Austrian Business Knows No Bounds

Engines in India, cable cars in La Paz, logistics on the Silk Road – Austrian technology and exports are at an all-time high.

by Bernd Vasari & Benjamin Wolf

The old station building in the Estación Central is still standing, but the tracks have already been torn up and the trains relocated. A single car tells the story of this station in Bolivia’s capital of La Paz, where travelers, laden with luggage, travel the country. Today, two cable car lines in operation connect the valley with towns in the hills, over 4,000 meters above sea level, over bridges some 1,000 vertical meters above the valleys below.            

The population of the city has doubled in size in recent years, as more and more people commute from the hills into the city and back. The existing infrastructure of minibuses and private cars was quickly overtaxed. Traffic collapsed, as in La Paz, a thick cloud of smog settled over the streets. Something had to be done. 

The decision: A massive expansion of public transport. First the bus network, and then cable cars. Now, just a half a dozen years later, there are eight cable car lines. 

The first line, the Linea Roja, opened five years ago, holds up to ten people per gondola. Less than a month later, the millionth visitor had passed the gate – some 36,000 trips a day. Four months later, the second, Linea Amarilla, opened, and at the end of the year, the third line went into operation. Today, the nine cable car lines in La Paz carry a million passengers a month. Meanwhile, Mi Teleférico has become the largest urban cable car network in the world – all built by the Austrian company Doppelmayr. For decades, the company has been promoting itself internationally, says marketing chief Julia Schwärzler, with agencies and branches in over 40 countries.

Today, “Doppelmayr cable cars can be found in 95 countries.” With a market share of 60%, the Vorarlberg-based company is the industry’s world market leader. With a turnover of €846 million in 2017/18, Doppelmayr employs nearly 3,000 people worldwide and is headquartered in Wolfurt, Vorarlberg.

Mi Teleférico is a cable car urban transit system connecting La Paz and El Alto in Bolivia. A total of 27 stations and 8 lines on a network length of 28 kilometers can carry up to 28,000 passengers an hour, with cars departing every 12 seconds. It’s open 17 hours a day. (photo credit: DOPPELMAYR SEILBAHNEN GMBH.)

On Strong Foundations

The history of the company goes back more than 100 years, to 1893, when Konrad Doppelmayr bought the forge of his Meister Josef Dür in Wolfurt. There, he made tools and repaired machines, specializing in food slicers, hatchets and pickaxes. A few years later, he added wine presses. After World War I, the company built the first ski lift in Austria, in Zürs.

In 2002 Doppelmayr merged with the cable car manufacturer Garaventa. Since then, plans have been developed in Wolfurt and in the Swiss town Goldau. Doppelmayr Wolfurt is the worldwide center of expertise for aerial-rope systems such as gondolas and chair lifts, Garaventa Goldau for pendulum and funicular railways.

It’s no particular advantage that Doppelmayr comes from Austria, says Schwärzler. It’s not the country, so much, “but that you are close to the customer, able to react quickly and are in direct dialogue with the customers.” And for that, Austria is ideal: Their main market is still the Alpine region with France, Switzerland, Italy, Germany and Austria. Local branches also matter. “Our commercial agents are well networked – they know the markets, of course speak the languages and are familiar with the country-specific features.”

In addition to the Alpine region and South America, the company is also active in Asia, where cable cars are very popular, crossing bodies of water, carrying visitors to temple mountains, connecting islands. However, the strongest market for Doppelmayr is still winter tourism. Currently, the company is working on orders for the Olympic Games in Beijing in 2022. With orders for Olympic Games, there is already experience. The company built 40 installations for the Winter Games five years ago in Sochi, Russia.

The turbines manufactured by Elin Motoren in Styria power energy plants all around the world. (c) ELIN MOTOREN GMBH

Go Global

Today, Austria’s exports are in demand worldwide, exceeding €150 billion for the first time, in 2018 – with an export quota of 54%. Even more impressive, though, is the growth trend of Austrian trade. Exports in 2018 increased by 6% on the year before and doubled since the year 2000. This makes the Alpine Republic with its 8.7 million people the 30th biggest export economy in the world, ahead of countries like Turkey, Norway, Iran, South Africa or Argentina.

Austria’s accession to the European Union in 1995 has played an important role in this, opening up a wider home market that has become both the manufacturing and exporting base for Austrian businesses.

But Austria’s exports don’t just stand out in volume and value – the country also ranks high (10th) globally when it comes to the complexity of what it sells, reflected in the vast array of different sectors involved and products that are exported. Still, this is a decline in ranking since 2014, as digital leaders like Singapore, Finland, the US and Czechia, (closely tied to the German export machine) have forged ahead.

And this, perhaps, points both to the opportunities and the pitfalls for Austrian businesses in the age of globalization and rapid innovation.

“Digitalization is disruptive in a number of ways,” says Roland S. Sommer, managing director of the Austrian platform Industrie 4.0. Founded jointly in 2015 by the Transport Ministry, three employer organizations and two employee organizations, the platform connects business, research and the public sector. “The big challenge is that digitalization not only affects manufacturing processes, it also fundamentally changes business models down to customer interaction,” explains Sommer. “That’s highly relevant, both for big companies and for our many world-leading small-and medium-sized businesses.”

Increasingly, products are being upgraded with services, while industrial know-how is used to enhance the customer experience or processes in complex organizations. Austrian companies like Doppelmayr lead in highly specialized niches and shine with often unmatched engineering prowess and a commitment to high quality and innovation. Yet, as the convulsions of the auto industry in Germany following the diesel emissions scandal have shown, focusing on an established and sophisticated technology because engineers (and managers) think it’s the best, can be dangerous – especially if consumers want to move on.

“At the end of the day,” says Sommer, “it is a competition for the best ideas.” Convincing the world that Austria’s got them will need more creativity than just having the best product – and it demands looking further afield.

ECONOMIC COMPLEXITY IN AUSTRIA: We can measure economic complexity by the mix of products that countries are able to make. Some products, like medical imaging devices or jet engines, embed large amounts of knowledge and are the results of very large networks of people and organizations, seen as clusters below. (image credit: KARIN DREHER / KARIN-GRAFIKDESIGN.COM; SOURCE: THE OBSERVATORY OF ECONOMIC COMPLEXITY / ATLAS.MEDIA.MIT.EDU)

How To Grow

Austria’s most important export market is still Europe, with eight out of ten key trading partners on the continent. While many of these products are re-exported to the wider world, growth prospects nearby are limited. Instead, future growth will focus on emerging markets in Asia and Africa.

China in particular is the driving force in Asia. But other countries such as India, Indonesia or Vietnam are also emerging growth regions. That is why the Foreign Trade Division of the Austrian Chamber of Commerce (WKÖ), branded abroad as Advantage Austria, is strengthening its network in Asia.

One of its busiest foreign trade centers is located in Ho Chi Minh City, Vietnam. “Vietnam is an absolute growth market with current exports from Austria worth €250 million,” says Michael Otter, head of foreign trade.

While the total number may still seem modest – Austria exports more to Lithuania, with 2.8 million inhabitants, than to Vietnam, with 96 million – the spectacular growth makes businesses hopeful. While total exports have doubled since 2000, they increased sevenfold to Vietnam, with high-tech machinery and chemicals (including pharmaceuticals) as the leading growth sectors.

With an EU-Vietnam Free Trade Agreement (EVFTA) to be inked and take effect this year, further potential opens up, as Austria’s ambassador in Vietnam, Thomas Schuller- Götzburg, points out. “The Vietnamese government is now intensively upgrading the country’s infrastructure to attract more overseas investors,” Schuller-Götzburg maintains. “The efforts include plans in the sectors of electricity, steel, oil and chemicals, and urban development. Austrian companies in construction, engineering and high-technology could benefit.”

Tapping this potential is the real challenge.

The vast majority of Austria’s 61,000 exporters are small- and medium-sized enterprises. Almost every second job in Austria – over 2 million in total – is directly or indirectly dependent on exports. What these businesses need is not just a top-notch product and an environment that fosters innovation and digitization at home – they also need a helping hand to grow globally.

The WKO and its foreign trade branch Advantage Austria aim to provide exactly this service. Funded by a statutory levy on revenues – each business is mandated by law to be a member – the WKO’s 3,800 employees maintain 74 foreign trade centers to support Austrian companies abroad. They provide market insights and local introductions, organize trade fairs, provide seed funding or even help find a suitable site for a new factory or store.

Since the WKO’s funding at home is ironclad – its status is not just secured by law, but together with the AK, the Chamber for Worker and Employees, a part of Austria’s Constitution – Advantage Austria can offer these services for free for all companies that are interested. That reduces risk for individual small enterprises and encourages bolder forays far from home.

As a result, Austrian direct investment abroad is currently at an all-time high. From 2006 to 2017, it more than doubled (from €80 to €195 billion), with the most popular target countries the Netherlands (€51 billion), Germany (€31 billion), Luxembourg (€13 billion) and Czechia (€12 billion). Investment in Central and Eastern Europe (CEE) alone totaled €60 billion. In Austria, 4.3 million people are employed; abroad, Austrian companies employ one million.

Powering the World

One of the companies taking advantage of both the expanding opportunities in sales and manufacturing around the globe is Graz-based Elin Motoren. Elin produces generators for wind turbines, liquid-cooled three-phase asynchronous motors in the plastics, tunneling and mining sectors, as well as field equipment suppliers – all technologies that support green energy and rapid development. Elin Motoren employs 1,150 people and expects €130 million in sales in 2019.

Founded in 1892, as Weizer Elektrizitätswerke F. Pichler & Co. (and renamed Elin in 1908), the company started out manufacturing generators, energy transformers and electric installations. After a turbulent half century, the company was merged with AEG in 1959, becoming for 30 years Austria’s largest electrical appliance manufacturer – owned and operated by the state.

In the 1990s, the acceleration of globalization and revolutions in technology called into question the wisdom of a state-owned manufacturing behemoth. The Austrian government reacted: Through a series of careful maneuvers, it reorganized and split up what had become the VA Tech AG, a corporation with 17,000 employees and €4 billion revenue, and in stages, took its various parts public.

However, unlike other countries where privatization was then en vogue, the process was gradual and calibrated, with a strong focus on ensuring that the business in question would continue to thrive in private hands. Elin Motoren is today owned by the Austrian private Trasys Group, which has managed to triple revenues and more than double employment globally since 2002, while also expanding its footprint at home.

It is the long years of experience that are so important for Elin success today, says Managing Director Wolfgang Landler. He considers the combination of quality and economic stability the success factors abroad.

“As a country of origin, Austria still represents a veritable USP [unique selling propo-sition] in some market areas,” Landler reports, with what feels like genuine pride. The biggest challenges abroad are often simply in surmounting stifling bureaucracy. Elin has subsidiaries in Central Europe (Hungary aand Bosnia-Herzegovina) and in India. The differences can be stark. In Bosnia-Herze-govina, Landler says, the employees are highly motivated and grateful for a job at an Austrian company – known for paying regularly and on time, in a country where this cannot be taken for granted. India, on the other hand, is less bureaucratic than Austria, says Landler. There, the challenge is finding qualified local employees; Elin usually hires local workers as much as possible and sends in expat professionals for specific tasks.

So, to keep such a global enterprise up and running, the prerequisite has to be a good knowledge of English – and some German. “In India, we speak English; in Bosnia-Herzegovina and Hungary, English and German,” says Landler. From here, the company expects continued growth, with an expected turnover of €250 million in 2025 and target markets in Europe, India and China.

Treasures in the East

China is set to become a key market for Austrian companies. With the gigantic “Silk Road Economic Belt” initiative, the People’s Republic seeks to revive the ancient network of trade routes that connected the East and West. China has announced plans to invest up to $1 trillion in the coming decade to redevelop the land route across the Eurasian plateau, with goods reaching their destination by up to 20 days faster than by sea (albeit with a higher price). The first direct freight train from Beijing arrived in Vienna on April 12, 2018.

Greasing these wheels are the increasingly global logistics firms, one of which is the Austrian company Gebrüder Weiss, headquartered in Lauterach in Vorarlberg. With 7,000 employees in 150 locations worldwide and revenues of €1.55 billion in 2017, the company handles both national and international land transport and international air and sea freight. With the reopening of the trade route, the company hopes to increase its presence, beginning with a new branch network from Eastern Europe through Turkey and Georgia to China. “Gebrüder Weiss wants to connect the Asian and European markets by land, especially by rail,” says Frank Haas, head of corporate brand strategy, while at the same time, consolidating their position in Southeastern Europe and America.

At the cutting edge of modern logistics, Gebrüder Weiss is also one of the oldest companies in the world, going back to the Lindauer Landbote of the 14th century. Back then, the Landbote organized transport missions, including shipping goods, mail and travelers, between Milan and Fussach am Bodensee, an important transit port between the southern German commercial cities and Lombardy. First documented in 1330, the company – that is still family-owned – has a history stretching back more than 500 years, steadily evolving into a global player in the transport and logistics market.

Even the great German poet Johann Wolfgang von Goethe traveled with the company on his return from his first trip to Italy in June  1788, at the cost of 122 gulden, according to his journals. In 1823 the name was changed to Gebrüder Weiss, named after Josef Weiss, with his half-brothers Leonhard and Johann Alois Karl Weiss.

In the 1950s, Gebrüder Weiss opened branches in Innsbruck, Graz and Linz, setting up the first transport and air freight service in Western Europe. The 1980s saw expansion to Switzerland and Germany, around Lake Constance, and the 1990s growth in Central and Eastern Europe, with new branches in Budapest, Prague, Brno, Bratislava, Maribor and Ljubljana. A small Vorarlbergerisch company had become a European player. But it also invested heavily in service and innovation, offering online tracking of shipments for the first time as early as 1998. And that was just the start.

In 2000, Gebrüder Weiss opened subsidiaries in Singapore and Hong Kong, followed by Nanjing, Beijing and Ningbo in China. In 2007, branches in Taiwan and Canada followed and the company embarked at the same time on a €100 million investment offensive in Central Asia, years before the Chinese “Silk Road” initiative. Russia, Kazakhstan, Turkey, Dubai, Iran and the US followed soon, as did an ever-more dense network in Central, Eastern and Southeastern Europe.

In practice, Gebrüder Weiss sets up an affiliate in each new market, hiring local experts, with many in the executive suite. “This way, we are no longer a foreign company, and try to act like a domestic one,” explains Haas. “Considering local practices is very important to us.”

The company has three “corporate” languages: German, English and the respective local language. “All three are equally import-ant,” Haas confirms. Employees abroad communicate in their national language, English comes into play when the deal becomes international. Many of the employees also speak or learn German.

The Austrian transport and logistics company Gebrüder Weiss employs over 7,000 people and is represented at 150 locations worldwide. It expanded rapidly in the last two decades. (photo credit: GEBRÜDER WEISS)

The Right Balance

Fast growth not only brings bureaucratic challenges, but also an occasional ethical conundrum. That is why, as Haas underlines, Gebrüder Weiss has set up a code of conduct. “Each business partner is evaluated by this; in the end, we are a value-oriented family business. If they can’t guarantee our standards, then we turn away from a business relationship.”

For Austrian businesses abroad, then, it seems to be crucial to strike the right balance: Focus on a niche and high-end technical know-how, like Doppelmayr, but without forgetting to cater to the ever-evolving wishes of the customers; build on the strengths of creative and well-educated workers at home, but also digitize business models to be able to compete in the world of industry 4.0; convey businesses over to private hands, but gradually, as the Austrian government did with the VA Tech and Elin; and finally, go boldly abroad and expand, with the support of Advantage Austria’s global network, while, just like Gebrüder Weiss, staying firmly grounded in their corporate values.

“Having our roots in Austria,” says Haas “works well with our foreign partners and customers.” Then with a smile, he adds, “At least, from my experience as a German.” So, inspired by the slogan of the beloved Manner Schnitten, the Neapolitan wafers that have been produced in Vienna with the same reci-pe since 1898 (and teasingly called welt-berühmt in Österreich – world-famous in Austria), Gebrüder Weiss has implemented a small campaign:

Österreich mag man eben,” Haas smiles – “You can’t help liking Austria.”

***

Where Do Austrian Goods Go?

Austria’s main export destinations still lie in Europe, with 76% of traded goods heading there. However, many products also serve as components for international re-export, for example German cars with Austrian components.

ILLUSTRATION: SHUTTERSTOCK, DESPOSITPHOTOS; SOURCE: THE OBSERVATORY OF ECONOMIC COMPLEXITY / ATLAS.MEDIA.MIT.EDU

What Does Austria Export?

Austria’s total export value exceeded €150 billion in 2017, a 8% increase on the year before. The country’s export portfolio is very diverse, with machines (29%), metals (14%), transportation (12%), chemical products (11%) and plastics and rubbers (5.2%) contributing over three quarters of the total.

ILLUSTRATION: SHUTTERSTOCK, DESPOSITPHOTOS; SOURCE: THE OBSERVATORY OF ECONOMIC COMPLEXITY / ATLAS.MEDIA.MIT.EDU

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