Podcast Transcript - The mighty Baltics: hear them roar

Host: Michael Mancini

Today, we are going to explore the Baltic states of Latvia, Lithuania and Estonia. I'm Michael Mancini, editor of CanadExport, the government of Canada's magazine for entrepreneurs who want to compete, partner and prosper in the global market place. Look for our magazine online at CanadExport.

The Baltic States joined the European Union in 2004. They are currently experiencing the strongest rates of growth in the EU. They are an acknowledged bridge to the larger markets of Russia and the European Union, and are important markets in their own right. In fact, billions in EU structural funds have fueled a massive boom that local firms can't even keep up with. But Canadian firms have largely ignored this area, leaving the opportunities to countries like the US, Germany, Sweden and Japan. In this podcast we'll explore why that is, and why Canadian companies should take notice. We'll also speak with a company that is thriving in this region.

Joining me today is Ed Kalvins, head of the Canada-Latvia Business Association, an organization which works to promote business ties between Canada and Latvia, and to encourage social and cultural interaction between the two countries.

Thanks for joining me today, Ed.

Ed Kalvins: Thank you very much.

Michael Mancini: What makes Latvia and the Baltic States an attractive market for Canadian companies?

Ed Kalvins: First of all, we should understand that there is a very large ex-pat community here in Latvia, which is made up of Latvian-Canadians who were educated and raised in Canada. They've been here for a while, they understand the local culture and the traditions, but they also have Canadian ethical values, which I think is fairly important in this part of the world. Another reason why Canadian companies should be interested in this country is because it's a transit state between Russia, the CIS countries, and the rest of Europe; the old USSR, Ukraine, Bella-Russia, all of those sorts of countries. And then we've got languages, we can speak Russian, obviously English, Latvian, and we can do business any way we have to. But we also have to understand that a lot of Latvians have established business contacts in Russia, in the Ukraine, and these are things that Canadians should and could be using.

Michael Mancini: What is the biggest area of untapped business potential for Canadians?

Ed Kalvins: Economically there is a real boom going on. We see this especially in the construction business. A lot of people are saying that the economy is overheating, and part of this is because... Well, first of all you’ve got to remember that after 50 years of neglect here; the infrastructure is in particularly bad shape. We're talking about environmental type issues, such as sewage and water purification, and all facilities, roads and that sort of thing. And this is putting a high demand on the local market because we're looking at a lot of structural funds coming in here from the European Union. But the local talent is not keeping up with the work that has to be done. The other part is that the independent wealth of people is starting to increase, so their demands for a higher quality of living is definitely apparent, and there's a real void. And at this stage that void is mostly being filled by Swedes, Danes, and Germans.

Michael Mancini: It seems that if a Canadian company is offering a service that's in demand, like in the construction or engineering industries for example, they could do very well in the Baltic States. What would make Canadian products and services attractive to that market?

Ed Kalvins: Not only is there a local market here, but there's markets to the east and the west. And Canadians really could get in here because number one, Canadian products and services are very high quality. Canadians as a nation are very well respected, and that's something that people should remember, just the respect here. There's some other nations from the west that aren't respected quite as much.

Michael Mancini: So why aren't Canadian companies represented there yet? What can we do better?

Ed Kalvins: One of the things that Canadians do is that they use the same model of sales as they would do in North America, in which they maybe get an agency to sell for them on a commission basis. This is a fatal error here, because those of us who have the ability to sell here are being approached by hundreds if not thousands of companies who would like to see us develop their market for them, over here, at our cost. Because of this, really nothing gets done. The only way you can really do it is to buy the services, in other words if you want a market survey, you pay for it. If you want ads put in the newspaper, you pay for it. If you want people to knock on doors, you pay for it. Now, the one thing that Canadians sometimes don't realize is, when they do the math and say how much do we have to pay for it, the cost of the services here are between a half and a third of what they are in Canada. So, if you want to open up an office here to serve Latvia, or even the Baltic countries, you would pay a third of what you would pay in Canada for your personnel.

Michael Mancini: So, you feel Canadian companies need to invest further resources in their market strategy?

Ed Kalvins: Yes. I think it's very simple, really. All they have to do is put a little bit of upfront marketing money directed at the right markets and have a reliable partner here, and I think that Canadian companies could do very well here.

Michael Mancini: What is the biggest obstacle to success?

Ed Kalvins: Trust is a major problem. For instance, one of the things that I've found is that terms of payment can be a real stumbling block, because Canadian companies before they ship something will want payment that will be their plans. Latvians, on the other hand, will only want to pay once they've seen the product. This, I've found, to be one of the major problems, and that is a question of trust.

Michael Mancini: If you were a Canadian business moving into the market, what would you do?

Ed Kalvins: Well, if I was a Canadian company that wanted to do business in the Baltics, I would go to the Canadian embassy, ask the Trade Commissioner there who the reliable partners would be here, because they know who they are. Then I would fly over here and have a talk with them, explain what the product is that they have and what they want to sell here, and talk face to face with the Latvian-Canadian connection. Then they should be very clear in explaining what terms of payment they feel they would want to have, and what they would expect out of their representative at this end. Now, the next step would be that that Canadian representative here could talk to several people in the Latvian community who are distributors of similar products, and then try to arrange the contracts. Once the contracts are arranged, then they could also either come here or they could handle things electronically to make the final deals.

Michael Mancini: What advice do you have for Canadian companies currently trying to do business in this market, but are not having the success they would like?

Ed Kalvins: Well, most of the ones are still sort of hovering here. They're sort of here and they're sort of not, but they're not active at the moment. They came and they submitted a few quotes, didn't win them, and then they went away. Where really, what they should have done is ask: “Well, why didn't we get that quote? Why did we lose it? Was it because of price, was it because we didn't have presence, was it because we didn't go and talk to people?” Face to face contact is still the best method to do business here. Again, an engineering company participated in a bid for an environmental project, and they ended up in second place. Technically they had the strongest sender, but they were a little short on price. Now, if they would have been represented by a Canadian counterpart over here, who could have gone and talked to people about this thing, I'm sure they would have won. Bottom line is the people here also know that price is not the only solution to a successful project. They realize that you really do have to pay for what you get.

Michael Mancini: Thank you for joining me today, Ed.

Ed Kalvins: Thanks for having me. It's nice to talk to you folks over on the other side of the big pond.

Michael Mancini: Ed Kalvins is the head of the Canada-Latvia Business Association and he was in Riga.

Marketing a product that is in demand internationally is key to success in the global market place. Joining me today is Terry Wason, from Smart Technologies of Calgary, an international company that makes interactive products that allow people to meet, teach and train regardless of distance. Smart Technologies has been active in the Baltic countries for four years. Thank you for joining me, Terry.

Terry Wason: Thank you very much.

Michael Mancini: Your products have international appeal for obvious reasons. What prompted you to expand your business into the Baltic States?

Terry Wason: Smart is selling in about 100 countries all over the world, and we are in all the major markets. We are a majority leader, and I believe it was just about time to go into smaller markets as well. Baltics, as such, even though they are in Eastern Europe, they have been perhaps the most advance of all the former CIS republics. And the other reason could be that in Eastern Europe, in Baltics particularly, ever since they became members of EU in 2004, they have been attracting a lot of EU funds, particularly in infrastructure and IT and education.

Michael Mancini: What is the business culture like in those countries?

Terry Wason: In terms of the attitude, the work culture, you would find that they are perhaps more like the Scandinavian countries than Russians or other Eastern European nations. So to that extent, they are more western in their world ethics and in their approach.

Michael Mancini: What was the first step that you took when establishing your presence there?

Terry Wason: So, when we went into Baltics or for that matter if you go into a new country, we ideally look for our distribution partner, who would be an AV company, which would have a nationwide presence, either directly or through their dealers, and would be strong in selling to the government and to education in particular.

Michael Mancini: What challenges did you face when you first moved into that market?

Terry Wason: The challenges would be finding the right partner, and the fact that there is not too much of support infrastructure. Like the Chambers of Commerce, or other industry associations; at least we found that to be a challenge. But the way we went about it was the Canadian embassies. They were quite helpful in identifying the right general partners for us. But the other way of doing it is that we participate in two or three big shows in Europe, particularly AV shows, and when we were there we found that all the big AV companies from these regions, they come to the show.

Michael Mancini: What services does the Trade Commissioner Service provide for you in the Baltic region?

Terry Wason: One is just providing the information about your sector and about your industry in that particular country. And the other could be in establishing contacts with the ministries or with the government in those countries. They still have a little bit of legacy of being the former East European nation of former Russian republic, in that they are a bit more bureaucratic than perhaps other western nations. And what I found was that the direct contacts between the higher ups in bureaucracy and the corporate or the private sector is not something which is encouraged. So you need to go through more official channels, and that’s where the embassies come in.

Michael Mancini: Can you give us some specific examples of times when the Trade Commissioner Service helped you?

Terry Wason: Brian, for example, he’s helped us in a couple of instances in the recent past. One was there was a tender in what he felt was perhaps that the process was not as transparent as it should have been. So, Brian helped us in getting our appeal or our point of view across to the ministry there. And that was one incident. Another one was, we had organized an international forum last year, and it was called Global Education Technology Summit. We had about 60 participants from 40 different countries. And these participants were essentially people from the ministry of education, decision-makers and decision influencers. Now, when we were to send out invitations to some key people in Lithuania, we couldn’t have done it directly, because that’s not something which is encouraged by the government there. So Brian helped us in sending out invitations through the local consulate office there on our behalf to the ministry, and we were able to get the due delegates from Lithuania to come to Canada.

Michael Mancini: And what resulted?

Terry Wason: The immediate result was that we were able to establish a rapport with two key officials in the government. And down the line I am sure that this is going to help us in our business.

Michael Mancini: After four years of doing business in the Baltics, how do you feel about your presence there now?

Terry Wason: We are happy with the way things are going with us in the market. We are seeing the results that we expected to see. There have been some challenges, particularly when it comes to government tenders or dealing with the government, but you learn as you go along and we are now meeting those challenges too. And we are fairly optimistic about the way things are now and the way they are going.

Michael Mancini: Terry thanks for speaking with us today.

Terry Wason: Thank you very much, it was a pleasure.

Michael Mancini: I’ve been speaking with Terry Wason, International Channel Manager for Eastern and Central Europe with Smart Technologies, in Calgary.

With me to discuss what we’ve heard so far is Claire Poulin, Canada’s Ambassador to Latvia, Lithuania, and Estonia. Thanks for joining me today, Claire.

Claire Poulin: Good morning, yes, thank you.

Michael Mancini: What would you say is the greatest misunderstanding Canadian entrepreneurs have about the Baltic States?

Claire Poulin: I think that people think that maybe it is part of the Soviet hinterland. It’s not, it’s not. It is a modern European center that is growing quite faster than any place in Europe. They also have good banking and finance systems.

Michael Mancini: What advantage would there be to using the Baltic countries as a spring board to Russia?

Claire Poulin: It’s more secure, in terms of investment. If you want to have access to the Russian markets, it’s easier to do it via the Baltic States. They are considered as a sort of bridge. There are corridors of transit, for instance in the winter, are free of ice and there is a lot, a lot of products that are transiting via the Baltic States.

Michael Mancini: How do you think Canadian companies can support their bids better?

Claire Poulin: I think it’s very simple. First of all they should ask for help. I think that they should not do it alone. A lot of Canadian firms, sometimes, they want to be, kind of, soloist in business, but the help is there and frankly it’s free in the form of our Trade Commissioner Service. There is also the fact that Canadians have to make the investments required in the market, like Terry (Wason) and Ed (Kalvins) just said, to spend money on marketing. I think that it’s a good investment. And thirdly, I may say that our Trade Commissioner Service is a value added in supporting Canadian companies in the tender process. This is key because we can, for instance, help them in finding the right partner, we can write a letter of support and make some interventions. We keep contacts. This is really our work, and it works very well with some companies. We’ve been troubleshooting, for instance, for Nortel, Bombardier, just to name a few of them, but they are trying to work in the market here and I think by our support it has been easier.

Michael Mancini: What kinds of partnerships do you arrange for Canadians?

Claire Poulin: They are people that are already making business here, or they are people that are successful with working with Russia, for instance. They are people that we trust, that have been working with our embassy for several years, or with the CLBA, or with other associations in the region. Please do not be afraid to be creative here. I have a good example of this, the Association of Producer of Wine Products came here last fall, and one enterprise from Québec, for instance, producing wine plants for countries of the north, was very successful here. It was seen as a very interesting opportunity for the Baltic States to have this kind of technology. So who knows, maybe one day we may end up drinking Baltic wine produced by wine plants produced from Canada. So this is very positive in terms of globalization, what do you think.

Michael Mancini: I look forward to sipping Baltic-Canadian cabernet someday. Thanks for speaking with us, Claire.

Claire Poulin: My pleasure. Thank you.

Michael Mancini: Claire Poulin is Canada’s Ambassador to Latvia, Lithuania, and Estonia.

Well that’s our show. Thank you to all of our guests today. Visit us online at CanadExport to subscribe to our twice monthly magazine. Or you can visit the page Overview of Services to learn more about the benefits of the Canadian Trade Commissioner Service.

I’m Michael Mancini, have a great summer, and look for our next podcast in September. Bye for now.

To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”