Compiled by: Dr. Khristian Edi Nugroho Soebandrija, BSIE, MM. 

Binus Aso School of Engineering, BINUS University.

The future of German mechanical engineering: Operating successfully in a dynamic environment

Authored by:  Festo Team and McKinsey&Company

German mechanical engineering –we shape the future!

German mechanical engineering has always been the backbone of the German economy.
Even internationally, it stands for progress, performance, and reliability. In the past 20 years, it has been able to grow at 2.2 percent1 p.a. and to generate an average EBIT margin of 3.9 percent.2 Hardly any other industry is so diverse, and developing with so much rigor. Reason enough, then, for German mechanical engineers to confidently look toward the future.

At the same time, there are signs of change. There is pressure from foreign competitors with improving quality and lower-priced services even in industries traditionally dominated by German companies. The international integration of markets is increasing, which in turn increases volatility. The upcoming fourth industrial revolution (“Industrie 4.0”), the impact of digital technology on the value chain, and disruptive technologies such as 3D printing have the potential to change the very structure of business models.
As such, mechanical engineers must not rest on their laurels: as in the previous decades, companies can only ensure their international competitiveness if they actively shape industry trends and achieve continuous improvement. And in doing so, the VDMA wants to provide the best possible support to its members.
To this end, not only do we want German mechanical engineering to keep pace with international competition, but we want to underpin and further expand Germany’s leading role even in the face of changing conditions.
Working with McKinsey & Company, the VDMA examined how this could be achieved.More than 330 companies were surveyed, and over 50 in-depth interviews were conducted with executives. The aim was to identify current success patterns and future industry trends, and to derive strategies based on these findings. The result: by implementing measures in six fields of action, German mechanical engineers can secure and expand future success: ƒ Targeted and granular internationalization and growth strategy to address the opportunities and challenges posed by internationalization with the appropriate business model ƒ Expansion of aftersales/service segment through integrated, innovative solutions to leverage profit in this increasingly important area.