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How strong Germany is in the platform economy?

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As per IMD World Digital Competitiveness Ranking, Germany is not digitally competitive. The two main reasons, suppliers with no digital presence are losing their customers and those without a digital business model are going to be hit harder by the corona crisis.

Even though with a strong foothold in industrial machinery products and the founder of Industry 4.0 leading into the internet of things. Germany is lagging behind other American or Asian companies to make a solid foot in the platform economy. Or even get themselves listed in the DAX.

Platform economy means the digital places where the companies don’t produce anything by themselves but uses different digital platforms to make easier earning routes for their business.

One of the experts from TU Darmstadt, Holger Schmidt in the digitization of business and work invented the platform index to measure the platform company’s performance on the stock exchange.

The most exciting platform economy business, as well as investments, has been seen in Asian countries. In platform business especially in B2B platforms, billions are invested such as Alibaba, Tencent, Ping An, or TikTok parent company Bytedance are the modern platform economy contributor.

One of the strong points of such companies is their focus on innovation, looking for new markets as well as the use of artificial intelligence. One of the strong contenders as per Professor Scott Galloway is Amazon in 2025 as they will not just be in groceries deliveries but also in the healthcare market.

The next is Apple in the education industry with the online courses to transform the traditional education model. And Tesla with the most frequently misunderstood platform model is way ahead to transform the car industry.

It is strange as well sad, but 70% of the startups in Germany saw its existing crisis even though they got backed up with the EU monetary fund. The crisis may push the German economy further than the 2002’s New Economy stock market crash or 2009’s financial crisis.

EU competition Commissioner Margrathe  Vestager of Europe’s sell-off, “ We have to be particularly vigilant in the coming months so that the bargain hunt doesn’t start here”. The statement has been that crisis-hit companies can become a lucrative situation for companies like Amazon, Apple, or Alphabet to make a heavy investment at a lower rate.

Even though you don’t understand but looking at the pattern, data and AI-driven business are the major drivers in the new fourth platform generation. Let’s look at the graphical representation by the following companies:-

Of the world’s 100 largest platforms worth $9.5 trillion holes the majority share is from the Americas and Asia.  68% from the Americas, 27 percent from Asia, and only 3 percent from European companies. SAP is one of the success stories of switching the business to a platform model. Spotify music service from Sweden, Adyen from the Netherlands, and Flixbus from Germany.

Even though studies prove that platform business pulls billions of dollars in revenue but the surety and investment are pretty much high with a risk of several years to make it a profitable venture and not failing miserably. But platforms created their networks with consumers, companies, and ecosystems partnering successfully to attract the right partners.

The platform business model has been termed as a superior business model to the traditional. The best 15 platform stocks in the platform index are outperforming the leading German stock market barometer, the Dax 30. The platform index is 17% higher than at the beginning of the year and the Dax is 18% lower.

Microsoft, Apple, and Amazon outshined the Dax 30 companies, and the German companies such as Daimler, BMW, and Volkswagen are worth less on the stock exchange market than the PayPal services.

And finally, to conclude the scenario, in the mid of the corona crisis, Facebook bought a stake in an Indian telecommunications company Jio for $5.7 billion and it is going to lay a huge undersea cable around the African continent to improve internet coverage.

Alibaba investing $28 billion in cloud infrastructure, and Tesla entering the UK electricity market. But, Continental in Germany is holding a jab in the autonomous driving investments. Daimler reduce the research spending and the digital boss in Deutsche bank left the company responsible for new platform business models.

The market winners are the investors with platform companies. Google, Apple, Facebook, and Amazon are continuing the invest at a high level during the crisis whereas Germany is busy saving money or waiting for state aid as stated in Zeit.

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