Comprehensive PEST Analysis of Germany: Factors Impacting Business

This report provides a comprehensive PEST (Political, Economic, Social, and Technological) analysis of Germany, focusing on various factors that impact the business environment. The political analysis examines Germany's democratic republic, its political system, government structure, and international relations, including its role in the EU, NATO, and its alliances with France and the US. The economic analysis assesses Germany's resources, GDP, employment rates, key industries (automobiles, machinery, chemicals), trade partners, and infrastructural provisions, highlighting the country's position as a major exporter and its modern, knowledge-based economy. The social analysis explores Germany's population, diverse lifestyles, cultural aspects (music, art, sports), demographic challenges, business culture, and the importance of customer preferences. The report also touches upon technological advancements, including telecommunication, internet penetration, and transportation systems, which support business operations. The analysis emphasizes the importance of understanding these factors for businesses looking to operate in Germany, highlighting both opportunities and challenges within the competitive market.

Pest analysis of Germany (European country)

GERMANY
Introduction
Germany exports and imports various types of products in the market and it is on the 2nd
position in relation to the exports and also on the 3rd position in terms of the imports. Germans
also maintain a high standard of living and social security. Berlin is the capital of Germany
(OEC, 2019). In this paper, the discussion will be related to the PEST ANALYSIS of
"GERMANY" which is the part of the European country. This paper will evaluate the different
factors such as political, economic, social and technological, as it could help to attain the large
market share in the competitive market. These `factors are essential and it should be considered
as it can assist in enhancing the market share.
PEST ANALYSIS
Political factor
It has been observed that the country is considered as a democratic republic and the
political system which operated is named as "Grundgesetz". The Democratic Party which is
linked with society and also the Christian unions led the political system in 1949. It is seen that
government of the country is divided into three parts such as the legislature, judiciary and
executives. The local government decides the entire business policies of the location including
the taxes (De Vreese, Esser & Hopmann, 2016). It has been examined that the country also focus
on the wide network of 229 diplomatic missions and it also manage connections in 190 countries.
It is also the biggest contributors to the budget of the European Union and the third largest
contributor to the United Nations. The country is considered as the part of the NATO defense
alliance, which is also company of development and coordination in the overall economy (Watts,
2016).
Germany has also maintained the alliance with France. The country has a membership of
the global companies like the UN and IMF. If the business has to be conducted in the country, it
is necessary to focus on these aspects so that it could be easy to attain a large market share in the
competitive market. The constitution of Germany focuses on the fundamental structure of the
government. In the present scenario, the political parties are negotiating with the government
(Gabriel, Kerrouche, Schüttemeyer & Siefken, 2018). The European Commission has considered
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taking action against the rising current account surplus. But the German government has not
responded, even though the overall size of its surplus breaks the rules of the EU. Germany
focused on austerity and also of the implications of the entire EU (Mayer & Schultze, 2018).
From the starting of the European Debt crisis, it has been analyzed that France criticized the
macroeconomics of Germany without influencing the policy of Merkel's. Also, the French
president Emmanuel Macron showed diplomatic skill and also the overall understanding of the
political struggles in relation to Merkel's.
Therefore, this has impacted the activities or the operations in the European country. It is
necessary for companies, to emphasize on different political aspects as it could be simple to
consider accurate decisions in relation to manage the operations (Muir, 2015). Germany boosted
the good alliance with the other country such as France at the time of the World War II. It is
analyzed that government of Germany and the United States have close political relations. In
1948, the Marshall Plan and strong cultural ties have also maintained good relation with the two
countries (Baynes, 2016). The two countries can be considered as the economically
interdependent as 8.8% of the German exports are from the US bound and 6.6% of the German
imports are originated from U.S (Gilpin, 2016).
Therefore, the changes made in the political system have affected the overall operations
that are taking place in Germany. But to invest in the growth, it is important for the companies to
emphasize on considering the political factors so that it could be easy to manage the operations
in the market (Bekker, Hipp, Leschke & Molitor, 2017). It will also assist in maintaining the
customer base which can enhance the overall customer base and maintain the operations of the
business in an effective manner. But in Germany, there are many issues which took place in
relation to the political scenario, so it is necessary to consider all the aspects as it helps to boost
the market share of the company (Welch, 2016).
Economic factor
In comparison with the other countries, it has been seen that the raw materials are
comparatively low. The country has only potash and lignite in a sufficient amount. The power
plants such as lignite are considered as one of the important sources for the Germans. It is one of
the leading producers of solar power technology and also of the wind turbines. There are many
other resources such as natural gas and oil that are from different countries (Friedman, 2017).
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The country imports two third of the energy and then only it is known as the 3rd largest energy
importer on the global platform. It is seen that the service sector have 70% of the GDP and the
German cities such as Berlin and Hanover manage the biggest annual international trade fairs. It
has been observed that Germany has a social market economy and is on the 4th position in
nominal GDP. The GDP of $3.747 trillion and the GDP growth is of 1.8% (Kraus, Richter,
Papagiannidis & Durst, 2015). The average national unemployment rate is 6.8% and 50 Billion is
approved as the billion economic stimulus plans which boosted the overall fortune of the 500
companies in Germany. There are more than 500 companies with headquarter in Germany and
the country has a large market share of Automobiles, metals, machinery and also chemical
goods. Also, the biggest national economy in Europe and it is on the second position in relation
to the exporter with the $1.408 Trillion exported in 2011 (Lehmann & Wohlrabe, 2017).
Company has significant trading partners that are France, Netherlands, USA and also
Great Britain. The popular brands that exist are Mercedes, Benz, BMW and Bosch. Germany is
considered as the modern economy which provides above average employment opportunities and
it has an important role in relation to the economy of the knowledge and has an important role in
the generating the innovative ideas. The investor's rate on the international level in Germany is
the important aspects which in the country. Direct investment from the outside of the country is
now on a high position with EUR 460 Billion. Germany is the developed nation with the huge
industrial capability (Jones, 2015). It is on the 5th position in relation to the largest economy
which serves the companies to boost their sales and also it helps to earn more profits in the
highly competitive market. Germany also shares 9% of total world trade but there are various
issues which are faced as the economic challenge just because of the Eurozone Crisis.
Infrastructural provisions are good in Germany that shows that business growth in the market
(Vu, 2016).
By having a wide scope of infrastructure, it could be simple for the companies to invest
in the companies as it boosts the sales and also the operations of the business in the market. The
overall GDP growth is approximately 0.6% in the year 2012 (López Prol & Steininger, 2018).
Due to the highly predictable external environment, the negative impact is on the overall
operations. So, it is stated that the domestic demand has played a important role in the entire
economy growth (Fritsch, Kritikos & Pijnenburg, 2015).
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In context to the industry perspective, it is seen that country focuses on the overall skilled
labor. The recent production growth rate is 6.7% which helps the business to sustain in the highly
competitive market. If companies emphasize on Germany is popular because of the
technologically advanced telecommunication system and it has a broadcasting medium such as
TV and Radio which is penetrated in more than 90% of the homes. The internet population is
20.416 Million which is considered on the fifth position and it is seen that the country has
developed the transportation system such as airways, railways and ports (Eckhard, 2018). This
could help the companies to maintain their activities in an effective manner and also the products
can be moved from one place to another in an easy way. Therefore, it can be said that it will be
beneficial for the companies if the operations are conducted in Germany. Germany is known as
the country which will help the business to grow and also boost the profits in the competitive
market (Yeager, 2018).
Socio-cultural factor
In Germany, there are approximately 82 Million residents, which simply states that it is
known as one of the biggest EU countries in context to the population. It is analyzed that the
society of Germany is molded by different lifestyles. Local architecture, music, literature and
sports focus on the socio-cultural factors of Germany. The country is known for its renowned
classical music such as Ludwig van Beethoven and Johann Sebastian Bach and the music are
flourishing in the market. It has been seen that popular art pieces are created in Germany and
also it is known for its old traditions in the visual arts. The innovation in Germany also consists
of the printmaking and wooden engravings. There are many international sporting events that
have represented Germany and this also consist of FIFA World Cup and ice hockey which is also
one of the leading motorsports in the countries (Kuhnt & Trappe, 2016).
Germany is considered as one of the popular countries of EU. The people are modern and
educated with positive views and opinions. There is also no difference in the culture related to
lifestyles and diversity. Country has the demographic challenges related with population,
immigration issues and depleting in the incomes just because of the economic crisis. The culture
of the business in Germany is unique and engineers and managers are offered appreciation. The
individuals in Germany have good academics and technical proficiency which boost the
opportunity for the companies to hire talented candidates for managing the operations of the
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business (Valeriani & Vaccari, 2016). In Germany the duty and responsibility are clear and the
activities of the company are also well structured. This has also changed the attitudes of the
people and in Germany; the individuals are also less social in the working environment. It has
been seen that the qualities of the Germans are to maintain the emotions and also they behave
objectively. The Germans focus on the direct communication style and they have an objective to
clarify the overall doubts. In Germany, there are almost 82 Million inhabitants and in terms of
population, it is considered as one of the largest countries. The country is modern and also
cosmopolitan which shape different lifestyles. It has been evaluated that there are different
ethnocultural diversity in Germany which impacts the overall business operations which exist in
the market (Franke & Simonson, 2018).
There are different forms of coexistence that are varied in nature and also the traditional
gender has the role which is dispersed. Despite the overall changes in the society, the family still
remains one of the essential aspects in context to the social reference unit. It is important for the
business to focus on the preferences of the customers as it could assist in enhancing the
productivity level and also image of the company in the competitive market. The Germans have
a strong sense in relation to the regional pride and also they share their suggestions in a direct
manner. At the time of entering into the market, it is important for the business to analyze the
thinking pattern of the customers, so that it could be easy to introduce the products and services
in the market (Krause & Battenfeld, 2017).
The federal government has an aim to maintain autonomy with effective assistance and
differentiation on the basis of region. In Germany, it has been analyzed that it is the country that
have best medical care; health care is one of the biggest sectors in relation to employment. So, it
can be said that it is important for the companies to focus on having an in-depth analysis of the
socio-cultural factor as it boosts the growth in the market (Yamamura & Streeck, 2018).
Technological factor
Germany has various technological inventions such as in 2008, Germany spends 2.6% of
its overall GDP in the area of research and development and it aimed to boost it by 3% by 2015.
Also, there are many US projects in relation to the research and development which is completed
in Germany. The major fields related to contribution consist of Nanotechnology, biotechnology
and electrical engineering. The manufacturing units considered the latest technology to
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implement the robotics system to reduce the manual procedures and the overall outcome are
related to enhancement in the efficiency and productivity in the market. It has been seen that the
country offers to fund a broad European research and development (Altmann, Kohler & Meil,
2017).
There are different laboratories and there are different research centers which are private,
present in the country. In Germany, the Ministry of science and technology maintains
coordination and also set the priorities for national science and technology programs. The natural
history Museum in Berlin is mineralogical, geological and botanical aspects. In Germany, there
are various specialized societies that are related to agriculture and veterinary science, medicine
and technology. The greatest strength of Germany is its automobile industry and it is also known
as the 3rd largest automobile producer. The country positions itself in the European Union and
has different components in context to science and technology (Storm & Naastepad, 2015).
Technological innovation is important for generating opportunities that will enhance
German Car-markers and their suppliers. Example: It has been observed that BMW, is working
on the wireless networks for the cars that will maintain the connections among the vehicles in
relation to exchange of the sensor data and also it will help to detect the slippery stretch of the
pavement. The technology used in Germany is innovative and latest which could help the
business to enhance their opportunities in the competitive market. The business also has wide
opportunities in relation to the strong infrastructure. It can be said that Germany is one of the
technologically advanced telecommunications systems that helps the companies to maintain the
broadcasting medium through television and radio. These two sources are penetrated in more
than 90% homes and it offers opportunities for promoting and marketing of the products and
services. It is seen that the internet population is 20.416 Million which is considered to be on the
5th position on the global platform (Dosi, Grazzi & Moschella, 2015).
The country has also developed the transportation system in relation to the airways,
roadways, and ports. The reputation of Germany in context to engineering and innovation simply
states that the customers are purchasing the products of Germany by focusing on designing.
Innovation and new technologies are considered as an essential factor which maintains the
overall competitiveness of Germany as one of the economic performers (Abdel-Kader, Dugdale
& Taylor, 2018).
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The report "Global competitiveness report 2010", states that Germany is on the 8th
position out of the 139 countries in relation to innovation in the World Economic Forum. Also,
WEF stated that, Germany is one of the international leaders in relation to innovation and also it
is on the 4th position in context to research and development. The quality of scientific research
and institution states that it is in the sixth position in term of maintaining the quality of the
products in the market (Amin & Goddard, 2018).
After Japan and Sweden, it is analyzed that Germany is in the third position for patents
filed with the U.S and Japanese. For maintaining the innovative approach and high technology,
the country is on the top five positions out of 17 countries. It also maintains link among the
Federal government, federal state and also economy to invest 3% of the GDP in R&D in 2015. In
2009, the research and development accounted for the 2.8% share in the GDP of Germany. This
is also on the high rate of R&D which is also surpassing the United States from 1989. The
companies in Germany work in the partnership with the universities and also with the research
institutions. The assistance is given in the areas such as Microelectronics, power electronics and
also process engineering (Weaver, Jansen, Van Grootveld, Van Spiegel & Vergragt, 2017).
Approximately 31,000 organizations in Germany that are involved in the operations of
R&D and it also maintain the positive climate in relation to innovation. According to the Euro-
stat, it has been stated that the funding in R&D is present in the private sector and also the
companies financed 68% in R&D expenditure in 2007 (Rauschnabel & Ro, 2016). German
environmental technology is also on the highest platform in the field of maintaining the air
pollution and recycling. In relation to the services in the field of waste management and water
resource consists of all technological products and services helps to boost the sustainable and
economic orientation. Country focuses on the concept of "Lust Auftechnik" (Passion for
technology) which maintains overall count in relation to innovation in Germany (Bergek,
Hekkert, Jacobsson, Markard, Sandén & Truffer, 2015).
Conclusion
It has been concluded that Germany could be one of the best options for the companies to
invest. The political factor is important to be considered so that it could be easy for the
companies to boost their market share in the competitive market. The GDP of Germany is good
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which could be helpful for the company in boosting the profits and also it will assist in
maintaining the image or the goodwill in the market. The competition level has been enhanced
and it is necessary for the companies to focus on the market where a high level of technology is
used. In relation to the socio cultural factor, there are approximately 82 Million residents, which
is one of the beneficial factors for the companies in enhancing the demand for the products and
services in the market. So, it can be said that Germany is one of the best market areas for
companies to invest in the entire activities. Innovation is also one of the factors that could be
considered by companies to enhance their market share. It is examined that Technological
innovation is necessary for generating opportunities that will enhance German Car-markers and
their supplier’s. The Latest technologies offer a wide opportunity to boost the production level in
the market.
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