The second French wave
Written by: Jasna Sýkorová
Last year the French rivaled the Germans in terms of investments in this country, ranking just behind the number one foreign investor. The interest shown by the big players also opened eyes at medium-sized firms, which decided to come here at last.
Photo: J. Vágner
JEAN-CHRISTOPHE OIOLI, the operations director for French firm Acésame, enthusiastically strolls through his kingdom in the newly built office and production hall in Čakovice, not far from Prague. He opened the brand new Czech branch this spring. There is still an occasional lack of furniture in the offices, and the space seems sparsely populated, but the main hall is already dominated by a partly disassembled automobile. Acésame’s main activity is benchmarking for the automotive industry, which in practice means that it prepares catalogues of all parts of any make or model for its customers. This catalogue is in software form, and each part is accompanied by a detailed verbal (manufacturer, material), numerical (dimensions, weight), and pictorial (photographs from several angles) description. Acésame specializes narrowly, and with annual sales in 2001 of around EUR 1.98 million (about CZK 65 million), it is considered a medium sized firm. The Czech Republic branch is currently its newest, following France, Japan, the US, and Germany. Its clients include well known automakers – Mercedes, Volkswagen, Honda, and Peugeot.
“We made our decision to enter the Czech Republic very quickly,” says Oioli, adding that they wanted to be close to a customer – VW Group. Last summer the company analyzed the business environments in several countries, including the Czech Republic. Last winter they reached their decision, and entered the Czech Republic through an empty front company that was custom-made for it by a consulting firm. (This process is common for mid-sized and small firms. This way they need not spend time on administrative proceedings as entry into the Commercial Register, and they can start doing business immediately. This procedure is impractical for larger investors with more administrative backup. It makes it more difficult to qualify for investment incentives.) Acésame’s decision was influenced by several factors: a customer’s recommendation, and an analysis elaborated by CzechInvest, which indicated both potential costs and personnel requirements. However, Oioli denies that his company was drawn here by low costs. “If we considered costs only, we would probably remain somewhere in the EU. Many processes, mainly logistics, are more complicated for us now – for example, transporting cars for analysis, or customs operations,” he says.
Nevertheless, just as Acésame knows that the average car represents 25,000 various bits of information, and that it takes eight people two months to process them, it also knows which goals the company must achieve in the Czech Republic within one year: to increase the number of staff to 25 (from today’s 10) and to invest up to EUR 610,000 (CZK 20 million). The company is also preparing a software update and further growth, so that in four years the funds invested should rise to EUR 4 million (CZK 130 million).
Acésame is not alone in its interest in the Czech Republic, but it is one of the few to see its ideas through completely. “Successful French mid-sized firms are looking for market space to expand into, and they feel drawn by central Europe,” confirms Jaroslav Hubata-Vacek, the director of the French-Czech Chamber of Commerce. The chamber serves as an entry point for French investors in the Czech Republic. It arranges consulting activities and contacts and accompanies potential investors around domestic firms. Despite their interest and assistance, there are not very many mid-sized firms that can see their investment plans through to the end. According to Hubata, there is still a lack of information about our market. “Unfortunately, some French businessmen distinguish very little between Poland, Romania, and the Czech Republic,” he says. “They come very poorly informed, they don’t have any strategies or budgets prepared. Or they have prepared for different price levels, and offer products that several times over exceed local purchasing power.”
Nevertheless, he feels that the situation is improving. “The arrival of large investments such as Société Générale’s in Komerční banka (last year) and the Toyota Peugeot Citroe¨n Automobile (TPCA) joint-venture on an auto plant (this year) serves as a good reference for other mid-sized firms, raising their interest in our country,” Hubata adds. Thanks to these references they are coming to the Czech Republic in a second wave.
The French Desk
The large players are getting in on the action, too. It is often in their interest to help second-wave firms. For example, Komerční banka decided to support French firms’ interest in doing business in the Czech Republic and to set up a service called the French Desk, which should become fully operational this summer. According to Philippe Delacarte, vice-president, mid-sized and large enterprises, this service focuses on firms with CZK 20-500 million in annual sales, and it should enable them to orient themselves more easily in the Czech environment. French (and other foreign) firms will be able to take their problems and needs to a single place. The linguistically talented people serving at the French Desk will help them open accounts and fill in forms, but also to find experts for other specialized services – from obtaining credit to currency trades.
Photo: Jan Vágner
“There were several reasons for setting up this client center,” Delacarte says. “When Société Générale acquired Komerční banka, there arose a need to take care of clients from the former Société Générale branch here in Prague. When we started solving clients’ problems individually with them, we discovered that it is very complicated for businessmen to feel at home with operations like opening bank accounts. We looked at Komerční banka with the eyes of foreigners, and we prepared this point of entry for them, to guide them through the obstacles,” he adds. Société Générale is not breaking any ground in offering this service, as it already has made similar changes in Germany and the US. Nonetheless, as Delacarte explains, “Komerční banka is our largest foreign investment, and we are paying extraordinary attention to such operations.” He also expects the French Desk to support Czech-French business contacts. “Besides being able to help firms become comfortable in this environment, our analysts can better acquaint them as to investment opportunities here in the Czech Republic,” he says. The other side of the coin applies for Czech firms looking to penetrate France.
Komerční banka intends to present this service in a broader context during Czech Season in France, which will be held in the largest French industrial cities this autumn. Czech Season, whose purpose is to raise awareness of the Czech Republic, is prepared by the French embassy in cooperation with CzechInvest and CzechTrade. “We expect that French firms will be interested in other projects in the Czech Republic,” says Martin Jahn from CzechInvest. “Unlike Germans the French fell behind at the beginning, but now they try to catch up. The fact that TPCA came to Czechia and not BMW or that Société Générale won Komerční banka instead of HypoVereinsbank proves that they really want to be here and that they are willing to invest more than others,” Jahn explains.
|Good advertising for the Czech Republic
The new TPCA Kolín production facility of the Toyota Peugeot Citroe¨n Automobile consortium should bring work to many firms and attract more Japanese and French investors. The question remains whether any slices will go to Czech suppliers from the “pie” offered by TPCA.
“If we succeed in working together with this automaker, it will mean a lot to us,” says Miroslav Pech, the sales director for Tanex plasty. With sales of about CZK 500 million, Tanex is a purely Czech firm that produces plastic car parts – head rests, gear shifts, etc., for automakers throughout Europe. Nevertheless, Pech believes that the chances of working directly for this automaker are not good: “The consortium already has business ties with about twenty multinational suppliers. It would be more realistic for us to get into the second line, and to apply for sub-deliveries.”
|The tide of investment
The entry of an investment partner brings expectations of better tomorrows. And if a foreign partner is involved, it can also lead to culture shock.
When Karel Vacek established the first mobile phone shop in 1996, he had no idea that such an overwhelming tide of events would follow. His shop developed into the well known firm GSM Partner, which in 1999 began wholesale distribution to dozens of shops throughout the country, with annual sales of CZK 310 million. However, continued expansion required additional capital, so Vacek, as sole owner, sold his firm to Avenir Telecom, a French distribution group.