paves the way for foreign investment
Laurie R McCarthy
Loranger Sosto Industrial Park
Kaposvar Loranger Industrial Park
Siofok Loranger Industrial Park
Dabas Loranger Industrial Park
Establishing an operation in a foreign country is often fraught with risk. Cultural differences, unfamiliar government policies and the need to staff the new operation can present significant challenges to the incoming company. One Hungarian developer - with strong American roots - has created a strategy for helping companies make that transition.
Today, with offices in Hungary and the United States (US), Loranger Development Companies takes a unique approach to industrial development by offering a full turnkey service. "We do whatever a company needs to get up and run quickly and easily" explains George Loranger, company Chair and Chief Executive Officer (CEO). "By working together as strategic partners we are able to leverage the client's potential for success by reducing capital investment and minimising risk."
Industrial development was not what Loranger had in mind when the American family business, Loranger Manufacturing Corporation, followed its long-time customer, Ford Motor Company, into Hungary. "We already knew that if we were going to remain competitive and continue to build our business we had to start looking beyond US borders. But at that point we were only thinking in terms of manufacturing."
The shift in perspective came when Loranger found a suitable manufacturing site - a 60,000 square foot building on an abandoned Soviet military base in Szekesfehervar. At that time Hungary had an inventory of vacated military installations and was trying to turn them into viable commercial properties. The problem was that the country lacked the financial resources to make renovations and create the infrastructure required to attract and keep foreign investors.
Facing competition for the building, Loranger clinched the deal by offering to take the entire complex and turn it into Loranger Sosto Ipari/Industrial Park, a 240 hectare park that has proven to be an excellent example of turning swords into plowshares.
In the process of developing the park, Loranger discovered the many challenges that companies face when venturing onto foreign soil:
Despite difficulties and frustrations, the Loranger Ipari Park venture prospered. Capitalising on its experience, Loranger decided to expand its horizons by offering its knowledge and experience to other firms committed to global expansion. Thus came the birth of Loranger Development Companies, a Hungarian-based enterprise that not only offers a choice of industrial park sites, but also provides a range of services. For example, Loranger Development Companies can:
Equally important, Loranger's experienced professional staff guides clients through the planning and implementation phases, and provides help in finding reliable equipment and material and service suppliers - essential tasks that Loranger learned can be especially problematic in a foreign country.
One early test of Loranger's turnkey approach was its work with Nokia. In 1994, Nokia Industrial Electronics (Helsinki, Finland) started looking for an expansion site for its Nokia Audio Systems operation based in Straubing, Germany. At the recommendation of the Hungarian Industrial and Trade Development Agency, Nokia personnel visited the Loranger Industrial Park in Szekesfehervar.
"Every culture is different" explains Loranger, "so we invested a lot of time getting to know the Nokia people to understand their requirements. While they clearly liked the park and were interested in expanding into Hungary, they were troubled by what they saw as the risks. They were concerned about the significant financial commitment required to purchase land and construct a facility. They were also uncertain about managing the labour and cultural problems created by the earlier Soviet regime. Finally, they wanted to be up and running quickly."
"Having been in that position ourselves, we were sensitive to their concerns" continues Loranger. "We had achieved a successful track record in expanding into Hungary and had established excellent, trust-based relationships with the Hungarian Government and industry."
To minimise Nokia's risk and capital outlay, Loranger offered to construct and lease the building. Loranger also hired the personnel and provided cultural training while Nokia handled the technical training. Furthermore, during construction Loranger provided interim manufacturing of the automotive speaker system components that would later be manufactured in the new Nokia plant.
This was a real plus for Nokia. Newly hired personnel manufacturing Nokia products in the Loranger plant. They were able to meet Nokia's increased production demands while gaining hands-on experience; they were later re-employed by Nokia. By the time the new building was complete, start-up was simple and virtually seamless.
Nokia's goal was to move into the new facility in the Loranger Industrial Park in December 1995. The company's expectations were exceeded, however, when the building was completed on 1 October 1995 - two months ahead of schedule.
"We were rather amazed that the factory was completed on time and per our agreement", states Klaus Burkert, Chief Financial Officer for Nokia Audio Systems GmbH. "Our management was even more impressed when we opened the factory doors with a fully trained workforce. We believe that our great success in Hungary is in part due to Loranger's imaginative and earnest efforts to help us."
Loranger believes that Hungary offers many advantages for industrial development. "The country is committed to becoming a major regional centre of world trade and industry, and offers attractive incentives for foreign investment", states Loranger. "It is ideally located, serving as a natural bridge between Eastern and Western Europe, and the Hungarian people are intelligent and well-educated, providing an excellent source of skilled, cost-effective labour. "Loranger's enthusiasm for Hungary has led to the acquisition of three more industrial park sites since the beginning of 1998.
The original site, Loranger Sosto Ipari/Industrial Park, has proven to be very successful and is currently 70 per cent occupied. Home to 24 international companies, including Philips (Holland), Stolwerk (Germany), Nokia (Finland), Denso (Japan), Brunswick (US), Shell Gas (France) and Loranger Ipari (US), the park lies within the city limits of Szekesfehervar. Only 40 minutes by car from Budapest, Szekesfehervar sits at the juncture of six major highways and main railway connections. It is often cited as "one of the world's top ten industrial growth cities", earning it the title of Hungary's Silicon Valley.
Loranger's second acquisition, Kaposvar Loranger Ipari/Industrial Park, is located in Somogy County, a prime agricultural region in south-western Hungary. Established in February 1998, the 40 hectare greenfield site was particularly attractive to Loranger because of its strategic location. Kaposvar is a busy, economic, commercial and cultural centre that also serves as the North Atlantic Treaty Organisation (NATO) logistical centre for the Balkan region. A technically skilled workforce of 47,000, plus the city's proximity to Europe's largest freshwater lake, Lake Balaton (56km), and to the bustling city of Pecs (70km) significantly added to Kaposvar's appeal.
The two newest Loranger parks in Siofok and Dabas have expanded Loranger's commitment to Hungary, providing potential clients with a broader range of industrial site options. Loranger states that, "Siofok Ipari/Industrial Park not only represents an excellent greenfield site that can accommodate five to ten companies, but it is also located in a very attractive and accessible city with a population that has the highest level of education per capita of any city in Hungary. Dabas Ipari/Industrial Park, another premium greenfield site, represents our first venture across the Danube. Dabas has a lot of potential too. Not only is it in close proximity to Budapest, with the capital's excellent educational, financial and cultural resources, but because it lies east of the Danube River, it enjoys special federal government investment incentives as well."
One important criteria which Loranger Development Companies considers when selecting an industrial park site is each city's commitment to industrial development and its support of foreign investment. "In the case of Szekesfehervar, Kaposvar, Siofok and Dabas, there are federal and local government incentives in the form of grants, zero and/or low interest loans, and special tax breaks for foreign investors. Some of the regions also offer manpower training for employers", explains Loranger.
Loranger Development Companies is actively working to attract investors to its parks, while building relationships and infrastructure to help in-coming companies make the transition quickly, with minimum risk and investment. Loranger states, "I believe the key to our success has been our ability to earn the trust of the Hungarians. We've also been patient and creative, and our understanding and appreciation of Hungary and its people has made us willing to take risks ourselves in order to minimise risk for our clients."
Laurie R McCarthy is an American freelance writer and marketing consultant based in Doylestown, Pennsylvania. She has written extensively for clients in the plastics industry, as well as for a variety of technical trade publications
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