Mittelstand
Mittelstand refers to small and medium-sized enterprises in German-speaking countries, especially in Germany, Austria and Switzerland. Economic and business historians have been increasingly giving Mittelstand companies more and more credit for Germany's economic growth in the beginning of the 20th century.
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[edit] Definition
The term is not officially defined or self-explanatory. The German word 'Stand' refers to a medieval model of society where the position of an individual was defined either by birth or profession. Basically there was three levels, the upper one being the aristocracy, the middle one being the free bourgeoisie of the cities and the lower one the peasants. Today, the term is used with two meanings. The first meaning refers to small and medium sized enterprises, SME ('kleine und mittlere Unternehmen', KMU), defined by number of employees and turnover. The second meaning refers to any family run or owned business (which doesn't have to be a SME). The correct term to describe households with medium or higher income would be 'Mittelschicht' with the English translation middle class.
[edit] Mittelstand Model
Many Mittelstand companies are export-oriented. They focus on innovative and high value manufactured products and occupy worldwide niche market leadership positions in numerous B2B segments.[1] They are typically privately owned and based in small rural communities. Many of the successful Mittelstand companies combine a cautious and long-term oriented approach to business with the adoption of modern management practices, like employing outside professional management and the implementation of lean manufacturing practices and total quality management.[1]
Typically, Mittelstand companies work closely with universities and researchers and cluster themselves around big manufacturers. Owner-managers often show a "love for the business" and rub shoulders with workers. Mittelstand companies benefit from Germany's unique apprentice system which supply a steady flow of qualified workers through 342 recognized trades.
[edit] In modern Germany
Germany's Mittelstand companies (SME) are a very important part of the country's economy. In 2003, these companies employed 70.2% of all employees in private business, according to the Institut für Mittelstandsforschung. Some predicted their demise that year due to narrowing of credit availability and a record number of firms collapsing[2]. Many Mittelstand companies are export-oriented and contribute to Germany being the worlds second largest exporter. They focus on innovative and high value manufactured products and occupy worldwide niche market leadership positions in numerous B2B segments.[1] They are typically privately owned and based in small rural communities. Many of the successful Mittelstand companies combine a cautious and long-term oriented approach to business with the adoption of modern management practices, like employing outside professional management and the implementation of lean manufacturing practices and total quality management.[1]
[edit] Main Sectors
Germany's Mittelstand is heavily concentrated in four main sectors:
- machine tools
- auto parts
- chemicals
- electrical equipment
[edit] Contrast to Others
The Mittelstand emphasis on long-term profitability stands in contrast to the public corporations of many countries (including German public corporations) which face quarterly or annual pressure to meet expectations.
[edit] Eurozone Crisis
Currently, while the rest of Europe is in the doldrums, Germany continues to grow - attributed by some due to the Mittelstand.
[edit] References
- ^ a b c d Venohr, Bernd (2010). "The power of uncommon common sense management principles - The secret recipe of German Mittelstand companies - Lessons for large and small companies". http://www.druckersociety.at/repository/2010/day01/15'30-17'00/Venohr_101118_PPT_Beamerversion.pdf. Retrieved 2010-12-08.
- ^ Sam Vaknin (Jan. 29, 2003). "Analysis: The demise of the Mittelstand". United Press International. http://www.upi.com/Business_News/2003/01/29/Analysis-The-demise-of-the-Mittelstand-I/UPI-19481043875148/. Retrieved 2011-12-14. "The investment requirements of Mittelstand firms total $20 billion annually. But access to capital is narrowing. Tottering local banks are risk averse, the capital markets are lethargic, private investors are scared and scarce. The Basel 2 capital adequacy requirements will considerably increase the cost of bank loans to risky borrowers, such as are most Mittelstand firms...According to Creditreform, quoted by The Economist, a record 37,700 companies went under last year. The Financial Times puts the figure at 45,000. This year will witness another bumper crop. The figures, according to the Institut für Mittelstandsforschung in Bonn, are even more harrowing. In 2001, 386,000 startups were liquidated and 455,000 formed to yield 69,000 new firms. New startup formation is at a low ebb."
- K. Hartmann: "German Mittelstand deals: Dead, or alive and kicking?". In: Acquisition Monthly Nr. 9, 2005, p. 2–3. (PDF, 360 KB)
- Institut für Mittelstandsforschung (Institute of Mittelstand Research): "SMEs in Germany - Facts and Figures 2004" (PDF, 340 KB)
