Mittelstand

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Darstellung der tragenden Rolle des Mittelstandes in Walter Wilhelms „Mission des Mittelstandes“ (1925)

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 since the beginning of the 20th century.[citation needed]

Definition[edit]

The term is not officially defined or self-explanatory. The German word 'Stand' refers to an estate, from the medieval model of society where the position of an individual was defined either by birth or profession. Basically there were 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.

Mittelstand model[edit]

Mittelstand companies are "highly focused, achieving unprecedented efficiencies by designing a business model with a razor-thin focus and learning to do the one thing really well" then to "compensate for their razor-thin focus... they diversify internationally and enjoy great economies of scale".[1] Mittelstand companies benefit from Germany's apprentice system, which provides highly skilled workers,[2] and there is a "collaborative spirit that generally exists between employer and employees... In the post-reunification recession, it seemed only natural to German workers to offer flexibility on wages and hours in return for greater job security.".[3]

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.[4] They are typically privately owned and often 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.[4] 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.

Typically, Mittelstand companies work closely with universities and researchers[citation needed] and cluster themselves around big manufacturers.

In modern Germany[edit]

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.[5] Some predicted their demise that year due to narrowing of credit availability and a record number of firms collapsing.[6] So far these predictions have failed to materialize, Mittelstand companies continue to employ 70% of Germany’s workforce. However, they contribute only 50% of its gross domestic product (GDP, $3.3 trillion). [7] Many Mittelstand companies are export-oriented and contribute to Germany being the world's second largest exporter.[7] They focus on innovative and high value manufactured products and occupy worldwide niche market leadership positions in numerous B2B segments.[4] They are typically privately owned and based in small rural communities.

The German Savings Banks Association (DSGV) publishes an annual analysis, Diagnose Mittelstand, based on surveys and balance sheets of over 100,000 Mittelstand companies amongst its member bank's customers.[8]

Main sectors[edit]

Germany's Mittelstand is heavily concentrated in:

  • machinery
  • auto parts
  • chemicals
  • electrical equipment[9]

Notes[edit]

  1. ^ Karan Girotra and Serguei Netessine (February 12, 2013). "Extreme Focus and the Success of Germany's Mittelstand". Retrieved 2013-06-21. 
  2. ^ "German Mittelstand: Engine of the German economy". Federal Ministry of Economics and Technology (BMWi). Retrieved 2010-12-08. 
  3. ^ John Studzinski (5 February 2013). "Germany is right: there is no right to profit, but the right to work is essential". Retrieved 2010-12-08. 
  4. ^ a b c Venohr, Bernd (2010). "The power of uncommon common sense management principles - The secret recipe of German Mittelstand companies - Lessons for large and small companies". Retrieved 2010-12-08. 
  5. ^ Günterberg 2004, p.5
  6. ^ Sam Vaknin (Jan 29, 2003). "Analysis: The demise of the Mittelstand". United Press International. 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." 
  7. ^ a b Sreedhar Kajeepeta. "Finding Hidden Gems in the German Mittelstand". Retrieved 2012-02-22. "Mittelstand companies employ 70 percent of Germany’s workforce and contribute to 50 percent of its gross domestic product (GDP, $3.3 trillion)." 
  8. ^ Diagnose Mittelstand 2012 and Suplementary tables, DSGV website. Retrieved 2012-02-13. Diagnose 2012 is the eleventh annual analysis published by DSGV.
  9. ^ "Germany's Mittelstand Still Thrives". September 30, 2010. 

References[edit]

  • K. Hartmann: "German Mittelstand deals: Dead, or alive and kicking?". In: Acquisition Monthly Nr. 9, 2005, p. 2–3. (PDF, 360 KB)
  • Günterberg, B.; Kayser, G. (2004). SMEs in Germany - Facts and Figures 2004. IfM-Materialien Nr. 161. Bonn: Institut für Mittelstandsforschung. Retrieved 2012-09-26.  (PDF, 340 KB)

External links[edit]