Germany has a developed social market economy, the largest in Europe and fourth and fifth largest globally by nominal GDP and GDP PPP (Purchasing Power Parity) respectively. Most of the world knows Germany because of its manufacturing sector which produces some of the best quality products. In 2016, the country became the third largest global exporter of goods and services. German economy remains relatively stable that economists believe that the country is less likely to be affected by financial crisis. Germany hosts 53 of the largest 2000 publicly listed companies by revenue globally. This country also leads in the number of trade fairs, it is the home to more than half of global trade fairs.
Machinery, Automotive, And Aviation Industry
The machinery and equipment sector drives the high-tech nation and leads in innovations like robotics. Germany has a proven engineering tradition and continues to offer modern manufacturing solutions. This sector has more than 6,419 employees with an ever-growing workforce that generated almost $267 billion in 2015. Germans lead in the European automotive industry in both production and sales. Globally, many people recognize the innovative and precise nature of German car manufacturers and suppliers. Worldwide, people appreciate German products like Bayerische Motorenwerke (BMW), Daimler-Benz, and Volkswagen for excellent engineering, innovation, safety, and designs. The country has developed quality research and invested in qualified workforce and infrastructure responsible for a peerless automotive industry for the last 125 years.
The aviation sector in Germany has been on a constant rise, especially over the last two decades. In 2016, the aviation industry revenue stood at $43 billion. Germany hosts leading civil and defence aviation manufactures with projections of producing approximately 35,000 new aircrafts within the next twenty years. Germany’s competitive advantage over giants like the US and Canada is its combination of cost efficiency, available talent, and a powerful manufacturing base.
Chemical And Medical Industry
The German chemical industry leads in Europe in terms of sales within Europe and exports to other continents. Germany has well-developed chemical research and development infrastructure. The country’s education system also produces quality graduates ready to work and offers investors a fertile and market ready environment for chemical products. In 2016, Germany recorded the third largest sale ($168 billion) in chemical products, behind China and the US. Of the total sale, the country exported 60% of the products to other European countries, 17% to Asia, 7% within the (North American Free Trade Agreement) NAFTA infrastructure, 3% to Latin America and 3% to the rest of the World. This result was after spending $3.83 billion in research and development. The same year, the chemical industry employed more than 331,000 people. Medical equipment and pharmaceutical goods are among the top German exports and give the country billions of dollars. The commodities include medical supplies, life-saving machinery, and other hospital equipment.
Consumer And Service Industries
Germany’s consumer spending is stable because of low levels of private debt and unemployment. The country is Europe’s largest consumer goods producer and market in terms of population and purchasing power. Located centrally in the continent and with good infrastructure, Germany has the vantage position to access western and eastern European consumer markets. Germans prefer value and established brands, most of which the diverse consumer industries provide. Most consumer industries embraced E-commerce, innovation, and also offer their employees flexible working hours. The leading consumer industries include food and beverage, textiles, garments, shoes, office supplies, computers, telecommunication equipment, furniture, tourism, Do It Yourself (DIY), and home improvements.
Textiles, garments, and shoes constitute the second largest consumer industry (generating about $50 billion in turnover, this is mostly Mittelstand companies) after food and beverage. Germany ranks fourth globally in the export of clothes and textile products. The DIY and home improvement market generated approximately $46.4 billion in 2014, which is 9% of the cumulative consumer good market. The German food and beverage industry is receptive to new cultural influences and international food and beverage players. Giant food and beverage players like Amazon Fresh and Tadim have a huge presence in the country. Other large players include Nestlé, Cargill, Mondelēz Deutschland, Südzucker, Arla, and Dr. Oetker Group among other thousands of franchises. Being Europe’s largest food producer, German food and agricultural commodity export in 2016 generated $65.8 billion.
Whether on job or vacation, Germans embrace domestic tourism. German vacation sites also attract more foreigners each year who go to enjoy the cultural sites, international events, and sporting activities among others. 2016 figures show that Germans spent $167 billion on culture and entertainment. The same year, German hotels recorded $518 million on accommodation from national and international tourists. The total tourism revenue was 39.2 billion. In general, German consumer industry rides high with the fact that German products are of high quality, therefore, all these products have high global demand. The continued growth of the consumer industry is because of flexible retailers who have both online and offline systems and tech-savvy customers who offer timely feedback and review. Retailers also have ROPO Effect (Research Online and Purchase Offline) effect which many Germans love.
Energy And Environmental Technology Industry
Germany leads in the production of green energy and environmental technologies. In addition, traditional energy is steadily transiting to renewable energy. By the year 2050, Germany aims at reducing greenhouse gas emissions by 80% and increase use of renewable energy by 60%. The country also has investments in offshore wind energy, solar panels, bioenergy, photovoltaics, energy grids, and energy storage projects. Currently, Germany has the largest electricity generation capacity in Europe, about 200 GW. German’s centralized location in Europe makes it an ideal onshore and offshore wind energy harvesting, therefore, leading to major opportunities for wind energy companies from around the globe. The total wind energy capacity in 2016 was 45 GW. Solar energy also plays a big role in providing sustainable energy. Germany’s solar energy supports electricity production and heating. The country provides incentives, infrastructure, and good environment for photovoltaic investments and energy storage. In 2014, Germany invested 2.3 billion Euros on new photovoltaic installations. Another energy sector that Germany invests in heavily is electric vehicles and their charging infrastructure.
Electronics And ICT Industry
Germany has the fifth largest electrical and electronic industries in the world with an annual market value of approximately $142.7 billion. This industry has wide-ranging products like home appliances, nanotechnology equipment, commercial lighting, automation systems, and luminaries among other products. This industry employs 29% of all Research and Development employees in Germany and accounts for over 12,000 new patents annually. On ICT, the country enjoys the largest market of its kind in Europe. Most ICT firms and startups are products of Mittelstands. Increased automation in all the country’s industries and activities led to the demand for software solution. Young people, especially graduates, continue to spearhead the ICT sector by offering solutions that not only save industries money but also offer government solutions for service delivery. ICT also rides on the back of small, medium, and big companies that need smart data services and products, security technology, and automated human resource management among others.
Mittelstand Industries
Although people know Germany for its big firms like BMW and Bayer, the Mittelstand industries are the real backbones of the German economy. In fact, financial loss at most big firms would not result in a big economic crisis in the country. As a key driver to the economy, 99% of German companies are Mittelstand small and medium-sized companies. In Germany, Mittelstand companies are family owned companies with emotional attachments, they display generational continuity, are independent, are nimble, flexible, have lean hierarchies, long-term focus, customer oriented, innovative, socially responsible, invests on the workforce, and have strong regional ties. Mittelstand companies employ less than 500 workers each and in total, they employ 80% of the country’s workforce and exports a significant number of products.
Mark Owuor Otieno in Economics
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