System Head Germany Plus – Germany's future as a place to do business – and a place to add value

2008

Michael Hüther, Randolf Rodenstock, Burkhard Schwenker, Jürgen R. Thumann (editors)

The study begins by postulating that German companies can gain competitive advantages on the markets of the world primarily by pursuing a strategy of differentiation. In light of this hypothesis, value chains are examined to see which functions are best able to set companies apart and therefore harbor the greatest value-added potential. These key functions are vital as a factor of competition and are mostly extremely knowledge-intensive. Examples include research and development, design, marketing and high-end production. This bundle of high-end functions is referred to in this document as "system head functions".

Our study found that companies with a strong focus on system head functions reap substantial benefits. They are more innovative, more competitive and generally more successful than comparable enterprises that exhibit no special strengths in these disciplines. "System head companies", as we call them, organize highly efficient global value chains. Yet many of them remain fiercely loyal to their home base. In particular, the consciously tend to keep precisely the system head functions we are talking about in Germany. Could this be a pattern that other firms can follow?

The extent to which highly productive links in global value chains can be kept on the ground in Germany is of critical importance to the future of this country. Debate surrounding this issue should command top priority on corporate and economic policy agendas. The study you are reading is intended as food for thought – and a call to action.