Professional Documents
Culture Documents
MICROECONOMICS OF COMPETITIVENESS
MIB 28 GRENOBLE GRADUATE SCHOOL OF BUSINESS
CONTENTS
A. COUNTRY ANALYSIS:
1.0 Introduction
1.1 Geography and Demographics ....2
1.2 Education .3
1.3 Economics .......3
1.4 Politics .5
2.0 Export Performance .6
3.0 Issues Facing the Country
3.1 Internal Issues ..7
3.2 External Issues .8
4.0 Sources of Growth ...8
5.0 Government Response ...10
6.0 National Diamond
6.1 Factor Conditions ..11
6.2 Demand Conditions ...11
6.3 Supporting Industries 12
6.4 Firms Strategy, Structure and Rivalry .12
B. CLUSTER ANALYSIS:
1.0 Introduction
1.1 What is Carbon Composite ..14
1.2 Uses of Carbon Composite ..14
2.0 The Global Carbon Market ..17
3.0 Emergence of the German Cluster ...18
4.0 Value Chain .19
5.0 The Carbon Composite Diamond
5.1 Factor Conditions .21
5.2 Related and Supporting Industries ...22
5.3 Firm Strategy ...23
5.4 Demand Conditions 24
C. RECOMMENDATIONS ...............................................................................................................26
D. APPENDIX .........................................................................................................................................28
E. REFERENCES ..29
A. COUNTRY ANALYSIS
1.0 Introduction
The topography of Germany is varied. The area along the Baltic coast is
sandy, with dunes and small hills. Adjacent to the coast are forested
ridges and numerous lakes of the Mecklenburg lake plateau. Around the
capital, Berlin, the relief is less hilly. The southern limit of the lowland
area is formed by a wide zone of fertile loess, reaching from Magdeburg
to the highlands in the South. In the West are a wide rift valley and a
narrow gorge carved by the Rhine River. A group of plateaus and low
mountains, the Black Forest and Odenwald Mountains form the greater part of southern Germany. They
merge gradually with the highest walls of the Bavarian Alps which form the boundary between Germany,
Switzerland, and Austria. The only major lake is Lake, which is shared with Switzerland and Austria. Except
in the extreme south, all of Germany is drained by rivers that empty into the North Sea. The Rhine, with its
two main tributaries, the Mosel and the Main, dominates the western areas; farther east are the Ems, the
Weser, the Elbe, and the Oder. These rivers have estuaries that are important for the ports located there. In
the South, the Danube flows from west to east.
The demography of the Federal Republic of Germany is monitored by the "Statistisches Bundesamt" or the
Federal Statistical Office of Germany. Germany has a population of 82,329,758 (July 2009 est.) with an age
structure of 0-14 years: 13.7%, 15-64 years: 66.1%, 65 years and over: 20.3%. Its population growth rate is -
0.053% (2009 est.) and is currently a matter of concern as it is characterized by zero or declining growth,
with an aging population and smaller cohort of youths. Until the late 1950s, the population was 99%
German; the Danes in Schleswig-Holstein were the sole national minority. The influx of foreigners as "guest
workers" beginning in the late 1950s led to a surge in the number of permanent foreign residents. Germans
constituted 91.5% of the total population in 1998. Of the foreigners in Germany, Turks were by far the
largest group constituting 2.4%, the other 6.1% is made up largely of Greek, Italian, Polish, Russian, Serbo-
Croatian, Spanish ethnic groups. Presently, Germany has a rate of urbanization of 0.1% (2005-2010 est.) and
1
http://www.nationsencyclopedia.com/Europe/Germany.html
the urban population constitutes 74% of the total sum (2005.)2 Germany has a mix of religions among its
population which is comprised of 34% Protestant, 34% Roman Catholic, 3.7% Muslim, and 28.3%
unaffiliated or other. 3
1.2 Education:
Education is of extremely high importance in Germany, and this is exemplified The Basic Law of 1949
which grants every German citizen the right to self-fulfilment. 4In theory, citizens are able to choose the type
of education they wish to pursue and are given access to their preferred occupation or profession. The goal
of educational policy is therefore to provide each citizen with opportunities to grow personally,
professionally, and as a citizen in accordance with his or her abilities and preferences. The government is to
provide equal educational opportunities and quality education for all through a variety of educational
institutions. As of 1999, public expenditure on education was estimated at 4.6% of GDP. With a literacy rate
of 99%, Germany has one of the world's highest levels of education, technological development, and
economic productivity. Since the end of World War II, the number of students entering universities has more
than tripled, and the trade and technical schools are among the best in the world.
1.3 Economics:
The Industrial Revolution began about a century later in Germany than it did in England. Germany did not
exist as a political unit until the latter part of the nineteenth century. When the Zollverein (Toll Union) came
in 1833, it made Germany into a common market by abolishing tolls between the various German
principalities. For several decades until the 1860's there were attempts at imitating the industrialization that
had taken place elsewhere in Europe within Germany. However, these attempts were only moderately
successful. In 1870 the modern German nation was created and thereafter major industries were founded that
led to the full fledged industrialization of Germany.5
Many enterprises were government initiated, government financed, government managed, or government
subsidized. As industry grew and prospered in the nineteenth century, Prussia and other German states
consciously supported all economic development, especially transportation and industry. German banks
played a central role in financing German industry. They also shaped industry wide producer cooperatives,
known as cartels (Konzerne). Various banks formed cartels in different industries. Cartel contracts were
accepted as legal and binding by German courts, although they were regarded to be illegal in Britain and the
United States.
The government played a powerful role in the industrialization of the German Empire founded by Otto Van
Bismarck in 1871 during the period known as the Second Industrial Revolution. It supported not only
heavy industry but also crafts and trades because it wanted to maintain prosperity within the empire as a
whole. In areas where the national government did not intervene, the highly autonomous regional and local
governments supported their own industries as each state aimed to be as self-sufficient as possible. Despite
several highs and lows in prosperity and the depression that marked the first decades of the German Empire,
ultimately the wealth of the empire proved to be immense. German aristocrats, landowners, bankers, and
producers created what can be termed the first German economic miracle, the turn-of-the-century surge in
German industry and commerce at which time bankers, industrialists, mercantilists, the military, and the
monarchy joined forces.6
2
Index Mundi (http://www.indexmundi.com/germany/demographics_profile.html)
3
Wikipedia (http://en.wikipedia.org/wiki/Demographics_of_Germany)
4
Read more: Education - Germany - system http://www.nationsencyclopedia.com/Europe/Germany-EDUCATION.html#ixzz0lAMw8mCE
5
San Jose State University, Dept Of Economics: http://www.sjsu.edu/faculty/watkins/germany.htm
6
http://en.wikipedia.org/wiki/Economic_history_of_Germany
From the prosperity of the empire during the Wilhelmine Era (1890-1914), Germany plunged into World
War I, a war that spawned many of the economic crises that would later destroy the successive Weimar
Republic. British economist John Maynard Keynes denounced the 1919 Treaty of Versailles as ruinous to
German and global prosperity. The war and the treaty were followed by the Great Inflation of the early
1920s that wreaked havoc on Germany's social structure and political stability. During this period of
inflation, the value of the nation's currency, the Papiermark, collapsed from 8.9 per US$1 in 1918 to 4.2
trillion per US$1 by November 1923. Germany experienced hyperinflation in 1923 and chronic high
unemployment throughout the 1920's as a result of the inability of the government to effectively manage the
problems within Germany. When the unemployment rate jumped in 1930 as a result of the onset of the Great
Depression the support for the Weimar Republic drained away. After the brief period of prosperity during
the mid 1920s and the commencement of the Great Depression, the fascist candidate Adolf Hitler
capitalized on the social insurrection in order to win the 1933 election for German Chancellor.
During the Hitler Era (1933-45), the economy developed a hothouse prosperity which was supported with
high government subsidies to those sectors that had a propensity to give Germany military power and
economic independence from the global economy. During the war itself the German economy was sustained
by the exploitation of conquered territories and peoples. With the loss of the war, the country entered into
the period known as Stunde Null ("Zero Hour"), when Germany lay in ruins and the society had to be rebuilt
from scratch.7 Following the World War, The Occupation Authorities in the American, British and French
zones kept the economic policies of the Nazis in place. Price controls, rent controls, wage controls and
extensive general regulation of the economy was implemented. The net result was an economic disaster and
the creation of near-famine conditions. But by the loosening up these controls the past problem of excessive
expansion of the money supply returned. Further, since inflation had been suppressed during the Nazi years
through the use of price control the removal of these price controls also lead to inflation.8
The Germans proudly label their economy a "soziale Marktwirtschaft", or "social market economy," to show
that the system, as it has developed after World War II, has both a material and a social or human
dimension. They stress the importance of the term "market" because after the Nazi experience they wanted
an economy free of state intervention and domination. The only state role in the new West German economy
was to protect the competitive environment from monopolistic or oligopolistic tendenciesincluding its
own. The term "social" is stressed because West Germans wanted an economy that would not only help the
wealthy but also those who might not be able to cope with the strenuous competitive demands of a market
economy. The term "social" was chosen rather than "socialist" to distinguish their system from those in
which the state claimed the right to direct the economy or to intervene. Later came the phase referred to as
the Economic Miracle wherein the West German boom that began in 1950 was truly memorable. The
growth rate of industrial production was 25.0 percent in 1950 and 18.1 percent in 1951. Growth continued at
a high rate for most of the 1950s, despite occasional slowdowns. By 1960 industrial production had risen to
two-and-one-half times the level of 1950 and far beyond any that the Nazis had reached during the 1930s in
all of Germany. GDP rose by two-thirds during the same decade. The number of persons employed rose
from 13.8 million in 1950 to 19.8 million in 1960, and the unemployment rate fell from 10.3 percent to 1.2
percent. Labour also benefited in due course from the boom. Although wage demands and pay increases had
been modest at first, wages and salaries rose over 80 percent between 1949 and 1955, catching up with
growth.9
Today, as Europe's largest economy and second most populous nation (after Russia), Germany is a key
member of the continent's economic, political, and defence organizations. With the advent of the Cold War,
two German states were formed in 1949: the western Federal Republic of Germany (FRG) and the eastern
7
http://en.wikipedia.org/wiki/Economy_of_Nazi_Germany
8
http://www.sjsu.edu/faculty/watkins/germany.htm
9
http://en.wikipedia.org/wiki/Economic_history_of_Germany#The_Social_Market_Economy
German Democratic Republic (GDR). The democratic FRG embedded itself in key Western economic and
security organizations, the EC (which became the EU) and NATO, while the Communist GDR was on the
front line of the Soviet-led Warsaw Pact. The decline of the USSR and the end of the Cold War allowed for
German unification in 1990. Since then, Germany has expended considerable funds to bring Eastern
productivity and wages up to Western standards. In January 1999, Germany and 10 other EU countries
introduced a common European exchange currency, the euro. 10
The German economy - the fifth largest economy in the world in PPP terms and Europe's largest - is a
leading exporter of machinery, vehicles, chemicals, and household equipment and benefits from a highly
skilled labor force. Reforms launched by the government of Chancellor Gerhard Schroeder(1998-2005),
deemed necessary to address chronically high unemployment and low average growth, contributed to strong
growth in 2006 and 2007 and falling unemployment, which in 2008 reached a new post-reunification low of
7.8%. These advances, as well as a government subsidized and reduced working hour scheme, have helped
to explain the relatively modest increase in unemployment during Germany's 2008-09 recession - the
deepest since World War II. GDP grew just over 1% in 2008 and contracted roughly 5% in 2009. Germany
crept out of recession in the second and third quarters of 2009, largely due to rebounding manufacturing
orders and exports - primarily outside the Euro Zone - and relatively steady consumer demand. Germanys
economy will probably recover to about 1.5% growth for the year 2010. However, the relatively strong euro,
tighter credit markets, and an anticipated bump in unemployment could cloud Germany's medium-term
recovery prospects. Stimulus and stabilization efforts initiated in 2008 and 2009 and tax cuts introduced in
Chancellor Angela Merkel's second term will increase Germany's record budget deficit, which is expected to
exceed 5% of GDP in 2010.11
Germany has revenues of about $1.398 trillion, and expenditures of $1.54 trillion (2009 est.) As for its
industries, it is presently among the world's largest and most technologically advanced producers of iron,
steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages,
shipbuilding, and textiles.
1.4 Politics:
Germany has a Federal Republic type of government and is called the Federal Republic of Germany or the
Bundesrepublik Deutschland in German. As of mid 1995, Germany was coming to terms with the recent
unification of its western and eastern portions following four decades of Cold War division which was
achieved in October 1990. In effect, German unification consisted of the incorporation of the German
Democratic Republic (GDR, or East Germany) into the Federal Republic of Germany (FRG, or West
Germany). Thus, rather than reflecting a mix of both states' systems, the unified country largely represented
a continuation of the West German political and economic system. West German chancellor Helmut Kohl
preferred this "fast track" to unification, outlined in Article 23 of the West German Basic Law, or
constitution, because he feared that international circumstances might change and the chance for unification
might be missed.12
The Federal Republic of Germany is a federal State characterised by a polycentric administrative structure, a
co-operative system of federalism and the strong position of the Federal Chancellor as its head.
Its administrative structure consists of three different levels: federal, Land (state), and local. Each level is
legally autonomous and, in principle, independent in fulfilling its constitutionally defined tasks. The Basic
Law distributes the competencies and tasks between the Federal Government and the Lnder (local
government), while the local authorities form independent bodies of self-government which allows them to
10 CIA The World Fact Book (https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html)
11 CIA The World Fact Book (https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html)
12
http://www.germanculture.com.ua/library/facts/bl_politics.htm
regulate all their local affairs under their own responsibility. Germany is composed of 16 Lnder with 13
territorial Lnder and 3 city states (Berlin, Hamburg, Bremen) which are both a Land and a local
authority.
The primary function of the federal government is to prepare political decisions and legislation. Legislative
competencies are divided between federal authorities and the Lnder. Where the Basic Law does not
explicitly give legislative jurisdiction to the federal authorities, the Lnder have such jurisdiction. Key areas
in which the Basic Law (Art. 73) gives jurisdiction to the federal authorities include foreign affairs, defence
and monetary policy. In addition, the federal government can issue so-called competing legislation that
override the Lnder legislation in areas specified in Art. 74 of the Basic Law. This concerns the fields of
waste management, air quality control, noise protection and nuclear energy to name just a few examples.
Finally, the federal authorities have the right to issue framework legislation (Art. 75 Basic Law) in areas
such as nature conservation, landscape management and water resources management.
13
Read more: Foreign trade - Germany http://www.nationsencyclopedia.com/Europe/Germany-FOREIGN-TRADE.html#ixzz0lBY9Ljw2
14
http://www.morgenweb.de/nachrichten/politik/politbarometer/20090509_poba_probleme_und_wirtschaft.html
15
http://www.karlsruhe.ihk.de/produktmarken/standortpolitik/konjunktur/DIHK-Konjunkturberichte_fuer_Deutschland/DIHK-
Wirtschaftslage_in_Deutschland/Wirtschaftslage_und_Erwartungen_Jahresbeginn_2010.jsp
Besides the rising unemployment rate, Germany has to solve the problem to financially support businesses,
especially in the field of exports. Due to the fact that exports are the main driver for economic boom, the
government has to ensure that a credit crunch does not endanger future development.
The final issue concerning Germany internally is the fiscal reform on one side and the budget consolidation
on the other. As shown in the following graph, the statistics from the last years and the forecast for the
coming years show that Germany is generally spending more than they are earning. This is leading to a
budget deficit which has to be limited by a debt
brake. 16 In opposition there is the fiscal reform to
reduce the taxes which has been submitted by
several parties of the German government. The
reason for this reform is the release of the
consumers, who would then have a higher income
and more liquid money to spend, thus supporting the
general sales of businesses, lead to investments and
make the economy grow further. The negative
outcome, however, is that the taxes are one of the
major sources of income for the German
government. Due to the high national debt, Germany
has to achieve high savings. Providing tax reductions
would mean that the requisite amount of money in
order to balance the deficit would be missing.
16
http://www.scribd.com/doc/25366189/Haushaltskonsolidierung-Steuerreform-ist-bezahlbar
17
http://www.finanznachrichten.info/wirtschaft/189-deutsche-wirtschaft-waechst-wieder-die-diw-berlin-konjunkturprognose/
18
http://www.diw.de/de/diw_01.c.100415.de/publikationen_veranstaltungen/daten/konjunkturbarometer/konjunkturbarometer.html
The table below shows the exact changes within the different sectors in comparison to the quarter of the
previous year. Moreover, the second graph illustrates the development of the exports from the year 2005 to
2009.19
'$
"'$
19
http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/DE/Content/Statistiken/Zeitreihen/WirtschaftAktuell/VolkswirtschaftlicheGesa
mtrechnungen/Content100/vgr310j.psml
In terms of technology to support any initiatives, both male and female scientists from Germany are playing
in the Champions League of international research. The number of applications for patents serves as an
indicator of innovative strength: Germany is the leader in this field within Europe. 20 The German
government also has an interesting economic policy to enhance prosperity by laying down the groundwork
for stronger growth and more jobs, to promote efficient and cost-effective economic activity, and to
safeguard competition and transparency in the markets. In contrast, environmental policy focuses first and
foremost on reducing burdens to the environment. Social policy, in turn, strives primarily to promote social
cohesion. A sustainable economic policy also targets the efficient use of energy and raw materials. This
means that factors such as energy consumption, resource consumption and transportation need to be
increasingly decoupled from economic growth. Over the long term, the use of renewable natural resources
must be linked to the capacity of such resources to regenerate. Non-renewable natural resources must be
used sparingly, and anticipated scarcities must be counteracted through innovation.21
Home demand conditions influence the shaping of particular factor conditions. They have an impact on the
pace and direction of innovation and product development. According to Porter, home demand is determined
by three major characteristics: their mixture (the mix of customers needs and wants), their scope and growth
rate, and the mechanisms that transmit domestic preferences to foreign markets. Porter states that a country
can achieve national advantages in an industry or market segment if home demand provides clearer and
earlier signals of demand trends to domestic suppliers than to foreign competitors. Normally, home markets
have a much higher influence on an organization's ability to recognize customers needs than foreign
20
www.auswaertiges-amt.de
21
http://www.bmwi.de/English/Navigation/Technologypolicy/theinformationsociety.html.
markets do.22 German consumers are really sophisticated in terms of environmental protection, renewable
energy and innovation. There has been a constant need in the automobile industry and Wind Energy industry
(turbines) for an alternative raw material that lasts longer, is safe for the environment and serves the
consumers needs.
The most important industries in Germany are the Automobile, Electronic, Engineering and Chemical
industries. Over the last years, there has been a structural change of the industries traditional branches like
steel and textile. There has been a decline due to changes in the consumer market. The current new order is
the Pharmaceutical industry and renewable energy industries.23
22
http://www.themanager.org/models/diamond.htm
23
http://www.tatsachen-ueber-deutschland.de/de/wirtschaft/main-content-06/die-wichtigsten-industriesektoren.html
24
http://gcr.weforum.org/gcr09/
B. CLUSTER ANALYSIS:
1.0 Introduction:
1.1 What is Carbon Composite:
Carbon composite is a generic term that refers to a class synthetic, pure carbon materials composed of
carbon fibers reinforced in an all carbon matrix. First synthesized in the late 1950s,25 this material was
initially used in the aerospace domain. Space shuttle programs quickly adopted its use as ablative material,
replacing graphite as the primary material used in thermal protection. During the 70s carbon composites
gained popularity across several research labs in the US and Europe, and the technology was extensively
developed over the next decade. This was the golden period for carbon composite research, as research and
development efforts focused on multiple aspects from improving the constituent materials to the design and
manufacturing process. This greater understanding of the underlying science and the evolution in fabrication
techniques is what consequently made carbon composite an economically viable material, finding new
application in a number of other industries beyond the aerospace sector.
At the root of the success of carbon composites is the inherent structure of carbon itself. The carbon element
as a solid substance can be manipulated to exhibit a wide range of structures and properties, and all these
variations can be achieved without the addition of other compounds as is done with metal alloys. Carbon can
be amorphous or crystalline in structure, strong, hard and stiff or soft and ductile, can have different
porosities, and can be made impervious to liquids or gas. The use of different manufacturing techniques can
combine these and other properties to create a carbon composite highly tailored to its application. For
example, by manipulating the temperature during fabrication, the resulting reinforcing carbon matrix can
range from amorphous to graphitic. The greater the degree of graphitization, the more thermally conductive
the carbon composite will be, but also the more brittle. The carbon fiber is also highly versatile in conferring
the final properties to the carbon composite. Depending on the orientation of the fiber, the composite
material can be constructed so that different amounts of the load-carrying fibers can be oriented in specific
directions to accommodate the design loads of the final structure. 26 As a result, the carbon fiber composite
can be stronger in a certain direction or equally strong in all directions. The complex interwoven nature of
the fiber can make the composite very difficult to break such that even upon impact of many tons it will only
deform minimally.
aerospace and also military sectors29, still carbon composites have seen widespread use across other
industries, having been cited in the manufacture of solar and photovoltaic modules, wind power
installations, robotics systems, medical technologies, and even jewellery to name a few30.
The application of carbon composite is limited only by imagination and the array of structural and functional
characteristics the material can take on. Among prospective possibilities, the role of carbon composites in
space structures and prosthetic devices may arguably be among the more exciting and promising
applications on the horizon.
29
Chung, Deborah D. L. Carbon Fiber Composites. Boston: Butterworth-Heinemann, 1994. Print.
30
http://www.en.carbon-europe.com/about_CCT.html
31
Prof. Philip M. Parker, Ph.D., The 2006-2011 World Outlook for Carbon and Graphite Fibers (2005), INSEAD ICON Group
International, Inc., San Diego (CA) USA
32
Eiichiro Uchino, Japan Carbon Fiber, The Chemical Daily, October 23, 2008, http://www.icis.com/Articles/2008/10/27/9165932/japanese-
companies-dominate-growing-carbon-fiber-market.html
33
IBID
34
IBID
35
Lucintel, Worldwide Carbon Fiber Competitive Analysis and Leadership Study 2007,
http://www.researchandmarkets.com/reportinfo.asp?report_id=592017&t=t&cat_id= , October 2007
production is somewhat concentratedd in Japan, demand is spread (unequally) arround the globe. As it was
mentioned above, industries other thhan aviation are looking for usage of this multi-functional
m material -
especially the car manufacturing and the wind blade industry. This results in the high
h demand in Europe and
Northern America. Growing demand and few suppliers led BMW to the decision of opening its own carbon
plant in Moses Lake (WA)36 and the US to integrate vertically in order to satisfyy its hunger. In cooperation
with SGL Carbon Group they will prooduce approximately 3.000 metric tons per year.y This is a strategic step
towards more independence within this
t hard-fought market. Further, it will secuure its supply for BMWs
Megacity Vehicle.
Mechanics of the DLR (German Center for Aerospace & Aviation) created the first CFK yaw rudder40 and
some 20 years ago, Airbus opened a German plant becoming one of Europes biggest Centers for Carbon
Composite handling.41
A composite material is made when two or more materials are combined together to make a new and
different material. Researchers take individual materials, one a reinforcing material for strength and
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stiffness, and the other glue or a binding material, such as a resin, to surround and hold the reinforcement in
place. When the reinforcement material and the glue are combined, they make a new material. This new
material usually is not only strong and resistant to extreme temperatures, but can be much lighter that the
existing materials.
Graphite composite is composed of carbon fibers which are very strong, and to make a carbon composite
from this material the researchers combine it with polymer resin. Depending on the properties of the
particular polymer, the properties of the composite will be determined. One of the properties is maximum
temperature at which the composite can be used; the second property determines the strength of the
material.42
The Graphite processing requires substantial investment and technical knowledge, and there are not many
companies at this stage. In comparison, there is a much higher number of companies at the third and fourth
stages, when the composites are made. Further, the companies that focus their work on the last stages of the
process are normally relatively small companies, and those companies that focus on the final stages and
produce the carbon fiber are larger.It is also important to note that after the second part of the process, the
synthesis, the nano tubes can also be used in: electrical circuits, as paper batteries, in solar cells, in ultra
capacitors, and in many other modern applications43.
In the Germany, carbon cluster we find companies that specialized in every part of the transformation
process, universities conducting research in parallel to companies and the development of new and more
complicated products. Interestingly, there is a great level of integration of the different stages of the value
42
Fiber-Reinforced Composites: Materials, Manufacturing, and Design, Third Edition (Dekker Mechanical Engineering), P.K. Mallick 2010
43
http://www.understandingnano.com/nanotubes-carbon.html for more applications for nanotubes
Graphite:
According to the U.S. Geological Surrvey, Germany is lacking of any Graphite minning industry44, thus
making it difficult for companies to get
g sufficient raw material for development.
Infrastructure:
Due to its central location in Europee, Germany is one of the most developed countries with regard to its
infrastructure. This is reflected in most
m of the transportation networks within thhe country that counts over
550 airports, over 40,000 km in railways, and over 600,000 km of paved roadwayss45.
Germany is a social market economyy. This means that the state guarantees the free
f entry of entrepreneurs
and at the same time undertakes the task
t of maintaining the social balance. The German
G government seeks a
market economy based on the divisioon of labor and where the prices of goods annd services are determined
by the free market, and by extension making
m a fairer and equal economy.46
44
http://minerals.usgs.gov/minerals/pubs/commoddity/graphite/graphmcs06.pdf
45
https://www.cia.gov/library/publications/the-woorld-factbook/geos/gm.html
46
http://www.tatsachen-ueber-deutschland.de/en/eeconomy/main-content-06/economic-system.html
Entrepreneurship:
Germany has a total entrepreneurial activity of 5.1% and a ranking of 24th in the world,47 which may be
indicative of the absence of appropriate preparation for the new entrepreneurs. Furthermore, the low
percentage of entrepreneurship in the country may be attributed to the lack of ambition of students.
The entrepreneurial mindset is followed by a cultural disapproval and by economic restrictions through high
corporate taxes and high social security standards. On average, revenue from corporations is about 2%,
while unemployed persons may receive 60% of their salary for as long as 3 years. This does not encourage
entrepreneurial spirit in Germany since the residents can make more money from the social welfare system
than by owning their own company.
The creation of a company in the country is relatively straight forward and with a complete lack of
bureaucracy, normal companies operate with limited liability (Gesellschaft mit beschrnkter Haftung
(GmbH)). Under German law, the GmbH, has to have a minimum funding of 25.000 Euros that has to be
paid to the country in a minimum of 3 years, this would potentially enable the company to start with a 1
Euros capital.48
The customers:
Last but not least, the final part of the value chain of this cluster is the customers. As mentioned earlier, the
application of this technology varies from nanotechnology, to wind energy, and airplane construction. The
great advantage of this cluster is that it has highly sophisticated customers. These customers are interested in
the use of this technology in order to gain competitive advantage in their own markets. An example from the
article in composites world, the BMW Group (the final part of the value chain of composites) has a joint
venture with SGL Automotive Carbon Fibers (the starting part of the value chain).51 They are working to
develop a car chassis completely out of carbon composites which will in turn make the car even lighter and
reduce energy consumption.
47
Global entrepreneur Monitor special report : A global perspective on Entrepreneurship Education and Training, 2010
48
http://bundesrecht.juris.de/gmbhg/ Law relating to companies with limited liability
49
Technische Universitt Mnchen Technical University of Munich www.tum.de
50
University of Bayreuth www.uni-bayreuth.de
51
http://www.compositesworld.com/news/sgl-automotive-carbon-fibers-expands-on-bmw-plans Carbon Composites world.
Although this report focuses on Germany in general, the most obvious indicators of a Carbon composite
cluster may emerge in Southern Germany and more precisely in the area around the city of Augsburg in the
district of Swabia, in Bavaria. As mentioned above there are two main drivers for a possible formation of a
cluster. First is the Bavarian Cluster Campaign,52 which uses as its role models the Bavarian Ministry of
Economic Affairs, Infrastructure, Transport and Technology mentions the Silicon Valley (IT) or Oxford
(Biotech). The prime goal of the 2006 formed initiative is to enhance the ability of the states companies to
compete in globalized markets. Particularly, SMEs lack of access to research institutions and therefore this
campaign are supposed to tighten this collaboration. Hence the Ministry identified 19 key sectors53 (see
figure). The Advanced Materials Cluster plays a central role. Among this cluster the Ministry counts some
4000 companies researching and working on the following areas: Metal-based light-gauge materials, fiber
composites, creating and processing polymers, creating materials used in polymer-based electronics, high-
performance technical-use ceramics and glass, technical-use textiles and functionally-treated surfaces54.
Thus the identified Carbon
Composite Cluster is a part of
the Bavarian Advanced
Materials Cluster.
Second there is Carbon
Composites e.V. (CCeV).
Founded in March 2007 by 10
renowned companies and
research institutions in
Southern Germany, since then
it has been strongly
expanding55. According to
Michael Porters prerequisites
for relating & supporting
industries56 this association
boosts its 93 members on
topics like research and
innovation. Within CCeV
there are many different types
of companies working in
every field of the Carbon fibre
or composite Value Chain. These range from carbon fibre producing companies (SGL Group)57, to
Machinery & Equipment producing (M&E) companies, to end customers like EADS Eurocopter or AUDI.
In between there are research institutions like Fraunhofer Gesellschaft and KIT (Karlsruhe Institute of
52
Bavarias Cluster Campaign Networking Success , ed. Martin Zeil, Katja Hessel (Bavarian Ministry of Economic Affairs, Infrastructure,
Transport and Technology, May 2009) p. 4 et sqq.
53
IBID
54
IBID
55
Carbon Composites e.V., Herzlich Willkommen bei Carbon Composites e.V., Carbon Composites e.V. web Site, http://carbon-
composites.eu/ , accessed April 2010.
56
Michael E. Porter, On Competition, updated and expanded edition (Boston, MA: Harvard Business School Publishing, 2008), p.267
57
Carbon Composites e.V., Mitglieder, Carbon Composites e.V. Web Site, http://carbon-
composites.eu/module.php?link=TZ2lGdjF2Xx8FblZXZM1kJw0DZJJWZ3ZCN4ITPlZXa0NWQHJlJxkTPlZXa0NWQHxkJx0DblZXZM1kJ2
0DZJ5kJx0TZtFmb02 , accessed April 2010.
Technology) as well as higher education institutions like the Universities of Augsburg, Bayreuth, Stuttgart
and the Technical Universities of Munich and Dresden. From governmental side, there is the city of
Augsburg and the borough of Meitingen.
Bavarian Advanced Materials
Cluster and CCeV operate as the two
umbrella organizations helping,
coordinating and connecting its
member companies and institutions.
Thus they are able to shorten lines of
communication, guarantee quick and
constant flows of information and
allocate an ongoing exchange of
ideas and innovations. One factor of
competitive advantage is that all of
these home-based, related and
supporting industries provide in
innovation and up-grading an
advantage based on close working
relationships.
As mentioned before, the rivalry within the cluster has to be a non zero sum competition. As such, all
companies have to compete in a way where the differentiator is the key to success, rather than the prices.
Adding to this requisite, to make this process more efficient, there has to be a high integration within the
companies and their specialization occurring in the different parts of the value chain. In this cluster we can
find the required synergy of the companies, as seen in the following cluster map.
We will take the illustration to explain the synergy that is occurring, for example, in the automotive industry.
First, there is customer who, in order to improve characteristic of his product, orders a new type of breaks or
a component made from lightweight material that will have the same mechanical and resistance qualities.
Then, this customer will command this new component from the molding companies. The molding
manufactures of carbon based products, makes the plate, tube, or profile according to the customer
specification of size58. The product is then molded from the raw plates provided from carbon fiber
manufactures and carbon engineering plants. These plants sell the plate with the mechanical specification
required by the customer. To produce the carbon fiber and fiber plates, there is a required know-how and
research that is made by the companies in conjunction with research institutions and universities. This is a
machine intensive process and requires state of the art machinery, which are supplied by local engineering
companies.
58
http://www.flash-en.carbon-composite.com
To produce the carbon fiber and fiber plates, there is a required know-how and research that is made by the
companies in conjunction with research institutions and universities. This is a machine intensive process and
therefore requires state of the art machinery which is supplied from local engineering companies.
This element of the Porter Diamond may be the most elementary in regards to the German Carbon
Composites Cluster. According to Porter60 a nations companies gain competitive advantage if domestic
buyers are the worlds most sophisticated and demanding buyers for the product or service. () They
pressure companies to meet high standards; () demand conditions provide advantages by forcing
companies to respond to tough challenges. Two German industries may be regarded as the worlds most
demanding and sophisticated in regard to Carbon Composite processing, i.e. automotive and renewable
energy. A distinction between sophisticated demand and sophisticated buyers needs to be addressed. While
players in the aerospace industry are very quality-conscious, they are less concerned with low manufacturing
costs. However, in the car industry low manufacturing costs are crucial. Furthermore, worldwide concern
about CO2 emissions puts high pressure on the industry to manufacture environmentally friendly cars. The
tendency towards e-cars with heavy lithium battery engines requires automobiles to be as light as possible in
order to drive long distances and achieve high speed.61 In
2007, 5.7 million cars were produced in Germany.62 This
figure does not only indicate the strength of the German
automotive industry, but also the enormous prospects for
the German CFK cluster if they succeed in making carbon
composites suitable for line production. Though BMW
may soon be ahead of the other big car manufacturers due
to its Joint Venture with SGL, they also invest and research
in the field of Carbon Composites. Audis Space Frame
Technology is based on Carbon Composites components
and is announced to soon be integrated into serial
production.63 With the automotive industry holding the
most significant position in Germanys economy, their
need turns into national concern. Hence, with the
automotive industry behind them, the government and scientific institutions will be tempted to encourage
Carbon Composites technology development.
Besides its strong automotive industry, Germany is world leader in the sustainable energy revolution. With
an ambitious goal to reduce CO2 emissions by 270 million metric tons, the renewable energy sector in
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Germany is growing.64 Objectives to build offshore wind power stations request Carbon Composites because
metals and fiber glasses do not withstand those forces dominating at sea.65
These two industries, therefore, represent highly sophisticated buyer groups pressuring Carbon Composites
companies in a collaborative way to achieve a breakthrough in material handling. Their own industrys
sophistication is the engine behind current cluster developments and the raising of Carbon Composites
significance for mass production.
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12
C. RECOMMENDATIONS:
The conduction of the country and carbon cluster analysis for Germany has revealed that the country holds
many characteristics favoring the clusters success. The initial assumption that the cluster was nonexistent
has proven to be wrong. Though the cluster is in its fledging stages, there is no doubt about the clusters
actuality. In fact, research has shown that especially Southern Germany is highly concerned with the
development of the Carbon Composites Cluster. With the state of Bavaria putting the greatest efforts into
facilitating the clusters emergence, it will be interesting to see whether CFK will finally become rather a
Bavarian cluster than a German.
Concerning the country environment, Germany provides many positive factor conditions for the Carbon
cluster. Though the country lacks own graphite deposits, it provides the worlds most sophisticated
infrastructure and a high educated workforce. Further, it has a long well respected history in material
handling and processing. In fact, though Germany possesses no steel deposits either, it is one of the worlds
leading countries in the steel processing industry. The skills German businesses have developed here may
assist the Carbon industry to also achieve mass production levels. The Chemistry as well as Machinery &
Equipment industries also provide for the opportunity of fast growth. Chemical products play a major role in
handing graphite and carbon composites and carbon fibers require special machinery, a field Germany is
holding a world leading position. The aerospace industry, for a long time the only user and researcher of
Carbon, is well settled in Germany, providing for knowledge as well as demand. Further, some universities
have been identified as supporting research in the field of Carbon composites. Recently, the global concern
about CO2 emissions has led car manufacturers and renewable energy firms become interested in this
exceptional material. Both industries are world leading, very innovative, demanding and sophisticated.
Especially the car industry holds an economic position in Germany that is one of a kind. Both, BMW and
Audi believe in the materials value proposition. Their interest and efforts in carbon composites offer the
cluster new dimensions. With pressure for better and less cost intensive production ways, the Carbon
industry has good chances to get higher attention by the government.
Though all of these factors make the cluster sound like a true success story, there are still some challenges to
take. First of all, the ambition is remarkably high but there is no proof that Carbon specialists will really find
a way to use the material for line production. Without such achievement, the cluster will remain minor in
comparison to that of the already much farther developed Japanese. However, if there is a method, then it is
very likely that the consolidated forces of Carbon specialists and buyer industries will find the solution.
Important to notice, in order to do so collaboration is inevitable. BMWs joint venture with SGL Carbon is
going into the right direction but, arguably, not far enough. Under control of Ms. Klatten research and
findings are only for BMW use. Thus, the car manufacturer focuses too narrowly on competing against
players in its own industry. Instead, they should have identified the benefits of collaborative research with,
for example, Audi and Daimler in order to strengthen both, the German automotive industry and, in the
mean time, Germanys Carbon cluster. Unfortunately, this is not the case. Audi, member of the Carbon
Composites e.V. association, goes its own way, apparently leading to opportunity costs for both companies.
Still, SGLs move to build the Joint Ventures plant outside the cluster was strategically clever as it
guarantees them easier access to raw materials.
Another challenge is to attract government and universities to put higher efforts into the clusters
development. While it is remarkable that initiatives came and predominantly come from the private sector,
the German government has tools to facilitate for example information exchange and/or to decrease some
R&D risks by providing funds to the industry. Rather unlikely but beneficial would be to reduce the tax
burden and/or to allow for more DFI and thereby raise the clusters attractiveness. It may also support
promotion of the cluster and create higher awareness amongst industries. More government support would
also lead to higher awareness in the whole population. The more people know about the opportunities
Carbon incorporates, the more people may be interested to seek a career in the field. This trend would
encourage universities to enhance their efforts in researching for and developing the Carbon Composite
Cluster.
APPENDIX:
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