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| | | The Shepperd Report 7.03
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The Map of Europe Grows!
With the elections in Poland and the Czech Republic, the die is cast for both countries to join the European Union in 2004. This has once again placed the eastern part of Europe on the center stage as new opportunities for growth appear. The same can be said for all the other nations that will join the European Union next year. Companies are running head long into the “New Europe” to take advantage of low wages, low taxes, low costs for operations and the like. In a word, opportunity.
It is a different world than in 1990 and the first opening of the East. There is a developing infrastructure that is light years ahead of the heady times in the early 90’s. The move East is a much different decision to calculate today. However, while many run to new cities, there is a great opportunity along border regions between the “New” and “Old” Europe that could make for the best of both worlds.
These areas are now filled with fear of the”Great Sucking Sound” Ross Perot had claimed about Mexico in his American Presidential campaigns a few years ago. The fact is that NAFTA, the North American Free Trade Agreement sparked a major economic boom along what is now known as the “Borderland” On both sides of the border, major boosts in economic development were sparked with amazing benefits to those high-cost towns on the American side. There is a model here for many companies looking east.
Many companies hedged their bets and located on the border area of Mexico and Texas. They put their execs and technical people on the American side of the border, the placed production on the Mexican side. The executives still worked a lot on the Mexican side, but they had an American residence, American schools for the children, American stores for shopping and an American phone system.
On the other side of the border, there may also be an office for the execs and other highly skilled personnel to work. However, the production and warehousing is carried out at a fraction of the cost in America. Literally millions of people have gravitated to the Borderland area on both sides. This pleases the local governments and economic development officials.
It is a win-win. The high cost American side became the bedroom community and Northern Headquarters from companies located on the Mexican side. The cities received taxes on the high wages and from the newly-formed companies and support businesses. The Mexican side received high-paying jobs by their standard and people flocked from the mountains and interior of Mexico to grab a lifetime opportunity. At one point in time, there was an estimate of 250 people coming to Ciudad Juarez, Mexico to find work each day. Problem was, there were still more jobs opening in the city than people to fill them. That is growth!
Just ask the local officials in El Paso, Laredo, Nogales, Arizona, Houston, or any of the border cities about growth created in their area. Sure, jobs moved to Mexico, however, jobs also came to the Border cities, where everyone came to shop for the latest merchandise.
Personnel is a key factor in the success of any move. Lose key people and you may lose any and all benefits of moving to a low cost country for production. Moving to a border area helps keep, or attract key personnel who may give their all for the company, but not at the sacrifice for their children’s education, or their spouse’s future.
When you’re looking to locate in those new cities of the East, also be careful to consider the history, culture and geography of an area. Vienna, for example, may be overlooked in the rush East, yet, it is the very center of the Danube River Basin and has natural, historic and cultural connections to the region that exist regardless of the latest, hottest city for investment. Having had an office in Budapest for a number of years in the early 90’s and with projects in the Czech Republic, Hungary and Slovenia,, you always went by, through, or around Vienna. Quadral now is reopening its offices for the East. Berlin in the north and, this time in Vienna in the south.
Just as important as the location for a plant in the New Europe, is the process and structure within the plant. Location in the East and low hourly costs do not translate always into lower unit costs. Careful analysis is necessary to make sure the model you use for production will actually save money. Some moves to Mexico were the most costly decisions a company could make. The move East without planning, the right logistics and a good strategy may mean the difference between great results, or huge losses.
Ahead of the Pack
This summer, Quadral is proud to have called it right for their client not once, but twice. In the June, 2003 issue of WALLPAPER, a magazine for architecture and style, the area of DUMBO (Down Under the Manhattan Bridge Overpass) and the Red Hook area of Brooklyn were named as the hottest areas for living and working in New York. Two years ago, Quadral recommended both areas for a major, 80,000 square foot office project for a German client. Quadral identified both locations as the place to be in New York in the years ahead.
In a recent edition of FORBES magazine, Omaha, Nebraska was listed as one of the top ten cities to live and work in the US. Quadral linked a German client with a joint venture partner near Omaha earlier this year. Quadral identified the area of Omaha as a developing global metropole several years ago as the key location for a potential joint venure, or direct investment by the client. Right on again!
Quadral is working on the next areas for growth in the world, with the new borderland areas for the European Union. Just wait for what’s in store in this region and you can see why Quadral is excited. Of couse, we will have to wait a few years for all the magazines to report the developments.
Quadral Waltzes into Vienna
Our co-sponsorship of a concert for American Youth in Vienna marks the start of a new period of growth for the company. It is part of a new strategy to adjust to the realities of an expanded European Union. The concert was attended by approximately 300 people at the Akzent Theater. It was a benefit to help women with breast cancer and co-sponsored by Zonta International, Nadja’s, a world class jewelry design house and other Vienna companies. Quadral and the arts community are working closely together as we develop a Global Arts Practice to support orchestras, museums and other charitable organizations throughout the world. For more information, just respond with your inquiry via email on the Quadral website.
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