Chapter 3: Latvia

(continued)

3.6 Advantages and Disadvantages of Local and Foreign Suppliers

Purchasing Preferences

It is important to mention that the number of industrial enterprises purchasing environmental technologies and services is low and should perhaps be higher. The reasons for this may include the incomplete privatization process of companies, shortcomings in environmental legislation which lead to the inefficient penalty system, the relatively poor economic situation within some Latvian enterprises, and insufficient environmental competence.

The environmental technology market in Latvia is far from saturated. Survey respondents mentioned only a few of the most developed environmental technology providers in Latvia in their responses. Therefore, the opportunities for well-developed environmental technology service providers are great.

As a rule, Latvian end-users select local environmental technology suppliers, predominantly because of the lower price. In general, the use of environmental technologies meets the requirements of Latvian environmental standards. However, not all companies are in compliance with EU standards, which tend to be stricter than the national standards and therefore more difficult to attain. As EU accession is Latvia's ultimate goal, certain local environmental technologies (including equipment and devices) must be further developed to meet EU requirements. Some local environmental businesses have experienced success in both the domestic and foreign markets.

Strengths of Local and Foreign Environmental Technologies

The primary strength of the local environmental technology provider is the lower price offered to consumers (56 percent). A second strength not included on the original questionnaire but frequently cited in responses is the local presence. Besides physical proximity, a network exists within the environmental community where the buyer can obtain valuable information from other colleagues in the field before making a purchase. End-users sometimes prefer to buy from a local supplier because of the ease in obtaining service and after-sale repairs. High quality was less a characteristic of local products (7 percent), as was the user-friendliness and ease of operation (9 percent). Approximately one quarter of the local companies stated their income share from foreign customers was more than 10 percent.

The main preferences for foreign technologies were their high quality, mentioned by 71 percent of respondents, and their user-friendliness and ease of operation (mentioned by 64 percent of respondents). High quality was certainly a characteristic of Western technologies as opposed to Russian or Eastern European technologies. Interestingly, however, the industrial sector and municipalities claim not to purchase technologies from the Eastern European countries. Other reasons for choosing foreign technologies include the reliability and durability of products (49 percent), the possibility to customize and adapt them (31 percent) and good after-sale service (29 percent). Worth noting is the fact that not a single respondent pointed to low price as an advantage of foreign suppliers.

Barriers to Buying Local and Foreign Environmental Technologies

The major disadvantages of local environmental technologies and their barriers to the market are the lack of reliable product information (58 percent) and the scarcity of information concerning suppliers (53 percent). A third disadvantage mentioned by one quarter of the respondents was the price, deemed "too expensive." This can be explained by the relatively poor financial situation of Latvian technology buyers.

The primary disadvantages of foreign environmental technology suppliers, mentioned by 70 percent of the survey respondents was they are "too expensive." Other obstacles included too little information about the suppliers (51 percent), lack of reliable product information (49 percent), and difficulty in ensuring authorized technical after-sale service and maintenance (30 percent). Some foreign technology users expressed no opinion with regard to the high price of foreign technologies but instead commented that they meet the required standards and quality they desired.

The issues concerning insufficient information about suppliers and lack of reliable product information were pointed out by some 50 percent of respondents as disadvantages of both local and foreign technology providers. Therefore, the competence perhaps of technology users might be improved as well as to improve access to information and the level of consulting services. These are some of the major tasks that lie ahead for the improvement of the environmental technology market in Latvia.

REC * PUBLICATIONS * ENVIRONMENTAL TECHNOLOGY MARKET - BALTICS * LATVIA