Hamburg/Munich, January 18, 2013. The German market is attractive. There’s hardly a globalization strategy in which Europe’s economic powerhouse doesn’t feature. But if you want to make money in Germany you need local representation. Many fast-growing enterprises have been forced to acknowledge that market entry and expansion are not at all easy in Germany. Getting your market entry strategy right requires you to adhere to some basic rules. An interview with Alexander Kahlmann, partner at SCHICKLER consulting.
For most fast-growing companies, the first point of entry into European markets is a branch in London. What makes the leap from London to Germany so difficult?
To start with, you have to know where your leap into the global market is going to take you. Whereas, a few years ago, the hotspot for new businesses in the online sector was London, Berlin has now caught up as an attractive location. Germany is, however, highly decentralized, a consequence of the post-war reorganization of the country by the Allies. Opening an office in the capital isn’t sufficient to secure market entry if the actual business is in Düsseldorf, Frankfurt or Munich. For many companies, Berlin isn’t the right place. You have to know where your customers are. Moreover, many agencies and other service providers have in recent years positioned and established themselves at other locations in Germany.
Are there differences in the acceptance of new business models?
Yes. In comparison with the USA and UK, Germany has been tardy in its adoption of new technologies. Even Scandinavia is ahead of it. Many fast-growing companies wrongly assess the speed of market entry in Germany.
This doesn’t sound very attractive.
That depends. Expansion works differently here. Germans don’t like changing their behavior so fast, but the upside is that they are more loyal. Anyone who establishes stable customer relationships or behavior here can profit for a longer period of time than in other countries. Furthermore, if they like a model, Germans are very swift when it comes to execution and fulfillment.
Germans have a reputation of being very organized. Is this true?
Absolutely. Germans love organizing processes, down to the smallest detail. You won’t find much improvisation. For foreigners it can occasionally be disconcerting to see how tightly Germans stick to their processes. But the advantage here is that, at the end of the day, it works better. If you want to succeed in Germany, you need to take this into account in your market entry strategy.
The first step in building up an organization in Germany is to appoint a country manager. What do you have to consider when recruiting?
Unlike other countries, many career paths in Germany are still characterized by the “stack effect”: whilst Germans may frequently move between companies, they rarely change their line of business. An important prerequisite for acceptance is experience in the sector. Any company will have difficulties with a country manager who doesn’t come with experience or connections in the sector. Even if the person in question is perfectly suited for the job. This is different in other countries.
When it comes to market entry, are foreign companies at a disadvantage in comparison with their German competitors?
Not in the digital sector. If anything, it’s the other way round. Germans do not yet consider themselves to be on a par with the Anglo-Saxon countries. US companies in particular benefit from high levels of trust. But it’s essential to maintain this during expansion by following the rules we’ve outlined above.
What’s your bottom line? Would you invest in Germany?
Absolutely. Germany is a fantastic market with over 80 million people and a great deal of spending power. But, if you want to enter the market, you have to take its particularities into consideration. Anyone who believes that they can simply transfer their running business to Germany will fail in their expansion attempts.