Discussion on Globalizing Business in Germany

Introduction

Globalization remains a process that started decades ago, and it has reached and affected many countries and people around the world. For many companies, going global and expanding have been coveted business goals and strategies. Although expanding and going global offers a variety of financial benefits, it also requires an analysis of the political, economic, and sociocultural environment of the countries where expansion is aimed. In this paper, I am going to discuss Germany’s economic, socio-cultural, and legal-political factors a manager needs to consider when globalizing business in Germany. Economic development varies widely among the countries and regions around the world.

Economic Factors

Based on per capita income, countries can be categorized as either developed or undeveloped. Germany holds a significantly higher GDP and per capita income and is ranked #4 among the world’s most leading economies (The world's 10 biggest economies in 2017). A higher per capita income reveals a positive indication of a strong and stable economy, which offers attractive economic conditions for foreign business managers who aim to globalize business into Germany. Another essential economic factor that managers need to consider before expanding the business into Germany is Germany’s economic system. Germany has a social market economy that supports and encourages free enterprise, but it is also characterized by firm rules and laws regulating labor, unfair competition, and other aspects of the economy (Doing business and investing in Germany, 2017). Additionally, the German workforce is highly educated, trained, and disciplined, which makes it easy for foreign businesses to recruit well-trained and high-quality employees. Being a well-developed country with a well-qualified workforce, Germany has a higher labor cost compared to China or other Asian countries. With this being said, foreign companies that intend to expand in Germany through the Greenfield Venture market entry strategy will result in a costly and risky direct investment. Moreover, Germany's robust infrastructure and technological advancements further enhance its appeal as a destination for business expansion.

Socio-Cultural and Legal-Political Factors

Along with Germany’s economic factors, other factors like socio-cultural and legal-political factors play a significant role. As a result, international firms aiming to globalize into German markets need to include in their analysis legal-political factors like political stability, political risk, government interference, and also sociocultural factors such as social values, beliefs, language, religion, etc. Political risk, the risk of return on investment loss due to political changes and instability, is a major concern for international companies participating in global business (Draft, 131). Because of strong political stability and lower political risk, Germany is considered a stable country to invest in (Germany political stability-data, chart). Although these indicators are reliable, the government interference appears to be high. As a social market economy, Germany maintains strict laws and regulations that regulate employment compensation, labor practices, competition, advertising, consumer rights, and many other aspects of the business. These rules and regulations can present a challenge for international managers who operate abroad, so it is important that managers learn and obey these rules and regulations. Besides the legal-political factors, sociocultural aspects play an essential role in globalizing decisions. A proper understanding of Germany’s social values makes it advantageous for an international manager to succeed in the German markets. For instance, German culture places a high value on accuracy, precision, quality, orderliness, and tidiness. Also, Germany scores high in the value dimension of masculinity, which stands for preference for achievement, heroism, assertiveness, and material success (Draft, 133). When underestimated, these values along with many other social beliefs can be very challenging for international firms that aspire to expand into the German markets.

Conclusion

In conclusion, while Germany offers a promising environment for global business expansion, it is essential for managers to thoroughly analyze and understand the economic, socio-cultural, and legal-political factors unique to the country. By doing so, they can better navigate the challenges and leverage the opportunities present in the German market, ultimately leading to successful business ventures.

References

The world's 10 biggest economies in 2017. (n.d.). Retrieved from [source]

Doing business and investing in Germany, 2017. (n.d.). Retrieved from [source]

Draft, R. (n.d.). International Business: The Challenges of Globalization. [page 131]

Draft, R. (n.d.). International Business: The Challenges of Globalization. [page 133]

Germany political stability-data, chart. (n.d.). Retrieved from [source]