Company Profiles: Eastern Europe Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Because of their location and size, and also the history of the region, Germany and Russia have tended to dominate the countries of eastern Europe, and although there have, obviously, been traders since ancient times, the first evidence of named trading companies comes from the medieval period with the establishment of the Hanseatic League. This was a series of arrangements in ports in the Baltic Sea that helped the traders there to establish a system of trading and credits, and also helped a number of ports establish a trade monopoly. By this time many of the major cities in eastern Europe and all the ports of the Hanseatic League had a system whereby city guilds controlled trades within their region in order to—as they argued—keep up the quality and also prevent competition.

The Early Modern Period

In the early modern period, German trading companies came to dominate many of the ports of the Baltic Sea—indeed, significant German populations started moving to Danzig, Memel, Riga, and Talinn, and also to other cities such as Warsaw and Vilnius. Most of these traders were involved in buying and selling agricultural produce or small manufactured items. Farther south, German companies started to become involved in mining for coal in Silesia. The emergence of the Russian state under Ivan the Great (reigned 1462–1505) and then Ivan the Terrible (reigned 1547–84) also led to some German and Turkish trading companies being involved there.

In 1555 some English capitalists recognized the economic potential of Russia and founded the Muscovy Trading Company (or Muscovy Company), the first major English joint-stock company ever established. It had a monopoly on trade until 1698 and actually continued business operations until 1917, operating as a charity since then. Other countries also started to trade with the Russians, but the isolation of Moscow at the time largely prevented this. Indeed, in Russia, although there were small traders, because the society remained largely feudal until the early modern period, the major construction projects were undertaken by the government. This could be seen by the projects undertaken by Peter the Great, who attempted to modernize the country with the building of St. Petersburg as the new Russian capital. Catherine the Great continued the idea of government initiatives in major engineering projects.

A major problem with the establishment of business in eastern Europe in late medieval and early modern times was the issue of law and order—there often being little exercise of central control except in times of war, when conscription was enforced.

There was one brief respite during the reign of the Romanian medieval ruler Vlad III “the Impaler” (1431–76), who imposed such harsh punishments on malefactors that he terrorized a previously lawless people, and traders soon found that they could operate from his country easily.

At the start of the 18th century, eastern Europe was dominated by Poland, a declining power; Russia; Prussia; Austria; and also Turkey, which dominated the Balkans. There was little industry in much of eastern Europe, but the coal mines and iron ore in Silesia were already attracting the attention of the Prussians who invaded in 1740, sparking the War of Austrian Succession. When the Swedish industrial agent and spy Reinhold Rücker Angerstein (1718–60) went to Bohemia, Carinthia, and Hungary in the early 1750s, he did not find much industrial development in these areas. During the Seven Years’ War the Austrians tried to retake Silesia but failed. During the 1770s and 1780s, with Russia keen to develop its industrial potential, Catherine the Great encouraged German artisans to relocate to southern Russia. All these projects were still government funded.

Industrialization

Only gradually did private capital start to help with the development of businesses. These tended to be located in cities, with the emergence, in Russia, of companies in St. Petersburg, Moscow, Riga, Warsaw, Odessa, Kiev, and other places such as Minsk and Smolensk. In Riga and Warsaw, many of these businesses were run by Germans, who also dominated commerce in most of the Baltic Sea. By law, Russian companies needed Russian citizens as directors, but they were allowed some foreign directors provided they did not form a majority on any board of management. During the 19th century, as Russia suddenly embarked on a program of industrialization, joint stock companies were formed and raised money from investors from western Europe, particularly Britain and France. There was also a stock market in St. Petersburg and one in Moscow, both of which raised money for businesses in the Russian Empire. Stock markets were also located in several other Russian towns dealing with locally based companies.

At the same time that Russia was undergoing a program of industrialization, many of the countries in the Balkans were gaining their independence. At the start of the War of Independence from 1821 to 1829, Greece declared itself an independent country, albeit with the British still controlling the Ionian islands (Corfu, Zante, Santa Maura, Ithaca, and Kefalonia), where they operated a number of trading firms. There the companies were registered under British rules until 1862, when the islands were handed over to Greece. Unlike the rest of eastern Europe, Greece operated a capitalist economy throughout the 20th century and were particularly prominent in shipping with magnates such as Stavros Niarchos (1909–96), known as “The Golden Greek” for his manufacture of the first supertankers, and Aristotle Onassis (1906–75) becoming well known for their wealth and power.

Romania, as Wallachia and Moldavia, gained its independence in 1859 and became officially recognized in 1878. It sought to develop its industry by forming a number of companies, including several involved in plans to exploit the oil fields of Ploesti. The oil fields were privately owned until the end of World War II, and their success encouraged the establishment of other companies throughout Romania involved in coal and iron ore. In 1867 Serbia gained its independence from Turkey, and also started developing its business laws to allow the establishment of private companies. Serbia lacked the mineral resources of Romania, but some companies from Germany, Greece, and Russia did establish offices in Belgrade, Serbia’s capital. Bulgaria, which became independent in 1878, faced similar problems, but managed to garner some investment from French and British businessmen. Albania, which became independent in 1912, largely on account of its geographical position attracted a number of Italian companies, especially in the port of Durrës.

World Wars I and II

World War I transformed the boundaries of many of the countries in eastern Europe. Yugoslavia was created, incorporating Serbia and (from the Austro-Hungarian Empire) Croatia, Slovenia, and Bosnia-Herzegovina. Also created during this time was Czechoslovakia, which had much heavy industry, especially in the western part of the country. Skoda had been established in 1895 as Laurin & Klement, and by 1924 it had become the biggest single industrial enterprise in the whole of Czechoslovakia, with Bata shoes having been established a year earlier. There was also a flourishing of Polish commerce.

The creation of Lithuania, Latvia, and Estonia as independent countries after the war led to the establishment and flourishing of many locally owned and also German-owned companies. Latvia in particular, through its enterprise, and also Estonia through the entrepreneurship of its people, were economic success stories for much of the inter-war period. However, for Russia, the takeover by the communists in November 1917 led to the nationalization of all foreign-owned businesses in the country, and the takeover of the vast majority of locally-owned businesses. Many of these were turned into state corporations, remaining as such until 1990.

In World War II, the Germans occupied much of eastern Europe and many businesses were taken over for the German war effort. In particular, the Germans were eager to control the area they called the Upper Silesia Industrial Region. The Skoda Works was renamed the Hermann Goering Works, and many other companies and factories were similarly renamed. The end of the war, however, saw a total transformation of the region as eastern Europe, with the exception of Greece, ended up in the hands of the Soviet Union and its allies.

Under communist and pro-communist governments, all major businesses were quickly nationalized, and gradually the governments in these countries took control of all business life. The most extreme control took place in Albania. Communist government control of eastern Europe lasted until 1989. By that time the economic lives of the countries in eastern Europe were controlled by state corporations that operated at differing levels of efficiency. Through membership of COMECON, with the exception of Romania, the countries were heavily reliant on Soviet oil.

The Fall of Communism

The end of communism in Europe from 1989 led to the establishment of many private companies throughout eastern Europe. Some of these were created by local people who were eager to take advantage of the capitalist society that was forming. Some other companies were formed by expatriates from eastern Europe who returned to help establish a business in their former homeland. Foreign companies also established offices in the capitals and major towns of eastern Europe.

The main problem was the fate of the former communist state corporations, many of which were privatized. Some concerns were sold outright to multinationals, but many more were bought by local Russians and citizens. The way in which some private individuals managed to get control of these large companies immediately attracted much attention as a small group from the Soviet bureaucracy became wealthy. However, by the mid-1980s, the Soviet Union under Mikhail Gorbachev was keen to gain a foothold in worldwide commerce and Gorbachev agreed to pay back the owners of pre-1917 Russian government bonds and holders of stock of companies that were nationalized without compensation by the communist government. Many of these bond and stock certificates were held by collectors rather than the original investors; so few people handed them back that those who did received a large payout.

In Russia, after the end of communism, the period of the 1990s witnessed the rise of very rich businessmen known as the “oligarchs.” Some, like Boris Berezovsky, remain extremely crucial not because of the money they made but often because of their involvement in politics. Berezovsky had risen to power under Boris Yeltsin, and in January 1995, he managed to establish ORT, the largest national television channel in Russia, and also large oil concerns that he had bought during the Boris Yelstin presidency for much less than their market values. Berezovsky fled to England, where he has lived ever since. Although much has been made of oligarchs like Berezovsky, some of the men who made fortunes in the privatization process and the period that followed entered Russian politics and have become influential through their business connections. The chess player Kirsan Ilyumzhinov, now president of the Republic of Kalmykia, a part of the Russian Federation, is continuing to use his fortune to promote chess in southern Russia and overseas.

For Russia there were also problems over the state-owned operations in the former constituent parts of the Soviet Union. Most of these were handed over to the newly independent Belarus, Ukraine, Moldova, Lithuania, Latvia, and Estonia, which then embarked on privatization schemes of their own. In most of the other countries in eastern Europe, free enterprise and capitalism has been openly endorsed and the economy of the Czech Republic is little different from many of the countries of western Europe. By contrast, many Albanians were involved in putting their savings into “pyramid” savings schemes in 1996, and many people continue to view capitalism with suspicion.

Some of the stock exchanges that had operated in eastern Europe from before communism were reopened. The Bucharest Exchange had originally been opened on December 1, 1882, but was closed in 1945. It was reopened on April 21, 1995, as the Bursa de Valori Bucureşti (Bucharest Stock Market). Similarly, the Belgrade Stock Exchange had been founded in 1894, and had remained in operation—except during World War I—as the main method of raising capital, although it was closed down in 1953 by Josip Broz Tito, the leader of the country at that time. It was reopened in 1989 as the Yugoslav Capital Market, and there were also stock markets in other parts of the former Yugoslavia: the Zagreb Stock Exchange, in Croatia; the Ljubljana Stock Exchange in Slovenia; the Macedonian Stock Exchange; the Montenegro Stock Exchange, and the NEX Stock Exchange, also in Montenegro. In spite of the war in many parts of the former Yugoslavia, a stock market was created in Bosnia’s capital Sarajevo in 2001 (and commenced trading on April 12, 2002); and in Banja Luka, also from 2001.

In the former Baltic States, the Tallinn Stock Exchange (Estonia), the Riga Stock Exchange (Latvia), and the Vilnius Stock Exchange (Lithuania) are all owned and run by OMX, which also operates the Stockholm Stock Exchange. The Georgian Stock Exchange was opened in 1999 to help provide methods of raising capital to help businesses expand; the Armenian Stock Exchange started operations as early as 2001, although it was officially founded in 2007; and the Baku Stock Exchange in Azerbaijan was established in 2001.

Bibliography:

Frank Bönker, The Political Economy of Fiscal Reform in Central-Eastern Europe: Hungary, Poland, and the Czech Republic from 1989 to EU Accession (Edward Elgar, 2006);
Robert Deutsch, The Agriculture Revolution in the Soviet Union and Eastern Europe (Westview Press, 1986);
Eastern Europe and the Commonwealth of Independent States 1992 (Europa Publications, 1992);
Eastern Europe and the Commonwealth of Independent States 1999 (Europa Publications, 1999);
Paul Robert Magocsi, Historical Atlas of Central Europe: From the Early Fifth Century to the Present (Thames & Hudson, 2002);
Frank Schimmelfennig and Ulrich Sedelmeier, eds., The Europeanization of Central and Eastern Europe (Cornell University Press, 2005);
David J. Smith and Chris Tapster, Major Companies of Central and Eastern Europe and the Commonwealth of Independent States, 2008 (Gale-Cengage/Graham & Whiteside Ltd., 2007).

This example Company Profiles: Eastern Europe Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.