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The Czech Republic - an Alternative for your Business

By Stephen D. McLaughlin
Posted June 25, 2007



    When considering a nation in Europe in which to either expand or locate your business, the odds are probably pretty good that the Czech Republic isn’t way up on your list of possibilities. To be honest, prior to spending some time doing business there recently, I would have said the same thing. However, having gained some first hand experience in the Czech Republic, I am now able to see it in a different, far more positive light. 

    Located in the heart of central Europe, the Czech Republic (formally part of Czechoslovakia) has a long and rich history going back well over 1000 years. With the fall of the Soviet Bloc in the late 1980s and the removal of Communist rule in the early 1990s, Czechoslovakia peacefully split into two parts – the Slovak Republic, and the Czech Republic, in 1993. The Czech Republic joined NATO in 1999 and was granted entrance into the European Union in 2004. Since being accepted into the EU, the Czech Republic has enjoyed a constant economic growth – currently well over the EU average. Part of this is due to the Czech Republic’s burgeoning tourism industry which boasts well over  6.5 million visitors a year, most of them headed to the culturally rich and diverse capital city of Prague. Domestic industry has likewise continued to grow in recent years, which accounts of an unemployment rate of less than 4 percent in Prague – although this figure is higher in the outlying countryside. The current population estimate is 10.2 million people. 

    For business, the Czech Republic can be an attractive alternative to other European Union nations. This is due in large part to the fact that the Czech Republic government has worked very hard since it entered the EU to make the country attractive to foreign investment. Some specific reasons to consider doing business in the Czech Republic include: 

    Location, Location, Location: A quick glance at a map of Europe is all you need to understand that the Czech Republic lays in what is essentially the dead center of the Continent. While offering easy accessibility to all of the continental EU nations, perhaps the largest advantage of the Czech Republic’s location is the fact that it shares a huge border with Germany, the largest and strongest consumer market in Europe, and one of the largest and healthiest economic powerhouses in the world. The Czech Republic also shares borders with Austria, Slovakia, and Poland and provides a gateway to most of Eastern Europe that is both more accessible and more convenient than the majority of  other heavily industrialized nations of the European Union.  

    Growth and Modernization: Since its entrance into the European Union in 2004, the government of the Czech Republic has spent tens of millions of Czech Korunas (CZK) improving and upgrading its infrastructure. The process of upgrading existing and adding new infrastructure continues today, making many aspects of doing business there easier than it was just a few years ago. Transportation in particular has been very positively impacted. Additionally, the Czech Republic boasts some of the most modern and stable Internet services in the world, allowing for excellent communications with home or satellite offices in other countries. 

    Economy and Population: Due in large part to a number of governmental programs specifically designed to increase foreign investment and trade, the cost of doing business in the Czech Republic is significantly lower than similar costs throughout the rest of the European Union. Both in terms of goods and services and the hiring of local labor, the dollar goes quite a bit further in the Czech Republic than it does in any of its EU neighbors. While the Czech Republic has not yet converted to the Euro (current plans see this as possibly happening as early as 2010) the exchange rate of the CZK to both the dollar and the Euro is very favorable to foreign currency and investors. Additionally, both the government and the population are very welcoming to foreigners and, unlike some EU member nations in close proximity, both seem willing to go out of their to get your business.  

    Of course, expanding your business operations into any foreign country will bring with it unique challenges, which your expansion team will need to overcome. Perhaps the largest challenge existing currently for businesses looking to expand into the Czech Republic is language based. In most European Union nations, English or French  allows you to communicate with the vast majority of people on a business level. This is not always the case in the Czech Republic. Many of the locals – aside from the younger generation and particularly outside of Prague – speak only Czech. This is where an international consultant is critical to your success. In Global Market Insight’s case, we were recently tasked by a VC client to identify engineers specializing in the networking, semiconductors and software fields. It took some work but we did find the right skill sets who also spoke English, and who were available at very economical salaries. Our team, with their linguistic and multicultural skills, was the key to making this happen.  

    Perhaps the most important aspect of any foreign expansion or endeavor is picking the right location. When looking to expand into Europe, many businesses look no further than Great Britain, France, or Germany – simply because these nations are best known to us as Americans, and with which we have the longest financial history. But familiarity is not always the best choice as far as our bottom lines are concerned, and a positive relationship in the past does not always guarantee healthy profits in the future. When looking to expand your business in Europe, certainly keep the tried and true nations in mind, but don’t be afraid to look at the smaller, less well-known nations. For location, ease of business, and value for the dollar, the Czech Republic might be an excellent place to start.

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