Automation, Process Control, and Measurement Equipment in Germany: A Strategic Reference, 2006
ICON Group International, July 2007, Pages: 189
How to Strategically Evaluate Germany
Perhaps the most efficient way of evaluating Germany is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to automation, process control, and measurement equipment are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm).
Latent Demand and Accessibility in Germany
This report provides a detailed overview of factors driving latent demand and accessibility for automation, process control, and measurement equipment in Germany. Latent demand is largely driven by economic fundamentals specific to automation, process control, and measurement equipment. This topic is discussed in Chapter 2 using work carried out in Germany on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for automation, process control, and measurement equipment in Germany. I use the term “micro” since the discussion is focused specifically on automation, process control, and measurement equipment.
Chapter 3 is also a stand-alone report that I have authored. It covers proxy pro-forma financial indicators of firms operating in Germany. I use the word “proxy” because the provided figures only cover a “what if” scenario, based on actual operating results for firms in Germany. The numbers are only indicative of an average firm whose primary activity is in Germany. It covers a vertical analysis of the maximum likelihood balance sheet, income statement, and financial ratios of firms operating in Germany. It does so for a particular Standard Industrial Classification (SIC) code. That code covers “relays and industrial controls”, as defined in Chapter 3. Again, while “relays and industrial controls” does not exactly equate to “automation, process control, and measurement equipment”, it nevertheless gives an indicator of how Germany compares to other countries for a proxy adjacent category along various dimensions.
Chapter 4 deals with macro-accessibility and covers factors that go beyond automation, process control, and measurement equipment. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Germany:
Openness to Trade in Germany
Openness to Direct Investment in Germany
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in the Chapter 4, which is a general overview of investment and business conditions in Germany. Chapter 4 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Germany. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.
1 INTRODUCTION & METHODOLOGY 1
1.1 What Does This Report Cover? 1
1.2 How to Strategically Evaluate Germany 1
1.3 Latent Demand and Accessibility in Germany 3
2 AUTOMATION, PROCESS CONTROL, AND MEASUREMENT EQUIPMENT IN GERMANY 5
2.1 Latent Demand and Accessibility: Background 5
2.2 Latent Demand: Market Composition 5
2.2.1 Automation 5
2.2.2 Industry Trends 6
2.2.3 Process Controllers 6
2.2.4 Measurement Devices 7
2.2.5 Sensors 8
2.3 Accessibility: Key Factors 9
2.4 Accessibility: Trade Shows 10
3 FINANCIAL INDICATORS: RELAYS AND INDUSTRIAL CONTROLS 11
3.1 Overview 11
3.1.1 Financial Returns and Gaps in Germany 12
3.1.2 Labor Productivity Gaps in Germany 15
3.1.3 Limitations and Extensions 15
3.2 Financial Returns in Germany: Asset Structure Ratios 16
3.2.1 Overview 16
3.2.2 Assets - Definitions of Terms 16
3.2.3 Asset Structure: Outlook 19
3.2.4 Large Variances: Assets 20
3.2.5 Key Percentiles and Rankings 23
3.3 Financial Returns in Germany: Liability Structure Ratios 38
3.3.1 Overview 38
3.3.2 Liabilities and Equity - Definitions of Terms 38
3.3.3 Liability Structure: Outlook 40
3.3.4 Large Variances: Liabilities 41
3.3.5 Key Percentiles and Rankings 44
3.4 Financial Returns in Germany: Income Structure Ratios 57
3.4.1 Overview 57
3.4.2 Income Statements - Definitions of Terms 57
3.4.3 Income Structure: Outlook 60
3.4.4 Large Variances: Income 61
3.4.5 Key Percentiles and Rankings 64
3.5 Financial Returns in Germany: Profitability Ratios 79
3.5.1 Overview 79
3.5.2 Ratios - Definitions of Terms 79
3.5.3 Ratio Structure: Outlook 81
3.5.4 Large Variances: Ratios 82
3.5.5 Key Percentiles and Rankings 85
3.6 Productivity in Germany: Asset-Labor Ratios 98
3.6.1 Overview 98
3.6.2 Asset to Labor: Outlook 99
3.6.3 Asset to Labor: International Gaps 100
3.6.4 Key Percentiles and Rankings 103
3.7 Productivity in Germany: Liability-Labor Ratios 118
3.7.1 Overview 118
3.7.2 Liability to Labor: Outlook 119
3.7.3 Liability and Equity to Labor: International Gaps 120
3.7.4 Key Percentiles and Rankings 123
3.8 Productivity in Germany: Income-Labor Ratios 136
3.8.1 Overview 136
3.8.2 Income to Labor: Outlook 137
3.8.3 Income to Labor: Gaps 138
3.8.4 Key Percentiles and Rankings 141
4 MACRO-ACCESSIBILITY IN GERMANY 156
4.1 Executive Summary 156
4.2 Economic Fundamentals and Dynamics 157
4.2.1 Social Security Reforms 157
4.2.2 Labor Market 157
4.3 Political Risks 158
4.3.1 Basic Government Structure 158
4.4 Marketing Strategies 159
4.4.1 Services 159
4.4.2 Trade Fairs 160
4.4.3 Advertising Options 160
4.4.4 Associations 161
4.4.5 Public Procurement 161
4.4.6 Marketing to the New Federal States 161
4.5 Import and Export Regulation Risks 162
4.5.1 Self-Certification 163
4.5.2 Value Added Tax/Turnover Tax 165
4.5.3 VAT Applicable to Online Sales 165
4.5.4 Custom Regulations/Tariffs 165
4.6 Investment Climate 165
4.6.1 Openness to Foreign Investment 165
4.6.2 Conversion and Transfer Policies 166
4.6.3 Expropriation and Compensation 166
4.6.4 Dispute Settlement 166
4.6.5 Performance Requirements and Incentives 166
4.6.6 Right to Private Ownership and Establishment 168
4.6.7 Intellectual Property Risks 169
4.6.8 Transparency of Regulatory System 169
4.6.9 Capital Market Risks 170
4.6.10 Political Violence 170
4.6.11 Corruption 170
4.6.12 Bilateral Investment Agreements 170
4.6.13 OPIC and Other Investment Insurance 171
4.6.14 Labor 171
4.6.15 Free Trade Zone Options 172
4.7 Trade and Project Financing 172
4.8 Travel Risks 173
4.8.1 Country Data 173
4.9 Key Contacts 174
4.9.1 Trade Associations and Chambers of Commerce 174
4.9.2 Market Research Firms 176
4.9.3 Commercial Banks 176
4.9.4 Other Contacts 178
4.9.5 Contacts in Washington D.C. 178
4.9.6 U.S.-Based Multipliers 179
4.9.7 Useful Web Sites 179
5 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 181
5.1 Disclaimers & Safe Harbor 181
5.2 Icon Group International, Inc. User Agreement Provisions 182
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