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German Mittelstand, Indian Style

Germany has been one of the fastest of the major economies to recover from the global recession. Its economy was able to resume to normal growth and unemployment rates quicker than any other country. One of the reasons the German economy’s proven resilient is its long history as a SME supporter. The Mittelstand companies, Germany’s small- and medium-sized often family-owned manufacturing firms, have a lot to do with Germany being Europe’s strongest economy.

These small- and medium-sized businesses firmly rooted in Germany’s urban and rural areas act as solid and reliable employers in their communities and, in return, receive the communities’ support and loyalty. German Mittelstand companies follow a few principles: Rather than investing in risky investments and looking to make quick profits, Mittelstand companies invest in their people. Mittelstand companies try to avoid taking out loans in order to keep banks out of their decision making process. They also mainly focus on niche markets, a fact that allows them to keep production on a small scale and constantly innovate, improve, and diversify their product portfolio.

All in all, it seems that the German Mittelstand model is a winning one. Although this model is largely based on the German culture, German companies spread it wherever they go. A recent article in The Economist called “The masala Mittelstand” talks about how the German Mittelstand model is spreading into India, thanks to the arrival of large German manufacturers.

Large German and Indian car manufacturers such as Volkswagen, Mercedes-Benz, Tata, and Bharat Forge have made the West-Indian city of Pune in to a hub of auto suppliers. The article states that in recent years German firms were attracted to Pune, like Indian manufacturers years before, not only because of its reliable power and easy access to land, but also because of Pune’s engineering colleges and its tradition of manufacturing. As a result of this presence, the city’s entrepreneurs thrive, as these car giants rely on parts manufactured in the city for most of their production. Such industrial hotspots, which also exist in Chennai and the state of Gujarat, are a living proof of the fact that manufacturing entrepreneurship is gaining momentum in India.

The integration of the German model into the Indian marketplace proves two things. One, that economic success in many cases relies on a modern version of manufacturing small- and medium-sized businesses. Second, it provides us with further evidence that India is becoming THE place for global entrepreneurship.

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