I believe that was better for R. R. Donnelley to locate of a corporate subsidiary in Poland for several reasons:
Poland had a GDP 20 plus times bigger that Hungary and a population almost 4 times bigger than Hungary. Despite the unemployment and the inflation that remained serious problems, the private sector boomed, growing from approximately 20% of GDP in the late-1980s to an expected 55% by the mid-1990s. The country had a large literate population and many citizens were voracious readers - the average urban resident read two daily newspapers with a great opportunity to grow with the country economic stabilization.
The Donnelley investment in Poland were US $ 6.68 million, after a nine month ramp-up, a two-press operation would have estimated annual sales of US $ 8.3 million and operating profits of US $ 2.5 million.
In Hungary the proposed investment for Donnelley was just under US $ 37 million for 49% of the AMGH business.
Financial projections assumed that, as difficulties were eliminated, operating cash flow from existing Hungarian operations would increase to US $ 7.0 million. Operating margins for all three businesses were forecast at 15% - well below Western European rates of 20% for commercial printing.
The investment in Poland is smaller in a market that most of the printing jobs are sent out or made in low quality local industry. Donnelly have a better chance to have a bucketful start up in Poland comparing with Hungary where the market is more mature and is a lot competition between a more advanced printing industry.
RR Donnelley Core Business
Donnelley's core business had long been manage, reproduced, and distributed print and digital information for a wide variety of commercial clients. Most commercial clients focused on publishing and looked to Donnelley to be...