International business in Germany
Germany has conventionally been the largest economy in Europe and the leading in global science and engineering development. Today, Germany stands as the fifth largest economy in the world with its gross domestic product (GDP) estimated to be almost a third of that euro-zone. In fact, its GDP per capita is the highest in Europe and the living standard is among the world highest.
2. German demographic, political and economic background
With a population of approximately 82,329,758, Germany is among the most populous countries in the world. Its demography is distinguished by the declining growth. The aging population is ever increasing as opposed to the youthful population which is continuously decreasing.
People aged above 65 years account for 20.3% of the overall population yet women alone account for the highest number of about 9,701,551. This is almost equivalent to the overall younger population aged 0-14 years whose tally is approximated at 13.7% of the entire population. The middle age (15-64 years) accounts for 66.3% of the total population. German’s fertility rate which stands at 1.42 children born per woman, is at its lowest just like many developed countries.
The low fertility rate is attributed to greater literacy levels and educational achievements with the most educated having less children (Dunning, 1999). Religion has also been found to play a greater role in determining fertility rate whereby most conservative Christians seem to have more children than the contemporary Christians (Dunning, 1999).
According to the sex ratio, there are more females than males. Male appear to be the highest at birth but continuously decreasing with the increase in the number of years. At birth, the sex ratio (males/females) stands at 1.06. At around 15 years, it decreases to 1.05, but between 15-64 years, the sex ratio is 1.04. Above 65 years, the ratio of men to women is 0.72. Thus, the overall sex ration is 0.97. Germany further experiences low infant mortality rates of about 3.99 deaths per thousand births.
It is estimated that over 99% of the German population are literate. However, the younger population appears to be illiterate as compared to the older population. About 0.1% of the younger population is unable to understand anything beyond basic level texts. The illiteracy levels depend on the socio-economic class and ethnic group (Dunning, 2011).
Despite scanty levels of illiteracy, the world’s highest education level is in Germany. This has contributed to the greater technological development and increased economic productivity which materialize to be among the best in the greater euro-zone (Dunning, 1999). Germany boasts of its best trade dealings and technical schools with the annual number of students entering universities tripling.
Moreover, Germany has experienced a stronger economic growth subsequent to the World War II. This growth could be characterized by the hybrid social welfare and technical market capitalism (Pommerening, 2011). Free market has been promoted by the greater cooperation among governments, private sector and the labor organizations.
Cooperate responsibility is highly practiced and is extended to the employees, suppliers and customers (Pommerening, 2010). After the fall of the Berlin wall, Germany adopted more capitalistic model to heighten her competiveness with foreign businesses. Liberalization implied that market forces determined the economic activities with limited government role (Griffin & Pustay, 2009).
Economic and social policies that reduce the cost of doing business like excise duty cuts; financial plan cuts as well as structural reforms have similarly been adopted by the German government to increase foreign and domestic investment growth as well as job creation (Pommerening, 2010). Lately, the German government has been working on the labor market flexibility and increasing global competitiveness to its businesses by reducing cost of doing business through imposed tax cuts and other similar policies (Dunning, 2011).
3. German international business
High technical standards, quality and increased efficiencies are some of the remarkable characteristics of the German international business. Such attributes have driven the German economy to be amongst the largest exporters in the euro-zone which makes it account for 1/3 of the world export.
Basically, Germany auto-mobile industry is one of the biggest globally and opens to international trade. The auto-mobile industry accounts for 5.2 million Euros per annum and approximately 90% on the auto-mobile market. Its exports are approximated to be US$ 1.337 trillion with the auto- mobiles and machinery accounting for the biggest share.
There are many challenges that affect German international business. The major challenges include tax regulations, restrictive labor regulations, tariff rates and inefficient government bureaucracies (Pommerening, 2010). Other factors though minor yet found in many countries include access to financing, inadequate young educated workforce, foreign currency regulations, policy instability, inflation and inadequate supply of infrastructure (Griffin & Pustay, 2009).
Being the fifth largest economy, high population with greater purchasing power and greater transparency to international trade and business, Germany has proved to be economically viable on the global stage. In essence, better political climate, economic incentives such as tax rebates, and transparency in doing business has greatly attracted foreign investments in Germany. Despite reducing the cost of doing business, these factors encourage business activities.
Dunning, J. H. (1999). Governments, globalization, and international business. Great Clarendon Street, Oxford, UK: Oxford University Press.
Dunning, J. H. (2011). New Challenges for International Business Research: Back to the Future. Cheltenham, United Kingdom: Edward Elgar Publishing.
Griffin, R. W. & Pustay, M. W. (2009). International Business: A Managerial Perspective. Upper Saddle River, New Jersey: Prentice Hall publishers.
Pommerening, T. (2010). Strategic Changes for Business Models in the German Retail Banking Industry in the Post Financial Crisis Era: Using the Example of the Post bank AG. Munich, Germany: GRIN Verlag.