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Central Europe: the new frontier in North-American business.


Central Europe is the new frontier for North American businesses, yet reaping the financial rewards and adjusting to foreign cultures will take time, according to Maurice Olivier, a vice president of Arthur D. Little International and managing director of the consulting firm's Brussels office.

Speaking at a recent executive forum sponsored by Arthur D. Little and its affiliate Decision Resources, Mr. Olivier compared companies' objectives to gain a foothold in East Germany, Poland, Czechoslovakia, Hungary, or Yugoslavia to sailing and conquering uncharted waters. "Prospective navigators should reassess their sea-worthiness, reorganize their crew, plan for the long term, send out 'scouts', minimize the risks, and learn to be patient", he said.

To decide whether or not they have the ways and means to search and conquer, corporate officers must ask themselves if they are willing to take risks and tolerate unconventional business practices, Mr. Olivier said. Even if your company can afford it, how will management and the shareholders accept that the necessary cash flows will be exposed to unpredictable economic and financial fluctuation or to apparently irrational political and social turmoil?" he asked.

The Arthur D. Little consultant suggested that companies set up a task force that evaluates opportunities in the marketplace when planning workforce reorganization. "Its members do not have to be experts on Central Europe," he explained. What they need is good business sense, excellent knowledge of the company, and the ability to ask the right questions and listen carefully to the answers, as well as the confidence and support of top management."

Mr. Olivier cautioned companies against expecting quick profits in Central Europe, favouring longterm planning, "since the payback period will be at least five years, and possibly up to ten years." He urged executives to segment markets and avoid the trap of regarding the region - or each country - as a homogeneous society. And he offered a "stiff reminder" to businesses to "define the objectives."

"There is no room for amateurs in Central Europe", he said. Only those who know what they want and stick to it are likely to succeed in the long-term. This is not a region for diversifying out of your fundamental business".

Mr. Olivier advised companies to use "scouts" to understand the lay of the land and maintain frequent contact with members of the Central European business community. But he warned that ownership in the region is not necessarily what it appears to be. "The current trend is to dismantle the large companies and privatize them, but no one really knows who has the right to sell or transfer assets," he said. He added that to make matters worse, accounting procedures are often incomprehensible to Westerners. Consequently, financial analysis is difficult or impossible.

Mr. Olivier also warned companies against taking an aggressive stance, preferring the soft touch. North American companies probably have an advantage here, since our businessmen are often considered less arrogant than some of their Western European counterparts," he said.

To minimize risks, Mr. Olivier suggested that companies should avoid investing in one single country, but make "multi-dimensional" deals where technology and training are exchanged, as well as goods and services. "Act swiftly to avoid missing opportunities in a region where costs are rising rapidly," he said. "Central European businessmen are quickly recognizing the value of their assets - and their services - as capitalism takes hold. I have heard of top managers who have more than tripled their incomes by changing jobs three times in less than 18 months."

Companies should exercise caution, however, Mr. Olivier said. The translation to a market economy is likely to nurture a recession in some of these countries in the next few years," he predicted, adding that "national feelings may reemerge if Central Europe's investors are too greedy."

Despite all the difficulties and the increasing competition, Mr. Olivier said that companies can develop an active presence in Central Europe, "provided that they understand the region's political, economic, and social climate and implement these simple rules for success."

Arthur D. Little, the international management and technology consulting firm, helps corporations, institutions, and governments meet the challenges of today's complex and rapidly evolving global marketplace. Through its worldwide network of offices and laboratories, the company is unique in its ability to address clients' needs by combining management and technology expertise with extensive industry knowledge.

In a typical year, Arthur D. Little's approximately 2,400 staff members undertake consulting engagements for clients in some 60 countries.
COPYRIGHT 1990 Canadian Institute of Management
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Kitchen, David
Publication:Canadian Manager
Date:Dec 22, 1990
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