Austria – an attractive business location for companies from CEE

by Marlene Schloffer, RBI |

Recently, we published this interview with ABA – Invest in Austria CEO René Siegl. He told us that there is “a significant increase in the number of companies from CEE that successfully bring their marketable products to Western Europe”. In a follow-up interview Discover CEE spoke to Birgit Reiter-Braunwieser, ABA Director for Central and Eastern Europe. We asked her why Austria is attractive particularly for companies from CEE and also managed to get some exclusive tips on what to keep in mind when expanding your business from CEE to Austria.

Birgit Reiter-Braunwieser, ABA Director for CEE

Due to its geographical location, Austria is often referred to as the “bridge to Central and Eastern Europe”. In 2017, 29 per cent of the companies that settled in Austria and were accompanied by ABA came from Eastern and South-Eastern Europe. From which countries are those 29 per cent?

Most companies come from the neighbouring markets. Central, Eastern and South-Eastern Europe are currently developing particularly dynamically. In the previous year, 26 companies from Slovenia, 18 from Hungary, 14 from Slovakia, 11 from Russia and 6 companies from the Czech Republic settled in Austria. The market entry in Austria is often not implemented until the customer structure and the brand is already somewhat established in Austria. In Slovakia, for example, companies often already have an existing customer structure across national borders.

In general, the CEE markets are strongly represented with the number of settlements in Austria, large investment volumes are rather less to be found, with the exception of Russia – where it is in fact the other way around. Russia is, after Germany, the second largest country of origin of direct investments in Austria (according to FTI statistics of the Austrian National Bank). Many large Russian companies bundle their international trading business in Austria.

What makes Austria particularly attractive for companies from CEE?

Austria is a very wealthy country. Even if many companies from CEE have a labour cost advantage in their home country, with a lean structure they can often achieve more in Austria. Though, we at ABA hardly accompany any production settlements from CEE, in general it is a matter of distribution and sales or services. A further reason: The Austrian Economy is currently growing by around three per cent, so it’s a good time to expand. Austria also offers a lot of support to foreign companies. Of course we at ABA are also very happy to assist.

In times of globalization, is geographical proximity still an essential factor for settling business in Austria or has it rather become a minor matter?

Even in times of globalization and digitization, geographical proximity is definitely essential. Also, Austria often functions as a test market for the D-A-CH region, for companies from Western Romania, for example, Vienna has a great attraction. We see that companies from CEE are concentrating in Eastern Austria, i.e. the provinces of Vienna, Lower Austria, Burgenland and Styria. Upper Austria is interesting for many Czech companies. Due to the geographical proximity there are a lot of cross-border relationships between Austria and CEE. When expanding ones business, a contact or family member in Austria makes the settlement a lot easier. We have to bear in mind that almost 43 per cent of the Viennese population have a migration background, all of whom bring their social networks with them. The cultural proximity has an effect as well.

Is the shared common history and culture an advantage when doing business in Austria and CEE?

Definitively. Especially in the countries of the former “k. & k.” monarchy, there are strong common cultural values and history that connects. Nevertheless, it’s a mistake to think all of us are the same. On the one hand it is the well-known neighbour, but on the other hand it is also the foreign one. This requires a lot of tact.

In your opinion, can we even speak of “CEE in general” or is the diversity of the various markets too great?

CEE is certainly a very heterogeneous market. There is a noticeable difference between the new EU countries and the non-EU countries. Nor can it be assumed that a product that has been successfully introduced in Hungary, for example, will be successful on the Austrian market at well. As consultants, we have to adapt to our customers, because the diversity of the companies that contact us is also very high: on the one hand, we at the ABA advise many traditional companies with so-called old-economy business models, and on the other hand, many young and dynamic companies ask for our consulting services.

What tips do you have for companies from CEE planning to locate their business in Austria?

Generally speaking, the better prepared a company is, the more successfully and easily it will gain a foothold in Austria. There should be someone in the company who speaks German. We also advise companies to choose an Austrian CEO who knows the business culture and has a local network. Don’t try to save money when selecting the CEO.

Also, the fact that capital is necessary should not be underestimated when expanding your business. This sounds logical, but is often an issue. Experience has shown that there can be longer periods of thirst before business starts properly.

Many companies also take the complex and strict regulations in Austria less seriously. This is an issue particularly in the area of commercial law. Without the appropriate qualifications there is no trade licence – the rule of law applies without exception. I want to point out, though, that this serves a good purpose: to maintain the high quality of services.

You yourself are visiting the companies on site. Is there a country, a region or a city in CEE that you particularly enjoy?

For me it is incredibly fascinating to observe how change is progressing in the whole CEE region, how the cities are developing, e.g. the Jewish quarter in Budapest, which has become a nightlife scene with the many ruin pubs. The start-up scene in particular has given many cities and regions new dynamic. For me, Moscow has its own attraction – perhaps because it’s so different to what I’m normally used to.

At ABA, you are also responsible for start-ups. Is this something that is increasing particularly strongly in CEE?

Absolutely. In CEE there are many young, well-trained people who think entrepreneurially. Especially in the IT area there are many talents. The start-ups are also particularly interested in Austria because Austria offers a lot of support for them and often serves as an entry and test market for other western markets as well. Austrian companies are also very interested in bringing start-ups and innovation into their company, so in general, the start-up system in Austria has grown enormously within the last few year.

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