Markets Germany Magazine 3/24 | Location Advantage
North, South, East and West - Germany's Border Regions
Germany borders more countries than any other EU member. That’s an economic strength that can offer special advantages to international companies wanting to work with Germany’s nearest trading partners.
Dec 10, 2024
When employees of the financial services provider ODDO BHF travel by train from company headquarters in Paris to Saarbrücken in southwest Germany, it takes them just under two hours. The journey from the German financial capital Frankfurt to Saarbrücken isn’t much longer. That’s one of the reasons why in 2021, the financial group opened a new service center in Saarbrücken near the Franco-German border.
This article was published in issue 3-2024 of the Markets Germany Magazine. Read more articles of this issue here
3,767 kilometers is the length of the border between Germany and its nine neighboring countries: Denmark to the north, Poland and the Czech Republic to the east, Austria and Switzerland to the south, France, Luxembourg, Belgium and the Netherlands to the west. Germany has more direct neighbors than any other country in Europe. The borderland regions (Grenzregionen) are attractive locations for foreign companies for three good reasons.
Strong Sectors
- in western Germany: mechanical engineering, plastics and chemicals, metal and steal, financials
- in northern G: renewable energies, maritime economy, digital economy, life sciences
- in east G: automotive industry, microelectronics, information technology, renewable energies
- in southern G: mechanical engineering, automotive industry, electrical engineering, chemicals and pharmaceuticals
The first is that international companies setting up a location in the Grenzregionen will find it convenient to offer their products and services in the markets of those neighboring countries as well as in Germany. Conversely, they can source preliminary products in the adjoining countries and in Germany. Proximity to no less than nine neighboring economies, with excellent logistics routes on all sides, simplifies expansion from Germany into the rest of Europe.
“This is highly attractive for companies in many sectors,” said Tobias Chilla, professor of geography at the Friedrich-Alexander-University Erlangen-Nuremberg. “For some industries, customers on the other side of the border are the decisive argument, for others it is the favorable purchase conditions of primary products.” Many companies expanding across borders opt for locations—for example, Polish companies setting up in eastern Germany—close to their home base. In day-to-day business, such proximity is a great advantage and reduces risk, enabling efficient logistics between the locations. In some cases, companies even share resources such as machines or vehicles. The short commute between the company’s headquarters and the subsidiary also saves employees travel time, costs and stress. Language can also be a deciding factor for companies from the German-speaking countries of Austria and Switzerland. Austrian and Swiss companies wanting to tap into the Polish market can benefit from having a location in the German-Polish border region where German is a lingua franca.
Handy for Scandis: Consid
The Swedish IT service provider Consid opened a German office in Hamburg at the beginning of 2023. The company develops digital transformation solutions and digital business models for German clients including Norddeutsche Landesbank in Hanover and the online retailer Otto. The proximity of the northern German city to the Scandinavian countries was a decisive factor in the choice of location.
“The business culture in Hamburg is comparable to that in northern Europe due to its proximity to Scandinavia,” says Lars Napret, regional manager for northern Germany. “A similar understanding of values facilitates business cooperation.” Consid is one of a cohort of Swedish companies coming to Hamburg. “More and more Swedish companies are using the city as a starting point to enter the German market,” Napret enthuses. “Some even describe Hamburg as the southernmost Scandinavian city.”
Due to its borderland location, the travel time between Hamburg and Consid’s company locations in Denmark and southern Sweden is short. “The employees in Copenhagen and Karlskrona in Sweden are helping us to set up the company,” says Napret. “That’s why short distances were important to us.” The Fehmarnbelt tunnel between Germany and Denmark will provide an even faster transport connection from 2029.
“A company headquarters in Germany simplifies communication with local authorities and service providers for companies from German-speaking countries,” says Fabian Möpert, senior manager of EU/EFTA at Germany Trade & Invest and an expert on foreign market information for Poland, Hungary, the Czech Republic and Slovakia. “Translations of contracts and other documents are not necessary, which saves time and resources.”
Diverse labor pool
Companies based in borderland regions have a diverse pool of employees to draw from. “Those looking for employees in several countries sometimes have a greater choice,” says Möpert. Furthermore, companies that use the labor markets of next-door countries can react more quickly to short-term bottlenecks in the domestic skilled labor market.
The Bottom Line
Germany’s borderland regions on all sides offer obvious locational advantages for its closest trading partners: greater convenience, shorter supply chains and a diverse pool of multilingual talent to draw on.
The willingness to work across borders has increased in recent years. With the exception of 2020, the number of people commuting to work in Germany from neighboring countries on a daily basis has risen continuously since 2010. According to the Federal Employment Agency, around 240,000 cross-border commuters were employed in Germany in June 2023. Most of them come from Poland, followed by France and the Czech Republic.
Closer to customers: Belimo
Belimo Automation Deutschland, a subsidiary of the Swiss Belimo Holding, opened a new site in Großröhrsdorf near Dresden in eastern Germany in 2019. “The new location enables shorter transport routes and therefore faster delivery times for our customers in Germany and northern and eastern Europe,” explains managing director Volker Benath. The company is the global market leader in the development, production and sales of field devices for the energy-efficient control of heating, ventilation and air-conditioning systems. In addition to service and logistics, the 55,000-square-meter site in Großröhrsdorf also houses workshop and assembly areas.
Benath sees another advantage of the location close to the border: “The new site simplifies customs clearance from Germany immensely.” Before setting up the site in the eastern German border region, the company supplied European customers directly from Switzerland and therefore from outside the European Union.
This creates multinational teams that are characterized by cultural diversity. People from neighboring countries are often brought up to be multilingual—expertise invaluable to companies with international expansion ambitions. “Those who communicate with customers and business partners in their native language and are familiar with the cultural circumstances minimize misunderstandings and quickly build trust,” explains Chilla.
The German regional state of Saarland, where Saarbrücken is located, is a pioneer when it comes to multilingualism. From the first year of school, children there are presently taught French as well as their native language. The education program and campaign is part of the state’s so-called “France strategy.” Its aim is to make multilingualism the norm in large parts of the population by 2043. The strategy covers all areas of daily life—from school, university and working life to medical infrastructure and cross-border mobility. Companies like ODDO BHF are positioned to benefit directly from this campaign.
The ideal center: Oddo BHF
The Franco-German financial services group ODDO BHF opened its new service center in Saarbrücken in south-west Germany in 2021. “The location underlines our strategy as a Franco-German group,” explains Michael Cattarius, managing director of ODDO BHF Solutions. The city is centrally located between the two headquarters in Paris and Frankfurt. “The border location facilitates cross-border meetings and thus promotes cohesion within the group,” says Cattarius.
Cattarius also emphasizes linguistic diversity: “The potential for multilingual employees is much greater than at other locations. This allows us to create real added value in intercultural and linguistic terms.”
In total, the company employs around 3,000 people who manage client assets totaling more than EUR 140 billion worldwide across the main business areas of private wealth management, asset management, investment banking and corporate and international banking. The service center in Saarbrücken currently supports the group’s back office and IT units, but ODDO BHF has plans to expand its scope.
R&D edge: Roche
The Swiss pharmaceutical company Roche has four German sites, and it’s no accident that two of them are in border regions. The group’s biotechnology center in Penzberg, Bavaria, for example, is not far from Austria. Although the proximity to the border did not play a major role when the foundation stone was laid in 1972, Annett Fischer, head of Sites Network Communications Germany at Roche, finds major advantages today.
“We maintain good contacts with universities in Innsbruck in Austria,” she says. “And we also receive job applications from Austria.” Over the past five years, the Group has invested around EUR 1.3 billion in expanding the site.
Only a few kilometers separate the group’s headquarters in Basel and its southern German site in Grenzach-Wyhlen, Baden-Württemberg. Since Roche specializes in research, production and patient care, this proximity increases efficiency and time-to-market across the Group. “The rapid exchange between the sites enables us to incorporate experience from Germany into our global strategies at an early stage,” says Fischer. After all, Germany has a key role to play, as Fischer points out. “A market launch in Germany is the gateway to the markets in the 27 EU member states.”
