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Increasingly as more corporations become multinationals businesspeople would be well advised to spend time familiarizing themselves with other cultures and their social customs. For American business travelers traveling to Germany the cultural differences can be quite stark. Until 1871, there was no “Germany. ” Instead, Europe’s German-speaking territories were divided into several hundred kingdoms, principalities, duchies, bishoprics, fiefdoms and independent cities and towns.? Between 962 and the beginning of the 19th century, the German territories were loosely organized into the Holy Roman Empire of the German Nation.The initially non-hereditary Emperor, elected by the many princes, dukes, and bishops of the constituent lands and confirmed by the Pope, nominally governed over a vast territory, but had very limited ability to intervene in the affairs of the hundreds of entities that made up the Empire, many of which would often wage war against each other. The Empire was never able to develop into a centralized state. The 18th and 19th centuries were marked by the rise of Prussia as the second powerful, dominant state in the German-speaking territories alongside Austria, and Austrian-Prussian rivalry became the dominant political factor in German affairs.Successive Prussian kings succeeded in modernizing, centralizing, and expanding the Prussian state, creating a modern bureaucracy and the Continent’s strongest military. Despite Prussia’s emphasis on militarism and authority, Prussia also became a center of the German Enlightenment and was known for its religious tolerance, with its western regions being predominantly Catholic and Jews being granted complete legal equality by 1812. Under Chancellor Otto von Bismarck, Prussia defeated Austria (1866) and France (1870) in wars that paved the way for the formation of the German Empire under Emperor Wilhelm I in 1871.Germany became a federal state, with foreign and military policy determined at the national level, but most other policies remained the purview of the states. The government is parliamentary, and a democratic constitution emphasizes the protection of individual liberty and division of powers in a federal structure. The chancellor (prime minister) heads the executive branch of the federal government. The duties of the president (chief of state) are largely ceremonial; the chancellor exercises executive power. The Bundestag (lower, principal chamber of the parliament) elects the chancellor.The president normally is elected every 5 years on May 23 by the Federal Assembly, a body convoked only for this purpose, comprising the entire Bundestag and an equal number of state delegates. President Christian Wulff (Christian Democratic Union – CDU) was elected on June 30, 2010.?? The Bundestag, which serves a 4-year term, consists of at least twice the number of electoral districts in the country (299). When parties’ directly elected seats exceed their proportional representation, they may receive additional seats. The number of seats in the Bundestag was reduced to 598 for the 2002 elections.The Bundesrat (upper chamber or Federal Council) consists of 69 members who are delegates of the 16 Laender (states). The legislature has powers of exclusive jurisdiction and concurrent jurisdiction with the Laender in areas specified in the Basic Law. The Bundestag has primary legislative authority. The Bundesrat must concur on legislation concerning revenue shared by federal and state governments and those imposing responsibilities on the states.?? Germany has an independent federal judiciary consisting of a constitutional court, a high court of justice, and courts with jurisdiction in administrative, financial, labor, and social matters.The highest court is the Bundesverfassungsgericht (Federal Constitutional Court), which ensures a uniform interpretation of constitutional provisions and protects the fundamental rights of the individual citizen as defined in the Basic Law.? Typically, Germans have a masculine communication style that values truth and frankness in lieu of subtlety, instead believing that facts are important and those personal feelings shouldn’t obstruct the truth from being bluntly expressed. Outward displays of emotions in the workplace are discouraged and deemed as signs of weakness and a lack of professionalism.Their straightforward manner can be misinterpreted by other cultures as being quite offensive and downright rude. In Germany straightforwardness is seen as a sign of respect. This direct communication style is also evident in a lack of self-deprecation and thus is sometimes perceived as arrogance or hubris, however, this is a misconception of direct speech. As a consequence of their direct nature Germans are oft mislabeled as lacking a sense of humor. While it certainly is not true that Germans don’t have a sense of humor as with all cultures their sense of humor is well developed.There just happens to be a time and a place for joking in Germany and that time definitely isn’t during a business meeting or within any professional setting. The more serious a business meeting is, the more seriousness that is required or expected. Again while Germans seem extremely reserved this over-formality is a sign of respect as is using the proper terms Sie, Herr or Frau. In Germany, North America, and most western European countries punctuality is very important appointments and schedules are to be adhered to and tasks are performed in an orderly manner.This monochronic orientation of time is crucial in understanding the German businessman therefore meetings should scheduled and an agenda should be followed. Germans are also normally unsettled by uncertainty and indistinctness, thus Germans prefer to analyze problems in great depth prior to reaching any conclusions and are genuinely uncomfortable with business decision that are made based upon emotion. In addition more credence is given to printed documents than spoken word; therefore it is of vital importance to place significant information or decisions in writing.Detailed, long-term oriented planning is both expected and respected and such planning is used to outline future organizational goals. The German economy is the world’s fourth largest and, after the expansion of the EU, accounts for more than one-fifth of European Union GDP. Germany is the United States’ largest European trading partner and is the sixth largest market for U. S. exports. Germany’s “social market” economy largely follows free-market principles, but with a considerable degree of government regulation and generous social welfare programs.??Germany is the largest consumer market in the European Union with a population of over 82 million. However, the significance of the German marketplace goes well beyond its borders. An enormous volume of worldwide trade is conducted in Germany at some of the world’s largest trade events, such as MEDICA, Hannover Fair, Automechanika, and the ITB Tourism Show. The volume of trade, number of consumers, and Germany’s geographic location at the heart of a 27-member European Union make it a cornerstone around which many U. S. irms seek to build their European and worldwide expansion strategies. Market Challenges In 2009, Germany experienced the sharpest drop in economic activity since the end of World War II with GDP falling by 5%. This was due mainly to plummeting exports (-14. 7 percent) and a major drop in capital expenditure (-8. 6 percent). Thanks to a government-sponsored reduced working hours program (“Kurzarbeit”) and the government stimulus package of 81 billion euros, domestic consumption remained fairly stable. In December 2009, the Merkel government agreed to tax relief worth 8. billion euros to fuel economic recovery despite record high national debt. In 2010, the German economy rebounded strongly with GDP growth of 3. 6% and sky-rocketing exports (+14. 2%). In addition to exports, growth was increasingly driven by domestic demand. The German government expects economic growth to continue on a solid path in 2011. In recent years, German governments have implemented several reforms to address structural problems, such as a highly regulated labor market and high taxation, as well as high social insurance costs.These reforms and a series of changes in collective bargaining implemented since the late 90s have strengthened the forces driving economic growth. In 2010, Germany saw its unemployment rate fall to 7. 7%, its lowest level in 17 years. While long-term unemployment remains high, it has started to decline, and the outlook for 2011 is even more promising. The eight leading economic think tanks project wages to increase by 2. 8% in 2011 and unemployment to drop below the politically sensitive three-million mark during the next 12 months. As a result the jobless rate is expected to fall to an estimated 7. % in 2011. Among the reasons behind the surprising resiliency of the labor market – in addition to the widespread use of government-funded short-time work programs and company working-time accounts – is the fact that many companies entered the recession with a capital cushion and deliberately decided to keep highly skilled labor in hopes of riding out the crisis. In addition, parts of the services sector (e. g. , health and welfare, education and training) were not adversely affected by the recession and are continuing to create jobs.Moreover, a declining labor force helped to ease the unemployment situation. In 2010, average unemployment was at 3. 244 million, down from 3. 423 million in 2009, which marked the lowest average annual unemployment since 1992. In eastern Germany, the economic crisis hit the labor market less severely, and unemployment decreased from 13. 0% in 2009 to 12. 0% in 2010. Unemployment in eastern Germany is still almost twice as high as in the western part of the country (6. 6% in 2010). The number of employed persons rose 41. million in November 2010 (about 427,000 more than in November 2009), the highest level since Germany’s reunification in 1990. Germany presents few formal barriers to U. S. trade or investment, although Germany’s participation in the EU’s Common Agricultural Policy and German restrictions on biotech agricultural products represent barriers for some U. S. goods. Germany has pressed the new EU Commission to reduce regulatory burdens and promote innovation to increase EU member states’ competitiveness. The Merkel government has talked about the need for regulatory reform in Germany.In particular, Economics Minister Rainer Bruederle (pro-market Free Democratic Party – FDP) has pushed to reduce bureaucratic costs, since Germany’s regulations and bureaucratic procedures can be very complex. While not directly discriminatory, government regulation by virtue of its complexity may offer a degree of protection to established local suppliers. Safety or environmental standards, not inherently discriminatory but sometimes zealously applied, can complicate access to the market for U. S. products.American companies interested in exporting to Germany should make sure they know which standards apply to their product and obtain timely testing and certification. German standards are especially relevant to U. S. exporters because, as EU-wide standards are developed, they are often based on existing German standards. Market Opportunities For U. S. companies, the German market – the largest in the EU – continues to be attractive in numerous sectors and remains an important element of any comprehensive export strategy to Europe. While U. S. nvestors must reckon with a relatively higher cost of doing business in Germany, they can count on high levels of productivity, a highly skilled labor force, quality engineering, a first-class infrastructure, and a location in the heart of Europe. Market Entry Strategy The most successful market entrants are those that offer innovative products featuring high quality and modern styling. Germans are responsive to the innovation and high technology evident in U. S. products, such as computers, computer software, electronic components, health care and medical devices, synthetic materials, and automotive technology. Germany boasts one of the ighest Internet access rates in the EU and new products in the multi-media, high-tech and service areas offer great potential as increasing numbers of Germans join the Internet generation. Certain agricultural products also represent good export prospects for U. S. producers. Price is not necessarily the determining factor for the German buyer, given the German market’s demand for quality.?? The German market is decentralized and diverse, with interests and tastes differing dramatically from one German state to another. Successful market strategies take into account regional differences as part of a strong national market presence.Experienced representation is a major asset to any market strategy, given that the primary competitors for most American products are domestic firms with established presences. U. S. firms can overcome such stiff competition by offering high-quality products, services at competitive prices, and locally based after-sales support. For investors, Germany’s relatively high marginal tax rates and complicated tax laws may constitute an obstacle, although deductions, allowances and write-offs help to move effective tax rates to internationally competitive levels. Most inhabitants of Germany are ethnic German.There are, however, more than 7 million foreign residents, many of whom are the families and descendents of so-called “guest workers” (foreign workers, mostly from Turkey, invited to Germany in the 1950s and 1960s to fill labor shortages) who remained in Germany. Germany has a sizable ethnic Turkish population (2. 4% at the beginning of 2010). Germany is also a prime destination for political and economic refugees from many developing countries. An ethnic Danish minority lives in the north, and a small Slavic minority known as the Sorbs lives in eastern Germany.Due to restrictive German citizenship laws, most “foreigners” do not hold German citizenship even when born and raised in Germany. However, since the German Government undertook citizenship and immigration law reforms in 2002, more foreign residents have had the ability to naturalize.?? Germany has one of the world’s highest levels of education, technological development, and economic productivity. Since the end of World War II, the number of youths entering universities has more than tripled, and the trade and technical schools of the Federal Republic of Germany (F. R. G. ) are among the world’s best. Germany is a roadly middle class society. A generous social welfare system provides for universal medical care, unemployment compensation, and other social needs. Millions of Germans travel abroad each year. It is estimated that the population of Germany will decline from the current 82 million people to around 77 million people by 2050. Due to this demographic change, the available workforce aged 20-64 will shrink by more than six million by 2030, resulting in a marked shortage of skilled workers. In the absence of appropriate and timely policy action, demographic change threatens to become a constraining factor for prosperity and growth.??With unification on October 3, 1990, Germany began the major task of bringing the standard of living of Germans in the former German Democratic Republic (G. D. R. ) up to that of western Germany. This has been a lengthy and difficult process due to the relative inefficiency of industrial enterprises in the former G. D. R. , difficulties in resolving property ownership in eastern Germany, and the inadequate infrastructure and environmental damage that resulted from years of mismanagement under communist rule.??Economic uncertainty in eastern Germany is often cited as one factor contributing to extremist violence, primarily from the political right. Confusion about the causes of the current hardships and a need to place blame has found expression in harassment and violence by some Germans directed toward foreigners, particularly non-Europeans. The vast majority of Germans condemn such violence. In international business the importance of understanding and valuing diversity amongst those of different cultures is of the utmost importance especially given the global interdependence of the present day economy

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