‘Mittelstand’ – Can it change the game for India’s economy?

In Germany, Mittelstand (a term used for Small & Medium Enterprises), constitute 99% of all companies and contribute 53% of the nation’s GDP. Contributing blogger Vinay Upadhyay, who recently visited Germany as part of the international immersion of the One year MBA (PGPEX) at IIM Calcutta, sees in this a potential roadmap for India’s growth. In this article, Vinay recounts his experience of visiting Mannheim Business School in Germany as part of the PGPEX class’ international immersion. Prior to joining IIM Calcutta, Vinay worked for 6.5 years in IT system development and maintenance with firms such as Tata Consultancy Service (TCS). Vinay completed his B.Tech in electrical engineering from NIT, Jamshedpur. 

By Vinay Upadhyay

Finally, there we were, standing at the port of entry in Frankfurt International Airport. It was a bright morning on Aug 17, 2013. Our international immersion trip to Mannheim Business School, Germany was commencing. Months of preparation, anxious visa waits, and endless shopping had culminated to this point.

Mannheim Business School, Germany’s leading business school is located in the university town of Mannheim in Rhine-Neckar metropolitan region. The school was founded in the year 2005 as part of University Of Mannheim and is located in Mannheim palace. Strong presence of corporate such as John Deere, Daimler, and BASF in the Rhine-Neckar metropolitan area offers unique advantages to Mannheim Business School.

Arriving in Frankfurt

The Learning

The agenda of our immersion program was to learn about the evolution of European Union and German ways of doing business. The program included class lectures by eminent professors, guest lecture from industry people and industrial tours to various companies. The program also focused on small and medium scale industries in Germany. During the course of the program, we had opportunity to learn from the many eminent professors such as Prof Dr Jurgen Schroeder, Prof Dr Manfred Perlitz, and Prof Dr Sabine Kuester.

The class lectures were well complemented with company visits. We visited Deutsche Bundesbank, which is the German Central bank. This visit was planned during the sessions on European economy. It further supplemented our theoretical knowledge of European monetary system. We also visited Daimler in Rastatt, John Deere and Rochling Automotive in Mannheim. These visits, along with class lectures, bolstered our learning about the strong performance of the firms in engineering sectors.

PGPEX at Mannheim Business School

Germany is a mittelstand country. It means that small and medium scale companies have a major contribution in German economy. We were surprised to learn that the SME sector constitutes 99% of all industry and contributes about 53% of the GDP. These “hidden champions”, as they are called, have a razor-sharp focus on their product line. They invest a lot on R&D. Most of the hidden champions manufacture niche engineering products. They have gained market leadership in their segments. Firms like Karcher, SKF, Rochling, and Fuchs are shining examples of German mittelstand.

In front of European Central Bank

Innovation has played a vital role in Germany’s development. German companies have always been on forefront of innovation. Germany spends about 2.3% of GDP PPP on research and development. Another factor contributing to Germany’s growth is its focused approach toward doing things. This is true for most of the German firms as well. German companies have strong focus toward their product line. They take pride in their products. German companies also stress on quality. As they say, Germans make a product to “last forever”. Before coming for this immersion, I used to wonder that what makes German economy so strong. It has been so firm that it not only withstood many recessions but also supported some other troubled economies during crisis. Germany suffered hugely during World War 2. It was a satisfying accomplishment to know that how a nation developed so well, in spite of many difficulties.

The Fun

Work hard and party harder. This is what they say in Germany. Our classmates also planned their ways to have fun during this visit. Before the start of first

Enjoying German cuisine

lecture, a group went to Germany-France border to fulfill their dream of skydiving. Many others chose to visit the Frankfurt city, the financial hub of Germany. Between the exhaustive lectures in our first week, our colleagues had planned to scale the pinnacle of the magnificent Eiffel; while others liked to climb up the majestic and beautiful Swiss Alps and Mount Titlis in Alps range. There are only few places on earth which are as scenic as the slopes of Swiss Alps. All the beauty of these majestic creations of nature is mesmerizing.

Today, on August 31st, as we wait for our returning flight to Kolkata, I recollect memories of my experiences in Germany. This trip was a blend of learning and fun. Along with us, we bring a lot to ponder upon. We have many things to learn from German businesses. German way of doing business has many methodologies that we can implement in our own organizations, which can help us to transform our economy. But before we get lost in the technicalities of approaches and methodologies, we must imbibe the basics into our way of doing business. And these basics, as we learned from this tour, are focus and innovation.

PGPEX goes skydiving