Biotechnology in Germany

Multinational Business Management

Lucie Avenel – Marie-Claire Burgat – Shiho Kamei - Wilson KaoCelia Lao – Alain Truche – Adrian Tsai – Jeff Shusterich

Macroeconomic environment of Germany

Political structureParliamentary democratic federal

republic: Federal Republic of Germany.Federal President of Germany: Joachim

Gauck.Chancellor: Angela Merkel.Major political Parties: Coalition of the

Christian Democratic Union (CDU), the Christian Social Union (CSU); and the Free Democratic Party (FDP).

Political Attacks on Foreign Companies and Industries. Ex: Boeing and Airbus.

Legal SystemConstitution: Basic Law for 16 states.Five codes at the core system, civil,

civil procedure, commercial, criminal, and criminal procedure.

As a part of the European Union, Germany must obey all the laws set in place by that organization.

Political and legal structure

The politic and legal environment basically is riskless.

The low grades for Labor Flexibility is due to the employment and labor laws are strongly employee based, and commonly referred to as “employee protection law”

Germany’s economic and financial variables The GDP of 2012 is 0,6%, but Germany remains the

richest country of Europe and the 4th richest of the world in terms of GDP (PPP)

The most dynamic country as far as finance in concerned: the European Central Bank is in Frankfurt

Prices level

Sources: www.tradingeconomics.com , The Economics magazine

Germany’s economic and financial variables During the last 10 years the ratio between wages in Germany

and China countries went from 10–1 to 4-1, 2 reasons: Chinese workers wages are growing German government decided to decrease the minimum wage

allowed because of the increase of unemployment rate

And transportation costs are low if you want to enter the European market because Germany is geographically in the center of European Union

Global Times

• Situation: Cross-boarder with 9 countries• Distribution: Hambourg, Berlin, Munich, cities along the Ruhr

Social and cultural situation

Population 81 millions inhabitants - 14th most populous country in the globe

The fertility rate of 1.4 children per mother ⇒ estimated decline of population by about 4 million Growing aging population ⇒ shortage of skilled workers

91% German- Majority of immigrants are from Turkey- Italians, Greeks and the Serbs

Middle class society

People characteristics One of the highest level of education- Number of youths entering universities has more than tripled

since 1950- Trade and technical schools are among the world's best

Attitudes- Hard workers- Planning- Formality in works- Work and personal lives are rigidly divided

Culture Dimensions- Low Context Communication- High Power Distance- Individualism- High Uncertainty Avoidance- Achievement

Open to new technologies and product

Technology HIGH INVESTMENT RESEARCH AND DEVELOPMENT:

• Increase its investment in research and development: In 2010, public and private sectors spent a record 70 billion euros, amounting to 2.82 percent of GDP

• Employ 506 000 persons in R&D and 299 000 scientists & scholars

• Various forms of research locations: universities, companies and institutions run by federal or state authorities.

• Several research areas: Environment and Energy / Health and Safety / Interdisciplinary Technologies / Communication and Mobility / Future and Society

• Technology centers: Potsdam, Berlin, Franckfurt, Dusseldorf 

Technology (cont.)DENSE, MODERN AND POLYCENTRIC TRANSPORT NETWORK Due to its central position in Europe Largest German airports are Frankfurt Airport and Munich

Airport.

“MADE IN GERMANY” “Germany is the most inventive country in terms of patents

after the United States and Japan” based on the OECD’s 2009 Science, Technology and Industry Scoreboard

German innovations have shaped today’s world and promoted progress: exemples…

GREEN TECHNOLOGIES Leadership position in the field of sustainable production

technologies.  "Green Production Technologies" campaign

Porter’s Diamond Model:Biotechnology in Germany

What is Biotechnology ?Biotechnology“The application of science and technology to living organisms, as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services.”

Green Biotechnology: Agriculture• Plant and food

Red Biotechnology: Medicine• Medical and pharmaceutical for humans and animals

White Biotechnology: Industry• Industrial manufacture with biotechnical procedures, environmental

protection productive processes

Source: http://www.marketresearch.com/MarketLine-v3883/Biotechnology-Germany-6555038/

Industry Structure, Rivalry and Firm StrategyMarket Size

◦Germany biotech market had total revenue of 4,465 million in 2010, a compound annual growth of 1% between 2006 and 2010

◦Medical/healthcare sales provided most lucrative, totaling 3,138 million, equaling 70% of total biotech market in 2010

◦Anticipates CAGR 7% for five year period, and drive market to 6,260 million by end of 2015

Industry Structure, Rivalry and Firm Strategy

46.50%

4.50%10.40%

34.70%

3.90%

Main areas of activity in dedicated biotechnology companies

health/medicineagricultural biotechnologyindustrial biotechnologynon-specific servicesbioinformatics

Market Segmentation

Industry Structure, Rivalry and Firm Strategy

2006 2007 2008 2009 20100

100

200

300

400

500

600

495 496 501531 538

5691 92

114 125

Number of ded-icated biotech-nology compa-niesNumber of other biotechnology-active companies

source: biotechnologie.de

Number of Biotech companies

Industry Structure, Rivalry and Firm Strategy

Research Develop-ment

Validation Sales Total Other coun-tries

with research insti-tutes

712 315 180 6 1112 228

with biotech com-panies

214 193 21 141 551 178

with industrial part-ners

199 204 25 340 732 343

with other organi-zations

22 21 34 26 103 20

100

500

900

Cooperations of dedicated biotechnology companies along

the value chain

source: biotechnologie.de

Related and supporting industriesIntegrated Clusters

◦ As many as 25 industry relevant clusters of various sizes; largest are around Munich, Berlin, the Rhine Neckar triangle , Frankfurt and Cologne.

◦ Bioregions provide access to an outstanding scientific environment, excellent infrastructure, ready access to capital, experienced management, and highly trained personnel.

Examples◦ BioM (Bavaria) manages the biggest cluster in

Germany◦ Health-Capital (Berlin): cooperation between

industry, politics, and research

Related and supporting industries (cont.)Research and Education

◦63 Universities, 26 Technical Colleges, 104 non-academic research institutes, 9 sites for state departmental research

◦R&D expenditure in 2010: - Ranked 3rd out of 25 for total expenditures (OECD)- Ranked 1st for expenditures by the public sector

(OECD)

Supporting industries◦Pharmaceutical: 63% of revenues from

exports◦Medical devices: 62.5% of revenues from

exports

Related and supporting industries (cont.)Financing and Capital: most of funding

sources come from venture capital and grants

Source: company annual reports

Multinational Business ActivityBoehringer-Ingelheim (Pharmaceutical)

◦Net Sales: 32% in Europe, 46% in Americas, and 22% in Asia, Australia and Africa.

MediGene ◦operates in Europe and U.S.◦First biotech company in Germany to have

revenues from marketed productsMorphosys

◦97% of Revenue comes from outside of Germany

Government - Programs BioRegio competition of the Federal Ministry of

Education and Research (BMBF) (1995)◦ Provide impetus

BioIndustry 2021◦ Initiative that supports strategic partnerships between

science and industry Health and Research Framework Program of the

Federal Government (investment of about 5.5 billion Euros)

KMU-innovativ initiative◦ Aims to provide technology transfer

Go-Bio measure◦ Aimed at validation and start-ups

BioPharma competition

Government – Intellectual Property SIGNO: Protection of ideas for commercial use

◦ Helps universities, small and medium-sized enterprises, people intending to set up in business and inventors to secure and commercialize their innovative ideas

◦ It supports 24 patent and commercialization agencies Sample Agreements for Research and Development

Cooperation◦ Help with the drafting of joint projects involving

companies and universities or research institutions◦ Contribute towards reducing legal and administrative

expense associated with cooperation projects Law on Improved Enforcement of Intellectual

Property Rights◦ Facilitates the battle against product piracy and

strengthens intellectual property rights.

GovernmentPolicy Environment

GovernmentPolicy Environment

Demand ConditionsRed biotechnology / medical

◦Large and aging population: GDP health spending, Germany is 4th (11.6%)

◦ Internal market of highly sophisticated wealthy consumers

◦Life expectancy: from 81,5 years in 2000 to 82,7 years in 2009

◦Increase of chronic illness that needs medications

◦Favorable healthcare system◦Central position of Germany in Europe

Demand ConditionsGreen Biotechnology / Agriculture

◦Important consumption of biotech animal feed

◦Development of Genetically Modified Food in companies

White Biotechnology- Concern towards environment- Development of green energy- Advance in green technology in

Germany

Factor endowmentCommunication

infrastructure Long established/start-up companies.

Industry Government and Research are pulling in one direction

Medical biotech company revenueincreased by nearly 20 percent

for the period 2007 through 2010.

25 Industry Clusters: Lab to Market Place: Environmental stimulation – support and competition among clusters on regional, governmental and industrial expertise.

Swiss IMD's second best Infrastructure

Bio-regions

Factor endowmentSkilled labor & technology know-

how

Establishment of broad research platforms: Universities/Organizations with strong international connected growth searching for investors.

1.02B in research expenditure

343 Universities and 330 Research Institutes cooperating with companies for new products

Public R&D: 5.5B – Health Research Framework: Ex. 1000 Biotech Applications

50 National Universities: Life Science/Bio Med Engineers

48,000 Natural Science and Mathematics; 21,000 Medicine Students – with 9,000 obtaining biology degrees; 5,300 in Chemistry, 2,300 in Pharmacy

Germany has proportionally more natural sciences graduates than the US or Japan.

World Class Education System with 84% higher education over OECD 64% & Dual Degree System.

Labor Cost

Technology know-how Best Patent Record in Europe - 2nd to US globally; European leader in patents: 100

over UK and France; 4th Leading Nation in Triadic Patents Molecular Diagnostics: Largest IVD Market in Europe; Regenerative Therapies; 1B

in Heart Research Sector Comparatively not the best technological know-how in the industry (bottom 7)