World City Guide

Business

Business Profile
Since breaking free of communism in 1989, the Czech Republic, with Prague firmly at the helm, has managed a speedy and efficient move towards market capitalism, perhaps the most impressive of all the former Eastern Bloc countries. The ascension to the European Union in May 2004 rubber stamped this progress and the country’s economy remains one of the strongest in the region, with most of the structural economic problems of the switch from communism already dealt with. EU membership brings a host of challenges but also the potential of expanded markets and opportunities.

The Czech Republic’s principal industries remain power engineering and fuels, metallurgy, engineering, glass, wood and armaments. The rapidly growing service industry is a major source of income, with the related tourist industry providing enough invisible income to help redress the trade deficit. Tourism has become massively important economically for the Czech Republic and particularly Prague over the last decade, both as a major revenue generator and as an employer.

Prague is at the centre of Czech business (over 20% of the country’s GDP is created here) although there is no particular central business district, with companies located in all parts of the city and suburbs. As heavy engineering moves outside the city, service industries (financial, retail and telecommunications) and manufacturing industries (electrical, transport and food processing) are becoming increasingly prevalent in the centre. Companies basing their Czech or Eastern European headquarters in Prague include ABB, Siemens and Philips.

Banks are still sometimes cautious about making loans without sound collateral and sources of venture capital are still sometimes limited. This has led to a squeeze on the small and medium enterprises (SMEs), which should be at the heart of a dynamic economy.

Unemployment in the Czech Republic moved above the psychologically important 10% barrier for the first time since the fall of communism in 2004. The strong Czech Koruna is also an economic problem at the moment – exports, especially to the United States, have fallen in recent years. Prague’s rate of unemployment, though, is still only around 3%. Unemployment figures show wide regional variations and some regions of the country, notably those, like Most, in coal mining and steel production areas, are above 20%.

All is not gloom, however, since much of the Czech workforce is well trained (and willing to retrain), intelligent and hard working. Opportunities for venture capital investment, especially in the SMEs, can potentially reap rich rewards, while low share prices offer attractive bargains. Large conglomerates are being broken up and the companies that emerge should be leaner and better able to compete in a global market.

Business Etiquette
By and large the Czechs are a warm people who greatly value hospitality. In some instances, when dining with Czech business colleagues, it will emerge that the bill has quietly been settled. If this happens, business visitors should accept gracefully (considering the disparity in Czech and Western wages, this may also be a matter of personal pride) and try to find some later means of showing appreciation. Czech society is still largely male dominated and, especially with older businessmen, it is unheard of for a woman to pay for a meal, even if she is the senior member of the team. If invited to dine at a colleague’s home, a small gift is appropriate – a bottle of wine or flowers are best. When offering or accepting a lift with a business colleague, the favoured location is the backseat.

Initial business meetings are often serious affairs, during which even business partners refer to each other by title and surname. The use of forenames is a mark of friendship, however, using them without permission is seen as insulting or demeaning. Degrees are considered important and should always be used in addressing correspondence (only the doctorate is used in direct address). Meetings can take longer than expected and be more formal than the average Western businessperson is accustomed to. However, as the old Communist bureaucratic ways give ground to capitalism, business lunches and such meetings are gaining popularity, especially with the younger generation. One should not expect work-related meals to be the norm though.

Office hours are generally 0830-1700 and punctuality is essential – colleagues should be informed of any unavoidable delays. Dress is conservative for older businesses, while new companies tend to be more relaxed. A jacket and tie for men or smart suit for women is a good bet for first time business visitors. A firm handshake and maintaining eye contact are seen as signs of honesty and sincerity, while overloud talking and interrupting are construed as attempts to obscure issues. At first meetings, business cards will be exchanged and an offer of coffee or drinks is common. Congratulating local business people on the Czech Republic’s accession to the European Union should be avoided as this can be regarded as patronising at best or even insulting