In this research, the existing German market, the largest greenfield for online food delivery in the EMEA, is analyzed to verify the possibility of executing a nutritional-conscious business strategy plan in order to differentiate "XX" from the competition. The macro-and microenvironments of Germany's online food delivery business market were examined using a mix of PEST and Porter's five forces models. As a significant outcome of the market investigation, the common characteristics of German nutritional-conscious customers were addressed. Additionally, given the current state of the business, critical components of marketing approaches based on an STP Model are recommended to "XX" in order to solidify its position in this growing industry.
Online food delivery has emerged as a rapidly rising trend in the e-commerce market. The development of digital tools has transformed the food industry's perspective. Businesses have redesigned their company strategies in order to stay up with changing client expectations and preferences. Innovation is critical to success in order to stay up with increased client demands and competition in a saturated industry.
Table of Contents
1 Introduction
1.1 Background of the Online Food Delivery Business
1.2 Online Food Delivery Logistics and Service Models
1.3 Germany's E-commerce and Food Delivery Market
1.3.1 Market Potential
1.4 “Uber Eats” the Online Food Delivery Platform from Uber Technologies Ltd
1.5 Conceptual, Theoretical Strategy to Implement (Base of the Choosing Topic)
1.6 Statement of the Problem
1.7 Limitations and Assumptions
1.8 Methodology
2 Macro-environment Analysis
2.1 Theoretical Fundaments of the Pest Analysis
2.1.1 Political Factors
2.1.2 Economic Factors
2.1.3 Social Factors
2.1.4 Technological Factors
2.2 Application of the PEST Analysis
2.2.1 Political Factors
2.2.2 Economic Factors
2.2.3 Social Factors
2.2.4 Technological Factors
3 Micro-environment Analysis
3.1 Theoretical Fundaments of Porter's five forces analysis
3.1.1 Threat of New Entrants
3.1.2 Threat of Substitutes
3.1.3 Bargaining Power of Suppliers
3.1.4 Bargaining Power of Customers
3.1.5 Competitive Rivalry
3.2 Application of Porter's five forces analysis
3.2.1 Threat of New Entrants (New Online Food Delivery Businesses)
3.2.2 Threat of Substitutes (Food Providers)
3.2.3 Bargaining Power of Buyers and Suppliers (Two-sided Agents)
3.2.4 Competitive Rivalry (New Economy and Market Concentration)
3.2.5 Micro-environmental Conclusions
4 Opportunities and Threats Analysis
5 STP Model
5.1 Theoretical Fundaments of the STP Model
5.1.1 Segmentation
5.1.2 Targeting
5.1.3 Positioning
5.2 Application of the STP Model
5.2.1 Segmentation
5.2.2 Targeting
5.2.3 Positioning
6 Conclusion and Recommendations
References
Abstract
Online food delivery has emerged as a rapidly rising trend in the e-commerce market. The development of digital tools has transformed the food industry's perspective. Businesses have redesigned their company strategies in order to stay up with changing client expectations and preferences. Innovation is critical to success in order to stay up with increased client demands and competition in a saturated industry.
In this research, the existing German market, the largest greenfield for online food delivery in the EMEA, is analyzed to verify the possibility of executing a nutritional-conscious business strategy plan in order to differentiate "Uber Eats" from the competition. The macro-and microenvironments of Germany's online food delivery business market were examined using a mix of PEST and Porter's five forces models. As a significant outcome of the market investigation, the common characteristics of German nutritional-conscious customers were addressed. Additionally, given the current state of the business, critical components of marketing approaches based on an STP Model are recommended to "Uber Eats" in order to solidify its position in this growing industry.
List of Abbreviations
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List of Figures
Figure 1: Online food delivery market size worldwide from 2019 to 2023 (in billion U.S dollars) from Business Wire. (2020)
Figure 2: Online food delivery models adapted from Li, Mirosa, & Bremer (2020), and Hirschberg et al. (2016)
Figure 3: Market potential in the European Union (in order of market size) adapted from Statista (2021c)
Figure 4: Online food delivery market consolidation in Germany adapted from Wenzel (2018), Sullivan (2019), Skrabania (2015), Hüfner (2017), Delivery Hero (2021), Knieps (2021), Uber (2021), RTTNews (2021), DoorDash (2021), and Browne (2021)
Figure 5: Three-sided market of on-demand delivery from Bahrami et al. (2021), p. 2
Figure 6: Model application framework |Source: own elaboration
Figure 7: Germany's budget balance between 2016 to 2026 in relation to GDP from IMF. (2021a)
Figure 8: Bank lending to the private sector in the euro area (YoY, %) from CLAEYS & Bruegel (2021)
Figure 9: Gross domestic product Germany as of Q3 2021 from Destatis (2021d)
Figure 10: Development of the number of persons in employment with a place of residence in Germany from Destatis (n.d.-a)
Figure 11: Household savings in Germany versus the European Union as a percent of disposable income from 2000 until 2020 adapted from OECD (2021b)
Figure 12: Change in household expenditure, 2020 on 2019 from Destatis (2021g)
Figure 13: Eating behavior of people with health and sustainability orientation (LOHAS) in Germany in comparison with the population in 2021 adapted from IfD Allensbach (2021). ..
Figure 14: Germany’s online food delivery services revenue and penetration from 2017 until 2020 in million USD adapted from Statista (2021c)
Figure 15: Porter’s five forces driving industry competition from Porter (1980), p. 4
Figure 16: Uber’s virtuous cycle. Geographic density is the new network effect from Sacks (2016), as cited in Netzer et al. (2017)
Figure 17: Profitability points are defined as the intersection between total income and total expenses in the online food delivery business. The lower line represents a lower bound for total expenses, while the upper line represents an upper bound for total expenses from Alvarez-Palau (2021), p. 9
Figure 18: Network effect (value increases exponentially, costs increases linearly) from Jorgenson (2015)
Figure 19: Share of customers who have never switched or rarely switch online an aggregator platform from Ahuja (2021)
Figure 20: LOHAS characterization in the Sinus Milieu 2018 adapted from Köhn-Ladenburger, (2013) and Sinus-Institut, (2018)
Figure 21: Average US food-delivery bill per order, $ from Ahuja, (2021)
Figure 22: Positioning of online food delivery services in Germany |Source: own elaboration.
Figure 23: Uber Eats repositioning and sub-branding possible initiatives aimed towards a more health-conscious segment |Source: own elaboration
List of Tables
Table 1: Average delivery fee charged by Wolt, Uber Eats, and Lieferando in Germany
1 Introduction
1.1 Background of the Online Food Delivery Business
As a result of great advances in telecommunications and computer technology in the latter decade of the twentieth century, the internet was born, and with it, new business organizational systems. The internet enabled strategic business models, procedures, and alliances to be reinvented, resulting in the reorganization of a large number of traditional firms (cf. Nogoev et al., 2011, p. 1).
With the growth and development of economic activity on the internet or through its capabilities, a new concept, "e-commerce," was born. Electronic commercial transactions, also known as "e-commerce," are the exchange of goods and services over computer networks like the internet (Ibid.).
Over the last few years, e-commerce has evolved into an essential component of the global retail landscape that, like many other industries, has changed dramatically since the advent of the internet, with online platforms accounting for up to 18% of all sales worldwide by 2020 (cf. Vision Monday, 2021).
One of the most visible examples of a new business reorganization strategy due to the development of e-commerce lies in the restaurant industry. Online food delivery apps revolutionized the restaurant industry by allowing consumers to compare menus, pricing, and user ratings quickly and easily from a variety of restaurants. Consumers who use food delivery service portals do so for a variety of reasons, including technological reliance, convenience, and the shortened amount of time required for food delivery (cf. Das, 2018, p. 1; Wang, Song, & Yang, 2012, p. 1).
The global online food delivery service market was worth more than USD 107 billion in 2020 and, as shown in Figure 1, is expected to grow at a compound annual growth rate of 11.5% between 2021 and 2023, reaching a value of nearly USD 154 billion by that year (cf. Business Wire, 2020).
Online food delivery market size worldwide from 2019 to 2023 (in billion U.S. dollars}
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Figure 1: Online food delivery market size worldwide from 2019 to 2023 (in billion U.S dollars) from Business Wire. (2020).
All of this has resulted in numerous companies competing for market share and customers on a global scale while simultaneously raising customer expectations (cf. Das, 2018, p. 2). Just Eat, Grubhub, Delivery Hero, Deliveroo, DoorDash, Uber Eats, Takeaway.com, Ele.me, and Meituan Dianping are the top revenue players globally in 2021 (cf. Curry, 2021).
1.2 Online Food Delivery Logistics and Service Models
Today's diverse online food delivery business concepts are built on the various stages of the delivery process. As illustrated in Figure 2, orders can be placed in one of five ways, depending on the location of the order and the delivery method. The order can be placed directly with the restaurant or through a third-party online food delivery platform. The restaurant prepares the order, and finally, the restaurant or platform delivers the order to the client, or the meal is prepared for pick-up by the consumer (cf. Li, Mirosa, & Bremer, 2020).
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Figure 2: Online food delivery models adapted from Li, Mirosa, & Bremer (2020), and Hirschberg et al. (2016).
Online food delivery services are classified into two categories based on the marketplace where the order was placed:
1. Restaurant-to-Consumer Delivery
Restaurant-to-Consumer Delivery companies prepare and deliver food, as shown by KFC, McDonald's, and Domino's. The order is directly placed on the restaurant's online marketplace.
2. Platform-to-Consumer Delivery
Platform-to-Consumer Delivery is a service for restaurants that do not necessarily offer delivery services themselves; they use the services from third-party online food delivery platforms that also provide logistic services.
Additionally, third-party online food delivery platforms are classified differently depending on whether they offer logistical services or not:
1. Aggregators: act as a middleman between a consumer and a restaurant. It receives customer orders and sends them to a restaurant. The dispatch is handled by the restaurant.
2. New delivery app: has its own logistics service or employs crowdsourcing logistics and provides delivery for restaurants that do not have their own messengers (cf. Li, Mirosa, & Bremer 2020; Hirschberg et al., 2016).
Online food delivery platforms generate income from five distinct sources: restaurant commissions, customer delivery fees, customer service fees, in-app advertising, and tips, which go straight to drivers but effectively subsidize platforms' running expenses (cf. Ahuja, 2021).
1.3 Germany's E-commerce and Food Delivery Market
Internet access and adoption are increasing globally, and Germany is no exception. B2C-e- commerce revenue increased from EUR 28 billion to EUR 72.8 billion between 2012 and 2021 (cf. HDE, 2021), and industry analysts expect this trend to continue growing (cf. Statista, 2020b). Germany has not only the most internet users in the EU (cf. Internet World Stats, 2021) but also the largest e-commerce client base in Europe, with 62.1 million people regularly shopping online in 2021 (cf. PostNord, 2021).
1.3.1 Market Potential
Germany's online food delivery market reached US 5 billion in 2020, with a penetration rate of 28.5% (cf. Statista, 2020c). Additionally, Germany has the most extensive e-commerce client base in Europe (cf. PostNord, 2021) and a fast-growing online food delivery market (cf. Statista, 2021a). All of this adds up to making Germany the European Union's largest greenfield (cf. Statista, 2021c). Germany's market potential is illustrated in Figure 3 in relation to the EU countries with the largest market.
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Figure 3: Market potential in the European Union (in order of market size) adapted from Statista (2021c).
1.3.2 The Online Food Delivery Landscape in Germany in 2021
In comparison to more conventional markets, the expansion of online platform marketplaces in Germany has been aided significantly by the intrinsic characteristics of the digital economy, which have fueled higher concentration rates and winner-take-all dynamics (cf. Costa et al., 2021, as cited in Hildenbrand et al., 2021). In the case of online food delivery, this led to a Lieferando monopoly after acquiring Delivery Hero in late 2018 and then withdrawing from Deliveroo from the market in 2019 (cf. Dutton, 2019). However, new online food delivery platforms have joined the German market since then, including Wolt in 2020, followed by Uber Eats, Foodpanda, and Doordash in 2021 (cf. Delivery Hero, 2021; Knieps, 2021; Uber, 2021; RTTNews, 2021). Out of the new entrants, Foodpanda ceased its operations in Germany at the end of 2021 (cf. Browne, 2021), and Doordash acquired Wolt in Germany (cf. DoorDash, 2021), leaving only three big brands in the market. The development of the online food delivery market in Germany is illustrated in Figure 4.
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Figure 4: Online food delivery market consolidation in Germany adapted from Wenzel (2018), Sullivan (2019), Skrabania (2015), Hüfner (2017), Delivery Hero (2021), Knieps (2021), Uber (2021), RTTNews (2021), DoorDash (2021), and Browne (2021).
According to data retrieved from Priori Data GmbH and SimilarWeb Ltd., in 2020, Lieferando dominated the German online food delivery market with 80% market share, being followed by Domino’s Pizza, a restaurant chain, with 10% market share (cf. Statista, 2021e). Due to the lack of additional information regarding the market share of the new online food delivery entrants that inaugurated their platforms in Germany between 2020 and 2021, they will be presumed to have a negligible market share in comparison to Lieferando.
1.4 “Uber Eats” the Online Food Delivery Platform from Uber Technologies Ltd.
Uber Technologies, Inc., or Uber, is an American ride-hailing service firm headquartered in San Francisco. It was founded in 2009 by Garrett Camp and Travis Kalanick. Uber Technologies links customers seeking rides, food delivery, and shipping with those providing those services through an online marketplace that acts as a middleman. Fares are quoted in advance to the customer for each booking but are subject to vary based on local supply availability and demand at the time of booking (cf. Reiff, 2021; Alpert, 2021).
Uber Eats is an online ordering and delivery platform for food that was created in 2014 by Uber. Uber Eats is a separate smartphone app that enables users to order food from a selection of restaurants and have it delivered to them by Uber drivers for a delivery fee (cf. McDuling, 2016; Narcisse, 2016). It is a three-sided marketplace in which restaurants pay a charge to gain access to customers as well as delivery personnel (cf. Lehdonvirta et al., 2020, p. 19). Figure 5 illustrates how the three markets operate.
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Figure 5: Three-sided market of on-demand delivery from Bahrami et al. (2021), p. 2.
1.5 Conceptual, Theoretical Strategy to Implement (Base of the Choosing Topic)
Monthly use of health and fitness applications by internet users aged 16-64 has increased from 11% in 2012 to 27% in 2019. That number continues to grow at a steady pace as society becomes more nutritional-conscious and looks to maintain a balanced diet (cf. Mander, Buckle, & Trifonova, 2020, p. 6). Currently, the Uber Eats app only provides basic filtering on dietary preferences: Vegetarian, Vegan, Gluten-free, Halal, and Allergy-friendly (cf. Good Girls Gang, 2019). There is no additional information provided regarding macronutrients (cf. Roberts, 2021).
It is critical to label meals with macronutrient information to enable customers to make nutritionally conscious food purchases (cf. European Commission, 2020), not only because nutritional labeling has been shown to improve purchasing behavior and promote healthier eating (cf. European Commission, 2020), but also because technological innovation and differentiation are critical in two-sided platforms (cf. Mota, 2004).
This thesis proposes a healthier feature with the goal of improving the experience of nutritionally conscious customers by incorporating (1) nutritional information into the menus of restaurants that opt-in; (2) proactive meal recommendations based on the user's nutritional goals; and (3) tracking consumers' calorie consumption across orders. To ensure the success of a healthy approach in the online food delivery business, a market and client purchase criteria analysis is undertaken prior to implementation.
1.6 Statement of the Problem
The market analysis explores the construction and composition of the nutritional-conscious market in Germany in order to implement a nutritional-conscious strategy in Uber Eats.
The qualitative research described in this thesis was structured around three main goals:
1. Establish the significant trends of the online food delivery industry in Germany.
2. Provide insightful information about opportunities for Uber Eats in the nutritional-conscious industry in Germany.
3. Determine whether Germany is a potential market to implement a nutritional-conscious strategy at Uber Eats.
1.7 Limitations and Assumptions
This investigation is subject to numerous restrictions. Additional investigation will be required to elucidate this.
To begin, this thesis is limited to the German market due to the market's size and competition, as well as the dissertation's time constraints.
Second, because the nutritional-consciousness measurement is relatively uncharted territory and there is a dearth of relevant materials for developing nutritional-conscious scales, the definition will be simplified to the sociocultural group of the “LOHAS," which refers to “people who are interested in healthy living and social and environmental issues, and who buy products related to this” (Cambridge Dictionary, n.d.), also known as conscientious customers (cf. Helmke et al., 2016).
Third, due to the exceptional circumstances in which we find ourselves at the moment with COVID-19 and the degree of uncertainty and volatility associated with both the physical and financial systems, some descriptions of the market will be constrained and simplified to Q3 2021.
1.8 Methodology
The current study employs a variety of models to better understand the German online food delivery market, with a particular emphasis on the nutritional-conscious segment. The first section provides an overview of the writing process, its motivations, theories, and its broad context. The following section provides market research and analysis, beginning with a general theoretical explanation of the PEST Analysis and then moving on to a pragmatic analysis of the macroenvironment's political, economic, social, and technical components in Germany at the moment. The following section introduces and applies Porter's five forces to acquire a macrolevel view of the overall online food delivery industry. By then, a clearer picture of the German online food delivery market, the nutritional-conscious segment, and the external variables affecting the customer will emerge. Then, a simplified Opportunities and Threats analysis demonstrates the aspects in current circumstances that would probably affect "Uber Eats" if a nutritional-conscious approach is adopted. After the initial goals of this thesis are addressed, an STP Model will be conducted in order to give recommendations on how to develop Uber's nutritional-conscious strategy.
Figure 6 provides a more visual representation of the entire project:
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Figure 6: Model application framework |Source: own elaboration.
2 Macro-environment Analysis
Every organization must handle changes that have occurred or are anticipated to occur in its operational business environment. Such changes occur on a continuous basis, and any organization that fails to recognize and adapt to them risks suffering commercial difficulties or even the demise of the whole operation (cf. Cadle, Paul, & Turner, 2010, p. 2). In the case of Uber Eats, the examination of the business environment of Germany's nutritionally-conscious market in order to adapt to consumers' changing needs is of absolute importance before launching a new feature. This will be accomplished through the application of the macroenvironment analysis technique “PEST.”
2.1 Theoretical Fundaments of the Pest Analysis
The PEST analysis is used to create a description of the context or environment in which a business operates; it takes into account the external business environment in terms of Political, Economic, Social, and Technological factors that affect the decisions and activities of businesses. Analyzing the external environment is critical for any business when developing strategies to improve performance since it enables the making of critical decisions (cf. Buye, 2021, pp. 2-4; Cadle, Paul, & Turner, 2010,p. 3; Team FME, 2013, p. 12).
2.1.1 Political Factors
Political considerations enable the determination and evaluation of the impact of government involvement on the operation and performance of the business. This arises as a result of the government entity's laws and regulations. This category encompasses all government policies, all tax laws, and all tariffs imposed on commerce (cf. Bouzid, 2020, pp. 20-21; Team FME, 2013, p. 12; Cadle, Paul, & Turner, 2010, p. 4).
2.1.2 Economic Factors
Economic factors, on the other hand, take into account all macroeconomic variables. These variables are considered both nationally and internationally, as they have the potential to enhance or detract from an organization's performance. Economically, the impact on the company should be measured in terms of bank financing options, interest rates, currency rates, quality costs, inflation rate, labor and energy prices, and quality. The total road infrastructure has a considerable influence on this area, including the presence and functioning of roads, the closeness and functionality of ports, airports, railway systems, and so forth. The income per capita is frequently classified as an economic component, while in certain circumstances, it is also classified as a social factor. Additionally, events such as economic cycle changes, particularly periods of economic crisis and boom, should be taken into account (cf. Matovic, 2020, p. 97; Bouzid, 2020, pp. 21-22; Team FME, 2013, p. 13; Cadle, Paul, & Turner, 2010, p. 4).
2.1.3 Social Factors
Social factors encompass individuals' religion, beliefs, culture, habits, demographics, interests, and preferences. All of these factors have an effect on the results that a business aims to attain, whether positively or negatively (cf. Bouzid, 2020, pp. 23-24; Team FME, 2013, p. 15; Cadle, Paul, & Turner, 2010, p. 4).
2.1.4 Technological Factors
Given the rate of innovation in the markets, technological features are critical for a business. Businesses that understand how to leverage technological advancements can expect tremendous benefits. It can, however, be highly detrimental to companies that become obsolete and do not upgrade their infrastructure. The following are frequently considered in this area: level of technology development, innovation, amortization, level of equipment flexibility, level of automation, technological motivation, rate of technological change, technological development strategies, and the existence and functionality of technology parks (cf. Matovic, 2020, p. 97; Cadle, Paul, & Turner, 2010, p. 4).
2.2 Application of the PEST Analysis
2.2.1 Political Factors
(1) Stability
Germany’s economic and social stability has been kept in balance thanks to its (1) macro policies focused on stability and growth (2) institutions grounded in German ‘ordoliberalism’ (3) global companies with unique structures, (4) an equitable system of social security and cooperative social partners, and (5) a long-term perspective by companies and citizens with the willingness to forgo an immediate reward (cf. Folkerts-Landau & Schneider, 2016, p. 4).
Germany’s central bank has been tasked with ensuring price stability, protecting savers and income earners from wealth loss while encouraging growth and employment. By raising interest rates more sharply and early than other nations, Germany has been able to keep inflation rates below 3% for the last 20 years (cf. Deutsche Bundesbank, n.d.; IMF., 2021d). Low government debt is also an intrinsic part of German politics. For example, in 2009, a constitutional 'debt brake' was enacted. This law on federal indebtedness limits the federal government's net borrowing beginning in 2016 and the federal states' borrowing beginning in 2020 (cf. Folkerts- Landau & Schneider, 2016, p. 4).
Additionally, in the latest years, Germany has ranked in the global top 30 countries in both the Index of Economic Freedom 2021 and the Ease of Doing Business (Doing Business) 2020 report (cf. The Heritage Foundation, 2021, p. 202; World Bank, 2019). This is largely attributable to the fact that secured property interests, both tangible and intangible, are recognized and enforced for both German citizens and foreigners. Germany also has a powerful intellectual property protection framework. The judiciary is independent, and the rule of law is well- developed. Corruption in government is uncommon, and corrupt activities are normally pursued and punished (cf. The Heritage Foundation, 2021, p. 203). This is reflected in the Corruption Perceptions Index 2020. Germany's ninth-place standing indicates that the country does not suffer severely from corrupt activities (cf. Transparency International, 2020, p. 2).
(2) German Fiscal Expediture
The COVID-19 pandemic and the necessity to address its economic implications posed a significant budgetary burden for countries around the world. They had to safeguard the health of their people, safeguard employment, preserve their economies' productive potential and competitiveness, and drive economic recovery. Given the expected severe economic downturn, to provide EU member states with the fiscal space necessary to resolutely combat the pandemic, the European Commission announced on March 20, 2020, that the conditions for activating the general escape clause from the “Stability and Growth Pact” had been met (cf. Federal Ministry of Finance, 2021, p. 13).
The Stability and Growth Pact (SGP) is a collection of regulations to guarantee that European Union member states maintain solid public finances and coordinate fiscal policies. The guidelines are intended to avoid negative fiscal repercussions and to regulate excessive budget or public debt (cf. Liberto, 2021).
As a result, the German parliament authorized the borrowing of a supplemental budget, which exceeded the upper limit on the new borrowing spending cap (debt brake) stipulated in Article 115 (2) sentence 6 of the Constitution. The German federal parliament indicated in the 2021 budget that it would borrow EUR 122.3 billion, or around 4.31% of GDP, exceeding the constitutional limit of 0.35% of GDP (cf. Deutsche Bundesbank, 2021, pp. 9-10; Vallée, CohenSetton, & Buhl, 2021). The supplemental budget was intended to provide immediate assistance in the form of grants in order to ensure the economic survival of businesses and to bridge any liquidity shortages caused by the coronavirus pandemic. Expenditures for in-kind social transfers increased dramatically (by 8.7%). Subsidies increased significantly (126.6%) as a result of government expenditure on immediate and short-term assistance measures, among other expenditures. Additionally, intermediate consumption increased by 11.4% year on year, reflecting, among other things, spending on protective equipment, testing facilities, and vaccination centers (cf. Federal Ministry of Finance, 2021, p. 30).
Due to the continuation of the exceptional emergency situation, the German Bundestag passed a second supplementary budget on July 2, 2020, increasing the Federation's net borrowing to nearly €240 billion. However, borrowing remains lower than expected when looking at 2020 and 2021 as a whole (cf. Federal Ministry of Finance, 2021, p. 13). Figure 7 illustrates Germany's budget balance during the last few years.
(3) Corporate Taxation
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Figure 7: Germany's budget balance between 2016 to 2026 in relation to GDP from IMF. (2021a).
In Germany, all corporations are subject to corporate income tax. Profits from business/trading, passive income, and capital gains are all subject to taxation, although certain expenses are deductible. Corporate income taxes are often divided into three components: corporate income tax, solidarity surcharge, and municipal trade tax. The corporate income tax rate is 15%, but a solidarity surcharge of 5.5% must be added. As a result, the total tax (including the solidarity fee) is 15.825%. Corporate income tax rates are fixed (cf. Maywald, 2016). Each municipality in Germany has a separate municipal trade tax; for example, Frankfurt imposes a 16.10% trade tax that adds up to a total tax burden of 31.925%, while Eschborn imposes a 9.80% trade tax that adds up to a total tax burden of 25.625% (cf. Frase, 2021). The effective average federal corporate tax rate in Germany as of 2020 was 29.9%, which is higher than the OECD average of 23% and the EU27 average of 21.3% (cf. Alse, 2020).
(4) Vat Policies for Electronically Supplied Services in Germany
The difference between commodities and services is becoming increasingly blurred in cloud computing. To overcome this, the EU has created a new category called "electronically supplied services" that incorporates the majority of cloud computing. This type of service is delivered via an electronic network that is primarily automated and requires little human intervention (cf. Arintass, n.d.). Businesses in the European Union are taxed based on the country in which their goods or services are consumed (cf. Your Europe, 2021). If a customer buys an item from an online entrepreneur and then picks it up from him or if the online entrepreneur sends the item to his customer in Germany, this delivery is in domestic obligation to be taxed. The obligation to declare, register, and pay the VAT is borne by the online entrepreneur who has to collect the VAT from his customers together with the purchase price. The online retailer can issue an invoice for his service (cf. DATEV eG., 2019). Additionally, electronic marketplaces must hold detailed information on third-party sellers, including their German VAT transactions and a tax office certificate validating they are up-to-date on their tax affairs (cf. Huschens, 2021). Only if the online retailer is a small business owner, i. S. d. 19 UStG, VAT is not charged. A small business owner can be an entrepreneur if the income generated by him did not exceed the limit of 17,500 euros in the previous year and is not expected to exceed 50,000 euros in the current calendar year (cf. DATEV eG., 2019).
(5) Liability for Suppliers' Infringements
In the European Union, online marketplaces are not liable for platform suppliers' infringements if the platform is unaware of the infringement or takes prompt steps to remove the infringing content upon becoming aware of it (cf. E-Commerce Directive, 2000), and there is no general obligation for online platforms to monitor the information or to seek facts or circumstances indicating illegal activity (cf. Schulze et al., 2020, p. 489).
(6) Nutrition Policies
As measured by the Food Environment Policy Index (Food-EPI) in 2021, Germany's nutrition policies demonstrate that the country is currently falling far behind international best practices for lack of healthy and sustainable nutritional environments, necessitating urgent reform. The lowest ratings were given to the regulation of food advertising and marketing, food pricing, promotion of healthy food choices in retail settings, and intersectoral approaches. The highest ratings were given to political leadership, official dietary guidelines, and monitoring and surveillance. Additionally, in Germany, there is no obligation from restaurants to announce the energy or nutrient content of food, only from allergens and certain additives (cf. von Philipsborn et al., 2021, pp. 8-16).
2.2.2 Economic Factors
In 2021, public finances will continue to assist the economy in a big way. The specialized support measures and social services continue to mitigate the economic effects of the coronavirus outbreak. As a consequence, the federal government's general government deficit is anticipated to continue growing in 2021 (cf. Deutsche Bundesbank, 2021, p. 62).
(1) European Central Bank Policies
The negative supply and demand shock caused by the lockdown measures resulted in a decline in production and a slowing of inflation, necessitating a more expansionary monetary policy to sustain spending once the lockdown is released and to alleviate the debt load on indebted agents. As a result, central banks must assume the position of lender of last resort. Interest rate cuts and corresponding declines in nominal yields on government bonds, and therefore in financing conditions, are necessary to maintain the sustainability of public debt and stable financial markets. Financial restraints should also be avoided from compelling non-financial actors to cut back on their expenditure, which is why expansionary policies should be complemented by liquidity operations (cf. Blot, Creel, & Hubert, 2020).
In light of this, the European Central Bank (ECB) assisted the EU's economic recovery by maintaining low-interest rates, initiating a new series of quantitative easing (QE) through the "Pandemic Emergency Purchase Program" (PEPP), and refinancing operations to provide liquidity, supporting bank lending to firms and households (cf. European Central Bank, 2021).
The European Central Bank decided on September 18, 2019, to maintain low-interest rates on its main refinancing operations and the marginal lending facility at 0% and 0.25%, respectively, and to lower the deposit facility to -0.5%. Additionally, on April 30, 2020, the European Central Bank reduced its TLTRO rate by 50 basis points below the DFR to as low as -1% for banks meeting their lending benchmarks to the real economy, easing financing conditions. Given that the rate is lower than what banks pay on their excess liquidity, banks have a strong incentive to borrow long-term from the European Central Bank and to grant more loans (cf. European Central Bank, 2021; CLAEYS & Bruegel, 2021).
Figure 8 illustrates the development of private bank lending throughout time.
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Figure 8: Bank lending to the private sector in the euro area (YoY, %) from CLAEYS & Bruegel (2021).
Note: black vertical line indicates the introduction of NIRP (negative interest rate policy) in the euro area in June 2014.
In addition, to guarantee that interest rate disparities between bonds issued by various member states do not compromise the Eurozone's monetary policy functioning, the European Central Bank implemented a new program of asset purchases throughout the continent, the Pandemic Emergency Purchase Programme (PEPP; cf. Grund, 2020, p. 1). The PEPP is a temporary asset purchase program for commercial and public sector securities. Its initial budget was planned to be EUR 750 billion until the end of 2020 but has been expanded to EUR 1.850 billion and extended until the Government Council determines that the COVID-19 crisis phase has finished (cf. European Central Bank, 2021b).
On 26 March, the ECB announced that it would loosen the asset purchase limit for each country, which had previously been capped at 33% of each country's debt issuances, to a more "flexible" approach over time based on each country's shareholding in the ECB, the so-called capital key, allowing for deviations and thus allowing for effective spread reduction in sovereign interest rates. These purchases allow for the easing of financing conditions for both the private sector and euro area member states, thereby supporting governments' efforts to stimulate activity (cf. Blot, Creel, & Hubert, 2020, p. 13).
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