Internationality as a key success factor for the German Mittelstand
More than half of „large“ SMEs are active outside their home country A decisive factor for a company’s success is the filling of key positions in remote markets Internationality makes SMEs especially attractive for young, internationally-trained talents
A blog post of 9. March 2020
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- More than half of „large“ SMEs are active outside their home country
- A decisive factor for a company’s success is the filling of key positions in remote markets
- Internationality makes SMEs especially attractive for young, internationally-trained talents
As the country with the world’s biggest trade surplus and the third largest export nation after China and the USA, Germany’s international activities can be considered as one of the central success factors of the local economy. Almost half of the underlying export volume is contributed by small and medium-sized enterprises (SMEs) with a turnover of up to 500 million euros – the German Mittelstand.
A closer look at the secrets of these companies’ success reveals not only their extraordinary quality standards, long-term strategic orientation and innovative spirit, but also their internationality. According to KfW-Mittelstandspanel (published annually by German business development bank KfW), the foreign share of total turnover in the SME sector is almost 30%. Although almost two thirds of this are achieved in other European countries, growth in new business mainly stems from markets further away. International activities can be attributed in particular to “large” SMEs (defined as enterprises with more than 50 employees), more than half of which are active outside their home country. These entities generate almost two thirds of total foreign SME turnover.
Both from a historical and current perspective, the pioneering spirit associated with embarking on a course of expansion onto the world stage symbolizes a key factor for commercial advancement. Rapid development of new markets, the associated revenue-stream diversification and access to new customers on the one hand, cost-optimization and efficiency gains in manufacturing on the other form a framework of considerable dynamism synonymous with this sector.
The challenges internationality entails
However, in addition to the advantages in terms of sales and costs described above, such an approach also entails certain risks. Tariffs, geopolitical shifts, regulatory requirements and exchange rate fluctuations are just some of the aspects that must be kept in mind when it comes to international activities and supply chains that extend across borders. In addition to Brexit, Coronavirus, Trump & Co., especially the safeguarding of company secrets, patents and intellectual property, which are of great importance for many high-tech manufacturers for instance, must be assured. This is of particular importance when it comes to sourcing and production shifts as well as the associated decisions regarding local implementation. As a consequence, these points gain existential importance for securing sustainable, long-term market leadership.
Furthermore, filling key positions in remote markets poses an additional challenge for many companies, as they can rarely rely on stable, well-established local structures due to their smaller size. Besides taking into account “soft factors” such as culture and language, close partnerships with experts in the fields of labor law, taxation as well as executive search, management assessment and compensation are therefore necessary. For this reason, a number of service providers – often medium-sized companies themselves, advising their customers on such issues within and beyond their home markets – have emerged. Together with the often excellent work of the global chamber of commerce network, they form an ideal infrastructure to provide the necessary support “to go international”.
Internationality to attract talent
On another note, the international activities of the German SME sector also have very positive side effects on employer attractiveness. This aspect is particularly important when it comes to the recruitment of young, internationally-educated talent. Especially for university graduates who have already gained experience abroad in the course of their studies, an entry position is often seen as a mere stepping stone for a transnational career. In this context, many candidates are prepared to accept a work location away from major cities for the sake of an international environment. This is also confirmed by Oliver Meywirth, Managing Director of Capitalheads, a Kienbaum Group company specializing on the recruitment of young talents in the Mittelstand sphere:
“The internationality of the SME sector is an attractive factor, especially for well-trained graduates and young professionals. International career prospects enable medium-sized companies to attract junior staff even in less attractive sectors or remote locations”.
Whether Sauerland or Middle Franconia – a varied, culturally-diverse working environment and, for example, the daily use of foreign language skills combined with the possibility of quickly assuming responsibility beyond one’s own horizon represents a significant job enrichment and an important motivation for joining a SME player. Thus, in the competition for the best brains, internationality often trumps.
With 26 offices in 14 countries, Kienbaum is the ideal partner for the development of your organization’s full potential – not only in Germany and Europe, but all around the globe. Thanks to decades of international presence, Kienbaum offers you an unparalleled understanding of local markets. From Atlanta to Zurich, our transnational expertise spreads across the most important economic centers and regions worldwide.