Is it good for a company to expand NOW in Romania?
Hello to everyone. After some very important things that happened to my life the previous days, I am back in action. And I decide starting this week with a discussion I had with a gentleman, Mr Vlad Cuc, from a law firm here in Bucharest. Our discussion took place at http://www.linkedin.com/, the most serious and professional site you can use in order to get connections and learn things (especially the ones of you who complain that you don’t have connections and this is why you can not achieve your targets in life).
His discussion topic was “Crisis effects on those businesses planning to expand to Romania?” and he placed the problem as follows:
“What will the foreign investors do, will they expand or will they put their projects on hold?”
“I believe it’s no secret that Romania’s business world is greatly influenced by foreign investment. A question what kind of impact it will have to those companies looking to expand to the country. Will they put their plans on hold? Will they cancel altogether seeing how fragile the entire Eastern European market is? Or will they see it as way to sharply cut costs and decide to relocate sooner?”
My answer was:
“Now the moment is excellent, if someone is able to expand”
“If someone has a solid business, knows what he does, has a good business plan, funds, and a team to implement it and believes in the potential of Romania, NOW the moment is excellent so as to expand in Romania. He will find low costs in almost anything and suitable personnel to hire. Plus, as most of his competition will face big problems (especially if they did wrong moves in the near past, “drunk” by easy money and success) he will be able to gain market shares easier than the past.
The question is: Who will dare?”
He continued, by stating a more detailed opinion:
“We can split the investors in 2 categories: The sellers and the producers”
“Indeed, hell for some is heaven for others I suppose. Nevertheless, perhaps we can split the investors in 2:
1. those looking to solely sell on the Romanian market;
2. those looking to produce in Romania and export abroad.
I believe that those falling into the 1st category will probably put on hold their plans to invest in Romania as they will probably consider that Romanians won’t be a very good buyer-market in the near future.
Those looking to produce might be willing to invest in the country as they would be mainly interested to lower costs (they could indeed be able to do anything cheaper in the country).
Would love your opinions on the matter.”
My final reply was a bit longer (but still I would need much more space to present all my arguments so as not to be misunderstood…)
Romania can become the “China of Europe”
“I keep saying to my friends that Romania is one of the very few countries that could apply so as to become the “China of Europe”. Inside European Union, at few hours distance from the main European markets, Romania benefits from its location, combined with the port of Constanta.
If a company wants to have its production delivered in 2 months since it was ready, then it will always go to China. But now the latest trend for thousands of companies is to follow the example of Zara and to have the production very close to their markets, so as to design something, manufacture it in few weeks and in less than a month to have it on their stores. (that was an example, which can apply in endless categories of business).
The production costs are still significantly low in Romania. There are plenty of secondary cities “thirsty” for investments, while the authorizations can be received relatively soon comparing to other E.U. countries. Ok, there are also many problems, but guys, let’s be honest… Where will you invest in production and you will not find trouble? Where is this place in Europe where you will move fast, follow all the European laws, receive all authorizations and approvals (especially the environmental ones) in no time and you will succeed to start producing so fast? Especially now that the Real Estate prices are going back to reality and the employees become a bit more “down to earth” (especially in Bucharest) I think that the opportunities for a serious investor will increase ALOT.
In October, when I was participating at EXPO REAL, at Munich, I met many Germans who do the following business: They bring lots of German companies, small or medium sized, to invest in small and medium factories in Romania, from 3.000 up to 10.000 sq.m. of production area. So, they asked me for lands in cities like… Lugoj or Hunedoara. They agree with the investor and they usually buy the land, deliver the factory “turn key”, and sometimes even help him to hire personnel. I met 11 guys like this and each of them claimed to have 10 – 20 clients…
Especially due to the crisis the production will move eastwards… Unfortunately (for some) or fortunately (for some others), this is capitalism…
Regarding the ones who want to sell to Romanians their products: If they have a short time business plan, then I agree, now the time is wrong. But if they come here so as to stay, now they will be able to find the best people, train them, hope to keep some of them and create a team, open stores with low costs at rentals, transportation etc, advertise with low cost etc. They will be able to position themselves in the market in the best possible way. Probably they will lose money for a period, but at the market’s turnaround, they will be the first ones leading the way of success again”.