WHAT IS MADE IN GERMANY REALLY WORTH_LOVE ALUDO

WHAT IS ‘MADE IN
GERMANY’ REALLY
WORTH?
By
ALUDO, Love
Course: Introduction to Contemporary Germany
Evaluated by: Anne Delouis, PhD.
January, 2016

What is ‘Made in Germany’ Really Worth? | Love Aludo
2
WHAT IS ‘MADE IN GERMANY’ REALLY WORTH?
1.0. ABSTRACT
In this study, we will be focusing on all the components that come together to
create and add value to the German manufacturing industry, the story within the
“Made in Germany” label and the factors that have given the German products
their global reputation for dependability for decades owing, a fortiori, to great,
durable and sustainable inventions.
I am hoping that these practices can be used as models in developing economies,
that SMEs can learn from the success stories of family businesses in Germany and
that governments implement unbiased policies that promote transparency in
research to favor sustainable development, as well as the growth of businesses and
upcoming entrepreneurs.
German products are generally known for high quality, excellence, especially
engineering excellence, and with the increasing climate challenges, Germany is
fast meeting milestones on its renewable and clean energy roadmap for the
environment. German brands are important to everyone’s lives, from
pharmaceuticals, to food, and production machineries, clothing and automobile.
Seeing “Made in Germany” on a product in the stores holds positive promises.
Personally, a friend of mine handed me a household product recently and said “It’s
cheap, but it’s of good quality, it’s made in Germany”.
The general perception is that German products are expensive and consumers
might hesitate to pay for a German good, and opt for a cheaper competition
instead, but in the end, consumers would rather purchase Made in Germany, for
their quality, durability and precision. This loyalty reflects in Germany’s export
success and some of the intangible and invaluable influences driving the quality of
the label will be seen in this text.

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1.1. German Economy
Germany has a population of about 80 million people, the largest European
economy, one of the largest economies in the world and one of the world’s top
three exporters.
In 2014, exports from Germany (German products) amounted to US$1.511 trillion,
up 18.9% since 2010.
Based on statistics from the International Monetary Fund’s World Economic
Outlook Database, Germany’s total Gross Domestic Product amounted to $3.722
trillion in 2014.
Therefore, exports accounted for about 40.6% of total German economic output.
Given Germany’s population of 80.9 million people, its total $1.511 trillion in
2014 exports translates to roughly $18,690 for every resident in that country.
The following export product groups represent the highest dollar value in German
global shipments during 2014. Also shown is the percentage share each export
category represents in terms of overall exports from Germany.
i. Vehicles: US$259.4 billion (17.2% of total exports)
ii. Machines, engines, pumps: $258.5 billion (17.1%)
iii. Electronic equipment: $147.9 billion (9.8%)
iv. Pharmaceuticals: $80.1 billion (5.3%)
v. Medical, technical equipment: $69.5 billion (4.6%)
vi. Plastics: $63.3 billion (4.2%)
vii. Aircraft, spacecraft: $44.1 billion (2.9%)
viii. Oil: $42.7 billion (2.8%)
ix. Iron or steel products: $33.5 billion (2.2%)
x. Organic chemicals: $30.4 billion (2%)

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1.2. German Foreign Trade
Germany has gradually become the world’s second-largest exporter, with China
being the first. Their exports have contributed two-thirds of the country’s
economic growth in the past ten years and have increased the GDP per Capita
faster than that of any other major industrialized country.
“We German’s have 1% of the Labour force of the world and 10% of the exports
of the world, that gives you an idea of how successful and how oriented towards
international markets we are.”- Norbert Walter, Former Chief Economist,
Deutche Bank
Here is a list of Germany’s Top 10 trading partner countries with export value in
US Billion Dollars:
i. France $138b
ii. United States $121b
iii. United Kingdom $105b
iv. Netherlands $98b
v. China $92b
vi. Austria $77b
vii. Italy $73b
viii. Switzerland $65b
ix. Poland $58b
x. Belgium $58b

5
2.0. Common Terms for Key Drivers of the German Business Environment
2.1.0. The Mittelstand
Germany's industry growth is driven 99% by many small and medium sized
enterprises called Mittlestand.
Germany's Mittelstand usually encompasses the machinery, auto parts, chemicals
and electrical equipment sectors.
Although the term Mittelstand is not very easy to translate, we can say that they are
mid-sized firms as opposed to larger companies.
“Mittelstand companies benefit from Germany's apprenticeship system, which
provides highly skilled workers and there is a "collaborative spirit” that
generally exists between employer and employees . . . . In the post-reunification
recession, it seemed only natural to German workers to offer flexibility on wages
and hours in return for greater job security."
Most Mittlestands are family-owned companies with less than 500 employees. The
Mittlestand in Germany currently has more than 3 million companies, and employs
more than 70 percent of the country's workforce. About 99% of German businesses
have the Mittelstand status.
2.1. Family Businesses
The Family Businesses are the pillar of the German economy. This is very
important for German products and German businesses because they promise
continuity, long-term investments, independence, flexibility, very slim hierarchy,
innovativeness, strong competition, stability and customer focus.
“They account for 41% of German companies' sales and for 57% of all jobs in
the country. Between 2003 and 2005 the 500 largest family-run firms increased
their staff by 10% to 2.2 million employees in Germany, compared to a three
percent reduction for the country's entire economy. That makes family

6
businesses the German job motor. Ninety-five percent of firms are run as family
businesses. Some of them have been successful for decades - even centuries.”
Up to 85% of the German businesses have at least one member of the founding
family in management. This means that a coming together of proprietorship and
management is not an exception but a rule in German family businesses. The most
important management principles in the family businesses are: securing the family
business and orientation towards long-term goals for the brand. This makes it
difficult for managers or employees to take lightly the operations or perception of
the brand, because everything around the product is streamlined towards thriving,
market leadership and continuity. Some examples are Miele, Trumpf, Beckhoff.
In reforming the country’s labor market, successive governments have been ahead
of the curve, and so have Mittelstand companies. By avoiding debt, specializing in
niche markets, developing product-related services and investing in vocational
training, the Mittelstand have remained at the cutting edge of global
manufacturing.
2.2. The Hidden Champions
Hidden champions produce products that are not well known, but in the market for
these products they are ranked among the top 3 in the global market for their
products. A lot of the Hidden Champions started their products as an innovation
and maintained this peculiar spot in the market, or were at least able to keep a
prominent position as leaders.
Hidden Champions are relatively small companies but are committed to innovation
towards exports. They have a revenue of slightly less than $4billion. They provide
complete solutions for their products, including after-sales services. Hidden
champions are very expansive in how they find their customer base. They spend
about twice the amount of money that regular corporations spend on R&D to think
creatively and develop technology to meet human needs.
Some examples are Omicron Nanotechnology, Webasto and Ottoboc.

7
3.0. WHAT REALLY GOES INTO A GERMAN PRODUCT?
3.1. German History and Culture
“Germans are stoic people who strive for perfectionism and precision in all
aspects of their lives. They do not admit faults, even jokingly, and rarely hand
out compliments. At first their attitude may seem unfriendly, but there is a keen
sense of community and social conscience and a desire to belong. “-Kim Anne
Zimmerman
Gemans have long been involved in craftsmanship. They are known to have
structured professions, for example woodwork, at a very early stage in guilds, at
about the 14th
Century, centralizing knowledge about those aptitudes and gaining a
high skill set in the field. Yet till this day, one would need to undertake an
apprenticeship to learn e.g. Carpentry for 2.5-3years full time, only after which one
would be allowed to offer services in this domain.
An apprentice can further go ahead to be a master, gaining ability to transfer the
skills to apprentices by oneself. Germany’s growth success in industrialization can
be said to be the result of an agreement between industrial business people and the
aristocracy who were in charge of much of the land – the production of coal and
steel, machines and machine tools, chemicals, electronic equipment, ships were
common, and, later, motor vehicles, during the late 19th – early 20th
centuries.
Business, labor, and farm associations also cooperated with the government to
create a form of “organized capitalism,” different from the capitalism of Britain
and the United States which were less regulated. The strong industrialized base in
Germany saw the economy through two world wars; and yet, it is seen as a
globally recognized leader in manufacturing and technological inventions.
3.2. The German Personality Stereotype
Knowing who a person is can influence your reception or perception of what they
have to offer, and this is why, we cannot talk about the German brand without
reference to the “who” behind the “German”, that is, the traits that Germans are
associated with.

8
Perfectionism, for example, is a prime German characteristic which has proven
beneficial to their auto industry. Compromise and settling for what is manageable
is not good enough. Strictly speaking, only the quintessence, the best, will do.
The average German is motivated by winning, achievement and success and this
reflects in their business environment.
Germans are honest, some say painfully honest and the most direct in the world.
This means that when you read the Nutritional Value on the pack of a ketchup
made in Germany, you can be sure of what it promises.
Germans also feel that everything needs order, Ordnung: black from white, truth
from the lie, the public sector from the private sector, definitions must be precise
regarding what is masculine and what feminine and what is neutral.
This data subconsciously goes into the mind of the consumer as they consider
German brands.
3.3. German Work Ethic
The average German is hardworking, disciplined and productive. According to the
Organization for Economic Cooperation and Development (OECD) ranking of 38
countries on the list of annual hours worked per worker, the Germans work the
least of all, yet they still have the strongest economy in Europe.
3.4. Years of Apprenticeship and Technical Schooling
German excellence in production owes partly to years of apprenticeship and skills
acquisition. Apprenticeship is defined as:
“A combination of on-the-job training (OJT) and related classroom instruction
under the supervision of a journey-level craft person or trade professional in
which workers learn the practical and theoretical aspects of a highly skilled
occupation.”
Germany’s education system, focuses on vocational, or skills-targeted training that
incorporates a wide range of professions.

9
These Berufsschules (vocational school, technical school) are sponsored and
overseen by the Federal government in association with manufacturing groups
(Chambers of Commerce) and Trade Unions. For a product to be tagged “Made in
Germany”, it must have gone through the hands of highly trained personnel who
have survived highly regulated apprenticeship.
3.5. Research and Development
Innovative capabilities allow companies to re-invent themselves and have a
competitive advantage. German commitment to Engineering, Science and research
is prominently laudable. Research forms and integral part of the German economy.
The Germans have a very healthy appetite for success and are hardly prepared to
settle where they are. To keep the German reputation at its peak, German
companies spend billions on research. Industry-based and -financed investments
account for more than two-thirds of all R&D funding in Germany. Companies are
particularly involved in applied research and work closely with universities,
universities of applied sciences and non-university research institutes. One of such
successful technology transfers is found in the areas of environmental research,
resource-efficient production and new materials. In all, there are more than 800
publicly-funded research institutions in Germany, as well as research and
development centers run by industrial corporations.
In 2014, the annual budget for R&D stood at approximately 56.1 billion euros
(internal R&D expenditure) and in 2013, companies spent about 54billion euros to
strengthen Germany as a business location, in the international competition.
3.6. The German Labor Force and Management Models
German products are the final outcome of well-trained, loyal employees. Some of
them work for decades thus improving their chances to gain more expertise in their
field. In times of recessions in the firm or in the economy, the Mittelstand, for
example, would rather consider offering flexible hours to employees and more
training than lay off staff.

10
The German Management Style hinges on attention to details, leaders act based on
a plan, they do everything to eliminate risks, they avoid surprises, they give a
certain autonomy to subordinates to be part of the decision-making process, hence
decision making is slow, this may be seen as a weakness or a strong point but
Management does not rush into decisions. German leadership styles are sometimes
said to be full of regulations and of less compassion but this is a contributing factor
to discipline in the workplace. Work hours are work hours, there is zero tolerance
for frivolities in the work place, still the Germans play hard as they work hard and
they have a steady work-life balance.
3.7. German Government Roles in Driving Quality
Achieving the glorified status of Made in Germany has its hurdles of regulations,
bureaucratic procedures and standards which must be tested and certified. The
government also operates a welfare state which engenders ‘motivated’ employees,
the government creates an atmosphere for efficient economy, good road network
and transportation.
It is a system that makes the most resourceful use of every means. They operate a
Social Market Economy, sometimes classified as a coordinated market economy.
This ideology has some elements of a free market economy (free foreign trade,
private property, exchange of goods, and free formation of prices) but the state is
active, especially in implementing regulative measures and social policy.
People in poorer countries work hard, but they don't produce very much because
the system most times, is dysfunctional. Workers are much more productive in a
system with an efficient bureaucracy and well-organized economy.
3.8. Concern for Environment
Buying Made in Germany is buying environmentally friendly products. The
environmental policies in the country are geared towards energy-efficient goals
and Germany is a home to many energy-intensive products.
Germany’s Renewable Energy Act gives renewable energy precedence on the
network of environmental targets and guarantees that investors in renewable
energy reap its benefits irrespective of electricity prices. This both reduces red tape

11
and an increases investment and even further lessened the price of renewable
energy.
““Tax bads, not goods” is the slogan of a tax that puts a high price on
environmentally unfriendly activities, specifically fossil fuel use. Germany has had
a petroleum tax since 1951, and when it was updated in 2007, it was raised to 65
cents per liter. The money collected through the tax is used to offset costs
elsewhere. In the case of the “eco-tax” funds are used to lower payroll taxes with
the goal of making German workers more competitive internationally. The eco tax
is applied not only to gasoline and diesel for vehicles, but to heating oil and fossil
fuels used to generate electricity.”
With its Energiewende, Germany is ahead in renewable energy policies. By being
sustainable, Germany has created more than 370,000 new jobs, establishing the
world’s leading green technology sector, and has brought to a minimum its
dependency on the import of fossil fuel. Germany's Energiewende creates a global
market for renewable energies, such as wind and solar, by encouraging the speedy
development of these technologies through a steady policy structure. As a result,
the cost of both wind and solar has dropped ‘dramatically’ over the past few years.
Other countries are following the trend, especially the United States. Germany
considers this achievement prideworthy, as it will in turn be beneficial to further
technological and innovative breakthroughs from other countries in this field. This
practice will also help launch the Japanese energy transition. It lays a strong
foundation for responding to the challenges of climate change.
The German Federal Government has proposed an ambitious greenhouse gas
(GHG) emissions reduction target, in which by 2020 and 2050 GHG emissions will
be reduced from 1990 levels by 40% and more than 80%, respectively. The
decrease in German energy ensures sustainable developments.
In spite of economic recession throughout many parts of the European Union,
Germany’s economy is doing great. Germany’s manufacturing industry is
competitive worldwide, and energy consumption data as well as her productivity in
the energy sector rank among the highest in the world. China, Jordan, the
Philippines and The US can take advantage of Germany’s breakthrough in clean

12
production and recycling, productivity promotion, quality control and precision in
product design, in the manufacturing sector.
4.0. GERMAN INNOVATION AND CHINESE EXPORTATION
While China remains the world’s number one exporter, there stands to be a huge
difference between the products manufactured in both countries.
China is the world’s most populous nation, with a population of 1.3billion
inhabitants, Germany would hypothetically not seem to stand a chance with its
approximately 80million people, but in true terms, German export in billion USD
amounting to $1,492,000,000,000 was still worth more than half of the Chinese,
which was $2,343,000,000,000 in 2014.
Athar Hussain, Director and Professor at Asia Research Centre, London School of
Economics and co-author of a number of books including Transforming China's
Economy in the Eighties, is of the opinion that if China is to upgrade its economy,
it has to copy Germany's manufacturing model in place of the UK's financial
services model, according to him:
"While the share of manufacturing in China is still high, I still think there is
great potential there. Germany is a good role model for China. Even though the
German car industry was quite advanced in the 1960s, it has kept investing and
investing. They may be a high-cost producer but because of technical innovation,
people are prepared to pay high prices for BMWs."

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4.1 GERMAN INNOVATION AND OUR WORLD
German labels and inventions play very prominent roles in our everyday lives.
Below is an array of very few of the inventions that have modified and shaped the
way we live that were actually invented by the Germans. The list is almost endless:
Adidas shoes, the Airbag , Aspirin, Automobile, Bacteriology, which was a mega
success in the micro-world, the Beer, Bicycles, Book Printing, an evolution in the
art of reading, the C-leg by Otto Bock, (a Hidden Champion), the Chip cards, an
almost indispensable part of our IT world, the Christmas tree, the first fully
functional, programmable computer, used in 1941.
Contact lenses, an evolution from the eyeglasses, the Gummi bear candy,
helicopters, the timeless Jeans, the Kindergarten, also known as the crèche,
motorcycles, the MP3 format, the music record player, the refrigerators, the small
format camera, the end of big photographic machines, tape recorders, the
Televisions, Thermos flasks, Toothpastes, the X-ray technology for looking
beyond the skin through a transparent procedure, it is argued that Heinrich Göbel
invented the lightbulb 25 years before Thomas Edison but did not patent his work
and lost claim to the invention of incandescent light, but we are sure of Fanta,
which has remained a globally recognized refreshing drink for decades.
The most anticipated innovation is the Industry 4.0 manufacturing model, a
high-tech automation technology where raw materials and machines will interact
with each other to cooperatively drive production. This is the fourth industrial
revolution that includes self-configuration, self-optimization, self-diagnosis of
machines and intelligent support of workers in complex work.

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5.0. CONCLUSION: Passion for Detail
It is said that the Germans make the thing that goes inside the thing that goes inside
the thing.
In an era when most industrialized economies ship manufacturing tasks to lower-
cost countries, especially Asian, Germany manifests that a present-day economy
can still flourish on building things.
Other countries may quake in the face of competition from Asia, but not Germany.
Its luxury manufacturers sell posh cars to the new Asian rich. They make machine
tools and equipment that Chinese firms use to make consumer goods. Through
their researches, the Germans are constantly innovating, adapting and evolving.
The returns for possessing or merely looking at a wonder of German
manufacturing can be very rewarding and assuring both psychologically and
materially. From mp3 format to contact lenses and automobile, the Germans have
carved a niche for inventing the things that humans crave most, like shoes and
refrigerators, high-end appliances, X-ray machines, industrial equipment, music
production equipment used all over the world and calculators.
Speaking of calculators, it is impossible to analyze the value of German-made
goods or models in numbers, the products might be relatively expensive when
compared with products from other origins in the markets, but you can be sure that
they are worth more than figures. Made in Germany symbolizes trust. It is
appreciated by consumers who know the German’s devotion to precision, their
ingenuity and like the Volkswagen plant in Chattanooga motto goes; Passion for
Detail.

15
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completed on the 5th of January 2016. Thank you.

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