The Interpreneur survey: Understanding mid-market business trends in Germany

Europe’s largest economy, Germany, has been affected significantly by shifts in the global economy, from supply chain challenges, to the long-road to recovery for China. These impacts have made Germany businesses less keen to take advantage of prevailing economic winds as the global marketplace moves towards the black this year.

To understand how this landscape is affecting mid-market businesses, we recently surveyed 1,400 C-suite business leaders in 14 countries, in private sector companies earning up to £300m a year that have expanded internationally. We call these CEOs ‘interpreneurs’.

We have analysed the German data against the global outlook to get a better understanding of what drives German interpreneurs, moving against challenging landscape.

This report provides useful and important insight into the considerations for SME business leaders who are looking to or have already expanded overseas. There is clearly a slightly less optimistic outlook for future worldwide expansion by German business leaders; however, for most, expansion clearly has been beneficial.

In Germany, there is a comprehensive and solid understanding of global tax regulations worldwide. Nevertheless, entrepreneurs should always keep this point in mind and always be aware of the different regional legal frameworks and review this regularly wherever they operate. In this way, global legal changes that will come into force in the near future can be taken into account at an early stage.

Andreas Wiedmann
Partner, partner
Kreston Bancbach

Global business trends: Do German business leaders believe more businesses will expand overseas in the next 12 months?

German CEOs pessimistic about overseas business expansion

A cautious tale was revealed in Germany’s responses, with just 71% believing there will be an increase in business expansion. A stark difference to Nigeria’s optimistic score of 98%, putting Germany towards the bottom of the optimism chart.

Which markets do German businesses prefer to expand into?

Western Europe is Germany’s number one choice for global expansion

With supply chain challenges and a slow-to-recover economy after a pre-Covid over-reliance on China for trade, it is perhaps no surprise to see Europe as Germany’s emphatic choice for expansion.

• 46% also said their business would consider expanding in Eastern Europe, the highest response rate across all 14 countries.
• 35% said their business would consider expanding to North America, one of the lowest scores for the region.
  • Only 4% would consider expanding to Africa, again one of the lowest scores for the region.

What makes a country more attractive to German businesses looking to expand globally?

Economic growth prospects primary motivator

Germany tracked with the global response, which was future economic growth prospects, however they were the least likely of all countries surveyed to be influenced by favourable trade agreements.

This was followed by:

• Skills and talent (e.g. availability of local talent and openness to skilled talent immigration)- 32%
• Tech infrastructure and digitalisation– 32%
• Alignment with long-term growth strategy (e.g. regional investment into specific industries)- 29%

What motivates German interpreneurs to expand internationally?

43% of German respondents identified market growth opportunities as the primary motivation for their businesses to expand internationally. Meanwhile, 33% were driven by the prospect of gaining a competitive advantage by entering new markets ahead of their rivals. Additionally, 29% cited cost optimisation, such as leveraging lower production and resource costs, as a key factor in their decision to expand abroad.

What are the biggest international expansion challenges in 2024 according to German Interpreneurs?

Finding local partners a challenge to doing business internationally say German CEOs

Only Germany and Brazil named finding the right local partner as their number one challenge to doing business internationally.

What do German CEOs think are the biggest risks to global business expansion in 2024?

How much of a risk do the following pose to your business’s international expansion or planned international expansion?

Economic slowdown biggest risk to German businesses

According to the survey, 40% of respondents felt that an economic slowdown or recession poses a disruptive or significant risk to their business’s international expansion plans, with 12% identifying it as a disruptive risk and 28% as a significant risk. Conversely, 28% perceived this as a minimal or non-existent risk. Additionally, 38% of respondents expressed concerns about talent shortages and skilled labour gaps as disruptive or significant risks, while 36% highlighted similar concerns regarding cybersecurity threats and data breaches.

Which is the preferred international expansion funding source for German businesses?

Private investors financing German businesses international expansion

The data indicates a strong inclination towards private financing among German businesses for international expansion, driven by the desire for flexibility, control, and possibly the availability of substantial private capital within the country. 36% reported using/ considering using government funding for international expansion.

Other common sources of growth capital were:

• Employee equity schemes- 34%
• Capital markets (i.e. IPO)- 25%
• Venture capital or private equity- 25%

Understanding global tax: Is the C-suite ready for a global tax threshold?

Better local experts could be the answer for global taxation for German businesses

Germany, along with four other countries, consider themselves lacking the knowledge needed to understand international tax regulations, having half the confidence of the most confident country when it comes to understanding global tax, the US.

The growing importance of ESG for German investors & interpreneurs

The importance of ESG considerations

German business leaders not placing ESG as a top priority

Germany had one of the lowest scores when prioritising ESG practices, with a score of only 18% against highest score of 64% in China. There was a similar picture across Europe, with Germany, France and Spain being the least likely to prioritise ESG when expanding internationally.

The benefits of AI in international business operations

AI readiness

German businesses feel less confident about the use of AI in global operations than global average

Germany was again in the bottom third when it came to feeling ready to harness the benefits of AI.