With a gross domestic product of 3.346 billion euro, Germany is the fourth largest economy in the world after the United States, China and Japan and the largest economy in Europe. This gross domestic product is generated by the population of 84.5 million people who live on the 357.600 km2 that is Germany.
The high purchasing power parity (PPP) makes the German market a tempting market to enter. Many companies have already invested in a German market entrance. In 2018, foreign investment in Germany accounted 10 million euros. In total 795 billion euros of foreign investments are outstanding. What are the considerations to have a successful market entrance in Germany?
The German states, laws and regulations
Germany is organized in 16 states (Bundesländer). There are federal laws, which apply throughout the territory of the Federation, and state laws which are valid only in the respective “Bundesland”. Each state has its own constitution and also has the power to adopt legislation, general administrative orders and statutes within the legal framework of the federal constitution. What this means is that the regulations can be different in each “Bundesland”. As an example, in the federal states of North Rhine-Westphalia and Lower Saxony, the regulations in the field of construction differ in many technical aspects from Bavaria, Hamburg or Berlin.
To the letter of the Law
German law provides no room for acting to the Spirit of Law. As an example, if you, as a company, hire a number of self-employed persons, this is false self-employment, which is heavily fined in Germany. In the Netherlands this is against the letter of law, but tolerated.
GDPR
Before the European regulation on privacy was implemented by installing the GDPR in Germany a similar law called the “Bundesdatenschutzgesetz” already was in place. This law seems to be stricter than the GDPR. In your marketing and sales outreach this is something to consider.
Internet connection and 5G coverage
Especially when your company offers a SAAS solution, it is important to take in account what the quality of the internet connection is and if it is sufficient for that companies needs. In our online course we present data on the quality of the internet connection and if it is sufficient.
Another aspect here is the coverage for mobile data. In Germany multiple Ipad apps have been developed for outside sales, to enable them to register new orders while being off-line. This shows that mobile data isn’t available everywhere.
Culture
A culture can be defined by the following subjects:
- POWER DISTANCE
- INDIVIDUALISM
- MASCULINITY
- UNCERTAINTY AVOIDANCE
- LONG TERM ORIENTATION
- INDULGENCE
Language
Many Germans speak English well, but they are very reserved to speak it. It could be that they are afraid to sound like “Arnold Schwarzenegger”. But probable it is part of the culture where one can only claim to be good at something when proof can be shown. The German word for proof is “Beweis”.
Paper based
Although this tends to shrink, there still is a lot done on paper. This also is “Beweis”. In your marketing outreach you may need to create paper brochures.
Steps for developing the market entry strategy for the German market
Here are 12 steps for the development of a market entrée strategy.
Step 0) How ready for export is your company?
The primary step in developing a market entrance strategy is to verify which parts of your company are not ready for export. These are not show-stoppers. You can either make these parts; sales, marketing, implementation, support, development, etc. ready for export, or you can use one of the 16 strategies for market entrée we present in our online course, to overcome these challenges, and be ready for export much sooner.
Step 1) Select the Bundesland in which your product is the best buy in the market
Due to the differences in laws and regulations it is good to focus on one “Bundesland” first. It might be tempting to select the one that is closest by or has the richest clients. But these are not the right selection criteria for finding a market in which your product is the best buy in the market. When you need help with finding better selection criteria, our online course “How to find a Best Buy Market” will help you. Which “Bundesland” would you choose.
- Baden-Württemberg
- Bayern
- Berlin
- Brandenburg
- Bremen
- Hamburg
- Hessen
- Mecklenburg-Vorpommern
- Niedersachsen
- Nordrhein-Westfalen
- Rheinland-Pfalz
- Saarland
- Sachsen
- Sachsen-Anhalt
- Schleswig-Holstein
- Thüringen
Step 2) Select one Industry
When your company services multiple industries it is important to select one industry to focus on. This enables you to focus your marketing and sales budget which will make it more effective. When you need help selecting the best industry to focus on, our online course will help. At 69.3% the services industry is the largest sector of the German market.
Step 3) Select the best company size
There is a large amount of small to middle-sized companies (“Mittelstand”). However, German companies tend to be bigger in size compared to other countries in Europe. One of the reasons is that these companies tend to have a settlement in each “Bundesland”. This is something to take into account. Another aspect regarding company size is the process that is automated by your solution. When companies grow they tend to organize these processes differently. This is another subject addressed in our online course. Can your solution handle this other form of processing? Can your solution handle multiple settlements?
Step 4) Select the best contact person
Ideally the decision maker is the problem owner. But decision makers are often hard to reach. Especially when the companies are larger. Other contact persons can sometimes provide you with enough information to rate the chances of success with that prospect. Therefore it is important to understand what information you want to get, what information you want to give, and which buying role you need for each of them. Again the online course will help here.
Step 5) How to write a successful pitch for selling your software in Germany?
The most important part of developing a successful pitch is knowing how your solution is better than the competition. Especially the competing solution which the prospect is using now. This could be the “they have nothing in place” competitor. This is part of our Replacement Sell Strategy. When you want to know more about writing one, give us a call or drop an email. The priciples of the elevator pitch can be usefull as well.
Step 6) Exhibit at Business event
In Germany it is common to present once business through business events. The German word for business event location is Messegelände. There are many event locations to choose from. Keep in mind that selling on that business event will require your company to have a registered business in Germany, for tax reasons. This site might help: https://www.elster.de/eportal/start
Step 7) Registering a business in Germany
Registration of a company must be done both at country level and “Bundesland” level. Registration must be done at:
Step 8) Xing or LinkedIn
It seems like Xing is changing from a LinkedIn variation to a jobs portal. I’ve seen multiple messages of people moving away from Xing. Having said that, I have also seen many Germans who are not present at LinkedIn. And those who are not present at both. I would use LinkedIn.
Step 9) Meeting on site or off site
As always, a visit on site will provide more information and will have a better bonding effect. When multiple people are present there can be a hierarchy present. Employees tend to look at the “Geschaftsführer” before they respond. It is common to arrange meetings between people at the same level of hierarchy. The German word for this is “Augenhöhe” or “Ebene”. Sometimes a “Prokurist” will be present. This is an employee with authority to make decisions when the Boss is out of town.
Step 10) The offer
A local law firm should help setting up the general terms or at least with translating them. Sending an offer in English is okay for most working people, nowadays. Sending an offer in German is better.
Step 11) The order
The “Geschäftsführer” or “Prokurist” will sign the contract. What can happen after that, is that the continuation of the project is immediately transferred to someone lower in the organization. It is possible that the warm contact you worked on, so hard, suddenly stalls. Therefore it is good to agree upon the frequency of contact and expectations after the order is signed.
The execution of the project
Coming prepared is the best approach to execute the project successfully. The course “How to find a Best Buy Market” considers those elements in the organization that are not ready for export, and offers multiple strategies to overcome these. The course “preparing for market entrée” will help to prepare.
Can you develop a Market Entrée Strategy for me?
Many parts in the development of a market entrée strategy are about making choices. We can provide your with data and our experience. In the end you will have to make those choises. We are ready to help.
I want to write the Market Entrée Strategy myself
When you want to develop the market entrée strategy for the german market yourself consider our online course “How to find a best buy market“. It will provide you with the selection criteria, strategies and valuable insight that will enable you to create a successfull market entrance strategy for the German market.
Take the first step and contact us
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