British Industry Targets E. Europe

Stung by heavy investments of Germans and Italians, British are determined

BRITISH industry is poised to launch a campaign to strengthen trade links with East European countries and to gain a larger share of what manufacturers and investors hope will become a lucrative market in the years ahead. But British traders will find themselves facing tough competition from other exporting nations able to attract customers with better-known trade names.

John Banham, director-general of the Confederation of British Industry (CBI), says his organization will try to focus British interests on four target countries - Czechoslovakia, Poland, Hungary, and the Soviet Union.

He concedes that West German and Italian exporters were ``quicker off the mark than we were in seeing the potential for trade with members of Moscow's crumbling empire'' and that there is a lot of catching up to do.

Japanese traders are becoming ``extremely active,'' Mr. Banham says, and ``alert to the fact that Eastern Europe, including the Soviet Union, consists of 400 million consumers.''

The initiative by the CBI, the country's top employers' organization, follows criticism of Britain's performance in Eastern Europe in the past two or three years.

A 1990 survey by the design consultants Landor Associates pinpoints one of the main problems: British companies must battle to achieve name recognition. Among the top 10 world brand names recognized by citizens of former Iron Curtain countries only one - Rolls Royce - is British. The others include Sony (the best known name), Mercedes, and Adidas, the survey says.

Banham says the high profile of the companies already beginning to penetrate East European markets gives them an advantage, but that does not mean that Britain will be unable to expand into the same areas. He says refurbishment of factories, food processing, farm machinery, telecommunications, as well as health care and financial services are areas in which British experience and skills can be put to work in the former communist countries.

``There may not be a lot of glamour involved, but we know there are profits,'' he says.

Even so, other industrial leaders in Britain concede that Initiative Eastern Europe, as the campaign is called, will involve a lot of hard work.

Lord Jellicoe, president of the East European Trade Council, says: ``The stark fact remains that by and large our competitors have done better because they have tried harder.''

British business was in eighth place last year, behind Austria, in exports to Eastern Europe.

Lord Jellicoe maintains that there is a ``genuine lust'' in Eastern Europe for modern technology and know-how, and that Britain's competitors so far have been faster to spot the opportunities.

The CBI initiative will depend heavily on putting to use the knowledge and experience of British companies that already have successful track records in the region. Some 350 joint ventures have been established by British companies in the four target countries.

Over the next six months the CBI will hold a series of presentations for senior executives of companies interested in developing market strategies.

Banham says each of the four target countries will be the subject of a separate conference. ``We aim to demonstrate that companies which already have had success in the East European environment have tended to be those with well-developed strategies and executives prepared to work hard against stiff competition.''

An example of the kind of opportunities Banham says exist in Eastern Europe is the Ganz factory in Budapest, which was acquired 18 months ago by Hunslet Holdings, a company in Leeds. Hunslet has been making railway equipment for more than a century; Ganz is a manufacturer of railway rolling stock.

``When we bought it, Ganz had a nightmare management structure,'' says Joe Malins, head of Hunslet. ``There were 1,400 employees, and wages were low. We have halved the labor force, raised salaries, and begun to inject modern manufacturing ideas. The workers are much happier and feel secure.''

Hungarian rolling stock in the 1920s and 1930s was world famous. Hunslet hopes to put it back on the map.

Malins says that in the next five to 10 years East and Central Europe will become the biggest market in the world for railway equipment. He even dreams of selling Hungarian-made railway carriages to Britain. He has his eye, too, on a rolling-stock works in Czechoslovakia.

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