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Doing business in CEE: „Normal“ European markets after 30 years of transformation?, 26.9.2019

Doing Business in Central and Eastern Europe: “Normal” European markets after 30 years of transformation?

Panelists:

  • Hermann Anderl, Managing Director, Canon CEE

  • Martin Chaloupek, Head of Sales Central Europe, Frequentis AG

  • Janusz Kulik, Member of the Board, REWE International

  • Günter Thumser, former President of Henkel Europe and Henkel Central Eastern Europe

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Moderator: Arnold Schuh, WU
 

The Iron Curtain fell 30 years ago. The countries of the region have undergone a massive restructuring and modernization process of their economies and industries and 13 of them have become members of the EU. Strongly increasing incomes per head show that the economic catching-up process to West European standards has been successful so far. Many observers maintain that the CEE markets has become “normal”, meaning similar to those of their West European neighbors. This implies that the ways of doing business, market structures, buying behavior and competition have converged and there are no striking differences anymore - at least not more than between any Western countries.

Debate:

  • Have the customers’ behaviors and business customs in your industry become more “normal”? Or do they still vary by country, business or customer group?

  • What are major differences that you can still find in your industry?

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Günter Thumser: We have seen a tremendous growth in the CEE countries in the last 30 years. On average, these economies were outperforming Western European ones in annual growth by a factor of 2 to 3. Therefore, in this respect, CEE markets are different. Henkel Central Eastern Europe based in Vienna has management responsibility for business operations in 32 countries in Central and Eastern Europe and Central Asia. For Henkel all these markets have been “serious business engines”. However, the growth cannot be taken for granted – prices are going up, competition is getting tighter and the promo shares are increasing too. From a labor market perspective, the biggest concern in the whole region is the stagnating or even declining demographic development. Firms operating in CEE suffer from a major brain drain and these shrinking labor markets are a major challenge for corporate strategy. Recruiting and retaining talent has the highest priority for the management in CEE.

Janus Kulik: There was no real retail trade before 1989. A scarcity of products, empty shelves and long queues were a typical shopping experience. Billa was a pioneer in 1991 when it opened the first supermarket. Shoppers’ behavior has changed significantly in the last 30 years and CEE markets have become more Western: From seller markets, where people had money but no goods to buy, to buyer markets, where a huge variety of products is available - but still a lot of people cannot afford it. Smart shopping means in this context: “the cheaper you buy the smarter you are”. In retailing, there is no “CEE region” but many different markets with varying needs and wants. Even Czechs and Slovaks differ in their consumer tastes today. Whether international or national brands are more popular depends on the product category.

Hermann Anderl: The regional headquarters Canon CEE was established in 1994 and coordinates the activities in 24 countries in Southeastern, Eastern Europe and in the Caucasus today. Users of technological products are very similar worldwide, they go for the latest state of technology. The benefits of digital solutions for the processing of images are clear to the users – the hurdle is often the affordability. Therefore, a market for used equipment exists. The main challenges for Canon CEE are the brain drain to Western Europe and the USA, the high poverty rate, foreign exchange accessibility and high interest rates. Technological leapfrogging, the need to improve efficiency due to the labor shortage and the readiness to adopt digital solutions are seen as opportunities. Increasing wages will lead to a higher purchasing power what will help the consumer business.

Martin Chaloupek: Frequentis is a leading global player in secure voice communications and control center solutions. In those B2B and B2G markets for mission-critical applications, trust is a core element in business relations. Interpersonal relations play an important role in trust building with customers and partners. Sales people have to travel a lot to meet prospects in person and the sales process takes longer. They have to be prepared for stark differences in the rule of law, corruption and institutional quality compared to Western Europe. Strict compliance rules for all employees and external partners involved in the sales process are a standard and are monitored.