Super Vision International BusinessPIan
Border Tube Lighting to Germany GulturalAnalysis ExecutiveSummary
Introduction
t. History and Politics of Germany Cultural History
il. Geographical Setting i. Location ii. Climate iii. Topography
ilt. Social Institutions i. Family ii, Education iii. Political System iv. Legal System v. Social Organizations vi. Business Customs and Practices
tv. Religion V. Living Conditions i. Diet and Nutrition ii. Housing iii. Glothing iv, Recreation v. Social Security and Pension Systems vi. Health Gare
vt. Language Dialects
Appendixes. EconomicAnalysis
ExecutiveSummary
Introduction
l. Population
ll, Economic Statistics and Activity a. Gross Domestic Product (GDP) b. Personal Income Per Gapita c. Distribution of Wealth d. Primary IndigenousNatural Resources e" Surface Transportation f. Communication Systems g. Working Conditions h. Principal Industries i. Foreign Investment j. International Trade Statistics 1. Major Exports 2, Major lmports 3. Balance of Payments Situation 4, Exchange Rates K. Trade Restrictions L. Labor Force
lll. Developments in Science and Technology a. Current TechnologyAvailable b. Technological Skills of the Labor Force and General Population
lV. Channels of Distribution a. Intermediaries 1, Retailers 2. Wholesalers and Distributors 3. lmport and Export Agenb 4. Warehousing 5. Penetration of Urban and Rural Markets
V. Media
Appendixes. MarketAudit and CompetitiveAnalysis
Executive Summary
Introduction
l. The Product a. Evaluation of Product as an Innovation i. Reliability Advantages ii. Compatibility with the Market Level of Technology iii. Complexity b. Major Problems with Products Acceptance in the Market
ll. The Market a, The German Market i. Geographical Region ii. Forms of Transportation iii. Consumer Buying Habits iv. Distributions 1, Typical Outlets in which Products are Sold 2. Product Sales by Other Intermediaries v. Advertising and Promotion ,,1.Advertising Media 2, Customary Sales Promotions vi. Pricing Strategy 1, Customary Markups 2. Types of Discounts Available b. Gomparison and Contrast of the Competitors Products i. German Competitors ii. InternationalGompetitors iii. Domestic Competitors c. Market Size d. Government Participation in the Marketplace i. Agencies that Can help ii. Regulations
Appendixes. The MarketingPlan
Executive Summary
l. The Marketlng Plan A. Marketing Objectives Target Market Expected Sales Profit Expectations Market Penetration and Coverage B. Product Adaptation Gore Gomponent PackagingComponent Support Services Component C. Promotion mix A. Advertising a. Objectives b. Media Mix c. The Message d. Costs . B. SalesPromotion C. PersonalSelling D. Distribution From Origin to Destination Port Selection Packaging Documentation InsuranceGlaims Freight Forwarder E. Ghannels of Distribution F. Price Determinationand Terms of Sale Gosts of the Shipment of Goods G. Terms of Sale H. Methods of Payment
ll. Pro Forma Financial Statements Marketing Budget Advertising and Promotion Expense Distribution Expense
lll. Resource Requirements Finances Personnel Production Capacity Appendixes. -is"'* f F* &/- Iy,1'*,*.,:r:jo*
CULTURALANALYSIS
Executive Summary
The cultureof Germanyis very complexand rich. The Germanpeople are extremelyproud of their heritageand culture. Germanyhas had a very dynamic history. Today's unifiedGermany has its share of problemsmainly stemming from the reunification. The reunificationhappened after to the demise of the USSRand the end of the ColdWar.
Germany is Europe'slargest and most populatedcountry. This country has produced some of the worlds finest in philosophy,music and physics. Germany is very proud of its culture. As illustratedby the fact that traditional food and dress is still very presenttoday. Germany is located in the heart of Europe. lt is bordered by Poland, the Netherlands,France, Switzerlandand Austria. The German climate is variableand changesduring differenttimes of the year.
Familiesin Germanytend to consistof one or two parentsand childrenor simply two people living together. Traditionally,the man is the head of the household. Since more and more females are now in the workforcethe role of head of the household is shared. Many Germans live in apartments or condominiums.
Educationis a very importantto the Germans. Their educationalstructure is similar to that of the United States. The main differenceis their university system,which usuallytakes about five to seven years to complete. In addition, universitiesare known not for their title but for specializingin a particularfield. The fiteracyrate in Germanyis 99%.
The currentpolitical system in Germanyis a stableFederal Republic. The two parties that legislate over national issues are the Bundestag and the Bundesrat,The politicalparties that are activeinclude the Alliance,the Christian DemocraticUnion and the Free DemocraticParty just to name a few. The legat systemin Germanyis basedon the Grundgesetzof 1949. lt is a civillaw system that is similarto that of the UnitedStates. German life has a myriad of old traditionsthat have helpedto shape the culturaldevelopment of the country and their leisure activities. For instance, there is a strong love of food and wine that has grown over the years. Sports are also a favoritepastime of the Germans. Germanslove soccer,which they call fussball
Businesscustoms and practicestend to be more formalthan those of the U.S. Germansaddress each other by their job academictitles and surnames. Punctualityis extremelyimportant when doing businesshere. A handshakeis the most common form of greeting. Germans avoid hype and exaggeration. AlthoughGerman is the officiallanguage, many businesstransactions are done using English. Businessdress is quite formal in comparisonto the business casualthat has taken over corporateArnerica.
There is no state churchin Germanyand no controlof the churchesby the state. The relationship between church and state is that of a partnership regulatedby agreements. More than 55 million people belong to a Christian Church, mainly Roman Catholicor Protestant. The presenceof many workers from foreigncountries and their familieshas greatlyincreased the importanceof religiouscomm un ities.
Germany'sfood and dress could be characterizedas safe and traditional. Germany used to be a meat and potatoes kind of country but times have changed. Breakfastis usuallycontinental, with rolls,jams and chesses. Lunchis the main meal of the day and dinner is usuallycold cuts and cheese. German fashion is distinguishedby a classicand clean style. At work, German people dress formallyand classic. When visitingthe area it is smart to wear traditional suitsand businessattire.
Germany's social security plan and health care is one of the best in Europe. lt provides its citizens with pensions, health insurance, accident insurance,disability payments and supportfor the families of the unemployed. The broad network of social problems is taken for granted in Germany. The healthcare systemis mixedwith both socializedand private. Membershipof the statutoryhealth insurancesystem is obligatoryfor those employedwith a certain income. The government pays for the health care for the unemployedand welfare recipients. Benefitsare uniform, Introduction
SuperVision International is a manufacturingcompany of highquality lighting productsbased out of Orlando,Florida. The companycurrently distributes productsfrom fiber optlc lightingsystems, to more recentlydeveloped border tube LED lightstrips used to illuminatebuildings and signs.
The companiesproducts are currentlyused in swimmingpools, fountains, signs, billboards,wine racks,fine arts, landscape,channel letters, back-lit letters, fiber opticcurtains, decorative waterfalls, star ceilings,cove lightingand to outline buildings.
Some of the more famousproject that the companyhas been a part of in the past includesthe largecoca cola sign in Times Square,and the famous Pepsiglobe sign in Venezuela.
The productour analysisfocuses on is the LED BorderTube lightingproducts and how they can be distributedinto Germanyeffectively.
l. History and Politics of Germany
Becauseunderstanding political situation in Germanyis extremely importantto understandingthe societythe followingis a fairlybrief historyof the countriespolitics:
Fromthe times of the Neanderthals,political events in the area that is now Germanyhave beenfiercely contested. The inhabitantsof the land had early connectionswith the Roman Legionsfrom 50 BC to the 5thcentury AD.
Overtime powershifted from the Romansto Charlemagne(up to the early 9th century),and to Otto the Great's Holy Roman Empire(from late in the 1Othcentury).
By the 13thcentury, when the Hapsburgfamily began their reign,the landswere littlemore than a conglomerateof Germanspeaking States. After the devastatingthirty years war and much religious conflict,Napoleon came throughin the early 19thcentury. After Prussiaconquered the Leipzigbattle in 1813,Napoleons control of the regioncame to an end. Overtime the Prussianchancellor and Kaiser unitedGermany for the firsttime.
9 KaiserWilhelm ll dismissedthe chancellorBismarck in 1890and led Germanyinto \ A/t/lwhere he disappearedto Hollandupon finding out that the war was not goingwell. Germanystruggled with civilunrest and a disastrouspeace, uniting only in dislikeof the reigningWeimar Republic.Then cameAdolf Hitler,an Austriandrifter and Germanarmy veteranwho was able to unitethe countriesfeeling of disaffectionfor the currentsituation. In 1933his NationalSocialist German Worker's (or Nazi)Party assumed ultimate authority over Germany.Extravagant militaryspending and blaseborder bending gave way to outright aggression,\AA/Vll, and the unrivalledhorror of the Holocaust.Even the Germanswere surprisedby the successof their initialinvasions, but by 1943a litanyof heavylosses set the tone for the sluggishmarch to 1945's unconditional surrender.
Post\ A /ll Germanywas dividedup betweenBritain, France and the USA, consolidatingthe westernportion into the FederalRepublic of Germany,and the Sovietinfluenced zone calledthe communist GermanDemocratic Republic. This formulafor divisionwas repeated in Berlin,which becamea symbolin many countriesfor the cold war. The BerlinWall was finallydismantled in 1989.
The reunificationof Germanywas recordedas one of the most dramaticperiods in the country'shistory. After 16 years,however, it came to an end when a coalitionof SocialDemocrats and Greenstook officein 1998.
Today'sGermany has its shareof problems,but the large-scalesocial dislocationthat was projectedhas not occurredas heavilyas most thought. Todaythe excitementfrom reunificationhas died down,and there are many pocketsof resentmentand hard feelings in the society. The extremeright wing, although insidious and occasionallyviolent, is politicallyweak. Germanyhas absorbedthe majorityof refugeesfrom the formerYugoslavia, and these and other immigrantsare targetsof renewed racist attacks.
Cultural History
As Europe'slargest and most populousnation, Germany is a major playerof economic,political and defenseorganizations. This amazing countryhas producedsome of the most profoundpeople to date. IncludingBach, Kant and Einsteinjust to name a few. lt is a country rich in history. Deep in the heartof Europe,Germany has helpedmold Europeinto the beautifuland rich continentthat it has become. Germanyis also a countrythat has an extremelyrich culture. Many peoplestill wear traditionaldress and eat traditionalfood. Due to the demiseof the USSRand the end of the Cold War Germanyunited in
10 1990. Sincethen productivityand wages are now up to western standards. ln 2002,Germany joined many othercountries in Europe and adoptedthe Euroas theirmain currency.
ll. GeographicalSetting
A. Location Germanylies in the northEastern quadrant of CentralEurope. The countryborders the BalticSea and the NorthSea. The neighboring countriesare the Denmark,the Netherlands,Poland, Luxembourg, France,Switzerland, Austria, and the Czech Republic.
B. Climate
The Germanclimate is Variableand changesgreatly in different timesof the year. The most reliableweather is usuallyfrom May to October. The climateis describedas Temperateand marine;cool, cloudy,wet wintersand summers;occasional warm wind.
l1 G. Topography
The lowlandsin the northof Germanybegin in the Netherlandsand go acrossthe countryto Polandand all the way up to Denmark.
The industrializedcentral belt cinchesBelgium and Luxembourgto the Czech Republic'swestern prong.
The Rhineand MainRivers, long crucial for inlandshipping, cut throughthe CentralUplands. To the south,the DanubeRiver drains the Bavarianhighlands from the BlackForest, near the Frenchand Swissborders, to Munich.
The southernparts of the BavarianAlps connectwith Austria.The Bavarianforest in the southeastis the largestmountain forest in Europe.
lll. Social Institutions
A. Family
Characterizedby decliningbirth ratesand longerlife expectancies- To sustaineconomic growth with the currentsocial security programs,the countrywill either have to offer incentivesfor childbirthor allowmore immigration.
"ln 1910,the proportionof people65 yearsor olderwas slightly more than 5 %. Shortlyafter \ n/t/ll,this percentagehad increased to 10 o/o,by 1990 it had reachedeven 15 % and it is expectedto be (if the presenttrend continues),over 27 % by the year 2030. On the other hand the percentageless than 14 years old decreasedfrom 43 % in 1910to 23 % by 1950and 16 % by 1992, and it may be as low as 13 % withinanother three decades. The same sources expect,that today'spopulation of 82.1 millionwill increasemodestly to reachsome 83.8 millionby the year 2003, but will descendafter this slowlybut continuouslyand may fall from 75 millionin some thirty years from now."
Familiesmay consistof one or two parentsand children,or simply two peopleliving together. Traditionally the man is the head of the family,but increasinglythere is joint responsibilityin the home.The postwareconomic boom saw many women join the paid work force in a wide rangeof occupations.Most Germanslive in apartmentsor
l2 condominiumsbecause the cost of land and houseconstruction is high (two or three timesthe cost in Canada).Only 39 percentof Germansown their own home.German towns and citieshave strict rulesabout how housescan be constructed,what materialsmay be used,and how a housemay look. Propertylimits are clearly marked,with fencesand walls separatinghouses.
B. Education
The first levelof educationin Germanyis calledelementary educationand attendanceis voluntary.The secondlevel of educationis calledprimary education. The secondaryeducation, or the third levelof education,is dividedinto two levels:junior secondaryeducation and seniorsecondary education.
Highereducation is availableand it is calleduniversity. German universitystudents can completetheir first degree in about five years but averageuniversity students last seven years. Germany does not have a groupof elite universities;none enjoysa reputation for greateroverall excellence than is enjoyed by the others. Instead,particular departments of some universitiesare commonly seen as very good in theirfield.
"Most of the workforceis employedin the servicessector. West Germanycompleted the transitionfrom an industrialeconomy to one dominatedby the servicessector in the 1970s,and by the late 1980sthis sectoremployed two-thirds of the workforce.In contrast, when the BerlinWall fell, East Germanystill had not made this transition.Because more of the workforcewas engagedin industry and agriculturethan in the servicessector, its socioeconomic structureresembled that of West Germanyin 1965."(Study Guide)
Literacy rates: 99%
C. Political System:
The currentGerman political system is a stableFederal Republic. It is formedfrom the unificationin 1990 of the states (Lander)of the formerGerman Democratic Republic (East Germany) that acceded to the FederalRepublic.
Nationalelections were held on September22nd 2002 (Bundestag),and the next electionwill be in 2006.
13 The politicalparties that are activeinclude the Alliance,the ChristianDemocratic Union, the ChristianSocial Union, the Free DemocraticParty, the Partyof DemocraticSocialism and the Social DemocraticParty.
The FederalPresident is electedfor a maximumof two five-year terms by the FederalAssembly consisting of membersof the Bundestagand representativesof the state legislatures.
The federalgovernment is led by the chancellor,elected by the Bundestagon the nominationof the federalpresident. There is currentlyan SPD-Greensmajority coalition government, first appointedon October27th 1998and reappointedon October22nd 2002
The currentpresident is JohannesRau. The FederalChancellor is currentlyGerhard Schroder. The ForeignMinister is JoschkaFischer. The Ministerof the Interioris Otto Schily.
The two parties(houses) that legislateover nationalissues are the Bundestagand the Bundesrat.
The Executivebranch: Includesthe chief of state, presidentelected for a five-yearterm by a FederalConvention including all membersof the Federal Assemblyand an equal numberof delegateselected by the state parliaments.
Legislativebranch: BicameralParliament, consisting of the FederalAssembly (603 Seats)and the FederalCouncil (69 votes).
The extremeright wing, althoughinsidious and occasionallyviolent, is politicallyweak.
D. Legal System
The German Legal system is basedon the Grundgesetz (Basic Law) of 1949.tt is civil law systemthat has many of the facets of the American"system. For examplethe systemuses judicial review of legislativeacts in the FederalConstitutional Court as a checkon the legislativepowers of the Gerrnangovernment.
t4 The countrydoes participatein patentsfor technology.lt is proper to note also that in the pastthe countryhas not fully accepted compulsoryICJ jurisdiction.
E. Social Organizations
Germanlife is a mix of old traditionsand dynamiccultural development.The Germanmedia is very highlyregarded internationally,and has a numberof highquality print, radio, and televisionoutlets. Manypeople regard this mediamarket as one of the most prolificmedia industries in the world. Socceris the most popularsport in Germany,followed by tennis,hockey and basketball.More recentlysome areas have grownto like Baseball as well. There is a deeplyingrained wine and food culturethat many peopleenjoy. And for the largercities there have been major urban undergroundmovements.
This undergroundmovement featurestolerance and multiculturalismcoupled with surgingcreativity. Young people are findingnew and original meansof artisticexpression. Berlinabove all has become famousfor its urbanityand agglomerationof artistsand trendsetters.But othercities such as Hamburg,Cologne, Leipzig and Munichhave also becomebreeding grounds for artistic creativity.
Berlin-Certainly no othercity in Germanyand perhapsall of Europehas undergoneas profound,complete and swifta transformationas has this once-dividedcity over the past decade. Sincethe fall of the Wall in 1989some US$500billion have been pumpedinto rebuilding Berlin, which became the Germancapital in 1999.Some of the world'smost influentialarchitects, such as DanielLibeskind and Sir NormanForster, have lefttheir imprintson new city landmarkssuch as the revolutionizedparliament building and the new JewishMuseum. Notable shifts are also noticeablein the city'scultural landscape: International and multiethnicdiversity are a now its hallmarks,attracting creative types from all over the world. Each year sincethe early 1990s,the Love Parade,the world'sbiggest techno rave, has streamedthrough Berlin, bringing more than one millionyoung peoplefrom all overthe globeto each gathering.
15 F. Business Gustoms and Practices:
Businesstends to be moreformal in Germanythan in the United States. Germansaddress each other by theirjob or academictitles and surnames.A handshakeis the most commonform of greeting. However,a man shouldwait for womento extendher hand before he shakesit. Germansaccompany their handshakewith a slight nod of the head. Includingthis nod is a good way for a foreignerto make a positivefirst impressionGermans and avoidhype and exaggeration.Be sure you can back up your claimswith lots of data. Punctualityis extremelyimportant. Business dress tends to be formalrather than businesscasual. lV. Religion
A. Belief System: The ,,Grundgesetz'!(the GermanBasic Laws, which has the importanceof a Constitution)guarantees freedom of faith and freedomof religionand declaresthat no one may be discriminated due to theirfaith or religiousopinions. There is no statechurch in Germanyand no controlof the churchesby the state.The churches and severalother religiouscommunities have the statusof independentpublic-law corporations. The relationshipbetween churchand stateis that of a partnership,regulated by concordats and agreements.Germans who are membersof a churchsupport it throughtheir taxes, not directlyas in the U.S.When taxpayerslist their religiousaffiliation on their employmentrecord a part of their incometax is collectedby the tax authoritiesand givento the churchto whichthe taxpayerbelongs.
The socialand charitablecommitment of the churchesis an integral part of publiclife in Germany.Their work is indispensablein hospitals,assisted-living facilities, nursing homes, schools or day- care centers.
About 67 percentof the Germanpopulation, more than 55 million people,belong to a ChristianChurch. Nearly half of them are Protestants,nearly half of them RomanCatholics, and a minority belongsto otherChristian denominations. Approximately three millionMuslims live in Germany,and the Jewishcommunity has about 100,000members.
The two largeChristian Churches are the ProtestantChurch and the CatholicChurch. Through their dedicatedinvolvement in Germany'ssocial and politicaldevelopment, they contributed
t6 decisivelyto the restorationof democraticstructures after 1945. The churches,in particularthe ProtestantChurch played a very importantrole in the peacefulrevolution in the GDR. Todaythey addressthe publicin manyways, publishing documents and taking part in the debateon issueslike peaceand disarrnamentand labor marketpolicy, abortion and protectionof the environment.Their 1997joint publicationconcerning the economicand socialsituation in Germany,for example,prompled widespread discussions.
The presenceof manyworkers from foreigncountries and their familieshas greatlyincreased the importanceof religious communities,which were previouslybarely represented in Germany.This is especiallythe case with lslam.Today, approximatelythree millionMuslims from 41 nationslive in Germany,most of them coming from Turkey.
After the NationalSocialist genocide, only a few thousandpeople of Jewishorigin remained in Germany.Today the Jewishcommunities have nearly100,000 members, a numberthat is expectedto increase.Many of them have come in the pastyears from the countriesof the formerSoviet Union, and the largestJewish communityin Germanyexists in Bedinwith morethan 11,000 members.
V, Living Conditions
A. Diet and Nutrition
Germanyis a traditionallymeat and potatoestype of country. Thoughvegetarian and health-consciousrestaurants are startingto sprout,most Germanmeals are high in caloriesby American standards.
Breakfastusually entails rolls, jam, cheese,cold meats,hard-boiled egg and coffeeor tea. Lunchis the main mealof the day. Dinner is allegedlya lightermeal, but this can stillmean a platefull of sausagesand dumplings.
As far as beverages,Beer is excellentand relativelycheap. Each regionand breweryproduces beer with a distinctivetaste and body. Additionally,many very high qualitywine cellarsand companiesare locatedthroughout the country.
B. Housing
t7 Morethan sixtypercent of Germanfamilies live in rented apartments.Forty percent of Germansown a condominiumor a house. Thosethat do own a housethey are mainlybuilt from stone,not wood. Olderhomes do not have centralheating, but all new ones do and few homeshave air conditioning.
G. Clothing
Germanfashion design is often underemphasizedon the internationalscene. Howeversome Germanbrands are noticeable to the Americanpublic, such as Hugo Boss. lt is difficultto pointto a specificGerrnan design in fashionmatters. Generally, it can be said that Germanfashion is distinguishedby a classic,clear style. Germanfashion is mostlyconceived for everydaywear, with a less sportyemphasis than American[fashion].
At work, Germanpeople tend to dress in a classicstyle without a lot of sporty trends. lt is productivityinstead of pizzazzthatmeets the requirementsof the Germanbusiness people. When visitingthe area it is smartto wear traditionalsuits and businessattire instead of more trendyfashions.
D. Social Security and Pension Systems
Germany'ssocial security system provides pensions, health insurance,accident insurance, disability payments, and supportfor familiesand unemploymentinsurance. In addition,their social securitysystem makes provisions for therapyfor the disabledand educationassistance for lower-incomeindividuals. The broad networkof socialprograms is takenfor grantedin Germanyand there is littlestigma involvedin acceptingthese benefitsfrom the government.
E. Health Care
Germanyhas a mixed system of socializedand privatehealth care that coversalmost all who residewithin Germany, it is called Krankenkassen.Membership in the statutoryhealth insurance systemis obligatoryfor employedpeople up to a certainincome. Peoplethat earn higherincomes may join at a higherpremium or take out privateinsurance. The governmentpays for the health care for the unemployedand welfare recipients. There is no differencebetween medical and hospitalizationbenefits. Benefits are uniform.
Vl Language
18 "German ls one of the European languages of longer tradition and rougher history. Clear and ordered, the German language reflects the spirit of a nation of clear rdeas and admirableorganization in all the fieldsof life."(Language)
A. Official Language: Germanis the nativelanguage of 98 millionpeople in the world today.The writtenGerman is very uniformacross Germany and Austria.The spokenGerman however, presents many dialects, which belongto eitherthe HighGerman or to the Low German dialectalgroups (note that 'Low German'is not a negativeterm but just the name of a dialectalgroup).
High Germanand Low Germandialectal groups are different mainlyin their systemof sounds,particularly with respectto the consonants.However, it does not exista generallyaccepted standardof Germanpronunciation (although some normsof pronunciationpublished in 1957 as DeutscheHochsprache were accepted).
B. Dialects: Eventhe pronunciationof highlyeducated Germans is affectedby their nativedialects. Some German-speakinggroups, such as the Swabians,Saxons, Austrians, and Swiss,can be distinguished readilyby their characteristictypes of pronunciation.
Appendixes.
Bundenstag:
Political Foundations
FriedrichEbert Foundation 1155 15thStreet, NW, Suite1 100 Washington,D.C. 20005 Tel..202-331-1 81 9 Fax: 202-331-1837 e-mail: [email protected]
19 Friedj-phNaUmann FoundAtjtril" 1730Rhode lsland Ave., N\ry,Suite 1010 Washington,DC 20036-3101 Tel :202-293-0954 Fax. 202-293-0962 e-mail:75391 . 131 StOcompuserve.com
HansSeidel Foundation 214 MassachusettsAve., NW, Suite355 Washington,DC 20002 T el.. 202-54647 44 Fax. 202-546-5090
HeinrichBoll Foundation 1638R Street.,N.\y'f., Suite 120 Washington,DC 20009 Tel.. 202-462-7512 Fax'. 202-462-5230 [email protected]
KonradAdenauer Foundation 2005 MassachusettsAve., NW Washington,DC 20036 Tel.: 202-986-9460 Fax. 2Q2-986-9458 e-mail:kasusa@erols. com
GermanLanguage Dialects:
20 Chart of Declining birth rates and longer life expectancies:
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1S:l'1i
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From:Federal Statistical Office Germany
21 EconomicAnalysis
ExecutiveSummary
Introduction
Vl. Population
v' ::"J;T:""'"1':"J,T J.':lffJlEgn b. PersonalIncome Per Capita c. Distributionof Wealth d, PrimaryIndigenous Natural Resources ; 8:ffi g. Working"1:xiiJ""ff:',:1"" Gonditions h. Principal Industries i. Foreign Investment i. International Trade Statistics 1. Major Exports 2. Major lmports 3. Balance of Payments Situation Rates K.rrad" n""1i,"il"":"nse L. Labor Force v*r ::fl?1ff?5"i1":ffilr#g.rechnorosv b. TechnologicalSkills of the Labor Forceand General Population rx' ::?ffi|;"T,Tstribution 1. Retailers 2, Wholesalersand Distributors 3. lmportand ExportAgents 4, Warehousing 5. Penetrationof Urbanand Rural Markets
X. Media
Appendixes.
22 'ditrs ^#*F- C.# &d" S*ii"ItN.WS FirS{{,?W
ECONOMICANALYSIS
Executive Summary:
Germanyis the most populouscountry in Europewith over 82 millionpeople residingthere. The populationdistribution is mainlyin the age bracketof 15 to 64 years of age, with a growth rate of O.O4o/o,and a steady increasein migration. Thereare a handfulof differentethnic groups present, but Caucasiansare the most prevalent.The wealthis mostlydistributed amongst the middleworking cfass. The grossdomestic productfor Germany is US$2.16trillion, yet it has one of the lowest real growth rates in the industrializedworld.
There are severalmodes of transportationavailable with railwaysand higfrways spanningmost of the country. Germanyis very technologicallyadvanced with its telecommunicationssystem, and it strivesto keep improvingit. Telephones (main linesand mobile),radios, and the Internetseem to be the most popular communicationssystems right now. Qualityis the mainfocus of the working environmentin Germany. Managers'work closelywith their employeesto make sure that a qualityproduct is created,and to gain the reputationof beingthe best company.
The German governmentwelcomes foreign investments,yet there are some factorsthat add to the complexityof enteringthe Germanmarket. Germany's laborforce may be the tenth largestin the world,but the unemploymentrate for the countryis very high. As statedearlier, Germany is very technologically advanced,and well educated.
Germanschoose from an early age what area of work they would like to enter and begintraining early in their educationalcareer. The trainingdoes not stop there;adults are said to continuewith trainingcourses later on in their life as well. Due in fact of this great arrayof well-educatedpeople, entering the German marketand findingemployees is not too difficult.
The main channelof distributionto be lookedat is throughwholesale distribution intermediaries,for it is more practicalfor this product,and it providesseveral advantages.As mentionedabove, there are severalforms of media presentin Germanyincluding (but not limitedto) television,radio, magazines, and trade fairs. Germanyis actuallyhome to some of the largesttrade fairs in Europe.
23 Introduction:
Accordingto the German ForeignFederal Office, the Germaneconomy today ranksthird worldwidein terms of total economicoutput, and it placessecond with regardsto totalworld trade in front of Chinaand behindthe United States. lt is an attractivemarket for foreign investors,especially because of its excellentinfrastructure and highlymotivated, well-qualified work force. Due to the continuouseconomic growth after the war, Germanyhas been able to offer its citizensone of the higheststandards of livingin the world.
One of the reasonswhy Germanyis toutedas beingsuch a technologically advancedsociety is becauseof its participationin some of the most advanced researchand developmentprojects in the world. Germanyhas an affluentand technologicallyadvanced economy, yet accordingto the CIA worldfact book, throughoutthe 1990sand early2000s it turnedin a weak performance.Much of this is to blameon the country'srelatively high unemploymentrates; they're ageing populationand flawed social securitysystem, and on effortsbeing conductedto integrateand modernizethe lesseradvanced Eastern regions of Germany. For example,the CIA worldfact book citesthat annualtransfers from west to east total roughly$708 annually.
The German"social market" economy is organizedon free market principles and providesa "socialsafety net characterizedby generousunemployment, health,educational and basicwelfare benefits." After re-unificationand throughoutthe 1990s,the country'sgenerous social welfare system was extendedas a whole to easternGermany. Germantransfers to the east have had a ballooningeffect on publicsector deficits and borrowingsince 1990. (mac.doc.gov)
The continuousrise of FDI withinGermany, and the rise of Germancompanies participatingin FDI abroadunderscores the strongposition of the German economy. One problemthat shouldbe addressedwhen consideringconducting FDI in Germanyare the structuralrigidities in the labormarket, which include strictregulations on employmentand wage settingon a nationalbasis. lt should also be notedthat becauseof decreasinggovernment revenues and the rise in expendituresthe Germandeficit has been raisedhigher than the 3% EU debt limitexplicated in the Maastrichttreaty. (tatsachen) Also, accordingto the ClA, Growthin20A2 and 2003fell shortof 1%. Also,the Chiracadministration has attemptedto close"generous allowances and loopholesto utilizelegal and other meansof tax avoidance,"which have had a negativeeffect on the German economy.
There are severalcurrent predictions that claimthat the constructionindustry in Germanyis goingto declinequite a bit, and this in turn is a factorin the slower growthof the GDP. This couldeither play to Supervision'sadvantage or disadvantage,in that it may reducethe numberof competitorsentering the
24 market,or it couldcause a significantloss in profit. This particularaspect will be discussedlater in the report.
l. Population Germanywith a total populationof approximately82.4 million peoplehas the largestpopulation of any countryin Europe. The next closestcountries in terms of populationsize are the United Kingdom,France and ltalyall with totalsbetween 55 and 60 million people.
Total Population: 82,398,326(July 2003 est.) Number of German Citizens.' 75,188,700(2002 EST.) Number of foreign citizens.' 7,348,000(2002 EST.) Distribution of Population: 0-14years 14.9%(male 6,31 2,614; female 5,988,681) 15-64years 67.3%(male 28,213,316; female 27,240,648) 65+ years 17.8%(male 5,842,457; female 8,800,610)
Sex Ratio: at birth:1.06 male(s)/female under 15 years: 1.05 male(s)/female 15-64years: 1.04male(s)/female 65 yearsand over:0.66 male(s)/female total population: 0.96 male(s)/female(2003 est.)
Age Breakdown: 0-14years: 14.9% 15-64years: 67 .3% 65 yearsand over:17.8%
25 FE|'4ALE fiO+ 75-79 7S-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 ?a-74 15-19 10-14 5-9 s-4 4.0 3.5 3.0 2.5 e.S 1.5 1.0 S.5 0.S 0.S 0.5 1.S 1.5 ?-0 2.5 3.0 3.5 4.0 Fopulation(in millions) : U.S. CensusBureau, International Data Base. (nationmaster.com)
Pop.GrowthRate: 0.04%(2003 est.) Birthrates: 8.6births/1,000 population (2003 est.) lnfant MortalityRate: 4.23deaths/1,000 live births Numberof live births: 2000:766,999 2001:734,475 2002: 719.250
Death rates: 10.34deaths/1 ,000 population(2003 est.)
NetMigration Rate: 2.18 migrant(s)/1,000 population(2003 est.)
lmmigrationinto Germanyhas showna steadyincrease over the pastfew decades,the 4.45 MillionForeign citizens living / working in Germanyin 1980has risento nearly7 .34 Millionforeign inhabitantsin 2002. These refugeestoday hail mainlyfrom the followingcountries. Turkey, Yugoslavia (Serbia-Montenegro), ltaly, Greece,Bosnia and Herzegovina,Poland, Croatia, Austria, the UnitedStates, Macedonia, and Slovenia.The countriesof Turkey, Yugoslaviaand ltaly all have more than 500,000citizens living withinGerman Borders. (destatis.de)
EthnicGroups; German 91.5o/o,Turkish 2.4o/o,other 61% (Serbo-Croatian,ltalian, Russian, Greek, Polish, Spanish)
26 MajorCities / PopulatedAreas: Berlin, Frankfurt,Ltibeck, Munich, Rhine Valley,Weimar
ForeionTrade Zones: Hamburg,Bremen, Bremerhaven,Cuxhaven, Emden, and Kiel ll. Economic Statistics and Activity
A. Gross DomesticProduct (GDP): Usingthe purchasingpower parityapproach the GDP of Germany is US $2.16trillion, and the real growthrate of GDP isA.2o/o(2002 est.)
Germanyhas one of the lowest real growth rates in the industrializedworld, totaling only an estimated0.2o/o in 2002. lt is near the bottom of the real growth rate list with such countriesand the Netherlands,Japan and Switzerland.According to the EuropeanCommission growth is projectedto be a modest1.6% in 2003,and 1.75% in 2005.
GDP compositionbv sector: (2002est.) agriculture: 1o/o industry:31% seryices: 68oh The GDP per capifafor Germanyis approximately.US $26,200 (2002 est.) For historicalreference; US$29,572 (1997 esf.J B. Personallncome per Capita:The per capitaincome figure for 2000 was US $20,162 (gesis.org).
27 C. Distributionof Wealth: The distributionof householdnet wealth exhibitedin Germanyhas a highlyasymmetric profile such as those found in most countries."The richestX% of householdsdisposed The GlNl index of concentrationwas 30 in 1994
"fn 1998,monthly disposable income stood at DM 5,448(€ 2,786), with DM 4,192 (€2,143)utilized for privateexpenditure. There is an unequaldistribution of assetsand disposableincome." (gesis.org)"
1. Incomeclasses Working C/ass. 2s%(1ee8) Middle C/ass; 5e%(1eeg) Upper-Middle & Upper C/ass; 12%(1ee8)
+73.8%
!i il Incometax ffiilei%:'""tset:/r:#s0trf :t?
Contributionsfor socialsecurity I w"gf" _.-i +140.1o/o ffi +1O2.4Yo
+123.0o/o
* Gross income = 100%.
"*Changesforwestem Germany- 1980-96;changes for East Germany- 1990-96.
Source: WSI report on distibution of income, 1997.
D. PrimaryIndiqenous Natural Resources: lronore, coal, potash, timber, lignite, uranium, copper, naturalgas, salt, nickel
28 E. SurfaceTransportation Railways: Total: 45,514km(21,000 km electrified) Standardgauge: 45,276 km 1.435-m Narrowgauge: 214 km 1.000-mgauge (2002)
Highways: Total:230,735 km Paved: 230,735km (11 ,515 km of expressways) Unpaved:0 km (1999)
Ports and Harbors: Berlin,Bonn, Brake, Bremen, Bremerhaven, Colgne, Dresden,Duisburg, Hamburg, Karlsruhe, Kiel, Luebeck,Madgeburg, Mannheim, Rostock, and Stuttgart.(Hamburg & Bremenmost used)
MerchantMarine: Total:337ships (1 ,000 GRT or over)totaling 6,036,397 GRT/7,334,067DWT shrpsby type.cargo 94, chemicaltanker 15, container203, liquefiedgas 3, passenger3, petroleumtanker 5, railcar carrier2, refrigeratedcargo 1, roll on/roll off 4, short-sea passenger 7
Airports total:551 Airportswith paved runways total: 328 over3,047 m: 11 2,438to 3,047m: 54 914to 1,523 m: 69 under914 m: 131(2002) 1,524to 2,437m: 63 Airportswitft unpavedrunways total. 223 under914 m: 189(2002)
Waterways 7,500km
29 Majorrivers include the Rhineand Elbe& the KielCanal links the BalticSea and NorthSea
Pipelines condensate325 km; gas 25,289km; oil 3,743km; refinedproducts 3,827 km (2003)
F. Communication Systems Germanyhas one of the world'smost technologicallyadvanced telecommunicationssystems, with the easternregions becoming more modernizedand integratedwith that of the western part of the country(especially after re-unificationin 1991). Germanyis served by an extensivetelephone system with exchangesconnected by fiber-opticcable, coaxial cable, microwaveradio relay, and a domesticsatellite system. Cellular telephoneservice often includesroaming service to rnanyforeign countries.Germany's international service is excellentworldwide, and consistsof extensiveland and underseacable facilities as well as 4 satellitesystems. Germanyhas the 4th most abundantnumber of main telephone linesand cellularphone lines worldwide behind the US, Chinaand Japan.
Types: Telephone,Mobile/Cellular Phone, Internet, Television, Radio (am/fm/sw)
Availability: Telephonemain lines in use:50.9 million (March 2001) Telephonemobile/cellular lines in use:55.3 million (June 2001) RadioBroadcast Stations: AM 51, FM 787, shortwave4 (1998) TV BroadcastStations:: 373 (plus8,042 repeaters)(1995) EarthStation Satellite Systems: (4) INMARSAT,INTELSAT, EUTELSAT,and INTERSPUTNIK. InternetService Providers (lSPs): 200 (2001) InternetCountry Code: .de
30 Usage Rafes; fnternet Users: 32.1 million(2402) Numberof Televisions(per 1000inhabitants): 564 Numberof Radios(per 1000inhabitants): 944 (literacyonline.org)
G. Working Conditions Em p Ioye r-e m p Ioyee reI ati onshrps:
The socialpartnership between trade unionsand employers ensuresa high degreeof socialharmony. Collectivebargaining policyin recentyears has led to moderatewage and salary settlements.Also the use of migrantworkers by Germanfirms has been increasingin the recentpast due to ethnicmigration patterns.
The managerof an organizationhas two principleobjectives: for his companyto be the best and to producethe best products. Managerswork closelywith employees,and considerthemselves a team with their principlegoal beingproduct quality. German managersand employeesare said to be extremelyproduct oriented,and they place customersatisfaction as a priority. Not only does the managerwork closelywith the employeesof the company,but he alsoworks along with the government.The manageris alwaysaware of governmentstandards, policies, and regulations.(executiveplanet.com)
H. Principal industries Germanyis amongthe world'slargest and mosttechnologically advancedproducers of iron,steel, coal, cement, chemicals, machinery,vehicles, machine tools, electronics, food and beverages;shipbuilding; textiles. In the future,Germany plans on focusingon such industrysectors as: leasingservices, digital printingsystems, medical devices, automotive parts and services, e-commerce,and renewableenergy to name a few. fndustrial production growth rate: -2.1 o/o(est. 2001) f. Foreigninvestment: Type and Amounts of Key lnvestment Categories
31 At the end of the 1980s,there were regulardebates in Germanyon the qualitiesof the countryas a magnetfor foreigninvestors. A Trend could be seen for the annualinflow of investmentsinto Germanyfrom abroad between 1992and 2002. Accordingto a study by the InternationalInstitute for Management Germanyranks second worldwide following the UnitedStates in terms of investmentinflows into the country. The scaleof foreigninvestment in Germanyhas almosttripled sincethe beginningof the 1990s,from around€ 100 billionto € 280 billionat the end of 2000.
The Germangovernment promotes foreign investment in Germany, and makes sure that foreignfirms are treatedin the same manneras localfirms. Foreign companiesthat are registeredas GmbH (a limitedliability company) or as an AG (oint stock company)are treated no differentlyas the Germancompanies are treated by German law. Registrationof investmentobjectives with a government entityis not required,nor are there any requirementslimiting directors or shareholdersto any particular nationality.
The Germangovernment has establisheda policyin which propertyowned by foreignerswill be completelyprotected underGerman law, and that there will be no discriminatory actionsagainst foreign investors.
J. International Trade Statistics (destatis.de) Germany'sclosest trading relationships are with EU member states,with whichthey conductclose to half of all of theirforeign trade.ln 200| the most importantpartner was France. The curve for trade with centraland east Europeancountries also has also been risingsteadily. Whereas in 2001total foreign trade rose by just 4.6 percent,trade with these countriesincreased by 12.8percent, with Polandbeing the most importantmarket for Germangoods and servicesin centraland east European countries.The Czech Republicand Hungaryare also key trading partnersfor Germanyin the region. (tatsachen).
1.Major exports DollarValue: $608billion f.o.b. (2002 est.)
32 Commodities: machinery,vehicles, chemicals, metals and manufactu res, foodstuffs,texti les Partners: France10.7%, US 10.3o/o,UK 8.4%,ltaly 7.3o/o, Netherlands6.17o, Austria 5. 1o/o, Belgium 4.8oh, Spain 4.60/0, Switzbrland4.2% (2002) Trends: Germancompanies generate almost a third of their profitsthrough exports, and almostone in fourjobs are dependenton foreigntrade. The majorcategories of German exportsin 2A02were Automobiles(127.9M), Machinery / Equipment(94.6M) and chemicals (81.2M). Between1991 and 2002the exportratio for mechanical engineeringsoared from 52 percentto almost69 percent,in the chemicalsindustry from 50 percentto almost70 percent,in the automobileindustry from 43 percentto 69 percent,and in the electronicsindustry from 31 to 42 percent. *Economic data shows that German exports declined during the first two quarters of 2003 (europa)
The curve for trade with centraland east Europeancountries also has also been risingsteadily. Whereas in 2001total foreign trade rose by just 4.6 percent,trade with thesecountries increasedby 12.8percent, with Polandbeing the most importantmarket for Germangoods and servicesin centraland east Europeancountries. The Czech Republicand Hungaryare also key tradingpartners for Germanyin the region. (tatsachen)
2. Major Imports Dollar Value: $487.3billion f.o.b. (2002 est.) Commodities: machinery,vehicles, chemicals, foodstuffs, textiles,metals Partners: France9.57o, Netherlands 8.2%, US 7.7o/o, UK 6.5%, ftaly6.40/0, Belgium 5.2o/o, Austria 4o/o, China 4% (2002) Trends: Despitethe decreasein exportsduring the flrst half of 2003, importsremained strong. This can be attributedas a sign of strengtheningdomestic demand.
3. Bala nce-of-payments situation Accordingto 2002 data, Germanyis experiencinga trade surplusof roughlyUS $120.78. However,according to the "Autumn2003 EconomicForecasts" materials (obtained from the EuropeanCommission conference held 1012912003)
.,. JJ Germanexports declined during the firsttwo quartersof 2003, while importsremained relatively constant. The reportgoes onto mentionthat the Germaneconomy in fact fell into a shallow recessionduring the first half of 2003. The EC seemsto believethat the growthrate shouldincrease to about 112%by 2005. (EC-PDF file page 54- (europa.eu.int))
4. Exchange Rafes Priorto convertingto the Euroas a singleEuropean Union currency,Germany used the DeutscheMark, which was a freely convertiblecurrency that the governmentdid not maintain exchangecontrols on.
Trends: (Ratesin terms of Euro/ US Dollar) { 998 = 0.897 { 999 = 0.939 2OOO= {.O85 2OO1=1,117 2OO2={.06{ 2OO3=O.885 (FXCM Forex Capital Markets)
CURRTNCY 1 EUR in EUR .,,,,.4=-;H:,,..Dd.ii|'i.,'.' ':.,...t+..i25.6.} ,..,'.'',p.i?tg..$.98.$: AustralianDollar 1.62313 0.61 609 5 gotswaha Pula 6.i0.7rS43. .',,...,,..l..l..i {j6.4AS Brazilian Real 3.73372 4.267829 eiitish Pound $:i6ii&iii ,...... 1',,.,.,;.ttJ4.:8 $$l$, CanadianDollar 1.68872 0.592165 'Ctrineie Yuan .16.15$66 ,,,,.:6iog,6:li66g, Danish Krone 7.45112 0.1 34208 ',',-,,;''.":'''::lgi:i6ii.iis'i'i,, Hong Kong Dollar |g::,i:a:i:::8:: HungarianForint 259.2t2 0.00385784 Indian nupee i56.:i:82,.t.5. ,,l,r,.,0,;.CI:175I7, JapaneseYen 136.723 0.00731405
34 MalaysianRinggit 4.77394 o.20947L Mexican Peso 13.7458 o.47 27 494 New ZealandDollar 1 .83642 ' O,.5i44537 NorwegianKroner 8.881 64 0.113615 SingaporeDollar 2.127,67 , ,0.4699.98 South African Rand B.*U4e 0.j.18716 South Korean Won 1466:q1 O..0006.9,1847 Sri Lanka Rupee 124.336 a.40844272 Swedish Krona 9. 184.8'1 i,9;1.08825 Swiss Franc 1.57942 0.633143 Taiwan Dollar '4].'',,6:2,'le ",,0;,0,24o262 Thai Baht 49.247 0.0203058 VenezuelanBolivar 2,4i'2,;:'1: oi0004:i+,527
Table courtesyof (x-rates.com)
K. Trade Restrictions Severalstructural impediments to the continuedgrowth and diversificationof the Germaneconomy have been identified. (1) a rigidlabor market; (2) a regulatorysystem that discouragesnew entrants; (3) highmarginal tax ratesand highsocial charges; and (4) inadequateaccess to risk and venturecapital for start-upfirms.
However,other than E.U. imposedrestrictions, there are few formal barriersto U.S.trade and investmentin Germany.U.S. exporters oftenexperience disappointment when dealingwith Germany. This is due to the fact that Germany'sregulations can proveto be quite extensive,and sometimestend to protectthe alreadyexisting, local suppliers.Things such as complexsafety standards add complicationto the accessibilityto the marketfor many U.S. products. Germanbuyers sometimes require (although it is not statedto do so by law) additionalquality marks. These symbolsof qualityallow enhanced chances for a productto be marketed. Eitherway, both the EuropeanUnion and Germanyhave standards for the acquirementof a qualitymark, and thesestandards usually provokeproduct modification, and the productwill have to pass testing and receivecertification before being marketed. Nevertheless,the FederalRepublic of Germanyis a great placefor U.S.companies to do business.
All goodsthat are eitherimported or deliveredto or in Germanyare exposedto valueadded tax (VAT). The tax liabilityis the responsibilityof the importeror buyerof servicesfrom abroad. The basic VAT rate is sixteenpercent.
35 There are no free tradezones or portslocated in Germany. {mac.doc.gov}
L. Labor Fo.rce Germany'slaborforce is the 10tt1largest in the world,yet it is only about 29.5 % of the laborforce in the UnitedStates. The German laborforce is knownfor beingwell educated,very skilled,rigidly disciplined,and extremelyproductive.
Size: 41.9million (2001)
However,the unemploymentrate in Germanyis very high. This can be contributedto the fact that Germany has some of the highestwages and fringebenefits in the world. Also, thosewho claim unemploymentreap better benefitsthan severallow paying jobs that are available,therefore making unemployment more attractive. Regardlessof the high unemploymentrates, some "high-techsectors" in Gerrnanyare experiencinglabor shortages, and have made it easierfor foreignworkers to obtainvisas.
Unemployment rates: 9.8% (2,0A2est.) Labor force by occupation: industry 33.4o/o,agriculture 2.8o/o,services 63.8%
fnffation rates: On consumerprices 1.3% Q0A2est.) lll. Developmentsin Scienceand Technology
A. Current technology available (computers, machin€ry, tools, etc.) Togetherwith the federalstates, the governmentsupports the two major researchorganizations, the Max PlanckSociety (MPG) and the Fraunhofer-Gesellshaft(FhG). The Max PlanckSociety is the most importantsupport organization for basic researchperformed outsidethe highereducation. Largeprojects, which can only be conductedin largeteams involvingexpensive technology and large financialbacking, are undertakenoutside the world of academiaat researchinstitutions financed mainly by centralgovernment. The
36 FederalGovernment provides 50% of the basicfunding for the MPG and 90% for thatof the FhG. (germany-info.org)
"ln addition,central government also participatesin large-scale Europeanand internationalresearch projects in the form of researchIn 1999,R&D expenditureby Germanbusiness exceeded the DM 60 billionmark. The universities/collegesreceived R&D fundingof approximatelyDM 15.5billion and non-university establishmentsfunding of approximatelyDM 13.3billion. Thus, in 1999gross domestic expenditure on R&D by the FederalRepublic of Germanytotaled DM 88.8 billion, or 2.4o/oof the gross domestic product. (cordis.lu) Organizations,such as the EuropeanOrganization for Nuclear Research,CERN, or the GermanGenome Project." ln 200Z despitea lack of budgetedfunds, federaland state governmentscommitted a total of almost€ 4.9 billionto research projects,an increaseof almost3.4 percenton the previousyear. The Germangovernment believes that researchand development in areassuch as chemistryand materialscience, semi-conductors, laserand plasmatechnology form the basisfor tomorrow'snew technological developments. {tatsachen) Further interestinginformation can befound in the brochure: http-:{U$ffW*Frnbf .de/ou bf?,ctg .aqd f iq u res research .-2002.pdf
B. Technological Skills of the Labor Force and General Population
Germanyis an extremelywell educatedand technologicalsociety, with trades and crafts being developedearly in a student's educationalcareer. Decisionsabout careers are made early in Germanlife to ensureadequate time and trainingcan be dedicated to a particularskill or trade. This philosophyhas leadto an internationallyrecognized training system
Centralgovernment establishes the generalprinciples for organizingthe universitysystem, which are set out in the German "Hochschulrahmengesetz"or HigherEducation Act. Thereare currently360 tertiaryeducation institutions in Germany,including more than 90 universities.Of the 1.9 millionstudents registered for the wintersemester of 20A2,almost 1.4 millionwere enrolledat
37 universitiesor equivalentinstitutions which offerdegrees such as: "Diplom","Magister", or "StaatsprUfung." The secondmainstay of the Germanhigher education system is the "Fachhochschule",which offerspractical study in the fieldsof engineering,lT, businessadministration, social studies, design and health(tachen). There are also privatehigher education institutes throughoutGermany offering correspondence courses for students who are unableto physicallyattend classes. Favoritechoices of subjectsfor Germanstudents include: law, businessstudies, social sciences,languages and the arts, engineeringstudies, mathematics,natural sciences, and medicine.At present,students at universitiesstill requirean averageof 12 semesters,or six years, 10 semestersat otherhigher education institutions, to obtaintheir degree. At the beginningof 2001,a total of 494,000people were employedby highereducation institutions in Germany. Most youngstersin Germany(70%) learn an officialstate- recognizedtrade in what is known as the dual system of vocational training,instead of goingon to a Universityor Fachhochschule. Theoreticalknowledge is taught in vocationalschools and practical trainingtakes placeat the placeof work or in specialtraining facilities.This combinationof thesetwo elements"guarantees the internationallyrecognized high levelof qualificationof German craftsmenand skilledlaborers." Training usually takes 2-3 years. Studentsspend 3-4 workingdays with the companies,and on 1-2 workingdays in vocationalschools utilizing state-of-the-art machinesand facilities. Followingjobs are particularlypopular with Germanmale trainees:car mechanic,painter and decorator,electrician, and retail trade specialist.German female trainees usually pursue jobs as: commercialclerks, retail trade specialists,hairdressers and Doctor'sand Dentist'sassistants. It shouldalso be mentionedthat "numerousadults take part in furthertraining and retrainingprograms. In 2000,a poll of 19 to 64- year olds revealedthat four out of everyten men and women had takenpart in a furthertraining scheme, or 21.4million people, of whom 14.4million participated in furthertraining associated with their occupation.'' (tatsachen) lV. Ghannelsof Distribution
Americanbusinesses will find that sellingin Germanyhas a few challenges,but it is one of the easiestmarkets to enter in the world.The GermanWorkforce is one of the rnostwell-educated, well-trained, and well-disciplinedworkforces in the world.Although in the middle1990's a
38 wave of unemploymentcaused a major problem,a programof spending taxationand regulatoryreforms has been developedto promote new foreigninvestment.
The Germaneconomy is the worldsthird largest,and accountsfor somewhatmore than one fourthof the EuropeanUnions GDP. With total importsfrorn around the globe averagingaround $487.3 billion dollars annually,around $63.28 billion usually come from the UnitedStates. Due to the companieshigh standardof living,and reasonabletrading policies companieshave consistentlychosen Germany as a marketfor many types of goods.
A. Intermediaries: 1. A word about Retail:
Althoughour productmay not be distributedprimarily through industrialsuppliers it is importantto lookat the retailmarket briefly. For the Retailindustry in Germanythe total numberof outlets declinedsteadily over the 1993-1998period. The declinemainly took placeamongst small, independent traditional retailers whereas,retail chains retail franchises and in particularoutlets offeringlow pricesand large sales were able to expand further.
The retailtrade in Germanyis goingthrough a periodof change that has startedlater than many other Europeancountries. A massiveconcentration has providedprice competition in most retail goodssegments, and foreigncompetition has led to massive shakeoutduring the aforementionedperiod.
Manycompanies are strivingto sell goodsdirectly through on-line, tele-shoppingservices, and factoryoutlets. The losersin this processare mainlythe independentsmall and mediumsized retailers,which cannotcompete against the huge chainand franchiseretail operations that have priceleadership in most sectors. The primarydo it yourselfretail chains in Germanyare PraktierBau, Warichs, and Hornbach-Baumarkt. Industrial retailersof buildingmaterials are led by just by Praktikerand hornbach,and Bustoff-Fachhandel.
2. Wholesalers and Distributors:
In the GerrnanMarket as stated above the wholesalersand distributorsare gaininga priceadvantage over the independent retailers. In the ElectricalGoods sectorthere are approximately 120 primarywholesalers with an averageof 74 workerseach. In
39 the ConstructionMaterials industry there are approximately55 wholesalerswith an averageof 58 employeeseach. These companiesoperate by minimizingthe costsof productsthrough smallmarkups and largenumbers of sales.
For ConstructionMaterials the primaryplayers are Cementmuller WalterM ller BustoffgroHandlung GmbH, Muhl Prod and Svc,and M hl Prod and Svc Ringer. For ElectricalGoods wholesalers the primarycompanies are Sharp Electronics,and Tefal Detschland.
3. lmport and Export Aqents:
Many optionsare availableas far as bringingproducts into and out of the marketplace.A great deal of the activityis organizedaround the ForeignTrade Zones of Hamburg,Bremen, Bremerhaven, Cuxhaven,Emden, and Kiel. In Germanyagents negotiate approximately 30 percentof domestic good sales,and 60 percentof all industrialcompanies employ distributors. Many of the major importagents reside around the major ports of the country. United ParcelService of America is establishinga groupof leadingindustrial distribution and rail servicesto assistcompanies with commercialgrade productsfrom the Portsto the interiorof the country. AdditionallyEMS Kurierpost is a new freightforwarder with the missionof centralizingthe fonrvardingactivities over nightthroughout the country.
4. Warehousinq:
Bremenis a majorarea of tradingin Germanyand consequently has many of the warehousingfacilities for the country. In recent transactions,P and O Trans-EuropeanGmbH has invested11 millionin New Warehousein LeipzigGermany. ROTG- Tankcontaineris a new mergerof Vereinigtiand Transportmittel& KoninklijkeVan Omersonto provideboth truckingand warehousing activities.
Additionallythe port of Bremerhaven'sContainer terminal is one of the best terminalsin Europedue to its tract recordof serviceand operations.Other ports are Cuxhaven,which is a new port near the joiningof the Elbe Riverand the NorthSea, and Bremerhaven is regainingits statusas a mega-hubin Europe.
5. Penetrationof Urbanand Rural Markets:
40 With the ever-increasinginfrastructure developing in eastern Germanyit is becomingincreasingly easier to conductbusinesses with the consumersin those regions. In the past it has been more difficultbecause of the vast differencesbetween eastern and westernGermany. When productsare forwardedthrough rail, canal,or truckingservices in Germanythe systemis quitereliable, and many companiesare findingthat becauseof the ease of transportingproducts, the use of directselling over the Internetis becomingquite reasonable.
V. Media
In Germanyif is importantto realizethat a lot of the media practices commonin the UnitedStates are not allowedin Germany. Many commonpractices in Americalike billboardsare prohibited.
Newspapersand Periodicalsare importantto Germanconsumers, and manycompanies spend a greatdeal annually on them. Germanyis servedby two primarybroadcasting corporations and a numberof privatebroadcasters, all of which are underindirect supervisionof the state (laender).There are 312 privateradio and/or broadcaststations and 30 privateTV stations.
Germanyslarge Trade Fairs are the most effectiveways to introducenew productsand technologies.The AUMA ("Ausstellungsund Messausschussder DetschenWirtschaft") is a largeGerman Trade Show association.And has many publications availablein English.
Due to differingconsumer tastes in Germanyit is advisableto considera partnershipor cooperativeagreement. The Direct MarketingAssociation (Detuscher Direktmarketing Verband DDV) is a nationalmanagement association that can help monitorthe reactionof consumersto directadvertising.
Additionallyit is importantto notethat with directmarketing campaignsin Germanymost companiesare requiredto submit copiesof publicationsto the government.In the case of foreign companiesmany are requiredto pay a specificduty for these publications.
41 Appendixes.
Appendix-A: Realgross domesticproduct (changes on the previous quarter): 'The " Note: GermanGDP increasedslightly by O.2%upon seasonaland calendaradjustment in the fourthquarter of 2003 on the previous auarter."
2002 2003
1tt qtr 2ndqtr 3'dqtr 4th qtr 1"tqtr 2ndqtr 3'd qtr 4thqtr
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* http ://www.destatis.de/presse/engliscU pm2004 I p0790121 .htm
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42 MarketAudit and CompetitiveAnalysis
Executive Summary
Introduction
lll. The Product a. Evaluation of Product as an Innovation i. Reliability Advantages ii. Compatibility with the Market Level of Technology iii. Complexity b. Major Problems with Products Acceptance in the Market
lV. The Market a. The German Market i. Geographical Region ii. Forms of Transportation iii. Consumer Buying Habits iv. Distributions 1, Typical Outlets in which Producb are Sold 2, Product Sales by Other Intermediaries v. Advertising and Promotion 1. Advertising Media 2. Gustomary Sales Promotions vi. Pricing Strategy 1. Customary Markups 2. Types of Discounts Available b. Comparison and Contrast of the Competitors Products i. German Gompetitors ii. InternationalGompetitors iii. Domestic Competitors c. Market Size d. Government Participation in the Marketplace i. Agencies that Can help ii. Regulations
Appendixes.
43 # S U F H fI V I S ' AN
MARKETAUDIT AND COMPETITIVEMARKET ANALYSIS
ExecutiveSummarv:
Germany'sstrong post-wareconomic growth has helped its citizensto achieve one of the higheststandards of livingin the world. The countryis the largest memberof the EuropeanUnion on both a populationand pure-GDPbasis. The constructionmarket in Germanyhas been steadyand strongsince the reunificationof Westernand EasternGermany in 1991.
However,since 2000 the countryhas experiencedminimal growth in the building and constructionsector, with only755 172,728978, and723 333 buildingsbeing constructedin 2000, 20A1and 2002 respectfully.As consultants,we have concludedthat SuperVision could see this down trend as a threator as an opportunity.
For SuperVision Internationalthe Germanmarket presents new chaltenges. With many differentlaws and regulationsthe productswill haveto complywith the EuropeanUnion's recent energy standards, and also the end-usersof the productswill haveto deal with increasingenergy tax rates. An advantagefor SuperVision in this marketwill be the fact that their productlines are very energy efficient. In the past,high-energy consumption in Germanyhas led to restrictions and taxes on electricity.
The companywill also be facedwith the challengeof dealingwith an emerging market in the easternparts of the country,and this may also presentadded challengesfor the distributionand marketingof the products. However,along with these challengescome potentiallarge profits.
The factslhat Frankfurt is considereda rnajorbusiness center in Germany,and has Germany'smost spectacularskyline and Europe'stallest office building makesthis one of the key citiesfor SuperVision International to targetwith their LED Strip/Border-Tubeproduct lines. Other majorformer Western German cities to be targeted include: Berlin, Bremen, Cologne, Dortmund, Dtisseldorf, Essen, Hanover, and Stuttgart. Cities to be targeted in former communist EasternGermany include: Munich, Hamburg. The targetGerman buyer of our productsare goingto be constructionor architecturefirms who are in the businessof buildinglarge buildings that may havethe needfor exteriorlighting, or for buildingowners who want to add a little bit of lifeto their existingbuildings. We are hopingto find a companyto hirethat will handlethe promotion,sales, distribution and logistics(including reverse logistics)of the SuperVision product line.
We recommendthat employeesfrom SuperVision attend as many international tradefairs in Germanyas possibleto meet these key contactsand make the necessaryrelationships on behalfof SuperVision. Which ever agentsare selectedto enter into contractualarrangements for the sales,distribution, and logisticsof the LED-stripand border-tubeproduct lines and subsequent complementaryproduct lines must have closecontacts with the previouslycited third-parties.
Additionally,we havefound that a lot of lightingconcepts for hotelsand buildings are developedin closediscussion with architects.We have concludedthat it is imperativefor SuperVision to be very selectivewhen choosinga distributoror salesagent, and ensurethat they have key relationshipswith Germansuppliers, contractors,builders and architects.
We recommendconducting the marketing,warehousing, sales, distribution and logisticsthrough a distributoror a numberof independentdistributors located in target German cities. The best recommendationthat we can make as consultantsat this phaseof the projectis for SuperVision to hire/sign-upa distributorin either(a) 1 centrallocation such as Frankfurt,or (b) sign-upmultiple distributorsin multiplecities. These distributorswill take title of goods upon their arrivalat the Germanport and handlethe rest of the businessfrom that point in time. The distributorswill essentiallybe the face of SuperVision International and representthe company,so it is essentialand cannotbe stressedenough how importantit is that SuperVision hirethe correctDistributors.
As a last recommendation,we feel that the companyshould consider offering servicesonline via the internetby developinga Germanlanguage based website, thus increasingthe brandimage and awarenessof SuperVision's products, and reachingmore potentialcustomers.
There are many reasonsto believethat the Germanmarket is stilla good,viable optionfor initialEuropean expansion for SuperVision International.First, the countryis locatedin the heartof Europe,with 9 borderingnations. Second,as energytax ratescontinue to increaseand the countrybegins to changeits image to a more modernsociety, energy efficient lighting sources will be invaluableto businesseswithin the largercities.
45 Introduction:
Germany'sstrong post-wbr economic growth has helpedits citizensto achieve one of the higheststandards of livingin the world. The countryis the largest memberof the EuropeanUnion on both a populationand pure-GDPbasis. The constructionmarket in Germanyhas been steadyand strongsince the reunificationof Westernand EasternGermany in 1991.
l. The Product:
A. Evaluation of Product as an Innovation:
The majorityof the SuperVision product line of architecturallighting equipmentfeatures Light EmittingDiode (LED) technology, which is superiorto its alternativeneon, in bothterms of priceand energy efficiency. This productfeature is good becausethe German peopleappreciate and often expectefficient, high technology products.
As consultantswe were asked to evaluatethe market potential specificallyfor the LED-stripand border-tubelighting products. The entireSuper Vision product line includes: Fiber Optic Lighting, LED lighting,Pool Lighting, Spa Lighting,Undenruater Lighting, Sign Lighting,and ArchitecturalLighting.
Whileconducting our primaryresearch on the Germanmarket we discoveredthat there are numerousSpas and publicbaths throughoutthe country. As a resultof our findings,we have concludedand recommendthat, in additionto the LED bordertube architecturallighting, Super Vision pursue the sale and distribution of their underwaterand spa lightingproducts in Germanyalso.
1. RelativeAdvantage: The LED productshave an energyefficient low voltagesystem and extremelylong lamp lifethat reducesmaintenance costs. The amountof lamp life associatedwith each of the productdepends on the colorof the LED and the frequencyof the lightthat is emitted. Lamp life equals100,000 hours for red, clearred, orange,amber & 60,000hours for white,green, aqua, blue and white.
The LED borderstrip is availablein four and eight-footlengths, the BorderLight's tube can easilybe cut to any customlength. With five colorchoices of red, orange,green, blue, white, plus clear.
46 ffimwffiffiffi fusmpqw
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It also shouldbe pointedout to the Germancustomer that the side- glow cablesare nearlyunbreakable and havetreated exterior jacketsfor maximumdurability against the elements. Also the ultra- side glow cablescan provide25% largerdiameter and the resultis the brighfesfsideglow cable in the industry.
$tffiffiGL#w #AffiLHSffi
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2. Compatibilitywith the market'slevel of technoloqy: The differencesamong electrical outlet voltage between the US and Germanywill be a problem. The Germanmarket operates off of 220-voltpower outlets. Productadaptation will have to be addressed.
F#H$trR,,S#Fpffi
*SVl Border Light's power supply:comes in 12Volt/60Wattor 12Vt150Watt.
47 3. Complexity: The productsare relativelyeasy to use and install,and the energy efficiencyof these productsis very importantto German buyers who face expensiveenergy taxes. The targetmarket for our productsis going to be construction/architecturefirms who are in the businessof buildinglarge buildings that may havethe needfor exteriorlighting, or for buildingowners who want to add a littlebit of lifeto theirexisting buildings. The entireborder light product line: strips,power supply, tubes, tracks and end caps can be easily configur,ed,especially when you considerthat our targetbuyer (constructionfirms) should have this type of know-how.
B. Maior problems with Product's Acceptance in the Market:
The chief reasonfor a possibleproblem with the acceptanceof the SuperVision line of productsin Germanyis the fact that, according to the US trade bureau,the Germanconstruction sector is currently operatingat relativelylow levels,with the constructiongrowth rate in Germanybeing at its /ouresf/evels in years
Since2000 Germanyhas experiencedminimal growth in the buildingand constructionsector, with only755 172,728978, and 723 333 buildingsbeing constructed in 2000,2001 and 2002 respectfully.Experts predicted that the constructiongrowth rate would bottomout in 2003. As consultants,we have concludedthat SuperVision could see this down trend as a threator as an opportunity.
Anotherpossible problem for SuperVision is the possibilitythat there are alreadytoo many competingfirms similarto ours in the Germanmarket. ll. The Market:
A. The GermanMarket:
1. GeosraphicalReqion: Germany'sstrong post-war economic growth has helpedits citizens to achieveone of the higheststandards of livingin the world. The countryis the largestmember of the EuropeanUnion on both a
48 populationand pure-GDPbasis. The constructionmarket in Germanyhas been steadyand strongsince the reunificationof Westernand EasternGermany in 1991. Most of the construction effort has been focused in the east, where extensiveinfrastructure and modernizationprojects have been implemented.
Accordingto the countrycommercial guide on Germanyprovided by the bureau,the Germaneconomy today faces seriousissues including(but not limitedto) persistentslow growth& high unemployment,high outstandinggovernment debt & tax rates,and continuedhigh net transferpayments to easternGermany. They go on to indicate,"Signals for a significantupswing are not in sight and the trend towardrising unemployment remains." (Commercial Guide)
This alongwith the previouslymentioned grim facts aboutthe constructionsector in Germanycould be looked at as a threat to futureinternational expansion or as an opportunityfor SuperVision. They could be viewed as an opportunityif the low figureskept key competitorsout of the Germanmarket long enoughto let our firm get settledinto doing businessin the country. This couldallow SuperVision a few yearsto set up necessaryinfrastructure, supply chains,key relationshipswith suppliersand manufacturer's representatives,and get an overallfeel for how to do businessin Germany,before the constructionsector beginsto come out of the recessionthat is currentlydealing with.
The decisionof which marketsto enter is a key issuerelative to the successof a companythat is conductinginternational business in a foreigncountry. We are suggestingthat SuperVision target major citiesall acrossGermany where there are numeroustall buildings. Not only are we recommendingthat,Super Vision target the major citiesin the more affluentareas in formerWestern Germany, but also the developing,less prosperous cities in the formercommunist easternblock.
We are recommendingthat SuperVision target the key marketsin *Hamhurg, the folfowingGerman cities:Berlin, "Munich, Colog n e, Fran kfu rt, Essen, Do rtm u n d, Stuttgart, D iisseldo rf , Bremen, and Hanover, *Leipzig, and *Dresden.
* Former Eastern German cities. lf the hired German distributorsfeet that the eosternGerman markets of Leipzig & Dresden are feasible for Super Vision to target with their LED lightingproducts, than we as consultantswould
49 recommenddoing so. Our reasonfor this recommendationis becausethe two citiesare very close in proximityand both are undergoinga lot of infrastructurechanges and constructionat the presenttime.
2. Forms of Transportation: Majorroads can accessany part of the country,as Germanyhas one of the most advancedroad systemsin all of Europe. According to the LonelyPlanet travel guide, "German roads are excellent... The nationaland (in)famous motorway network known as autobahncan be wonderfuland can be a nightmare:speed-of-light Porschesand BMWs loomingmonster-size and impatientin your rear-viewmirror are one factor, soul-destroyingtraffic jams are another"(Lonely Planet) "As a result of the automobile,Germany's road system has improvedconsiderably during the 20th century.This holds particularlytrue for its networkof four lane expressways,the famousAutobahns" (Geogate). The Audubonconnects many Germancities; so once the distributorstake titleto goodsthere will be littletrouble transporting the shipmentsby transit.Also, The Germantrain networkis also very extensive,and the easternand westerntrain systemshave now beenfully merged.
Sinceits beginningsin the mid-19thcentury, the railroadswere owned and operatedby the state. However,the railroadsystem was recentlyprivatized by "DeutscheBahn AG." The total lengthof the rail systemin Germanyis approximately42,800 kilometers, and in the easternhalf of the countrythe systemis in poor conditionand in the need of major improvements(Geogate).
3. Consumer Buvinq Habits: Sincewe are mainlygoing to be sellingto the industrialsector, which has differentbuying habits than ordinaryconsumers, we are not goingto offermany sales promotionslike coupons or giveaways. However,we may offer a nice discountstructure to our hireddistributors to sell our productsin Germany.
Accordingto the US commercialservice, "Many advertising practicesthat are common in the UnitedStates, such as offering premiums,are not allowedin Germany. They also recommendthat any plannedadvertising campaigns should be discussedwith a potentialbusiness partner or an advertisingagency in Germany" (CommercialGuide).
50 We recommendthat our marketingand advertisingcampaign in Germanybe thoroughlydiscussed with the German-basedsales distributorsthat we sign up to sell and distributeour productsin Germany.
The followingaddress is for the Germanassociation of advertising agencies:
GesamtverbandKommunikationsagenturen e,V. (GermanAssociation of AdvertisingAgencies) Friedensstr.1 1 60311Frankfurt a.M" Telephone: t49l[69]2560080 Telefax:[a9][69] 236883 w\ /vv.gwa.de
4. Distribution: a. TypicalOutlets in whichthe Productis Sold: The targetGerrnan buyer of our productsare goingto be constructionor architecturefirms who are in the businessof buildinglarge buildings that may havethe needfor exteriorlighting, or for buildingowners who want to add a littlebit of lifeto their existingbuildings. b. ProductSales by Other Intermediaries: Germany'spopulation and industryare decentralizedand evenly distributedamong cities,which is not the case in most of Europe. lt is importantfor SuperVision to locaterepresentatives in the major partsof Germanythat we will be targeting,as the German customerwill expectto be able to make closecontact with our agents. lt also shouldbe notedthat the U.S. is the Federal Republic'slargest trading partner outside the EU.
We recommendconducting the marketing,warehousing, sales, distributionand logisticsthrough a distributoror a number of independentdistributors located in target German cities.
The best recommendationthat we can make as consultantsat this phaseof the projectis for SuperVision to hire/sign-upa distributor in either: (a) 1 or 2 central locations such as Frankfurt or Hamburg, or
51 (b) sign-up multiple distributors in multiple targef crtres.
Thesedistributors will take title of goods upontheir arrivalat the Germanport and handlethe rest of the businessfrom that point in time. The distributorswill essentiallybe the face of SuperVision Internationaland representthe company,so it is essentialand cannotbe stressedenough how importantit is that the correct Distributorsbe hiredby SuperVision.
We recommendthat SuperVision be very selectivewhen choosing a distributoror salesagent, and ensurethat they have key relationshipswith Germansuppliers, contractors, builders and architects. The selecteddistributors should target and market the Super Vision products to construction wholesalers, architectural firms, and wholesaleart suppliersin the German marketplace.
We also recommendthat SuperVision should also considerthe developmentof a Germanlanguage website, so that they can offer servicesonline via the internet.An advantageof havingan online presenceis that SuperVision will be able to increasetheir brand imageand awarenessand reachmore customersin Germany. An addedbenefit to pursuingthe click-and-mortare-commerce strategywhich generatessa/es revenuesis that we can gain the businessof smallfirms who do not wish to purchasethrough our sales reps or distributors.
However,we do not recommendthis strategybecause special attentionshould be givento insuringthat we do not angeror upset any of our agents/distributorsby implementingthis alternative distributionchannel. Our besf recommendationfor an e-commerce strategy is for Super Vision to make the website only be an informative website in which only information is exchanged and no online transactionstake place, this way we can ensure that our distribufors do not get upset and feel disintermediated.
5. Advertising & Promotion: a. AdvertisinqMedia: SuperVision needs to emphasizeto the Germancustomer how the LED borderlight strips and tubes are more efficientand saferthan the neon alternatives,which currentlyclaim a largesection of the market. Sincethe targetmarket for our productsis goingto be industrialbuyers, i.e. constructionsupply companies and architecturefirms, we will need to promoteour productsdifferently thanwould a companywho was sellingconsumer goods.
52 We feel that the best way to contactthese potentialcustomers is throughthree ways; throughpromotion at one of the numerous trade fairs held annually in Germany, via advertisements in German trade or industry journals such as architectural lighting or electronic componenfsjournals, or througtt one of a number of technicaland specialized periodicals that deal with technology and busrness rn Germany (Commercial Guide).
SuperVision should point out throughpromotion that the products have an energy efficientlow voltagesystem and extremelylong lamp lifethat reducesmaintenance costs. Also, the wide assortmentof LED colorsthat are offeredshould be emphasizedto the potentialbuyer. And if we decideto marketthe side glow cablesas well,their durability should be emphasized.
The amountof lamp life associatedwith each of the products shouldalso be includedin the promotion. lt shouldbe explained how the amountof lamp life associatedwith a LED dependson the frequencyof the colorof lightthat is emitted. Lamp lifeequals 100,000hours for red, clear red, orange,amber & 60,000hours for white,green, aqua, blue and white. The Germanbuyers will appreciatethe informationbecause they are well educatedand appreciatebeing well informed.
The Germancompanies will appreciatethe long lamp life and the fact that the lightingis done in an energyefficient manner. This efficiencyis particularlyimportant to the Germanbuyers because the Germangovernment, which mandatesincreasing tax rateson energyusage, has codifiedrecent legislation in. b. Sales PromotionsCustomarily Used: Also, it shouldbe notedthat many advertisingpractices common in the UnitedStates, such as offeringpremiums, are not allowedin Germany. The GermanEmbassy recommends, "Any planned advertisingcampaigns should be discussedwith a potential businesspartner or an advertisingagency in Germany."Following is the addressof the Germanassociation of advertisingagencies:
GesamtverbandKommunikationsagenturen e.V. (GermanAssociation of AdvertisingAgencies) Friedensstr.11 60311 Frankfurta.M. Telephone:[49]t691 2560080 Telefax:[a9][69] 236883 www"cwa.de
53 (Marketing*US)
6. Pricinq Stratesv: a. CustomaryMarkups: The pricingdecision for enteringand successfullycompeting in the Germanmarket for LED and fiber optic lightingis crucial. The pricingpolicy that we are suggestingwill allow SuperVision Internationalto meet theirstrategic goals relativeto the German market,and help to managecosts, sales volume and revenues.
To determinean optimalentry pricefor our product,many factors must be weighed. The probablelife-cycle of the LED bordertubes that we plan on exportinginto the Germanmarket is most likelyin its introductorystages, with few competitorscurrently operating in the market,i.e. an oligopolisticmarket.
We suggestthat SuperVision should undertake a "pioneerpricing strategy"that will maximizeprofit contribution over the entire marketingplan. However,the fact that the Germanconstruction sectoris experiencingsluggish groMh may forcethe companyto offer a lowerthan expectedcost to its distributorsor agents,thus resultingin lowerthan projectedsales revenuesin our fonruard lookingfinancial statements. Yet, an added benefitto participating in the Europeanmarket at this pointin time is the recenteconomic trend of the strengtheningEuro. This recenttrend of Euro appreciationversus the dollaris a very good sign for SuperVision, as the companywill be ableto benefitby receivingthe (stronger) Eurosas paymentfor their products.
When evaluatingthe pricingoptions , full-costpricing is most likely not the rightentry pricingstrategy for this product(and complementaryproducts) because it failsto taKeinto consideration the relationshipbetween customer demand for the productand price. Arbitrarilydeciding on an additionalinternational profit marginto add onto the pricethat the productsells for in the domesticmarket is also not a good ideafor SuperVision, as it wouldtend to be a naTveapproach to internationalbusiness.
We feel that the idealstrategy to pursuewould be to implementan incremental-costpricing strategy. This strategydistinguishes betweenvariable costs and fixed costs. The incrementalcosts of enteringinto the Germanmarket can be measuredas the new coststhat would not exist in the absenceof this expansion.One
54 down-sideto this pricingmethod is that likethe full-costmethod they fail to take into accountdemand and competitionin the target market,so some adjustmentsto our pricesmay needto be made as we continueto do businessin Germanyand get a feel for consumerdemand and industrycompetition patterns.
We are suggestingthat SuperVision undertake a "pioneerpricing strategy"because we feel that the LED productsare relativelynew to much of the Germanmarket. We feel that the optimumentry price can be obtainedby settinga price more towardsthe "skimming-price"side of the skimming/development-price continuum.
In otherwords, we suggestthat SuperVision set a relativelyhigh entry price,with the intentto earn semi-quickprofits before rivals respondwith substituteproducts at a lowerprice. But at the same time this priceshould not be set too high and shouldmeet customer demandpatterns. At this pointin the product'slife-cycle, when competitorsthreaten to steal our marketshare, we can adjust the priceto competewith the competitionand engage in life-cycle pricing. b. Types of DiscountsAvailable: We must also figure.outa way to encourageour distributorsto sell at the pricethat we want. We will do this by figuringout the ideal discountstructure to offerthe distributors.
We are assumingthat the pricingobjectives in the Germanmarket are not for quick profits,but rathertarget sales growth,target marketshare, enhancing a high-quatityimage and the benefitsof LEDs over neon,and probablymost importantlygaining the support of middlemen.This last objectiveis particularlyimportant to us becausethese middlemen(i.e. Distributors & Reps)are goingto be the peoplewho are actuallyout there sellingour product(s)"Super Vision must figure out the proper discountstructure to offer the agentsin orderto maximizesales revenues. Our channeldiscount policywill vary dependingon the agentsthat we selectto work with in the Germanmarket.
(Root, Ch. 8)
55 B. Gomparisonand Contrastof the Competition's Product(s):
We have evaluatedand listed 3 differentsets of possible competitors:German Competition, International Competition and Domestic(U.S.) Competition.
GermanCompetition: Our research has lead us fo believe that there are relatively few local German firms specializing in the LED/Energy Efficient Lighting industry.
OSRAM Opto Semiconductors GmbH
o Busihess type: manufacturer o Product types: LED lighting,Light Emitting Diodes in differentcolors and packages,LED Modules,Infrared detectorsand emitters,Intelligent Displays, High Power Laser Diodes. o Address: Wernenruerkstr.2, Regensburg,Germany D-93051 o Telephone: +49-941-850-5
DelidimitriouMarketing
o Business type: manufacturer,retail sales, wholesale supplier,exporter, importer, trade association o Product types: computerand'electronic components, consumerelectronics batteries, air coolingsystem components,LED lighting,consumer electronics batteries, batteryaccessories, international import & export, retail+ wholesalebusiness in all area. o Address: Auf der Steig 105, Stuttgart,Germany Stuttgart70376 o Telephone:004971 1-9953647 Web Site: http.//urunt.delidim itriou. com
Intern ati onal Comnetition : (Wholesalers/ Retailers/ Distribufors/ Exporte,rs)Ihese players may or may not alreadybe in the Germanmarket, and someof themmay provideadvantageous partnership opportunities.)
56 Dalian Xingchen Lamp & Decoration Products Co., Ltd o Businesstype: manufacturer,wholesale supplier, exporter o Producttypes: compact fluorescent light bulbs, LED lighting,compact fluorescent lighting fixtures and ballasts, solargarden lights. o Address:MSB 80138 Dalian Psot, Dalian, liaoning China1 16001 o Telephone:864112917477 ,13332219978 o Web Site: http://www.elampliqhting.com/companven.asp D-TEC o Product types: Engineeringsupport & consultancy on all kind of powermanagement and lightingdesigns, such as: electronicfor compactfluorescent lighting, High Frequencyfluorescent TL ballasts,DC to DC power converters,DC to AC power inverters,battery chargers, LED lighting. o Seruice types: Engineeringsupport & design consultancy o Address: Coolenstraat3, Weert,The Netherlands 6005 NX o Telephone:+31 6 50 297 785
M.J.Lighting Technology o Business type: manufacturer,exporter o Product types: LED lighting,energy efficient lighting, LED lighting,compact fluorescent lighting, LED lighting,DC lighting,Buried & recesseddrive-over, walkover LED lighting systems. o Service types: consulting,design, project developmentservices o Address: P.O.Box 18 , Wellington,Shropshire UnitedKingdom TFG 6WL o Telephone: 0044-(0)1952-840740
NRJSolar lla Boutiquedu Solaire o Businesstype: retail sales, exporter, importer
57 o Product types: LED lighting,solar garden lights, DC poweredappliances. o Address: 22, rue du mur du parc,Chambourcy, France78240 o Telephone:(33) 1 44 75 7A 19
NuovaThermosolar srl o Businesstype: manufacturer, wholesale supplier o Product types: photovoltaicsystems, fluorescent lightingfixtures and ballasts;battery chargers, LED lighting, recreationalvehicle power systems. o Address: Via Aldo Moro 161A,Formigine, Modena ltaly 41043 o Telephone: 0339 3666172
Sinicco o Business type: manufacturer,retail sales, wholesale supplier o Product types: photovoltaiccells, LED lighting, marinepower systems, ocean energy systems, photovoltaic cell manufacturingequipment, energy efficient appliances. o Address: Switzerland o Telephone:+41 79 778 9841
Skyart Lighting o Businesstype: manufacturer, exporter o Product types: DC lighting,LED lighting. o Address: 230/FXinxing Road GuzhenZhongshan GuangdongChina, Zhongshan, Cn China 528421 o Telephone: 86-760-2346381
RichsunSolar Go., Ltd. o Businesstype: manufacturer, exporter o Product types: solar light,solar garden lights, energy efficienthomes and buildings,LED lighting,energy efficient lighting,energy efficient appliances, solar charge controllers, solar roadstud, solar warning light, solar poweredstainless steel light,solar road marker,solar brick, solar tile, solar housenumber,solar traffic sign.. o Address: 5/F, No.9Building, Dayuan Industry Zone, Pingshan,Xili Town, Nanshan District, Shenzhen, China 518055
58 Web Site: http:l/www. solarroad.com
Prime Light Pte Ltd
o Businesstype: wholesale supplier, exporter, manufacturer o Producttypes: Ultra Bright LED, LED bulbs, LED Flood/Spotlamps, Solar LED lamps, RGB Lamp, LED light strip. o Servicetypes: CustomisedLED lighting design o Address:Blk 5 Ang Mo Kio IndustrialPark 2A, #04- 15AMK Tech ll, Singapore,Singapore 567760 o Telephone:65-64832188 o Web Site: httn:lAnffiyv.prime-light."c.-ojJr
Labcraft Limited
o Businesstype: Manufacturerof LED& energy efficient,low voltage lighting o Producttypes: LEDlighting, energy efficient DC lighting,low voltage lighting, solar internal lighting, solar externallighting, solar street lighting, marine lighting, commercialvehicle lighting, industrial lighting and recreationalvehicle lighting. . o Address:22FKing Street, Saffron Walden, Essex UnitedKingdom CB10 1ES : ff5lJ'?J:;,i'1rtrf;":Jfi3i,- Wuhan Electronics
o Business type: manufacturer,exporter o Product types: Multi-purposePortable solar light, LED lighting,solar outdoor lighting systems. o Address: No.39,JianghanRoad, Wuhan,, Hubei China430019 : ff5'$J:"i,ffi,:^l:l''*?''';'1-"""-
Domestic(U.S.r competition : Theseplayers are possiblecompetitors should they choose to exportinto the Germanmarket if they haven'talready started doingso ...
Daydreams Solar
59 o Bu'sinesstype: retailsales o Product types: packagedpower systems, LED lighting,portable power systems, photovoltaic module components. o Seruicetypes: consulting,design, education and trainingservices o Address: RR1boz11 16, Starks, Maine USA A4Y1 o Telephone:696-9983
DeepRooF Lighting o Business type: manufacturer,retail sales, wholesale supplier,importer o Product types: compactfluorescent lighting fixtures and ballasts,compact fluorescent light bulbs, compact fluorescentlighting, energy efficient lighting, LED lighting, fluorescentlighting fixtures and ballasts,Track Lighting,HID Lighting. o Address: 157-37Roe Ave., Flushing, New York USA 11355 o Tefephone:800-782-7180
Digital Light o Business type: manufacturer o Product types: LED lighting,LED, SMD, LED Light Strip,LED LightBulbs, LED DisplayBoards, LED Backlighting,LED FullColor Displays. o Address: Avenueof the Stars,1801 Century Park E, 24th Floor,Los Angeles,California USA 90067 o Telephone:310-551-9999
Brite-LEDOptoelectron ics o Business type: manufacturer,wholesale supplier, exporter o Product types: LED lighting,LED discrete components(High Brightness White LEDs). o Address: 2812 DuncanTree Circle,Valrico, Florida usA 33594 o Telephone:813-654-5192
Prolight, Inc.
60 o Business type: manufacturer o Product types: compactfluorescent lighting, LED lighting,energy efficient lighting . o Address: 581 OttawaAvenue, Holland, Michigan usA 49423 o Telephone: 616-396.6722 or toll free 800-968-2556
GoodMart.com o Business type: E-Commerceiretail sales, wholesale supplier o Product types: compactfluorescent lighting fixtures and ballasts,compact fluorescent light bulbs, energy efficient lighting,fluorescent lighting, fluorescent lighting fixtures and ballasts,LED lighting,infra-red conserving halogen lamps, energysaving metal halidelamps, Energy Star qualified lightingproducts. o Address: 45 Main St. STE 403, Brooklyn,New York usA 11201 o Telephone: 877-402-6100 o Web Site: http://www.goodmart.co"fn
MichiganLighting Systems o Product types: fluorescentlighting fixtures and ballasts,compact fluorescent lighting fixtures and ballasts, energyefficient lighting, LED lighting. () Address: 3225Walker Ave NW, Grand Rapids, MichiganUSA 49544 o Telephone:616.785 .1415
Wesbar Gorporation o Business type: manufacturer,wholesale supplier o Product types: LED lighting,Vehicle lighting, wiring, systems provider. o Service types: researchservices o Address:42A1 CountyHwy. P, West Bend, WisconsinUSA 53095 o Telephone: (262)334-2381
AII competition information was generated through searches on the LED Lighting Busrnessesrn the World by Business Name website which can be found at: http.l/energy.sourceguides.com/businesses/blrP/light/LEDLighting/byN/b yNameD.shtml
61 C. MarketSize:
EstimatedIndustry Sales for the PlanningYear: As of 2002,there were 723,333businesses in Germanyand of these, 57,016were in the constructionsector (see busrness notificationstable below). The constructionsector is a key indicator for SuperVision to lookat when tryingto determinethe size of the potentialGerman market. There is no singlebusiness center in Germany,although Berlin is the largestin terms of population.
We have researchedthe opportunitiesfor future constructionplans in Germanyand have concludedthat it will be advantageousfor SuperVision to targetmarkets all acrossthe countryof Germany, ratherthan our previousideas of simplytargeting the more prosperousand affluentwestern cities.
Accordingto the countrycommercial guide, "While market conditionsin the new and old federal states of the reunited Germanycontinue to convergeimpressively, U.S. exportersand potentialinvestors should, nonetheless, be awarethat the new federal states of easternGermany still present,in certainrespects, distinctivecommercial opportunities and challenges."(Commercial Guide)
The larqest cities in terms of population are as follpws: Berlin (3.4 million),Hamburg (1.7 million),Munich (1.2 million), Cologne (964,000), Frankfurt (644,000), Essen (603,000), Dortmund (592,000),Stuttgart (582,000),Dusseldorf (568,000), Bremen(543,000), Hanover (51 6,000).
Number of Businessesin Germanv:
Businessregistrations 2000 2001 2002 Total 755 172 728978 723333
64 337 59 939 57 016 Wholesale and retail frade; repair of motor vehicles, motorcycles and 226978 2tt 917 218r93 personal and householdsgoods Hotels and restaurants 66 062 63 928 63 877
62 iReal estate,renting and iibusinessactivities, etc. r983ll 191449 lOther community, social and 58637 ipersonalservice activities iOthereconomic activities 143l36t 1426s4
Last updatedon 08. July 2003
Construction work completed:
t Specificaiitu .Unit..;1:209{ 2,00:22003 Germany onstruction work completed Bui ldinssiconstructionworks Number 30308s 282 420 267 326 llings, total Number 326 187 289 590 268 096 Living floor space I 000 mz 36 717 33 526 3t 594 Estimatedcosts of buildinss and EUR mn 76 2r3 72 260 66 248 other structures lncl.: Constructionof new buildines Buildings/construction works Number 213205 197 525 187045 Dwellings Number 292 328 25987s 240 934 Living floor space I 000m' 31927 29 r32 27 452 Estimatedcosts of buildinss and other sffuctures EUR mn 63 733 60310 55 100 Preliminiary result.
Last updated on 08 April 2004
(FSO-Construction Work)
Note on Data for Buildinq Activitv:
"The statisticson buildingactivity are compiledon the basisof the 1998Law on Sfafisficsof BuildingConstruction. These sfafisfics cover the permitsissuedfor building constructionand the constructionwork completed,the volumeof unfinishedbuilding projectsat theend of theyear, retiremenfs of sfructures,and the currentadjustment of fhe sfocksof residentialbuildings and dwellings.The item directlysurueyed is the
63 building,which ,s either c/assifredas residentialor non-residentialand furlher categorisedby typeof building.Residential buildings are thus c/assified as one-,two- or multi-familyhouses or as residentialhomes.
/n essence,fhe sfafisfrcson huildingactivity record additions to and retkementsfrom !- the stockof buildings,using indicators such as thenumber of buildings,dwellings, living floor space,useful floor area and walled-rnspace. Hence, they presenta substantial partof thebuilding activity primarily in termsof quantity." (FSO - Construction & Housing)
EstimatedGompanv Sales for the planningvear:
Moreinfbrmation on the constructionmarket in Germanycan be obtainedfrom the U.S.Commercial Service's German industry sectorspecialists:
Architectural/Constr./ Engineering Bettina +49 341-213-8440 Leipzig Services Kutsche [email protected] Building Products Bettina +49 341-213-BM0 Leipzig Kutsche [email protected]_ Construction Machinery Bettina +49 341-213-8440 Leipzig Kutsche [email protected]
D. Government Participation in the Marketplace:
1. Agencies that can help vou:
One of the best governmentagencies in Germanyfor businessesis the Officeof the FederalCommissioner for ForeignInvestment in Germany. This agenciessole purposeis to helpthe businessthat it tryingto do businessin Germany. Investin Germanyis the primarycontact for a businessinterested in doing businessin Germany.
The websiteInvest-in-Germany.com has a myriadof goals. To beginwith, they will introduceyou to all the sidesof the German corporateenvironment and businesspractice. Their missionis this; "we connectyou with today'sGermany and introduceyou to
64 economicadvantages and businessopportunities in Germanyas a site for Europeanexpansion" (lnvest).
In addition,the site givescontacts both in the privateand public sectors..They will also assistyou in locatingsuitable sites for manufacturingand R&D. Furthermore,they will provideinformation aboutthe marketand your marketsegment. Most importantly,they will connectyou with economicdevelopment authorities throughout Germany.
Anotherhelpful agency is the Germancommercial service, which is a joint trade missionprogram designed to tap marketopportunities in new federalstates. lt was implementedto introduceU.S. small and mediumsized exporters to distinctivemarket opportunities in Germany. In addition,the commercialservice Berlin and Leipzig offersmarket information, analysis and reporting,trade show supportand roundtables to assistU.S. firmswishing to capitalize on thesespecific market opportunities.
Eventhough there are agenciesto help you, Germanydoes have governmentregulations that you mustfollow, and oftentimes these regulationscan be baffling. Governmentregulation in Germanyis often complexand may offer a degree of protectionto already establishedlocal suppliers. Safety or environmentalstandards can complicateaccess to the marketfor U.S. products. Germanbuyers may requireadditional performance or qualitymarks, which are not necessarilylegally required, but enhancea product'schances to be marketed. Productsentering the Germanmarket require testing and certificationbefore they can be marketed. lf you chose to exportit is importantto knowwhat standardsapply to your product and it is also importantthat you obtaintimely testing and certification.
2. Requlations vou must follow:
Accordingto the GermanEmbassy in WashingtonD.C., "the legal basisin Germanyfor foreigntrade and paymenttransactions is the ForeignTrade Act." This act definesthe principleof freedomof foreigntrade and paymenttransactions and also indicatesthe main restrictions.
The most importantimplementing regulations under the Foreign Trade Act is the Foreign Trade and Payments Ordinance,which containsmost of the rulesand regulationsdealing with foreigntrade and how they relateto normaleveryday business. The ordinance also includesthe relevantEU regulations.
65 The part of the legislationthat is of particularinterest to Super Vision is the "lmportList," which specifiesthe freedornof imports and any restrictionson them and is part of the ForeignTrade Act itself. 'iespecially The GermanEmbassy's website goes on to pointout in the case of industrialproducts, the importof goods into Germanyis almostcompletely liberalized." They implythat the importerneeds neitheran importpermit nor an importdeclaration, and that "this appliesto potentialpartnerships with a registeredoffice within the territoryof the FederalRepublic of Germany."To take advantage of theqerules we recommendthat SuperVision select an agent locatedwithin the countryto conductsales of the products.(Trade)
Furtherinformation on Germanycan be found at the U.S. CommercialService Germany website http://www.buyusa.de/en.
66 The MarketingPlan
Executive Summary
ll. The Marketing Plan A. Marketing Objectives Target Market Expected Sales Profit Expectations Market Penetrationand Coverage B. Product Adaptation Core Component PackagingComponent Support Services Component C. Promotion mix A" Advertising a. Objectives b. Media Mix c. The Message d. Costs B. SalesPromotion C. PersonalSelling D. Distribution From Origin to Destination Port Selection Packaging Documentation InsuranceClaims Freight Forwarder E. Ghannels of Distribution F. Price Determinationand Terms of Sale Costs of the Shipment of Goods G, Terms of Sale H. Methods of Payment
ll. Pro Forma Financial Statements Marketing Budget Advertising and Promotion Expense Distribution Expense
lll. Resource Requirements Finances Personnel Production Capacity Appendixes.
68 f ^f f.s &/ -1yo,1f{.vr:.: ",7 THEMARKETING PLAN
Executive Summaru
The MarketingPlan that we have developedfor SuperVision International targetsthe constructionand architecturefirms in Germanywho routinelybuild large-scalecommercial buildings. We also suggestmarketing the BorderTube productsto architecturefirms, and art supplycompanies that have an emphasis towardbuilding construction.
From our analysisof the German industry,w€ have figuredtentative estimates that out of the 57,016construction firms in Germanyit is possiblefirst year Super Visioncan expectto sell to one half of one percentof all of the new building projects. lf each projectaverages $750 in BorderTube Products,Supervision can expectto be usedin 1,336.63projects with total revenue of $1,002,427.5. These numbersand marginsare subjectto a greatdeal of changedepending on SuperVision's actual policies in the market.
With these preliminarynumbers, in the first year we predictthat the total profitwill be close to zero becauseof large advertisingcosts in trade magazinesand direct mailfliers throughout the Germanconstruction and architectureindustry. Also, a largeamount of producttraining that will be necessaryfor the new distributorsin the region. After the first few years we expect profitto be 15-20 percentof the total sales price.
The Productwillhaveto be modifiedto be used in German220 volt power outlets,and the packagingwill need to be convertedto the Germanlanguage. AdditionallySuper Vision may want to considera German-speakingproduct supporthotline for the Germanmarket.
To distributethe productswe recommendhaving the modificationscompleted in the Orlandofactory, trucked by AmericanFreight Company to Port Canaveral, Florida,containerized through Transgroup Wolrdwide freight fonrvarder, and placedon a vesselto HamburgGermany. Once in Germanywe suggesthaving the containerstransported by rail to the Frankfurtwarehouse of Delidimitriou Marketing,where warehousing and distributionwill occur. This companywill probablybe ableto distributea greatamount of localknowledge for the German market,and can be used as a strategictool for key sales.
69 In orderto persuadeGerman companies to purchaseSuper Vision Products we suggesthaving incentives offered for any high exposureprojects in the firstfew years. This will help to get the companiesimage and productknowledge get dispersedthroughout the new industry.Additionally the companymight try promotionaltools betweendistributors or key constructioncompanies for cash bonusesand free merchandisefor the highestquantity and qualitypurchasers. This couldpotentially create a contestbetween companies vying for SuperVision products.To createthis we recommenda largeamount of DirectMail publicationsand advertisementsin Trade publications.
Additionally,to get the distributorsto purchasethe productswe recommendCost Insuranceand Freightpricing in the firstfew years. This will be attractivefor the importersbecause they will have less of a burdenand riskfor priceincreases.
70 I. The Marketing Plan
A. Marketing Objectives
Target Market The targetGerman buyer of SuperVision International's LED Border Tube lightingsystems are goingto be constructionor architecturefirms who are in the businessof buildinglarge buildings that may havethe needfor exteriorlighting, or for buildingowners who want to add a little bit of lifeto theirexisting buildings. Additionally art supplycompanies with an emphasistoward building construction should be cateredto as well.
Expected Sales From our preliminaryanalysis, we believeSuper Vision may expectto sell to aroundone half of a percentof all buildingworks happeningin Germanyduring in the first year. lf each buildingwith the lighting averages$750 in SuperVision BorderTube lightingproducts, using the total constructionworks numberfrom 2003 in Germanyof 267,326. SuperVision can expectto be used in 1336.63building projects, with total salesof $1,002,472.5. In the yearsfollowing the introductionof the productthe companycan expectthe salesto increaseover the first years numbersby 10-15percent. These numbersare subjectto great fluctuationwith companypolicies in the region. lt shouldbe re-stated that theseare only preliminaryestimates.
Profit Expectations In the firstyear the projectwould ptobablygenerate few if any gainsto profitdue to the largeexpenses of settingup the international distributionchannels and trainingthe Germandistributors to marketthe productscorrectly. Additionally large amounts of expensesare likelyto occurin yearone by simplyvisiting the distributorsand buildinga strongbase of knowledgeof the productsin Germany. After year one the profit marginsmay be as high as fifteento 20 percentof the total sales even after the distributorscut of the profits.
Market Penetration and Goverage SuperVision International'sborder tube lightingproducts can be sold througha distributorto many of the 57,016 construction firms in Germany. The distributorsshould, however focus on the construction and architecturefirms here who specializein largecommercial buildingsor bridges.Over time the companycan use the German peoplesinterest in high qualityproducts to pull the demandfor the products. lf a few prominentbuildings in Germanyuse the bordertube lightingproducts, many of the other peoplewill want them as well. This is howthe firm usedthe prominentsigns in TimesSquare, and
71 the Hard Rock Caf6,to createdemand in manyAmerican companies for theirbuildings.
B. Product Adaptation
Core Component The bordertubes themselves are legalin Germanybut consideration for the powerdemands of Germanoutlets should be considered. Many of the outletsin Europeand specificallyGermany demand differentplugs than those in the UnitedStates. The Germanoutlets support 220-volttype of appliances.
PackagingComponent Beforethe productscan be sent to Germanythe packagingneeds to be translatedinto German. lf the productsare onlywritten in English the German consumersmay disfavorthe lack of adaptationfrom Super Vision.
Support Services Gomponent Becausewe suggestSuper Vision use a Distributorinstead of a wholly ownedSubsidiary in Germany,requirements for Servicesare less of a burdenon the parentcompany, but stillequally important. Super Visioncan educatethe Distributoron technicalsupport and createa networkso that the productscan stillhave a technicalsupport side. Also, SuperVision may considerthe use of an internationaltechnical supporthotline to aid the constructioncompanies in the installmentof these types of products,or find a Distributorwith these types of supportcapabilities.
C. PromotionMix
Advertising a. Objectives SuperVision International'smain objectiveis to createaware,ness of the productsfrom the companyin the Germanconstruction and architecturalfirms by providingthem with the productadvantages and accomplishmentsthat the companyalready currently has. AdditionallySuper Vision should strive to meet new contactsand possibledistributors in the area throughTrade Fairsand DirectMail Publications.
b. Media Mix
72 The primemedium of advertisingfor SuperVision in German shouldbe tradepublications that usuallycirculate in the constructionand architectureindustry. Additionally Super Vision can benefitfrom sendingdirect mail publicationsto the larger constructionand architecturefirms in Germany.
On the other handtelevision and mass mediaoutlets will not benefit SuperVision as much due to the fact that the good beingmarketed is an industrialnot a consumergood. Theseoutlets will simply not providethe valuethat industryspecific publications provide.
c. The Message In the UnitedStates, Super Vision products represent a very high technologyway to create interestin ordinaryobjects in prime locations.The companyseems to stressthe quality, distinctiveness,and energyadvantages that the productscan createfor any business. In GermanySuper Vision should continue to fosterthis image. For a marginalprice, Super Vision products can make any buildinga sightto behold. These benefitsshould be well marketedin the directmail publications.
d. Gosts The costsof advertisingthese productswill be fairlylow sincethe companydoes not needto use mass mediatypes of outlets. Being an industrialgood, trade publicationswill createa greatvalue and interestfor the money. Additionally,after a few prime SuperVision productsare installedin Germanythe productsseem to advertise for themselves.When constructioncompanies want a high quality effectfor a buildingthey will see the value added effect of the SuperVision products around the world.
Sales Promotion SuperVision can createa greatdemand for their productsin Germanyby offeringa sales promotionaldiscount to thosefirms that most use the SuperVision products. For examplethe companycould create a contestbetween German Industrial ConstructionCompanies and Architecturalfirms for the most sales. By usingstrategic premiums and promotionsin conjunctionwith the Germandistributor, the companycan createa great strategyto add to its demandin the new marketplace.
PersonalSelling We suggestthat the sellingof the productbe handledby the GermanDistributor and marketingagency. These peoplewill have the knowledgeof the Germanindustry to appropriatelysell the productswith its main accountspersonally if necessary.Any
73 personalselling should be donewlth an agentknowledgeable aboutthe territoryand the needsof the Germanmarket.
D. Distribution : From origin to destination
In orderto take advantageof the new manufacturingplant, that was createdfor SuperVision in 1997,in OrlandoFlorida, we suggest that the modificationsto 220 volt and changesto packaging,be madein OrlandoFlorida. From this pointthe companycan containerizethe finishedproducts into twenty and forty foot containersand transportthem by truck to the Port of Canaveral. From here,with properdocumentation the containerscan be transportedto the port of Hamburg. From the freightfonruarder in Hamburg,the distributorwill arrangeto havethe productstaken by railto a warehouseof a distributor,most likelyin Frankfurt,for distributionthroughout Germany to the many constructionand architecturefirms.
The Decisionto transportthe containersby railfrom Hamburgis basedon the findingthat Hamburgis Germany'slargest port of entry, and the largestport for rail entrancesin Europe. The infrastructurefor the raiMayshere is highlydeveloped and cost effective,while the roadwaysstill need some developmentin many areas.
Port Selection: Port of Canaveral,USA by ship to port of Hamburg,Germany Web sightfor more informationon the Port of Hamburg,visit: http: //www. h afe n - ha m b u rg . d e/htm l-e n g l/ho m e. htm For more informationon the Portof Canaveralvisit: http :/lw$4ry&e tt- g nave ra | -ojg/p.gt in fo/po *? ut ho rity.h tm
Packaging Becausethe productsbeing containerized and shippedacross the oceanare fairlydurable, breakage is not a majorproblem, and they would be in neontype lighting. Howeverprecaution need to be exercisedto ensure that the productsare protectedfrom breakage, pilferage,moisture, and excessweight. By doingthis the company willensure that they do not losetime and moneyin the shipping process.
Documentation In orderto havethe FreightForwarder in the Portof Canaveral successfullyget the productsfrom the UnitedStates to Germany, manydocuments are necessary.Super Vision Internationalneeds
74 to ensurethat they have the properBill of Lading,Commercial invoice,Shippers Export Declaration, and the Certificateof Origin.
InsuranceClaims Dueto damagingweather conditions, rough handling by carriers, and other common hazardsinsurance is necessaryin order to avoidthe potentialfor majorfinancial loss to the exporter. In Super Vision International'smarketing plan we suggestthat the company quoteall pricesabroad Cost Insuranceand Freight. By doingthis the companycan ensurethe productsare insured,and know what the ultimatecosts to the foreign distributorsare. Over time the companycan modifythis policydepending on how the relationship with the freightforwarders in Port Canaveraland the distributorsin Germanyis evolving.
Fright Forwarder ln port Canaveralthe FreightFonuarder will help SuperVision ensurethat the properdocuments are at hand. This will help greatlywith the pricequotations by advisingon freightcosts, port charges,consular fees, costsof specialdocumentation, insurance costs,and their handlingfees. They can helpwith proper packaging,and even reservethe necessaryspace on a vessel, aircraft,train, or truck. They can also helpwith the passageof the productsthrough customs overseas in Germany. In short,the servicesprovided by a FreightFonruarder are virtuallya necessity for SuperVision International. The followingare somefreight forwardersin Port Canaveral,Florida:
Caftainer Ocean Line C. Martin Taylor & Company, Florida Marine lnternational 550 CargoRoad lnc. 6050 BabcockSt., Ste.26 CapeCanaveral, FL 32920 405-eAtlantis Road PalmBay, FL 32909 Phone:799-0707. Fax 799-0708 CapeCanaveral, FL 32920 Phone:953-3500 Fax: 953-8223 Phone:783-7499. Fax 783-6901
Tra-nsqroupyvorldwide. I nc. 405-FAtlantis Rd. CapeCanaveral, FL 32920 Phone:321-868-2230 Fax: 868- 2234
E. Channelsof Distribution:
In orderto completechannel of distributionfor SuperVision Internationalin Germany,a representativefrom Super Vision International,conversant in German,should attend one or bothof
75 the followingtrade fairsfor the constructionindustry in Germany. Thiswill helpthe companyto meetand selectwholesale intermediariesthat will be appropriatefor the company.
The Inter:nationalLishtinq and ElectricalTrade Fair in Frankfurt from the 18-22of April 2004. The websiteto learnmore and reservea spot is: h,ttp-,./,/Jig hLb.u ildj n g .m essefra n Kfu,l:t. co mlg Io b a l/e nlh om e. htm I
Bauma-which emphasizedheavy-duty construction equipment morethan lightingproducts, will be heldthis year in Munich.The websitefor this is: http://www.b3pma.de/
Becausethe productsfor SuperVision are industrialgoods, designedto be sold to constructioncompanies, retailers are not necessary.Instead Wholesale Intermediaries who can simply warehousethe productsand managethe demandare calledfor.
Most likelythe companythat distributesand warehousesthe productswill be locatedin FrankfurtGermany, the langesteconomy in Germany,which is centrallylocated near the port of Hamburg. This city has most of the warehousingand distributionfacilities for Germanimported products.
One optionfor a marketingand warehousingintermediary that can take titleto the Bordertube lightingproducts is:
Delidim itriou Marketing o Business type: manufacturer,retail sales, wholesale supplier, exporter,importer, trade association o Product types: computerand electroniccomponents, consumer electronicsbatteries, air coolingsystem components, LED lighting, consumerelectron ics batteries,battery accessories, international import& export,retail + wholesalebusiness in all area. o Address: Auf der Steig 105, Stuttgart,Germany Stuttgart 70376 o Telephone: 0049711-9953647 o Web Site: http://urvuw.delidimitriou.corn
Thiscompany might be a potentialmatch for the marketingof the SuperVision products, but might also be marketingcompeting products.Without detailed discussions with the companyit is hard to tell. Thisis anotherreason the companyshould attend the abovetrade fairs.
76 F. Price Determinationand Terms of Sale-
Cost of the Shipment of Goods In orderto approximatethe cost of shippingthe productsoverseas, the freightforwarders in Port Canaveralestimate that the average cost for transportinga fully loadedforty foot containeris around $1,800-$2,200"However, this may be slightlymore expensive for Supervision'sproducts because the containerswould haveto be placedin certainareas of the shipthat do not get wet very easily. Basically,the electricalproducts are treatedalmost as a perishable item in many respects. SuperVision should also ask the selected freightforwarder to researchthe handlingfees of the carriersfor electricaland perishableproducts. These tend to differdepending on which carriercompany is actuallyselected.
At the port of Canaveralthe first 2 hoursof loadingtime are free. After that a marginalloading charge is placedin orderto motivate quickand efficientloading of packingof containers.The port of Canaveralestimated that the pricequoted ($t,800-$2,200) contains all pier charges,warfage fees, and unloadingcharges.
The transportationfees from the manufacturingplant in Orlandoto the Port Canaveralhave to be consideredas well. The American FreightCompany is a truckingcompany that owns over 80 other truckingcompanies, and traditionallyoffers deep discountsfor commercialgoods. lt is headquarteredout of IndianRocks Beach, Fforida,and can be reachedat 1-800-532-2409.
The otheroption for gettingthe productsfrom the manufacturing plantto Port Canaveralis to simplylet the freightfonruarding companyhandle the logistics.lt can be slightlymore expensive, but may savetime and hassleover the longrun.
Goods importedinto the FederalRepublic of Germanyare generallysubject to VAT. In the case of farm products,the rate is 7o/oand in the case of most industrialgoods it is 16% of the customsvalue together with the customsduty and the costs incurredup to the first domesticplace of destination(e.g. the freight costs).Under the VAT exemptionrules, no VAT is leviedon sample and specimengoods, advertising materials for goods,and goods whichare only temporarilyimported (exhibits at fairs).
77 The followingformula will help SuperVision estimate a final consumerprice that can be quoteto the foreigncustomers and distributors.(ClF)
Factoryprice (with company margins) +domesticfreight (by truck) +exportdocumentation costs (calculatedby FreightFonrvarder) +oceanfreight and insurance(Calculated by FreightForwarder) +importduties (marginal percent of landedcost) +distributormarkup (approximately 15 percent) Construction/Architecture Firm Price
With the calculationof all of thesecosts SuperVision can reacha price that it can projectfor the ultimateconsumer. With an incrementalpioneer pricing strategy Super Vision can targetsales growth,target market share, enhancing a high-qualityimage and the benefitsof LEDs over neon,and probablymost importantly gainingthe supportof middlemen"
We suggestthat Supervisionset a relativelyhigh entryprice, with the intentto earn semi-quickptofits before rivals respond with substituteproducts at a lowerprice. But at the same time this price shouldnot be set too high and shouldmeet customerdemand patterns.At this point in the product'slife-cycle, when competitors threatento steal our market share,we can adjustthe price to competewith the competitionand engage in life-cyclepricing.
G. Terms of Sale:
By quotingprices Cost Insuranceand Freight(CIF) to the distributorsin Germany,Super Vision can offera total pricethat includesmost of the variablecosts. This mightfoster a greater demandfrom these distributorsbecause more of the intangiblesof purchasingare taken out of their equation. They will have a total cost and knowwhat they are payingfor the products. CIF includes cost, insuranceand freightto a named overseasport where the sellerquotes a pricefor the goods(including insurance), all transportation,and miscellaneouscharges to the pointof debarkationfrom the vessel.
Otheroptions include Cost and Freight,ex works,free alongside ship,free carrier,and free on board.
78 H. Methods of Payment In creatingrelationships with new distributioncompanies in iliil;ffH,Hti#iffit*;fiiffi"= A letterof creditadds a bankerspromise to pay the exporterto that of the foreignbuyer providedthat the exporterhas compliedwith all ::n?.5s1ilffi,?*l?:iliil:" Ji$:l'":'*'::il,n";Tf:,[?:,i Whilethis mightat first put a greaterburden on the buyer,this will providethe best optionfor paymentin the new marketfor the products. ll. Pro Forma Financial Statements and Budgets
A. Marketing Budget
Advertis i ng/Promoti on Expense In year one a great deal of the profitsfrom the exportingventure shouldbe usedto buiH productknowledge and imagein Germany. Sincethe Germanpeople value high quality products and technology, mucheffort should be placedtoward having as many advertisements in tradepublications and directmail publications as possible. Additionallythe companyshould look to offer incentivesto high profile projectsin the majorcities. Over the long run this will help to createa greaterdemand. We suggestthat the companyinvest Tz of the advertisingbudget for these publications
Distribution Expense SuperVision has a responsibilitywith teachingthe distributorsto marketthe productsalong with the companiesoverall image. Although the distributorholds the title to the goods after the letterof credit transaction,it is importantto make technicalsupport and product knowledgeavailable to the distributorsand the construction/architecturefirms. This expenseis likelyto be high in the beginningof the projectas well. We suggestone half of the marketingbudget goes to fosteringthis imageand productsupport. lll. Resource Requirements
A. Finances The primaryfinancial requirement for SuperVision will be coveringthe high marketingand productsupport costs during year one. The
79 Distributorassumes most of the dayto-day costsof the product,but SuperVision has a greatresponsibility to guidethe distributor'splan of action. lf enoughresources are not givento the distributingfirm, DelidimitriouMarketing, Super Vision may have high costsand strong problemswith productconfidence in the marketover the long run.
B. Personnel SuperVision should dedicate a numberof peopleto the tasks of monitoringand settingup the internationaldistribution channel. A Groupof approximatelythree peopleshould be enoughto efficiently monitorthe market,allocate resource for producttraining, organize the credittransactions with the appropriatedocumentation, and create promotionalmaterials for the trade publicationsin the market. After a few weeks these tasks can be reorganizedand added to if necessary. This shouldbe sufficienthowever to get the ball rollingin Germany.
c. Production Capacity Productioncapacity will have to be addressedwith regard to the requirementsfor 220-voltoutlets. The currentplant in OrlandoFlorida will haveto addressthese new issuesand lookto createthe numberof adjustmentthat will be necessary.
Appendixes.
80 References
Cultural Analysis.
www.qermanv-info.oro http://www. lonelyp la net. com/desti nations/eu rope/qerma nv/facts. htm http://www.economist.com/countries/Germany/profile.cfm?folder=Profile- Pol itica |%2 0Stru ctu re
EconomicAnalysis:
mac.doc.gov nationmaster.com destatis.de Lonelyplanet.com gesis.org WSI report on distributionof income, 1997 literacyonline.org executiveplanet.com europa.eu.int FXCM ForexCapital Markets x-rates.com germany-info.org cordis.lu http://www. bm bf . d e/p u b/facts_a n d fiou res_resea rch_2002 . pdf http://www. d estatis. de/p resse/e ns I isch/p m2 004/p07 90 1 2 1. htm
Market and Competitive Analysis:
GermanCountry Commercial Guide 2003 www.lonelyplanet.com http://www. b uyusa. de/e n . www.svision.com FSO StatisticOnline www.prime-liqht.com www.invest.com www.trade.com http://enerqv.sourcesuides.com/businesses/byP/lioht/LEDLiqhting/byN/by NameD.shtml http://www. g ood m a rt. com http://www. sola rl ia htg o. com http://www. la bcraft . co. u k http://www. sola rroad . com http://www. elam pl io htinq . com/company en. asp http://www. d el id i m itriou. com Root Chapter8
81 The MarketingPlan:
http://uruvw. hafe n -h a m b u rq . d e/htm l-e n g l/home. htm http ://rnnnnu. po rtcan ave ra | . o rq/po rti nfo/p o rtau th o rity.h tm http://l io ht-b u i ld i n q .messefrankfu rt. com/s loba l/e n/home. htm I http://www.bauma.de/ http://www. del id im itriou. com http://www. tra nsq rp. co m
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