Malaysian SMEs advised to emulate success of the German Mittelstand
The Malaysian government will continue to support the growth of domestic companies including the small and medium enterprises (SMEs), in increasing their competencies and capabilities through the available programmes and facilities.
“There is no doubt that quality foreign direct investments (FDI) is important in terms of job creation, transfer of advanced technology, human capital development and growth of domestic companies,” said YB Datuk Ahmad Maslan, Deputy Minister of International Trade and Investment (MITI) in his opening speech during the Southern Region Domestic Investment Seminar 2017 at the Hatten Hotel, Melaka.
“Nonetheless, domestic investors need to take on a more aggressive role in driving the country’s investment agenda to ensure Malaysia continues to enjoy sustainable economic growth in the future.
“The Government will continue to support the growth of domestic companies including the small and medium enterprises (SMEs), in increasing their competencies and capabilities through the available programmes and facilities.
“We hope to see more local players, especially the SMEs to emulate Germany’s Mittelstand or even the mid-sized companies in Japan and Korea, that have found much success in spearheading the economic growth in their respective countries,” added the YB Datuk Ahmad Maslan.
Businesses usually described as Mittelstand are generally private, family run companies that specialize in one product or service. They have a maximum of 499 employees and a maximum of 50 million Euro annual turnover. Mittelstand companies generate approximately 40% of total German export sales.
Many Mittelstand companies also have deep ties with their local communities. A key strength of the Mittelstand is the strong family ties many of them have. Because of this family ownership, these firms tend to follow conservative financing strategies (retained earnings and bank loans) that maintain family control.
The Mittelstand model has brought stability to the German workforce and economic strength to the economy, and it's this dependability and reliability that can be replicated elsewhere, experts say.
According to a study released by the Institut für Mittelstandsforschung (IfM) Bonn, German Mittelstand companies generally operate using the following management model:
– Strategy: Market leader in global niche markets.
– Governance: Family ownership with a long-term focus + external management know-how.
– Operational effectiveness: World class in key processes.
– Management style/work culture: “Sowing and harvesting together.”