As with doing business in any country, it is imperative to fully understand
the political, technological, legal, and environmental landscapes of the
country. By gathering information on past and present situations,
companies can make educated decisions about how they can successfully operate
in a foreign country in the future. Many companies grow into global
companies to create economies of scale as well as economies of scope.
In creating economies of scope, it is important to realize what a given
country has to offer that differentiates it from other countries.
This in turn will determine the type of operation established as well as
the size of investment made in a foreign operation.
Germany has a politically stable government which welcomes investment by foreign companies. The government is fair with foreign investors and is not known to take over foreign investments once they are up and running. In fact, the German government is a member of the World Intellectual Property Organization which attempts to protect proprietary information. This is quite important to companies attempting to bring new technology to a foreign country. Along with political stability the German economy is quite stable falling behind only the United States and Japan. The legal environment of Germany can be a hindrance to employers. Once employees are hired, they are not easily let go. German law protects individuals from being easily laid off or fired and employees are typically promoted based on seniority rather than performance. However, while it is harder to let employees go, the high costs of job turnover are not present as Germans tend to be very loyal employees. German law also enforces contracts making a contract meaningful rather than a worthless piece of paper as it is in some countries. Finally, while Germany has a highly technological labor pool, the labor is not cheap. While this high cost of labor may be acceptable to a highly technological production process, this is a deterrent to building simple manufacturing plants.
Upon reviewing the P.E.L.T. of Germany, it can be realized that it is safe to make large investments in operations without the fear of government intrusion or the inability to enforce contracts rather than continuing an export only relationship with the country. If cheap labor and major tax breaks are the goal, then a company would be wise to look elsewhere to possibly a developing country. However, in these other countries a greater risk exists for political instability, technology theft, and currency fluctuations.
Boston, William. German Garbage Scandal Raises Fears of Rampant Corruption. The Wall Street Journal. March 20, 2002.A19.
CIA - World Factbook - Germany
Interview with Dr. Kirsten Daniel of Loyola University, New Orleans
Scarborough, Jack. The Origins of Cultural Differences and Their Impact on Management.Quorum Books 2001. p216.