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Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
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Eastern Europe Market
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Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
Eastern Europe Market
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Eastern Europe Market

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  • 1. SIS International Custom Research Opportunities & Challenges in Researching Eastern Europe Presented to: AIMRI June 20, 2008 By: Ruth Stanat President, SIS International Research1
  • 2. Table of Contents 1. Growth Opportunities 2. Market Opportunities 3. Pitfalls in Researching these Countries 4. Where to Focus your Clients’ Research Efforts 5. Managing the Research Budget2
  • 3. I. Economic Snapshot • Economic Indicators • Demographic Profiles • Sector Analysis3
  • 4. Economic Comparison Chart Germany- Poland Czech Hungary Russia Benchmark Republic GDP 3,323.9 421.5 175.3 138.2 1,289.6 (US$ bn) GDP per 40,247 11,057 17.139 13.879 14,662 capita (US$) CPI Inflation 1.4% 2.0% 2.0% 5.5% 12.5% Current 4.4% -2.8% -3.8% -7.1% 5.1% Account Balance (% of GPD) Exports 1.361 137.9 113 85.73 365 (US$ bn) Imports 1.121 150.7 109.8 85.99 260.4 (US$ bn)4 Source: The Economist.com and the CIA World Factbook
  • 5. Economic Comparison Chart (cont’d) Ukraine Romania Bulgaria Slovakia Croatia GDP 141.2 168.8 39.6 75 50.96 (US$ bn) GDP per 3,056 7,805.6 5,220 13,738 12,863 capita (US$) CPI Inflation 9.9% 9.4% 6.1% 5.2% 2.6% Current 2.8% -9.4% -12.2% -6.9% -7.1% Account Balance (% of GPD) Exports 46.68 40.25 19.77 55.31 12.11 (US$ bn) Imports 54.3 64.33 28.79 57.06 25.78 (US$ bn)5 Source: The Economist.com and the CIA World Factbook
  • 6. Economic Comparison Chart (cont’d) Serbia Estonia Slovenia Latvia Lithuania GDP 41.44 21.2 45.9 27 28.57 (US$ bn) GDP per 5,665 15,857 22,852 11,915 11,329 capita (US$) CPI Inflation 11.2% 3.9% 3.5% 6.5% 2.4% Current 8.9% -13.3% -2.6% -15.8% -9.2% Account Balance (% of GPD) Exports 8.824 11.31 28.18 7.551 17.09 (US$ bn) Imports 18.3 14.71 30.22 13.7 22.64 (US$ bn)6 Source: The Economist.com and the CIA World Factbook
  • 7. Poland (Economic) • Memberships: EU Membership and Structural Funds since 2004 • GDP: $421.5 bn – GDP Growth Rate: 7%; Inflation: 2.0% (2007 CPI est.) • Per Capita Income: $11,057; 17% of population below poverty line • Unemployment: 12.8% • Current Account Balance: -$2.8 billion – Exports have more than doubled since 2002 • Forecast: – GDP growth: 5.1% in 2008, 4.3% 2009-2012 • Goal to adopt Euro in 2012 – Labor market problems • 54% participation rate in the labor market • Wages growing faster than productivity – Need to liberalize market regulations “Poland: Factsheet” Economist Intelligence Unit. May 16, 2008.7 “Poland” Central Intelligence Agency World Factbook. May 15, 2008.
  • 8. Poland (Demographic) • Median Age – male: 35.8 years – female: 39.5 years • 11 million Internet users in population of 38 million • Low divorce rate compared to the rest of Europe – Country is Catholic, 90% of people define selves as “religious” • “Brain drain” worker migration to UK – Trend should reverse over long-term – Firms need to know how to attract best talent http://culture.polishsite.us http://data.un.org “Divorces by urban/rural residence” UNSD Demographic Statistics8 “Poland” Central Intelligence Agency World Factbook. May 15, 2008.
  • 9. Poland (By Sector) • Machinery and Transport equipment – 30% of imports – 38% of exports • Packaging – 1.5% of GDP – Metal and Paper Packaging expected 5-10% annual growth • Foreign Investment – Driver of recent economic success – Computers – Consumer Electronics – Automobile Component Production • Agriculture – Inefficient small farms without investment • Oil, Coal, Refining (controlled by government)9
  • 10. Czech Republic (Economic) • Stable, prosperous economy fueled by exports to EU • Real GDP: $175.3 billion • Real GDP growth forecast: 4.7% in 2008, 5.4% in 2009 – Slowed by US credit crunch, will begin to expand again • Forecast: – Domestic demand will drive economic expansion in 2008 • Led by new availability of credit cards, mortgages – In 2009, GDP boost will come mostly from trade (exports) • Unemployment: 6.6% (2007) • Inflation: 2.0% (2007 CPI est.) • Current Account Balance: -$3.8 billion • Currency: The Czech government and the central bank have reached an agreement on measures designed to stem the appreciation of the currency “Czech Republic: Factsheet” Economist Intelligence Unit. May 16, 2008.10 “Czech Republic” Central Intelligence Agency World Factbook. May 15, 2008.
  • 11. Czech Republic (Demographic) • Median Age – male: 38.2 years – female: 41.6 years • Sex Ratio – under 15 years: 1.06 male(s)/female – 15-64 years: 1.01 male(s)/female – 65 years and over: 0.65 male(s)/female • Per Capita Income: $24,400 • One of Eastern Europe’s highest life expectancies – Life expectancy at birth: 79 years – Behind only Germany and Slovenia11 “Czech Republic” Central Intelligence Agency World Factbook. May 15, 2008.
  • 12. Czech Republic (By Sector) • The cabinet endorsed the first draft of a healthcare reform bill in April 2008 • Restructuring of Czech firms allows for more US FDI • Rapid growth in use of cell phones – Privatization of telecommunications was slow starting • Financial Sector not exposed to international credit crunch – Czech Komercni Bank not affected by parent SocGen scandal • EU funds • 58% occupations in services sector • Sale of CZK150bn in state-owned firms • Tourism – 5% growth in 2005 has slowed to 1% • Automotive – 2008 opening of Hyundai plant – Industry to double from 2005 to 201112
  • 13. Hungary (Economic) • Transitioned from Planned to Market Economy • Remarkable turnaround of budget deficit – 4% of GDP in 2008 from near 10% in 2006 – Low budget, low growth • GDP: $138.2 billion – Real GDP growth rate: 1.3% (2007), 2.3% 2008, 3.4% 2009 • Unemployment: 7.1% • Inflation: 5.5% (2007 CPI est.) • Current Account Balance: -7.1% of GDP • Private sector 80% of GDP, FDI $60 billion since 1989 “Hungary: Factsheet” Economist Intelligence Unit. May 16, 2008.13 “Hungary” Central Intelligence Agency World Factbook. May 15, 2008.
  • 14. Hungary (Demographic) • Median Age – male: 36.8 years – female: 41.8 years • Sex Ratio – under 15 years: 1.06 male(s)/female – 15-64 years: 0.97 male(s)/female – 65 years and over: 0.57 male(s)/female • Income per Capita: $19,500 • 4.4 million Internet users in a population of 10 million • Only recent emergence of middle class14 “Hungary” Central Intelligence Agency World Factbook. May 15, 2008.
  • 15. Hungary (By Sector) • Industrial Growth – Mining 28.2% – Manufacturing 13.8% • From 1989-2000, 1/3 FDI into East Europe went to Hungary • Investment concentrated around Budapest – Special initiatives for doing business in eastern Hungary • Agriculture – Land 1/10 price of Western Europe – Speculating issue as EU ascension imminent • Financial Services – Foreign companies do not need government approval – May conduct cross-border financial services – Hungary issues investment-grade sovereign debt15
  • 16. Russia (Economic) • GDP: $1,289.6 billion • GDP Growth: 8% in 2008 so far • Unemployment: 5.9% • Inflation: 12.5% (2007 CPI est.) • Heavily dependent on Oil • Domestic Investment: – Increased at a rate of 21% in 2007 – Necessary for diversification and modernization of infrastructure • Outflow of foreign direct investment increased by 55% in 2007 “Russia: Factsheet” Economist Intelligence Unit. May 16, 2008.16 “Russia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 17. Russia (Demographic) • Median Age – Male: 35.1 years – Female: 41.4 years • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.93 male(s)/female – 65 years and over: 0.45 male(s)/female • Income per Capita: $14,600 • Highest number of legal abortions in the world – 1.8 million in 2004, down from 4 million in 1992 – 53.7 abortions for every 1,000 women • Income Inequality – Very high inequality in distribution of wealth17 “Russia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 18. Russia (By Sector) • State control in key sectors – Oil, Titanium (Russia produces 66% world’s titanium) • Heavy Industry concentrated in European Russia • Agriculture concentrated in warmer-climate South • Oil-fueled future growth is major concern – Official statistics hide growth because transfer prices allow profits to occur in non-energy sectors18
  • 19. Ukraine (economic) • Domestic Consumption – Rising Wages and Pensions • GDP: $141.2 billion (2007) – Real GDP Growth: 6.9% • GDP - composition by sector: – Agriculture: 9.2% – Industry: 32.6% – Services: 58.2% • Inflation: 9.9% (2007 CPI est.) • Steel Exports, solid growth in metals • Continual economic reforms improve business landscape “Ukraine: Factsheet” Economist Intelligence Unit. May 16, 2008.19 “Ukraine” Central Intelligence Agency World Factbook. May 15, 2008.
  • 20. Ukraine (Demographic) • Median Age – Male: 36.1 years – Female: 42.5 years • Sex Ratio – Under 15 years: 1.06 male(s)/female – 15-64 years: 0.92 male(s)/female – 65 years and over: 0.51 male(s)/female • Income per Capita: $6,900 – Projected 104% growth through 201220 “Ukraine” Central Intelligence Agency World Factbook. May 15, 2008.
  • 21. Ukraine (By Sector) • Metals • Internet – Users grew by 17.8% in 2007 – Rapid acceleration of speed and availability • Food & Drink – Projected 47% increase by 2012 – Mass grocery retail is a developing market21
  • 22. Romania (Economic) • Joined EU Jan. 1, 2007 • Real GDP: $168.8 billion (2007) – Real GDP Growth: 5.9% • Unemployment: 4.1% • Inflation: 9.4% (2007 CPI est.) • Current Account Balance: -9.4% of GDP “Romania: Factsheet” Economist Intelligence Unit. May 16, 2008.22 “Romania” Central Intelligence Agency World Factbook. May 15, 2008.
  • 23. Romania (Demographic) • Median Age – male: 35.9 years – female: 38.7 years • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.99 male(s)/female – 65 years and over: 0.69 male(s)/female • Income per Capita: $11,10023 “Romania” Central Intelligence Agency World Factbook. May 15, 2008.
  • 24. Romania (By Sector) • Occupations 41% agriculture • 4 million internet users increasing (21 million population) • Tax rate 16% • Textile and Footwear • Light machinery and Auto assembly • Italy major import and export partner24
  • 25. Bulgaria (Economic) • Strong Economic Growth since 1996 – Inflation (6.1% 2007 CPI est.) , Corruption still a problem • GDP: $ 39.6 billion • Real GDP Growth: 6.2% in 2007 – Peak of Economic Boom Cycle – Projected 6% annual growth through 2012 • Unemployment: 6.9% (down from 9.7%) • Nominal Wage Growth: 20.6% • Current Account Balance: -12.2% of GDP • Opportunity for Consumer Good Importers – Imports: EUR24bn, EUR39bn by 2012 – Exports: 18 EURbn – Consumption: 88% of GDP “Bulgaria: Factsheet” Economist Intelligence Unit. May 16, 2008.25 “Bulgaria” Central Intelligence Agency World Factbook. May 15, 2008.
  • 26. Bulgaria (Demographic) • Median Age – male: 38.9 years – female: 43.4 years • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.97 male(s)/female – 65 years and over: 0.69 male(s)/female • Income per Capita: $11,800 • Marriage 4x as common in urban areas as in rural areas – 26,658 urban marriages versus 6,843 rural marriages in 2006 “Marriages by urban/rural residence”. USND Demographic Statistics. February 21, 2008 .26 “Bulgaria” Central Intelligence Agency World Factbook. May 15, 2008.
  • 27. Bulgaria (By Sector) • Minerals – Coal, copper, and zinc • Tourism – 6% projected annual growth 2008-2012 – January 2008, government announced national strategy for increasing tourism from EUR2.4bn to EUR6bn – Massive construction in hot spots (e.g. Black Sea) – Residential House Prices: 30% Increase27
  • 28. Slovakia (Economic) • Successful transition from planned to market economy • Joined EU in May 2004 – Goal to adopt Euro on Jan 1, 2009 • GDP growth: 5.7% – Fueled by exports and high domestic investment – Manufacturing and construction • Forecast – 2008 GDP: 4.4% • Government expenditures more significant than investment – Inflation predicted to decrease from 2007 level (6.9%) – Large Current Account deficit (-6.9% of GDP) • Higher trade deficit expected for 2008 “Slovakia: Factsheet” Economist Intelligence Unit. May 16, 2008.28 “Slovakia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 29. Slovakia (Demographic) • 60% of Slovaks live in villages with fewer than 5,000 inhabitants – To reach consumers, far reaching marketing efforts necessary • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.99 male(s)/female – 65 years and over: 0.6 male(s)/female • Median Age – male: 34.8 years – female: 38.2 years • GDP per Capita: $19,80029 “Slovakia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 30. Slovakia (By Segment) • Growing Tourism Sector – Overnight stays above 8 million in 2007 for first time – Italian and Austrian visitors largest groups – More jobs in hotels, restaurants • Manufacturing – Advanced technology sectors growing • Automotive, Transport Equipment – Least advanced technology manufacturing sectors declining • Leather, Textiles • Banking Sector – Largely in foreign control • Major construction of highway infrastructure30
  • 31. Croatia (Economic) • GDP: $50.96 bn – Moderate, steady GDP growth around 4-6% • Per Capita Income: $12,863 • Unemployment: 11.8% • Current Account Balance: -$3.836 bn, -7.1% of GDP • Forecast: GDP growth expected around 10% for 2008-2009 • Trade deficit growing: $5.07 bn in 2007, a 5-year high • Uneven regional development • Economy heavily influenced by state – Privatization often resisted by both politicians and the public • Currently furthering agenda of EU mandated reforms, though at slow pace – Especially slow in politically sensitive areas such as agriculture, fishing, ship-building, and steel • EU entry expected in 2011, at earliest “Croatia: Factsheet” Economist Intelligence Unit. May 16, 2008. “Croatia” Central Intelligence Agency World Factbook. May 15, 2008.31 “Croatias current account deficit reaches 5-year high” The Earth Times. Apr 22 2008 .
  • 32. Croatia (Demographic) • Median Age – male: 38.9 years – female: 42.6 years • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.99 male(s)/female – 65 years and over: 0.63 male(s)/female • Largely Catholic population32 “Croatia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 33. Croatia (By Sector) • Tourism – Tourism receipts cover about two-thirds of the merchandise trade deficit – The tourism industry accounted for almost $10.8 bn last year • Major trading partners are Italy, Germany, and Bosnia and Herzegovina – Major imports are machinery, transport and electrical equipment; chemicals, fuels and lubricants; and foodstuffs – Major exports are transport equipment, textiles, chemicals, foodstuffs, and fuels “Croatia: Factsheet” Economist Intelligence Unit. May 16, 2008. “Croatia” Central Intelligence Agency World Factbook. May 15, 2008.33 “Croatias current account deficit reaches 5-year high” The Earth Times. Apr 22 2008.
  • 34. Serbia (Economic) • GDP: $41.44 billion – Real GDP growth rate: 7% (2007 est.) • Inflation: 11.2% (2007 CPI est.) • Current Account Balance: 8.9% • High unemployment rate: 18.8% (2007 est.) • Increase in economic growth rate after ousting Milosevic in 2000 • Political instability due to unresolved Kosovo issue • Country has a large amount of foreign debt and a high export deficit – Country is making attempt to dramatically increase exports • Major goal is to gain admission to EU – EU is Serbia’s most important trading partner “Serbia: Factsheet” Economist Intelligence Unit. May 16, 2008.34 “Serbia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 35. Serbia (Demographic) • Median age – Male: 36.1 years – Female: 39 years • Sex Ratio – Under 15 years: 1.07 male(s)/female – 15 – 64 years: 0.97 male(s)/female – 65 years and older: 0.68 male(s)/female • Highest malnutrition rate in Eastern Europe as of 2003 – 9% of population undernourished, compared to 2.5% in Germany, Ukraine, Poland, United States, etc.35 “Serbia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 36. Serbia (sector) • Exporter of manufactured goods, food, and live animals – In last 10 years, EU has contributed money to increasing livestock inspections, food safety, and lab modernization • EU also contributing to infrastructure development – Serbia is looking to become a regional hub for air transportation • Serbia will import environmental technology to fulfill its EU admission requirements – Will see increase in unleaded gasoline, filters, etc. • Telecom is Serbia’s fastest-growing industry – Annual growth-rate of 18.3% in telecom sector36
  • 37. Estonia (Economic) • 2004 Joined NATO and EU – Stronger economic growth due to structural funds and foreign investment • GDP: $21.2 billion – Real GDP Growth: 7.3%, projected 2.2% 2008, 3% 2009 • Overheating? – Demand putting upward pressure on prices, wages • Losing competition to China – Inflation: 3.9% (2007 CPI est.) – Current Account Balance: (-$3.1 billion) – Unemployment: 5.2% • Major trade partner with Finland (16% imports, 22% exports) “Estonia: Factsheet” Economist Intelligence Unit. May 16, 2008.37 “Estonia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 38. Estonia (Demographic) • Conflict between Estonians and Russians – Highlighted by relocating Russian statue • Median Age – Male: 36.2 years – Female: 43.2 years • Sex Ratio – under 15 years: 1.06 male(s)/female – 15-64 years: 0.91 male(s)/female – 65 years and over: 0.5 male(s)/female – total population: 0.84 male(s)/female • Income per Capita: $21,80038 “Estonia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 39. Estonia (By Sector) • Freight Transport – Port of Tallinn – Dependant on Russian cargos • Fluctuates with political environment – Air freight • 8-9% annual growth through 2011 – Road frieght • 4.5% annual growth fueled by trade with Europe • Electronics and Telecommunications39
  • 40. Slovenia (Economic) • Richest nation in Eastern Europe – Former trading arm of Yugoslavia – Strong ties with western trade partners • GDP: $45.9 billion • Real GDP growth: 6.3% • Inflation: 3.5% (2007 CPI estimate) • Current Account Balance: -$1.5 bn “Slovenia: Factsheet” Economist Intelligence Unit. May 16, 2008.40 “Slovenia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 41. Slovenia (Demographic) • Median Age – male: 39.8 years – female: 42.9 years • Sex Ratio – under 15 years: 1.06 male(s)/female – 15-64 years: 1.02 male(s)/female – 65 years and over: 0.64 male(s)/female • GDP per Capita: $27,300 • Religiously diverse • Literacy rate: 99.7%41 “Slovenia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 42. Slovenia (By Sector) • Increase in light manufacturing and services – Pharmaceuticals – Electrical Engineering • Automotive – Revoz is top exporter • Slovenia division of Renault • Ideal geographic location – Transportation services for increasingly integrates nations • Heavy investment in infrastructure – Tourism • Recent increase in tourism receipts • Financial Services – Domestically grown, difficult for foreign firms to invest42
  • 43. Latvia (Economic) • Latvia faces economic problems – Overheating? Government/Central Bank slow to respond – Current Account Balance: -$5.84 billion, 22% of GDP – High inflation: 6.5% (2007 CPI est.) – Currency is pegged to the Euro, increasing inflation • Privatization of Real Estate and Banks • WTO in 1999, EU in 2004 • GDP: $27 billion – Real GDP Growth: 10.7% • Unemployment: 5.9% • Riga (capital) produces 57% of GDP “Latvia: Factsheet” Economist Intelligence Unit. May 16, 2008.43 “Latvia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 44. Latvia (Demographic) • Median Age – Male: 36.9 years – Female: 43 years • Sex Ratio – under 15 years: 1.05 male(s)/female – 15-64 years: 0.95 male(s)/female – 65 years and over: 0.49 male(s)/female • Income per Capita: $17,700 • Ethnically diverse • Life expectancy at birth: 72 years44 “Latvia” Central Intelligence Agency World Factbook. May 15, 2008.
  • 45. Latvia (By Sector) • Forestry and Woodworking – Large natural supple of timber • Dependence on Russia – Hurt by Russian financial crises, major import/export partner – Russia attempting to transport goods via its own ports • Construction – 14% increase in 2007, 7% of overall GDP – Strong investment and booming housing market • Population density linked with job opportunities – Fewer schools, healthcare, public services in rural areas – Best to concentrate focus on major cities45
  • 46. Lithuania (Economic) • Rapid growth following 1998 Russian financial crisis • GDP: $28.57 billion – Real GDP Growth: 8% • Unemployment: 3.2% • Rapid Real Wage Growth • Inflation: 2.4% (2007 CPI est.) • Current Account Balance: -9.2% “Lithuania: Factsheet” Economist Intelligence Unit. May 16, 2008.46 “Lithuania” Central Intelligence Agency World Factbook. May 15, 2008.
  • 47. Lithuania (Demographic) • Median Age – Male: 36.4 years – Female: 41.6 years • Sex Ratio – Under 15 years: 1.05 male(s)/female – 15-64 years: 0.96 male(s)/female – 65 years and over: 0.53 male(s)/female • Income per Capita: $16,700 • 2008 population growth estimate is flat (-0.284%) • Literacy rate: 99.6% (for men and women)47 “Lithuania” Central Intelligence Agency World Factbook. May 15, 2008.
  • 48. Lithuania (By Sector) • Agriculture – Changes from collectivization to private to capital-scaled farms • Construction – 15% annual growth – Almost completely privatized – Shift from Russian to domestic contracts • Manufacturing – Leather and Textiles are largest manufacturing sectors – Wood and Furniture growing the fastest • Export to UK and Sweden (60% of exports to Sweden are for IKEA) • Financial Services – Consolidation: 9 commercial banks, 90% foreign capital – Falling interest rates fuel strong growth48
  • 49. II. Market Opportunities • Comparatively high growth rate – Most countries have projected 5-10% annual GDP growth – Economies like Poland are among the fastest growing in Europe • Exports are growing – Exports are growing in many countries, indicating a need to find new markets for their products • Relatively untapped domestic market – Clients of market research can benefit by introducing their products to the domestic market (e.g. Poland has a large domestic market) • Numerous opportunities for market researchers – Growing markets require more research – CATI call centers – Increased need for fieldwork49
  • 50. Industries with Growth Potential • EU Structural Funds support new EU members’ infrastructure growth and economic development – More government contracts • Luxury consumer goods (cosmetics, clothing) • Automotive • In most post-socialist countries, we see tremendous growth in the services sector – Opportunity for… • Real estate construction • Retail • Services sector • Tourism, hotel construction • Financial services50
  • 51. Market Opportunities in Electronics and Fast Moving Consumer Goods Segments • Expect growth in Internet and small electronics users • Eastern Europe will be manufacturing small electronics in increasing amounts – Electronics suppliers are operating in Eastern Europe, where the cost of labor is up to 70% less than the rest of Europe • Countries attempting admission to EU are undergoing modernization and inspection of food industries • Companies will benefit from research in DIY products and services, consumer electronics, and clothing – These are sectors with opportunity for growth – Multi-channel retailing should be researched51
  • 52. Energy & Natural Resources • New Infrastructure • Oil & Russia – Russia provides Europe with 25% of their oil – Leverages its relationship with Germany to prevent market change – Russian economy is overly-dependent on oil • Natural Gas – Russia has the largest proven natural gas reserves in the world, (47.57 trillion cubic meters in reserves) – Russian natural gas exports are rising (up 22.7% Jan-April 2008 compared to same time period in 2007) • Green Energy “Russia” Central Intelligence Agency World Factbook. May 15, 2008. “Russian natural gas exports up 22.7% in Jan-April – ministry” Interfax Information52 Services International Information Group. May 30, 2008.
  • 53. Healthcare • All Eastern European countries required to participate in Public Health Insurance System – Lowest income bracket is main beneficiary because standards still poor • Poor public healthcare standards are leading many to buy into private healthcare systems – Private medical insurance has doubled in growth in Eastern European Region • Increase in household income and living standards enables more consumers to buy into the private services – Obvious correlation between income and health conditions53
  • 54. Healthcare (cont’d) • Rural areas very limited in healthcare options – As countries develop and join EU, they will need to provide healthcare to these areas – Average private spending on healthcare: • 10% in Slovakia and Czech Republic • 25% in European Union Countries • Very low public spending in countries with poor healthcare systems – Reforms are pending—they are urgent but difficult with current budget deficits – In majority of countries, already see sharp rise in healthcare budgets • New opportunity for previously understaffed, dormant industry54 “Health care systems in Central and Eastern Europe” Euractive. 21 April 2004
  • 55. B2B • Transition from state-run to privatized industries – Most ex-communist states are transitioning into privatized systems opening up a large new sector that has been largely un-researched – Increasing importance of B2B relationships and information • Emphasis on primary research – “Channel Research” to determine market landscape – Need for interviews with manufacturers, distributors and reps, suppliers, and customers • Need for aggregated information – Primary research should be compiled with secondary research and primary research results – Analysis can help businesses understand market sizing, market potential, key competitors, and the market landscape55
  • 56. Consumer Goods • Rapid consumer demand growth – Current Account deficits show import potential – Increasing per capita income means increasing consumption propensity • Disposable income in Eastern Europe is still below the European average • Governments expenditures are increasing consumption – Rising per capita income also responsible for increased consumption • Discount stores in Poland have made private labels popular – 85% of discount stores’ products consist of private labels – Supermarkets make up a smaller but still significant portion of private label sales56 www.prmpublications.com
  • 57. Retailing • Increased consumption creates opportunity for retailing • Markets are already saturated with modern brands • Retailers are realizing that multi-channel retailing is underdeveloped in Eastern Europe • Russian opportunities: – Russia has opportunities for grocery retailing – 2007 International Retailer’s Survey found that retailers will target St. Petersburg and Moscow in the next 5 years • Corruption in Russia and Ukraine make bribery common • Reform and opening of previously Soviet countries are encouraging international retailers to enter Eastern Europe Corruption Perceptions Index, Transparency International 200757 survey www.prmpublications.com
  • 58. Financial Services • Privatization and consolidation of banks • Foreign capital stakes are enormous • Growing domestic wealth and income lifts industry • Technological leaps and bounds – Stock exchange improvement • MSCI Frontier Markets Index – Tracks the performance of the equity markets in the frontier markets (Bulgaria, Croatia, Estonia, Romania, Slovenia, and Ukraine) – Financial Services comprises of 57% of the markets in the index58
  • 59. Tourism • New EU Member states benefit from stabilization – Poland, Hungary, Czech Republic, Slovenia, Slovakia, Estonia, Latvia and Lithuania • Low-cost airlines allow for cheap travel to East Europe • Bulgaria and Slovakia expected to grow the most – 6% increase in annual visits • Technology of airports are limiting potential – Need for up-to-date technology, information59
  • 60. Construction and Real Estate • Tourism fuels massive construction – Need for more and better airports • Serbia aims to become a regional air transportation hub • Real Estate boom – Foreign investment in fast growing industry led by the US and Germany – Shortage of housing and consumers with more disposable income have increased demand for new roads, malls, and housing • Russia is increasing roads, pipelines, and ports – Russia is the leading builder of railroad track in Eastern Europe60
  • 61. III. Pitfalls in Researching These Countries • Market Research Lacking • Published Information Often Misleading • Need for Market Intelligence and Competitive Intelligence61
  • 62. Market Research Lacking • Primary Information – No baseline information – Censuses not always comprehensive, only basic information gathered • Since 2000, web publication of data becoming more prevalent • Starting to share information in more languages • Secondary Information – Lack of primary information causes a lack of secondary information62
  • 63. Market Research Lacking (cont’d) • Unrecorded economic data – Transition economies are largely influenced by underground economic activities, which are unrecorded and often not factored into projectable data. • Lack of Projectable Data – Tracking Studies needed to incorporate information from rapid market changes63 “Estimating the Size and Growth of Unrecorded Economic Activity in Transition Countries: A Re-evaluation of Electric Consumption Method Estimates and their Implications” Social Sciences Research Network. December 2003
  • 64. Published Information Often Misleading • Published information is often missing key information and statistics • Leads to biased publications and rankings for statistics and industry information • Russia Oil Figures Misleading – Transfer pricing de-emphasize importance of oil profits64
  • 65. Market Intelligence • Do not consider Pan-Eastern Europe Market – Must segment country-by-country – Each has its own specialties and dynamics – Why? • Diversity of geography, culture, level of economic development, disposable income – Divergent Factors that minimize Pan-European identity • Strong national identity and ethnocentrism • Dissatisfaction with E.U. policy • Convergent Factors that contribute to Pan-European identity • Creation of European identity post Berlin-Wall era based on collective economic/political/socio traits • Convergence of global consumer aspirations in increasingly global world65
  • 66. Market Intelligence (cont’d) • Impact of US Recession and EU Slowdown – “Coupling and Re-Coupling” of economies • Emerging economies inevitably tied to Developed Countries • Slowed demand impairs growth in Western Europe, the area most frequently trading with Eastern Europe • Heightened macroeconomic instability following global credit crunch • Competitor Intelligence – Do not ignore local competitors66 “World risk: Alert - Can emerging markets rescue the global economy?” Economist Intelligence Unit. January 31, 2008
  • 67. IV. Where to Focus Clients’ Researching Efforts • Short-Term: – Focus on the growth industry sectors [e.g. retail, construction, real estate, fast moving consumer goods, etc.] for primary exports • Mid-Term: – Identification of sales channels and key market opportunities for strengthening your clients’ brands in these markets • Long-Term: – Focus on new product concept development and advertising programs for adapting your clients’ products to the local market67
  • 68. V. Managing the Research Budget in Eastern Europe Suggested allocation of research budget in Eastern European markets: • Phase I: Market Intelligence from desk research • Phase II: Qualitative Research – Focus Groups – IDIs – Home Visits/ethnography – Sales Observational Interviews – Mystery Shopping • Phase III: Quantitative Research – Face-to-Face [rural areas] – Online [in major cities] – CATI - B2B – Channel Studies68
  • 69. Summary 1. Multinationals “jump” to China and India and “chase” the numbers rather than Eastern European markets 2. Research efforts must have a specific research design, methods, and deliverables for this region (e.g. country by country research) 3. Engage the client in the research design to further their understanding of the local markets 4. Encourage client travel to the region to view the research69

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