Transcript Geopolitics of the New Europe David Chelly ESCEM 2

Geopolitics of the New
Europe
David Chelly
ESCEM 2nd Year
students
Business & Management
in the New Europe
Minor
4/5-7/2005
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Aims of the seminar
This course provides students with an introduction to
the Eastern European business environment in a
context of political, social and economic reform and
European Union enlargement.
This course may interest young graduates, as Central
and Eastern European countries offer excellent job
opportunities for western European students in
management
Students are introduced to specialized research
sources, which may be useful to them in their careers
The documents of this course are fully available through
the internet, in English and in French, at the web
address http://www.centreurope-us.org
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Your instructor
•
•
•
•
David CHELLY
Ph.D in Management Sciences, postgraduate diploma in Finance, degrees
in Money and Banking, Law,
Accounting and Sociology.
Head of a consultancy firm and a
website (http://www.centreurope.org)
specialized in business with Central &
Eastern Europe
Professor of management in various
business and engineering schools
[email protected]
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The course’s outline
•
•
Central and Eastern Europe basics - The
transformation process – The enlargement challenge
An economic overview - Nature and extent of Foreign
Direct Investments
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I. Central and Eastern European
basics
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Discovering Central European
countries: focus on Latvia
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A rich and ancient history
• It is not because we don’t know Central
and Eastern Europe history that these
countries do not have any history.
• Almost all CEE countries have played a
major role in Europe in their history
• But they have early fallen under the
domination of different empires, which
have shaped their future
Charles the IVth (13461378), King of Rome and
Empereur of the Holy
German Empire
Cyrille and
Méthode,
inventors of the
Cyrillic alphabet
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The empires and their influences
• Long dominated by the Habsburg Empire, the history of
Central Europe has been marked by education, art and
modernism.
– While in 1789 in France only a third of the citizens
were able to speak and read French (the rest spoke
local dialects), education in German had been
compulsory for a century in the whole Kingdom
• Eastern European countries used to live under the
Ottoman and the Russian Empires rule, which prevented
their economic development.
Vlad Tepes (1428-1476),
a Romanian figure of the
struggle against the
Ottoman Empire.
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Exercise : Central and Eastern
European countries on the map
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Central and
Eastern
Europe map
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The communist heritage
• Central and Eastern European countries have lived forty
(seventy) years of communism, which still influence local
behaviors and habits.
The communist heritage:
Corrupted civil servants, unreliable
businessmen, opportunist politicians…
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Young democracies with
unstable governments
• Local democracies suffer from a lack of political maturity.
– Demagogue politicians are elected on the basis of their
unrealistic pledges
– The leading coalitions are not able to keep the power due
to a too large number of political parties and to political
scandals
But the
political risk is
limited to only
a few
countries in
the CIS and in
the Balkans
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Geopolitics of Europe: focus on
the Orange Revolution
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Ailing institutions
• Central and Eastern European states
suffer from bureaucracy and corruption
• Most institutions (The Police,
Universities, Hospitals…) in Central and
Eastern Europe are in crisis
• Income inequalities and regional
discrepancies are widening
• Eastern Europe faces a serious
demographic problem.
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An inefficient legal framework
• In Central and Eastern Europe, the legal frameworks
are very similar to those of Western Europe.
• But in practise, the legal environment is a “jungle”.
Law are:
– Incomplete (lack of case law, decrees…);
– Volatile and contradictory;
– Not enough enforced
On the main square of Sofia, one can buy
the most recent and expensive software
CDs for a few dollars.
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The communist era and the
transition: The movie Kolya
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Towards a stronger Europe
• A group with 25 +
countries offers a
stronger opposition
to the other world
powers
– The USA will
endeavour make
the enlargement
fail
• The EU must adjust
itself to the
enlargement
– Is it able to ?
– How far can we
go ?
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A difficult task to achieve
• A few international disputes are not
solved yet
– Borders in central and Eastern
Europe have more been designed
according to the side chosen by
the countries during the two World
Wars rather than according to the
human realities.
• The first relationships between
ancient and new EU members are
marked by conflicts
• Reciprocical expectations from
ancient and new members strongly
diverge
Will they get along
together ?
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Exercise : sub-groups in Central
and Eastern Europe
• You are a consultant with the French Center for External Trade (CFCE).
Your task is to promote business relationships with Central and Eastern
European countries.
• Up to now, the CFCE had grouped the countries of this region in a
category called « Pays de l’Est » (« Eastern countries »).
• Until 1991, the region used to comprise eight countries: Albania,
Yugoslavia, Bulgaria, Romania, Hungary, Czechoslovakia, Poland, and
USSR. But now they count up to more than twenty.
• Your mission is to split them in different subgroups, that should be
geographically close and economically homogeneous. Explain your
decisions.
• The countries are : Albania Armenia Azerbaijan Byelorussia BosniaHerzegovina Bulgaria Croatia Estonia Georgia Hungary Latvia Lithuania
Macedonia Moldova Poland Czech Republic Romania Russia SerbiaMontenegro Slovakia Slovenia Ukraine
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II. An economic overview
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A rich Central Europe
• Central Europe is mainly composed of reformed
Catholics, close to the Protestants in terms of
seriousness and rigor.
• Central Europe comprises the former Eastern block
countries that previously belonged to the Habsburg and
Prussian Empires, but also Germany, Switzerland and
Austria
According to M. Kundera’s « The
Stolen West or the Tragedy of
Central Europe (1983) » , Central
European countries culturally
belong to Western Europe.
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An under-developed Eastern
Europe
• Eastern European
countries are mainly
economically underdeveloped.
– None of them have
until now successfully
managed their
economic transition to
capitalism.
• The religions are
orthodox and Muslim.
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Exercise (4/6/2005) : What are the
strong points of Central and
Eastern European economies
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An generalized improvement of the
economic performances
• After a deep collapse of
their GDP, Central European
countries have been
achieving steady economic
growths, followed by most
Eastern European countries
• Hyper-inflation had severely
hit most CEE countries
Compared European GDP Growth (2000-2004)
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10
8
Romania
Germany
6
Poland
France
4
Ireland
Russia
2
0
2000
2001
2002
2003
2004
-2
– But this issue is today under
control
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The new economic challenges
• Unemployment has risen above average
European standards.
• Public debts have dangerously grown
– The consequence is high interest rates,
which prevent all economic development.
• Commercial deficits are found in most CEE
Georges Soros: a
countries.
real philanthropist?
– The values of the currencies tend to
decline, which impoverish these countries
and put them under the threat of
speculators
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Restructuring and current
situation of financial and
production systems
• Privatisations of banks and companies are well
advanced
– But the industrial restructuring is still unsufficient
• Central and Eastern European economies move
towards less industry and agriculture and more
services
– Central European traditional sectors are not
competitive in the new international division of
labour
– But these countries develop new competitive
advantage
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Why invest in Central and
Eastern Europe ?
• Foreign direct investments in all sectors and from all
countries are welcomed and little restricted.
• Central and Eastern European countries benefits from
a cheap and qualified workforce and an advantage of
territorial location
– Investment incentives are offered for Manufacturing
investors.
• But the main reason for FDI is good access to
domestic and foreign markets
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A strong demand for Western
products
Local consumers ask for western products.
They are fascinated by the consumption society and
relatively under-equipped.
Each unveiling of an
hypermarket is celebrated
by hours of queues of
avid consumers.
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Unsaturated B2B and B2A markets
Local companies urgently need comprehensive
updating of equipments/technologies and restructuring
their organization.
The local supply is unable to provide these
services.
Local public authorities lack of everything
Services of public utility (environment, education,
culture…) constitute a huge market, often financed
by the EU.
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Exercise (4/6/2005) : which
European country does offer the
best opportunities for French
exporters and investors?
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Marketing products in Central and
Eastern Europe
• Little adaptation to the products is
necessary.
• Local consumers are price-sensitive
and crave for presents, prizes…
• The distribution sector is very atomized.
– Direct marketing has thus become a
common way to distribute products.
• Consumers are receptive to media and
off-media campaigns.
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TV ads in Eastern Europe
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Where and how to invest ?
•
•
•
•
•
A few countries attract the majority of FDI, mostly in the
services sector
In Eastern Europe, some large companies are
scheduled for privatisation, but the best deals have
long been done
Joint ventures and licensing also offer limited
opportunities
The most profitable way of investment is the Greenfield
investment
Good personal relationships are crucial to succeed in
Central and Eastern Europe
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Managing people
• In Central and Eastern Europe, the workforce is cheap
and qualified, especially in technical fields.
• But commitment, sense of initiative and ethics at work
are low
– « pretend to pay us and we will pretend to work »
– « the one who does not steal, steals his family »
(Czech proverbs)
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HRM strategies
• Two HRM strategies coexist in Central and Eastern
Europe:
– A culture-free model based on the global best
practices
• Corporate cultures must be stronger than
national cultures.
– A cross-cultural management model based on
contingent strategies
• Different environments, cultures and attitudes
towards work lead to different practices :
corporate communication, pay systems, HRM…
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More information…
D. Chelly &
F. Lafargue,
Guide culturel
et d’@ffaires
pour l’Europe
de l’Est,
L’Harmattan,
2003
www.centreurope.org
East-west business portal
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