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Adventures in eastern Europe: Utah businesses go it alone.

ADVENTURES IN EASTERN EUROPE

On the desk of a vice president at Beehive Machinery in Sandy, Utah, sits a can of sausages. Its label, printed in Hungarian and English, proudly proclaims: "In this can is the last breath of Communism." At the Jefferson Institute in Provo, a vice president remembers a young Russian coming up to him after he was given one of the Institute's diplomas: "I feel so powerful? I can really do this. Before I had the ideas, but I didn't think I could do them. Now I know I can." In a small apartment in Romania, the president of the Easti Group, a Salt Lake City art importer, discovers a cache of dozens of beautiful paintings dating from the 1930s and 40s - all of them painted in green. "I was the only color we could get for six years," says the artist apologetically.

Although the Russian word glastnost has been art of the international business language since 1985, it was the destruction of the Berlin Wall two years ago that heralded the end of the Soviet economic system. Today, as the Soviet Union struggles to make the switch to a free-market economy, a number of Utah companies, including Beehive Machinery, the Jefferson Insitute, and the Easti Group, have found success in forging business links between the Salt Lake City-Provo area and Moscow. Despite cultural differences, occasional language barriers, disparate currencies, and other obstacles, each of these companies anticipates significant long-term growth in Eastern Europe and the Soviet Union.

Beehive Machinery

Beehive Machinery manufacturers equipment for the processing of meats, fruits, and vegetables. More than 75 percent of its business is overseas, and nearly 30 percent of its equipment is exported in Eastern Europe and the Soviet Union. "We've been in that part of the world for nearly 20 years," said Jim Varney, vice president of international sales. "We went there for a simple reason: Eastern Europe and the Soviet Union represent enormous market potential."

Doing Business by Committee

In the past, if Beehive wanted to do business in the Soviet Union, a Russian company would first have to define the need for Beehive's equipment. The proposal would then be submitted to a buying group representing this Russian company's industry. As hard currency became available, these buying groups would decide which companies would be able to purchase Beehive's equipment. "In those days," said Varney, "it wasn't necessary to see the individual companies. We'd put on seminars and demonstrate our equipment to as many as 200 firms at a time. Then the companies would make a recommendation to their buying groups, and we would negotiate with that group."

Varney admits that some aspects of the business were easier to accomplish prior to 1989 when the Communists were still in control. "In Eastern Europe, we dealt with a limited number of trading companies. With the new reforms sweeping these countries, we are now able to deal directly with the customer through our agents."

Nobody Does It Alone

There are a number of obstacles to overcome before doing business in the Soviet Union, including a firmly entrenched bureaucracy, cultural differences, and the lack of hard currency. "You can forget about going there and trying to deal directly with customers," said Varney. "It just doesn't work that way. In order to do business, you need representatives who can act as your liaison in different countries." Varney estimates that 90 percent of his time is spent meeting with Beehive's worldwide representatives. "There are four qualities we look for in our representatives," he said. "First, do they have specific industry knowledge? Second, do they speak English? Third, do they understand how Amerian business works? Fourth, can you trust them?"

Varney cautions that the wheels of the Soviet bureaucracy grind exceedingly slowly. "If Americans want to do business in the Soviet Union, they need to change their way of thinking about quick results. Sometimes we've worked on an agreement that has taken two to three years to come to fruition. Nothing happens overnight there."

One of the problems American companies face when doing business in the Soviet Union is that rubles are virtually worthless on the international monetary market. "We don't accept payment in rubles," said Varney, "only hard currency, such as U.S. dollars." One of the ways Beehive protests itself is by demanding letters of credit confirmed on a first-class U.S. bank or a Western European bank. "Our experience has taught us that it's better to insist on letters of credit," said Varney. "It makes business a bit more complicated, but this way, there is no confusion."

The Jefferson Institute

The Jefferson Institute, founded by Mark and Elizabeth Stoddard, is in the business of providing education on such subjects as entrepreneurial training and the free-market system.

In September 1990 the Stoddards were contacted by Dr. Elvin Kalinin, a former deputy minister of education for the Soviet Union. Kalinin, currently the chairman of the All Union Charitable Foundation Intellect in Moscow, was familiar with the training seminars offered by the Jefferson Institute. He invited the Stoddards to come to Moscow to reach entrepreneurial seminars to Russians aboard a cruise ship that travels from Moscow to Leningrad. Eventually the Jefferson Institute was able to make several agreements with Kalinin. As a result, the Jefferson Institute's book, Seven Steps for Success for the Entrepreneur, has been published in Russian, and the institute was given permission to conduct one-day training seminars as well as business cruises.

One-on-One Contact

The company has chartered a luxury cruise ship for the purpose of putting Russian businesspeople in contact with American businesspeople. Cruises run from 10-17 days and cost approximately $2,800, including airfare from New York. "So far we've held five cruises this year," said Eric Stoddard, vice president of international sales, "and it's been very gratifying to see the results of our efforts. Generally, we have approximately 100 Russian businesspeople and between 20-60 American investors or entrepreneurs on any given cruise. We're teaching Russians the nuts and bolts of American business, but ultimately our goal is to get the two cultures together to create a business exchange."

Doing business overseas can be difficult under the best of circumstances, but this is especially true in the Soviet Union. For example: Where does one stay? How does one find office equipment and administrative assistance? Where are the social opportunities to meet potential business partners? What are some of the cultural differences of which Americans should be aware?

The Jefferson Institute's cruises solve many of these problems. Clients are met at the Moscow airport and taken by coach to the cruise ship. The ship is equipped with a computer center and office equipment in addition to meeting and recreational areas. Though the seminars are conducted in English, the Jefferson Institute provides numerous interpreters and translators.

"Our program provides the opportunity for an intense cultural exchange," said Stoddard. "If you're on a cruise ship for 12 days with 100 Russian businesspeople, you eat with them, you jog with them - you have time to get to know them. That's really how any business is accomplished - through one-on-one contact."

The Jefferson Institute boasts a number of success stories. One young Russian had energy and ideas but lacked the basic knowledge of how to run a business. After he attended one of the institute's seminars, he approached a friend who owned a tavern and suggested business might be even better if a VCR were installed on the premises. From there, he decided the next step was to rent out videos to patrons. Then he went to Germany and purchased several computers which he leased to clients. Today, he has started a construction company which specializes in renovating pre-Revolution buildings.

"Russians are hungry to learn about American business," said Stoddard. "They are a highly intelligent and well-trained work force, and they want the American Dream for themselves."

Rubles vs. Dollars

Unless one uses letters of credit like Beehive Machinery, American companies are paid in rubles or dollars. "We've been paid in both rubles and dollars," said Stoddard. "If you're paid in rubles, you can't take the money out of the Soviet Union, and of course, rubles are worthless outside of Russia. So you might use rubles to purchase the goods you need to run your business within the Soviet Union, or use the rubles to purchase items that will have good resale value in Western Europe."

Stoddard confirms that dollars are available in the Soviet Union and that finding them is part of the challenge of doing business with Russians. "At first they will tell you they have no dollars, but that's just one of the things to learn about negotiating with them. The Russian we've met are very direct people, and they expect the same directness from you. If you want something, tell them you won't take anything less. If they truly want to do business with you, they will find the dollars."

How to Make Contacts

Before a company thinks about doing business in the Soviet Union or Eastern Europe, Stoddard suggests a company ask itself two basic questions: (1) Is there a customer for my product in those countries? (2) Will my company have access to a supplier? "The fundamentals are the same everywhere," said Stoddard. "You have to find out if there's market for your product."

Contacts are an important way of answering these questions, especially in the Soviet Union. Because decisions are made slowly, contacts become an invaluable tool. "American companies have to remember that they're the outsiders - it's not their country," said Stoddard. "A company needs to make contacts that will believe in their product or service - it's one of the tools you'll need in getting to understand the Soviets."

The Easti Group

The Easti Group, founded by Jim Dabakis in the spring of 1989, specializes in importing art from Eastern Europe and the Soviet Union and setting it to galleries across the United States.

A one-time local radio and television talkshow host, Dabakis's interest in Eastern European and Soviet art began in the 1980s. (Note that when Dabakis is in town, he can still be heard with John Prince on KTalk.) "I had 13 weeks of vacation while I was working at the radio station," said Dabakis. "A lot of my vacation was spent in Eastern Europe as a tourist, and I was struck by the beauty of the art - a kind of socialist-realism that expressed what life had been like behind the Iron Curtain for the last 60 years, especially during Stalin's regime."

Finding the Artists

When Dabakis and his Russian partners decided to launch the Easti Group, they set up an office in Budapest. Since then, they have opened five more offices, including one in Leningrad and the others in Western Europe. From the beginning, Dabakis made the decision to travel to smaller cities and towns to find quality art. "A lot of art dealers had already made contact with artists in the major cities," said Dabakis. "So it made sense to go to the more remote areas. Also, it made for more interesting adventures."

In order to find the artists, Dabakis contacted art schools as well as other artists for potential names. From there he headed off to villages in search of the artists. "I had language problems from the very start," said Dabakis. "In major cities, many people speak English, but in the villages to which I traveled, English wasn't spoken. When I arrived in a town or village, one of the first things I did was to contact the local university or high school to find students who could speak English. They have been the secret of our success - they are the ones who have helped to make contact with the artists." (The Easti Group now has a foundation to support a program which brings Eastern European and Soviet students to Salt Lake City.)

Who Buys the Art

Dabakis sells the art to galleries across the U.S. Average prices are $1,500 to $5,000 for sketches and $25,000 for paintings. The Easti Group does not work with any Utah galleries. "There isn't the market here for those kinds of prices," said Dabakis. "Recently, at a gallery in Scottsdale, we sold several paintings at $60,000 each. People in Utah appreciate art, but in general they're not willing to spend that kind of money." Dabakis expects the Easti Group to gross approximately $4.5 million in sales for fiscal 1991.

In August, the Overland Trails Gallery in Scottsdale had a show of some 80-90 pieces of Eastern European and Soviet art. The art for the Scottsdale show was framed in Springville, Utah. "The third or fourth largest framery in the United States is Allman-Ricks Frame, in Springville, Utah," said Dabakis. "It's exciting because sometimes there's a kind of ripple effect to our business. Other Utah companies sometimes benefit from our Salt Lake-Soviet Union connection."

Russian Partners

Dabakis employs Russian partners to handle the logistics and paperwork of shipping the art to the United States. "I found my partners initially through contacts," said Dabakis. "They have been invaluable because they understand how to work through the Soviet bureaucracy - they know how to get things done."

More than 70 percent of Dabakis's time is spent traveling - meeting artists, working with his partners, and keeping track of inventory. Dabakis stresses the importance of finding partners whom one can trust. "Because of the nature of the Soviet regime, abuses and unethical business practices became a way of life. It's hard to change that way of thinking overnight, so it's important to get to know your partners. It's also important to make sure there is good communication between you and your partners or representatives, so you minimize the opportunities for abuses to occur."

Currently, Dabakis and his partners are involved in other business opportunities in the Soviet Union, including providing answering machines, fax machines, and copiers. "There's tremendous potential in providing basic business services to the Soviet Union," said Dabakis. "Unfortunately, I don't have the time to pursue everything right now, so I put my ideas on the back burner for a future time."

The Future - Patience and Commitment

Doing business in the Soviet Union and Eastern Europe is not for the faint or heart or for those who hope to get rich quick. Overcoming the obstacles of distance and culture require planning and long-term commitment. Companies such as Beehive Machinery, the Jefferson Institute, and the Easti Group represent a growing number of U.S. businesses who see enormous growth potential in the Soviet Union. "If you have the right kind of product and you're willing to invest for the long-term," said Varney, "doing business in the Soviet Union is a wise decision. The long-term prospects are tremendous."

Michele Swaner is a business consultant and free-lance writer based in Utah.

PHOTO : Beehive Machinery manufactures separators for the fruit and vegetable, red meat, poultry, and fish industries.
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Title Annotation:Beehive Machinery, the Jefferson Institute, and the Easti Group of Utah trade with the Soviet Union
Author:Swaner, Michele
Publication:Utah Business
Date:Sep 1, 1991
Words:2489
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