Directory Free Newsletter Contact Log in

European-American Topics - Business - Eastern European markets

Taking advantage of the Eastern European markets
By Stephen D. McLaughlin

For some of us, the image of Nikita Khrushchev banging his shoe on the podium of the United Nations in the early sixties and uttering the words “We will bury you” is burned into our minds. For others, Ronald Reagan standing in front of the concrete and barbed wire monstrosity separating East and West Berlin and saying: “Mr. Gorbachev, tear down this wall!” echoes resoundingly today. Solidarity in Poland, the uprising by the freedom fighters against the Ceausescu regime in Romania, the general sweep of freedom as oppressive governments toppled one by one... these are events burned in memories all over the world.  Well, the wall is down; and for the most part Communism is a thing of the past in Eastern Europe. While there are still parts of Eastern Europe that are in considerable turmoil, much of what was formally part of the Soviet block nations – including a great deal of the former Soviet Union itself – is becoming an extremely important part of the European Union, and of the global economy. Tens of millions of potential customers in both the consumer and business markets are looking for goods and services that were both unavailable to them until recently and which their own business infrastructure is unable to provide them with.  While, for the most part, the Eastern European markets are wide open and invite trade with the West, it is necessary to remember that doing business there is not like doing business in the United States, or even Western Europe. In large part because of their recent history of oppression and the fact that to most of these countries free enterprise is a new and unfamiliar concept, businesses face unique challenges when doing business in Eastern Europe. However, while these challenges can certainly appear formidable, the key to overcoming them is knowledge, and understanding. Just a few of the most significant challenges you are likely to face include: 

1.Cultural Differences and Diversity: While there are many who talk about Eastern Europe or former Soviet Block nations as being a single entity, nothing could be further from the truth. Doing business in Poland, for example, is not the same as doing business in Estonia – the same way doing business in China isn’t the same as doing business in Japan. Eastern European nations each have their own rich and unique history and culture and because of this each have different and often times complicated customs and protocols when it comes to business transactions. To effectively compete in Eastern European markets, it is necessary to be aware of the “do’s” and more importantly the “don’ts” of doing business in each individual country.

2.Government Regulation: While it is certainly safe to say that the citizenry of most Eastern European nations currently enjoy more freedoms and live under less oppression from their own governments than at any time since the end of World War Two, the same cannot always be said for Western companies attempting to transact business there. Because many of the governments of the Eastern European nations are far less than two decades old, there is very often less stability in their rules and regulations than you will find doing business with nations where the governments are older and, therefore, better established. Tariffs, import/export taxes, customs regulations, the level of governmental intervention in a specific business transaction – all these and many other facts can change literally overnight. To adequately protect your profits, a thorough understanding of the governments you are involved with is crucial. It is not enough to know how things are now – you must also understand how things were last year, and have a reasonably good idea, based on recent trends, of how things will be tomorrow.

3.Negotiating Strategies: As we all know, the purpose of business negotiation is to get the best deal you can possibly get, and thereby increase your profit margin, while at the same time offering the individual or company you are negotiating with a deal that they can live with as well. When negotiating a business deal in Eastern Europe, there are several questions you should ask yourself:

• What is the general sentiment of the government and people towards the United States?

• How do the local ethnic and religious customs affect negotiation?

• How stable is the government and/or business environment in the country – and even the region of that country – you are looking to do business in.

• Are there any ethnic, cultural or religious prejudices you need to be aware of (example: is there a strong sentiment against Western Europe in the area you are looking to do business in). 

The single threads that run through dealing with the above listed challenges – and which is crucial to dealing with the many other challenges you will face doing business in Eastern Europe – are knowledge and understanding .  One of the things I have learned in my years of consulting and advising businesses of all sizes on how to trade in Europe is that it is virtually impossible to have too much knowledge with regards to the diversity and rich cultural and ethnic differences that exist between Westerners and Eastern Europeans, and also between Eastern Europeans themselves. Lack of appreciation for the specific challenges they will encounter in the Eastern European marketplace is the single largest reason why some businesses fail in their dealings there.  
The profits are there in Eastern Europe. They want what you have to sell them, and they will pay a fair price. But before you venture into that market, make sure you know what you are getting into and if you are unsure of the specifics, seek help from a professional. Believe me, it’s worth it.          

Author Bio:  Steve McLaughlin founded Global Market Insights, with offices in Europe and the U.S., with his vision of giving clients two synergistic competencies: knowledge of the global marketplace and industry expertise in manufacturing, finance and information technology. Steve has over twelve years of international experience in three continents, having started in executive search as a Beckett-Rogers Associate. Steve is a graduate of Rice University where he was student body president, and completed post-graduate studies in International Economics at the Universidad Mayor, Santiago, Chile.


© 2006 All content property of European Weekly unless where otherwise accredited