With its stable, modern economy and strong tradition of research and innovation, Germany offers strong opportunities for Canadian businesses across multiple sectors. Germany is Canada’s eighth-largest export market and ranks fourth among Canada’s suppliers. These and other factors help make Germany a notable consideration as an export market.
Canadian exports into the German market total $3.5 billion annually.
Canadian has $4.5 billion in direct investments in Germany.
Canadian firms hold $7.4 billion in assets in Germany.
Start with these five experts:
“Canadian suppliers need to keep in mind that doing business in Germany isn't just about selling to German buyers, but also to European supply chains buying for other markets.”
Where will Canadian businesses find opportunities in Germany?
The big areas are automotive and ICT. We have all the major Canadian companies here in the automotive OEM sector. In ICT, OpenText is here. There are also opportunities in other sectors such as infrastructure, transportation, renewable energy and technology. We have an aging population, with people increasingly wanting or needing to stay at home. So Canadian companies that offer products or services for an older demographic will want to look at Germany.
What are some misconceptions about doing business in Germany?
Canadian suppliers need to keep in mind that doing business in Germany isn't just about selling to German buyers, but also to European supply chains buying for other markets. Germany is, like Canada, very export driven. For Canadian businesses working with a German company, it becomes easier to approach markets such as Eastern Europe, Africa and Asia.
Any cultural practices and sensitivities to be aware of?
Business meetings in Germany are really direct and focused – maybe three minutes for small talk and then direct to business. It’s important to be prepared and to be on time. That's one of the key differences I've found when meeting with Canadians: they’re often at least five minutes late.
“As the country’s economy is highly decentralized, all 16 states have active inbound attraction agencies. They work closely together with the federal agency, Germany Trade and Invest, and municipal economic development agencies.”
What resources are available to Canadian companies looking to make a direct investment in Germany?
Regional support for inbound foreign direct investment is available in all of Germany’s regions. As the country’s economy is highly decentralized, all 16 states have active inbound attraction agencies. They work closely together with the federal agency, Germany Trade and Invest, and municipal economic development agencies. Together they can provide the full site-selection process and tailor a package of subsidies.
Are there certain areas of Germany that offer more subsidies for foreign investors?
The five eastern German states have a larger portfolio of financial incentives. Due to structural weaknesses, going back to Germany’s division until 1989, they are still target regions for some EU-based funds, such as the European Fund for Regional Development. Nevertheless, eastern Germany is home to some very interesting and innovative clusters in various industries. In addition – again partly related to the history of unification – business costs are sometimes significantly lower than in western Germany.
What do Canadian companies need to know about hiring in Germany?
German labour laws are comparatively employee-friendly. Social benefits are higher than in Canada and labour flexibility is lower. Also, unions play a significant role, often being part of centralized decision-making within companies as part of work committees. There is also a mentality amongst employers that keeping core staff is crucial, even in times of crises. Instead of, for example, firing engineers and other important employees, management may negotiate with unions to limit working hours more broadly.
“Understanding the differences between the two countries is important. German companies are more long-term driven where Canadians are more sales-driven.”
What are some of the key things Canadian companies need to know when working to build their business in Germany?
Understanding the differences between the two countries is important. German companies are more long-term driven where Canadians are more sales-driven. They tend to focus more on quarterly results; by comparison, Germans make decisions based on long-term planning that looks ahead to future generations. While quality is important in Canada, in Germany it’s very, very important, especially when it comes to consumer products. In fact, Germans focus more on quality than they do on service and price. That’s why Canada Goose is doing so well in Germany – it’s very expensive, but high quality.
Are quality certifications important?
Normally for a producer the EU conformity declaration is sufficient. As a producer you have to provide this EU conformity declaration, where you declare that your product was manufactured according to EU standards.
How do sales and service structures in Germany differ from Canada’s?
There are some differences that could impact how Canadians set up their business in Germany. In Canada, sales representatives tend to cover a regional area while in Germany sales reps have nationwide coverage or they operate in very large areas. Delivering service is also easier in Germany compared to Canada, where service is expensive because of the long distances involved.
“Germany is very open to foreign investment with no restrictions as you would find in Canada where sometimes there must be a certain percentage of resident Canadians involved.”
What German legal and regulatory requirements might surprise Canadian businesses?
In Germany, you will find stronger regulations in company law where you wouldn’t necessarily expect it, being used to Canadian law. With an incorporated entity, if you violate certain requirements, it could lead to personal liability for managers or a Canadian parent company. Example: If you lose the nominal share capital in your company or run out of cash, you might be obliged to file for insolvency, which is not the case in Canada. Or you might not be aware that failing to file for insolvency quickly enough could be a criminal offence.
Are there any aspects of German company law that appeal to Canadian investors?
German company law is federal, so it is consistent all over the country. Germany is very open to foreign investment with no restrictions as you would find in Canada where sometimes there must be a certain percentage of resident Canadians involved. This is not required in Germany. You could run the corporation from across the Atlantic. However, risk is reduced by having local managers.
Can Germany’s strong labour laws and practices cause difficulties?
The role of workers’ councils and their interactions with managers are unknown territory for foreigners. Different than a union, these councils can be elected by workers to represent their interests to management if the company has as few as five employees. We have cases where foreign owners thought local managers were too “cozy” with workers and didn’t understand the benefits of working with the councils – their contributions can strengthen your business.
“We offer many advantages for a Canadian firm interested in a European HQ – including excellent transport infrastructure. You can easily serve the whole European market by truck, train or inland vessel from one production site.”
What factors should a Canadian company weigh before setting up manufacturing operations here?
Located in the heart of Europe, Germany can be a strategic hub to serve other European countries. We offer many advantages for a Canadian firm interested in a European HQ – including excellent transport infrastructure. You can easily serve the whole European market by truck, train or inland vessel from one production site. But also consider production costs; wages here are higher than some other European countries and if wages are a large component of your operation, Germany might not be the best location. On the other hand, productivity is also high and that may be important for your business.
What regional variations should Canadians understand?
In some areas, especially in Eastern Germany or structurally weaker regions, it is possible to get high subsidies if you set up a business. These funds are offered by the EU or German development programs, but often companies have problems finding qualified staff in those regions. In some areas, the local government and its business development corporation assist by solving bureaucratic problems, whereas in other regions, they do not – which can lead to enormous administrative delays.
What are your top tips for Canadian businesses seeking to overcome any challenges?
The challenges are not too big for Canadians if you have the right support. Talk to the local administration before starting any business operation, and to avoid intercultural problems, consider installing German management.