Croatian CEO Survey 2014

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Croatia 2014

For the first year, we have surveyed the top representatives of leading firms active in the Croatian market. A total of 32 Croatian business leaders participated in this year’s Croatian CEO survey. This report compares and analyses local views with the PwC’s annual Global CEO Survey, presented annually for the last 17 years at the World Economic Forum in Davos, Switzerland.

The Croatian CEO Survey 2014 showed that our CEOs have more optimism than their global peers in terms of global economic growth. Although the majority of them have cost reduction on their restructuring agenda in the upcoming period, they are aware of innovation and regional expansion as the main opportunity to grow their business. The bottom line is: a strong push is necessary in order to catch up with the fast pace of the companies in the surrounding CEE region.

This won’t be easy. However, the CEOs’ increasing confidence indicates that, certain doubts aside, they do believe in success.

Key Findings

Confidence in growth – A better tomorrow

Hrvoje Zgombic, Country Managing Partner, PwC Croatia

„63% of the Croatian CEOs expect that the global economy will improve in the upcoming 12 months”

„The CEOs’ responses indicate signs of recovery. Yes, companies facing tougher competition and economic turmoil must be more efficient and innovative, but many examples show that one can succeed. The confidence in growth will be further improved once the external environment stabilises. The economic situation over the last several years has been a radical filter for private sector companies although the regulatory framework (e.g. ‘pre-bankruptcy settlement’) had a significant impact on its dynamics.”

Hrvoje Zgombić Country Managing Partner, PwC Croatia

Trends & Opportunities – Growth through innovation

Dejan Ljuština

„88% of the Croatian CEOs believe technological advances will have the biggest transformative effect on their business over the next five years”

„Historically, technological advances have been the driving force behind transformations in business. Coupled with demographic shifts and global convergence, the incumbents on the market are consolidating their businesses , finding new innovative ways of increasing value for shareholders."

Dejan Ljuština , Consulting leader, PwC Croatia

Trends & Opportunities – Opportunities for growth

Mislav Slade-Šilović

„88% of the Croatian CEOs believe technological advances will have the biggest transformative effect on their business over the next five years”

„Necessity to grow scale through regional consolidation is recognised by few Croatian companies, leaving room for stronger activity. Besides opportunities for synergy through cost efficiency, asset optimisation, portfolio optimisation, cross-sales, joint access to third markets, etc., there are still certain obstacles primarily in the political environment, cost of capital, and in general management’s focus on restructuring activities rather than on expansion activities.”

Mislav Slade-Šilović, Assistant Manager, Consulting, PwC Croatia

Company initiatives – Big plans for the future

Ivan Bavoljak

„72% of the Croatian CEOs plan to execute cost reduction as a type of restructuring activity in the upcoming year”

„In the past few years, the Croatian companies have been working intensely to increase cost efficiency and this trend will continue in the upcoming year. Untapped potential lies in strategic partnerships and consolidation within the region, which is necessary in order to achieve competitiveness in the EU market.”

Ivan Bavoljak, Manager, Consulting, PwC Croatia

Company initiatives - Current transformative initiatives

Emanuel Tutek

„The digital consumer has been around for a while, and now it’s obvious he can’t be ignored anymore. Even though the Croatian companies are becoming market driven and chasing consumers, for a long-term success, they will have to face a challenge of becoming market drivers by bringing R&D and innovation into action as a core part of their customer strategy.”

Emanuel Tutek, Assistant Manager, Consulting, PwC Croatia

Company initiatives - Organisation readiness

Dejan Ljuština

„The big thing that will continue to impact the global economy is a continuous technological growth, meaning that the companies of tomorrow will increasingly depend on whether they are capable to keep the pace and capitalize on such a trend. Because of that, organisations have to continuously challenge, re-think and refresh their internal capacities since the margin for error is diminishing.”

Dejan Ljuština, Consulting Leader, PwC Croatia

Threats - Concerns about the future

Hrvoje Jelić

„100% of the Croatian CEOs are concerned about the Government’s response to the fiscal deficit and tax burden and see it as the biggest potential threat to their organisations”

„The results of the survey among CEOs in Croatia are not surprising at all, they are in line with the views of the business community in general. When the CEOs’ comments and answers are translated into a less diplomatic language, it appears that the main issues and obstacles for doing business in Croatia can be summed up to insufficient (or inexistent) legal certainty and poor performance of various public authorities (which do not work in favour of a stable and motivating business environment), primarily courts and tax authorities.”

Hrvoje Jelić, Partner, Tax & Regulatory Services, PwC Croatia

Regulation – Working with Government

John M Gasparac

„Confidence that the economy will grow again is the first step to ensuring that companies have begun to re-invest and recruit. I believe that increasing optimism will gradually transform itself into an increase in demand, and thus into new orders.”

John M Gasparac, Partner, Territory Assurance Leader, PwC Croatia

Sector snapshot: Communications

Perica Baškarić

„59% of the Croatian CEOs think Government should focus on developing an innovation ecosystem which supports growth”

„The industry is being disrupted: while the communication needs are growing, the form of communication is changing and the value is shifting to higher layers, i.e. applications. With industry borders being blurred, telcos are forced to find new business models and develop partnerships and ecosystems that will enable them to capture and retain part of the value.”

Perica Baškarić, , Assistant Manager, PwC Croatia

Sector snapshot: Banking & Capital Markets

Damir Kecko

„Success in the market demands leaders who are able to manage through uncertainty and complexity as they seek to deal with regulatory change while preparing for the future. This in turn demands a clear sense of who their key customers and markets are going to be in the future and what investments and changes will be needed to respond. It also requires a forward looking view on how regulation will interact with other transformational trends in areas such as cost, returns, and ability to meet customer expectations.”

Damir Kecko, Manager, Deals, PwC Croatia

Sector snapshot: Retail & FMCG

Mislav Slade-Šilović

„The Croatian retail market has experienced a dual path. While certain retail and FMCG companies seek inorganic growth, primarily through acquisitions, others are putting focus on internal efficiency through category management, product portfolio optimisation, procurement, supply chain and sales force efficiency in order to increase profitability and create financial headroom for future growth.”

Mislav Slade-Šilović, Assistant Manager, Consulting, PwC Croatia

Sector snapshot: Power & Utilities

Ivan Bavoljak

„Along with the Croatian market liberalisation and competition penetration, existing companies have put emphasis on operational and strategic restructuring to ensure cost effectiveness and long-term competitiveness in the market. This is good news for consumers as they will in the short term benefit from reduced cost of electricity.”

Ivan Bavoljak, Manager, Consulting, PwC Croatia

Stakeholder Trust - Stability

Ivan Bavoljak

„M&A transactions are dependent on management expectations and establishing a clear communication framework with relevant stakeholders. Media scrutiny over and interest of relevant stakeholders for transactions put more pressure on companies to follow clear and transparent transaction procedure.”

Siniša Dušić, , Partner, Assurance/Advisory-Deals, PwC Croatia