Domestic Challenges Plague Various German Businesses - German Businesses Encounter Multitude of Self-Generated Issues
Competitive pressure, red tape, and high energy bills are causing a financial crisis for many companies. Even the shareholder protection association DSW recognizes its own flaws. According to them, businesses have been snoozing through the past two decades, with outdated structures, bloated administrations, and weaker innovation being major reasons for Germany's economic woes.
Despite constant discussion about high energy prices, they only had a minor impact on the companies analyzed in a DSW and Advyce & Company study, which focused on 100 stock market companies. The study's author, Martin Geißler, suggests that while Corona and the Ukraine war have presented challenges, many problems can be traced back to companies failing to adapt to change.
Many businesses have outdated organizational structures with bloated administrations and inefficient, digitally underdeveloped processes. This increases structural costs, particularly affecting banks and the pharmaceutical industry. Additionally, research and development investment is lagging behind the global average.
High salaries, particularly in banking, contribute to the problem. On the other hand, IT companies manage to reduce costs through digitization. Internal bureaucracy is another area requiring attention, according to DSW CEO Marc Tüngler.
The study considered factors such as energy costs, international competition, skills shortages, regulation, and wage and structural costs, and how they impact the transformation needs of 100 HDAX-listed companies, including DAX, MDax, and TecDax companies.
High wage and structural costs are the biggest challenges for companies, followed closely by bureaucracy. While high energy costs affect some industries, such as the chemical and raw materials sectors, their impact is marginal compared to other cost factors for the majority of the German economy.
However, the study reveals significant potential. Germany's strong foundation in trained specialists and highly specialized companies in various industries can be leveraged. The government needs to reduce labor costs, support industries in their transformations, and lower energy costs to unleash this potential.
According to the enrichment data, additional challenges include:
- High energy costs due to Germany's reliance on natural gas and the effects of Russia's war in Ukraine.
- Burdensome regulations, particularly related to the Green Transformation program, which has slowed the transition to renewable energy sources.
- Demographic challenges, with the retirement of a significant portion of the workforce within the next 15 years potentially creating a skills gap.
- Difficulties for traditional German automotive companies in transitioning to electric vehicles due to high energy costs and regulatory pressures.
- Inadequate infrastructure to meet energy demands, resulting in high electricity prices.
The stock market performance of many HDAX-listed companies, including DAX, MDax, and TecDax, was analyzed in the study, considering factors like energy costs and bureaucracy. Despite high energy costs being a challenge for some industries, particularly the chemical and raw materials sectors, their impact is marginal compared to other cost factors for the majority of the German economy in the stock market.
