THE GERMAN EXPORT ENGINE Harvard Case Solution & Analysis

THE GERMAN EXPORT ENGINE Case Solution

Problem Diagnosis

             This case is basically focused upon the economic history of one of the European countries, Germany. The case starts by highlighting the performance of the country in the 19^th century as well as it highlights the time when the financial crisis had hit the country but its performance still remained strong. The case shows a good historical background of Germany in terms of economic situation and highlights the main factors and the components of its success which had made it a defacto political and an economic leader of Europe. This report analyzes the main driver of the success of the export engine of Germany and also evaluates the response of the country to the Euro zone crisis.

Analysis

             A detailed analysis, assessment and evaluation have been performed for each of these areas in separate sections as follows:

Overview of Germany’s Export Success

             Most of the countries around the world want to fuel their growth with exports however; Germany has been so far successful in meeting this goal. The growth rate of the exports in the year 2010 had been 14.2 %. It was also due to its rapid growth in its export engine due to which the country was able to emerge from the recent financial crisis. The gross domestic product of the country had dropped by -5% in the year 2005 but then again in the year 2009 and 2010 the gross domestic product of Germany had rapidly increased and had grown by 3.5% and 2.5% respectively.

            It was in March, 2011 that the exports of the company had reached to a value of about Euro 100 billion which was basically a record breaking value at that time. At this point, the country was ranked as number fifth in the Global Competitiveness Report for the period of 2010 to 2011 and it was ranked sixteenth in the 2010 World Competitiveness Yearbook of 2010(Stephan, 2013).

Germany as Europe’s Export Leader

             The total contribution of the country in the world merchandise trade is about 9% and Germany is also considered as one of the leaders in the merchandise trade. The company has also maintained the title of the world’s biggest merchandise exporter in Europe in 2009 despite the fact that it had lost this title to China. The export share of Germany has been growing as shown in the appendices.

            The share of the total exports of the company had grown to 47.5% in 2008 from 24.8% in the year 1990. However, this percentage had then reduced to 40.8% in the year 2009 but this decrease in the share of the exports as a percentage of GDP was justifiable since this decrease was equal to the size of the Euro area which was about 14.28%. Nonetheless, after 2010 the percentage of exports of GDP started increasing again.

            On the other hand, if we talk about the growth of the export services of Germany, then the total percentage contributed to the global commercial services by Germany had been around 6.3% in the year 2009. Only United Kingdom and United States have surpassed this percentage by their respective 7% and 14.1% contributions to the global commercial services. Despite this, Germany has also been enjoying current account surpluses which have been rising consistently from 2002 to 2010. As a result, Germany has reached to a level of 5.3% from a level of 2%.......................

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