In the latest of our series to help the Scottish business community, Gareth Magee gives an insight into how to do business in Germany.
Population: approx 82 million
Loading article content
Capital city: Berlin
GDP: approx. US$3.4 trillion
Known throughout the world for quality and efficiency, dealing with Germany is a serious business in more ways than one. Wages are high, as is productivity, and goods and services coming out of Germany are recognised as amongst the best in the world.
Perhaps this is why Germany and China are doing so much business together. As China's largest trading partner in Europe, Germany can often serve as a more accessible 'gate' to the Chinese market for businesses elsewhere in Europe.
Foreign investors are free to choose the form of entity with which to operate in Germany, mainly opting for setting up a branch, a GmbH (private, Limited Liability Company) or a partnership.
The simplest is to start business with a German branch. As in all other cases, the business must first be registered with the local trading office before being allowed to start business. The branch itself may be a registered branch (registered in the Commercial Register) or a branch with no official registration. Being registered often simplifies business relations since a registered branch is more acceptable to a business partner. This is due to the fact that general information and changes concerning the foreign 'parent' have to be filed at the Commercial Register.
There generally is no minimum capital required for a branch, however, at least for tax purposes; an endowed capital is required, enabling the branch to carry out its business.
A branch manager may be appointed, which can include foreign managing directors.
With high wages, good employee benefits, a long history of trades unions and stringent employment laws, Germany may not at first seem the most attractive place for a UK company spreading its wings. But when the market size, the aforementioned strong trading relationships with China, and regional incentives for foreign companies are taken into account, these benefits might outweigh the seemingly onerous requirements (which are really not that much more burdensome than in the UK).
The most widely held view of the Germans, in business terms, is without a doubt, efficient. And the country has definitely earned this reputation - which isn't a bad thing when doing business. Considered and conservative, the German way of doing business is different to the UK. Given that we may be viewed as a bit too informal at times, happy to have a joke in the boardroom, in Germany strict professionalism is always the best route until the lie of the land is well and truly marked out.
Cutting down on risk will also make your proposition more attractive to our conservative German counterparts. Sharing of statistics, analysis, planning, thought processes and consultation will all improve the odds of success in a culture that values unambiguous prospects.
So what does an efficient approach entail? Unsurprisingly: punctuality; short and to the point communication; respect; preparation and planning in advance (as opposed to 'winging' it); and not pressuring for a quick decision. If you are presenting proposals, don't expect them to be taken as read after an engaging presentation - they'll be analysed in detail before any decision is made, and the charm of the presenter won't be much of an influence. The numbers always do the talking.
So, if you're looking to inject a bit of "Vorsprung durch Technik" into your business, Germany might have the right climate, but get the culture right too. Germany excels at many things, but giving second chances isn't one of them.
Gareth Magee is a partner at Scott-Moncrieff, leading accountants and business advisors, which, through its membership of the Moore Stephens network, helps Scottish businesses realise their international potential.