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Low-cost Poland competes with China
Central and Eastern Europe still a leading 'low-cost countries' (LCC) region for Western European markets, according to new report.
A report by Matthias Tomenendal and Kevin Waddell from The Boston Consulting Group dismisses the myths about the cost- and quality-competitiveness of Central and Eastern European (CEE) countries, that could hinder companies from making the optimal investment decisions.
CEE up
CEE is the dominant low cost region for Western Europe, especially in the automotive industry. The report informs that over 80 percent of the motor vehicles and trailers being imported into Western Europe from LCCs come from countries such as Poland, Hungary, the Czech Republic and Slovakia. As for cars, the percentage is even higher, reaching 90 percent. China, always regarded the optimal LCC for sourcing, plays a negligible role in comparison.
China down
Sourcing from CEE is economically favorable for certain products, the report claims. Although it is generally thought that China’s size, potential and growth give it an unbeatable cost advantage, it is not the leading import country for all industries. While leather, TVs and luxury clothing products are more favorably sourced from China because of their high cargo value relative to size, steel tends to be more favorably sourced from Poland, primarily because of its relatively low cargo value per cubic meter. While 80 percent of the leather and luxury clothes sourced from LCCs in 2003 came from China, about 80 percent of automotive and steel products were sourced from CEE.
Not so fast
The report dismisses the myth that the CEE region may soon become unattractive because the existing wage differences between CEE and Western Europe will quickly disappear. Boston Consulting claims that this process will in fact take several decades because of the small differences in the growth rates. But the faster the economic growth in CEE countries, and the more radical the reforms, the faster the convergence of wages.
Not so different
It must be kept in mind that CEE’s skilled labor availability is comparable to that in Western Europe. Lower wages do not have to mean lower productivity and subpar quality in manufacturing, Tomenendal and Waddell write. A recent survey of international business executives conducted by the IMD business school has revealed that as for the availability of skilled labor, Poland, Hungary, the Czech Republic, Slovakia and Slovenia were all ranked higher than the UK, Italy and China.
The report gives guidelines on the implementation of the optimal sourcing and manufacturing footprint: "Realizing the optimal CEE footprint is not an easy process for Western companies-but it will pay off if prepared and executed appropriately." A.T.
(Source: http://www.wbj.pl/?command=article&id=23957&type=wbj) |
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