Germany's Mittelstand | The Economist
As the world gazes admiringly at Germany's economic success, we discover why the country's small and medium-sized companies have performed so well
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On the outskirts of the sleepy town of Gutersloh in northwest Germany is Miele, a company that's been making kitchen and laundry appliances in the area for over a hundred years. Across the country over ten thousand of its employees produce over a million washing machines and tumble dryers every year. With annual sales of 2.8 billion euros the company now has eight plants across Germany.
Miele is one of many small and medium sized German businesses known collectively as the Mittelstand. Firms like these provide the muscle to the country's economic might.
Other nations may quake in the face of competition from Asia but not Germany. Its luxury manufacturers sell posh cars to the new Asian rich, and the metal stand makes machine tools and equipment that Chinese firms use to make consumer goods. But what makes the Mittelstand so successful?
In recent years politicians have done a lot to help. In reforming the country's labour market successive governments have been ahead of the curve but so have Mittelstand companies themselves - constantly innovating, adapting, and evolving. By avoiding debt, specializing in niche markets, developing product related services, and investing in vocational training, Germany's small and medium-sized companies have remained at the cutting edge of global manufacturing Miele is still family-owned. Marcus Miele whose great-grandfather Karl co-founded the company in 1899 is one of its managing directors. Like many Mittelstand businessman he refuses to saddle the company with debt even if it means slower growth.
Just a few miles down the road is Beckhoff Automation another successful family-owned company. It started out as an electrical installation shop in the 1950s and has since turned itself into a multi-million euro company - selling specialized industrial computers to customers all over the world. And Beckhoff doesn't just design its products here it also makes them. Visit one of its production lines and you're confronted with a scene you'd usually expect to see in China or Taiwan. This is where it makes the motherboards for its computers. By its refusal to outsource jobs like these Beckhoff maintain strict control over the quality of its products - but it also means the company can respond quickly to an increase in demand and that demand often comes from other German companies. Hans Beckhoff inherited the business from his father and has overseen the company's rapid growth over the past thirty years. He says that by sticking together, Mittelstand firms have created a value-added chain.
In other European countries there are plenty of University graduates and unskilled workers but not much in between. In Germany vocational training is much better. Skilled blue-collar workers are the heart and soul of the Mittelstand. Not only trained to operate the machines but also to understand how they work. By offering academic apprenticeships a dual system where University students spend as much time working as studying firms like Miele play a crucial role in keeping Germany's unemployment levels low.
The mittelstand's success has attracted admiring glances from the rest of Europe but it's built on foundations that may be hard to copy - from Germany's family traditions to its skilled workers. Like Silicon Valley, the mittelstand remains one of a kind
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On the outskirts of the sleepy town of Gutersloh in northwest Germany is Miele, a company that's been making kitchen and laundry appliances in the area for over a hundred years. Across the country over ten thousand of its employees produce over a million washing machines and tumble dryers every year. With annual sales of 2.8 billion euros the company now has eight plants across Germany.
Miele is one of many small and medium sized German businesses known collectively as the Mittelstand. Firms like these provide the muscle to the country's economic might.
Other nations may quake in the face of competition from Asia but not Germany. Its luxury manufacturers sell posh cars to the new Asian rich, and the metal stand makes machine tools and equipment that Chinese firms use to make consumer goods. But what makes the Mittelstand so successful?
In recent years politicians have done a lot to help. In reforming the country's labour market successive governments have been ahead of the curve but so have Mittelstand companies themselves - constantly innovating, adapting, and evolving. By avoiding debt, specializing in niche markets, developing product related services, and investing in vocational training, Germany's small and medium-sized companies have remained at the cutting edge of global manufacturing Miele is still family-owned. Marcus Miele whose great-grandfather Karl co-founded the company in 1899 is one of its managing directors. Like many Mittelstand businessman he refuses to saddle the company with debt even if it means slower growth.
Just a few miles down the road is Beckhoff Automation another successful family-owned company. It started out as an electrical installation shop in the 1950s and has since turned itself into a multi-million euro company - selling specialized industrial computers to customers all over the world. And Beckhoff doesn't just design its products here it also makes them. Visit one of its production lines and you're confronted with a scene you'd usually expect to see in China or Taiwan. This is where it makes the motherboards for its computers. By its refusal to outsource jobs like these Beckhoff maintain strict control over the quality of its products - but it also means the company can respond quickly to an increase in demand and that demand often comes from other German companies. Hans Beckhoff inherited the business from his father and has overseen the company's rapid growth over the past thirty years. He says that by sticking together, Mittelstand firms have created a value-added chain.
In other European countries there are plenty of University graduates and unskilled workers but not much in between. In Germany vocational training is much better. Skilled blue-collar workers are the heart and soul of the Mittelstand. Not only trained to operate the machines but also to understand how they work. By offering academic apprenticeships a dual system where University students spend as much time working as studying firms like Miele play a crucial role in keeping Germany's unemployment levels low.
The mittelstand's success has attracted admiring glances from the rest of Europe but it's built on foundations that may be hard to copy - from Germany's family traditions to its skilled workers. Like Silicon Valley, the mittelstand remains one of a kind
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The Economist videos give authoritative insight and opinion on international news, politics, business, finance, science, technology and the connections between them.
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