Building Australia’s Mittelstand – Competitive and strong small to medium sized business

According to Professor Bernd Venohr of the Berlin School of Economics over the last 15 year only two countries have been able to increase their manufacturing and service industry export output. They are China (no surprises there) and Germany. Germany provides an interesting case to consider.

Germany does not have an abundance of raw materials or cheap labour to draw on.

Germany’s industrial competitive power is drawn from what is termed the Mittelstand. The Mittelstand is a strong small to medium sized family owned businesses who not only compete successfully in their local markets but also internationally where required.

So what are the core ingredients for building strong small to medium sized businesses?

1)      Dominate a niche

Mittelstand businesses focus on a segment of the market where they can gain leverage through knowledge expertise of the “domain” in that they compete. Building on the knowledge advantage allows the company to compete on value rather than price.

2)      Operational effectiveness

Embedding innovation and operational effectiveness by regularly challenging the way things are done for improvement; keeping close to customers, listening and asking for feedback to generically improve products and services rather than being reactive.

3)      Long term capital returns

As family business owners the Mittelstand take a long term view; the exit strategy for an owner is usually a succession plan to the next generation of the family; selling only where that option is not available. Investments in assets, profits and returns are considered for medium and long term returns not just short. When required, business owners work though difficult economic periods focused on survival, to then gain exponential capital returns on economic upturns.

4)      Company Culture

Mittelstands build a “Company Community” whereby the employees understand their long term job security is dependent on the long term success of the company. The family business owners consider their employees as human beings not human resources to foster trust and mutual benefit.

It would be foolish for Australia or any other country to rely on the export of minerals for long term prosperity. The German Mittelstand model is shining example of how the success small to medium sized businesses can carry the economic success of a country.

Create and build your own Mittelstand company, talk to Putney Breeze about how you can plan, prepare and execute your business growth plans to improve profitability.