Fewer and fewer medium-sized companies are daring to make the leap overseas, even though conditions are not bad.

SME Study from Commerzbank/Infratest, April 2013

New Markets, New Opportunities?

German SMEs, known across the globe as the “German Mittelstand”, are the backbone of the German economy. This makes it even more distressing that a lot of medium-sized companies are still finding it hard to make the leap into new regions, and overseas in particular.

According to a recent study on the internationalization of the German Mittelstand conducted by Commerzbank, the second largest bank in Germany, and research institute Infratest, only 9% of the companies that have focused on the German-speaking market thus far are considering expanding their operations abroad. This represents a huge drop from 23% in 2007. 88 percent of the around 4,000 companies polled reportedly felt they needed adjust to the limits of growth. At least two thirds feared financing shortfalls. Almost as many were expecting strong fluctuations in demand and every second company was anticipating cash losses.

On the one hand, the larger medium-sized companies tend to operate successfully in Europe and overseas and are still investing energy in their activities there. This stands in sharp contrast to the increasing numbers of small and medium-sized companies that have shelved their original plans to go international. Despite the fact that the framework conditions are not bad: borrowing money is cheaper than ever, access to rapidly growing markets is increasingly easy, and the German Mittelstand survived the financial crisis comparatively well.

On the other hand, the European environment has grown increasingly volatile. There is a lack of planning reliability, especially in Southern Europe, that medium-sized companies need to mitigate the investment risk of overseas expansion. And yet, for these companies in particular, accessing new markets outside Europe would open up opportunities, introduce more balance and stability in their business, and better equip them to deal with the long smoldering euro crisis.

After all, “Made in Germany” is more than just a quality guarantee: it opens access to markets that remain closed to others, as the study confirmed. German entrepreneurs know this is part of the reason their companies and products are in demand: because they are more innovative, technically sophisticated and – above all – because they were developed and manufactured under German management. This is a huge opportunity. While it might be possible to copy products, processes and management skills are still strongly culturally influenced, which makes them hard to imitate.

What can we do for you?

If you are considering expanding your operations into one or more regions outside Europe, the following fundamental questions need to be answered:

  • What markets are particularly attractive because of the economic or geopolitical situation?
  • Where do medium-sized companies have the best market potential?
  • What does the euro crisis mean for activities outside of Europe?
  • What are the best potential distributiion partnerships?
  • Where could possible synergy effects be created with existing international operations?
  • What criteria have to be considered when looking for a suitable site?

Based on our experience with similar expansions and additional analysis, we can pinpoint the potential of new markets and partnerships and quantify opportunities and risks. This lays the initial stable groundwork for a well-founded decision.

We recommend a subsequent iterative approach:

  1. Exploration and evaluation of possible operations or partnerships abroad
  2. Selection of 2–3 options and the initialization of a test phase (12–18 months)
  3. Completion of the test phase with the intensive involvement of local partners

We supply the respective detailed analyses, scenario evaluations, business cases (incl. worst case), site evaluations, sensitivity checks and progress controls as part of our suite of services.

It would be our pleasure to offer our advising services, experience and operative support to help you establish distribution channels abroad.

The Study

“Neue Märkte, neue Chancen – Wachstumsmotor Internationalisierung” (New Markets, New Opportunities – Internationalization as a Driver of Growth)
Study of 4,000 medium-sized companies undertaken by TNS Infratest as part of the Commerzbank UnternehmerPerspektiven, April 2013

» to the study