How to Do Business in The Czech Republic
March 22, 2018
Since officially forming as a nation in 1993, the Czech Republic has emerged as a European economic powerhouse. In fact, it’s averaged faster economic growth than any other EU country since joining the European Union in 2004. A large part of that is due to their global trade.
The US-EU trade relationship has long been healthy and lucrative, and has made trading with EU member nations such as the Czech Republic easier, and cost-effective. Czech-US trade isn’t massive, but the Czech Republic does enjoy a trade surplus with the US, which entices the nation to export more frequently.
The US and the Czech Republic have had a decades long, prosperous political and economic relationship. Being part of the EU, the Republic enjoys the bilateral trade relationship between the US and the Union
The Czech Republic was named the world’s best country for cross-border trade, and one of the easiest to do business in. With a large network of companies and businesses, opportunity is everywhere. If you’re a small business leader looking to go international, this small EU country might be for you.
When you think of great places to find international suppliers, you may not think of Eastern Europe. The large amount of countries can be difficult to navigate, and political situations can scare away business owners going global for the first time.
But, at least one country has thrived in the past couple of decades in Eastern Europe, and has actually become one of the world’s most promising business destinations.
The Czech Republic, formerly a part of Czechoslovakia, has revealed itself to be a global economic power with one of the highest standards of living in the world.
Since joining the European Union in 2004, the Czech Republic has steadily improved economically to become the most stable and prosperous post-communist state. It has also seen a GDP growth of 2% on average since then, above average for the entirety of the EU.
On top of that, according to the World Bank, the country is ranked number one for ease of cross-border trading in the world for 2018. So, for international businesses, the Republic is a great place to find suppliers. But, what about the US specifically?
The Czech Republic was named the world’s best country for cross-border trade, and one of the easiest to do business in.
Well, the US and the Czech Republic have had a decades long, prosperous political and economic relationship. Being part of the EU, the Republic enjoys the bilateral trade relationship between the US and the Union, and the benefits that this offers to businesses expanding to Europe.
In all, the Czech Republic has many great opportunities for US businesses to find suppliers. If you’re looking to invest in Eastern Europe, look no further than Czechia. Yes, that’s the shortened version. Again, who knew?
Introduction to the Czech Republic
Often called “the city of a hundred spires” for its large number of churches and palaces, Prague is Czechia’s capital and largest city.
Prague is considered a Beta + global city, as it contributes largely to the global economy. The city represents 25% of the country’s GDP, and is its highest performing regional economy.
The city has seen a major shift from industry to a service-centered economy, a sector that employs nearly one fifth of Czechia’s workforce. Largely focused on this and exports, Prague is often ranked near the top for Central and Eastern Europe’s best cities to do business. It held the title in 2010.
For international businesses, Prague is a need-to-visit destination. Opportunities for finding suppliers are vast, and many other domestic and international companies are headquartered there. If you’re doing business in Czechia, you’ll have to go through Prague.
Geographically, economically, and logistically, Ostrava is a prime location for international businesses to trade, find suppliers, and generally invest their time.
Formerly known as Czechia’s “steel heart” for its focus on resource extraction and industry, Ostrava has largely moved away from this area, and has restructured itself toward trade. Exports are the focus, as Ostrava’s proximity to Polish and Slovak markets greatly diversifies its own.
Ostrava is well known as a key logistics center for trade, and has one of the country’s best strategies for foreign direct investment. This should be music to the ears of international businesses everywhere.
Czechia’s official currency is the Czech koruna (CZK), often called the “crown” by English speakers.
Though a member of the European Union, the Czech Republic has yet to adopt the euro. Legally obligated to do so as of 2005, the Czech government deferred the decision indefinitely in 2009.
The reasons for this decision are varied, but what you need to know is that this is great for international businesses.
One CZK is worth 0.047USD, meaning that every US dollar is worth around 21 koruna. This is a very favorable exchange rate for US businesses looking for suppliers in the Czech Republic.
Goods can be found at much cheaper rates, and using local currency for anything from travel expenses to knick-knacks will save you money.
The only official language of the Czech Republic is Czech, formerly called “bohemian,” interestingly.
Czech is spoken by 96% of the population, with the rest speaking German and Russian. But, the latter two are generally spoken by older generations.
Slovak and Czech share a high level of intelligibility, meaning that speakers can understand each others’ language fairly well. If you’re looking into the Slovakian market, your Czech partners can be of great help in translation.
English is fairly prominent in large cities, but dwindles the more rural you go. You’ll probably need a translating app to understand signs and directions. But, for more formal meetings, a translator is recommended.
Make sure to ask your supplier which language they prefer, though. They may just give their English a shot.
Holidays and Traditions
Despite being considered the world’s most non-religious country, Czechia still celebrates most Christian holidays. The rest are generally focused on Czech state independence, which is recognized across the country and officially by the government.
|Restoration Day of The Independent Czech State, New Year’s Day||January 1||Nationwide|
|Good Friday||Friday before Easter Sunday||Nationwide|
|Easter Monday||Monday after Easter Sunday||Nationwide|
|Labor Day||May 1||Nationwide|
|Liberation Day||May 8||Nationwide|
|Saints Cyril and Methodius Day||July 5||Nationwide|
|Jan Hus Day||July 6||Nationwide|
|St. Wenceslas Day, Czech Statehood Day||September 28||Nationwide|
|Independent Czechoslovak State Day||October 28||Nationwide|
|Struggle for Freedom and Democracy Day||November 17||Nationwide|
|Christmas Eve||December 24||Nationwide|
|Christmas Day||December 25||Nationwide|
|St. Stephen’s Day||December 26||Nationwide|
Communication From the US
To contact your Czech suppliers by phone, you’ll have to use the US exit code (011), and enter the Czech phone code (+420). Once you’ve done that, simply dial the rest of the phone number as you normally would.
Internet service is great in Czechia, and sending emails to arrange meetings shouldn’t be a problem.
Finding a Supplier
Language barriers and an unfamiliar market can make finding a supplier in Czechia difficult and time consuming. To help international businesses succeed, the Czech government has set up government agencies geared to this specific task.
CzechTrade is a promotion agency run and regulated by the Czech government. The main objective of the agency is to connect Czech businesses with foreign partners. CzechTrade does this by offering training programs, practical assistance to foreign buyers, and provides other incentives.
The agency also helps international businesses find Czech business partners and suppliers. A team of specialists is tasked to help your company find a new Czech-based supplier for goods and/or services. All you have to do is submit a form and the team will assess your needs and specifications.
This program is unique to the Czech Republic, and makes trade with the country even easier.
Traveling to the Czech Republic
A valid US passport will get you into Czechia. It must have 2 blank pages, and be valid 3 months after your trip has been scheduled. US citizens are also exempt from visa requirements if they’re visiting the country for less than 90 days and don’t wish to travel to other EU countries.
Visas and Permits
If you’d like to see the sights or meet a supplier in another country, you don’t need any sort of visa. The Schengen agreement has allowed visitors to travel to any country in the Schengen area, meaning that they can cross borders without further documentation.
This is great for international businesses looking to find suppliers in other Eastern European EU countries, especially such connected markets as Czech and Germany, Poland, and Slovakia.
Using a Cell Phone
Cell phone frequencies in Europe are different than in the US. While you can bring your phone and insert a European SIM, the frequency that your cellphone is set to may make your calls drop.
The best way to stay connected in Europe is to buy a cheap, unlocked GSM cell phone, and insert a SIM from the city or country that you’re visiting. These can be found at major airports, and at any near convenience store.
Vodafone is the biggest, most popular SIM provider in Europe, and O2 is the most popular in Czechia. Prices range from $10USD to $25USD, depending on the plan and amount of data included.
Public wifi is easily accessed at coffee shops, hotels, and other sit down, restaurant and café-style locations. It’s the same as other technologically-developed nations.
In fact, the Czech Republic is often ranked in the top 10 for fastest internet speeds in the world. So, often public wifi is better than your internet at home.
Some cities are even introducing programs to expand public wifi to increase tourism. Smart Prague is one such project, which is an initiative to introduce fast, reliable public wifi to high-volume tourist areas like zoos and botanical gardens.
But, to make sure you’re always connected, get at least a bit of data for your SIM’s plan.
Exhibiting or attending trade shows are often considered the best way to find suppliers and network internationally. But, cultural differences and language barriers can make these meetings intimidating. Here are a few trade show tips for Czechia.
- Don’t Expect a Smile: Smiling is common when trying to get someone’s attention or to portray friendly demeanour. Czechs aren’t big on smiling back, and can often come off as cold or not friendly. This isn’t the case. Keep smiling, but don’t be upset if it isn’t reciprocated.
- Make a Lasting Impression: Czechia’s small size means suppliers talk. Word-of-mouth reputation is vital to succeeding in the Republic, and news spreads quickly. Don’t be forgotten.
- But, Don’t Be Forward: Czechs are more reserved than many European peoples, and can be easily turned off by forwardness and overconfidence. Be modest while trying to make yourself known. But, Czechs are forgiving and friendly people. Don’t worry too much.
|For Décor and Home||Prague||Twice Yearly||Decoration, Furniture, Design|
|Boat Expo||Prague||Every Two Years||Boating, Watersports|
|Drevostavby||Prague||Once Yearly||Wooden Building, Construction|
|Modern Vytapeni||Prague||Once Yearly||Heating, Air Conditioning, HVAC|
|For Fishing||Prague||Once Yearly||Fishing Equipment, Accessories|
|STYL||Prague||Twice Yearly||Fashion, Style, Design|
Though accommodating and forgiving, lucrative business relationships in the Czech Republic start with your own accommodation of their culture. But, don’t make assumptions.
It’s easy to assume that Czech business culture is similar, if not the same as, other Eastern European countries. The languages are similar, history is similar, and short geographical distances can easily fool the unknowing traveler.
Czech business has its own quirks, and knowing them shows both respect and genuine interest in your supplier’s culture. Once again, knowing these things can make a business deal, but not knowing them probably won’t break one.
To get the best possible outcome from your Czech business encounter, knowledge is power.
The Same or Better
Czech business culture is hierarchy and ranking based. Decisions are made by executives, and lower-level employees rarely question them. This structure applies to business meetings as well, and to get anywhere in negotiations or otherwise, you’ll have to follow suit.
Decisions are made by executives, and lower-level employees rarely question them. This structure applies to business meetings as well, and to get anywhere in negotiations or otherwise, you’ll have to follow suit
Suppliers in Czechia are mutually respectful, but can be standoffish when it comes to ranks, intellect, status, and expertise. If you’re sending a lower-level associate to a meeting with a Czech executive, it could be viewed as disrespectful.
In fact, if you happen to be of lower rank or status in your company, the Czech supplier can be quite unresponsive. However, if you can prove yourself with individual skill, knowledge, and expertise, this always overrides status and rank.
One of the best reasons to find suppliers in Czechia is for networking. The country’s small size means word gets around, and making a great first impression will get your name in on conversations with more and more business people.
If you can land an inside connection before arriving, you’ll meld easily into Czech business culture. If not, making these connections early on will ensure long, lucrative relationships, and tons of opportunity.
But, there’s always a downside. If your meeting doesn’t go well or a deal can’t be reached, that’ll get out too. Other suppliers will talk, and you’ll have to try even harder to enter the Czechian market. This is why knowing the culture is so utterly important.
With all of this formality, Czechs can be misunderstood as very formal and stuck-up. While that may be true for some, the younger generation of Czechian suppliers are opening up to new ideas and practices.
You may be invited out for a business lunch, dinner, or even go to someone’s home to conduct a meeting. These meals have their own etiquette protocols and formalities, but these don’t differ much from other formal dining in France or Spain.
Generally, the formalities are beginning to taper off. The business generation is getting younger, and the relaxed protocol reflects that. Just do one thing: don’t be late. Whatever you do, don’t be late.
As with all meeting practices, it’s best to keep it formal in Czech business communication. It’s probably true of most places, but Czechs aren’t too fond of vulgarity, and prefer an attentive and respectful business partner. So, though the culture is becoming laxer, read the room. If everyone’s being formal, follow suit. Don’t get adventurous, especially on your first try.
But, there are some particulars that will improve the relationship, and help land a deal with your potential supplier.
For example, regular eye contact is crucial. Though your Czech supplier may not maintain it consistently, you need to be aware of how often you avert your eyes. Czechs are known for their indirect communication style, but that shouldn’t be read as inattentiveness or disinterest.
Small talk isn’t huge in Czech business, either. Your supplier will want to get to know you, but generally only for the purpose of legitimizing you as a business partner. Schooling, company ranking, experience, and other topics that prove you’re a good fit are usual topics before business begins.
Make sure not to get too personal. Finances, your personal life, and related topics should be left alone.
Business Etiquette: Do’s and Don’ts
If this guide’s been a bit long for you and you just want to get to the point, here are a few quick etiquette tips. Though they aren’t very in depth, these will get you by in a Czech meeting.
- Keep it Formal: Besides being generally polite and “proper,” there are a few things to keep in mind. Don’t take your jacket off until the most senior business person does. Don’t sit down until they do. These are the major things to watch for.
- Hold Off: Often, the first meeting in Czechia is just to get to know you. It’ll probably be with a middle manager. Don’t show all of your cards. Try to figure out the rank of the person you’re meeting with, and wait to negotiate with an executive.
- Be Early: Punctuality is vital in Czech business. It’s related to formality, and shows a genuine interest in the meeting and making a good impression. If you can, be as early as possible for a meeting.
- Wait for the Host: Generally, the host will begin and end the meeting. Whether with an invitation to begin business talks, or an invitation to end them, let the host speak before you do. Don’t seem too eager to begin, or to leave.
- Leave the Past Behind: This might be obvious, but the former Czechoslovakia can still be a touchy subject in both independent countries. Whatever you know or think you know about it, keep it to yourself.
- Read the Room: If your Czech supplier acts formally, do so. If they seem more relaxed, follow suit. The generational gap in Czech business can be large, and past styles are embraced or done away with depending on the demographic. Be flexible.
Now, it’s time to get down to it. You’ve got the style down, and you know your stuff. Negotiations are at the heart of business, and shouldn’t be taken lightly. Here’s what you need to know for nailing them in Czechia.
Don’t Push It
Czech suppliers have an indirect communication style. They don’t like confrontation, and avoid saying “no” at all costs. Instead, Czechs prefer to say things like “perhaps” or “that may be difficult.” This can be confusing, but it’s best to take these kinds of responses to mean “no.”
Czech suppliers have an indirect communication style. They don’t like confrontation, and avoid saying “no” at all costs
So, because “no” isn’t preferred, avoid putting your potential supplier in a position to say it. Don’t be too pushy, and don’t use pressure tactics that force this kind of response. For example, “highballing” and “lowballing” require a refusal and later agreement on a deal. This doesn’t work in Czechian business.
Czech suppliers respect intellect, expertise, and knowledge. They don’t much care for flattery or decorative tactics, but want to know the facts, and how the deal affects their bottom line. Details are important, but only if they’re related to the negotiation and its outcome.
So, be prepared. Do your research, bring physical tangible proof of your results. Visual aids are good too. Charts, graphs, whitepapers, anything that can be considered concrete evidence that your company is a good fit for the supplier. It may seem odd to have to sell yourself so hard, but it’ll prove worth it in the long run.
Wait it Out
The top-down, hierarchical business structure of the Czech Republic can really bog-down a negotiation. It’s ranked, and decisions are made exclusively by higher ups. In fact, first meetings may not even be with executives. Middle managers generally run these, so you may not want to open with big offers.
So, bottom line is you’ll have to be a bit patient. Rushing negotiations can break a deal, and can even be impossible to bypass. You can’t expect to tear down the company structure. As your relationship develops, these waiting periods will taper off. But, for the time being, sit back, and don’t lose your cool.
This is also a consequence of Czech communication styles, and an unwillingness to say no. While you may be used to haggling or lowballing, as we’ve said, it’s best to avoid it in Czech business. But, what you might not know is that you probably won’t even get a counter offer, and you might have to do it yourself.
Anything that they’ll offer is what they’re willing to pay. They don’t have a plan B. This is vital to consider when negotiating
Czech suppliers often expect to get counter offers, and don’t give them. So, anything that they’ll offer is what they’re willing to pay. They don’t have a plan B. This is vital to consider when negotiating. You can submit an offer, but don’t expect the Czechs to respond. You may want to wait for their initial offer, and work from there to avoid confusion or insulting your supplier.
Regulations and Permits
As part of the European Union, the Czech Republic enjoys ease of trade with the other 27 EU nations. The member nations have largely reduced tariffs, duties, and documents required for imports and exports under the Single Europe Act.
Since its inception, the US has had a great bilateral trade relationship with the EU.
For US businesses looking to import goods from Czechia, all you need to worry about is US import documentation and duties.
However, knowing Czech exporting regulations is still beneficial, and knowing them can get you out of a bind if your supplier is unsure.
To export from Czechia, you’ll need two copies of a commercial invoice, one bill of lading, and three copies of a certificate of origin. In some cases, you may need a Single Administrative Document (SAD) to describe the goods being exported, but this will depend. It’s good to have just in case.
After that, all you’ll need to do is conform to US import requirements with customs.
The Czech Republic is often lauded as having one of the highest standards of living in the world. Conducting business is fairly easy, and it’s beautiful on top of that.
But, like any other country, it has its flaws.
Unfortunately, the Czech Republic has long struggled with bribery and corruption in government, public, and private sectors. Corruption is considered to be fairly prominent, and ranked 47 out of 176 countries according to Transparency International.
In fact, international business executives say that corruption is the most problematic factor in doing business in Czechia. Bribery is generally the most common form of business corruption in the country.
There isn’t much international businesses can do but wait. Wait and see how your negotiations go, and what happens. Obviously, if you encounter this situation, you’ll need to react in compliance with Czech and US law.
But, you probably won’t have to. The Czech government has implemented plans and programs to reduce corruption levels. Transparency International, mentioned earlier, does great things to research corruption in the country, and tabled legislation looks to resolve the issue.
Sending money internationally can be a hassle. You don’t know where your money is, you get tacked with fees, and in countries like Czechia, the receiving bank can even give you issues.
While it has rebounded in the past year, the Czech banking system is known for having high interest rates. However, the banks have recently done away with a policy that purposely kept the CZK from strengthening beyond 27 euros.
The CZK has continued to plummet in 2017, and doesn’t show major signs of recovery
While this might seem like a bad thing for those looking to take advantage of foreign exchange rates, the change hasn’t had much effect. The CZK has continued to plummet in 2017, and doesn’t show major signs of recovery.
So, to get everything you can out of international business in Czechia, you’ll need to send payments. But, as we said, fees are high, payments get lost, and banks just aren’t the secure places we thought they were.
Veem will ease your mind.
With Veem, you can send international payments quickly, securely, and for much less than what the major banks are charging you.
Veem uses innovative multi-rail technology to find the perfect route for your money to take to its destination. Payments are between you and your supplier, and it should stay that way.