If you are an investor with spеculative strategy, you definetely shouldn’t. Because your time is now! Ukraine today is good bargain for investors with strong nerves

The economic bulb of recent years has burst out.  And prices for vast majority of Ukrainian assets dropped down sharply, sometimes by 95%.

Real estate, both commercial and residential, suddenly turned from a liquid asset into burden for its owners. The latter are offering up to 70% discount off the recent year price.

Stocks now cost 5-20% as much as they cost a year ago. Only few speculative players keep on generating transactions on the Ukrainian stock exchange.

Firms, even those having good market positions and quite strong brands, are being sold for slightly more than the sum of their debts.

The fact is that if you are investor that takes risks, you have great chances to earn a lot in midterm by acquiring of carefully selected assets from devastated sellers and reselling them to conservative investors, who are waiting for better times nowadays.

City features

Lviv is the biggest city of Western Ukraine ( 850’000 inhabitants), located 60 km from the border with European Union. Historically, Lviv has favorable environment for trade and finance sectors, tourism and supplementary services. The locals adore sport, first of all football, and support two strong city teams FC Karpaty and FC Lviv.

Economic up cycle of Lviv City is resulting not only from EURO Championship, but also from foreign investment – driven by favorable business-oriented attitude of local authorities.
Within the near future Lviv will be connected with Europe via new air, railway routes as it modernizes airport and narrow-gauge express railway. Automobile trips will be also streamlined due to new roads and new customs points on the border crossing with Poland.

Funding

State Program on Preparation to EURO 2012 anticipates spending of €11.5 bln, including €8.5 bln from investors. The vast majority to be spend for transport infrastructure, hotels and stadiums.
Preparations in Lviv Region are budgeted around €1.2 bln and to be split as follows: government (19%), region administration (17%) and investors (64%).

Prior to the Championship Lviv City will built new 34’000-seat stadium (€60 mln), reconstruct five football training bases (€17 mln), airport (€70 mln) and automobile roads (€240 mln), renew city transport (€115 mln), build and renovate more than 50 hotels and hostels (€275 mln), improve public facilities and touristic attractiveness (€70 mln) as well as invest in further medical facilities (€14 mln).

Institutional Environment

EURO 2012 is a subject of national proud in Ukraine and especially in Lviv region. Demonstrating a superior organization and execution of the event is considered as a precondition for subsequent EU accession.
State and local authorities are determined to offer the most favorable treatment for foreign businesses. The government is committed to secure transparent funds distribution. Investors and unique goods suppliers for EURO 2012 are provided with extra incentives.
The organization of the Championship by itself includes measures, which foster business and touristic info dissemination, enabling better public control.
Notably, that EBRD, WorldBank and European Investment Bank play an important role in financing of EURO 2012.

Sales Algorythm

Once you think your product can be marketed in context of EURO 2012 in Lviv, please contemplate the following steps to undertake:
• Collect country(city) info as well as analytics, related to the market of your interest
• Develop your marketing tactics based on local nuances
• Meet local authorities within the delegation or individually, as well as private matchmakers
• Establish contacts with prospect clients/partners
• Conduct negotiation taking into account Ukrainian business culture
• Sign agreements and execute accordingly

Drawn from our experience with many clients, we have come up with a brief overview of the top 5 success factors for foreign company in Ukraine. When our clients set up a business we tackle these issues in details, guiding the client through the seed stage.

1. A knowledgeable local assistant

You will really benefit and your things will go faster and smoother if you have trusted assistant in Ukraine. He/she will make you familiar with the local features and conditions for doing business. Besides you can always use him/her as your distant hands to solve your practical questions in Ukraine.

2. Massive and frequent communication

Communication really is the key to a healthy relationship. Establish partnerships, listen carefully, share your ideas and keep new connections alive. The regular personal meetings with your potential clients or partners are critical in Ukraine. You are also recommended to keep closely in touch with people responsible for your expansion.

3. Accurate planning

Project “Ukraine” is going to be a serious challenge unless your get prepared to it carefully. You may want to take professional project manager on board. Anyway, you need to set clear goals, secure careful planning and  monitoring of achievements. Once you take final decision to be present in Ukraine,  we urge you to make full-scale business-plan.

4. Sufficiency in resources

You cannot risk with your project success by economizing on everything. Be prepared to spend some money for onsite visit, data collection, initial marketing. Besides, it is crucial that you assign a special person dedicated to the expansion.

5. Good initial knowledge transfer

Whether you want it or not, you are newcomer in Ukraine, who will inevitably meet with many difficulties. You can avoid that by collection information regarding macro environment as well as specific issues, connected with your business purposes. Think first of local experts you may talk to. Also, valuable sources of information can be found on Internet, sometimes, for free.

Cost of doing business becomes ridiculously small.

Will you believe that there is a country in the middle of Europe where 150 bucks is ordinary monthly salary? As a matter of fact, in Ukraine currency devaluation and unemployment caused the reduction of salaries by up to 70% in terms of Euro. Similar situation with other operating expenses like office rent, telecommunication and information services as well as insurance. Materials and component parts in many cases cost twice less than just a year ago again in terms of Euro.

Export Rules.

Supply managers from all over the world have new challenges as Ukrainian exporters are now able to offer minimal prices in Dollar and Euro. New times force Ukrainian companies actively seek client abroad and propose them favorable terms of pricing and delivery. Some foreign company are already establish factories at Western borders of Ukraine with the purpose to sell the production to the customers in Europe.

Domestic Competition disappears.

Since 2005 markets have been growing and competition were getting tough. But when economic turmoil began local players found themselves overloaded with expensive debts and not able to manage changes. Many of them disappeared, frozen activities, reduced product lines. Nowadays Ukrainian firms are limited in resources to invest in new products, enter new market and compete with more powerful competitors from abroad.

Speculative investments flourish.

Today, you can easily acquire commercial and residential real estate, land and fixed assets for 30-50% of their last year price. Companies with aggressive investment strategy are able to select the most attractive objects and dictate the conditions to the sellers. The excessive proposition makes many assets underestimated. Investors with long-term plan has also an opportunity to buy businesses or stakes in companies for as little as 10-20% of their last year value.

Business Tourism and Business Services have never been more affordable.

Due to currency devaluation Ukraine becomes a paradise for business travelers in terms of pricing. Hotel prices were reduced by 30% in Euros, apartment rent fall by 50%, average bill in restaurant is 50-60% smaller than a year ago. If you contemplate Ukraine as a potential destination for you business, it is a right time to visit it as well as order services from local researchers, translators and lawyers.

If you have a well-established business with modern technologies and proactive management, you need to consider carefully the opportunity to win this uncovered and underestimated market.

These are the reasons for opening call-centre in Ukraine:

• Screaming under-saturation of the market;
• Extension of well-educated bilingual young people in the country;
• Extremely small salaries of call-centre agents, one of the lowest cost of doing business worldwide (much less than in Philippines, India and Eastern-European countries);
• Reports of international institutions, complementing Ukraine for its highest outsourcing attractiveness ;
• Ability to cover all Russian-speaking region with 300-million population, forming 4.5% of world GDP;
• Favorable competition and opportunity to win the market due to better technologies as well as management;
• Location next to 4 counties, members of European Union

We have detailed analytics for Ukrainian markets. For further details please contact us.

In despite of economic boom in Ukraine during 2004-2008, the vast majority of markets are still far from saturation. The competition is much more fragmented comparing with countries to the West. Many local players, dependant on lending, were knocked out by economic turmoil. Management culture as well as service level in Ukraine do not meet European standards. Thus, foreign firms with midterm and longterm strategies can take advantage by positioning themselves in Ukraine these days.

Market saturation

Ukraine consumes 2-5 times less products and services per capita comparing to European countries. There are quite perspective markets in Ukraine, which due to different reasons, remains untouched by competition.
One can hardly name “competition” situation on the most of Ukrainian markets. Companies do not see their rivals. When planning or developing products, they can afford not to take their competitors into account.
That becomes especially obvious outside Kiev City. Specifically regions are missing wide retail networks with modern goods and services. Such things as customized software, brokerage services, broadband Internet, logistic premises, modern hotels are in deficit countrywide.

Concentration Level

Immature Ukrainian markets are characterized by high level of fragmentation. This, however, may be different in one given region, where one company controls everything.
The barriers for entering the markets are rather low. There are no big fishes, impacting your pricing policy and overall strategy, except mobile phone sector and few state-owned sectors.
Ukraine provides many niches, which can be taken up and secure long-term sustainable earnings. On the other hand, there is a good opportunity for big foreign players to become a big fish by bringing effective and efficient technologies and management approaches to the markets.

Share of foreign capital

There is no transparency of books in Ukraine. Companies, except those from financial field, usually do not comprehend the advantages of shareholding form of ownership. That’s why big joint-stock corporations unhurriedly come to Ukraine. Simultaneously, smaller nimble firms from Germany, UK, Poland are finding application to their better technologies and systems. If we look at PR agencies, Health Care Organizations, Hotels, Parcel Delivery Agencies, we will discover that foreign capital constitute less than 15% of overall capital in sector. That means that Ukraine unlike, say, Baltic States, is far from being the battlefield of foreign business monsters.

Management and Service Standards

Amazingly, how little Ukrainian managers know about business. Like in communism era they are good at knowing their product, but lack knowledge of strategy, motivational systems, project management, measurement and finance. Quick, emotional, living today, very ineffective and vulnerable to changes they are an easy meat for foreign well-organized companies. Lack of planning and excessive ambitions made many of them today stuck overloaded with loans and helpless.
Customer satisfaction was not at all a priority of Ukrainian firms. No trainings for front-offices, primitive IT, absence of loyalty programs, all this restrains their further development. In such a way service level will be the first differentiation point for foreign firms to gain Ukrainian customers.

Although Ukraine is a part of Europe geographically and historically, we are not classical “Europeans”. In our emotionality we are more similar to Southern Europe. The cartoon below, although devoted to Italy, will help you to understand Ukraine as well.

In general, Ukrainians lack discipline and responsibility, but they are very adaptable to different people and situations. Friendship goes before business in Ukraine. So be prepared to set personal relations with people you are going to work with.

Ukrainians are more emotional than analytical and more people-oriented than focused on results.

Ukrainians are not about planning, they love to be spontaneous in their private and business lives.

The nation is polychromic, which means that we do not control time well. This means frequent delays, rescheduling and cancellation of meetings.

Most of Ukrainians lack objectivity, their judgments are strong and 100% right.

You usually need to high your expectations with a grain of salt. Average Ukrainian tends to promise a lot, sometimes more than he/she can do.

Interestingly, Ukrainians usually start conversations with unimportant things. The most critical things go at the end, when the personal contact is established.

Aural agreements means much more than written. It is known, that Ukrainians never read just look through agreements they sign.

In their relations with foreigners Ukrainian people becomes especially courteous in case if they speak foreign language or have a translator. Only less than 10% of population – primarily the youth of Kyiv and other big cities – can communicate in English.

Generally people are very smart. 90% of Ukrainians have higher education. People over 35 (56% of population) received soviet education which was quite strong, although too theoretical. Serious reforms in education started just few years ago. Thus, Ukraine has ample of technically advanced people with strong knowledge in math, physics, chemistry, and engineering, but lacks professionals in the field of business administration, finance, human resources, international trade.

And, of course, we are the best nation in the World!

I have collected short list of memorable and proven advices which may help you in your day-to-day communication with Ukrainians:

Overall

Greeting

Business Meeting

Restaurant

This is important for firms, trading with Ukraine, investing in Ukraine or utilizing local facilities.

International Trade

Firms, looking for suppliers internationally, can enjoy favorable pricing in Ukraine. Machines, spare parts, natural resources, agriculture production, metals, chemical products and many other goods are exported more actively than ever. And vice-versa, Ukrainian businesses, which is dependant on import, feels difficulties with selling their products on domestic market.
It would be also a good idea to visit Ukraine these days. Apartments, transfers, restaurants, excursion and translation services are paid in Ukrainian Hryvnya and therefore are much cheaper comparing to 2008.
Notably, that having troubles with liquidity Ukrainian suppliers and service providers are very amendable in terms of payment condition (discounts, payment delays and so on).

Investments

It is also right time to buy assets, such as commercial real estate, precious metals, ready-made businesses etc. If you are about to open production in Ukraine, you will enjoy great number of inexpensive workforce, as well as cheap equipment and resources. Almost any midterm investments in Ukraine will look attractive these days as the cost can be reduced to minimum.
There are especially good conditions for small niche production, export-oriented production, IT&T, health care and energy-saving sectors.

Outsourcing

Ukraine has many flexible production facilities, which can be outsourced by foreign companies. The idea of producing cheaply in Ukraine and selling in EU seems to be very smart and actual today. German, Italian, French and Dutch firms are successfully cooperating with local manufacturers on producing clothes, bags other hand-made products.
Ukrainian legislation is clearly regulating tolling schemes, making them widely and successfully used. It is noteworthy, that Western Ukraine takes leads in outsourcing for foreign firms due to the closeness to eastern borders of European Union.