99 percent of the companies in Germany are medium-sized.
It is not for nothing that small and medium-sized enterprises are considered to be the heart of the German economy. The spectrum of their business fields ranges from small craft enterprises and start-ups to the “hidden champions” who are world market leaders in their sector. Today, not only large corporations, but also medium-sized businesses are subject to strong digitization pressure.
Under the conditions of digital transformation, many medium-sized companies have to rethink their business models and their positioning on the market from a strategic point of view and in some cases reinvent themselves.
The current economic environment in which SMEs operate can be summarized as follows: competitive pressure has increased considerably in recent years as a result of globalization and digitization. The resulting changes in the market and competition already began in the 1990s. Since the turn of the millennium they have gained considerable momentum.
3 Critical factors for medium-sized companies
Due to the ever better networking of global markets and the rapid technical progress, the competitive situation for a production country like Germany is becoming increasingly critical. Earlier geographical advantages and unique selling points are dwindling and competition from low-wage countries is increasing.
While people like to dream in old memories about technological leadership, quality leadership and export records, they ignore essential social and economic changes. But the ignorance of digital progress does not stop it.
International Competition Regardless of whether companies are active in the B2B or B2C sector: Today, their potential customers are no longer dependent on local or indigenous producers. The Internet has made it possible for them to purchase products and services almost anywhere in the world. As a result, competition has also taken on international or even global dimensions for many medium-sized companies.
The Chinese market is exerting massive pressure on the B2C markets via mobile applications such as Wish or Aliexpress, and as soon as Alibaba has built the European logistics centre, the last shortcoming in Far Eastern trade, the long delivery time, is eliminated.
Price and quality pressure through comparable products An important effect of the commercial Internet is that products and services have become comparable through their virtual presentation. Today, informed customers can choose which provider to choose from a very wide range of options.
Among other things, companies are exposed to strong price pressure as a result. The Internet also offers the possibility of comprehensive service and quality comparisons. Products without a clear USP will be subject to price pressure.
Shortage of skilled workers and demographic change One of the biggest challenges for companies today is to present themselves to applicants and their current employees as an attractive employer. Demographic change is fundamentally changing the labour market. Even today, certain industries are having difficulty finding suitable personnel.
In addition, medium-sized companies compete on the labour market with large, often international companies that offer their employees location and career advantages as well as strong employer brands, at least at first glance.