How is it that this economic giant seems to be picking up steam while its neighboring countries are barely scraping by? From the looks of it, Germany is simply doing the right things in the right place and at the right time.
Doing the right things…
German companies are known for engaging in very specific, yet very profitable businesses. Call them specialists, if you will. Just as Japan specializes in making wicked-sick gaming consoles and tech toys, they specialize in making industrial machinery.
Yeah, it’s definitely not as exciting as a PS3 or a Nintendo 3DS, but they make a killing seeking out low-key niches and doing everything in their power to excel at what they do.
Take for instance Kugler-Womako, which specializes in making passport-printing production lines, and Winkler+Dünnebier, a company that manufactures envelope-producing machines.
I’ll bet you ten bucks that you’ve never even heard of these companies before. Heck, you probably can’t even pronounce their names! But these two are world-class champions in their fields. They do what they do, and they do it well. It’s companies like these that drive Germany’s growth.
…in the right place…
Germany also has the advantage of being in the right place. Demand for Germany’s goods is just a stone’s throw away as many of its largest trading partners are neighboring European Union (EU) nations. We’re talking France, Austria, and the Netherlands! The Big EU is where the party’s at, son!
On the supply side of the equation, Germany has access to cheap labor in central Europe, which has helped a great deal in cutting back on labor costs and increasing efficiency.
Aside from that, being a member state of the euro zone allowed it to benefit from the euro’s depreciation in 2010. The euro’s weakness gave Germany’s exports a hand by making its goods more affordable in world markets.
…at the right time.
There’s also bit of luck and timing involved in Germany’s recent growth. China’s economy has been booming lately, and its appetite for Germany’s goods is as crazy as ever!
Germany makes many of the industrial machines that have made China the manufacturing beast that it currently is.
On top of that, in 2010, China’s foreign car imports grew a jaw-dropping 93.3%! German cars were second only to Japanese cars in the 813,600 total automobiles that were imported. China really loves Bimmers and Porsches, eh? But then again, who doesn’t?!
You can be as blind as a bat and still see that there are many things working for Germany at the moment. But is it doing EVERYTHING right? Not quite!
Clearly, exports have been fueling Germany’s economic engine. But while exports are a strength for Germany, its reliance on it for growth presents a weakness. It’s basically at the mercy of global demand!
To take control over its own destiny, it will have to balance out its strong exports with an increase in domestic spending, which has been lagging behind.
Maybe then Germany can grow to become a well-rounded economy capable of uplifting the EU as a whole, instead of an above-average one that merely stands out from the crowd.