World Atlas
Neighborhood Relations: Why Austria is an important regional business centre
Written by Violetta Wilczek, Research Consultant, Signium International (Austria)
After the recent political and economic changes, can we still call the small Alpine country in Central Europe the “island of the blessed“, as the late pope Paul VI once did?
This nation of 8 million people benefited tremendously for almost a decade from the economic boom experienced by its eastern neighbours while the Czech Republic, Slovakia, Slovenia, Hungary and Poland all went through periods of rapid economic growth. Austrian banks, industrial groups and service companies were some of the first to profit from the European Union Enlargement in 2004. Austria’s familiarity with its eastern neighbours, geographic proximity and understanding of its neighbours’ cultures also acted as a magnet for foreign companies. Vienna’s favourable location made it an obvious hub for multinationals’ regional headquarters seeking to exploit the central and eastern European boom.
A good infrastructure, excellent standards of living and the ready availability of well-trained and flexible staff were influential competitive advantages when it came to doing business in Austria or using the country as a launching pad to its high-growth neighbours. Vienna has surpassed Zurich as the world’s leading city in quality of life, according to the Mercer 2009 Quality of Living Survey.
As the central European business story developed, Austrian entrepreneurs ventured further afield, into south-eastern Europe, the western Balkans, and even Russia and Ukraine, indirectly increasing Austria’s own attraction as a business centre.
However, there are currently two significant risk factors that could be particularly damaging to the Austrian economy – its high dependence on the automotive industry and, paradoxically, its strong exposure to central and Eastern Europe. The sharp decline in demand for new cars in Europe is hitting Austria particularly hard and has caused an increase in the country’s very low unemployment rate. Austrian companies have already witnessed a considerable drop in business levels with Hungary as well as with car factories in Slovakia and Czech Republic.
In spite of this transition in the Austrian economy, there are some very convincing reasons to consider doing business in Austria. Industrial wages are still lower than in Germany, making Austrian companies competitive in the region, and the unemployment rate is expected to stay well below the EU average. Sharp cuts in corporate taxes in 2005 also helped to increase Austria’s appeal as a business location. Moreover, the Austrian economy has experienced an increase in spending on Research & Development triggered by the government. As a consequence of these measures some significant corporate relocations have taken place. Siemens of Germany, for example, moved their competence centre for automotive electronics from Munich to Villach in southern Austria.
In a time when companies seek to minimize risk and gain stability in their business relations, Austria provides a clear advantage for those companies which are traditionally based in other western European countries and look to further develop their eastern European, Balkan and Russian markets. But as in any international expansion project, executives need to keep the cultural peculiarities of each country in mind as they can often make the difference between success and failure in doing business in that region.
Austrian “coziness” and a unique way of doing business - the intercultural aspects
When doing business in Austria the first point to consider is that Austria has a proud and distinct cultural and historical identity of its own, and holdovers from the former Austro-Hungarian Empire are everywhere.
Austrians will very often go out of their way to achieve their goals. If you want to do business with Austrians you must first establish a solid personal relationship with your business partners. This initial step is very important to Austrians as they will invent as many good excuses as necessary to avoid conflict. And if there is conflict, it will be hard for the Austrian to show or openly admit the true reason, size or implications of the conflict. A sound personal relationship will help overcome this potential obstacle – allowing one to correctly address any problems that arise. Austrians are also often very indirect in their communication, which can lead to misunderstandings if that trust base is not well-established before commencing business relations.
They tend towards a heavy use of flattery and one often comes across phrases such as Gnädige Frau (gracious madam) and Küss die Hand (kiss your hand). While these may seem over the top or from another century, they are very much a part of the communication that garners trust, and for success are indispensable!
It is often said that Austrians are “light-footed like dancing boxers”, showing off or being theatrical rather than presenting the facts in a business meetings. However these dramatics often translate into an impressive capacity for improvisation, even if they don’t always follow through on their plans forcefully enough. Many tend to ignore deadlines; they might well try to squeeze something extra into a schedule, or do two or three things simultaneously. When successful they like to celebrate achievements and are happy to organize the event themselves. Feedback is important to them and they tend to pay a lot of attention to it.
Use of titles is still very important in business relations and in internal hierarchies in Austrian companies. When you know your partner is a professor, you don’t even have to know the exact name as they are often addressed as solely Herr Professor. Management stresses a clearly defined hierarchy more than anyone else. This is also the case in the public administration.
Whether looking to buy into an Austrian company or just establish a business partnership one must not forget that personal relationships within the company are critical in the operations’ success. Discussing plans over a cup of coffee - or several cups of coffee - and regular visits to the Heuriger (wine-taverns) with the whole team are just as important in your business dealings as the numbers and analysis of any deal. ■