A Pestle Analysis of Germany

Two of Germany’s most famous writers, Goethe and Schiller, identified the central aspect of most of Germany’s history with their poetic lament, “Germany? But where is it? I cannot find that country.” Until 1871, there was no “Germany.” Instead, Europe’s German-speaking territories were divided into several hundred kingdoms, principalities, duchies, bishoprics, fiefdoms and independent cities and towns.

Finding the answer to “the German question”–what form of statehood for the German speaking lands would arise, and which form could provide central Europe with peace and stability–has defined most of German history. This history of many independent polities has found continuity in the F.R.G.’s federal structure. It is also the basis for the decentralized nature of German political, economic, and cultural life that lasts to this day.

POLITICAL ASPECT OF THE COUNTRY:

The government is parliamentary, and a democratic constitution emphasizes the protection of individual liberty and division of powers in a federal structure. The chancellor (prime minister) heads the executive branch of the federal government. The duties of the president (chief of state) are largely ceremonial; the chancellor exercises executive power. The Bundestag (lower, principal chamber of the parliament) elects the chancellor. The president normally is elected every 5 years on May 23 by the Federal Assembly, a body convoked only for this purpose, comprising the entire Bundestag and an equal number of state delegates. President Christian Wulff (Christian Democratic Union – CDU) was elected on June 30, 2010.

The Bundestag, which serves a 4-year term, consists of at least twice the number of electoral districts in the country (299). When parties’ directly elected seats exceed their proportional representation, they may receive additional seats. The number of seats in the Bundestag was reduced to 598 for the 2002 elections. The upper chamber or Federal Council consists of 69 members who are delegates of the 16 states. The legislature has powers of exclusive jurisdiction and concurrent jurisdiction with the in areas specified in the Basic Law. The Bundestag has primary legislative authority. The upper chamber or Federal Council must concur on legislation concerning revenue shared by federal and state governments and those imposing responsibilities on the states.

Germany has an independent federal judiciary consisting of a constitutional court, a high court of justice, and courts with jurisdiction in administrative, financial, labor, and social matters. The highest court is the Federal Constitutional Court, which ensures a uniform interpretation of constitutional provisions and protects the fundamental rights of the individual citizen as defined in the Basic Law(23 May 1949) become constitution of the united Germany 3 October 1990 .

Major political parties: Social Democratic Party (SPD); Christian Democratic Union (CDU); Christian Social Union (CSU); Alliance 90/Greens; Free Democratic Party (FDP); Left Party (LP).

Suffrage: Universal at 18.

ECONOMICAL ASPECT OF THE COUNTRY:

The German economy the 5th largest economy in the world and Europe’s largest. Is a leading exporter of machinery, vehicles ,chemicals ,and household equipment and benefits from highly skilled labour force .

Embarking on modernization and integration of Eastern German economy-where unemployment can exceed 20% in some municipalities-continues to be costly long term process with annual transfers from the west to east amounting in 2008 to roughly $12 billion.

Reform launched by Government of Chancellor Gerhard Schroeder(1998-2005).

Addressing chronically high unemployment and low average growth.

Which resulted to strong growth and falling unemployment in 2006-07.

New post reunification of unemployment low to 7.8%.

Reducing working hour scheme.

Chancellor Angela Merkel biggest challenge was to fight with recession.

Modest increase in unemployment during recession(2008-09) healthy decrease in 2010.Recovering well as GDP contracted nearly 5% in 2009 but grew by 3.3%.

Germany manage to crept out of recession largely to rebounding manufacturing orders and exports-primarily outside the euro zone

Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts

Results second term increased Germany’s Budget deficit to 3.3% in 2009 and to 3.6% in 2010

The economy follows free market principles with a significant degree of government regulation and generous social welfare programs and protections. The state plays a role in the economy, providing subsidies to certain sectors and by retaining ownership of some segments of the economy, while promoting competition and free enterprise.

Economic life in Germany is more international in nature than in most other major industrial nations. One in three euros in Germany is generated through exports; nearly one in four jobs depends on exports.

Current Scenerio:

GDP (2010 nom.): $3.339 trillion.

Annual growth rate: (2010 est.) 3.5%; (2009) – 4.7%; (2008) 1.7%.

Per capita GDP (2010 nom.): $44,660.

Inflation rate (December 2010): 1.6%.

Unemployment rate (October 2010): 7.5%.

Agriculture (0.9% of GDP in 2010):

Products-corn, wheat, potatoes, sugar, beets, barley, hops, viticulture, forestry, fisheries.

Industry (26.8% of GDP in 2010):

Types-car-making; mechanical, electrical, and precision engineering; chemicals; environmental technology; optics; medical technology; biotech and genetic engineering; nanotechnology; aerospace; logistics.

Trade (2009): Exports-$1.124 trillion: chemicals, motor vehicles, iron and steel products, manufactured goods, electrical products.

Major markets (2009)-France, Netherlands, U.S. Imports–$937 billion: food, petroleum products, manufactured goods, electrical products, motor vehicles, apparel. Major suppliers-Netherlands, China, France.

SOCIAL ASPECT OF THE COUNTRY:

Area: 357,114 sq. km. (137,846 sq. mi.)

Major Cities : Capital-Berlin, Hamburg, Munich ,Cologne, Frankfurt , Essen , Dortmund , Stuttgart , Dusseldorf , Bremen , Hanover .

Terrain: Low plain in the north; high plains, hills, and basins in the center and east, mountainous alpine region in the south.

Climate: Temperate, cooler and rainier than much of the United States.

Nationality: Noun and adjective–German(s).

Population (January 1, 2010 estimate): 82,329,758.

Population growth rate (% per annum, 2010 est.): -0.053%.

Urban population (2008): 74%.

Ethnic groups (2010): German 91.5%, Turkish 2.4%, other 6.1% (made up largely of Greek, Italian, Polish, Russian, Serbo-Croatian, Spanish); Danish minority in the north, Sorbian (Slavic) minority in the east.

Protestant 34%; Roman Catholic 34%; Muslim 3.7%; unaffiliated or other 28.3%.

Language: German.

Education: Years compulsory-10; attendance-100%; literacy-99%.

Health: Infant mortality rate (2010)-3.99/1,000; life expectancy (2010)-women 82.42 years, men 76.26 years.

Persons employed (second quarter 2010): 40.3 million.

TECHNOLOGICAL ASPECT OF THE COUNTRY:

German industry is very diversified and in many sectors it is a global leader.

The most important branch of the economic activity in Germany, with traditionally a very high share of total economic production, is industry. The 49,000 German industrial undertakings employ nearly 6.4 million staff. Together they generate turnover of more than 1.3 trillion euros. 98 per cent of all German industrial undertakings are small or medium-sized companies (SMEs) with 500 or fewer staff.

Germany is the world’s third largest automobile producer, with more than 70 percent of vehicles produced here intended for export. Machine and plant construction, in which most German industrial undertakings are involved, is also of outstanding international importance.

Germany is also a world leader in the chemical industry. Furthermore, among Germany’s most innovative sectors with above average growth rates are those of technologies for the use of renewable energies as well as information technology and bio-technology.

A century ago, with its world-leading chemical industry and its cadre of top physicists, Germany was widely considered a technological heavyweight. But it has now fallen behind in many areas of emerging technology. The German biotech industry, for example, started much too late (it hardly existed until the mid-1990s) and is still trying to make up ground. And while German universities are doing excellent research on nanotechnology, many worry that the country will not turn that basic science into products.

Germany’s greatest strength is its automobile industry. In the years to come, many emerging technologies, from optical communication links to nanotech mate­rials, will find their way into cars. Tech­nological innovation will be critical to creating the opportunities that will lead German carmakers and their suppliers out of their current trouble. In particular, German carmakers are betting on computer-based assistance systems that could make driving safer and more comfortable.

The basic idea is that a car would map information from a variety of sensors, like cameras and radars, into a digital model of the surrounding traffic conditions. In case of danger, the system would issue a warning to the driver. In more-advanced systems, vehicles could use wireless communications to inform each other in real time about oil puddles, traffic jams, or accidents. BMW is working on wireless networks for cars .

They have introduced prototypes of hybrid gasoline-electric vehicles, carmakers in Germany are betting on the longer-term vision of fuel cell cars that consume hydrogen.In the late 1990s, after massive antinuclear protests, the government coalition of Social Democrats and Greens decided to shut down Germany’s nuclear power plants by 2020. The country committed itself instead to developing renewable energy sources such as wind and solar power.

But whether renewable energy sources can ever contribute sufficiently to German energy production is much debated-hence the re emergence of the nuclear option. Developers of so-called third-generation nuclear plants claim that their technology is much less risky.

Looking further ahead, German researchers are doing world-class basic science in fields ranging from materials science to biomedicine. German neuroscientists have made important contributions to research in brain implants and in non invasive brain-­machine interfaces.

Automobile Industry

Currently, six German companies dominate the automotive industry in the country: VW, Audi, BMW, Daimler AG, Porsche Opel.Nearly six million vehicles are produced in Germany each year, and approximately 5.5 million are produced overseas by German brands. Alongside the United States, China and Japan, Germany is one of the top 4 automobile manufacturers in the world. The Volkswagen Group is one of the three biggest automotive companies of the world (along with Toyota and General Motors).

LEGAL ASPECT OF THE COUNTRY:

The administration of justice is divided into five branches: ordinary, labor, administrative, social and financial courts.

The plaintiffs and the accused can appeal against a court ruling.

The law of the Federal Republic of Germany applies to virtually all aspects of life.

Germany’s legal system has been shaped by constitutional law but is also influenced by the law of the European Union and by international law.

The body of federal laws now encompasses approximately 1,900 acts and 3,000 statutory instruments.

Laws are passed by the Bundestag, and decrees on the basis of laws are enacted by the Federal government.

State law is mainly concerned with such matters as schools and universities, the press, radio and television, as well as the police and local government.

The legal stability attracts foreign companies and is to the benefit of investments and entrepreneurial activity in Germany.

Business-life in Germany is based on the principle of competition.

To control unfair market behavior is within the responsibility of the Federal Cartel Office in Bonn.Fair competition is also safeguarded by the Act Against Unfair Competition.

Trademarks and patents enjoy strong protection in Germany. For Germany, the German Patent- and Trademark Office is in charge of these registrations.When exporting to Germany, various aspects have to be considered: Customs and taxes, quality and environmental standards, Trademark and competition rules etc.

The importer is responsible for clearing the items to put the goods in circulation in Germany. Imported goods must be accompanied by a customs declaration, which has to be submitted in writing, and an invoice in duplicate. Like most of the member states of the European Union, Germany adheres to the metric standard. Quantities and qualities of goods must therefore be quoted in metric units or units derived from them.As consumer protection and information are of fundamental importance, there are precise regulations on labelling products, especially for food, which are bound for the Single European Market. For safety aspects of several kinds of products, Germany has established the Federal Institute of Risk Assessment.

ENVIRONMENTAL ASPECTS OF THE COUNTRY

Industrialization has taken its toll on Germany’s environment, including that of the former GDR – Global Depositary Receipt.

Resources

Germany has 107 cu km of renewable water resources, of which 86% are used for industrial purposes.

Germany relies principally on fossil fuels as sources of energy.

40% energy consumption – petroleum

30% consumption -domestic coal deposits.

17% consumption – natural gas

10% consumption – nuclear energy

Other sources of energy, such as hydroelectric, solar, or wind-powered electric power plants, are relatively insignificant.

Most production is in private hands.

Environment current issues: 

Emissions from coal-burning utilities and industries contribute to air pollution.

Acid rain resulting from sulfur dioxide emissions, is damaging forests.

Pollution in the Baltic Sea from raw sewage and industrial effluents from rivers in eastern Germany; hazardous waste disposal.

Still by 1994, 50% of Germany’s forests had been damaged by acid rain.

Government efforts

The Federal Emission Protection Act of 1974.

The Petrol Lead Concentration Act shortened the lead content of gasoline by 1976.

The Effluency Levies Act, effective January 1978, requires anyone who discharges effluents into waterways to pay a fee reckoned in accordance with the quantity and severity of the pollutant

Merkel Backs EU Carbon Emissions Tax

Government looked toward stricter enforcement of existing laws and to technological improvements in engine design.

The “polluter pays” principle, established emissions standards for industry, agriculture and forestry operations, and public utilities.

Government established a mechanism for ending the use of nuclear power over the next 15 year.

Government working to meet EU commitment to identify nature preservation areas in line with the EU’s Flora, Fauna, and Habitat directive.

MICHAEL PORTER’S NATIONAL DIAMOND FRAMEWORK

MPND framework study of patterns of comparative advantage among industrialized nations.

FACTOR CONDITIONS IN GERMANY

High quality strategy are several key favourable factor conditions-

A highly skilled technically trained workforce.

A substantial scientific capacity to create knowledge.

A well developed and high quality infrastructure.

These conditions were created by scientifically oriented education system, a well developed, government sponsored, well developed, university based research programs,and firm research investments. These factors makes Germany the leader in improving existing industries.

Unions and employers are effectively involved in state decision making through centralized peak groups that have strong control over their memberships.

Moderately corporatist in regard to national policy processing ,but unions have essential equal power to employers and government.

The state emphasized labor market policies to adopt industry to technological change and market shifts ,particularly for vocational education.

Developed a “social market economy”.

German union have great political strength

Still concerns due to the following factors:

Germany lags behind the USA in term of starting new industries or Japan in commercializing new products.

Still lagging in developing industries in fields like consumer and business services, electronics and computers.

Very high corporate and individual tax rates and tough environmental laws have become a competitive disadvantage.

DEMAND CONDITON IN GERMANY

The demand condition in Germany are very supportive of international success.

Its home market is the world’s third largest comprising of sophisticated demanding consumers who expect a high level of quality and services.

The saturation of home markets led it’s industries to seek overseas markets ,unaided by colonies.

Thus,they is experienced ,large scale competitors in developing market share in expanding international markets.

RELATED AND SUPPORTING INDUSTRY

These are one of Germany strengths as strong supplier industries began strong downstream industries.

For eg. International success in the chemicals and plastics produced international success in “pumps, liquid measuring and control instruments, plastic processing machinery, process controls and heat exchangers” plus other linked industries.

Weaknesses in electronic and computer industries hindered Germany international competitiveness in some advanced industries.

FIRM STRATEGY ,STRUCTURE &RIVALRY

The German economy is highly open and thus results in global competition which placed pressure on industrial structure particularly from Japan. Labor market deregulation has been attempted as a means to achieve employer flexibility. But a strength is the fact that German firms have long been international players.To adequately balance competiveness with standards of living created by an extensive welfare system, many industries have adopted niche market strategies focusing on quality, innovation and differentiation.

Firm strategy in Germany are favourable to achieving international success.Firms in order to stabilize employment focuses on long term market share rather than short term profit as in USA ,Singapore and UK.

Ownership is primarily by institutional owners like bank and other corporations.

Corporate finance is credit based from banks while stock market play a smaller role.

Banks plays a much greater role than government in adjusting the industrial structure to change.

The German automobile industry with 7 major competitors(VW, Audi, BMW, Daimler AG, Porsche, Opel) provide intense competition in the domestic market, as well as the foreign markets in which they compete but also have thread of automobile industry specially Japan who is having 9 major automobile giants like Suzuki Nissan etc. giving tough competition.