KfW Competition Indicator: German SMEs remain in leading group

• Second place in survey on competitiveness of small and medium-sized enterprises by international comparison
• Future potential rated weaker than that of SMEs in USA, Great Britain and emerging economies
• More innovation needed to keep pace

German SMEs currently regard themselves as being very well equipped to outperform their foreign competitors, but their position on markets in Germany and abroad is under attack. This is the conclusion of the new KfW Competition Indicator, which reflects the assessments made by small and medium-sized companies of their current and future situations as compared to those of their international rivals. The Indicator is based on a survey regarding company and location-specific factors, conducted by KfW Research this May and June among 2,200 internationally operating SMEs in ten important industrialised and emerging countries.

German SMEs rate their ability to compete internationally as almost equal to that of US companies and therefore rank second in the table, with British firms coming third. The current position in the leading group results from excellent and stable local conditions in Germany as well as a positive opinion of the companies' own performance at present. However, the German SMEs take a critical view of their own future potential. Their low level of innovation activities may well reduce their ability to compete internationally in future, given that this factor is a key element in long-term competitiveness. Companies from the USA and Great Britain, but also from emerging market countries such as Brazil and China, perceive their situation as far better in this regard and are ready to win global market shares from German SMEs in the years ahead.

"German SMEs currently score well chiefly for service, quality and short delivery periods. Over time that will not be enough for them to continue competing successfully with foreign companies", says Dr Jörg Zeuner, Chief Economist of KfW Group. "Small and medium-sized enterprises need to focus more strongly on innovative products and services and invest in them more heavily. Only this will enable them to keep up with their competitors from the USA, Great Britain and the emerging economies, which are doing precisely that!" Dr Zeuner adds that otherwise there is a real threat of a permanent decrease in competitiveness. "If we look at Japan we can see what effects this can have. Despite excellent local conditions, the SMEs are unable hold their ground against international competitors when it comes to corporate performance."

The poor competitiveness of Spanish and Italian SMEs that the KfW survey identified is alarming from a European perspective. "Any further decline in their ability to compete would weaken the eurozone even more and could cost internationally operating German SMEs, which are primarily interlinked with other European companies and countries, sales, profit and jobs", the KfW Chief Economist emphasises. He sees a need for action in both countries especially in respect of reducing bureaucracy and restraints on financing. Another worrying aspect are the negative effects of corruption and political instability that are relatively high for developed industrialised countries.

The new KfW Competition Indicator can be downloaded from:

www.kfw.de/wettbewerbsindikator

About the KfW Competition Indicator:

The KfW Competition Indicator is based on a self-assessment by about 2,200 SMEs that are exposed to foreign competition. Companies with between 30 and 500 employees were surveyed in ten industrialised and emerging countries (Germany, France, Spain, Italy, Great Britain, the USA, Russia, China and Brazil). The KfW Competition Indicator will appear at regular intervals and provide information about the international competitiveness of SMEs in Germany and other important economies in Europe and beyond.