IS INTEGRATED BUSINESS DEVELOPMENT IN SOUTH ESTONIA AND NORTH LATVIA

BETTER NETWORK, MORE INFORMATION, GREATER POSSIBILITIES, HEALTHY COMPETITION, LOCATED SYNERGIES =

SUCCESFUL COOPERATION

DELBI PROJECT AIMS TO

LATVIAN & ESTONIAN BUSINESS ENVIRONMENT SURVEY

Target group SME’s with 1-99 employees In survey participated 304 companies Interviews were carried out in CATI method Objective of the survey was to determine the

need for support network and what are the deficiencies related to possible cross-border cooperation

© TNS

D is tr ibu tion o f respon den ts in th e breakdow n o fregion an d n u m ber o f em ployees

8

R E G I O N E s to n ia , n = 1 5 0

Pärnum aa (n= 36)

V iljandim aa (n= 17)

Valgam aa (n= 9)

Võrum aa (n= 11)

Tartum aa (n= 68)

Põlvam aa (n= 9)

N U M B E R O F E M P LO YE E S

1 (n= 57)

2 - 4 (n= 53)

5 - 9 (n= 22)

10 - 19 (n= 9)

20 - 49 (n= 6)

50 - 99 (n= 3)

R E G I O N La tv ia , n = 1 5 4

Al ksneū (n= 8)

C sisē (n= 16)

Gulbene (n= 12)

J rm alaū (n= 31)

Lim baži (n= 10)

Madona (n= 14)

Ogre (n= 22)

S aulk rasti ( n= 4)

S igulda (n= 14)

Valka (n= 3)

Valm iera (n= 20)

N U M B E R O F E M P LO Y E E S

1 (n= 11)

2- 4 (n= 59)

5- 9 (n= 37)

10 - 19 (n= 24)

20 - 49 (n= 14)

50 - 99 (n= 9)

5%

10%

8%

20%

6%

9%

15%

3%

9%

2%

13%

24%

11%

6%

7%

46%

6%

38%

35%

15%

6%

4%

2% 7%

38%

24%

16%

9%

6%

© TNS

D is tr ibu tion o f respon den ts in th e breakdow n o fcom pany’s m a in fie ld o f opera tion

9

E s to n ia , n = 1 5 0 La tv ia , n = 1 5 4

Production

Agriculture, forestry and fishing

Repairs and installation of m achinery and equipm ent

S upply of electricity, gas, steam , w ater and air , sew age, w aste m anagem ent

Construction

W hole and retail sale, sale and repair of m otor vehicles

Transportation and storage

Accom m odations and catering

I nform ation and com m unications

Financial and insurance serv ices

Real estate

Professional, technical activ ities and research

Adm inistrative and support activ ities

Education and training

Healthcare and social w elfare

Art, enter tainm ent and spare tim e

Other serv ices

13%

6%

3%

3%

14%

22%

7%

5%

3%

1%

8%

3%

1%

1%

2%

7%

15%

5%

1%

2%

4%

27%

6%

9%

3%

1%

1%

5%

6%

3%

6%

2%

4%

© TNS

C ou n tr ies w h ere produ cts o r serv ices a re m arketed

14

E s to n ia , n = 1 5 0

Estonia

Latv ia

Lithuania

S om e other European country besides the Baltics

Russia

Elsew here

97%

11%

5%

23%

2%

1%

La tv ia , n = 1 5 4

Latv ia

Estonia

Lithuania

S om e other European country besides the Baltics

Russia

Elsew here

98%

19%

15%

16%

9%

3%

Approxim ate ly every tenth Es tonian com pany that partic ipated in the survey dis tributes its products or services in Latv ia and a lm ost every fifth Latvian com pany m ark ets in Es tonia . Respondents w ho answ ered “e lsew here” m ark et the ir products o r services prim arily in the U S A; Aus tra lia , I s rae l and S audi A rabia w ere a lso m entioned.

I n w hich countries does your com pany m arket its products or services?

© TNS

C oopera tion w ith com pan ies in th e n e igh bou rin g cou n try

15

20%

6%

74%

E stonia, n=150

Currently cooperatingw ith Latv ian com panies

H ave cooperated w ithLatv ian com panies

H ave not cooperated

22%

11%

67%

Latvia, n=154

Currently cooperatingw ith Estoniancom panies

H ave cooperated w ithEstonian com panies

H ave not cooperated

The share o f those currently cooperating w ith com panies in the ne ighbouring country is s im ila r in Es tonia and Latvia – approxim ate ly one fifth.

Does your com pany cooperate or has your com pany cooperated w ith Latvian/ Estonian com panies in any w ay?

© TNS

Reasons for not operating on the neighbouring country’s m arket (1)Of those w ho don’t m arket in the ne ighbouring country and have not cooperated

20

E s to n ia , n = 1 1 1

N ot enough initiative to enter the Latv ian m arket

L atv ian m arket is not attractive enough

Our products or serv ices are not suitable for the Latv ian m arketN ot enough inform ation on the

Latv ian m arket and businessLatv ian law s and regulations got in the w ay of operating in Latv ia

Estonian law s and regulations got in the w ay of operating in Latv ia

Language barriers

N o needN o capacity / labour / resource, it

w ould be too costly

Latv ian pr ice level is not suitableH ave enough w ork in Estonia,

don’t w ant to expandH ave not thought about this

opportunity

Other

5%

11%

17%

1%

12%

5%

3%

8%

41%

10%

La tv ia , n = 1 0 3

N ot enough initiative to enter the Estonian m arket

Estonian m arket is not attractive enough

Our products or serv ices are not suitable for the Estonian m arket

N ot enough inform ation on the Estonian m arket and business

Estonian law s and regulations got in the w ay of operating in Estonia

Latv ian law s and regulations got in the w ay of operating in Estonia

Language barriers

N o needN o capacity / labour / resource, it

w ould be too costly

Estonian pr ice level is not suitableH ave enough w ork in Estonia,

don’t w ant to expandH ave not thought about this

opportunity

Other

13%

6%

28%

27%

2%

3%

23%

2%

1%

6%

19%

9%

W hy aren’t your com panies operating on the Latvian/ Estonian m arket?

© TNS

Reasons for not operating on the neighbouring country’s m arket (2)Of those w ho don’t dis tribute in the ne ighbouring country and have not cooperated

21

Reasons for not cooperating w ith the ne ighbouring country are different in case o f Es tonia and Latvia . W hile the bigges t share o f Es tonian com panies choose the response „have not thought about this opportunity “, Latvian com panies m ention the fact that the ir products / services are not suitable fo r the Es tonian m ark et, too litt le info rm ation about the Es tonian m arket and language barriers .

Respondents w ho answ ered „other reason“ specified the ir response as fo llow s :

Estonian com paniesWe’re located too far from Latv ia, there are enough com panies in the sam e fi eld in Latv ia

D istance

N o tim eThere’s a representative in each country , w e only com m unicate w ith the Germ ans and they talk to others

Latv ians have not off ered their goods w ell enough

We have a contract only w ith the S tate Forest Managem ent Centre

We w ork w ith a bigger com pany in Estonia

N ot the target groupWe w ant to w ork in Estonia and are w ork ing on it right now, look ingfor contactsWe purchase certain m ater ials and equipm ent from Latv ia now already, w ill not exclude prov iding the serv ice on the Latv ian m arket as w ell in the future.

Other culture

Too diffi cult for one person to deal w ith all that

Latvian com paniesEstonians prov ide enough of the given serv ice and it’s good quality

Territor ia l location

Legis lation is not convenient, property rental

S hould fam iliarize oneself w ith Estonian legis lation

We w ork only in S igulda, in Riga regionWe act in the interest of the m em bers of our cooperativeAccording to regulations, w ork ing w ith Estonia is not allow ed

Don’t believe our products are needed

S m all quantities

© TNS

I n te res t in do in g bu s in ess on th e n e igh bou rin g m arketOf those w ho don’t dis tribute in the ne ighbouring country and have not cooperated or no longer cooperate

22

9%

10%

77%

4%

E stonia, n=119

Yes, w ithin the next 1-2 years

Yes, w ithin the next 3-5 years

N o

Don't know

22%

17%

54%

7%

Latvia, n=109

Yes, w ithin the next 1- 2years

Yes, w ithin the next 3- 5years

N o

Don't know

Latv ians are m ore interes ted in cooperating – 39% of Latvian com panies and 19% of Es tonian com panies w ould be interes ted in do ing bus iness on the ne ighbouring country ’s m arket w ithin the nex t fiv e years .

W ould your com pany be interested in doing bus iness on the Latvian/ Estonian m arket in the future ?

© TNS

E va lu a tion s to cu rren t kn ow ledge o f m arketin g opportu n ities fo r on e’s produ cts / se rvices in th e n e igh bou rin g cou n try

24

3%

20%

24%

53%

Estonia, n=150

Very good

Rather good

Rather bad

Very bad

8%

27%

41%

24%

Latvia, n=154

Very good

Rather good

Rather bad

Very bad

Tota l o f 35% of Latvian com panies and 23% of Es tonian com panies cons ider the ir current know ledge ofm ark eting opportunit ies for the ir com pany’s product or services in the ne ighbouring country to be good.

How w ould you evaluate your current know ledge of m arketing opportunities for your product or services in Latvia/ Estonia ?

© TNS

O bta in in g in fo rm ation abou t m arketin g opportu n ities in th e n e igh bou rin g cou n try

25

E s to n ia , n = 1 5 0

Through business par tners or acquaintances

On the internet

By v is iting Latv ian com panies

At a sem inar or conference

Media

Elsew here

Have not obtained anyinform ation

15%

14%

7%

2%

1%

2%

77%

La tv ia , n = 1 5 4

Through business par tners or acquaintances

On the internet

By v is iting Estonian com panies

At a sem inar or conference

Media

Elsew here

Have not obtained anyinform ation

34%

23%

9%

4%

5%

2%

49%

Estonian com panies are m ore pass ive w hen look ing for/ obta ining inform ation about m ark eting opportunities in the ne ighbouring country than Latv ian com panies – three quarters o f Es tonian com panis and ha lf o f the Latvian com panies have not obta ined any inform ation. They have looked for/ obta ined inform ation m ost frequently from bus iness partners and acqua intances or on the internet.

Respondents w ho answ ered „other cooperation“ specified the ir response as fo llow s :Es tonian com panies : pro fess iona l association, experiences , com m unicating w ith private persons / consum ers in Latvia . Latv ian com panies : exhibit ions , w ord o f m outh from custom ers , w e a lready have contacts .

W here have you looked for or obta ined inform ation about m arketing opportunities in Latvia/ Estonia during the last 12 m onths?

© TNS

N eed fo r in fo rm ation abou t th e n e igh bou rin g cou n try’s econ om y an d m arke t ( 1 )

26

E s to n ia , n = 1 5 0

Latv ian econom y in general

Latv ian legis lation and tax system in general

Establishing a branch or representative in Latv ia

Establishing a com pany in Latv ia

Market s ituation of a specifi c fi eld in Latv ia

D iff erent m arketing opportunitiesin Latv ia

Cooperation opportunities w ith Latv ian com panies

S em inars, fa ir s and other events in one’s fi eld in Latv ia

Other inform ation

Don’t need any inform ation

10%

12%

6%

3%

24%

19%

27%

12%

3%

59%

La tv ia , n = 1 5 4

Estonian econom y in general

Estonian legis lation and tax system in general

Establishing a branch or representative in Estonia

Establishing a com pany in Estonia

Market s ituation of a specifi c fi eld in Estonia

D iff erent m arketing opportunitiesin Estonia

Cooperation opportunities w ith Estonia com panies

S em inars, fa ir s and other events in one’s fi eld in Estonia

Other inform ation

Don’t need any inform ation

26%

42%

39%

27%

49%

33%

49%

42%

3%

21%

The bigges t share o f Es tonian as w ell as Latvian com panies could use inform ation about cooperation opportunit ies w ith the ne ighbouring country’s com panies or about the m arket s ituation o f a specific fie ld. Latv ians a lso m ention inform ation about events in the ir fie ld in Es tonia and about Es tonian legis lation and tax sys tem .

W hat k ind of inform ation w ould your com pany need about Latvian/ Estonian econom y and m arket ?

© TNS

S u itable in fo rm ation ch an n e ls fo r fin din g coopera tion pa rtn ers in th e n e igh bou rin g cou n try ( 1 )Of those operating on the ne ighbouring country’s m arket o r interes ted in do ing so

28

E s to n ia , n = 5 3

I nternet based searchable database of par tners

I nform ation point w ith face to face serv ice

I nform ation hotline

Trainings or sem inars

Other channel

Don’t need inform ation to fi nd cooperation par tners

86%

26%

19%

18%

7%

5%

La tv ia , n = 8 7

I nternet based searchable database of par tners

I nform ation point w ith face to face serv ice

I nform ation hotline

Trainings or sem inars

Other channel

Don’t need inform ation to fi nd cooperation par tners

84%

27%

35%

28%

10%

4%

Estonian as w ell as Latvian com panies think that an internet based searchable database w ould be the m ost suitable for finding partners . Latvians a lso cons ider an inform ation hotline m ore necessary.

W hich sources of inform ation w ould be suitable for your com pany for fi nding cooperation partners in Latvia/ Estonia?

© TNS

Year o f es tablish in g th e com pany

10

37%

28%

15%

20%

E stonia, n=150

Dur ing last 5 years(2007- 2011)

6- 10 years ago (2002-2006)

11- 15 years ago(1997- 2001)

More than 15 yearsago

16%

19%

23%

42%

Latvia, n=154

Dur ing last 5 years(2007- 2011)

6- 10 years ago (2002-2006)

11- 15 years ago(1997- 2001)

More than 15 yearsago

Estonian com panies w ith 1-99 em ployees that partic ipated in the surv ey are y ounger com pared to Latv ian com panies . I n Es tonia the share o f com panies that have been es tablished during las t five years is double com pared to Latvia .

© TNS

E xis ten ce o f a deve lopm en t o r action p lan

13

15%

7%

4%

74%

E stonia, n=150

Yes, for the next 1- 3years

Yes, for the next 4- 5years

Yes, for m ore than 5years

N o

38%

6%4%

52%

Latvia, n=154

Yes, for the next 1- 3years

Yes, for the next 4- 5years

Yes, for m ore than 5years

N o

Com pared to Es tonia , a la rger share o f La tvian com panies hav e com piled a deve lopm ent plan to guide the ir activ it ies . I n to ta l 48% o f Latvian com panies and 26% of Es tonian com panies hav e a dev e lopm ent or action plan.

Does your com pany have a deve lopm ent plan or an action plan for the nex t years?

© TNS

M ain con clu s ion s ( 1 )

5

Latvian com panies m arket their products/ services in Estonia som ewhat m ore but general level of cooperation with com panies from the neighbouring country is sim ilar. Approxim ately every tenth Estonian com pany m arkets in Latvia (11% ) and approxim ately every fifth Latvian com pany m arkets in Estonia (19% ). Approxim ately every fifth Estonian and Latvian com pany cooperates with com panies from the neighbouring country in one way or another (20% and 22% correspondingly). I n term s of m anner of cooperation, im port and export of goods are m ost dom inant. For com panies that had cooperated earlier but have term inated it (6% of Estonian and 11% of Latv ian com panies), non -profitability was the m ost frequent reason for term inating cooperation.

Latv ian com panies’ interest in initiating cross -border cooperation is higher com pared to Estonia. Estonian com panies explain lack of cooperation m ost frequently by stating the fact that they have not thought about this opportunity; Latvian com panies m ention m ost frequently that their products/ services are not suitable for the Estonian m arket, lack of inform ation about the Estonian m arket and language barriers. 19% of Estonian and 39% of Latv ian com panies not cooperating today would be interested in expanding their activ ities to the neighbouring m arket.

Latv ian com panies are m ore interested in inform ation on the neighbouring m arket than Estonian com panies and they are also better inform ed on this issue. One quarter (23% ) of Estonian com panies have looked for/ received inform ation about m arketing opportunities in Latvia and less than half (41% ) note that they would need this k ind of inform ation. Latv ian com panies are m ore active – half (51% ) have received inform ation and m ore than three quarters of com panies (79% ) need it. Approxim ately every fourth Estonian com pany (23% ) and every third Latvian com pany (35% ) would say they have good knowledge of the m arketing opportunities for their products/ services in the neighbouring country.

© TNS

M ain con clu s ion s ( 2 )

6

I nform ation about m arketing opportunities has m ost frequently been obtained through business partners/ aquintances or internet. Com panies from both countries need the m ost inform ation about the m arket situation of a specific field and cooperation opportunities with com panies from the neighbouring country. I n addition to that, Latv ian com panies are also interested in inform ation on Estonian legislation and tax system and about sem inars/ trade fairs and other events tak ing place in Estonia. The m ajority of Estonian as well as Latv ian com panies would prefer an online database to search for partners. Latv ian com panies also m ention an inform ation hotline som ewhat m ore frequently.

I n conclusion, we can say that the general activness and interest towards cross -border cooperation is noticeably higher am ong North Latv ian com panies with less than a hundred em ployees than am ong South Estonian com panies. Latv ian com panies also plan their future developm ent m ore specifically – half of the Latv ian (48% ) and one quarter of Estonian (26% ) com panies have a developm ent plan for future years. Thus, in case of Estonia the first necessary actions could be those that would increase com panies’ general interest in the potential of the Latv ian m arket and would m ake com panies think m ore about cross -border cooperation opportunities . Latv ian com panies are already m ore prepared for actions associated with finding specific cooperation partners and initiating cooperation in their field.

© TNS

C om parison o f E s ton ian an d La tv ian m ain resu lts

31

Markets in the ne ighbouring country

I s currently cooperating w ith com panies from the ne ighbouring country

H as previous ly cooperated w ith com panies from the ne ighbouring country

Does not m arket and has not cooperated in the ne ighbouring country

I nteres ted in s tart ing a bus iness on the ne ighbouring country ’s m ark et ( o f those currently not cooperating)

W ell inform ed o f m ark eting opportunit ies in the ne ighbouring country

H as searched for/ obta ined info on m arketing opportu-nit ies in the ne ighbouring country during las t 12 m onths

N eeds inform ation on the econom y / m arket of the ne ighbouring country

H as a developm ent plan for the nex t few years

11%

20%

6%

74%

19%

23%

23%

41%

26%

19%

22%

11%

67%

39%

35%

51%

79%

48%

Estoniancom panies(n= 150)

Latv iancom panies(n= 154)

© TNS

Com parison based on s ize o f com pan ies

32

Markets in the ne ighbouring country

I s currently cooperating w ith com panies from the ne ighbouring country

H as previous ly cooperated w ith com panies from the ne ighbouring country

Does not m ark et and has not cooperated in the ne ighbouring country

W ell info rm ed o f dis tribution opportunit ies in the ne ighbouring country

H as searched fo r/ obta ined info on dis tribution opportu-nit ies in the ne ighbouring country in las t 12 m onths

N eeds inform ation on the econom y/ m arket o f the ne ighbouring country

H as a dev e lopm ent plan for the nex t few y ears

6%

15%

4%

82%

20%

20%

40%

22%

23%

33%

12%

55%

31%

32%

44%

36%

1- 4em ployees(n= 110)

5 and m oreem ployees(n= 40)

Estonian com panies Latvian com panies

19%

17%

7%

76%

36%

53%

74%

33%

20%

26%

15%

59%

34%

49%

83%

59%

1- 4em ployees(n= 70)5 and m oreem ployees(n= 84)

Estonia : I n case o f a lm ost a ll indicators , com panies w ith at leas t 5 em ploy ees are m ore activ e ly cooperating and better inform ed; only eva luations to the need fo r inform ation on the ne ighbouring m arket is ra ther on a s im ila r leve l in com panies o f both s izes . Latv ia : Approx im ate ly one fifth o f com panies w ith 1- 4 as w ell as 5- 99 em ployees m arket in Es tonia . K now ledge o f the ne ighbouring country’s m arket and obta ining info rm ation are a lso on a s im ila r leve l. I n case o f o ther indicators , com panies w ith at leas t 5 em ployees are ahead o f the sm alle r ones .

© TNS

C om parison based on exis ten ce o f deve lopm en t p lan

33

Markets in the ne ighbouring country

I s currently cooperating w ith com panies from the ne ighbouring country

H as previous ly cooperated w ith com panies from the ne ighbouring country

Does not m arket and has not cooperated in the ne ighbouring country

W ell inform ed of dis tribution opportunit ies in the ne ighbouring country

H as searched for/ obta ined info on dis tribution opportu-nit ies in the ne ighbouring country in las t 12 m onths

N eeds inform ation on the econom y/ m arket of the ne ighbouring country

10%

29%

11%

62%

31%

26%

51%

11%

16%

4%

79%

20%

22%

37%

has adevelopm entplan (n= 39)nodevelopm entplan ( n= 111)

Estonian com panies Latvian com panies

30%

25%

15%

60%

38%

58%

87%

10%

19%

8%

73%

33%

45%

72%

has adevelopm entplan (n= 73)nodevelopm entplan ( n= 81)

A genera l trend is that com panies w ith a deve lopm ent plan have m ark eted and/ or cooperated m ore in the ne ighbouring country and they eva luate the ir need for inform ation to be bigger even though they are m ore inform ed than com panies w ithout a developm ent plan.

DELBI BENEFIT TO SME’ S

better knowledge of business support services; increased awareness of opportunities provided

by cross-border activity; increased capability to successfully enter and

operate in the neighboring market; better integration and increased competitiveness

of cross-border value chains; better knowledge of vocational education

possibilities

Aim of the future cooperation - mutual and respected understanding of SME growth

Substantial investments to raise SME capital and resources to be able to enter new markets

Very clear financial planning (equal division of budgets or responsibilities)

TOGETHER OR SEPARATELY

THANK YOU FOR THE PARTICIPATION!

Tartu, 10th October 2013