Germany – the new mini-superpower
As its economic clout rises, Germany sheds its postwar identity, becoming more assertive in Europe and the world.
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The company's approach to business, and the world, helps explain Germany's rise as a 21st-century economic power. It isn't so much that Roth & Rau are dealing in an industry of tomorrow, though that doesn't hurt. It's the way the firm is doing it.Skip to next paragraph
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Overall, Germany spent $120 billion a year in the 1990s to unify the country and rebuild its infrastructure, training its sights on the global marketplace. That helped it pull away from the rest of the EU. Forty percent of Germany's exports now go to the so-called BRIC countries (Brazil, Russia, India, and China). The closest EU competitor ships less than 10 percent. German machine-tool exports alone spiked 128 percent between 2009 and 2010. The unemployment rate in Germany hit an 18-year low last fall – 7.5 percent.
Yet at the heart of the country's resurgence is something called the Mittelstand, of which Roth & Rau is an archetype. These are the more than 1,500 small- and medium-sized firms spread across the countryside that produce high-end niche products – from tools to sonar to precision parts for race cars. The Mittelstand account for more than half of German exports and 70 percent of its workforce.
Mittelstand characteristics are unique. Many, like Roth & Rau, are or were family owned. They operate on "old-fashioned" values of worker loyalty and core competency. When successful, they usually don't sell off: They plow profits back into the firm. They keep their production and quality control local. Mont Blanc pens, for instance, are sent around the world but produced in German plants.
"The Germans took seriously the idea that global competition will come from the BRICs, and they set about engineering a response," says a Western diplomat. "They started to make things; that's what they do."
The Roth & Rau brain trust, for example, decided early on that it would not sell coated solar wafers as an end product. What the company sells are the machines that make the coating process, and, equally important, the know-how to make the machines work. "We built this out of our former lives," says Silvia Roth, vice president of operations. "It was the right product at the right time – but we have to keep the gap with the Chinese."
By "keeping the gap," Ms. Roth means something central to the firm's survival and typical of the world-beating mittelstand culture. At Roth & Rau, everyone knows the machines they sell to China will be copied. They can't do anything about it. But they also know duplicating the precision-coating process isn't easy, and this has given them an estimated five-year jump on Chinese capability.
"China's strategy is to dominate solar," says Roth, who is something of a pioneer in solar R&D. "They want to be No. 1, and they may be able to, which is why we continue to evolve and develop."
To stay ahead, the company makes the sale of training and technology as important as hardware. It recently invested $10 million to develop a single device that combines the dozen steps in the wafer-coating process.
Innovation remains a central part of the firm's ethos, too. Since some breakthroughs in 2002, there's been no improvement in the science of silicon coatings – just advances in the efficiency of production. "But we think we are on the verge of a breakthrough," says Roth, citing a technology that they believe will boost the efficiency of solar panels from 16 percent to 20 percent.