INTERNATIONAL - AUSTRIA: A small but mighty market

Sep 29 2008 Perry Gourley, Business Insider

Austria may be a nation of only 8 million but it is an economic over-achiever discovers Perry Gourley

IT MAY BE one of Europe's smallest nations but Austria wields more might on the world stage than its population statistics would suggest.

As one of the main power hubs for the United Nations, it is home to some of the biggest procurement budgets in the world used to help alleviate global poverty, fight crime and monitor nuclear installations.

Early next year a Scottish Development International trade mission will head to Vienna in a specific bid to help Scottish firms win a slice of what is potentially a highly lucrative pie.

Although English is the business language of the UN, winning contracts from agencies such as the United Nations Industrial Development Organisation (UNIDO) and the International Atomic Energy Agency (IAEA) does pose other challenges.

"It can be a very time consuming process to get on the approved list of these organisations," points out Alison McKinlay, who is organising the trade mission for Scottish Development International.

As the majority of UN contracts are not advertised widely, direct and regular contact with agency procurement staff and decisionmakers in Vienna is important to keep abreast of opportunities.

"One of the aims of the mission is to help Scottish firms make the initial contacts and relationships needed and we also hold regular seminars to help them bid effectively for work," explains McKinlay.

Although the UN's shopping list totals around £4bn a year, working for the organisation is not the preserve of major companies - the average contract is just £15,000.

There are a number of areas where Scottish skills and expertise are in demand.

Murray Bainbridge of Scottish Enterprise went to Vienna last year to meet procurement teams at the IAEA as part of a bid to get more Scots companies involved in its work around the world.

While the IAEA's role as a nuclear watchdog in nations like North Korea and Iran is a high profile one, it is also involved in the huge task of overseeing the closedown of power stations around the globe as they come to the end of their operational life.

"With the decommissioning at Chapelcross nuclear site in Dumfries and Galloway, a Scottish supply chain has developed with the specific skills in engineering and construction needed and we identified there was potential for companies to get involved in the IAEA's work," says Bainbridge.

Many of the decommissionings the IAEA is involved in are in regions like Latin America and Eastern Europe where Scots firms could find it difficult or be wary of trying to do business direct.

"The IAEA will act as a middle man and provide guarantees on payment which reduces a lot of the risk for companies," points out Bainbridge.

While its status as a UN base is an attraction, John Clifford, Austria's honorary consul in Scotland, argues it is a good market in its own right for firms to try and do business with.

"It may be quite a niche market compared to the likes of Germany, France and Spain because of its size but it's one I believe UK companies will find very welcoming.

I'm always amazed by the number of Scottish and UK firms who are already doing business there."

Clifford cautions that while Austria has a positive image of Scottish products it is important for firms looking to sell there to be aware of the way indigenous businesses operate.

"There is quite strict regulation of Austrian companies. They need a licence from the local chamber of commerce to trade and there is a degree of monitoring of customer service and pricing and so on.

"That tends to lead to high standards which means Austrian consumers have come to expect good quality and are very discerning."

While most Austrian business people - especially the younger generation - speak English, it is also advisable to use German in documentation such as invoices.

"It's worth bearing in mind that although a very friendly nation, the Austrians can be quite formal and attention to things like titles of business people is important," says Clifford.

As a small country, Austria imports a significant proportion of goods and services and there are a number of key sectors where it looks to the world market.

As an increasingly fashion-conscious nation, the clothing and footwear market has expanded rapidly in recent years and although consumers have traditionally turned to Germany and Italy for trends they are now looking further afield.

As one of the world's wealthiest nations per capita, spending on leisure activities such as gardening is also relatively high.

Austria has a surprisingly large automotive sector and is home to manufacturing plants for a number of the world's major names including Fiat and GM.

Food and drink imports have also risen strongly in recent years.

While scotch whisky is the main sector export from Scotland - brands such as Glenfiddich are among the biggest sellers - Scottish seafood is also in demand.

Charlie Devin, sales and marketing director of Moray-based Lossie Seafoods - who has been selling smoked salmon to Austria for the past 15 years - describes it as a "dependable" market.

"It is one of our smallest countries by volume but a steady market and we find the Austrians very good to deal with. There are no language issues, the logistics of trading there are straightforward and they always pay on time.

"They are also interested in the Scottish provenance of products and consumers there are prepared to pay a premium for quality."

As with Lossie Seafoods' other overseas markets, finding a reliable importer and distributor has been crucial.

"We've been with the same one for the past 12 years and have a very good relationship with them.

We do get regular enquiries from potential new customers in Austria but always pass them on to the distributor to deal with direct which they appreciate."

Austria is also one of Europe's most advanced countries on environmental issues and there are significant opportunities for partnership working in areas such as renewable energy.

"There was a very strong Austrian presence at this year's All-Energy renewables event in Aberdeen," says Clifford.

"Although they obviously don't have the same wind and tide resources as Scotland they are major players in biomass and there is significant potential for partnerships as Scotland's forestry industry continues to grow."

Renewable energy is also a key focus for the UN Industrial Development Organisation in its work to support developing countries.

Austria's location also provides a good stepping stone for companies looking to expand into the south east of Europe and to tap into some of the recent accession countries to the EU.

"Austrian firms - particularly banks - have been prominent in countries such as the Czech Republic and Slovakia for many years and many European businesses now use Austria as a base from which to serve the whole region," says Clifford.

FACTFILE: Austria

Despite only having a population of 8 million, Austria ranks as the 21st largest economy in the world and is the third richest country in Europe. Economic growth rates have been among the community's most steady over the past five years averaging around 3 per cent a year.

Although home to a number of global businesses - particularly in engineering and chemicals - the majority of enterprises in Austria are relatively small on an international scale. Business between the UK and Austria is now worth an estimated €8bn per year.