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Mittelstand

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Title: Mittelstand  
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Subject: Economy of Germany, Germany, Reutlingen University, Outline of Germany, Small and medium-sized enterprises
Collection: Economy of Germany, German Words and Phrases, Types of Business Entity
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Mittelstand

Representation of the supporting role of the Mittelstand in Walter Wilhelms „Mission des Mittelstandes“ (Mission of the Mittelstand, 1925)

Mittelstand refers to small and medium-sized enterprises in German-speaking countries, especially in Germany, Austria and Switzerland. Economic and business historians have been increasingly giving Mittelstand companies more and more credit for Germany's economic growth since the beginning of the 20th century, often under the name of hidden champions.[1]

The term is also used in other languages as an alternative to e.g. SME/SMB.

Contents

  • Definition 1
  • Mittelstand model 2
  • In modern Germany 3
  • Product competitiveness of Mittelstand products in Export-markets 4
  • Main sectors 5
  • Notes 6
  • References 7
  • External links 8

Definition

The term is not officially defined or self-explanatory. The German word Stand refers to an estate, from the medieval model of society, under which a person's position was defined by birth or occupation. There were three principal levels, the upper one being the aristocracy, the middle one (the Mittelstand) the free bourgeoisie of the cities, and the lower one the peasants. Today, the term is used with two meanings. The first refers to small and medium-sized enterprises (SME; German, kleine und mittlere Unternehmen or KMU), as defined by number of employees and turnover. The second meaning refers to any family-run or -owned business (not necessarily a SME). (Note that the correct term to describe households of middling income would be Mittelschicht, with the English translation middle class.)

Mittelstand model

Mittelstand companies are "highly focused, achieving unprecedented efficiencies by designing a business model with a razor-thin focus and learning to do the one thing really well"; then to "compensate for their razor-thin focus . . . they diversify internationally and enjoy great economies of scale".[2] Mittelstand companies benefit from Germany's apprenticeship system, which provides highly skilled workers;[3] and there is a "collaborative spirit that generally exists between employer and employees . . . . In the post-reunification recession, it seemed only natural to German workers to offer flexibility on wages and hours in return for greater job security.".[4]

Many Mittelstand companies are export-oriented. They focus on innovative and high-value manufactured products, and occupy worldwide niche market leadership positions in numerous B2B segments.[5] They are typically privately owned and often based in small, rural communities. Many of the successful Mittelstand companies combine a cautious and long-term-oriented approach to business with the adoption of modern management practices, such as employing outside professional management, and the implementation of lean manufacturing practices and total quality management.[5] The Mittelstand emphasis on long-term profitability stands in contrast to the public corporations of many countries (including German public corporations) which face quarterly or annual pressure to meet expectations.

Typically, Mittelstand companies work closely with universities and researchers and cluster themselves around big manufacturers.

In modern Germany

Germany's Mittelstand companies are a very important part of the country's economy. In 2003, these companies employed 70.2% of all employees in private business, according to the Institut für Mittelstandsforschung (IfM).[6] Some predicted their demise that year due to narrowing of credit availability and a record number of firms collapsing.[7] So far these predictions have failed to materialize, Mittelstand companies continue to employ 70% of Germany’s workforce and contribute 50% to its gross domestic product (GDP, $3.3 trillion). [8]

The German Savings Banks Association (DSGV) publishes an annual analysis, Diagnose Mittelstand, based on surveys and balance sheets of over 100,000 Mittelstand companies amongst its member bank's customers.[9]

Product competitiveness of Mittelstand products in Export-markets

Stiff competition between foreign manufactured goods within the Asian markets has seen machine-tools, automotive parts and medical supplies from German Mittelstand ceding ground to high-technology imports manufactured by companies located in ASEAN & BRICS countries.[10][11][12][13]

Main sectors

Germany's Mittelstand is heavily concentrated in:

  • machinery
  • auto parts
  • chemicals
  • electrical equipment[14]

Notes

  1. ^ IfM Bonn – Institut für Mittelstandsforschung (de)
  2. ^ Karan Girotra and  
  3. ^ "German Mittelstand: Engine of the German economy" (PDF). Federal Ministry of Economics and Technology (BMWi). Retrieved 2010-12-08. 
  4. ^ John Studzinski (5 February 2013). "Germany is right: there is no right to profit, but the right to work is essential". Retrieved 2010-12-08. 
  5. ^ a b Venohr, Bernd (2010). "The power of uncommon common sense management principles - The secret recipe of German Mittelstand companies - Lessons for large and small companies" (PDF). Retrieved 2010-12-08. 
  6. ^ Günterberg 2004, p.5
  7. ^  
  8. ^ Sreedhar Kajeepeta. "Finding Hidden Gems in the German Mittelstand". Retrieved 2012-02-22. Mittelstand companies employ 70 percent of Germany’s workforce and contribute to 50 percent of its gross domestic product (GDP, $3.3 trillion). 
  9. ^ Diagnose Mittelstand 2012 and Supplementary tables, DSGV website. Retrieved 2012-02-13. Diagnose 2012 is the eleventh annual analysis published by DSGV.
  10. ^ "How much is 'Made in Germany' really worth?". Deutsche Welle. 20 January 2014. 
  11. ^ "German machinery manufacturers face Chinese challenge" (October, 2013). Automotive Products Finder. 
  12. ^ "German machine tool industry aims to catch up with Japan in Thailand". VDW (German Machine Tool Builders ́ Association). 26 November 2014. 
  13. ^ "The future of German mechanical engineering" (July 2014). McKinsey & Company. 
  14. ^ "Germany's Mittelstand Still Thrives". September 30, 2010. 

References

  • K. Hartmann: "German Mittelstand deals: Dead, or alive and kicking?". In: Acquisition Monthly Nr. 9, 2005, p. 2–3. (PDF, 360 KB)
  • Günterberg, B.; Kayser, G. (2004). "SMEs in Germany - Facts and Figures 2004". IfM-Materialien Nr. 161. Bonn: Institut für Mittelstandsforschung. Retrieved 2012-09-26.  (PDF, 340 KB)

External links

  • , Working Paper 30, FHW Berlin. [(PDF, 363 KB)The German Miracle Keeps Running: How Germany's Hidden Champions Stay Ahead in the Global EconomyVenohr, Bernd and Meyer, Klaus E. (2007):
  • The Institutional Environment Supporting SME Enterprises in GermanyJörg Meyer-Stamer, Frank Wältring:
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