Een Nederlands bedrijf is gespecialiseerd in de productie van en groothandel in onderdelen voor deuren. Het zoekt nu mogelijkheden voor expansie van haar activiteiten in Hongarije en wil een onderzoek uitvoeren naar de haalbaarheid, alsmede de benodigde werkzaamheden en risico's van het opzetten van een productie- en distributiecentrum voor onderdelen voor overhead deuren in Hongarije samen met een buitenlandse partner. Het plan is om bepaalde onderdelen vanuit Nederland naar Hongarije te exporteren, echter de meer arbeidsintensieve componenten zullen in Hongarije worden gefabriceerd vanwege de goedkope arbeidskosten, wat zal resulteren in lagere prijzen. Gezien de gunstige ligging van Hongarije kan het centrum als basis dienen om apparatuur te distribueren naar andere Midden- en Oost-Europese landen. In de studie wordt onderzocht wat de specifieke technische en infrastructurele eisen zijn voor het opzetten van een productie- en distributiecentrum. Tevens wordt er gekeken naar de juridische eisen en allerlei organisatorische aspecten met betrekking tot het opstarten van een bedrijf in Hongarije. Een gedegen logistiek plan zal worden opgesteld. Het eindresultaat van de studie zal een business plan en een investeringsvoorstel zijn.

De studie is afgerond per 30-09-2001.

Summary

Introduction
A Dutch company being a medium-sized company established 20 years ago is specialized in the development, production and distribution of overhead door components for industrial and residential use. The company initially was solely an importer and distributor of these products, but increasing demand for overhead door components stimulated the company to become active also in production in the first half of the 1990's.

In the recent years the company has managed to increase its turnover by a rate of 20-25 percent annually. Besides the well-established market presence on the EU markets the company has a good chance to achieve further success on the market of Central and Eastern European countries. Nevertheless, certain factors hinder the smooth expansion of the company in this regard. In particular, the lack of free space and capacity to expand at the Dutch site can be mentioned. Additionally, shortage of available skilled labor force in the area of the Dutch site also makes it difficult for the company to keep up with the continuously increasing demand.

These reasons altogether have led the company to consider the strategy of expansion by setting up additional production facilities. Because of favorable investment climate and conditions, Central and Eastern Europe has been chosen as the new spot for the realization of an investment project. From the economically and politically most advanced CEE countries, Hungary has been selected for deeper investigations with regard to the possible location of the new plant.

In order to be able to make the final judgment on the proposed investment, a number of aspects - mainly economical and technical ones - needed to be examined carefully and completely. For the realization of this feasibility study, support from the PESP programme of SENTER was requested, which has been awarded to the company.

The following aspects were investigated in the framework of the feasibility study:

• marketing study;
• legal study;
• technical study;
• import and logistic study;
• organizational issues;
• financial aspects.

Marketing study
During the investigation a number of business missions were carried out to Hungary. The aims of these visits were in particular to elaborate the possibilities and to investigate the influencing factors of setting up a subsidiary in the targeted country. In the frame of the project the market of overhead doors in Hungary and the neighboring countries were analyzed extensively with great importance. Possible customers and competitors have been identified in order to get a clear picture of the current situation in this particular industry.

The experts of the project team have executed a complete scan of the Hungarian market of overhead doors in order to obtain relevant and important information on possible competitors, customers and market potentials. With the aim of supplying the market of CEE in the future, market opportunities were investigated by the means of contacting potential customers and companies who are already active in the sales/distribution of overhead doors or its components.

Legal study
A thorough investigation of the local regulations and legal requirements concerning company establishment has been carried out by the experts in order to eliminate any risk of making a wrong decision which might affect the operation of the new company. Because the Hungarian operation should not affect the activities of the mother company as far as claims are concerned, the legal form of the new entity has been decided to be a Kft., i.e. a limited liability company.

Technical study
A comprehensive analysis of technical aspects was executed, including production facilities, quality assurance, logistics, IT and communication and customs related issues. Exact specifications of the machinery and other equipment were given, and the definite lay-out of the factory was determined alongside with a drawing with all the necessary connection points for power, gas and pressurized air supply. A list of spare parts for the machines and maintenance was also prepared. As for logistics is concerned, various transport methods were considered, as well as the set-up of a warehouse for distribution purposes by the determination of the requirements.

Import and logistical study
Possible sources for raw material supply also have been investigated in the frame of the investment project. An important part of the necessary materials can be supplied directly from Dutch and other EU-based suppliers towards the new company to be established. Meetings with representatives of local producers and trading companies have also been held in order to find out the possibilities to purchase some of the materials locally. A local steel producer has been identified as a possible supplier of black steel, while another local company has been considered as a company offering solutions for galvanizing issues.

Import conditions, means of transport and logistics were seriously considered as well. Hungarian import conditions regarding goods of EU-origin are favorable. Because import issues require great competence, specialized Hungarian experts of customs clearance have been identified and contacted in order to outsource this activity to them from the time the investment process commences.

Organizational issues
Furthermore investigations regarding labor issues have made an important part of the present feasibility study. The conclusion is that the availability of skilled workers in the metal industry in especially Eastern Hungary is sufficient. In addition, wage levels are much lower compared to the Western-European levels, and there is quite a difference between the Western and Eastern part of Hungary as well.

The structure of the new company's organization was determined and as a result, job descriptions were prepared for the various positions required. A training programme has been also prepared for the Hungarian machine operators. Part of the training will take place in The Netherlands, and Dutch employees will also hold on-the-job training in Hungary as soon as the production lines are installed.

Financial aspects
As far as the capital structure is concerned, the minimum registered share of the Kft. has been determined to be the minimum requirement of 3 million HUF in accordance with the Hungarian company law regulations.

A detailed financial plan has also been prepared including every important financial performance indicator, serving as a basis for the final decision over the planned investment in Hungary. The investments can be financed by a 7-years bank loan of the Hungarian ING-subsidiary based on a intercompany guarantee of ING Holland to ING Bank Rt. in Budapest.

Conclusion
The PESP project can be regarded as successful, since the investigations carried out have proved the feasibility of the planned production. Having analyzed every important issue that may have any effect on the proposed investment, the project team finally concluded that the intended Hungarian operation is feasible with respect to the production part of the project. Therefore concrete steps have been taken already in order to start the investment operations, for which the green light has been given by the management team of the Dutch company.