Business the Company\'s Objective Is to Develop

Business

The company's objective is to develop capabilities in the Research and Development areas as well as ensuing products that can be sold and distributed in the European and American markets. It should be noted, however, that such a move must be taken with caution and care; approaching the European business marketplace may not work in the same manner as other business environments. As one expert recently wrote "approaching the European markets without recognizing the importance of national languages and cultures in daily life is a crucial mistake" (Robert, 2010, pg. 31). It would be wise for the company to remember Robert's words due to the unique nature of the European markets and Germany in particular; since that is the country this paper recommends the company conducts its business.

It is important to note that choosing a country to base the company's operations is a delicate and time-consuming matter that must be conducted with care and scrutiny. With that thought in mind, it is recommended that the country of Germany continue to be the country with which the company does business. The company's relationship with the German partner must be strengthened and will bear fruit if a number of items are kept in mind. For instance; Germans are very private individuals, and are apt to keep business partners at an arm's length when it comes to their personal lives. German's are also strict adherents to regulations and structures, hence; when the company is negotiating contracts and agreements with German companies, it is necessary to keep strictly to business and business guidelines. A discussion on the general cultural differences follows this recommendation.

Cultural Differences

There are plenty of differences between the methods and manners that the company conducts business and the manner in which the Germans conduct business. Most Asians understand the art of manipulation and the importance of gaining or losing 'face'; this art is almost totally unheard of in Germany. On the plus side, however, Germans and Asians both understand the value of a rigid structure system, with certain events taking precedence over flexibility or spontaneity. Both cultures understand that there are certain ways that business should be conducted and to deviate from those methods leads to uncertainty and disaster. Part of the reason for recommending a partnership with a German company is because (to a degree) many of their cultural oddities are the same as the company's; ie, their willingness to consider input from all employees as equally importance, and the relatively slow pace at which important decisions are made. Good business cannot be rushed. However, one must note that Germans are also highly individualistic, while the Asian culture focuses much more on what is good for everyone concerned and especially on the family. The company's representatives will certainly tread softly in this area.

German Values and Beliefs

One recent article determined that "Multinational corporations (MNCs) often pursue global strategies that emphasize efficiency, flexibility, and learning, but globally developed strategies often clash with the environmental idiosyncrasies of MNC country subsidiary markets in which the strategy is actually implemented" (Grewal, Chandrashekaran, Dwyer, 2008, p. 886). What this means is that the company will need be mindful of the 'environmental idiosyncrasies' of German.

Those environmental idiosyncrasies can include almost anything imaginable but the example used by Grewal et al. might be the most succinct; it states "consumers have distinct and idiosyncratic needs; e.g., cows are viewed as holy animals in India, thereby diminishing the potential market for beef and related products" (Grewal et al., pg. 890).

If the company's main objective is to establish Research and Development teams that will be successful in developing products for consumption throughout Europe and the United States then one method of achieving this objective is to understand how the Germans view the objective and how they might be capable (and willing) to assist in this venture.

While the German culture certainly values individualism, while the Asian is more concerned with family values, there are other values that the two areas share. One of those values is that both the German and Asian people believe an ideal of 'the community good', with all parties working together to accomplishing an end that benefits all parties. This is a mindset that bodes well for collaboration and coordination.

A recent study found that the "German business system encourages MNC's to have a long-term, high-investment orientation" (Dickman, 2003, p. 265) which is very similar to the company's philosophy. Since the Germans look at a relationship in a long-term manner, then the company may well wish to define the exact parameters (remember the German adherence to strict structuring) of the relationship, with a focus on how exactly the relationship will work, what the objectives and goals are for the relationship, and spell out how each partner benefits and why. As the study suggests; "success will depend on head office -- foreign affiliate relations shaped by factors such as cross-border communication, trust and power distribution" (Dickman, 2003, p. 265).

The company can begin to build such trust through open and honest communication, especially at the top. This might well be undertaken through an executive level person since Germans respond favorably to professional rank, status, education (knowledge) and expertise.

An additional reason for choosing Germany as the company's partner in this venture is because Germany has the expertise and experience as investors in other countries and will understand our goals and objectives almost as well as the company does. One recent study showed that German MNE's are major participants in the internationalization process "with huge foreign direct investments to other EU and third world countries" (Miskinis, Reinbold, 2010, p. 717). Since the most frequent definition of a successful MNE is that of an "enterprise that engages in FDI and owns value-added activities in more than one country" (Dunning, Lundan, 2008) then it would likely behoove the company to find a successful German MNE to partner with.

German Politics

German politics will have some bearing on the approach the company must take in establishing a partnership with a German MNC. The good news about the German political scene is that the political actors and the voters are comfortable and are used to working within coalition groups. A number of recent analysis and studies of Germany politics found that party politics were (and they continue to be) strongly influenced by the wake of unification, the different degrees of quality of life in Western and Eastern Germany, the effects of the crisis of the welfare state and all the reforms and attempted to reforms (Debus, 2009, Padgett, 2005).

This is especially true even today when the five-party system shows a coalition between the two strongest parties -- CDU and FDP -- with the Christian Democrat Union holding the strongest cards and most seats, and the Free Democrat Party losing much of its appeal and base to the other three smaller parties.

However, the politics notwithstanding, once again, the German people show a remarkable tolerance for coalition and collaboration even among the political parties. As one expert states "cooperation appears to be a quite natural strategy because in these systems a compromise between many different actors is required to change the status quo anyway" (Zohlnhofer, 2007, p. 1121). This tolerance is a good sign for the company, since it displays a willingness to solve problems and address issues that might make other countries less advantageous to work with than Germany.

A word of caution is set forth here on the political front; a 2007 study showed that Germany's economy has been growing much more slowly than Great Britain, France or even the average of the other members of the European Union and that the main reason for the slowdown "has more to do with shortcomings in political rather than in economic decision making…In 1990, East and West Germany were reunited after being split apart at the end of World War 11 (and) the integration (including the necessary modernization) of the East German economy has been a continuous and costly long-term process" (Weidenbaum, 2007, p. 25). Many citizens, especially the ones in East Germany, have felt that the process and its resulting problems have been exacerbated by the lack of political control. The recession has also taken its toll on the Germany economy (as it has on the rest of the world as well) and civil unrest and dissension is percolating.

A number of politicians have ceased on the unrest and disgruntlement as a platform to promote their ideals and ideas, but so far the two strongest parties have maintained control while things have quieted down. It is hoped, therefore, that German politics will have little if any influence on the proposed partnership.

Technological Conditions

The technological conditions found in German business society are second to none in Europe. Before an attempt is made to discern the advantage of German technology, however, one must first address the Globalization Paradox. The Globalization Paradox was recently described as addressing the ambivalence of newly emerged creative milieus and their territorial embedding practices, oscillating between distinct local context regarding their professional practices while still necessitating access to and be present on the global marketplace (Zhang, 2004; Lange, Kalandides, Stober, Mieg, 2008). Germans seem to understand the Global Paradox and work well within its constraints. The company would benefit from that understanding and would likely pick up valuable information and technology that could assist the company in reaching its objectives. Weidenbaum states "the country's industrial base is among the world's largest and most technologically advanced" (p. 26) and a country report showed that "Germany has one of the world's highest levels of educations, technological development and economic productivity" (Federal Republic, 2003, p. 2). The company would surely benefit from a working relationship with a carefully selected German firm. Another similar report showed that Germany touts an "outstanding research landscape with a high level of integration and networking" (Technological Landscape, 2008, p. 68).

According to the study, The Fraunhofer Society (Europe's largest ICT research institute) is based in Germany and all of the major ICT manufacturers operate German-based R&D laboratories. Additionally, the German ICT industry accounts for a full 25% of all global ICT R&D expenditures. In other words, the company would be joining a select group of other companies also banging on Germany's technological doorway.

Germany's Economic Activities

Germany, even with all the recent recession woes, still maintains an economy that is the fifth largest in the world. Germany's gross domestic product in 2005 was over 2.8 trillion dollars with a GDP of more than four times that of Russia. It also sports a population of over 85,000,000 and a society that imports as much as it exports. Germany's marketplace is wide-open to research and development and oftentimes leads its European neighbors in technology and development. Although the company is not looking at Germany specifically for new markets, having the world's fifth leading economy and a market of 85 million willing buyers is something to be considered. According to Weidenbaum, Germany is an ideal base for tapping into all other European markets and in the area of research and development has few rivals that can match its output.

One specific problem still facing Germany today is that the old West German government is still pumping millions of dollars into the old East Germany in order to keep its citizens on equal footing. This annual outflow affects unified Germany in a myriad of ways, with high unemployment and costs of doing business. According to Weidebaum, another problem with the German economy is the "structural rigidities in Germany's labor market have slowed down the pace of economic activity" (p. 24).

The labor unions previously negotiated higher wages and regulations that force companies to keep workers. This is a serious problem since it results in employer reluctance to hire new workers and a resulting chronic high unemployment rate. However, since the company is not looking to specifically promote products to Germany, but instead is looking to export to other European countries (as well as the United States) Germany's overall economic benefits outweigh its economic liabilities, at least as far as the company is concerned.

On the plus side, Germany is still in much better shape economically than most of its European neighbors. Also on the plus side is the fact that Germany maintains a balance of trade that is approximately four percent of GDP and it is the world's largest exporter. Most of its exports are to other countries in the European Union. The company would benefit immensely from a partnership with a German MNC that has the capabilities to export any newly developed products to its European neighbors, and it should be a huge consideration when contemplating in which country to base its R&D partnership. Germany seems to be the most conducive player in the market.

Structure of the entity

The structure of the entity is normally based upon what would work best for all stakeholders. There are two separate governing bodies in Germany that take precedence over legal business matters; they are the German Federal government and the European Union. Their business rules and regulations are similar and many of the organizational business structures are supported, although "German federal statutes remain the primary body of law, applicable to companies doing business in Germany" (Holme, Roberts, Owen, 2009, p. 2).

Under German federal law, and according to Holme, Roberts and Owen the most likely business structure would be through a separate subsidiary called the GmbH (Gesellschaft mit beschrankter Haftung). This is an entity that is very similar to the U.S. Limited Liability Company because it limits the liability of the shareholders. It is also treated as a separate entity from its parent company (or companies) and has its own legal status as well as tax status (which would mean it is not taxed at the current company's corporate rate).

Organizational structures

A recent study found that "effective corporate governance uses mechanisms to ensure that executives respect the rights and interests of company stakeholders, and that those stakeholders are held accountable for acting responsibly regarding the protection, generation, and distribution of wealth invested in the firm" (Aguilera, Filatotchev, Gospel, Jackson, 2008, p. 476). Additionally, the researchers found that "effective corporate governance can be reached through different paths and nonlinear trajectories" (p. 477).

One path that the company can take to ensure the success of this venture is to set an organizational structure that provides for simplicity, overview and defined responsibilities. Remembering that the German business culture is one that is most comfortable with set structures and guidelines, creating a structure will be seen by the company's German counterparts as a natural business practice. The German business culture is one that finds importance in providing detailed agendas, rigid structures and solid facts, arguments and thinking.

Therefore, it will be necessary to communicate in a straightforward and nondescript manner, providing an organizational structure that details the requirements for each entity as well as for the involved individuals. To do otherwise would seem as insincere to most German businessmen.

A number of organizational structures are available to the company, but at least initially a Functional Organization Structure (FSO) would likely work best. The FSO is focused around the idea that each job has a certain function, and that each employee should know what is expected of him or her in order to expedite that function. Since this partnership is being created with the thought that long-term products can result from research and development, it can be treated as a stand-alone entity with job functions that are spelled out for each area. The organization will have an individual in charge that will oversee the entire operation and report back to both partner groups. German business culture strictly adheres to a hierarchy with distinct responsibilities spelled out for the various roles and departments, and it should be a relatively simple matter to spell out the focus and objectives the research and development team ultimately desires to reach. Implementing a FSO should create that type of environment.