How did Germany retain its engineering prowess despite the outsourcing movement to cheaper countries like India and China?
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Germany is the world's 2nd largest exporter due to its strong engineering companies. How did Germany retain its lead in engineering despite the outsourcing movement to cheaper countries like India and China? Also, in the developed world, engineering has lost its lustre among its students. Do German students shun engineering the same way as the students in the rest of the developed world shun STEM subjects?
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Answer:
The Germans have always focused on quality unlike the Chinese. - Africa is one of China's largest markets and even there most of the ignorant, illiterate and corrupt officials attest to the German quality. (Source : personal observations) - Also the Germans have a put in place a no. of measures to ensure their dominance in manufacturing stays intact. Some of these include: - Apprencticeship - The German manufacturers employ young workers before they have graduated from college. They train them, nurture them and employ them leading to a highly trained, highly educated workforce that churns out quality goods at cheaper prices. - Ever heard of the Mittelstand? - If you have, good for you. If you haven't, don't worry, I hadn't either. I actually asked myself this question a few years ago and did some exhaustive research and came across a series of interesting articles and research. In brief, the Germans have a a variety of companies, small-medium sized enterprises, privately (mostly family) owned that each gross $50M+ in revenues. These companies are known as their "Hidden Champions" http://www.german-way.com/history-and-culture/germany/business/, http://www.pwc.co.uk/ceo-survey/german-lessons-what-uk-companies-can-learn-from-the-mittelstand.jhtml. - Specialization - Germany has the highest no. of firms that are market leaders in their respective manufacturing fields, (See Mittelstand above). They specialize only in a single product and produce it better than anybody else. Guess where you will find the largest producer of the silver paper in a cigarette box. Yep Germany. - Focus on employees - See the above point I made on apprenticeship? Well during the recession, most of the German firms chose not to lay off their skilled workers because why would you train them, nurture them, guide them etc only to have them look for other work and lose your most skilled workers? - Since they are private companies, their management don't report to shareholders or award themselves hefty bonuses. Also they do not have a life-long fixation on their stock prices. In fact most of them have been in business for a hundred years or more. - The operate on very little debt - Huge point this. - Have you ever heard of the term "German machine?" - It's used to describe their cars, machinery, even the way their national soccer team plays on the field. It is actually an apt term. The German economy is built around these industries in the manufacturing sector not the other way round. From the government to labor unions to universities to research centers, their whole focus is centered around German manufacturing. The government eases laws and is very flexible around the manufacturing titans. The universities provide a steady stream of talent and focus mostly on research that advances the products that these companies produce. Co-operation between labor unions and the manufacturing sector is like a Hollywood romance and not Hollywood horror movie. - If all this doesn't give you food for thought, then think about this. President Obama launched NNMI http://manufacturing.gov/nnmi.html as a direct result of the success of the Mittelstand in Germany. All in all, the next time, you hear of Greece, Spain etc think of Germany - a superpower in its own right..
Tameem Hassanali at Quora Visit the source
Other answers
This list derived from the CIA Factbook (http://en.wikipedia.org/wiki/List_of_countries_by_exports) suggests Germany in 2013 was estimated at 3rd, behind China and the US, and, for both the US and Germany, a large portion of that is probably due to re-exports, or the export of goods that are made from materials produced in other countries. As an expat living in Germany, my observation is that the education system, which allows skilled tradespeople to begin training at age 13, along with incredibly robust automotive and technology industries, provide a broad base for lots of high-skilled workers and the jobs to support them. We should note that engineering work and production work are two different things. The outsourcing of production to India and China doesn't logically require product engineering to have been outsourced to those countries as well. BMW, Daimler and VW group all do much of their assembly and production in Germany. Further, companies the likes of Siemens, Bayer, BASF, ThyssenKrupp and others do loads of construction and development and lead the world in their industries. To your second point, I think your observed STEM deficit is less to do with engineering having "lost its lustre" and more to do with the exponential explosion in demand for engineers. The various industries have grown quicker than universities expected, and so the labor supply side is still working to catch up. Edit: As a follow-up to one of the comments here, Training should never end with any person, and every person who works is at risk of becoming obsolete if their knowledge remains static. Skilled workers here means something different from assembly line workers -- skilled here as in carpenter, metal worker, machinist. These folks still attend practical high schools that provide cross-functional educations, but their equivalent of high school is different from those who intend to pursue careers that require university credentials, vice those that require apprenticeship/journeyman style credentials. Also, industries are structured in Germany in a way do discourage rapid violent change. Employment laws are further structured as such that it is very difficult to fire employees, at least difficult to do so quickly. In many cases, if someone has worked at a company for years, companies may be required to give them months of notice before termination. This all creates an environment of predictability for workers and companies. If I were to make a wild unfounded conjecture, I imagine this encourages managers and owners of companies to work toward the long-growth goal, rather than attempting to realize short-term profits.
Matt Lutze
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