1. Strengths of German SMEs Presentation at the SME Convention January 13th, 2011 at Mahatma Mandir, Gandhinagar, Gujarat, India Prepared by Dr. Abdelmoneim Issa Frankfurt Main, Germany www.prac.de [email_address] December 2010

2. Contents of Presentation (1) Structure and economic potential of SMEs in Germany (2) Success factors of German SMEs (3) Innovative German SMEs / products (4) German SMEs and the international finance crises

3. (1) Structure and economic potential of SMEs in Germany

4. SMEs in Germany 2008 (EU Statistics) (Value added: Euro = black, USD = blue); 1 € = 1,32 US$ (15.12.2010) Source: Eurostat, 2008 254 316 294 865 774 1640 /$

5. SMEs in Germany, 2007 / 2008 (German Statistics) (Euro = black, USD = blue); 1 € = 1,32 US$ (15.12.10) Source: Statistisches Bundesamt: Ausgewählte Ergebnisse für KMU 2007, Wiesbaden 2010 (Federal Statistical Office) Source: Institut für Mittelstansforschung (Institute for SME-Research), Bonn 2010, Germany Trade and Invest, Köln 2008 47,3% Value Added (2007) 70,5 % 21.15 million 30.01 million Employment (2007) 37,5 % € 1 932 billion $ 2 562 billion € 5 148 billion $ 6 826 billion Turnover (2007) 99,7 % 3.62 million 3.63 million Enterprises (2008) Share SMEs Total Number 45,2% € 556 billion $ 737 billion € 1 230 billion $ 1 631 billion Value Added 58,3 % 12.967million 22.259 million Employment 33,6 % € 1.545 billion $ 2 048 billion € 4 593 billion $ 6 090 billion Turnover 99,3 % 1.811 million 1.824 million Enterprises Share SMEs Total Number 2007

6. (2) Success factors of German SMEs

7. R&D expenditures of business enterprises 2002 – 2008 in millions of Euro/USD (Euro = black; USD = blue); 1 € = 1,32 US$ (15.12.2010) Source: Stifterverband Wissenschaftsstatistics 2008 (819) (12 424) (2 250) (3 038) (3 075) (6 386) (8 846)

8. R&D expenditures of the Federal Government and the Federal States in millions of Euro/USD (Euro = black; USD = blue); 1 € = 1,32 US$ (15.12.2010) Source: Federal Report on Research and Innovation 2007/2008 (10 717) (12 086) (13 440) (15 912) (14 727) (11 018) (12 336) (10 613) (11 971) (10 246) (11 752) (10 507) (12 037) (10 681)

9. Innovation activities of enterprises, 2004 - 2008 Source: ZEW: Innovation in Germany, 2007

10. Innovation expenditure of enterprises, 1992 – 2008 in billions of Euro/USD (Euro = black; USD = blue) 1 € = 1,32 US$ (15.12.2010) Source: ZEW: Innovation in Germany, 2007 (77.4) (109.8) (119.8) (12.9) (8.4) (29.3) (30.5) (10.6) (9.7)

11. German enterprises with marketing and organizational innovations, 2006 Source: ZEW: Innovation in Germany, 2007

12. R&D and Innovation activities as prerequisites for a successful participation in the international market Internationalization Potentials Internationalization Competence Successful International Market Access Systematic planning Strategic disposition

13. Internationalization Potentials: - Size of company - Degree of specialization - Financial situation - Knowledge and R&D capabilities - Management international orientation - Market position in the national market - Quality of product Internationalization Competence: - Qualification of personnel - Language capabilities - Degree of knowledge of the international market - Marketing and strategic competence - Conceptual and planning capabilities Determinants of International Market Access of German SMEs Internationalization Potentials / Internationalization Competence

14. Potential analysis Personnel structure and capacity Structure and capacity Quality of product Number and Qualification of personnel: Language and international experience Management and financial capacity Organizational structure Innovation potential Determinants of International Market Access of German SMEs Systematic Planning – Analaysis of the company´s internationalization capacities

15. Overall assessments of potential target markets Offer Demand Competitor Situation Social development Economic development Political development Determinants of International Market Access of German SMEs Strategic disposition – Overall analysis

16. Strategic decision process: Assessment of the international competitiveness Pre-selection of target markets (long list) Specific analysis on selected markets (short list) In-depth analysis on the selected target market Assessment of political situation Assessment of legal framework Determinants of International Market Access of German SMEs Strategic disposition - Specific analysis General analysis on potential target markets

17. Political and legal situation in the target market Legal framework Political situation Law and economic order Taxation system Governm ent inter-vention in economy Protection intellecualmaterial property Stability of Government Stability of economic order Stability of social order War,revol-ution, terrorism Strategic disposition - Analysis of the political and legal framework Determinants of International Market Access of German SMEs

18. Cooperation Representation License/ Franchising Direkt investment Definition of company’s objectives in target market Stipulation of personnel ressources Acquisition of market-specific Information Decision on market access form Preparation of feasibility studies Determinants of International Market Access of German SMEs Strategic disposition - Final decision on the market and products

19. Success factors in international markets - internal factors (companies´view) Determinants of International Market Access of German SMEs 36% 29% 57% 57% 50% 36% 64% 29% 79% 71% 71 % 7% 7% 14% 43% 36% 21% 29% 29 % 29% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% International project references National project references International experience of personnel Professional qualification of personnel Professional and financial reputation Technological specialization Adapting client demand Quality of technical proposal Very important Important Less important Not important

20. Determinants of International Market Access of German SMEs Success factors in international markets - external factors (companies´view) 64% 43% 57% 50% 50% 43% 50% 7% 64% 36% 21% 36% 7% 7% 21% 50% 36% 43% 21% 21% 36% 50% 50% 36% 14% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% Develop relations with local authorities Initiate and develop of business relations with the private sector Knowledge of mentality Acceptance of mentality and culture Knowledge of business culture Language capability Complementarities of objectives Technological complementarities of business partner Reliability of the business partner Very important Important Less important Not important

21. Determinants of International Market Access of German SMEs General Motivation for Internationalization (companies´view) 7% 7% 57% 57% 50% 21% 43% 29% 36% 79% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% Increase turnover Create new working places Economic Growth of company Access to new markets Very positive Positive Less positive Not positive

22. Enhancement of company’s economic performance Internal motivation for Internationalization Marketing of technology-oriented products Improvement of personnel qualification Expansion of company’s position in the sector Secure and stabilization of exports Specific internal motivation for internationalization (companies´view) Determinants of International Market Access of German SMEs

23. Diversification and increase of sales potentials External Motivation for Internationalization Economic stabilization of company through international investment Opening new markets for company’s own products Substantial increase of turnover Specific external motivation for Internationalization (companies´ view) Determinants of International Market Access of German SMEs

24. (3) Innovative German SMEs / Products

25. Environmental technology Optical technologies Biotechnology Nanotechnology Lithium-ion battery Innovative technological areas

26. Innovative research areas for the coming decades Climate protection, resources conservation, energy Mobility Security Health Prospective areas of research and development

27. (4) German SMEs and the international finance crises.

30. Thank you for your attention