Draw a circle around Central and Eastern Europe. It doesn't take long to discover why this region, coveted for centuries by kings and emperors, continues to be strategic to the business leaders of today.
Consider its proximity to the European Union. Look to the east, and notice its historic ties and access to the former Soviet states.
Now consider that six of the region's countries -- Slovenia, the Czech Republic, Hungary, Poland, Romania and Slovakia -- form the Central European Free Trade Association (CEFTA), a common market of nearly 90 million people.
Zero in on Ukraine and its own 51 million population, and nearly 500 million customers surrounding Ukraine. Now you can begin to understand why U.S. companies are invading the region today, as so many others have in the past.
A friendly invasion
This invasion is a welcome one. It brought over $20 billion in foreign investment to Hungary over the past decade and $30 billion to Poland. The Czech Republic has seen its share of foreign investment double in the past year with $2.5 billion in 1998. There are similar stories to tell all over Central and Eastern Europe.
Throughout the region, U.S. companies are finding a low-cost, skilled labor force ready to take on new projects. With the right training and management, workers are proving time and again that they can produce quality products.
There are incentives, as well. The Czech Republic recently dropped its minimum investment level to $10 million to allow more manufacturing projects to qualify for incentives. Though some incentives are disappearing from the region as countries try to meet EU guidelines, you can still benefit if you're a large company.
Sending out the scouts
The spoils are many, but so are the battles along the way. The best strategy for success in Central and Eastern Europe seems to be to listen to the scouts -- business people who have faced the challenges and survived.
R. Lance Bozman, located in Budapest, is the managing director of corporate development in Hungary for AIG/Lincoln Properties. His company was created to develop, manage and own quality commercial and residential facilities throughout the Central and Eastern European region.
| "We're now winning projects in Germany, Belgium and France and supplying those projects with goods manufactured in the Czech Republic."
-- Andrew Rice, senior vice president, international business,
Jordan Industries, Inc. |
"If you're fresh from the U.S., you may be surprised to find that the environment isn't as pro-business as you'd expect," said Bozman. "Tax dollars, employment and generating revenue are becoming more important, but it's going to take a generation to change."
Just as in any deal in the United States, it's important to look at all the angles of any deal.
"Don't sacrifice the right decision for a quick decision," said Bozman. "Double your due diligence. Pay attention to details. It takes an enormous amount of time to get answers. It also takes a lot of patience."
Bozman also said it's important to have people you trust looking at a European site for you.
"Listen to your in-country people, once they're there," said Bozman. "It's the people on the ground who understand the issues, the people back home might not. Trust your overseas staff when they say it's going to take some time to get a construction permit, or to hire good people or get approval from the government."
Finding the right person in the country can be difficult, but it pays off in the long run.
"Take the time to find the right local partner," said Bozman. "You need to know how the decision-making process works in the region. The best way is to find a local consultant."
A success story
Andrew Rice is senior vice president of international business for Jordan Industries, Inc. In 1993 Jordan's Czech joint venture, Dura-Line CT, was one of the first joint ventures with a private firm in the Czech Republic, producing telecommunications conduit for installing fiber-optic cables.
His company has enjoyed growth with Dura-Line, quadrupling its capacity in five years.
"We're now winning projects in Germany, Belgium and France and supplying those projects with goods manufactured in the Czech Republic," said Rice.
Rice also said that a company expanding in Europe needs to have someone in the country.
"Spend time in the country," said Rice. "You have to teach by being there. You can't send your staff to a course. You have to be there to remind them to phone the real estate agent, to make counter offers, to stick to their pricing.
"Every successful company in the region has either placed their people there permanently, or they travel there extensively."
It's important to have a representative in the country for another reason. Your prospective customers want to connect with a human face.
"Customers want a local person to call with the smallest question," said Rice. "Finding the right person -- an agent, distributor or local buffer -- is very important. Ask customers who they trust in related businesses."
Bozman has great faith in the future of the region.
"The younger generation is amazing to watch," said Bozman. "Even though they may not understand the end result, they're willing to listen, learn and adapt. They have a unique ability to move on to the next level."
Nanci Tangeman is an Amsterdam-based freelance writer.
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