There isn’t a defining word in English to properly capture the whole meaning of Mittelstand. On paper, it refers to small and medium-sized enterprises, hereinafter SME(s), within the German-speaking sphere: Germany, Austria and Switzerland. Due to astonishing achievements, other countries tried to implement Mittelstand for their own. The word is formed from 2 roots: Mittel (medium) and Stand (class). You would be none the wiser after just this.
Mittelstand is not just a simple taxonomy word; it’s an idea that encompasses a broad set of values and definitions. Europe categorizes SMEs as businesses whose personnel and turnover numbers fall under specified limits. In contrast, enterprises in Germany don’t reduce themselves to such an exact classification but instead emphasize on how they act and their role in the respective society. Various traits circle Germany’s SMEs firms, such as: family-run business principles, longstanding objectives, independence, dextrous decision making, heavy investments into workforce well-being and education, almost non-existing hierarchies, social trust and support, and a lot more.
As you may have been aware, SMEs face quite a few obstacles that make or break the life cycle of a business. Access to financial resources for a start-up is quite a daunting task due to low or lack of credit score thus limiting their options to other means or outright stopping the train in its tracks. Another disincentive is a limited and scarce competitive labour pool. In addition to competing against the reach of large enterprises, it’s quite troublesome to get your hands on a skilled worker. Final but not least stumbling block is, of course, the market share of products. From researching to advertising, competing against big players of the vertical with their fully stacked departments worth years of experience somewhat dissuades many beginner entrepreneurs.
Despite the setbacks presented, the Mittelstand is booming. A quick research will just return SMEs being the backbone of Germany. What is the secret? “Behind the mask, there is more than just flesh. Beneath this mask there is an idea... and ideas are bulletproof.” as Alan Moore once said. Quite frankly Germany’s SMEs just tackled these obstructions of progress to such a degree that transcended the realm of it. Allow us to elaborate:
Unlike other financial systems in developed countries, the German one is formed of three types: private, public savings and cooperative banks. Neither public savings nor cooperative banks are institutions focused on profit. They provide loans to local firms and private households, based on a mandate of supporting the local economy further emphasized by the fact that they are mostly allowed to give loans in the respective geographical region. Moreover, these institutions are part of a joint liability structure thus sharing responsibility for losses and provide technical support through excess deposits. Such cooperativeness improves on the general stability and resilience more than private banks.
Another important factor is the KfW (Kreditanstalt für Wiederaufbau), state-owned development bank which provides both long-term and short-term loans to SMEs. It dates back to the aftermath of WW2 in a measure to stabilise and promote the growth of the economy. So far the organisation has provided financial aid of over €1.7trn by 2018. The focus point being finance for technological progress.
With a core of family-oriented values, it comes as no surprise that banks and owners nurture a buoyant relationship. Such close ties create a solid ground for facilitating access to credits at a lower interest rate thus overcoming the turmoil of temporary financial difficulties or start-up funding. This heavy contribution towards successful decision making is a good example of bringing necessary stimulation in securing independence.
An often overlooked expenditure is research and development costs, hereinafter R&D, which is essential to the innovative aspect of SMEs. But this has not been the case for Germany; the Fraunhofer Society was founded - a coalition between companies and universities, devised to capitalise on research. There are currently 72 Fraunhofer Society institutes spread across Germany’s landscape as well as subsidiaries abroad, each putting everything into fields of applied science, as opposed to Max Planck Society working primarily on basic science.
What is a worker without management and management without workers? A labourer’s competence directly relates to the performance and success of the economy as a whole. However, we must differentiate upon competence as an amalgam of innate talent and accumulated experience. The former is out of our control and can only be helped to define and blossom, the latter is formed as a result of assiduous work. An existing problem is the little internship times offered in most businesses. Such span of time is insufficient to harness enough value from an employee, therefore he becomes a liability.
To combat such crude ideas, Germany has a well-established educational system in place, which encourages connections. Diving into the nitty-gritty details of Germany’s school system is a meticulous task better left for another time. Mittelstand companies are recognised as one of the main reasons for low unemployment rates among young people. The main points to be considered are as follows: 82% of apprentices do vocational training at SMEs, and most of them are converted into regular employees at the end of their training, above-average investment expenditure, dual-system of equal focus between education and apprenticeship. Therefore, the driving force of skilled property comes not only from the allotted training spaces, but crucial financial support as well.
Surely you must have entertained the thought of how do several to 50 people face off against giant enterprises that employ several dozen workers in specific departments and focusing on specific sets of skills. The funny thing is that they simply don’t. Mittelstand is mostly about devoting yourself to one thing and perfecting it. They achieve their dominance by targeting niche products. Small enough to be deemed not-a-threat by the big “brothers”, while at the same time needed to complete various projects. It’s all in their flexible and not existent hierarchy. Innovative, down-to-earth, dynamic and diverse are just a few words to characterise Mittelstand companies, yet these all are the main features that have a great contribution to both SMEs and national economy to prosper.
From another perspective, one wouldn’t really call that relationship a competition. Many German SMEs manufacture the type of up and downstream products that facilitate large corporations to achieve their goals, and synthesise complex and innovative goods and services in their turn.
Mittelstand’s power contributes to over 65% of Germany’s export revenue and the “Made in Germany” label surely puts everyone's mind at rest concerning any quality defects. So, with all the advantages and challenges, it makes sense that you might want to tap this fountain of high-quality merchandise. But where to start?
Three million and counting companies is an overwhelming amount to divide. And here is the case when business intelligence directories, such as Global Database, come in handy. To find lists of companies in Germany, all you need is a few clicks. Using the advanced segmentation tools provided, you just check the number of employees, region, industry, type of activity and/or any other criteria of your interest. With the German companies database, within seconds you get lists of small and medium companies in Germany, in case that would be the criteria of choice, with comprehensive data sets for each of the companies on the list. Not only do you get a Germany business email list and other contact information and data points that would allow you to make a fast strategic decision, but you also get the opportunity to have the credit risk, due diligence and know-your-customer checks in your hands with no effort.
