Discussion on Globalizing Business in Germany

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 a coveted business goal and strategy. 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 is aimed to expand. In this paper, I am going to discuss Germany’s economic, socio-cultural, and legal-political factors a manager needs to consider globalizing business in Germany. Economic development varies widely among the countries and regions around the world.

Based on per-capital income Countries can be categorized as either developed or undeveloped. Germany holds a significantly higher GDP and per-capital income and is ranked #4 among world’s most leading economies. (The world’s 10 biggest economies in 2017). A higher per capital income reveals a positive indication of a strong and stable economy which offers attractive economic condition for foreign business managers who aim to globalize business into Germany. Another essential economic factor that managers need to look at 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) In addition, 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 well qualified workforce, Germany has a higher labor cost compare to China or other Asian countries. With this being said, foreign companies who intend to expand in Germany through Greenfield Venture market entry strategy, will result in a costly and risky direct investment.

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 partake into 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 the global business. (Draft,131) Because of a strong political stability and lower political risk, Germany is considered a stable country to invest. (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 is important that managers learn and obey these rules and regulation. Beside the legal-political factors, sociocultural aspects partake 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 the international firms which aspire to expand into the German markets.