Foreign direct investment into Poland by a British international company

Foreign direct investment into Poland by a British international company

The client was a manufacturer and distributor of innovative high temperature heating, insulating, and electronic control systems solutions for the major appliance industry. Its customers included GE, Electrolux, Whirlpool and LG.

Our challenge

Our task was to review and strengthen the client’s business development strategy. This included expansion into Central Eastern Europe (CEE). It was aware that if it did this in an EU country, there would be the possibility of lower costs, grants and subsidies.

The client required a clearer idea of the various alternatives and consequent advantages.

What we did

The first task was to work with the client on the selection criteria for the potential location for the new manufacturing facility in CEE. These included:

  • growth in the country
  • foreign direct investment criteria
  • interest rates
  • exchange rates and their relative stability
  • wage rates and inflation
  • RPI
  • political risks/exposures
  • availability of grants or subsidies available from European Union and country.

Following presentation of our report, the next steps were to:

  • visit countries with the MD
  • check the laws on foreign direct investment (FDI) in each country
  • hold meetings with local chambers of commerce
  • hold meetings with other similar UK companies and their MD/CEO in each country
  • report on the suitability of each location.

After review, we recommended Poland as the destination country.

The next step was to review locations in Poland and set up meetings with local government agencies to find out about local issues and grants. The selection criteria were:

  • unemployment rates
  • ability to recruit bilingual senior and middle management
  • attractiveness of area to expats
  • total cost of employment – operatives/supervisors/managers
  • local building/employment/training grants
  • proximity to key customers
  • proximity to airport with direct flights to the UK
  • road communications
  • universities with relevant research capabilities
  • trucking routes
  • local packaging
  • environmental risks relating to site
  • provision of utilities
  • expansion of potential (including site and utilities)
  • local area and site security.

Next, we concentrated on the legal, financial and operational aspects of setting up the company in Poland, including:

  • company registration
  • opening of an account at a Polish bank
  • getting the required permissions and licences
  • registration with the tax office for VAT
  • consultations with other authorities and institutions
  • public announcements on the planned decision
  • application to government/local authority for financial support for creation of new jobs.

The construction of the factory followed and included:

  • negotiation of terms with the construction company with MD
  • technical conditions of infrastructure connection
  • various reports on the impact on the environment
  • construction design with the client
  • consultations with other authorities and institutions
  • public announcements on the planned decision
  • getting a decision regarding the site development
  • application for construction permit
  • monitoring the construction.

Staffing the company in Poland involved:

  • seeking a plant manager
  • interviewing for a plant manager with MD and key staff in the UK
  • arranging a contract for the country manager with lawyers in Poland
  • recruiting an agency to help with key positions
  • holding meetings with local human resource and government agencies for white and blue collar staff with MD.

The outcome

Within 18 months of the initial briefing the company was established and operational in Poland, with a lower cost base and customers who saw this move as a demonstration of its commitment to the business relationship.

The company’s MD commented:

“… TCii provided valuable support during the pre-operative phase of establishing our facility in Poland. Andrew, the lead TCii consultant on my project, is a fluent Polish speaker … his knowledge and experience of working in Poland was excellent. He was able to introduce a wide network of contacts, including local authorities, government agencies, banking and universities. I am happy to recommend his company to anyone considering similar plans.”

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