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Country Commercial Guides FY 2000: Germany Report prepared by U.S. Embassy Bonn, released July 1999 Note*

CHAPTER IV. MARKETING U.S. PRODUCTS AND SERVICES

U.S. companies intending to export to Germany must take into account German demography. To a far greater degree than its European neighbors, Germany's population and industry are decentralized and evenly distributed. Major cities and businesses dot the countryside in a landscape which features no single business center. A U.S. supplier seeking sales in Germany must be careful to ensure that its distributor, or its own dealerships, have a country-wide capability. Too often U.S. companies seem to seek to cover Europe from a single European base, or even through periodic visits from the United States. The German commercial customer expects to be able to pick up the telephone, talk to his or her dealer, and have replacement parts or service work immediately available. U.S. exporters should avoid appointing distributors with impossibly large geographic areas, without firm commitments regarding parts inventories or service capabilities, and without agreements on dealer mark-ups.

Success in the German market, as elsewhere around the world, requires long-term commitment to market development and sales back-up, especially if U.S. companies are to overcome their natural geographic handicap with respect to their European competitors. One of the most commonly voiced complaints still heard from the German business community is about the American penchant for being here today and gone tomorrow. While this approach can produce occasional one-time deals, it is not the way of the competition, whether it be third-country or German, and is definitely not the way to establish a solid position and reputation in the German market.

Too often, U.S. suppliers are perceived by Germans as being unreliable: too quick to defer processing an export order in favor of a subsequent domestic order, too likely to bypass a successful distributor to deal directly with his customer, and interested in export sales only when domestic order books are unfilled or there is a fortuitous slip in the exchange rate. Many U.S. companies are not seen as long-term players in the market, and are not viewed as likely to provide adequate after-sales support. Distance from the market is no excuse to a customer with a problem.

No business visitor or company wishing to export to Germany can fail to note that trade fairs play a crucial role in marketing in this country, a role perhaps unique in the world. This is not too surprising when one considers that the trade fair movement was born in Germany in the Middle Ages and that, even today, a major portion of the truly world-class vertical fairs take place within Germany's borders, attracting buyers from around the world. During any given year, one or more major trade fairs will be staged in Germany for almost any product or service Americans have to sell. Trade fairs thrive in Germany because they are occasions on which business is actively done, rather than serving simply as public relations venues. U.S. exhibitors in German fairs should bring their order books and be prepared to sell. While U.S. exhibitors and even visitors can often conclude transactions, all attendees can use the great German fairs to conduct market research, see what their worldwide competition is doing, and test pricing strategies. The German fairs should not be thought of as strictly venues for doing business in Germany. The major shows attract buyers from throughout the world, allowing U.S. exhibitors do business here with buyers from Europe, Asia, Africa, Latin America and even with other U.S. companies.

There is a general consensus that Germany's extensive trade fairs are the most effective vehicle for introducing new products or technologies. Annual polls show that decision-makers in Germany value trade fairs as by far the most important medium on which they base their purchasing decisions. The large number of foreign visitors to German shows often leads to sales to non-German customers. Both CeBIT 99, the world's largest computer and telecommunications show, and the 1999 Hannover Trade Fair, the world's largest industrial trade fair of any kind, saw record numbers of visitors and exhibitors. This confirms the conviction that there is no other venue where an American company can get so much product exposure for its marketing dollar. Trade fairs provide a U.S. company interested in entering Germany also with the opportunity to research its market and the potential of its product properly before making a business decision, which is advisable in any case. Not all products can be easily sold and, even in a high-priced country such as Germany, it is important to attach the right price tag to a product.

The promotion of U.S. participation at German trade fairs is also an essential part of "Showcase Europe," a field-driven initiative which is designed to pay tribute to the ongoing integration of a single Europe. "Showcase Europe" concentrates on the following sectors of strategic interest: Aerospace; Energy; Medical Equipment, including Drugs and Pharmaceuticals; Telecommunications and Information Technologies; Environmental Technologies and Equipment, Franchising, and Travel and Tourism. In these fields, the Commercial Service offices located in European countries attempt to concentrate various marketing and advocacy actions. At selected fairs, for example, U.S. Embassy staff will attempt to bring U.S. companies together not only with potential German business partners, but also with visitors from other European countries. "Showcase" also focuses on advocacy on behalf of U.S. business interests and concentrates on further opening the markets in the above listed sectors to U.S. companies, and include official U.S. government advocacy on behalf of American firms bidding on German procurement projects.

Besides exhibiting at a German trade fair, in most cases advertising is considered a suitable promotion method. Regulation of advertising in Germany is a mix between judicial rules and voluntary guidelines developed by the major industry associations. Legal rules were established at the beginning of the 20th century by the "Law Against Unfair Competition." This law continues to be valid today, although it has been modified over time. In essence, this law allows competitors to bring suit if advertising "violates good manners."

Many advertising practices that are common in the United States, such as offering premiums, would not be allowed in Germany. Any planned advertising campaigns should be thoroughly discussed with a potential business partner or an advertising agency in Germany. Following is the address of the German association of advertising agencies:

Gesamtverband Werbeagenturen e.V.
(German Association of Advertising Agencies)
Friedensstr. 11
60311 Frankfurt a.M.
Telephone: [49][69] 2560080
Telefax: [49][69] 236883

There are numerous technical or specialized periodicals that deal with all aspects of technology and doing business in Germany. In addition, Germany has a well-developed array of newspapers and magazines, which offer the opportunity to gather information and advertise products and services.

For nearly all facets of doing business, there appears to be an industry or trade association that is active in a particular field and which can often serve as a suitable point of contact when trying to establish a partnership.

Selling to German government entities is not always an easy process. However, although a delay in implementing all facets of the EU Utility Directive occurred, it is safe to say that, in general, German government procurement is non-discriminatory and generally appears to comply with the GATT Agreement on Government Procurement (the Procurement Code) and the European Community's procurement directives. That said, it is undeniably difficult to compete head-to-head with major German or other EU suppliers with long-term ties to German government purchasing entities.

Marketing to the new Federal States

While market conditions in the new and old federal states of the reunited Germany continue to converge impressively, U.S. exporters and potential investors should, nonetheless, be aware that the new federal states of eastern Germany still present, in certain respects, distinctive commercial opportunities and challenges.

For instance, while promotion and investment assistance provided by the German Federal Government usually covers the entire territory of Germany, some programs and terms are more favorable in the new federal states as part of the government-led effort to transform these states of the former East Germany to a market economy. Additionally, at both the federal and state-level there are investment grants, special depreciation and credit programs, and regional promotions, which apply specifically to the new federal states.

One new regional promotion initiative of particular interest to U.S. firms interested in market opportunities in the new federal states is the IIC or Industrial Investment Council of the New German Laender (States). Through extensive market research, the IIC is in the process of identifying (and will subsequently disseminate information on) the distinctive commercial conditions which set eastern Germany apart as a favorable commercial destination -- especially for major U.S. investors in certain key sectors but also, indirectly, for U.S. exporters of all sizes and sectors. Among some of the distinctive conditions which the IIC's market research is highlighting for the new federal states are: the degree of wage and labor flexibility across the board; the degree of local flexibility in accommodating major infrastructure projects; technical, workforce, and niche R&D capabilities; transportation logistics and distribution advantages; etc.

To help U.S. firms capitalize on these and other distinctive opportunities in the new federal states, the commercial team in the U.S. Mission Bonn-Berlin offer the following programs:

-- The Economics Section organizes an annual conference in the autumn to highlight the positive investment experience of U.S. firms in the new federal states and to promote U.S. investment even further beyond the current 300 U.S. firms who have already invested a total of $8 billion accounting for some 55,000 jobs.

-- The Commercial Service runs, together with its partner, the German Federal Economics Ministry, a joint trade mission program to tap market opportunities in the new federal states. This Commercial Service/Federal Economics Ministry joint program is designed to introduce U.S. small- and medium-sized exporters to distinctive market opportunities in the new federal states in specified best-prospect sectors.

Additionally, the Commercial Service Berlin and Leipzig, in cooperation with the Economic Section, offers an array of market information analysis and reporting, trade show support, round tables and other program initiatives designed to assist U.S. firms capitalize on these specific market opportunities. Companies interested in business opportunities in eastern Germany should contact the Commercial Service office in Berlin (see appendix E) for further details.

Marketing U.S. Agricultural Products

The Foreign Agricultural Service (FAS), USDA, maintains a U.S. Agricultural Trade Office (ATO) in Hamburg, Germany:

U.S. Agricultural Trade Office
Alsterufer 28
20354 Hamburg, Germany
Tel: [49][40] 4146-070
Fax: [49][40] 4146-0720
E-Mail: atohamburg@fas.usda.gov
http://www.usembassy.de/atohamburg

The primary objective of the ATO is to facilitate trade in U.S. agricultural products. To meet this goal, the ATO provides the following support and services:

Trade Leads: Designed for German buyers searching for specific U.S. products. More than 36,000 U.S. firms receive trade leads through this system each week.

U.S. Supplier Listings: Lists of U.S. suppliers for use by potential German buyers.

Buyer Alert: Lists of specific products being offered by U.S. exporters.

German Importers: Lists of German importers, by product sector, for use by U.S. exporters.

Market Briefs: Background and basic information on exporting agricultural products to Germany.

USA Promotions: Decoration and other promotional materials for use in special USA promotions.

Trade Shows: Information on key trade shows being held in Germany. Also, coordinate special USA pavilions at certain food shows in Germany, and organize and recruit German buyers for U.S. food and agricultural trade shows.

American Food Directory: Extensive listings of U.S. food and beverage products imported and available for sale in Germany.

The ATO also works closely with numerous U.S. agricultural trade associations and U.S. firms conducting programs designed to boost foreign demand for U.S. agricultural products.

The Foreign Agricultural Service also maintains an Office of Agricultural Affairs, which is located at the U.S. Embassy in Berlin, Germany. This office oversees USDA activities in Germany and can provide information on German food law as well as German import requirements. FAS Berlin may be contacted as follows:

Office of Agricultural Affairs
American Embassy/Berlin
Clay Allee 170
14195 Berlin, Germany
Tel: [49][30] 238-5174 (Embassy Switchboard)
Fax: [49][30] 238-6290 (Embassy Number)
http://www.usembassy.de/embassy.fas