Known as the beating heart of Europe, Germany is widely regarded as a cultural and economic powerhouse. Due to its proximity to Western European economies like France, Italy, and the Benelux countries, it is considered to be a prime target market.
Germany is a global leader in innovation and it’s also the fourth largest economy in the world. Even the recession that has plagued Europe for the past decade could not bring the German economy down – with the country even boasting a +1.9% growth rate in 2016.
The idea of expanding into the German market seems very appealing for many companies and it’s no surprise why. However, there are several factors (i.e. purchasing behaviors, differences in culture, laws, etc.) that need to be considered first before you start branching out and taking your business abroad.
In this article, I will give you a closer look at the top 6 factors that you need to take note of when doing business in Germany.
Let’s dive in:
1) Personal Data Protection
Germans do not play around when it comes to protecting their personal data. If you plan on putting up an e-commerce website in Germany, be prepared to face many barriers to online sales. Several federal laws protect personal data in the country – remember that if you will be requiring customer data that is necessary for the sale.
2) Complicated Regulations
One of the biggest obstacles you will face when establishing a business in Germany is the abundance of regulations. Businesses exporting to Germany are required by the law to comply with national (DIN), European (EN) and International (ISO) standards. These countless regulations partly explain why the workplace culture in the country appears very strict to foreigners.
3) Tradition and Innovation
Germany is a front-runner when it comes to technology and innovation in different sectors, particularly in manufacturing. Its economy is supported by a wide range of businesses that include construction, automobile manufacturing, health care, and renewable energy technology.
But despite the technological advances in the country, Germans lag behind in terms of digital technology. Their economy still heavily depends on manufacturing Mittelstand – also known as small and medium-sized enterprises – sectors that are still having difficulties getting on board the process of digital transformation.
E-commerce is a growing industry in Germany – representing 25% of distance sales. If you are hoping to establish a retail business in the country, expect to have well-established rivals in a distribution network that’s very dense. You can choose from different types of shops like malls, discounters, general and specialized department stores, and so on.
5) German Culture
Adapting to the German culture is key if you want your business to succeed. More than anyone, Germans demand quality in everything, Although they have high expectations, they also take price into consideration. Research has proven that German consumers are willing to visit different e-commerce websites of physical stores just to make sure they have chosen the best price-to-quality ratio.
Lastly, regardless of the service or product you intend to export to Germany, be sure to translate all of your business details, website, and content. Instead of just focusing on localized content, don’t forget to transcreate all of your marketing campaigns in order to speak to more audiences.
Once you’ve successfully tapped into the German market, there are reliable firms out there that can take care of your company’s payroll management needs. Payroll outsourcing in Germany is a simple and more cost-effective way of paying your employees in full, as well as filing wage tax returns on time.
Outsourcing payroll gives you peace of mind because you are sure that the correct wage and social security taxes are paid. This means you never have to worry about tax penalties for late payments or incomplete filing.
Doing business in Germany has a lot of benefits, which all stem from the country’s strong business sectors and economy, high skill levels of workers and the German business culture’s core values.
If your U.S. company is expanding into Germany, the success of your endeavour will rely on a sound understanding of these important values. It will also depend on your ability to interpret their influence over business interactions – something you can learn through different initiatives and cross-cultural awareness courses.