Interview in October 2014
The interview took place by video-conference from our offices in Sant Cugat, with Rabat and Berlin.
In Berlin we will be speaking to our resident consultant specialised in the German market, Inge and our freelance consultant if Rabat, Faris. The conversation starts in a Babel of languages, but continues exclusively in English to simplify matters.
The two markets are in two very different points in their economic cycles and the needs of the two countries for services and goods are very different, but, in terms of trade, are the divergences really that big?
Júlia Farré, Managing Consultant in International Team Consulting kicks of the interview.
What opinion do the Germans have of Spain?
Inge: In general, the Germans have a positive opinion of Spain. It is one of their favourite holiday destinations and, when getting back to Germany, they like to find Spanish products they have consumed on vacation.
In business, the “mañana” stereotype is still widely prevalent so Spanish companies have to demonstrate that they are capable of complying with the agreements they have reached with their partners. Whilst, intermediaries in German industrial and technical industries are open to establishing relationships with Spanish companies, but, before sealing agreements, they want to be sure that the company is going to comply with the services requested.
Faris: The reputation of Spanish products is very good. Spain is currently Morocco’s leading supplier of goods. Some three years ago many Spanish companies looked to Morocco when searching for an alternative to a domestic market in crisis. Many of these companies sold their goods at very competitive prices, especially construction machinery, which caused a crisis in the home-grown industry which could not compete with low priced imports from Spain.
This has meant a certain deterioration of the previously good opinion of Spanish companies. Currently, many Moroccan companies insist on a well designed business plan to avoid reaching agreements with companies solely interested in the short-term dumping of excess stocks. Even so, many Moroccan importers supply Spanish products at competitive prices. It is a good time to approach the market.
Do your more than 20 years’ experience in international trade tell you whether the presence of Spanish companies has increased on the German market recently?
Inge: Germany is a very mature market and any company looking to enter the market must be impeccably prepared. Any German importer will demand the highest quality, both of merchandise and service, from any foreign company that wishes to establish relations. The general impression here is that the small Spanish enterprises are not sufficiently prepared for the German market, so the increase has not been very large recently.
Which sectors do you think offer the best business opportunities?
Inge: In Germany Spanish food produce in very highly considered as are chemicals and metal industries.
Faris: In Morocco all industries will find opportunities to export with success as, in general, Spanish goods are very well received.
Possibly, those sectors with the best opportunities are those related to public works financed by international banks. The public tenders for water treatment and renewable energies are not only of interest to alrge companies that become lead contractor, but for those smaller firms that can find opportunities as subcontractors.
Although competition is fierce, other sectors of interest in the Moroccan economy are agriculture related (irrigation and machinery) construction and furniture…
Is price a determining factor?
Faris: For a Spanish company it is paramount to offer competitive prices. Morocco is a small economy and is open to all-comers. Very often low cost products from Egypt, Tunisia and china will take preference over higher quality products with higher prices.
Although Spanish products are more highly valued as being European goods, these low-cost countries are their main competitors. However, when it comes to machinery, the Chinese may be cheaper to purchase but the life-time cost is more competitive as maintenance and spare parts are cheaper and easier to obtain. Hence, the increasing appreciation of countries that can offer “neighbourhood” service.
Another point to keep in mind is that many business in Morocco are not registered creating a thriving black market, especially in the electronics and automotive fields.
Inge: Many Spanish companies have the tendency to think they can charge more in Germany when, the truth of the matter is, it is the German purchasers who decide the market price in relation to the value of the product.. Before starting out on their German adventure, Spanish companies should have a careful look at prices there. They will often find that these are lower than in other European markets.
As far as import channels are concerned, Germany has a very well organised system, I believe?
Inge: Yes, the German market tends to be very strict and different products will use different channels. When talking about offering industrial services, the normal way to work is with an independent sales agent. These if a very important figure for Spanish companies wishing to enter the market. He will be your man on the ground, the one who contacts and makes the first visits to potential clients to offer the services on a day-to-day basis. Equally the distribution of industrial goods will also require a commission agent. Most German distributors are always open to taking on new products provided that they have something new or different to offer. Any distributor will want to take on an innovative product that his competitors don’t have.
Faris: The sales agent, as such, does not exist in Morocco. The main reason for this is that the very low prices of imported goods mean that the margin of profit is too small to justify the effort.
I recently made a market study for a firm from the automotive industry and found that there were at least 6 different channels through which the business operated.
What I would suggest is that Spanish companies pay a local expert in the field a monthly salary to carry out market research for 3 or 6 months in order to evaluate the real possibilities their products will have in the Moroccan market. To minimise this cost, many firms form a cluster or group of companies to share costs.
A further point to be considered is that Morocco is the entry point for many of the neighbouring countries. Many Spanish products reach these markets (Mauritania, Mali, Niger and, even as far as Senegal).
Investment in renewable energies is going ahead in Morocco,; whereas in Europe it is on stand-by. Are there any changes in this sector in Germany?
This type of investment in Germany has been put on hold. Two or three years ago, the German government used to subsidise firms wishing to invest in solar energy, but currently the market is stagnant.
As far as methods of payment are concerned, which do you consider to be the one that is used the most?
Inge: In Germany it is usually by bank transfer. There are differences between sectors, but 30 to 60 days is the norm.
Larger companies tend to pay on far shorter terms, sometimes 7 or 10 days, for which they require a discount that goes from 2 to 5%. These discounts are often applied automatically and are taken for granted so are often not even mentioned. I would recommend Spanish companies to enquire always about the discount structures of individual firms.
Faris: In Morocco the form of payment varies from sector to sector. Normally first operations will be covered by a Letter of Credit whilst subsequent deliveries would be paid by bank transfer at 30 or 60 days. However, many Spanish companies pay an insurance premium to guarantee payment of the goods. Some Moroccan companies require payment in cash, but this is usually only with low-cost countries like Turkey or China.
Inge: In Germany the question of export payment insurance is very important. There is the feeling that payment delinquency doesn’t exist,, but the crisis has affected us as well, especially in the last 10 years, the percentage is still small compared to other countries, but is increasing. I would always recommend taking out the insurance even if it does increase costs a little.
In a couple of words, what are the keys to commercial success, especially in Morocco?
Faris: Proximity, Price and Culture.
Moroccan businessmen prefer to travel to Madrid or Barcelona rather than France or Germany. Price, as I said earlier, is important when coming to an agreement, but Moroccans generally feel very comfortable in Spanish environments.
Inge: Quality Product-Service-Price, Inter-cultural Competency and Patience.
The balance between the quality of the product/service and their prices must be comparable. As far as inter-cultural competencies are concerned, there is the perception that German companies involved in international trade all speak English. That just isn’t so. Thus, it is important to find somebody who speak German for our market. Patience is one of the Capital Virtues when dealing with Germany. Closing deals can often take a long time, up to a year, as Germans like to get all the “i’s” dotted and “t’s” crossed.
In summary, we can conclude that, although we are talking about two markets in very different stages of their economic cycles and with varying needs for different goods and services, there is a coincidence when talking about certain aspects like service, price, culture, language, patience…. which makes them more similar than would appear at first sight. Thanks to both of you for shareing this information with us.
Faris: Thanks to you, this chat has been very interesting.
Inge: Thanks from me too. I have learnt a lot about Morocco. Gracias y hasta pronto!
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