German Firms and the Wild West of Globalization

Today, any company’s survival depends on its ability to follow the twists and turns of the global economy. Presiding over the game are investors, analysts and fund managers who demand profits. Success can be a Darwinian proposition, with corporate legacy no longer a priority – and three German firms provide case studies on strategies for adapting to rapid globalization and overseas competition. One method is merging firms into dominant brands. Another is breaking a company up into small pieces that target niche markets. Another method is to become a “virtual organization,” manipulating specialized third-party contractors all over the world, while providing incentives for base employees to work flexible hours. The first strategy, employed by Daimler in its merger with Chrysler, had problems, but fast adaptation and restructuring by major firms like Hoechst, Addidas and Trumpf have allowed Germany alone among G7 countries to increase its share of exports. As a result, German companies remain world leaders in many sectors, including chemicals and auto-making. There are also small and midsized companies, often family-owned, not listed on the stock exchange, that analyst Hermann Simon identifies as “hidden champions.” They are not slaves to the short-term whims of investors; instead, they pursue long-term goals and invest profits in research and the future. – YaleGlobal