Czech goods supply the world

While large companies, typically with strong foreign backing, are the major movers behind Czech exports, small and mid-size firms are also enjoying a fair slice of the pie. Find out what they’re selling, and who their major customers are.

SULKO: Opening a window for exports


Petr & Libor Suchánek

Sulko, a producer of plastic windows, started out long ago in rented stables, and its founders traveled through neighboring villages to hire staff. Today about six trucks leave Zábřeh na Moravě every week for all parts of Europe.

This is truly notable for a family-owned company whose CZK 700 million in sales are generated mainly by custom orders for private clients. In the Czech Republic Sulko is one of the three largest manufacturers of this product line, but it’s the only one that exports. What’s more, it exports to very sophisticated markets: Switzerland, Belgium, Germany, and Denmark. “I’ve always been attracted westward from our borders. In the beginning of the ’90s, I worked in Germany and it was a great experience for me, and I’m still benefitting from it,” says owner Libor Suchánek, explaining his motives.
But the road to the west wasn’t without obstacles. In 1996 and 1997, an economic crisis in this country caused many large developers on which Sulko then focused to go bankrupt, and the firm had to concentrate on private clientele in order to maintain its revenues. The first attempt with a German partner also failed. “We lost about one and a half million marks,” Suchánek recalls. “Then we started over, this time in Belgium, and we were successful, mainly thanks to high quality, honesty, and good communication.” Sulko’s second largest export market is Switzerland. “It’s a reference market – any company that exports there gains the respect of customers,” claims Jarmila Hloušková, the export department director. Sulko’s latest export success is Denmark, where the firm has established contacts with four partners.
Suchánek admits that, although exports are important to the firm, he doesn’t want them to exceed 30% of Sulko’s production. “Logistical costs are very high, so today we’re looking more for customers along our existing routes. Transport must be economically viable,” Hloušková points out. In the future, Sulko wants to focus on the domestic market, where it has built a network of 14 offices and nearly 60 business partners. Additionally, the firm is constantly expanding its line of window frames and glass to include door frames, shading technology, and other equipment like hardware, parapets, eave coverings, etc. Libor’s son Petr, who handles the firm’s marketing, says that Sulko’s strength is its very up-to-date offer of interesting solutions for window replacements in prefab apartment buildings.

Klára Smolová

THANKS TO EXPORTS, this country’s trade balance for the first eight months of this year was in the black more than CZK 41 billion. In the same period last year (January through August) Czech foreign trade was nearly CZK 18 billion in the red. This year 31,000 Czech firms exported and sold goods and services worth over CZK 1.2 trillion, markedly exceeding the value of imports. According to CzechTrade, the largest 530 Czech exporters, while representing only about 2% of the total, accounted for nearly 62% of all exports. This is less surprising when you note that these firms include such giants as Škoda Auto, Moravia Steel, ČEZ, Barum, Karosa, and Matsushita.
“Foreign trade is benefitting from the expansion of the European Union to the east and the elimination of the last foreign trade barriers,” says Volksbank analyst Miroslav Frayer, adding that the Czech Republic’s geographical position and the shift of international companies from west to east also affected the results. According to Jitka Hanzlíčková, director of the CzechTrade agency, the positive trend is also due to the fact that Czech exporters have learned how to move in the competitive environment of the EU, where they are better able to penetrate with their goods.
As Komerční banka’s chief economist Kamil Janáček observes, the main barrier to exports today is the prosperity of the main “old” EU countries. The strengthening crown could pose another barrier, but Hanzlíčková says that it cannot markedly hurt the condition of Czech exports. “Producers try to diminish its negative influence by offering sophisticated products with high added value for which price doesn’t play such a significant role,” she points out.
The list of articles exported from the Czech Republic is no longer made up of only metallurgical materials, cars, and large machinery as it was in the past. CzechTrade has records of many “nontraditional” foreign demands – like hunting dogs, carts for attractions at Vienna’s Prater, artificial fingernails, ice cream, or boots for firemen. In Great Britain and the US, Czech Christmas decorations are also popular, as is Czech software. Such products are primarily the domain of small and mid-sized firms.
The Prague Tribune addressed several such manufacturers and discovered that although companies like CADware, Jablotron, Roltechnik, and Ahorn (see sidebars) are not among the strongest Czech exporters, they still have something to offer to the world. The share of know-how contributing to the value of their products is usually very high, so when competing on global markets they don’t typically stress low prices, but rather the high quality and careful development of their products.
Even though Czechs offer goods that are comparable to those of the Spanish and Italians, for example, foreign customers still have the tendency to depress the prices of Czech goods to about 60% of those of western European competitors. “Unfortunately, the hallmark of an eastern European country is holding us back to a certain degree,” Hanzlíčková points out. “If we succeed in improving our image, it would facilitate the positions of many exporters, especially the smallest ones.”

ROLTECHNIK: Flexibility and innovativeness


Jiří Šejnoha

For ten years Roltechnik has manufactured shower stalls, bathtubs, and hydromassage systems, and during that time has not only built a position as the second largest manufacturer in the Czech Republic, but also joined the ranks of the largest in eastern Europe.

VLADIMÍR PAŘIL, the company’s owner and director, started in business in 1991 by manufacturing capstans for glider ascents. At about the same time that market collapsed, an opportunity arose for him to manufacture shower stalls for the well-known German manufacturer WDB. In 1995 Roltechnik started its own development and construction in order to enter the developing markets of eastern Europe. “We focused mainly on the Baltic states, for several reasons,” says Jiří Šejnoha, the firm’s business director. “First, the competition there was lighter. Second, shower stalls were practically unknown, and third, the Czech Republic was a symbol of quality to them – like a little Germany.”
Comparisons with Germany aren’t far off the mark. Between 1999 and 2002, Roltechnik provided 25% of its production capacity to two major German sanitary equipment manufacturers – Dücker and Hoesch – and took part in the development of their new models. After having problems on the stagnating German market, both firms went out of business, but it was a priceless experience. “We learned a lot from them, not only about production but also about the market and how to act towards customers,” acknowledges Pařil, who decided to build his business policy on flexibility and innovativeness. “Each country has its specifics with respect to technical parameters, markets, and distribution. If you want to assert yourself you have to be able to adapt,” he adds.
And Roltechnik is succeeding. With 120 employees and CZK 320 million in annual sales, 55% of its current production (20,000 units a year) goes to foreign markets, and not just to the Baltic states. It has subsidiaries in Slovakia and Hungary, and its main markets include Italy, Russia, and Romania. With an eye towards penetrating the west, it recently closed a distribution contract with a Spanish wholesaler, and negotiations with Bauhaus of Germany are also in progress. “There’s a lot of competition on the western market, and their know-how is four grades higher,” says Šejnoha, but adds that he’s ready to take on the challenge.

Klára Smolová

CADWARE: Small firm, large exports


Michaela Doležalová

Exports are not solely the domain of large, powerful firms. A relatively small company with just a few employees can also find positions on foreign markets – if it has something of value to offer.

This is the case of CADware of Liberec. Besides distributing CAD programs, its six employees send its very successful photo plotters out to the world. Using the precision of lasers, this device can “print” on film patterns of circuit boards created using professional software. Circuit boards are then manufactured in accordance with the film. So this is a technologically demanding product, which derives 80% of its price not from material, but from labor and know-how. Despite this ratio, CADware can attract customers primarily through its prices. “We deliver high quality at a reasonable price. To a marked degree we’ve filled a niche in the global market – no firm had offered high-quality equipment in this price category,” says Michaela Doležalová, a company executive, explaining the recipe for success.
One photo plotter costs EUR 5,500 on average, but the newest product lines can go for as much as EUR 20,000, so the firm’s sales, shored up by its newest products, are in the tens of millions of crowns. Exports to 20 countries account for 70% of all sales. “Most exports go to Germany, the UK, Poland, Russia, Slovakia, and Hungary,” Doležalová says. But the firm also has foreign customers in Mexico, the US, South Africa, India, Vietnam, and South Korea. CADware has also delivered several photo plotters to Brazil with the help of CzechTrade, which primarily provided the firm with useful information on possibilities for exporting to Brazil.
However, it was also in Brazil that CADware ran up against the greatest administrative barriers. “Selling there is very complicated. The authorities require an unbelievable amount of paperwork on imports; everything must be in English and Portuguese. We email every document for them to check, and then they send them back. Then the goods are tied up in customs for weeks,” explains Doležalová. Sometimes communication barriers also pose problems. “If customers can communicate in English or German, we can deal with them directly. But there’s a problem in Hungary, for example, so we have an external worker there who can speak Hungarian and mediates our sales. In Poland we have two such people,” Doležalová adds.
For customers in countries where language is a barrier, CADware has special internet presentations in Hungarian and Polish, which simplify communications. According to Doležalová, the Czech Republic’s EU membership facilitates exports. “No one used to want to bother with imports, they all just wanted to buy goods in their own countries. This problem no longer exists,” she notes.

Milan Duda

BRANO: Czech exports help drive the auto industry


Pavel Juříček

The well-known sign, “This door is self-closing,” is almost synonymous with Brano Group. With a history that dates back to 1862, this group is represented in seven cities throughout the Czech Republic, and has built its good name over the last 10 years around the world, mainly in the automotive industry.In 1995 Brano had no exports. “I guided the firm towards exports and the automotive industry, as I saw good prospects there,” recalls the company’s general director, Pavel Juříček. Under his leadership, Brano Group achieved sales of CZK 4.2 billion last year, nearly 70% of which came from 54 countries around the world. Juříček says that the reasons for the expansion abroad are clear: “The Czech Republic is very small. It’s not enough to manufacture here for only 700,000 cars. If you want to stay competitive, you have to operate globally.”
So the group started focusing on automakers around the world with products such as pedals, car lifts, and door systems. Today its customers include firms like Volvo, Ford, GM, Opel, and Peugeot. Its largest customers are in western Europe and North America, but the markets in China, South Africa, and Malaysia are also promising. Brano Group’s head sees potential for success mainly in his firm’s research and development capabilities. “These capabilities are at a very high level. 150 of our 2,300 employees work in R & D,” notes the general director.
Another of Brano’s virtues is its flexibility, but according to Juříček, this is endangered by factors like the rigid labor code. “In view of clear threats posed by countries like Romania, Bulgaria, and Turkey, the Czech Republic isn’t a particularly advantageous country in terms of labor costs,” he points out. “So we have to compensate for competitors’ lower costs with greater flexibility,” says Juříček, according to whom similar barriers are forcing many firms to move their production facilities elsewhere. He is also considering moving some of the production to neighboring Slovakia.
On the other hand, Juříček is pleased that all administrative export barriers have been de facto eliminated recently. “In the past it was very hard to do business outside our borders, and the amount of administrative barriers were unbelievable,” he recalls. “For example, customs offices were open only until 2 pm on Fridays, which is a problem when you work through the weekend and need to supply an automaker. But that’s history, and now the only barriers are within ourselves,” says Juříček, alluding to the opening of trade with EU countries.

Milan Duda

AHORN: It began with exports


Pavel Koňarik

Interest from Germany gave birth to Ahorn’s production of slats for bed frames. Today exports to Germany still account for big business, while numerous other foreign markets fuel the firm’s innovations.

In the mid-90s, Pavel Koňarik and his wife manufactured customized furniture. But when competition in the field began to toughen, Koňarik began looking for another field of production, when demand for wooden bed slats arose from a German firm. In the end the couple couldn’t agree with the potential customer on prices, but since they had already bought the necessary equipment, they started making slats for the Czech market. Eventually a lack of domestic demand brought up the issue of exporting once again. The first country they tried to find interest from was, not surprisingly, Germany – which is today Ahorn’s largest foreign buyer of wooden slats. “Our export breakthrough came when we were contacted by a German businessman in the furniture and mattress line who mediated contacts among firms. He knew the environment and helped us aquire many new customers,” recalls Koňarik.
The Ahorn name was incorporated in 2000 (to replace the couple’s old business license), and today exports account for half of the firm’s CZK 100 million annual sales, 80% of which go to Germany. Austria, Slovakia, Poland, and, recently, the Baltic states and Australia are other significant export destination, while the remainder of production stays on the domestic market, where the firm has its own sales outlets and contracts distributors. For Ahorn, exports are not only a way to sell in greater volume, but are also a source of innovation. According to Koňarik, the foreign markets he ships to are a few years ahead of the Czech market, so thanks to his firm’s presence abroad, Ahorn can introduce some of these novelties into their production for the domestic market as well.
While success on foreign markets is an important factor for firms that export, another issue is payment. For example, of Ahorn’s total volume of exports to Germany, 1-2% go unpaid – a figure several times higher than that in the Czech Republic. “In this country people in this field know each other, so they can’t afford not to pay if they’re serious about their businesses,” notes Koňarik, explaining one reason for the difference. “Finding reliable customers abroad is the key to successful exports,” he points out. Today Ahorn uses the services of a lawyer in Germany who checks on all potential customers. The main goal is to exclude those to whom not paying for ordered goods is a “hobby”. They’re often not difficult to recognize – an owner of seven firms, two of which are undergoing bankruptcy, probably won’t be the best customer.

Petr Vykoukal

JABLOTRON: Marketing electronics by proxy


Dalibor Dědek

Breaking onto the global market isn’t easy. Jablotron, which has focused on exports since its founding in 1990, had to pretend at first that it was from Taiwan, in order to convince customers that its security and signalization electronics were of high quality.“Taiwan was our gateway to the world,” says Dalibor Dědek, Jablotron’s general director and co-founder. The firm established a subsidiary in Taiwan, because at the beginning of the 1990s it was seen as a far more capable manufacturer than post-revolution Czechoslovakia. “When people didn’t want to buy our products (from Czechoslovakia) we began offering them from Taiwan. But we were gradually able to convince them that this country is no slouch when it comes to manufacturing,” Dědek explains.
The tactic of conquering foreign markets “by ambush” paid off for the firm. Today Jablotron exports to over 40 countries, and exports account for 80% of its sales, which last year reached CZK 500 million. Most of the exports go to Scandinavia, while the most dynamic market is China. “The economy there is growing before your eyes, but there are also unpleasant aspects,” notes Dědek. “Two years ago they started counterfeiting our products, and they did it so well even we weren’t able to recognize it. We hired detectives, who discovered where the manufacturing was taking place. The police raided the facility and destroyed all the products, and the owner wound up in prison. The manufacturer paid us compensation and, according to Chinese law, the firms that installed the equipment had to pay us too,” the director recalls.
As its exports rose, the firm realized that it was better to concentrate on research and development than on manufacturing, so it moved a large part of its production outside of the original facilities. Although some production still takes place in the Czech Republic, most of the manufacturing has already been moved to China. “We’re still keeping a limited manufacturing base (in the Czech Republic), particularly for prototype and small modified series. When we need large production runs we can outsource them,” explains Dědek. “We’re trying to employ brains rather than hands.”
Thanks to the concentration of innovative minds, the firm is always coming up with new ideas. Last year Jablotron shocked global markets with a desk-top GSM telephone that looks like a regular phone but operates as a mobile. “Maybe we weren’t the first with this idea, but we had the courage to launch it. At a trade fair in Hong Kong people were using miniature handsets to show us what mobile phones should look like. But other people thought it was an excellent idea,” says Dědek. Jablotron immediately received an order for 100,000 such telephones with a three-month delivery deadline. “It was a brutal deadline, but we met it,” he recalls with a smile.
This market for this telephone, originally intended for the older generation, has undergone a transformation. “Mobile operators use it as a substitute for ordinary lines. When you change offices you don’t have to reroute any wires, you just move the telephones,” notes Dědek, lauding the advantages of this phone, for which Jablotron has set up a new subsidiary.

Milan Duda

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