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French fortifications
Written by: Jasna Sýkorová
Photo: Petr Poliak, Kurt Vinion
French companies doing business in
the Czech Republic are focusing on changes related to this country's
impending EU membership. Chief among them is the issue of keeping
up with the increased competition.
A SORT OF CALM before the storm, that was the situation for major
French players here last year. But the arrival of the Toyota Peugeot
Citroen Automobile (TPCA) plant heralded a new inflow of French
capital into the country. According to CzechInvest, the state agency
supporting investment into the Czech Republic, the volume of expected
investment in the automotive industry alone over the next few years
(including the TPCA project) will amount to around EUR 1.14 billion.
In comparison, the total of French direct investments in this country
for all of 2002 has been EUR 400 million.
Certainly not all of the investments and activity that stem from
the French business community are new. Firms that have been operating
here for years are also confirming and strengthening their position.
By making the most of the know-how and capital background they
have gained from their parent companies in France, they are bolstering
their businesses to face the increased pressure that may result
from the Czech Republic's EU entry. Like many other international
companies, French firms are seeking to minimize their costs, and
are implementing information technologies in their solutions. The
French strategy, however, has some extra innovations - among them,
the most obvious of late has been in the areas of personalized
marketing and specialization of products and services.
"
An individualized approach to our clients has been very important
to us," says Petr Slabý, deputy director of marketing for
Komerční banka. This trend became even more significant after Société
Générale, a French bank known for innovations in this field, acquired
Komerční banka. "We are creating and offering individualized
banking products - packages for different groups of customers.
These are not only tailored to the stage of a company's 'life cycle',
but are also relevant to their specialization - for example, to
doctors or firms using franchising as a business model," Slabý
explains.
The logic of offering personalized solutions is also apparent in
the field of food-voucher distribution - a market currently controlled
on a worldwide scale by three French entities: Accor Services,
Sodexho Pass, and Cheque Déjeuner. Even in this seemingly uncomplicated
segment, the trend is to offer packages, although these naturally
take on a different form than those offered by banks. The employer
(i.e., the client of the voucher company) receives "pre-packed" envelopes
prepared for each employee that is on the food-voucher plan. Thus,
the client's time spent with administration and distribution is
minimized.
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Guillaume Bertier
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"
We have invested more than one million dollars into the new production
line and printing machines," says Guillaume Bertier, general
director of Accor Services in the Czech Republic. "The process
is very fast - the issued vouchers come back to us in few days
time, and it has to be a very smooth operation," he adds.
Accor Services has approximately 270,000 users in the Czech Republic
and a network consisting of about 20,000 restaurants. Following
up on the success of this service, companies in the industry are
seeking other ways to make vouchers function in other fields as
well.
Treating the customer as an individual is not only the domain of
service-oriented industries. It is also part of the strategy of
the production plant TPCA, a French-Japanese consortium that represents
the biggest investment project in central Europe lately. "The
small vehicle with the 'working name' of B-Zero will be produced
in three styles - three different body designs with the same undercarriage," explains
Jean-Pierre Chantossel, executive director of TPCA. The Czech Republic
was chosen as the host country for the ambitious project after
one year of debate and negotiation for possible locations. Of a
total EUR 1.3 billion, EUR 800 million will be invested locally
- moreover, the majority of supplies will come from domestic Czech
sources (see sidebar, left). However, Chantossel does not conceal
that there are many established Japanese suppliers for Toyota and
French ones for PSA Peugeot Citroen, which already have production
facilities in the Czech Republic, as they will be able to respond
to the TPCA's "individual" needs most promptly.
A certain number of the suppliers with an international background
will merely adapt or increase their production capabilities. Examples
of these flexible and responsive French firms include Valeo, a
specialist in automotive air conditioning, and s.n.o.p., a producer
of car parts. Others, like interior producer Lear or logistics
operator Gefco, are establishing greenfield operations within the
TPCA plant zone. Chantossel points out that there should be up
to five companies joining the site near Kolín, and while their
names have not been made public yet, the suppliers list has to
be completed this summer.
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Jean-Pierre Chantossel
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Division of labor
While the Japanese part of the consortium is responsible for engineering
and production, the French side is in charge of sourcing and
purchasing - which is one of the reasons why this plant has attracted
the attention of French companies in general, not only those
directly involved. Komerční banka is said to be responsible for
the banking operations, and other French companies, including
property developers, are seeking avenues for other cooperation. "We
are not a direct supplier to TPCA," says Silvano Pedretti,
co-president of property developer Orco Group. "But being
part of such an important project in the Czech Republic is definitely
an opportunity even for us. For example, we may lease some apartments
to expatriates coming to work here," Pedretti explains,
adding that sharing the same French roots can be an advantage
in cooperation. "We are all Czech firms with international
clients and backgrounds, but the common language and culture
removes some barriers immediately."
According to Martin Jahn, managing director of CzechInvest, the
TPCA plant project was an enormous boon to promoting the Czech
Republic in France. "We organized a promotional tour in France
called 'Czech Days' that drew a lot of attention from the French
business community," says Jahn. "I have to admit that
if it was not for TPCA, the success would have been notably diminished.
The main wave of French investments into the Czech Republic has
not come yet. We expect more companies to follow," he adds.
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The facts about TPCA
On a 125-hectare plot in Kolín, the rough construction
of a plant for a new model of small cars with the working
name of B-Zero is nearing completion. Toyota Peugeot Citroen
Automobile (TPCA), the result of a joint-venture of the Japanese
automaker and its French partner, is investing a total of
EUR 1.3 billion in the project, 800 million of which are
earmarked for the Czech Republic alone. Production should
begin in 2005, and in two years' time the production line
is expected to already be turning out around 100,000 new
cars per year, with a total plant capacity of 300,000. Nearly
3,000 workers will be employed at the facility. The first
300 or so people should start this year, including 35 expatriates
(26 Japanese and nine French).
This is the first cooperation of such proportions between
Toyota (which is charged mainly with production) and PSA
Peugeot Citroen (in charge of sourcing and purchasing). The
new compact car will be made in three versions, but the basic
features should be the same in order to reduce costs. The
cars should sell for about EUR 8,000. Of the roughly 150
suppliers, 70% will be from the Czech Republic (accounting
for about 40% of the volume). Most of them have already closed
contracts with TPCA, and agreements with the 20% remaining
direct suppliers should be signed this summer. The list of
suppliers includes such firms as Bosch and Valeo, and recently
Lear, a seat and interior manufacturer.
On Ovčáry, near Kolín, there will be an assembly line, a
paint shop, a welding shop, and a test track. TPCA will import
diesel engines from France, and gasoline engines and transmissions
from Poland. Masatake Enomoto, TPCA's president, and Jean-Pierre
Chantossel, its executive director, both point out that TPCA
chose the Czech Republic for its project because of its overall
favorable conditions - the combination of infrastructure,
work force, geographic location, and tax incentives.
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Customized packages
KOMERČNÍ BANKA adjusts its banking products according to
the individual needs of customer groups. In 1997 it launched
its so-called "packages strategy", which it deepened
and broadened in 2001, after it was purchased by Société
Générale.
A package is a set of services and products that, in the
small firm segment (for example), combines maintaining an
account, an overdraft option, direct banking, and credit
card payments. Thanks to the bundling of products and services,
the client gets faster and simpler service. Additionally,
packages are launched with fixed prices, so they are more
transparent for clients in terms of fees. "The 'contents'
of product packages are adjusted to a firm's developmental
stage and to its country of residence," says Petr Slabý,
deputy marketing director for Komerční banka. "It's
impossible to just copy a model that was developed or exists
somewhere else," he adds.
Packages for small and mid-sized firms are broken down by
size of annual turnover, and an appropriate credit service
comes with each package. "Packages were launched this
April. Along with them we also introduced special 'fast loans'
for this segment. The number of loans extended has risen
by 600% since then," Slabý notes.
The bank also created a specialized package, Optimum Medicum,
for physicians and pharmacists, to which is linked a special
credit that allows the bank to use money owed by doctors
to Všeobecná zdravotní pojišťovna (General Health Insurance
Company) as collateral. The bank is also preparing special
packages for other segments, such as merchants and craftsmen. "Wholesalers
and shop owners linked to them have a great need for circulating
assets - i.e., inventories and outstanding debts. So it's
necessary to offer them a different approach to banking services
than we would to manufacturing firms," says Ivan Čopák,
director of the Podnikatelé (Entrepreneurs) division.
Spurred on by its new parent, Société Générale, Komerční
banka launched a special approach to franchise financing
in the second half of May. The bank is currently implementing
a pilot project in which the cosmetics firm Yves Rocher will
become its partner, Čopák adds.
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Opportunities in accommodation
French developers don't stop building hotels, even when
the tourist industry is down due to catastrophes, natural
or political. Instead, they seek synergies that help to minimize
risk. Luxembourg plaza, a complex combining a luxury hotel
and office space, is a good example. Local developer Orco
Group will begin construction on the plaza site this summer,
with total investment in the project reckoned at EUR 52 million. "It
is the biggest project we are working on," says Silvano
Pedretti, co-president of Orco Group. "We want to promote
the synergy between the hotel and the office space - office
clients may represent five to twenty percent of the hotel
occupancy, which would be especially good for the hotel in
the beginning," he observes.
Another French company, Accor Hotels, is profiting from its
affiliation with the Accor group, a worldwide leader in the
hotel industry. "We exchange know-how between divisions
and hotels, and we choose the same providers in order to
save money and time," explains Guillaume Bertier, general
director of Accor Services, the division focused on food
vouchers. "Those synergies help us to face difficulties
of the market," adds Bertier. In addition to its established
hotels in Prague - Novotel, Ibis Karlín and Mercure - a new
Accor Hotels project is the Ibis in Smíchov, slated to open
in 2004.
While other industries are awaiting the entrance of the Czech
Republic into the EU warily, not many in the real estate
development segment expect much to change. "In general
we think that the Czech Republic's EU membership will stimulate
tourism to the EU, but not automatically. Prague and the
rest of the country really need to improve and increase their
marketing efforts," says Bertier.
Speculation concerning increased real estate prices may also
be misleading. "I feel that in this country there is
a velvet revolution for everything. There will be slow progress,
not abrupt change," Pedretti says. "If there is
an opportunity to invest into real estate, maybe a few more
foreigners will, but this has already been happening. I hope
selling and buying will become easier," he adds. Nevertheless,
Orco isn't waiting for gigantic European newcomers to come
and claim their share. The firm is going for new acquisitions
aggressively, as illustrated by its recent entry in the tender
to acquire IPB Real's portfolio.
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Logistics: a time of changes
and investments
The logisticS services market in the Czech Republic is very
competitive, and new companies will find entry without a
customer base difficult, says Guilhem Vicaire of FM Česká,
a daughter company of French FM Logistic. Thus new arrivals
have been scarce - FM Česká itself entered the market back
in 1996 with Ferrero, a confections producer. One exception
is the French Gefco, which has traditionally worked for Peugeot
and will thus become one of the providers of logistics solutions
for TPCA. As manufacturers often hire only one company for
managing shipments (warehousing, transport, and tracking
the movement of goods), Gefco is hoping to get the lion's
share of the logistics business. Additionally, logistics
companies often specialize in one particular area (i.e.,
car parts) so the fields of their activities are very clearly
defined.
Even the companies that are already established on the market
must work hard in order to keep up with the changing needs
of their customers. "Let's look at developments in the
retail sphere. Hypermarkets are becoming ever stronger, and
they place completely different demands on comestibles firms.
They require interconnectible and specialized IT systems," Vicaire
says. Certainly, a strong parent company with capital and
know-how is a big advantage. "We profit from our connection
with France. We can copy and import IT solutions from there,
where they have developed them. This makes international
operators like us stronger than the local ones," he
adds. Furthermore, the Czech Republic's accession to the
EU will bring new legislation that will require further investments
by logistics operators - for example, complicated registration
systems that will make it possible to track the movements
of each pallet.
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