MOD001093 MOD001093 ENTREPRENEURSHIP AND ENTREPRENEURSHIP AND

INNOVATION: INNOVATION: GERMAN MITTELSTAND GERMAN MITTELSTAND

FIRMS : HIDDEN FIRMS : HIDDEN CHAMPIONSCHAMPIONS

Prof.Stephen OngProf.Stephen OngBSc(Hons)Econs (LSE), MBA (Bradford)BSc(Hons)Econs (LSE), MBA (Bradford)

Visiting Professor, Shenzhen UniversityVisiting Professor, Shenzhen UniversityAcademic Fellow, Entrepreneurship & Innovation,Academic Fellow, Entrepreneurship & Innovation,

The Lord Ashcroft International Business School, Anglia The Lord Ashcroft International Business School, Anglia Ruskin University Cambridge UKRuskin University Cambridge UK

MBA ANGLIA RUSKIN UNIVERSITY MBA ANGLIA RUSKIN UNIVERSITY

Today’s Overview Today’s Overview

LEARNING OBJECTIVESLEARNING OBJECTIVES To assess the significance of To assess the significance of

middle order middle order “Mittelstand”“Mittelstand” firms in Germany; firms in Germany;

To appraise critically the To appraise critically the special attributes of these special attributes of these firms;firms;

To review the growth of these To review the growth of these firms todayfirms today

GERMANY’S GERMANY’S MITTELSTAND MITTELSTAND

FIRMS FIRMS

GDP per personGDP per person

How to How to Keep your Keep your

income income high and high and higher?higher?

Manufacturing % GDPManufacturing % GDP

Who is Who is working working hard to hard to make make more more stuff?stuff?

Trade % GDPTrade % GDP

Who is Who is exporting exporting more stuff more stuff

than than consumingconsuming

??

Germany’s Germany’s Mittelstand FirmsMittelstand Firms

Video by the Economist (2012)https://www.youtube.com/watch?v=eUjqQZLbKgA Video by Al Jazeera(2012)https://www.youtube.com/watch?

v=1CRDcqkHLE4

International Trade International Trade (2006)(2006)

Hidden Champions Hidden Champions Defined (Simon 1996)Defined (Simon 1996)

1.1. No.1 or 2 in World Market, or No.1 or 2 in World Market, or No.1 in EuropeNo.1 in Europe

2.2. Revenue below 800M Euro Revenue below 800M Euro (96%), Median 100M Euro, (96%), Median 100M Euro, 66% over 50M Euro. 50% 66% over 50M Euro. 50% ExportsExports

3.3. Low public visibilityLow public visibility

Hidden Champions : Growth Hidden Champions : Growth Rates (1994 – 2004)Rates (1994 – 2004)

Changes in Ownership Changes in Ownership Structure Structure

(1994 vs 2004)(1994 vs 2004)

Management of FirmsManagement of Firms

ATTRIBUTES OF ATTRIBUTES OF HIDDEN HIDDEN

CHAMPIONSCHAMPIONS

Hidden Champions (Simon Hidden Champions (Simon 1996)1996)1.1. Mission: World Mission: World

Market Market leadershipleadership

2.2. Narrow Narrow market market segment, segment, focus strategyfocus strategy

Hidden Champions (Simon Hidden Champions (Simon 1996)1996)3.3. Serve target Serve target

markets markets through own through own subsidiaries subsidiaries with specialised with specialised know how.know how.

4.4. Value oriented, Value oriented, not price. Very not price. Very close to top close to top customers.customers.

Hidden Champions (Simon Hidden Champions (Simon 1996)1996)5.5. Highly Highly

innovative in innovative in product and product and process. Global process. Global and continuous and continuous innovation.innovation.

6.6. Both Both technology and technology and market driven.market driven.

Hidden Champions (Simon Hidden Champions (Simon 1996)1996)7.7. Competitive Competitive

advantage in advantage in product quality and product quality and service. Close to service. Close to top competitors top competitors and defend market and defend market position position ferociously.ferociously.

8.8. Deep in value Deep in value chain. Rely on own chain. Rely on own strengths, strengths, superiority in their superiority in their specialisation.specialisation.

Hidden Champions (Simon Hidden Champions (Simon 1996)1996)9.9. Very strong Very strong

corporate corporate culture, culture, precise precise employee employee selection & selection & motivationmotivation

10.10. Very strong Very strong and long term and long term leadershipleadership

GROWTH OF GROWTH OF HIDDEN HIDDEN

CHAMPIONSCHAMPIONS

Foreign Subsidiaries Foreign Subsidiaries (1994-2004)(1994-2004)

Manufacturing in Emerging Manufacturing in Emerging MarketsMarkets

Case : Alfred Case : Alfred Kaercher Kaercher GmbH & Co KGGmbH & Co KG

Founded 1935 by inventor-Founded 1935 by inventor-entrepreneurentrepreneur

Market leader in cleaning machinesMarket leader in cleaning machines Turnover 1.92 B Euro (2012) from 160 Turnover 1.92 B Euro (2012) from 160

countriescountries 10,000 Employees in 100 subsidiaries in 10,000 Employees in 100 subsidiaries in

60 countries60 countries 14 Factories in Germany, Italy, USA, 14 Factories in Germany, Italy, USA,

China, BrazilChina, Brazilhttps://www.youtube.com/watch?https://www.youtube.com/watch?

v=5Y9qpn10WSov=5Y9qpn10WSo

Case : Kaercher – Case : Kaercher – Revenue Growth (1975 – Revenue Growth (1975 –

2005)2005)

Case : Kaercher – Case : Kaercher – Product Portfolio Product Portfolio

StrategyStrategy

ConclusionConclusion

 ““If some want to If some want to KarcherizeKarcherize you, you, to exclude you, to exclude you,

we want to help we want to help you get out of you get out of

these ghettos.” these ghettos.” Jean-Mar ie Le Pen Jean-Mar ie Le Pen

(19 April 2007, Paris)(19 April 2007, Paris)

26

Further ReadingFurther Reading Herbert Simon (1996) “Hidden champions: Herbert Simon (1996) “Hidden champions:

lessons from 500 of the world's best lessons from 500 of the world's best unknown companies”, Harvard Business unknown companies”, Harvard Business School PressSchool Press

The Economist (2007) The fading lustre of clusters : Special Report

QUESTIONS?