Cash flow analysis/ ROI

Background

Germany presents itself as a critical target for entrepreneurship, although a thorough assessment is essential to establish the preferable niche. The history of entrepreneurship in Germany dates back to 1815, as the entrepreneurs faced the consequences of political challenges, shifting borders, and extensive institutional rearrangements. After 1815, Germany was a taxing environment, and since its unification in 1871, during World War I and post-World War II, innovativeness became a salient characteristic of the German enterprise (Landes et al., 2012). Based on its Geography, Germany is situated in the European continent, comprised of 16 states that are independent regarding their internal governance or law-making procedures. Additionally, Germany is a member of the European Union, embedded on universal goals to enhance peace, provide liberty without borders, enhance economic cohesion and solidarity and steer sustainable development for balanced economic growth. Based on the July 2021 statistics, the population of Germany is estimated to be 79,903,481 characterized by a median age of 47.8 years and a ratio of 0.96 male(s)/female (Index Mundi, 2021).

Based on the general evaluation of the background information regarding Germany's attractiveness for entrepreneurship, it presents a potential opportunity to embrace innovation and creativity, especially in the changing business environment. The potential and huge economic size define the overall attractiveness of Germany's business environment. The vast size of the economy by being a member of the European Union provides an opportunity for extensive exploration through the free entry and exits within the borderless market. Studies confirm that Germany is the biggest winner or beneficiary of the European Union from the single market membership providing access to free transit of capital, goods, and services, and labor across the EU member states (Reuters Staff, 2019). Therefore, establishing a business in Germany provides an opportunity to compete in a free market where every organization has access to labor at the same rate, making the competition a healthy aspect across the region. Additionally, with the highly diversified population classified by gender, age, and race, Germany is a top choice for business, providing an important opportunity for diversification into diverse market segments.

Culture

Organization, perfectionism, and effective planning characterize the German business culture, holding strict adherence to vertical hierarchy in decision-making processes in the organization. Formality and following outlined protocols are essential factors for effective relationship establishment and management in Germany (Santander Trade, 2021). German business culture emphasizes the need for teamwork, communication, and women in business, which serve as a critical aspect for the defining moment in establishing an organization. Additionally, the official language is German, with almost 95% of the people speaking it as their first language. The minority groups are highly underrepresented in Germany, with the Turkish, Polish, Syrian, Romanian, and the unspecified representing 1.8%, 1%. 1%, 1%, and 8.9%, respectively, of the entire population (Index Mundi, 2021).

Thus, doing business in Germany presents a significant opportunity to establish a collaborative organization guided by the principles of teamwork and collaboration to soar higher heights in the corporate world. Tripathy (2018) confirm that teamwork or collaboration in business is a salient approach to achieving goals faster and easier by increasing innovation and diversity of ideas. Germany's team-based culture emphasizes collectivism rather than individualism to establish a perfect business environment characterized by creativity, trust in the organization, effective conflict resolution, and healthy risk-taking. Therefore, establishing a team-oriented business in Germany is a practical approach to thrive the collective culture.

Besides being a collective-oriented culture, establishing a business in Germany is easy due to its effectiveness in communicating mutual vision and aligning teams into joint goals. However, a critical challenge with establishing a business in Germany is the lack of ethnic diversity. Curtis (2019) confirms that when an organization fails to factor in ethnic diversity, dealing with injustices and inequality and incorporates the multiplicity of values and ideas. Therefore, it is likely that the entrepreneur will have a significant challenge implementing change due to possible unanimous resistance from the teams, contributed by a lack of ethnic diversities that steer multiplicity in values. Change management risk will be an imminent danger for the investor, specifically in sectors requiring local recruitment.

Political System

Germany has one of the most stable political systems marked by higher transparency and limited corruption. Germany has a robust legal anti-corruption framework, which criminalizes bribing across sectors, including in commercial practice, public service sectors, among other many (Global Legal Insights (GLI), 2021). The German government provides significant supports inform of grants for investment, research, and development to enhance investment in Germany. Besides, there is a peaceful coexistence in Germany characterized by a non-violent environment and significant political relations with the external business environment among the European Union's member states. Procedures related to foreign investment is that foreign investors are subject to standard conditions similar to the German investors with no administrative controls over foreign direct investment (FDI) except for the regulated industries such as military products, and pharmaceuticals, etc., which are subject to specific controls (Santander Trade, 2021a).

German political system is favorable for foreign direct investment, especially if the choices lie outside the regulated sectors' bracket. The practical guidelines against corruption are significant factors for a start-up to ensure compliance and cost-effective operation of the business. A stable legal framework in support of entrepreneurship is a salient approach to ensure sustainability. Thus, choosing entrepreneurship in Germany is a salient choice to alleviate legal costs for establishment. Ethical business practice steers sustainability in business through reduced cost of operations and increased organizational resilience (Bannerman & Roberts, 2012). A business operating in Germany is safe from corruption-related costs due to practical legal restrictions compelling to ethical practices. Therefore, operating in Germany, the business is likely to experience legal risks, mostly related to attempts at corruption or to gain unfair competition.

Economic System

Germany is the largest economy in Europe and the Fourth largest world economy after the United States, China, and Japan. The German economic system is the 29th freest economy globally and 16th among the 45 European countries, with economic freedom on 72.5 above the regional and global averages (The Heritage Foundation, 2021). The German economic system is defined by a vast contribution of the service sector, followed by production industry, construction, and agriculture rating at 70.4%, 22.9%, 6%, and 0.7%, respectively (Statista, 2021). The federal corporate tax rate stands at 15.8%, with the government upholding higher-level business freedom, characterized by a skilled labor force (The Heritage Foundation, 2021). Germany remains an open economy, being a member of the European Union with 45 preferential trade contracts. The government targets to support investment through subsidies for up to 1% of the GDP for the renewable energy sector.

The openness and vastness of the German economy present a potential competitive risk due to the free entry and exit in the market. Therefore, with the opportunity available equally to all entrepreneurs, the business faces a risk of declining business revenue due to a competitor's action. This element is a salient indicator for the investor to focus on the less ventured sector and strategize to differentiate his venture from other businesses. A salient approach to ensuring competitive advantage is embracing differentiation that guides the business to a government-subsidized and less competitive model. Additionally, the investor will gain an economy of scale due to the anticipated economic growth and already-existing colossal economy.

Legal System

The Judiciary branch of the government heads the legal system of Germany. The businesses are recognizable under the German statutes and regulations focus on inhibiting abuse. In Germany, corruption in business is listed as a criminal act and punishable by the law (Global Legal Insights (GLI), 2021). Under the German legal system, the laws are made to protect the welfare of the businesses; there are no restrictions to foreign direct investment, but the government can review and restrict specific businesses for public order. Analytically, Germany provides a conducive environment for business, marked by protection by the law and limited government restrictions. Under the General Equal Treatment Act of the EU and German law, prohibit bias or discrimination of employees based on religion, race, sex, and identities. To ensure diversity in the organizational hiring process, the investor may encounter compliance risk where a proportion of the applicants are eliminated to factor in diversity issues in employment. As a result, the venture may be subject to legal costs for noncompliance with the regulations.

Summary and Recommendations

Germany is a highly attractive place for business, considering the vast opportunities available for new and existing ventures. Therefore, numerous ventures would ideally thrive in Germany based on the analysis of the facts of the business environment. A necessary form of business to establish in Germany is the renewable energy business. Renewable energy business receives vast government incentives equivalent to 1% of the total GDP. Besides, it would be crucial to initiate a finance consultancy firm, considering that the service industry contributes the largest to the German GDP rating at 70.4%. Besides, with Germany being a member of the EU, investing in a service sector would be a salient approach to acquire labor across the EU member countries for diversity and expansion purposes. The renewable energy and financial service business are preferable for the distinctions mentioned above even though other sectors present adequate opportunities due to the openness of the market.

References