Doing business in Slovenia (not Slovakia)

LJUBLJANA, Slovenia — If you’re an American thinking of buying a new mattress, you might check out the website for Dormeo and see a short promotional video with promises of Italian luxury set against the Florence skyline. What you would not know is that while those mattresses are manufactured in Italy, their production was outsourced by a Slovenian company, Studio Moderna, that sells them around the world.

Tiny Slovenia, part of the former Yugoslavia, has made it big in Europe’s post-Cold War single market economy. Yes, Dormeo mattresses are manufactured in Italy. But their main selling point, efficiency and convenience, represents a company that has taken advantage of the opportunities presented by new Eastern European markets.

“Look how easy it is to carry the mattress,” said Sandi Cesko, chairman of Studio Moderna, pointing out the window of the Dormeo showroom on the outskirts of Ljubljana to a woman — “One woman! Alone!” — carrying the mattress and loading it into her car. The mattresses are rolled and shrink-wrapped for easy transport.

“But people wouldn’t buy them if they didn’t know what was inside,” Cesko said, “so we explain it to them on TV.”

His company began by selling a single product — a brace to counter back pain — in 1991 using direct marketing campaigns in newly opened Eastern Europe. Now it sells products, from mattresses to folding bicycles, made by Studio Moderna and other companies via infomercials, catalogs, wholesale vendors and its own stores in 20 Eastern European markets, including Turkey and Russia, and beyond.

Studio Moderna’s rapid growth in the former Yugoslavia illuminates the success of Slovenia as a whole in its 18-year history as an independent nation. The name Studio Moderna comes from a small marketing company started by Cesko’s father four decades ago. “Slovenia was the export window of Yugoslavia,” he said. “Tito realized it was better to connect to the world.” After its relatively peaceful separation from the other Yugoslav states, Slovenia quickly took advantage of that strong manufacturing and transportation infrastructure. It joined the EU along with seven other formerly communist countries in 2004 and adopted the euro as its currency on Jan. 1, 2007. Along with the other new EU members it also joined the Schengen Area, which allows for borderless travel within the bloc. In 2008, Slovenia had the highest GDP per capita of any new Eastern European EU member state, at 16,600 euro ($24,300).

Slovenia met the commercial standards of its western neighbors even before the breakup of Yugoslavia, according to Anton Bebler, professor at the University of Ljubljana and president of the Euro-Atlantic Council of Slovenia. “It’s due to a higher level of general education,” Bebler said. “Our peasants are much better educated than peasants in other parts of the former Yugoslavia.”

And with few natural resources, Slovenia has always taken advantage of its advantageous position on the borders of east and west, north and south, Bebler said. “One of the arguments by the Serbs when Yugoslavia was breaking up is that Slovenia exploits the others,” he said, by buying raw materials and reselling them westward for higher prices. “Now, 18 years later, Slovenia’s economy is much less connected with the economies of other ex-Yugoslav states.”

While Slovenia is on the make, not everyone seems to know it. At an Avis car rental office in Germany, the attendants first need to be convinced that the vehicles can be taken into Slovenia. Then the company levies an extra daily fee, citing the risk of theft in Slovenia, even though the country’s highways buzz with high-end German cars. Along with those BMWs and Audis, an endless stream of Turkish trucks and Romanian passenger vans criss-cross the country in a brief few hours, transporting goods and workers.

How to capitalize on that transit traffic is Slovenia’s conundrum as the economies to its east grow and orient themselves toward the west, via this tiny country of just over 2 million. The current solution is an expensive highway sticker and hefty fines for any vehicle that crosses the border without one.

But the Slovenes recognize they are part of a small country and must think creatively. Consider the dilemma faced by Dimitrij Piciga, general director of the Slovenian Tourist Board: “Outside of the 500 kilometers around Slovenia, people still mix it up with Slovakia.” So his office targets neighboring countries in promoting weekend breaks, while figuring out how to appear as more than a blip on the radar screens of tour operators taking groups from Vienna to Dubrovnik or Venice, who are “obliged to pass through Slovenia." With just 1,500 hotel beds in the capital, Ljubljana, Piciga can’t expect to attract large conferences. But certain areas, such as culinary tourism and outdoor activities, could grow. When Slovenia held the rotating presidency of the EU in the spring of 2008, another first among the member states that joined in 2004, it had a tremendous impact on tourism, Piciga said — the presidency accounted for more than 50,000 hotel nights for official visitors. “But this was the direct impact, more important was the media,” he added. The country held Slovenia events connected to the presidency in Japan, China and India and this year Piciga expects to exceed 100,000 Japanese visitors.

In the two decades since independence, Slovenes, like Cesko and Piciga, have seized the opportunities offered by their new political circumstances. But as Slovenia’s economy grows to the point where the country will have to subsidize other EU members rather than the other way around, Bebler said there is a new joke among diplomats: “Instead of the Belgrade express it’s the Brussels express.”

But he’s not too worried that the small country will again be eclipsed by a regional power. “There are great differences between today’s EU and then-Yugoslavia,” Bebler said. “The methods of mediating conflict are much more democratic.”