If you are reading this, you might think that it is time for your business to cross borders, and start up in Germany.
Given that 80% of international market entries fail, we have made it our goal to help impact driven businesses to avoid pitfalls. The attitude-behaviour gap is known as the emotional tendency to say “Yes” even before you started to gather the appropriate data. We want you to avoid falling into this trap. Before you take the big step, make sure your expansion plan has a solid foundation. In this blog we will give you a simple, but extensive guide on some crucial facts we have gathered until this day.
1. Proper planning your expansion strategy
Guidelines, Rules and Regulations:
Make sure you understand the legal requirements within the target country. Here are some useful pages that gather the main aspects you should be aware of when targeting Germany.
Next to requirements, it is important you research other rules that might affect the distribution and sales of your product. An example is the change of the German packaging act of 2019. Businesses failing to comply with the new packaging law can face a fine up to €50,000. Don’t be one of them.
Finance:
It is well known that overestimation of the market size can lead to unrealistic revenue planning. You want to thoroughly plan your finances to avoid
- Running out of budget
- Having to rely on other people’s money or influence
- Not having the freedom to do things at your own pace, and being pressured by shareholders, for example
Further, if you want to use your economic force for good, you have good chances of receiving financial support for your project. For example, we managed to be granted financial support by GIZ amongst four other Coffee Changemakers for our client Moyee Coffee. In our article about funding we talk more extensively about the topic, and list a number of partners and organisations that will help you find your way regarding this topic.
Germans:
Understand who you are doing business with. Especially when talking to buyers, you often only get one shot, and losing this chance because of not being prepared would be terrible. One important detail is language. Surprisingly, a study by Wall Street English showed that 65.5% of German employees state that they have little or no knowledge of English. You want to make sure to have a German native speaker in your expansion team. We have compiled 9 characteristics to be aware of when doing business with Germans.
2. Market Entry to Germany: Deciding about the right entry strategy comes next
Location:
Germany is quite heterogeneous, since its industries are located decentrally. The economy and traditions vary strongly from one federal state to another. It is important to kick off from the right strategic location. For example, if you are looking to sell sustainable products, Berlin is always worth keeping an eye on because purchasing power is relatively high and people are open to novelties. We have collected a list of industries in Germany and their geographic locations.
Develop the right Market-Product-fit:
it is a common mistake to assume that a neighbouring country is so close and similar, that you can just adopt the same strategy. In an interview with Communications Specialist of food & beverage marketing Katharina Wagner, she tells us that this happens when brands follow the lean approach too much and try to enter the market without rethinking their product quality, packaging, sales folders, websites or marketing strategy.
Learn from competitors:
It is helpful to look into the expansion strategies of competing or similar companies, as you can learn and gain inspiration for your own expansion strategy. Also, you want to know what your USP’s (Unique Selling Points) are in comparison to what’s already out there. In our case study on how three beverage brands successfully entered the German market, we realised that their strong points where:
- Focus on experiences to raise brand awareness: make sure you spend a fair amount of your budget on promoting your brand.
- Berlin as a starting point: Berlin is known to be a suitable “lab” for testing new products. Purchasing power is relatively high and people are open to novelties, therefore new trends get adopted by a larger crowd more easily.
- Being personal: Get in touch with your potential consumers and earn their trust. This brings us to the next point →
Understand your target consumer:
Target groups can be extremely diverse and it is important to get to know the customers that you will be serving before you actually start doing it. German consumers are very demanding and inform themselves extensively about the source of their products. But once you earn their trust, you will gain a sustainable relationship, since they are also known to be loyal buyers. It can be challenging and equally rewarding to invest in this relationship.
We will be sharing a more extensive blog on our insights on German consumers next week. Want to stay tuned? Subscribe to our newsletter!
3. Executing and monitoring your project: Running a test pilot
We believe that validating your expansion strategy is a critical success factor. This is a low risk approach to convert your assumptions into proven facts. In our experience, it is very important to spend time on site while conducting market research, and not only behind the computer.
- It can be useful to speak to potential consumers on the street to gain in-depth qualitative insights, and to organise meetings with potential partners and experts in the field
- Events and meetups are a great opportunity to promote your products and services. Further, it is an opportunity to get in touch with people and gain network information.
Going through this list has hopefully made you aware of the strong and weak points of your expansion plan, and where to invest some more time and research. If you make sure to go through the three steps of planning, a proper market research, and a test pilot, you should know whether you are ready (or not!) to take the big step.
In the end, the important thing is to ask questions, and to ask as many questions as possible: where others have failed, you can learn from their experience! We are here to help you ask the right questions!
RECOMMENDED FURTHER READING:International Expansion – The One Thing You Are Probably Not Thinking Of