Country Analysis - Social, Cultural, Economic Context For Business 1j23h

Brandenburg Gate, Berlin

Octoberfest, Munich

Potsdamer Platz, Berlin

Inter City Express (ICE) Train, Frank

Apprenticeship Programs

5

Electronics Trad

BMW 3-series Final Assembly, Munich

Awesome Castle and Snow, Schwanga

Proud Culture

Garzweiler Open Pit Mine

Wangen Tower Center

Subsidized Solar - Yikes

Christian Influence

A C O U N T RY A N A LY S I S

Statistics  Europe’s largest economy  4th largest in the world  3.55 Trillion GDP* 

$38,100 GDP/capita* (26th)



3% growth 2011, 0.4% 2012



2.5% inflation



1% Real Interest Rate

 Population: 82 million  138,000 sq. miles (Montana)  Temperate climate  Language: German  Capital: Berlin  Currency: Euro  Founding member of EU  An “up-market” country 15

History Rich in Conflict (-) Holy Roman Empire (1st Reich) Napoleonic Wars World War I World War II – Nazi  Nationalistic, low migration East and West 

West industrial powerhouse

Reunification  

East struggling post communism UN non-permanent seat 2011-2012 17

Cultural Tradition (+) Strong Christian tradition (63% of population) “Das Lander der Dichter und Denker”= “the land of

poets and thinkers 

Immanuel Kant & Albert Einstein

#3 music producer in the world today  Beethoven, Bach, Mozart, etc. “Work hard / play hard” culture  

Protestant work ethic Oktoberfest, soccer

Work / life balance 1,419 working

hours / year! 

Lowest in OECD 18

’s apprenticeship program Apprenticeship Programs trains 1.5 million people annually.

 56% English speaking  19% earn University degrees  Challenged by dropping

19



Matches skills with employers’ needs



Manufacturing, legal training



60% participants obtain full-time employment



Partners with major corporations

• •

Slow, Steady Economy (++)

• •

$3.55T GDP, 26th per capita 3% growth 2011, 0.4% 2012 2.5% inflation 1% Real Interest Rate

Strongest Economy in Europe and 4th world wide 

Growth stagnating after 3% in 2011

 70% services, 29% industrial

economy 

$1.5T in Exports (2nd), $1.3T in Imports (3rd)

 5.4% Unemployment  “Overbanked” market with

$4.2T in domestic credit (4th)  Competitive: 27 Fortune 500, ~1000 middle-market leaders 20

German y

Political (+++) Stable, safe, secure, and expensive

Political Powerhouse of the EU Federal Parliamentary Republic  

Multi-party system established in 1949 Dominated by the CDU and SPD

Free and open markets  Foreign Direct Investment € 513 Billion in 2011- #7  Government subsidy for early-stage innovation  No restrictions on capital transactions or transfers Much like a Volvo 

Stable, safe, boring, secure, and expensive for what you get 22

and the EU ( +/- )  Largest member of EU  Contributes 21% of total budget  Instituted as “economic handcuffs” following WWII 

Eurozone free trade increase addressable market and labor pool

 Chancellor Merkel walks a tightrope representing

the demands of her constituents and the EU  is viewed as Europe’s “America” for

pushing tougher standards on the weaker of the EU (Greece, Spain, Ireland, etc.) 

The curse of Power 23

Institutions & Infrastructure (+++)

24

Financial Markets, Taxes, Legal • 12 Largest Stock Market and Exchanges: o o o o

Deutsche Borse $1.3 Trillion 3rd largest bond market Total Financial Assets: $11.9 Trillion Assets per Person: $145,090

• Taxes reformed in 2008 o Average overall tax burden of 29.8%*

• Strong Legal System • Ranked #1 for IP protection

25

Summary and Recommendations

Doing business in Opportunities & Challenges / Risks

 Growth Slowing  Euro-zone financial crisis  Primarily EU Trading partners

 Highly trained and

disciplined work force  Stable Government  Excellent infrastructure  FDI encouraged / open economy 



 Regulation and

bureaucracies can be complex

Ease of repatriation of profits

 High investment intelligence  Developed capital markets 

Downward pressure on exports



Safety regs “zealously” applied

 High corporate costs  Average corporate tax 29.8%

Low lending rates

 English as a 2nd language

 

Imports at 19% to match VAT Expectations of labor force

 Former East long 27

term prospects

Business Recommendations Recommended Focus Area  IT Hardware / Software / Services –  Cloud computing, mobile, security sell to  

4th largest IT market Robust growth (5-20%)



Establish local GmbH

 R&D focus with some high tech Manf.  High Technology – develop  t venture: Siemens, Fraunhofer  Strong IP Protection for sensitive technology  R&D incentives  Manufacturing – make in  Automotive sector  Abundant natural resources  Focus on quality, precision  Skilled workforce  Domestic and export market  Infrastructure, distribution networks 

Central to Europe

 Medical Equipment – sell to   11% of GDP spent on Healthcare  Sales growth of 6% (2012)  US manufacturers already have 30% share  of imports 28

Focus on miniaturized electro-medical, nano-technology, and minimally invasive equipment Take advantage of shifting demographics

Fragen? (Questions?)

Backup, Ancillary Slides

German Introduction “Willkommen meine Damen und Herren,  Wir praesentieren Ihnen eine Laenderstudie

ueber Deutschland. Es freut mich ausserordentlich, Ihnen die Herren Lengyel, Louis und Mt Mc Clellan vorzustellen. Vielen Dank!“

31

’s Objectives & Strategy What are ’s objectives?  Protect from collapse of Euro?  Increase GDP growth  Control unemployment  ROI former East What is ’s strategy?     

Reduce dependency on exports Innovation (continue apprenticeships) Raise labor input Growth friendly tax structure Increase labor migration - immigration 32

33

https://www.google.com/publicdata/

Taxes  Taxes reformed 2008 to increase

competitiveness 

Corporate tax cut to 15% from 25%

 Average overall tax burden

29.83%* 



A flat nationwide corporate income tax rate of 15%. Trade tax, which is a municipal tax, set by each municipality individually at a minimum rate of 7%, but there is no statutory ceiling.

 Tax burden can differ from

municipality to municipality. 

Up to 10% less in certain areas

34

Global Competitiveness Index Haiti India Vietnam

China Peru South Africa

35

Ireland Singapore

German y

UNDERVALUED? 36

Legal

Judges Defendants convicted

20,411 807,81 5

First-instance proceedings Civil courts Family courts Criminal courts Convicted prisoners Terminated cases of supervised probation

37

1,579, 804 688,99 3 786,06 7 60,067 54,411

Ease of Doing Business

38

scorecard Historical context (-) Cultural Tradition (+) Social context (++) Political context (+++) Economic context (++) Euro-zone context (--) Institutional context (+++) Infrastructure context (+++)

Overall “doing business” score (++) 39

• • • •

Markets Sector Market Size and Growth $M) $140,000

14%

$120,000

12%

$100,000

10%

 Large (~$100B USD) IT,

Chemical, Automotive, Telecom markets Robust 2011 growth slowing, Automotive sector growth hardest hit US share of imports in most markets minimal  $30B Medical Equipment market imports <1%, US share is 30% German customers value quality  Market research is encouraged High concentration of franchising Government sales challenging  Entrenched incumbents 



$80,000

8%

$60,000

6%



$40,000

4%



$20,000

2%

$0

0%



2012 2013 41

$3.114T GDP (5th @ PPP), 26th per capita 3% growth 2011, 0.4% 2012 2.5% inflation #2 Exporter (after China)