The document discusses creating a more competitive business environment in Eastern Europe. It identifies three key factors: 1) the strategic geographic location of Eastern Europe, 2) supportive economic policies to stimulate business and entrepreneurship, and 3) networks where companies can exchange information and increase competition. The industries thought to become most competitive are IT, food processing, telecommunications, hospitality/tourism, banking, FMCG, and financial services. Sound economic policies from governments are needed, including reducing corruption, improving legal infrastructure and taxation policies, and providing incentives for entrepreneurs.

1. A simple framework for better businesses
Europe United
Mircea Ioan Gherghina (Romania)
Richmond Minami (Japan)
University of Amsterdam
2013

2. Technology, Media and
Telecommunications
100%
Real Estate and
90%
Breakdown by Industry
Construction
80% Public Sector
70%
60% Manufacturing
50%
40% Life Sciences and
Health Care
30%
Energy and Resources
20%
10% Consumer Business
0% and Transportation
2011
Source: Deloitte, Top 500 Eastern European companies
Companies in the energy and resources sector of the economy make up the majority of the top 500 Eastern European companies. There has
recently been a decrease in the number of companies in this sector, suggesting an expansion and growth of the economy in other sectors.

3. GDP per capita in USD, constant prices 2005, 1980-2010
Country 1980 1990 2010 Dynamics
1980-2010
Albania 1,763 1,618 3,265 +85 %
Macroeconomic Trends
Bosnia and - 530 4,268 -
Herzegovina
Bulgaria 2,284 2,915 4,419 +94 %
Croatia - 6,363 10,619 -
Greece 15,272 15,520 21,944 +44 %
Macedonia - 2,526 3,267 -
Romania 3,752 3,829 5,210 +39 %
Brazil 4,205 3,999 5,629 +34 %
China 229 477 2,965 +1197 %
India 285 403 1,011 +255 %
Russia - 4,611 6,293 -
World 4,988 5,707 7,466 +50 %
*Source: UNCTAD, compiled by Vass& Alexe (2012)
Despite the fact that China and India have seen explosive rates of growth in GDP per capita, Eastern European countries have seen very high
rates as well, often coming close to or above the world average. It would not be unreasonable to expect continued periods of high growth in the
region.

4. If I was to make a very broad
generalization, I would say India
is good at processing in a
factory model, doing things
quickly and being cost-efficient,
and Eastern Europe is a better
destination for more
Central and Eastern Europe experimental tasks.
seems to be a target for
international criticism at the - Daniel Marowitz, Deutsche Bank
moment. Nonetheless we
believe these countries will Remove the administrative
remain the European burden from an organisation
Union’s economic that is lean and smart with
powerhouse both during a good motivation system
and after the current crisis. and you will be able to
No-one knows when but one innovate cheaper and more
thing is for sure: the crisis efficiently: significantly
will end, and then increase power of R&D,
international investors will shorten the item, achieve
realise that most of the a better result.
countries in the region have - Bronislav Pánek, Business
favourable tax Consultant
systems, a well-educated
workforce and tremendous
market potential.
- Andreas Treichl, The educational
CEO Erste Group AG
achievement in
Eastern Europe is
comparable to the
one in the West.
- S. Van Wijnbergen,
Insights
Professor at University of Amsterdam

5. Which industries do you think will become the most competitive in Eastern Europe?
IT
Food
processing
Telecomm
Hospitality/
Tourism
Banking
FMCG
Financial
Services
Apparel
Using a sample of forty-two people, whose ages ranged from nineteen to forty-five , we found that twenty-four people believed that IT would
become the most competitive industry for Eastern Europe. This was followed by the food processing sector. Our sample consisted of business
students, university professors, and managers of small and medium enterprises.

6. The Framework
Business hubs Geographic
Economic
location
policies
A more
competitive
Eastern Europe
Creating a more competitive Eastern Europe requires a solid framework. Companies in the region must be able to take advantage of three main
factors: the geographically strategic location of Eastern Europe, supportive economic policies to stimulate sound business and entrepreneurship,
and closely knit networks where companies can foster exchange of information and steepen competition.

7. Sound economic
policies of
governments
Incentives for
Less corruption entrepreneurs
Legal infrastructure
& Taxation
Finding the right types of economic policies shouldn‟t be difficult, since the problems with the present system make themselves apparent. For example, although conditions
are improving, ten percent of selected firms from 27 transition countries reported that bribes were frequently needed “to get things done with regard to customs, taxes,
licenses, regulations, services, etc” (World Bank ). In addition, taxation policies have proven to be inefficient, with still significant parts of Eastern European economies
operating in “Shadow economies” in order to evade high tax rates or time-consuming bureaucracy. According to one study, the Shadow economies of eleven Eastern
European countries average 29.8% of each respective country‟s GDP (World Bank Leibfritz 4). Lastly, there may not be enough systems in place to give entrepreneurs
sufficient incentives to operate. Getting credit is much harder in this region, with some countries‟ laws, such as Romania‟s, requiring more than 150% in collateral (OECD
Potter, Proto 30).

8. Collaborative
R&D
Bargaining
Business Brand
power alliances
hubs
Sources of
Capital
Creating “clusters,” or “concentrations of highly specialized skills and knowledge, institutions, rivals, related business, and sophisticated
customers in a particular nation or region”(Porter,2000), is central to our concept. In fact, Eastern Europe has potent human capital, but lacks
only the structure and organization to implement it effectively. Such a structure would give the region significant advantages, such as increased
bargaining power for businesses with local authorities or dispersed suppliers, opportunities to create strong brand alliances, and having easier
access to capital, for example through VCs. By alligning themselves in such a way, companies in the region can help to create systems which
generate innovative businesses and drive competition in the likes of Silicon Valley or London.

9. Geographic location
Natural resources to
supply local
businesses at low-cost
Black Sea as a center
for trade and transport
in Europe
Europe’s access
point to two
continents
Eastern Europe „s location harbors many advantages which sets it apart from other regions. It is located between the economically advanced
and fertile Western Europe and rapidly accelerating areas of Asia. It can act as an intermediary in trade, with trading ports in the Black Sea and
highways connecting three continents. There are many resources dispersed over the region as well, with copper, coal, arable land, and even
petroleum in some countries.

10. Business in Future Eastern Europe:
An Exemplar Company from the IT industry
Clustered in a
technopolis
Close to the West European Market, in
centered near a
major the same time zone, & less than two
Low taxes and hours away from their customer’s
polytechnic
paperwork for university in EE headquarters by plane
start-ups
Software Inc.
-software provider
for small and
medium sized
accounting
companies
By combining the three elements of economic policies, business hubs, and geographic location, future companies in Eastern Europe will be able
to benefit greatly. The software industry is just one example of the broad benefits that could be realized. Through the strategic combination of
the three elements per industry or enterprise, Eastern Europe can significantly increase competitiveness.
Bibliography: Andreea Vass, Ileana Alexe, Comparative Analysis of South Eastern Europe Economies Facing the Crisis, Romanian Journal of European Affairs, vol. 12
Michael Porter, Location, Competition, and Economic Development: Local Clusters in a Global Economy, Economic Development Quarterly, 2000 , World Bank and OECD data