The workings of Europe's largest economy, Germany, can be felt all over the world including Estonia. How one of our largest export partners is doing affects countless companies in Estonia – both through direct orders as well as through subcontracting in the long supply chain. As of the start of the year, Germany was Estonia’s sixth largest export partner, with total export amounting to 236 million euros and comprising six percent of Estonia’s total export.
Although the economic situation in Germany is also complicated due to the coronavirus pandemic, entrepreneurs there generally feel quite optimistic. Germany is one of the countries with the most stable economic growth in the euro area. This year, the German Institute for Economic Research (DIW) forecasts GDP growth of 3%. In the coming year, the economic recovery is likely to continue at an even faster pace (GDP forecast for 2022 at 3.8%).
E-commerce and the implementation of industrial digital solutions have gained a particularly strong momentum. Before the crisis, the pace of digitalisation in German small and medium-sized enterprises (Mittelstand) was slow, but now they have realised its importance and sped up the pace of developing digital processes. German export and the number of orders from abroad also showed a growth trend in the first half of this year, clearly exceeding the pre-crisis level.
Enterprise Estonia hasn’t underestimated the importance of Germany's economic influence either, as Germany has remained one of the main key markets for Enterprise Estonia for many years and will remain in focus in the future. Enterprise Estonia has been actively directing its efforts toward Germany for the last four years, including several business and trade fair visits with joint stands, numerous training programs and countless meetings and seminars. The status of export focus country necessitates the provision of services and activities in a specific target market on a wider scale – such a course of action was mutually agreed upon between the companies and Enterprise Estonia.
Export volumes are growing
The export numbers of companies using Enterprise Estonia's services in relation to Germany show an upward trend. The year before last, the sales turnover of these companies that were geared towards Germany amounted to 25.1 million euros (or 2.8 percent of Estonia's total exports to Germany), last year it increased to 31.6 million euros (accounting for 3.5 percent of exports to Germany).
The first half of last year, ravaged by the pandemic, brought an increase instead of the expected decline – export volumes in the first half of the year increased from 15.3 million euros in 2019 to 20.7 million euros in 2020.
Export growth to Germany, Enterprise Estonia clients vs. Estonia (base January 2018) (Source: Statistics Estonia)
Export of Enterprise Estonia’s clients to Germany (Source: Statistics Estonia)
Kristjan Erm, business development manager of Enics, sees Enterprise Estonia as a good partner and says the representatives of Enterprise Estonia have good connections in Germany and effective methods that help Estonian companies better enter the market. "Good business relationships and long-term cooperation are still built on the basis of people and relationships, and that requires efficient work," Erm says, praising Tiina Kivikas, Enterprise Estonia’s expert adviser in Germany.
Flowit Estonia of Swedish origin has been more serious about exporting to Germany for the last two years now. Juhan Pukk, partner of the IT-company, finds that although the German market is attractive, it requires patience and thorough homework. "If you don’t have the patience, you should avoid Germany,” he emphasises. “It is worth taking your time to get to know the locals and build trust.” Pukk appreciates the support of Enterprise Estonia, but adds, “Enterprise Estonia can help you find the necessary contacts in Germany, but you still have to do your own homework and take care not to forget the relationships established. Simply buying a plane ticket for a visit organised by Enterprise Estonia will not bring any results.”
One of the most important export programs to Germany has just ended – Mission Germany, which was initiated in 2017 and has taken place three times since, has helped Estonian companies enter the German market with the support of consultants and trainers there. Almost 60 Estonian companies participated in the programme, learning how to better understand the German market, developing a market entry strategy and developing their product to be suitable for the German market.
Sceptical Germans are moving online
As the coronavirus pandemic has put a stop to all possibilities for face-to-face meetings, efforts are being made to maintain business relationships through virtual communication. Until a few years ago, the conservative Germans were strongly sceptical about electronic communication. In the last year, however, there has been a revolution in society in that regard. While in the past working from home was not commonly accepted, now digital communication has become an obvious matter and it also helps Estonian companies reach the right people faster.
Due to circumstances, trade fairs, which are also very important in the German business culture and are vital for entrepreneurs, have also moved to the virtual space. In the pre-coronavirus era, Enterprise Estonia used to organize 6-7 joint stands at trade fairs that were important for Estonian entrepreneurs in Germany every year. Attendance was ensured at all major events – at the boat fair Boot, at the construction fair Bau, at the electronics trade fair productronica, at the medical technology fair Medica, at the transport fair transport und logistik, etc. Germany is already preparing to restart their trade fair activities today, and with the support of Enterprise Estonia, participation at the main trade fairs will continue in the future, although most trade fairs now will probably be using a hybrid solution, i.e. virtual fairs will be organised in parallel to physical fairs.
Preparation and adaptability
Partner organisations that have collaborated with Enterprise Estonia in arranging its different services such as the German-Baltic Chamber of Commerce in Estonia, Latvia and Lithuania (AHK) and the Marketing Institute have also offered professional assistance to Estonian entrepreneurs in organising contact trips in various sectors and conducting export trainings and consultations respectively. According to Tarmo Mutso, head of the AHK Estonia office, the Germans prepare for the meetings very thoroughly and expect the same from the other side as well. "When going to a meeting with a German entrepreneur, it is smartest to go with the mindset that the Estonian entrepreneur needs a German partner more than the German needs an Estonian – you must be able to prove very convincingly what kind of added value you can offer and why you are the most suitable partner," Mutso said.
Anu-Mall Naarits, CEO of the Marketing Institute, also notes that most Estonian companies should be prepared to adapt their products to the German market and take into account local taste preferences, otherwise excellent products can seem too foreign. "The biggest challenge for smaller companies seeking to enter the German market is staff, as many do not have a German speaker on their team, which is absolutely necessary in such a large market,” she explained. “Also, the company's marketing materials must be up-to-date using the correct language, from website to introductory brochures and business cards.”
However, when promoting international sales, Naarits considers the worst option to be the "we-are-used-to word-of-mouth-advertising-and-do-not-need-other-channels” attitude. To build trust, you need to communicate and tell your story – for example, by creating an educational newsletter or a LinkedIn group, or through organising webinars. In Germany, it is sensible to find your own niche, because achieving success even in a smaller niche can mean a huge order for an Estonian company.
Involving an international expert
Germany's continued importance as an export focus country can be seen from the replacement of Mission Germany with a new service Involving an International Expert which takes an even more individual approach to the needs of the business. Enterprise Estonia has two very capable export advisers in Germany who help companies with drafting and finding an export partner, but they cannot help with specific issues. Therefore, it is wise to involve a person who is familiar with the field and can lead the company in the right direction. The company chooses an expert of a country and field they need the most assistance from at the moment. If necessary, Enterprise Estonia can help them find a suitable expert and covers part of the costs related to the expert's work.
In addition, Enterprise Estonia will continue to organise contact trips to Germany, joint visits, trade fair visits, national joint stands, trainings, useful seminars and other activities that help Estonian entrepreneurs to better prepare for entering the German market and operating there. We will be also bringing you interesting articles about the German economy and keep you up to date with current developments in key economic sectors in Germany.
Original article available here
The activities of export advisers are funded by the European Regional Development Fund.