Chapter 4: Lithuania

(continued)

4.7 Major Suppliers in the Environmental Technology Market

Local Suppliers on the Market

From Table 4.23 it is apparent that each sector has its own suppliers that tend to include local providers.

Foreign Suppliers on the Market

This situation can be explained by several factors. As already mentioned, the majority of environmental projects in Lithuania are financed by the EC, World Bank, PHARE Programme and others. When a Western country offers credit to the Lithuanian government for a specific project or area of development, it is usually understood that project input would also come from the donating country. This creates favorable conditions for companies from the donating country to enter the market. Northern and Central European countries are the most active in granting credit and in offering finance to the Baltic States. This explains the large market share belonging to companies from Western Europe.

The second influential factor is that of location. It is clear that a large distance between supplier and customer creates difficulties in contact and after-sale maintenance, increases delivery time and so on. Therefore, companies located in Western Europe have a clear advantage over companies based in North America or Asia.

European companies also can adapt more easily to specific market conditions, including the economic situation and the way in which business is traditionally carried out. In addition, Lithuanian people relate to the European lifestyle and business practices, and they trust European products more than their American counterparts.

Thus, as shown by the listing in Table 4.24, Danish, German and Swedish companies have the largest market share in waste and water related technologies. Market shares in other areas are distributed among all countries more evenly, but still German and Scandinavian companies are dominant.

The relatively small size of Lithuania's environmental technology market, however, is something of a deterrent. Lithuania, with its population of 3.6 million, 65,200 km² of territory and relatively undeveloped economy does not offer substantial business opportunities for Western suppliers. In many cases, investments and pay-back rate analyses shows negative results. The turnover expected in the country on the whole is small compared to the annual turnover of large companies operating in countries such as the United States, Germany and Great Britain. Companies entering the East European market do not usually separate the Baltic States into three different countries and therefore appoint their agents or create subsidiaries to be responsible for all three Baltic States or, according to their internal territorial responsibilities, control business in the Baltics from Poland or other adjacent countries. This approach has both positive and negative effects. The main negative effects come from the underestimation of the value attached to both direct personal contact and from insufficient direct marketing to each of the three countries. This is very much the case with American companies and their subsidiaries.

Large suppliers that have already won their market share in Lithuania have started to establish local subsidiaries. This approach allows them to effectively manage operations in eastern Europe and at the same time is good for Lithuania in that it provides employment and tax contributions.