110228_management practices of german mittelstand-champions

8/2/2019 110228_Management Practices of German Mittelstand-Champions

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Management Practices of Germanys Mittelstand-Champions

Prof. Dr. Bernd Venohr

2011 Prof. Dr. Bernd Venohr

In the Zone 2011: The geography of global prosperityContours of advantage: innovation, human capital and industry focus

The University of Western Australia

Perth, March 10, 2011


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Deutsche Weltmarktfhrer 2011 Prof. Dr. Bernd Venohr

German Mittelstand Champions

Germany leading exporter: Share gain in world trade since 2000

Top 3 position in 2/3 of all industry sectors

1,500+ world-leading companies,thereof 1,350 "Mittelstand" ("State of Mind")

Key characteristics: 85 % active in B2B markets

Annual Revenues: 100 m (median); 62% foreign sales (60 countries)

Large worldwide footprint (10 -20 wholly owned subsidiaries)

650 employees (median)

Age of Enterprise (median): 70 years

70% Family ownership

70% located in rural communities


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Three typical examples

Rescue Operation San LorenzoCopiap mining accident 2010


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German microeconomic businessenvironment

Management Made in Germany

Strategy:Dominating global niche markets

Governance:

Enlightened family capitalism

Operational effectiveness:

World class in key processes


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Appendix


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Germany has a leading position in international trade

Germany and China are the only largecountries gaining shares in world trade

German companies employ a top 3position in 2/3 of industries

50%

75%

100%

125%

150%

175%

200%

225%

250%

275%

300%

325%

1995 1997 1999 2001 2003 2005 2007 2009

China

Germany

JapanUK

USA

ItalyFrance

De

velopmentof1995ss

hare

inworldexport

Rank CountryNo. of toppositions No. of

sectors withTop 3 position

% of all

industrysectors

1st 2nd 3rd

1 Germany 67 40 35 142 61.21%

2 China 72 19 16 107 46.12%

3 USA 34 37 26 97 41.81%Source: Own estimates; ICCP, UN Comtrade DB, 2007

Country share in worldwide exports; 1995 = 1; Source: UN Comtrade DB


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About 90 % of the 1500 German world market leaders are inthe B2B segment

MachineEquipment

ConsumerProducts

IndustrialProducts

Cars & CarComponents

ElectricalEngineering

Pharma & MedicalTechnology

Chemical Products

Construction &

Building Products

High-Tech(e.g. Photonics)

Commodities &Natural Resources

Food & BeveragesDiversified without industry focus

Logistitcs & other ServicesFinancial Services

Retailing and Wholesaling

Software

Heavy Machinery

Media ProductsRenewable Energy

Source: Database German World Market Leaders 2.2.2 (01.10.2010) World Market Leader (narrower sense)

About 1,500 Germanworld market leadingcompanies in total:top 3 position(revenue / volume)worldwide

About 1,350 small andlarge mid-sizedcompanies / Mittelstand(annual revenues lessthan 1 bn)

Large companies witha number of leadingpositions / largenumber of microleaders


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Profile of a typical German mid-sized world market leader

100.0 m

RevenuesMedian

600

EmployeesMedian

62%

Export RevenueShare Median

70%+ familyownership

70% based in smallcities/ruralcommunities

Average companyage: 70 years

Source: Database German World Market Leaders 2.2.2 (01.10.2010) World Market Leader (narrower sense)


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Unique corporate culture driven by family ownership

Long-term survival and intergenerational transfer as key objective(stewardship idea)

Profit as inevitable by-product of serving customers better the anyone else

Focus on long-term sustainability with key stakeholders: customers;employees; suppliers; community at large

Companies as communities: high degree of mutual trust and loyalty, leadingto an implicit life-long contract (long tenures)

Lead through example

love for the business

domain knowledge

Flat hierarchies and informal channels of communication bottom-up management style

high degree of cross compartmental cooperation

high degree of flexibility and market focus


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Institutional framework fostering long-term perspective andcooperation: top location for high value manufacturing

Corporate Governance

Two-tier board system Co-Determination

(Stakeholder Model)

Financial System

Bank-centered system Important role of savings-

banks and credit unions

Industrial Relations

Sector-level bargaining Restrictive labour laws Plant-level work councils

Domestic Competition

Factors of Production

Cooperation between companies

Training/Education

Apprenticeshipsystem

Decentralizeduniversity system

Norms / Standards

DIN VDE

Technology Transfer

Fraunhofer-Gesellschaft,Steinbeis-Stiftung

Numerous localtechnology centers

Employers Associations

IHK / AHK BDI / BDA

Related and supporting industries Demand conditions

110228_management practices of german mittelstand-champions

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