Biotechnology as a Result from the Combinational Use of the Knowledge from Pure Sciences - Research Paper Example

Introduction This paper looks at the viability of establishing a biotechnology firm in the southern region of Germany due to several advantages offered by this location. Various factors have been considered in depth in arriving at this decision to locate the firm there versus locating in other regions of the country or even in other European countries. The decision making process included the best mode of entry into this vibrant German biotechnology sector that can assure the highest chances for success. All those relevant factors are discussed in this paper. Executive Summary Germany has long-standing and enviable reputation as breeding ground of excellence in the sciences specially in physics, chemistry, genetics, mathematics and biology. It is a very good choice for any biotechnology firm looking for the right place to set up operations in a foreign country. The only question is where in Germany is the best or ideal location for such business operation. The country's strength lies in its research institutions which are definitely world-class and leading edge too. Biotechnology is a result from the combinational use of the knowledge from pure sciences such as biology, medicine, food science, genetic engineering, microbiology and biochemistry, to name just a few. The choice of location is dependent primarily on support institutions that will foster a conducive environment for research to be conducted at the highest level. An investor-friendly climate is likewise a crucial consideration when selecting the ideal site in which investors are encouraged to put up businesses with political support and financial incentives. Such an ideal location combines the academe, private business and government to achieve their goals. When all these factors are taken into account, the selection process can be narrowed down to the southern German state of Hessen. This state has been actively soliciting investors in its biotechnology sector and it now has the highest number of jobs related to this sector in the entire country. As of last count, it has some 250 biotechnology firms located there which had produced some three billion euros in total revenues. While other German states were not so keen on attracting biotechnology-related firms, Hessen is the exact opposite by providing support systems in place. Most Germans are averse to technological or chemical products due to some horrendous experiments that went wrong such as the medical tragedy of thalidomide in the 1960s or even the newer genetically-modified organisms (GMO crops) of today. In the state of Hessen, things are viewed differently and there is tremendous public and political support for biotechnology firms to locate there. As a research-based industry sector, biotechnology requires strong professional networks and information exchanges between all researchers to reduce duplication of work and instead speed up the process because there is stiff competition among firms that result in short product and innovation cycles. This means alliances between suppliers and researchers are crucial for success in this field. This German state provided the right nurturing environment by giving opportunities for all these to occur. The result is that there is a highly-concentrated cluster of biotechnology companies in Hessen today. This also includes pharmaceutical and industrial chemical manufacturing firms clustered in areas like Marburg, Giessen, Frankfurt, Offenbach, Kassel and Darmstadt. Within this region itself are some 17 universities with biotechnology laboratory research facilities, 3 research hospitals, 31 technology transfer centers and 24 other additional research facilities. The sheer preponderance of these facilities helps to produce a good breeding ground for the very spirit of inquiry that fuels research endeavors along with pure talent and good innovative ideas, the crucial requirements for long-term success in the biotechnology sector. In particular, the biotechnology industry is encouraged and supported in the region with financial assistance and the right political environment as well. The Frankfurt BioTech Alliance is proof of this private-public initiative to support ongoing industry development in the region. Although the industry is not directly subsidized, there are many sources of easy economic funding in the region for firms who want to locate and start operation there. There is relatively easy availability of credit that is crucial to a successful business environment and Frankfurt provides capital being Hesssen's global financial center. In 1999, the big drug firm Sanofi-Aventis put up a € 67 million venture capital fund that invests in biotechnology firms with interesting ideas and promising lines of research. A joint venture mode of entry is recommended as the region is already set up with IT support, manufacturing facilities and logistics support. There is no point in developing what is already in place. By partnering with an existing firm, our firm can focus on core business processes without the distraction of administrative and other tasks. As a new entrant to the region, partnering with an existing firm will increase the likelihood of securing funding from local or regional sources if and when the need arises. Finally, the region provides the industry with knowledge and expertise, and we must make use of the availability of local talent. The number of research facilities and universities provide a ready pool of trained talent that will enhance our research team and eliminates need for more costly global talent search. The joint-venture company will allow for the bundling of certain complementary competencies not otherwise possible if we choose to go it alone. This allows us to maximize and gain valuable expertise from a wide range of related fields as well. While there are cultural differences and several regulations we must adhere to, a joint venture will provide us with existing knowledge on both and help us maintain compliance. Language barriers are not significant because German and English are closely related (Jelden, 2001). Discussion Political Environment – the country is a federal parliamentary democratic republic and plays a leading role in European and world affairs. As the biggest nation in Europe, it also has a strong and cordial relationship with the United States of America after World War II when its economy was rebuilt by the US with massive aid but this cooled off somewhat during the debates leading to the Iraq War. Both countries are close political allies in many respects such as fighting the war on terrorism and voting on the same side of issues at the United Nations. There are strong cultural and ethnic ties as well due to a large population in the US of German extraction or descent. Both countries cooperate closely on a number of global concerns such as greenhouse gas emissions, climate change, trade barriers and global finance. A number of American military bases are located in Germany with Ramstein Air Base the biggest there. Local Macroeconomic Situation – the two countries are likewise economically related with almost 9% of total German exports going to the US with almost the same amount (8.8%) of US exports going to Germany. On the other hand, some 10% of US imports come from the German state and 7% of German imports originate from the US. Their close ties are reflected in the fact their two countries (together with Europe) account for 40% of total global GDP and over 30% of total world trade (Liebenow, 2003). Germany is the largest country in Europe in terms of economic output and the largest nation in terms of population with 85 million people. It has high economic and living standards for its people with Germany now ranked fifth in the world in terms of gross domestic product or GDP using PPP (purchasing power parity). Economic Attitudes – Germany has a good base of entrepreneurial people that account for its being the second biggest exporter with total receipts of $1.133 trillion last year. It has a trade surplus of about € 165 billion and is a leading proponent of increased trade liberalization and globalization in finance and commerce. Germans are very serious when it comes to work and this partly explains the reason why Germany that has a high labor cost and a very strong labor union system is still competitive in world markets. This is due to their high productivity because Germans tend to separate or compartmentalize and keep different tasks as separate. It is what sociologists and anthropologists termed as being monochronic (Nees, 2000) and doing one thing at a time but doing it exceedingly well resulting in high-quality products. Local Business Culture – doing business successfully in Germany requires knowledge of local business cultural practices such as meticulous planning that results in a very orderly life in both personal and professional or business spheres. This planning gives the Germans a sense of security and structure which is why they are serious about their work and keep their personal and working lives strictly separated. Most Germans believe there is proper time for everything and abhor overtime which indicates sloppiness, inefficiency and lack of planning. Language Barriers – although the official language is German, many of the citizens are bilingual especially the younger generations. The German and English languages both came from the same linguistic roots although they may seem to sound different at first. Both are derived from the Old High German. Businesses entering into Germany need to know why some partnerships and joint ventures fail. This is primarily due to the false impression the two countries have many things in similar but the reality is that there are significant differences in cultural, social and organizational practices or behaviors (Ditzel, 2007) to be minimized. Conclusion Cost-Benefit Risk Analysis – choosing Germany and the state of Hessen seems a good choice after all factors are considered such as availability of political and economic support in conjunction with the ready pool of research talent in the area. Most Germans can understand and speak English quite well. A joint-venture entry mode will help to avoid a big expense if it will build everything up and also the risks. It is a preferred type of collaborative arrangement that offers prospects of gaining new learning through technology transfers (David, 2006). Reference List David, F. R. (2006). Strategies Management: Concepts and Cases. 8th ed. Upper Saddle River, NJ: Prentice Hall. Ditzel, U. (2007). Cultural Differences in Business Life – Understanding German and American Business Culture. Munich, Germany: GRIN Verlag. Jelden, M. (2001). German-English/English-German Dictionary and Phrasebook. Illustrated edition. New York, NY: Hippocrene Books, Inc. Liebenow, L. A. (2003). Opening and Welcome. In Drager-Stiftung (Ed.), US–German Economic Relations (Part 3). Berlin, Germany: Beuth Verlag Gmbh. Nees, G. (2000). Germany: Unraveling an Enigma. Yarmouth, ME: Intercultural Press. Read More