VOLUME 7, ISSUE 4 - FALL EDITION 2000

From The Director's Desk...
Strategic Competition in the European Marketplace

J. Joseph Grandmaison, Director

American companies can fight as equals in any market in the world. But in Central and Eastern Europe, some companies are more equal than others. The European Union and West European governments are crafty. They provide massive foreign assistance to the countries of Central Europe - for very admirable reasons - but they do not let an opportunity slip by to turn that assistance to their own commercial advantage. In addition, our West European competitors enjoy the benefits of geographic proximity and, in many cases, substantial tariff differentials. Despite all that, Americans can and do succeed in this market as long as they come with a long-term approach and a commitment to customer service. Most importantly, however, they need a targeted strategy that recognizes their competitors' advantages and targets realistic opportunities. The same is true for TDA investments in Europe: Strategy is vital.

A good example was TDA's November '99 Environmental Technologies event in Budapest. We brought to Budapest 30 private sector sponsors of industrial projects not likely to be financed with European foreign assistance and thus not restricted to European suppliers. We have invested subsequently in feasibility studies on five of those projects. We anticipate earning returns on those investments in the form of U.S exports that far exceed those we would have earned without targeting our strategy so narrowly.

We are told that many U.S. companies feel the heat of competition most in Poland and Hungary. At the same time, the opportunities for U.S. firms in these growing markets demand that TDA branch out beyond our typical public sector infrastructure investments. That is why we have established a private sector project identification strategy for those two countries. It is aimed at identifying serious, successful private sector companies who have expansion and development plans for which they seek U.S. partners. We will make feasibility study investments in support of the most attractive projects from the point of view of U.S. exporters. Equally important, however, many of these companies need investors. That is why we will host a conference this fall in New York City on investment opportunities in Hungary. For more information, contact Lance Ludman at (703)875-4357.

If you think the Europeans are tough to beat in Poland and Hungary, you have not been to Southeast Europe. Don't get me wrong - TDA is bullish on opportunities for U.S. firms in Southeast Europe - but you will have to think harder and smarter to be successful there. The reasons are simple. First, the only significant resources to fund procurement of U.S. goods and services are those available through the International Financial Institutions. Second, the multinational monster called the Stability Pact is unique in this region. With the Stability Pact attempting to coordinate foreign assistance and infrastructure investments, TDA and our colleagues at the Commerce Department have to keep a close eye on procurement practices to make sure U.S. firms are eligible to compete. There is a lot of money for projects in the region, and TDA's objective is to make sure U.S. companies get their fair share.

That is why we are sponsoring a conference September 13-15 in Philadelphia targeting the top energy and transportation infrastructure projects. This event will be special because it will focus on a specific universe of projects with funding secure or likely, and the local officials in charge of the projects will be there to give you all the necessary details. You should be there too. (See related article on page one)

I realize Central and Eastern Europe is neither the easiest market to enter, nor are the opportunities the largest. Some of you may be waiting until the business dynamics in the region are easier. Others may be sitting idly while management attempts to find Bulgaria on the map. If either is true for your company, you are making a mistake. I recall hearing a successful international business consultant describe what I thought was a very sensible market entry strategy. If you wait until the business dynamic is perfect, the companies in your target market will be strong enough to beat you there, and they might even start putting up a tough fight on your home turf as well.

Central and Southeast Europe are not for the faint of heart, but committed companies with competitive products and strategic managers can be successful. Simply maintaining an agent in the region is probably not enough. As good as they may be, those people seldom have the political muscle within the company they represent to force corporate management to make their territory a marketing priority. That is not the commitment I mean. I also do not mean to suggest that marketing in this region is inexpensive. It is possible for small companies with limited marketing budgets to pursue opportunities in Central Europe - if they are smart - but it takes commitment.

TDA is ready to stand with those committed companies. We are too small to effect massive change across this entire marketplace, but if we invest strategically project by project, and if we seek our partners based on their commitment company by company, we will make a difference.