International business thrives in the country of Germany. They have a variety of characteristics and features of tradition within the country. Taking an overview of areas such as culture, legal system, geography, political system, and history is just the beginning to this unique country. Through the research provided, it should be a useful indicator of whether or not Germany is a desirable place to pursue international business in.
The national flag of Germany consists of three equal horizontal bands of black (top), red (middle), and gold (bottom). The colors of black, red, and gold have played an important role in German history and can be traced all the way back to medieval times where there was a banner of the Holy Roman Emperor. This original banner had a black eagle with red claws and beak on a gold field. The Holy Roman Empire was a German-majority, multi-ethnic empire in central Europe until 1806, when it was defeated at the Battle of Austerlitz. After this battle, German-states that were part of the Holy Roman Empire came under French rule and several German organizations began agitations to free Germany from foreign rule and create a unified country. Among these organizations were two prominent ones by the names of Lutzow Free Corps and Jena Student’s League. The members of these two organizations wore uniforms of black with gold and red accessories and used flags of those colors as well. When Germany was unified in 1871 under Otto Von Bismarck, it chose a national flag with horizontal stripes of black-white-red. However after Germany’s defeat in the First World War, a republic was declared in 1919 and the black, red, and gold flag was restored. After the Nazi government took power in 1933, West Germany restored the old black-red-yellow flag on May 23, 1949 and East Germany used the tricolor flag with its coat of arms. In 1990, the two Germanys were reunited and the Unified Germany continued to use the black-red-gold flag that we see today (Hooper, 2011).
Germany is a neighbor to nine other countries and two seas. Going around Germany clockwise, starting on the North side, is the North Sea, Denmark, and the Baltic Sea. On the East side of Germany is home to Poland and the Czech Republic. On the South side is Austria and Switzerland. Finally, on the West side of Germany, there is France, Luxembourg, Belgium, and the Netherlands (Jelski, 2015).
The population of Germany is 82,490,000 people (Carroll, 2005) who live on 135,200 square miles of land. With those facts in mind, this means that about 611 people live in one square mile (Population Density, 2007). The land area of Germany has lots of variation by location. Topography of Germany includes a quarter of the land is around sea level and under 100 meters in height. This flat region is the Northern area of Germany. As you go more south, there is more hills and height reaches 1,000 meters. Farther south there are mountains that are about 3,000 meters high. On the West side of Germany, is the Black Forest. And on the East side of Germany is the Bohemian Forest. Towards the center of Germany is the Thuringian Forest (Germany Topography, 2015).The main rivers of Germany are the Oder River, which leads to the Baltic Sea. This is located in the north-east region of Germany. Another main river is the Danube River which flows into the Black Sea, which is located at the south-east region. The last important river located in Germany is the Rhine River which flows from the southwest region up to the northwest region of Germany and flows into the North Sea (Germany, 2015). The climate in Germany is colder in the winter and warmer in the summer. In the summer there is usually lots of rain. It gets colder the more West you travel, and near the highlands. Extreme hot in the summer and extreme cold in the winter is rare. The weather varies between the years. One summer it will be rainy and the next would be mostly sunny (Weather, 2013).
Germany’s natural resources are lignite, which is coal, along with timber, iron ore, potash, salt, uranium, nickel, copper and natural gas (Gurtler, 2010).These resource are produced all over Germany with the largest industries located in Hamburg, Berlin, Hannover, Dresden, Munster, Erfurt, Dusseldorf, Frankfurt, and many other locations. These locations also specialize in different categories such as Healthcare, Engineering, Transportation, Pharmaceuticals, Technology, Energy, and Financial Services (Germany Success, 2015). Germany is also one of the nation’s largest producer of automobiles, machines, electrical equipment, and chemicals (Germany Exports, 2013). Germany can easily produce these goods with the natural resources and environment it has.
The political system of Germany is the second democratic system in German history. They follow the constitution of Basic Law which was adopted in 1990. The purpose for Basic Law is to have the people participate in the political formation of the people. The legal system of Germany is a civil law based of statues, as compared to other common law systems. Germany uses an inquisitorial system where judges are involved with the facts of the case as well as the investigating (Hartmann, The State, 2011). Free elections take place and are a part of the fundamental principles of the parliamentary democracy. Free elections are a section of Basic Law, article 20 paragraph 2. This states that the people vote through the electoral system. In article 38 of Basic Law, it reads, “The Members the German Bundestag shall be elected in general, direct, free, equal and secret elections they shall be representatives of the whole people; they shall not be bound by any instructions, only by their conscience”(Dannemann, 1998).
The government plays a crucial role in the German economy. They directly and indirectly affect the policies in several ways. There are three figures that play a big role to the economy. These figures include the chancellor, the minister of finance and economy, and the Bundeskartellamt. Again, depending on which party is elected, the government involved in the economy is varied. The chancellor’s role deals with how the interest and style of the specific chancellor, who will create policies that deal with the financial community. The minister of finance and economy are responsible for the federal budget and policy maker. The Bundeskartellamt are to prevent monopolies and cartels. As of now, it is declared non-active due to the change of times as the position was created in the 1870’s (Solsten, 1996).
The German legal system is effective for German citizens and other foreign businesses. The German legal system is impartial because people are not judged unfairly (German, 2015). It was ranked 5.0 out of 7.0 in 2011 for International Legal System Efficiency Assessment (Bukowski, 2011). The political and legal conditions suggest that the country could be a potential market. Germany’s average household net-adjusted disposable income per capita according to OECD is $7000 USD, which is higher than the average household income per capita (Pascal, n.d.). According to German laws, there is no difference between German citizens and foreign citizens regarding investing or starting a company. This shows the fairness we would prefer when starting our company in a new country (Ease, 2014). Germany’s ease of doing business ranking is 14 out of 189 and they have been consistently ranked in that position.
Corruption is an improper and usually unlawful conduct for someone or in this case, a country’s benefit. If a country has a great amount of corruption, citizens will continue to flock to other locations and business deals will be moved to safer locations. In 2014, Germany ranked 12 out of 174 countries on the corruption perceptions (Ugaz, 2015). With this low of a score, other countries should feel safe doing business in such a non-corrupt place. Officials and leaders are not easily bribed in Germany and people play by the rules, which in turn entices more businesses to enter into their business market.
In Germany, a lot of new legislation went into effect on January 1st, 2015. One of these includes the German Parliament approving minimum wage of €8.50 ($11.61) an hour. This had some impact on businesses overall. This showed a huge landmark for Germany, where wages had previously been negotiated by employers and trade unions and the government was not actively involved. Now they have switched to having a statutory minimum wage. From observations, their have not been any pending legislation that is relevant to international companies (Thomas, 2014).
Germany has a mixed economic system. The German economy is essentially a social market economy. It was originated and implemented by Christian Democrat Ludwig Erhard, Minister of Economics in the early 1960’s in former West Germany (Soros & Sachs, 2010). A social market economy guarantees the free play of entrepreneurial forces, while at the same time endeavoring to maintain the social balance (Hartmann, Successful, 2011). Before Germany engaged in a mixed economic system, East Germany had a different type of system: a centrally planned economy. Beginning in 1945, large tracts of real estate and factories were taken over by the state under reform programs for agriculture and industry. After this time, the first Five-Year Plan of 1951 and the second Five-Year Plan of 1956 were conducted. By the early 1960s, Kombinate (collective farms) accounted for about 90 percent of all farm production. The private farmers who resisted collectivization were arrested. When production began to decline, the Socialist Unity Party of Germany introduced the so-called New Economic System of decentralized planning. Production declined even further, however, and it became increasingly evident to many East Germans that their "planned economy" had lost the economic battle with the capitalist West (Eric, 1995).
Today, Germany is considered a developed country. This means that they are highly industrialized, highly efficient, and whose people enjoy a high quality of life. The gross domestic product is a primary indicator to gauge the health of a country’s economy. It represents the total dollar value of all the good and services produced within the country during a certain time period. The Gross Domestic Product (GDP) in Germany was worth 3,634.82 billion US dollars in 2013. If you compare this to the United States, their GDP in 2013 was worth 16,800.00 billion US dollars. The U.S. is nearly four and a half times as much. In the standpoint of the total world economy, the GDP value of Germany represents 5.86 percent of the world’s GDP (Germany GDP, 2013). The Human Development Index (HDI) is a statistic of life expectancy, education, and income used to rank countries on human development. The HDI of Germany in 2013 was 0.911 and their rank was 6. If you compare this to the United States, their HDI in 2013 was 0.914 and their rank was 5 (Germany Human, n.d.).
The German economy has endured a transition of economic freedom with the Rule of Law, the size of the government, regulatory efficiency, and market openness. In regards to the Rule of Law, you are able to be protected, which gives a motivating force for workers and investors. With the ability to have private property, corruption cannot infect the economy in straight away paths and citizens have more confidence to undertake entrepreneurial activity. Germany is on the verge of decreasing costs of production which allows for more open business that will bring value to the society and help maintain and keep a stable currency. Lastly, with market openness, they deal with trade, investment, and financial freedom. Trade freedom can open up a realm of doors for investments and other financial cases. With investment freedom it creates entrepreneurial opportunities and incentives for the economic activity to expand, greater productivity, and job creation. Regarding financial freedom, this provides availability to citizens to have savings, credit, payment, and investment services available and in the area. In able to allow for the economy to grow, the market has to expand overtime and prosper for society as a whole (Miller & Kim, 2015).
In conclusion, West Germany and East Germany came together in 1990 to form what we know as Germany today. It has several geological features including many Forests, rivers, and seas. Germany has several natural resources, the main one being lignite and is considered to be a developed country with high industrialization, high efficiency, and a high quality of life. The economy has went through several transitions and is now considered to have a mixed economic system with a high corruption ranking. Germany has brought about a lot of change and went through several transitions that most countries could learn from and establish new grounds to operate in a more efficient and effective manner throughout our entire world.