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Developing
a Market Entry Strategy
for Central & Eastern
Europe
kpmg.com/cee
Introduction
Central and Eastern Europe (CEE)
isone of the most dynamic regions
inthe world. The regions nations
continue to solidify their transition to
democratic market economies and
many countries have become respected
members of the European Union (EU)
and the OECD. We define Central
and Eastern Europe as the formerly
communist states between Germany,
Austria and Italy in the west and the pre1939 Soviet Union territory in the east,
stretching from Estonia in the north to
Albania in the south. The region as a
whole has over 130 million inhabitants,
which is more than the UK and France
combined. Its growing number of
middle-income consumers and the
anticipation of strong infrastructure
investment supported by European
Union funds are enticing propositions,
attracting strong interest from
investors across the globe.
While the investment prospects are
attractive, decisions made now
can have enduring consequences.
Inadequate market understanding
or insufficient forward planning can
greatly inhibit a ventures chances of
success. Commercial and operational
issues, taxation, intellectual property,
employee remuneration and regulation
all bring challenges in new markets
and jurisdictions. Meanwhile, pricing,
innovation, supply chains and routes
to market in one country or sector may
turn out to be quite different in another.
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
10
20
20
20
20
20
20
FDI stock
20
12
F
20
100
20
11
F
30
200
09
20
10
F
40
300
08
50
400
07
60
500
06
70
600
05
80
700
04
90
800
03
900
20
FDI inow
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
02
20
Market entry
Given Central & Eastern Europes attractive opportunities,
itisno surprise that many companies are considering
expanding into the region. Although the regions appeal
is justified by many factors, any entry does require research
and planning. Whether you are considering an acquisition,
a greenfield investment or a restructuring, you need
to understand the strategic and financial impact of
your decisions as well as the implementation risks.
Understanding where the opportunities and risks lie, thesize
of each opportunity and what competitors are doing will
arm you with the confidence to make a sound investment
decision.
The commercial arena is changing rapidly due to the regions
increasingly competitive markets as well as government
reforms and initiatives. Many economic sectors prove
to be aminefield of complexity. Moreover, potential
target companies may lack reliable and timely financial,
tax, commercial and operational information. Market
information and competitive intelligence may be irregular,
inconsistent, inaccurate or simply non-existent. Investors
often underestimate the cost of entry and the strain on
management resources.
Our approach
to market entry
Market assessment
Demand forecasting
Value chain analysis
Customer needs/behavior surveys
Competitor profiling
Channel analysis
Risk analysis
Institutional and regulatory environment
mapping
Entry barrier analysis
Resources availability
Cost driver analysis
Internal capability assessment
Vision and objectives
Internal core competencies
Internal SWOT
Implementation
Acquisition
Target identification and profiling
Target prioritization
- Long-listing
- Short-listing & ranking
Target approach
Preliminary due diligence
Detailed due diligence
Valuation, Deal negotiation,
Tax structuring
Closing / Integration
Partner approach
Evaluation and planning
Closing and implementation
Greenfield
Business case development
- Business plan development
- Selection of location, product, etc.
- Financial model build
- Operational planning
Tax structuring and incentives
Roadmap preparation
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Government
institutes
Research
bodies
Investment
Analysts
Academics
NETWORK OF
EXTERNAL EXPERTS
Industry Experts
Trade
Associations
Global Economic
Indicators
National
Economic
Indicators
Public
Databases
AVAILABLE
AVAILABLE
EXTERNAL
EXTERNAL
RESOURCES
GEOGRAPHIC BASED
RESEARCH
INDUSTRY RESEARCH
LIBRARIES
RESOURCES
Purchased
Research
KPMG
Research
Local Economic
Indicators
Company
Managers
INDUSTRY PARTICIPANTS /
STAKEHOLDERS
Distributors
Competitors
Suppliers
Customers
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network
ofindependent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity.
All rights reserved.
EU members
Candidate countries
Estonia
1.3 mln
Association agreement
Other
Czech
Republic
10.5 mln
Slovakia
5.4 mln
Moldova
3.6 mln
Hungary
10.0 mln
Romania
21.5 mln
Croatia
4.4 mln
Bosnia Herzeg .
3.8 mln
Serbia
7.3 mln
Slovenia
2.1 mln
Montenegro
0.6 mln
Albania
3.2 mln
Bulgaria
7.6 mln
Macedonia
2.1 mln
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Country
Katowice
Poland
Population
(mln)
2.7
Warsaw
Poland
2.7
Budapest
Hungary
2.4
Bucharest
Romania
2.1
Prague
Czech Republic
2.0
Belgrade
Serbia
1.5
Cracow
Poland
1.3
Sofia
Bulgaria
1.3
Zagreb
Croatia
1.2
Lodz
Poland
1.2
2011 KPMG Central and Eastern Europe Ltd., a limited liability company
and a member firm of the KPMG network of independent member
firmsaffiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Score
Global Rank
Slovenia
86.7
Lithuania
77.3
11
Latvia
69.2
18
Poland
66.9
21
Romania
65.6
22
Hungary
65.0
23
Estonia
63.7
25
Czech Republic
58.6
32
Slovakia
53.6
40
Bulgaria
51.0
46
Switzerland
49.4
48
Germany
46.3
52
Score
Global Rank
Estonia
6.0
Macedonia
6.0
Lithuania
5.9
Latvia
5.7
21
Hungary
5.5
35
Moldova
5.5
39
5.4
40
Poland
5.4
47
Slovakia
5.3
49
mean
4.9
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Score
Global Rank
Estonia
5.6
26
Hungary
5.4
31
Lithuania
5.1
43
Poland
5.1
46
Czech Republic
5.1
47
Slovenia
5.1
48
United States
5.0
55
Spain
4.9
57
mean
4.7
Property rights
Example countries
Score
Global Rank
Estonia
5.3
33
Montenegro
4.8
48
Slovenia
4.6
58
Poland
4.6
59
61
India
4.5
mean
4.4
Italy
4.3
69
Brazil
4.3
72
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
2008
6.1%
14.4%
15.2%
21.5%
23.6%
13.1%
3.9%
16.5%
13.4%
20.0%
17.8%
22.5%
7.0%
5.0%
Agriculture
Industry
Financial intermediation
& business
Manufacturing
Construction
Source: EUROSTAT
Services
700
600
500
400
300
200
100
0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
EU-27
CEE
Source: International Monetary Fund, World Economic Outlook Database, April 2009
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Score
Global Rank
Czech Republic
5.7
12
Estonia
5.6
14
Hungary
5.6
15
Slovakia
5.5
19
Latvia
5.2
29
Slovenia
5.1
30
Romania
4.9
42
Poland
4.8
47
mean
4.6
2011 KPMG Central and Eastern Europe Ltd., a limited liability company
and a member firm of the KPMG network of independent member firms
affiliated with KPMG International Cooperative (KPMG International),
aSwiss entity. All rights reserved.
FDIInowby countries
800
80
700
70
50
Baltics
Western Balkans
Czech, Slovakia
& Hungary
Poland
11
F
12
F
20
20
09
10
F
20
20
07
06
08
20
20
20
05
20
12
F
11
F
20
09
10
F
20
20
08
20
20
07
20
05
20
20
03
20
20
20
06
10
04
20
100
02
30
200
04
40
300
03
400
60
20
500
20
600
02
USD billion
900
20
USD billion
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative
(KPMG International), a Swiss entity. All rights reserved.
Stephen Young
Baltics and Belarus
T: + 371 67 038 062
E: stephenyoung@kpmg.com
Marek Sosna
Poland
T: +48 22 528 1200
E: msosna@kpmg.pl
Alex Verbeek
CEE Corporate Finance
T: +420 222 123 431
E: alexverbeek@kpmg.cz
Gergana Mantarkova
Bulgaria, Macedonia,
Albania and Kosovo
T: +359 2 9697 500
E: gerganamantarkova@kpmg.com
Daniela Buhus
Romania and Moldova
T: +40 741 800 800
E: dbuhus@kpmg.com
Eva Doyle
CEE International Tax
T: +420 222 123 564
E: evadoyle@kpmg.cz
Daniel Radi
Croatia and Bosnia-Hercegovina
T: +385 1 5390 161
E: dradic@kpmg.com
Boris Milosevic
Serbia and Montenegro
T: +381 11 2050 520
E: bmilosevic@kpmg.com
Iwona Sprycha
CEE Post Merger Integration
T: +48 22 528 1144
E: isprycha@kpmg.pl
Alex Verbeek
Czech Republic
T: +420 222 123 431
E: alexverbeek@kpmg.cz
Quentin Crossley
Slovakia
T: +421 2 5998 4430
E: qcrossley@kpmg.sk
Judit Drimmer
CEE Shared Service Centres
T: +36 1 887 7349
E: judit.drimmer@kpmg.hu
Mark Bownas
Hungary
T: +36 1 887 7122
E: mark.bownas@kpmg.hu
Nevenka Kran
Slovenia
T: +386 1 420 1160
E: nkrzan@kpmg.com
www.kpmg.com/cee
2011 KPMG Central and Eastern Europe Ltd., a limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information
without appropriate professional advice after a thorough examination of the particular situation.
The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.