Over the last 35 years Poland has undergone a tremendous change. GDP per capita increased more than ten-fold over that period, and Polish economy is currently the sixth largest in the EU. Why then, if things are so good, is there no globally recognised ‘made in Poland’ brand? Although many experts are quick to point to a lack of access to adequate funding, the root cause of this challenge lies elsewhere.
1,079.5% – Polish GDP per capita grew by this factor between 1990 and 2022, according to the World Bank.
In the early years of the transformation of the political and the economic system, the engine of the Polish economy was the gradual takeover of orders and individual stages of the production process from partners in the West – Western Europe, the US and UK. As branches of multinational corporations were established across Poland, a multiplicity of companies emerged which based their business model on cooperating with foreign partners. This helped build the country’s recognition as a safe place to locate investments, making it possible to introduce quality standards, production and work methodology, as well as managerial education based on international experience.
However, the cost of this solution, despite the high profitability derived from the cooperation, was the loss of the need to acquire new niches and markets by such symbiotic companies. After all, the volume of sales depended not so much directly on the production capacity of the company in question, but on the market success of the product of the foreign brand that used components made in Poland for its production. Although in the data of the Polish national statistical office such production is classified as ‘Polish exports to foreign markets’, these goods would be delivered to recipients who, to a greater or lesser extent invented, designed, patented them, and then assembled them and brought them to market. Without this integration, supported by the prudent use of funds from the EU and government programmes, Polish economic success would be incomparably smaller.
The second path of Polish development
Overlooked by many, in the shadow of the huge investments and their integration into Western companies’ supply chains, Polish companies of a different kind were growing in parallel. These enterprises were established at times by chance, at others by necessity, occasionally by taking over a family workshop. However, they were always founded by individuals who seized the opportunity created by transformation, whether they were specialists in their fields or simply brimming with energy and enthusiasm. Over the years, this type of company grew organically by improving their products. They achieved excellence of production processes, often exploiting niches that were too small or too unattractive for large foreign companies. Over time, many of these enterprises reached a scale of operation that enabled them to become viable competitors to international players on the Polish market. Among such companies, there is no shortage of those that achieved success, understood in terms of revenues, often surpassing the threshold of one billion złotys a year (around £200m).
Many of them have not yet made the transition to a corporate structure, but can no longer be viewed ordinary family businesses. The founders and leaders of such organisations often ask themselves two questions: “What’s next?” and “How do we do it?
What is next?
The Polish market is very comfortable for domestic companies: it’s large enough to build a certain scale of operations and grow the company to a substantial size. Yet it is also small enough fort the limits of growth to be reached faster than in other developed markets. For this reason, the management of such companies at some point faced a dilemma: how to maintain the current pace of development? The most common solution they come to is to embark on a path of expansion into foreign markets. So why do we celebrate so few high-profile Polish successes on the international stage, if this is such a common aspiration?
Having worked with Polish companies for many years in helping them expand their businesses into foreign markets, I have noticed certain patterns appearing, over and over again.
Most Polish companies – despite achieving success on their home market producing goods and services often at the highest level, and despite their considerable financial resources – approach the expansion process as if they were merely building a new business line at home.
My hypothesis is that they succumb to thinking that if something works here, in Poland, it must also work ‘over there’. Many companies also have a distorted picture of what foreign expansion actually is. Many entrepreneurs understand selling their own production surpluses to other countries as ‘expansion’. However, trade should only be qualified as a prelude to internationalisation.
True international expansion, as I understand it, is the actual, long-term presence of a given company on a foreign market and the associated process of investment in building local structures, brand recognition, adapting the product portfolio to local expectations, and the subsequent development of ‘local’ products.
From my perspective, one of the biggest challenges is how Polish entrepreneurs think about their products in the internationalisation process. They need to realise that the fact that their products and services sell well in Poland is usually of little significance in the eyes of foreign consumers. Customers on a new market are looking for a product or service that will meet their very specific needs and expectations in the specific, local socio-economic context of another country, which will be communicated to them in a way that is clear to them, based on a system of values that they understand. This is an aspect that is unfortunately often overlooked.
Many companies, instead of first getting to know their future customer and their expectations in depth, try to ‘evangelise’ them with their Polish product. In most cases, such model of expansion, carried out ‘for oneself’ and not ‘for the consumer’, leads the Polish investor to quit their newly ‘conquered’ market within six to 12 months. The problem relates not only to the products themselves, but also to ill-considered communication with the new market. Most of the companies that engage J.Dauman Group with their dream of launching an expansion project would like to appear on the British market ‘preferably tomorrow’ – even though, in 90% of cases, not only have they not carried out a professional analysis of the new market, have not developed a marketing strategy for it. Often they do not even have a website designed with this completely new customer in mind!
By Piotr Kubalka, head of J.Dauman Group
