20 April 2011
1.8 Practical recommendations
Adopt a more far-sighted approach
Although nascent signs of recovery are emerging in Europe, the overall European economy will take time to rebuild growth momentum, so will the Czech Republic. Given the high economic dependence and fading out of growth at the European level, the Czech economy is set to be enveloped in the vacillating fortunes of the European economy over the near term. Hong Kong companies, interested in tapping into Czechs’ deeper pockets, are therefore advised to adopt a more far-sighted approach. Instead of earning quick profits, Hong Kong companies should see making inroads into the Czech market as a medium- to long-term commitment that will bring benefits over a long period of time, especially when the country’s potential as a regional distribution hub can be sufficiently explored. While ODM suppliers are still much sought after among Czech and Slovak companies, OBM opportunities also represent decent potential in the Czech market. On top of various important trade fairs in Germany and Poland, there are a handful of local trade shows such as Styl and Kabo (fashion and leatherware) and Amper Expo (electronics), providing good occasions for Hong Kong suppliers to get into contact with potential clients in the Czech Republic. In order to mitigate the annoyance caused by long flights and exorbitant travel costs, local companies can consider the alternative of using trade fairs and exhibitions in Hong Kong as a platform to meet Czech businesspeople.
Target the Czech Republic as both a market and springboard
Despite deeper pockets, Hong Kong companies should not only focus on the Czech domestic market, but exploit the country’s potential as a regional distribution centre in Central and Eastern Europe. Thanks to its historical links and geographical proximity, Czechs are used to doing business with Europeans, especially Germans and Slovaks, and are very knowledgeable about the differences between Eastern and Western Europe. Given its centric location and well-developed transport connections, many foreign companies such as Becker Acroma (paints), Denso (automotive supplies), DHL (IT services), H&M (fashion), IKEA (furniture), LEGO (toys), Omnipack (packaging) and Schneider (logistics) have chosen the Czech Republic as a manufacturing/services/support centre to oversee and expand their business operations in the region. Riding on its relatively advanced infrastructure, both logistically and technologically, the Czech Republic is often used as a springboard for overseas firms entering the 500 million-strong EU market and in particular nearby emerging economies such as Slovakia and Poland.
Strike a good balance between price and quality
The global economic crisis has clearly manifested itself in the Czech Republic, where consumers are looking and waiting for bargains. The once-buoyant sales of goods such as electronics, readymade clothes, shoes and cosmetics, have suffered particularly hard from falling incomes and the credit pinch. But this temporary act of trading down, despite being extensive, should not be considered a permanent trend. Hong Kong exporters should never regard the Czech market as a dumping place for their unsold stock, as quality in general remains a decisive factor for most Czech consumers. In any case, while Hong Kong companies may choose to offer products with reduced features and product content, they should never economise on quality. By striking a good balance between price and quality, Hong Kong companies can turn the negative into positive by establishing images and/or brands that promise quality to consumers at reasonable prices.
Win business through value-added services
While there is a growing trend of direct trade with China, quite a few Czech traders, especially those that are small or medium in size, still find it more reliable and convenient to make use of Hong Kong as a trading platform. On the one hand, Czech importers appreciate the professional services such as design, branding, legal, banking and finance services that they can easily obtain in Hong Kong, although they can buy at lower prices if they do their own sourcing directly on the Chinese mainland.
Czech exporters, on the other, are particularly interested in the banking, design and branding services that Hong Kong companies can offer to facilitate penetration in the mainland as well as Asian markets. As a matter of fact, most Czech traders realise that Hong Kong is one of the, if not the most, convenient bridgeheads to the China market. Hong Kong companies should therefore leverage on their design and branding capabilities, as well as market intelligence in relation to Chinese and Asian consumer preferences, to help Czech companies introduce their products into the lucrative Chinese and Asian markets. For instance, some glass and lighting companies such as LASVIT have been using their regional headquarters in Hong Kong to take care of orders from the mainland and other Asia Pacific markets.