Entering the Central Europe Market

What is the Central European market?

Often, Central and Eastern Europe are discussed as a single region (CEE). There are important differences.  

There are the Visegrad Four countries, or V4 countries which share cultural values and common roots in religious traditions. These countries include:

• The Czech Republic
• Hungary
• Poland
• Slovakia

Other Central Europe countries include Austria, Germany, Italy, Slovenia and Ukraine, bringing the total to nine countries.

What is your Market Entry Strategy?

Entering a new market starts with a plan, objectives and criteria. Common background information should include the following:

Distribute vs. manufacture — many companies begin entering a foreign market by establishing business partnerships that allow them to export into that market. Before choosing one mode of entry over another there are many governmental, legal and financial laws and regulations that need to be reviewed.

Infrastructure — The roads, railways and related transportation/logistics alternatives can be key factors regarding the cost and time required to distribute your products.

Population/size of market — it is not just the size of a country that matters. It can also be the extent to which a population matches your target’s demographics. Poland’s population of nearly 40 million is greater than the other 3 countries combined (the Czech Republic, Hungary and Romania have approximately 11 million, 10 million and 5 million inhabitants, respectively). This, among other facts, may help you to plan an entry strategy into just one country or the entire region.

Similarities and Differences

One might prefer to think of the countries of Central Europe as one homogeneous region. But because of differences in their economic development and their experiences during the communist era (pre 1990),combined with their ethnic and linguistic differences, the people in these markets may not relate to your business or its products in a consistent manner.

Languages — Though related through their history, each country has its own primary language. There are several other languages spoken in the region, but English is in the minority. So if you need to do any market research or develop marketing or advertising messages, it is important to have staff or a qualified third party available to deal with local communications.

Currencies — While they are all members of the EU, only Slovakia has adopted the Euro as its currency. Thus you may be dealing with at least 4 different currencies in this region. Exchange rate fluctuations should be factored into any financial projections.

Per capita income — There is considerable variation in the amount of money a typical household earns and has to spend.

• On the western side of the Central European countries, Germany and Austria average$47,000 to $51,000.
• To the east,Ukraine, Bulgaria and Belarus range from about $3,000 to nearly $8,000.
• And in the middle (after all, these are in “Central” Europe), Hungary and Poland average about $14,000, with Slovakia and The Czech Republic between $18-20,000.
• Combined with population statistics, per capita income can provide one estimate of potential sales, assuming of course, that there is desire to purchase what you sell. 

Economies and industries — A few highlights may be useful.

• As the largest economy in Central and Eastern Europe and one of the top ones in the EU, Poland is one of the key markets to consider.It is well situated, as it is next to Germany, southeastern Europe and Russia. Finally, Poland is investing heavily in its infrastructure to upgrade roads and make it easier to move goods within its borders.
• Slovakia’s economy is one of the strongest in the EU. Manufacturing, particularly within the agricultural and automotive industries, is strong.
• Hungary also has a relatively strong economy, skilled and low cost labor, and a modern infrastructure.
• The Czech Republic’s economy is one of wealthiest and most stable in the region. It also has one of the most developed industrialized economies.

Do Your Research

Though you can learn a lot about a new market through diligent secondary research and analysis, there are still many questions that can best be answered by doing primary market research studies directly with potential customers.

A market research firm that knows and understands international markets, their languages, customs, policies and even attitudes toward research can help to:

• scope the market – objectively and often with more resources than your own staff
• identify competition, how they go to market, their messages and prices
• conduct focus groups or personal interviews
• create and execute online or telephone surveys

Results from such research can aid your decision making by

• determining how much of a need exists for your product
• testing your communications and any regional/local meanings
• estimating the extent to which your products would be purchased
• identifying any problems early enough to take action prior to full rollout

In addition, such a firm can offer advice and guidance based on similar projects for other clients who had common expansion goals and needs.

Next Steps

• Make sure you have clearly stated your objectives – i.e. prioritize countries you wish to enter, and what market penetration, sales, or other goals you have.
• Identify your ideal customers – e.g. where are they, what are their demographics, and how many of them exist?
• How will you meet your goals? — i.e. what exactly will you do, and how will you do it?
• Get some objective help to guide you and reduce risk — e.g. identify and hire a local partner, a consulting firm, a bank, or a market research company that has an intimate understanding or unique knowledge about the market.