INDUSTRY ANALYSIS

«Furniture manufacture»

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CARDS 2002 Project Development of Investment and Business Climate in Croatia

CONTENTS: Foreword ___________________________________________3 1. Introduction ______________________________________5 2. Industry definition, segments and limits _________7 2.1. Industry products definition-segmentation_____________7 2.2 Market size ______________________________________8 2.3. Labour supply___________________________________15 3. Porter's model ______________________________________19 3.1. Industrial rivalry analysis _________________________20 3.2. Market permeability, i.e. entry barriers _____________23 3.3. Threat of substitutes, i.e. substitute products _________25 3.4. Bargaining power of suppliers ____________________26 3.5. Bargaining power of buyers ______________________28 4. The SWOT analysis _________________________________30 5. The industry’s life cycle _________________________36 6. Competitiveness assessment – peer group _______________42 7. Conclusion _________________________________________43

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The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe, Raiffeisenbank Croatia and Emerging Markets Groups.

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CARDS 2002 Project Development of Investment and Business Climate in Croatia

Foreword
Many transition countries, such as Poland, experienced direct foreign investments in the primary wood processing and furniture production industry at the very beginning of their transition way. Lower labour costs, but also high quality timber, which is rather rare in most countries of Western Europe due to high utilisation rate, have been the key element to international companies to make investments in transition countries. The mentioned foreign investments had favourable impact on growth of wood processing industry and export of furniture in countries – recipients of foreign investments, such as Poland. On the other side, in spite of abundant supply of high quality wood raw materials and experience in furniture production, in recent years Croatia does not meet growing local demand for furniture but it has been experiencing growing shortage in commodity trade within the mentioned industry. In addition, considerable foreign investments in furniture production area failed to occur and not earlier than last years there are some more positive trends. At the same time, most companies in wood processing industry are still in restructuring stage resulting in non-specialised production, lack of recognizable local brands and lagging behind current trends at market. Current low level of technology and high fixed costs has detrimental effect on international competitiveness of Croatian manufacturers, especially under conditions of growing competition from other transition countries and China. However, restructuring process within the industry has been lately intensified in Croatia and the Government strategy of development of wood processing industry and implementation of operational plans will also contribute to these efforts. The Government still has significant influence on trend in furniture production industry, especially because the major portion of wood stock in Croatia is owned by the state company. Further liberalisation of the timber market will result in growing interest of

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The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe, Raiffeisenbank Croatia and Emerging Markets Groups.

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CARDS 2002 Project Development of Investment and Business Climate in Croatia
potential foreign investors in furniture production in Croatia, especially after abolishing of some provisions having disincentive impact on investments and specialisation of production in the current transition period. If comparable advantages of the main competitors are taken into account, production of high-quality panel furniture in small series is considered as the largest potential area for implementation of foreign investments. Additionally, there are possibilities for investments in plants for primary wood processing, i.e. in saw-mills and high capacity dryers. In the following years, we expect development of furniture production and further growth of international demand, but competition as well, that could result in growing interest of foreign investment companies in Croatia.

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The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe, Raiffeisenbank Croatia and Emerging Markets Groups.

0. which accounts for 4. which can be located in business group under the DN code.1) is grouped within the furniture manufacture group and other manufacturing industry (NACE 36).5 thousand people. The project is implemented by: Deloitte Central Europe. i.3% of total export value of the Republic of Croatia (RH in further text). At the same time the mentioned business group employed around 5% of the totally employed in manufacturing industry or nearly 14. approximately 3. whereas costs for remaining intermediary consumption amounted to barely less than 600 million kuna. therewith realizing gross added value of 1. a hundred companies with more than 10 employees dealing primarily in the business activity of furniture manufacture and the rest of manufacturing industries realized during 2004 sales revenue in the amount of 2.e. At the same time production material amounted to 977 million kuna. During the same year amount of 545 million USD of concerned products was imported in Croatia.e.3 billion kuna.8%. During 2004 the DN business group had share in gross added value (GVA) with approx. 5 The Project is financed by the European Union. Introduction According to Classification of Economic Activities in the European The industry of furniture manufacture is grouped within the furniture manufacture group and other manufacturing industry… Community (NACE) the industry of furniture manufacture (NACE 36. In the commodity trade of the Republic of Croatia with foreign countries the group of furniture manufacture business and other manufacturing industries (NACE 36) realized during 2004 commodity export in the amount of 346 million USD. According to other source.15 billion kuna.3% of total commodity import value. Raiffeisenbank Croatia and Emerging Markets Groups. .5 CARDS 2002 Project Development of Investment and Business Climate in Croatia 1. i.

the furniture manufacture industry only realized approximately 80% of total revenues and employed over 90% of totally employed in the entire business group under the NACE 36 code. whereas the value of imports was greater and amounted to 287 million USD. The project is implemented by: Deloitte Central Europe.4 million USD. Raiffeisenbank Croatia and Emerging Markets Groups. . the primary business of which was furniture manufacture.000 persons. calculated by author Among the business group under NACE 36 code furniture manufacture is Among the business group under NACE 36 code furniture manufacture is the most significant one… the most significant one (NACE 36. Out of other industries in the mentioned business. for instance. 6 The Project is financed by the European Union. the sectors of other manufacturing industries and jewellery manufacture can be singled out. During 2004 furniture was exported in the amount of 217.92 million USD of foreign proprietary investments was recorded… of foreign proprietary investments were recorded in the Republic of Croatia.1). At the same time the mentioned companies employed approximately 11. During 2004 there were 365 companies registered in the Republic of Croatia. 27.92 million USD 27. In the period from 1993 to the end of the third quarter. In 2006. Investments were made in 15 companies with furniture manufacture as their primary business. according to the amount of totally realized revenues.6 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 1: GVA and number of the employed in the group of furniture manufacture business and other manufacturing industries (NACE DN) Source: wiiw.

panelled and upholstered furniture… manufacture we include timber wood manufacture of seats.11) Manufacture of miscellaneous furniture for business and sales premises (NACE 36. Industry products definitionsegmentation The furniture manufacture itself can be additionally divided into following sub industries… According to National Classification of Business the furniture manufacture (NACE 36. panelled and upholstered furniture.7 CARDS 2002 Project Development of Investment and Business Climate in Croatia 2. 7 The Project is financed by the European Union. dimensions. furniture can be divided into massive. Industry definition. particleboard being the most used material coated with decorative materials. .13) Manufacture of miscellaneous furniture (NACE 36. which usually represents the most appreciated furniture segment. Under massive furniture Considering the very manufacturing technology. depending on product kind: Manufacture of chairs and seats (NACE 36.14) Manufacture of mattresses (NACE 36. Raiffeisenbank Croatia and Emerging Markets Groups. segments and limits 2.1. Panelled furniture accounts for the majority of totally manufactured furniture. furniture can be divided into massive. tables and chests of drawers.1) itself can be additionally divided into following sub industries. The project is implemented by: Deloitte Central Europe. purpose and product's manufacturing material.15) Each of the above mentioned sub industries can be further subdivided depending on kind. mostly veneer.12) Manufacture of miscellaneous kitchen furniture (NACE 36. At the same time the above classification mostly matches international trading and customs classifications. Considering the very manufacturing technology.

The project is implemented by: Deloitte Central Europe. In 2004 total furniture export value amounted over 180.1).920 workers. plastics and/or glass. but is primarily made of metal. Simultaneously. Raiffeisenbank Croatia and Emerging Markets Groups. which does not consist of wood. total of 242 million euro of furniture was imported. we deem it necessary to explain the difference between the two. considering the fact that they are used in final fitting. in spite of significant comparative advantages of Croatia.8 CARDS 2002 Project Development of Investment and Business Climate in Croatia Besides. . their primary business being furniture manufacture… In Croatia during 2004 there were 365 registered companies. thus generating commodity trade deficit of 62 million euro. Secondary wood processing refers to manufacture of wood products. considering the frequent mistake and mixing of secondary wood processing and furniture manufacture. but are not classified as furniture. 2. Also. There are still disputes among professional circles whether parquetry and interior joinery (doors and windows) should be included. 8 The Project is financed by the European Union. furniture manufacture comprises manufacture of furniture. On the other hand. all sub industries of furniture manufacture industry recorded positive trends and business revenue growth.1 million euro.2 Market size In Croatia during 2004 there were 365 registered companies. which do not need to be further processed in order to be used for their end-purpose. their primary business being furniture manufacture (NACE 36. The same year mentioned companies realized total revenue of 340 million euro and employed 10.

seats and chairs manufacture increased by 422. manufacture physical volume increased by 20. At annual level. An average productivity.e.476. twoseated and three-seated sofas was rather small.264 euro during the concerned year. i. 52. Manufacture structure shows that Croatian manufacturers make mostly upholstered and non-upholstered chairs and seats. calculated as business revenue per employee.9 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 2: Revenues. productivity according to furniture manufacture sub industries Source: CBS (State's institute for statistics).6%.191 persons employed in the manufacture of seats and chairs. 52. In 2004 there were 2.602 pieces of chairs and seats manufactured mainly upholstered wooden chairs (1. HGK (Croatian Chamber of Commerce). amounted to 23.202 pieces. number of companies and employees.6 million euros… industry. During 2004. Raiffeisenbank Croatia and Emerging Markets Groups. whereas the number of manufactured armchairs. there were a total of 2. the most significant increase was realized by 9 The project is implemented by: Deloitte Central Europe.. During 2004. in comparison with 2003. in comparison with 2003.. Also.470. FINA.11) During 2004 there were 38 companies registered in the mentioned sub 38 companies registered realized business revenue in amount of approx. . author’s calculation Manufacture of seats and chairs (NACE 36.6 million euro.6%. which realized business revenue in amount of approx. manufacture physical volume increased by 20. The Project is financed by the European Union.563 pieces) and nonupholstered wooden seats (641.065 pieces).

In the export structure export of so-called miscellaneous parts of seats and chairs prevails (44 million euro) and chairs with wooden frame (nearly 27 million euro). i. Along with production increase during 2004. but with lesser intensity than export. an increase in export of concerned products.e. EUR Source: CBS. i. seats and chairs import reached the value of 69. At the same time.e.10 CARDS 2002 Project Development of Investment and Business Climate in Croatia manufacture of upholstered chairs with wooden frame and two-seated sofas. Table 3: Import and export of seats and chairs.e.75 million euro during the observed year. In the concerned year it amounted to 105. incomplete products. out of which the most imported were upholstered seats with wooden frame (26. During 2002 and 2003 positive trends in commodity trade with foreign countries were recorded.e. The project is implemented by: Deloitte Central Europe. chairs and specialized stools was recorded.2 million euro. an increase in seats. as well. as well. Raiffeisenbank Croatia and Emerging Markets Groups.1 million euro) and multipurpose seats (10 million euro). while more expensive completed chairs and seats. incomplete products… In spite of positive balance of foreign trade it is apparent that mostly parts are exported. upholstered and multi-purpose seat elements are mostly imported. In recent years import has recorded an increase. . i. author's calculation 10 The Project is financed by the European Union. i. It is apparent that mostly parts are exported.

The same year import value of the same products amounted to even 34. In 2004. manufacturing majority of which was classified as miscellaneous wooden office furniture. productivity of 42.5 million euro) on foreign markets. Significant manufacture was realized in processing of shelves.11 CARDS 2002 Project Development of Investment and Business Climate in Croatia Manufacture of miscellaneous furniture for business and sales premises During 2004. 11 The Project is financed by the European Union.6 million euro.35 million euros and employed 876… for business premises including seats and chairs. More than half of imports refer to importation of unclassified metal household furniture. as well (around 60. Raiffeisenbank Croatia and Emerging Markets Groups.273 pieces of furniture for business and selling purposes were manufactured during 2004.000 pieces of annual manufacture capacity). whereas importation of office tables accounts for 2. Majority of Croatian export refers to wooden wardrobes sale (6 million euro) and metal household furniture sale (4. .7 million euro and recently there has been an import increase trend of the concerned products. where even 240.35 million euro and employed 876. Also. there were 71 companies registered in the concerned manufacture. The mentioned companies realized sales revenue in the amount of 37. including medical furniture.6 million euro. 505. amounted to 13.638 euro per employee was realized in furniture manufacture of the mentioned sub industry. with their primary business being manufacture of furniture 71 companies realized sales revenue in the amount of 37. The project is implemented by: Deloitte Central Europe. metal furniture and wooden wardrobes and wall-units.531 pieces of furniture was manufactured. export value of furniture for business and selling purposes.

The project is implemented by: Deloitte Central Europe. In the same year there were over 33. there were 39 39 companies employed 511 workers and realized sales revenue in the amount of 10.8 million euro. The mentioned companies employed 511 workers and realized sales revenue in the amount of 10.000 euro worth kitchen furniture was exported. During 2003 and 2004 export value of the mentioned segment sees a constant decrease.000 kitchen tables manufactured. In 2004. the import value of kitchen furniture has recently been on 12 The Project is financed by the European Union.237 euro. Unlike export. The same year's average productivity amounted to 21. In kitchen furniture production structure the most represented were wooden cupboards production (43.8 million euros… companies registered in the Republic of Croatia.12 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 4: Import and export of furniture for business and selling purposes. author's calculation Manufacture of the remainder kitchen furniture According to the latest information available. EUR Source: CBS.909 pieces) and wooden hanging units (42.550 pieces of exclusively kitchen furniture was manufactured. almost 15 million of which refers to built-in kitchen units. Raiffeisenbank Croatia and Emerging Markets Groups. The physical production indexes show a slight stagnation of the mentioned industry during 2004. there business being kitchen furniture manufacture.784). . seats and chairs excluded. in 2004.85 million euro. In the same year kitchen furniture was imported in value of even 23. total of 129. a total of 900. In 2004.

The biggest part of physical manufacture refers to manufacture of shelves (284. Most companies are engaged in the mentioned manufacture segment. The project is implemented by: Deloitte Central Europe. Except for the highest number of companies and highest revenues realized.793 pieces). considering that in 2002 export 13 The Project is financed by the European Union. In 2004.311 euro. Raiffeisenbank Croatia and Emerging Markets Groups.09 million pieces of various furniture items was manufactured in the industry of manufacture of miscellaneous furniture.978 pieces) and various kinds of wardrobes and beds. wall-units and mirrors.838 and realizes productivity of 30. In 2004.3 million euro.3 million euros… manufacture of wardrobes. beds. almost 40 million of which referred to export of wooden unclassified furniture and wooden parts. the concerned industry employs even 6. .3 million euro. The mentioned companies realized business revenue in the amount of 207. a total of 1. EUR Source: CBS. domestic miscellaneous furniture manufacturers exported commodities in value of 52. there were totally 212 registered companies.13 CARDS 2002 Project Development of Investment and Business Climate in Croatia the increase. wooden footwear furniture (185. there has been a noticeable trend in export increase of the mentioned manufacture segment. author's calculation Manufacture of miscellaneous furniture Sub industry of manufacture of miscellaneous furniture comprises mostly In 2004. Table 5: Import and export of kitchen furniture. Recently. in 2004. According to the latest information. there were totally 212 registered companies and realized business revenue in the amount of 207.

were registered in mattress manufacture sub industry… sub industry. When compared with 2002 and 2003. Table 6: Import and export of miscellaneous furniture. In 2004. . majority of which referred to wooden household furniture and wooden furniture parts. The biggest share of manufacture refers to manufacture of mattress supports.2 million euro and in last few years it was stable.000 of which was manufactured. mattresses and mattress supports export amounted to 14. Commodities in value of 99 million euro were imported the same year. The manufacture of mattresses itself divides into manufacture of mattress supports.000 pieces manufactured in 2004. They employed 504 persons. only five. 644. were registered in mattress manufacture Only five. However. Majority of exports consisted of sales on foreign markets of mattress supports. foam rubber mattresses and metal springs mattress. with realized business revenue of 32 million euro during 2004. spring mattresses and other bed equipment. the mentioned segment meets manufacture increase in all categories.14 CARDS 2002 Project Development of Investment and Business Climate in Croatia amounted to less than 46 million euro. the concerned industry realized the highest productivity within the entire furniture manufacture of 63. and there were totally 897. EUR Source: CBS. The project is implemented by: Deloitte Central Europe. author's calculation Manufacture of mattresses The least companies. Raiffeisenbank Croatia and Emerging Markets Groups. 14 The Project is financed by the European Union.731 euro.

in the mentioned period at the Croatian Central Employment 15 The Project is financed by the European Union. Table 7: Import and export of mattresses. it is important to point out official statistics on new registered persons in 2005 as well.007. and labour force qualified for work in furniture production. manipulators/operators of wood processing machines manipulators/operators products. Labour supply In analysis of labour force offered in the furniture production industry.9 million euro. Raiffeisenbank Croatia and Emerging Markets Groups. carpenters for furniture and tuners and operators of wood processing machines). For forecasting of future trend at the labour market. qualified labour force includes: wood converters (mainly wood processors. In analysis of labour market. .3. of machines manufacturing wood In the end of 2005 there were 457 unemployed forestry and agronomy engineers in Republic of Croatia. majority of which referred to import of miscellaneous bed equipment and other mattresses. mainly unemployed wood converters. EUR Source: CBS.15 CARDS 2002 Project Development of Investment and Business Climate in Croatia At the same time import amounted to 14. author's calculation 2. forestry and agronomy engineers. In the same time. total number of unemployed persons qualified for work in furniture production area accounted for 3. i.e. For example. labour force was classified as specialists. The project is implemented by: Deloitte Central Europe.

The largest number of unemployed persons qualified for work in furniture production and wood processing industry was recorded in Osječko-baranjska County. Taking into account current inflexibility. but also inflow of new labour force.e. then the highest number of new unemployed persons was recorded in the city of Zagreb and the counties in Slavonia region. low mobility of labour force in Croatia we consider that it is necessary to analyse the number of unemployed persons.16 CARDS 2002 Project Development of Investment and Business Climate in Croatia Office (HZZ) there were new 477 graduated forestry and agronomy engineers registered. while the lowest number of registered unemployed persons was recorded in the counties located in the northern part of Croatia and in the counties along the sea. . at level of a county. i. Splitsko-dalmatisnka County and the city of Zagreb. During the same year. The project is implemented by: Deloitte Central Europe.427 new registered unemployed persons qualified for work in furniture production sector. 16 The Project is financed by the European Union. Similar trend were noticeable in 2005 and if number of new registered unemployed persons qualified for furniture production is analysed. In 2005 in these regions inflow of the mentioned labour force was also the highest. The highest number of unemployed graduated engineers is recorded in Osječko-baranjska County and in the city of Zagreb. Human resources in this branch of industry are also unused in most of other counties. Raiffeisenbank Croatia and Emerging Markets Groups. there was total of 2. which is expected taking into account location of faculties of forestry and agronomy.

calculated by author Qualified working force 130 111 223 158 122 210 143 127 55 248 54 81 81 304 63 260 29 47 52 252 257 3. Raiffeisenbank Croatia and Emerging Markets Groups.17 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 8: Number of unemployed persons. .007 engineers 21 2 20 16 10 5 10 11 6 25 8 16 11 118 7 28 5 11 3 27 97 457 17 The Project is financed by the European Union. end of 2005 Graduated County Zagrebačka Krapinsko-zagorska Sisačko moslovačka Karlovačka Varaždinska Koprivničko-križevačka Bjelovarsko-bilogorska Primorsko-goranska Ličko-senjska Virovitičko-podravska Požeško-slavonska Brodsko-posavska Zadarska Osječko-baranjska Šibensko-kninska Splitsko-dalmatinska Istarska Dubrovačko-neretvanska Međimurska Vukovarsko-srijemska Grad Zagreb Total: Source: CES. The project is implemented by: Deloitte Central Europe.

Raiffeisenbank Croatia and Emerging Markets Groups.427 engineers 30 5 18 15 7 11 31 17 6 20 9 15 27 107 5 22 10 7 6 31 78 477 18 The Project is financed by the European Union. 2005 Graduated County Zagrebačka Krapinsko-zagorska Sisačko moslovačka Karlovačka Varaždinska Koprivničko-križevačka Bjelovarsko-bilogorska Primorsko-goranska Ličko-senjska Virovitičko-podravska Požeško-slavonska Brodsko-posavska Zadarska Osječko-baranjska Šibensko-kninska Splitsko-dalmatinska Istarska Dubrovačko-neretvanska Međimurska Vukovarsko-srijemska Grad Zagreb Total: Source: CES. .18 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 9: Number of registered new unemployed persons. calculated by author Qualified working force 108 82 151 99 153 110 135 120 29 182 99 155 86 267 43 25 46 42 73 167 255 2. The project is implemented by: Deloitte Central Europe.

The project is implemented by: Deloitte Central Europe. Porter's model Power of suppliers HIGH Entry barriers HIGH Industrial rivarly HIGH Threat of substitutes WEAK Power of buyers HIGH 19 The Project is financed by the European Union. . Raiffeisenbank Croatia and Emerging Markets Groups.19 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3.

Table 10: Business revenues and number of employees of the 20 most significant furniture manufacturers in the RH Source: FINA. author's calculation 20 The Project is financed by the European Union. HGK.20 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3.920 persons.1. Industrial rivalry analysis The industrial rivalry analysis will be made on a sample of companies. primarily deal in furniture manufacture. which. amounted to 31. according to address book of Croatian Chamber of Commerce (HGK). As of the latest information on productivity levels. According to the mentioned source. At the same time the mentioned companies realized business revenue in the amount of 340 million euro. Raiffeisenbank Croatia and Emerging Markets Groups. measured by business revenue per employee.140 euro. during 2004 there were 364 companies engaged in furniture manufacture and they employed total of 10. The project is implemented by: Deloitte Central Europe. .

they realize almost 70% of total business revenue of all furniture manufacturers. that competition level varies between different furniture manufacture segments. on the Croatian territory there 21 The Project is financed by the European Union.5% of total revenues of the entire industry. At the same time. according to domestic manufacturers experiences. they realize almost 70% of total business revenue of all furniture manufacturers… According to business revenues of the biggest 20 companies. for instance. That competition level varies between different furniture manufacture segments… The mentioned concentration rate results and the HHI identify competition pressures on the level of entire furniture manufacture industry (NACE 36. Thus. If the HHI is between 0 and 1. while concentration of the leading five accounts for 41. their influence on employment trends in furniture manufacture industry is also significant. Herfindahl Hirschman index (HHI) for the 20 most significant companies. According to business revenues of the biggest 20 companies. i. revenue share of 10 leading companies. as to the realized business revenue for 2004.9%. CR10. which indicates that there is low concentration in the concerned industry.000 it indicates the existence of monopoly in the concerned market segment. the 20 leading companies employ 7.e. The three leading companies (CR5) as to the realized revenues in 2004 realize 33.800 it is considered highly concentrated. and if it is over 1. Besides. amounts to 486. The project is implemented by: Deloitte Central Europe. can be concluded. however. . amounts to 55.000 the market is considered not to be concentrated. competition pressures are distinct.21 CARDS 2002 Project Development of Investment and Business Climate in Croatia For a more detailed industrial rivalry analysis we chose method of calculating the concentration rate (CR) and Herfindahl .2%. that is. Hence.Hirschman index (HHI) of realized business revenue during the concerned year on the sample of 20 leading companies engaged primarily in furniture manufacture and registered on the territory of the RH.1).279 or 67% of the totally employed in this industry. but if it approaches the level of 10. Raiffeisenbank Croatia and Emerging Markets Groups.

Similar concentration rate level is present in kitchen furniture manufacture. two companies additionally stand out as to the realized business revenue amount. Hence. thus having a strong influence on the growth of industrial rivalry within the industry. Besides. Likewise. due to the fact that the majority of domestic manufacturers Domestic companies are usually not specialized in only one segment or in the very furniture production… are not specialized in one segment of furniture manufacture. the above mentioned levels of market concentration and competition pressures in segments of furniture manufacture should be taken with certain reservation. Considering that the majority of manufacturers is engaged in the very segment of miscellaneous furniture manufacture and that none of the companies significantly stands out by the amount of business revenue. Domestic companies are usually not specialized in only one segment or in the very furniture production. but they are usually engaged in all phases of wood processing. This includes primary processing. . which increases fixed costs and makes it difficult to leave the market.22 CARDS 2002 Project Development of Investment and Business Climate in Croatia are only a few manufacturers in the mattress manufacture segment. in the concerned furniture manufacture segment concentration rate is higher and in this way competition pressures on companies are reduced. being engaged both in all wood processing phases and in furniture production demands higher level of investments needed. high storage costs and low differentiation rate of domestic furniture additionally influence the growth of competition pressures among 22 The Project is financed by the European Union. that concentration rate is the lowest in this very manufacture segment. as well. Likewise. However. it can be concluded. mostly due to a surplus of demand for hard timber over supply. Raiffeisenbank Croatia and Emerging Markets Groups. Lower rate of market concentration and more powerful competition are more distinct in the segment of manufacture of office furniture and seats and chairs. This manner of unspecialized manufacture of most of domestic companies takes effect on intensifying of competition pressures among them. The project is implemented by: Deloitte Central Europe. where three companies stand out as far as business results are concerned. too.

Only in mattress manufacture the intensity of competitive powers is somewhat lesser expressed due to only a few firms that currently produce mattresses in Croatia. regardless of somewhat lesser number of domestic manufacturers in certain sub industries. HEP d. entry barriers The strongest barrier to come onto market of furniture manufacture in the The strongest barrier is extraordinary powerful bargaining power of suppliers… Republic of Croatia is extraordinary powerful bargaining power of suppliers (such as Hrvatske šume d. Raiffeisenbank Croatia and Emerging Markets Groups.23 CARDS 2002 Project Development of Investment and Business Climate in Croatia the companies themselves. Current timber products supply system has a discouraging effect on entry of new furniture manufacturers to the territory of Croatia.2. the current system of timber products price fixing is not entirely grounded on market principle. i. which includes investments increase and high fixed costs. force companies into engagement in almost every phase of wood processing.d.d. we can conclude that industrial rivalry rate is high in almost every segment of furniture manufacture. because it warranties only mid-term timber products supply and only if strict conditions are met. The project is implemented by: Deloitte Central Europe. We can conclude that industrial rivalry rate is high in almost every segment of furniture manufacture… Due to everything that was mentioned above. Also..e. as process of joining of the Republic of Croatia into the European 23 The Project is financed by the European Union. Non-existence of developed timber products market and primary processed lumber in Croatia. Likewise.). . Market permeability. i.e. This has discouraging effect on entry of new companies into furniture manufacture. there is a monopoly in the supply of timber products. 3.

the starting investment costs will be on the increase. that entry barriers are currently distinct.24 CARDS 2002 Project Development of Investment and Business Climate in Croatia Union intensifies. Otherwise. paint and varnish disposal. The mentioned higher initial costs could discourage potential foreign investors and could redirect their investments into neighbouring countries. The starting investment costs will be on the increase. especially with the Similarity and already existing harmonization of domestic furniture quality standards with those of West European countries… German. especially Competition of countries with lower labour costs puts pressure on furniture price cuts at global level… China. Similarity and already existing harmonization of domestic furniture quality standards with those of West European countries. due to harmonization to European manufacture standards. positively influences the entry of new companies on domestic market. there are currently two institutions in Croatia. . especially on panelled furniture. Recently. Euroinspect d. mostly because 24 The Project is financed by the European Union. International trend towards assembly-line manufacture orientation represents one of entry barriers because it implies production in big series. in order to lower the limited fixed costs and to increase international competition. It is expected that most funds will need to be invested in systems for environment protection.d. it is very important nowadays to manufacture furniture in assembly-line and in large quantities. In spite of the fact. puts pressure on furniture price cuts at global level. Raiffeisenbank Croatia and Emerging Markets Groups. Companies which already do business on markets of the European Union countries and the mentioned harmonization of domestic regulations with the EU standards should give an additional impulse to realization of investments in the industry of furniture manufacture in Croatia. which have not yet been candidates for the European Union membership and are not obliged to adapt their laws to standards of the European Union. authorized to issue necessary certificates. competition of countries with lower labour costs.e. The project is implemented by: Deloitte Central Europe. Hence. due to harmonization to European manufacture standards… drying and storage of timber products and dangerous goods disposal. and Šumarski fakultet. i.

e. . 25 The Project is financed by the European Union. because of its advantages when compared with other materials. there is growing orientation towards greater manufacture of furniture made from other materials than wood.3. substitute products In the industry of furniture manufacture probability of substitutes is almost In the industry of furniture manufacture probability of substitutes is almost impossible… impossible. wood is expected to stay one of the most important raw materials for furniture manufacture. However. i.25 CARDS 2002 Project Development of Investment and Business Climate in Croatia there is monopoly of state-owned enterprise in timber sale. The project is implemented by: Deloitte Central Europe. it can be We can conclude that intensity of entry barriers is high… expected. various metals.e. that is. 3. that liberalization of the mentioned business is about to come. despite the reduction of wood in furniture manufacture in the past years. due to ever faster obsolescence and shorter furniture lifetime. i. Possible threat of trend changes exists. Threat of substitutes. Current global trends have a favourable influence on increase in demand for furniture. plastics and glass. Raiffeisenbank Croatia and Emerging Markets Groups. But for now we can conclude that intensity of entry barriers is high in the industry of furniture manufacture in Croatia.e. due to frequent changes in design and manufacture technology. This will have a positive influence on barrier reduction in entry of companies into furniture manufacture in Croatia. i. where one of Croatian major advantages-high-quality timber products-is not expressed so much. Current system of selling of timber is just a phase towards fully liberalized market.

despite low demand and poor sales. administratively determined price of raw material. while ordinance established formula determines the price. 26 The Project is financed by the European Union. which does not entirely represent ratio of demand and supply on the market. Bargaining power of suppliers Strongly expressed bargaining power of suppliers has currently the most significant influence on domestic furniture manufacture… Strongly expressed bargaining power of suppliers has currently the most significant influence on domestic furniture manufacture. which are intended for economic exploiting. Considering that business in the mentioned activities has not still been liberalized and there are state monopolies. Also. the current influence on domestic furniture manufacture is negative.485 hectares of forest on the territory of the Republic of Croatia. According to the latest information. the raw material distribution system is insufficiently transparent. (HŠ-Croatian Forests). as well. the price of oak is bellowing the global level.4. if demand is higher than supply. do not change and are above the global price level. Hence. prices of fir and spruce. At the same time. The project is implemented by: Deloitte Central Europe. can not be satisfied. which. which are used in intermediary consumption during furniture manufacture.e. . but on the entire wood industry. Currently.d. and it disables companies to plan long-term manufacture.26 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3. to the most important goods. This refers primarily to suppliers of raw material and electric power. which leads to significant demand both domestic and international. has the most significant negative influence on the industry of furniture manufacture. which leads to fact that Croatia imports the mentioned kinds of timber from other countries. mostly under the management of Hrvatske šume d. there are 2. unfortunately. Exactly this. as it Administratively determined price of raw material does not entirely represent ratio of demand and supply on the market… can be expected. Raiffeisenbank Croatia and Emerging Markets Groups. majority of raw material in Croatia is sold by HŠ through public tenders. i. 81% of which is government property. in spite of proportional forest resources.

especially in short-term. the criterion on the number of employees in companies. which have unfavourable influence on investment growth and on development of the very industry of furniture manufacture in Croatia. if we take the investment return period into consideration. For instance. which is very important. 27 The Project is financed by the European Union.27 CARDS 2002 Project Development of Investment and Business Climate in Croatia Likewise. Also. because it discourages investments in manufacture modernization and in this way disables productivity increase and catching up with international competition. Price changes mostly occur due to tariff model changes. The project is implemented by: Deloitte Central Europe. the current agreement structure comprises some paragraphs. negatively effects on manufacture development with the approval of agreement. that the agreement would be terminated if companies owners structure changes. The mentioned paragraph has direct negative effect on realization of possible 'Brownfield' foreign investments in the concerned industry. Likewise. quick changes of administratively determined price levels have an unfavourable effect on domestic manufacturers and their business. the most important energy supplier used in the process of furniture manufacture. Raiffeisenbank Croatia and Emerging Markets Groups. because they do not manage to adapt at such short notice to new market conditions and/or to transfer one share of costs to its buyer. Impossibility of making a contract of agreement with HŠ for term longer than five years we consider one of the biggest obstacles in realization of Impossibility of making a contract of agreement with HŠ for term longer than five years we consider one of the biggest obstacles in realization of FDI… foreign investments into the industry of furniture manufacture in Croatia. which has negative effect on the manufacturers themselves making long-term planning of manufacture and costs calculation impossible for them. which states. Domestic manufacturers’ experiences show sudden electric power price Domestic manufacturers’ experiences show sudden electric power price changes… changes. . agreement with HŠ on raw material supply includes a paragraph.

the liberalization of electric power supply should have a positive effect on further development of the industry of furniture manufacture in Croatia. After declaring independency and loss of the former markets there were more intense endeavours to come onto new markets. Raiffeisenbank Croatia and Emerging Markets Groups. which would eliminate the momentary negative effects of monopoly on domestic manufacturers. This primarily refers to the proposition of raw material market re-establishment. to visit fairs and make contacts with foreign buyers. which would reduce manufacturers' costs and would enable faster adaptation to current market demand. but exported their products through the distributor company of 'Exportdrvo'. with the help of Croatian Chamber of Commerce. 3.5. .28 CARDS 2002 Project Development of Investment and Business Climate in Croatia We can conclude that extraordinary powerful bargaining power of suppliers in the industry of furniture manufacture has the most significant influence on determination of development perspective of the concerned industrial branch. manufacturers did not realize direct contact with foreign wholesalers and retailers. However. inexperience and poor foreign language knowledge unfavourably reflected on business co-operation intensification and 28 The Project is financed by the European Union. In spite of currently unfavourable effects of powerful bargaining power of suppliers on trends in furniture manufacture. However. low level of managerial skills. after the 'Exportdrvo' heavily reduced furniture export volume of domestic manufacturers. Bargaining power of buyers Up to the declaration of independence of the Republic of Croatia the majority of domestic manufacturers were mainly orientated towards product sales on markets of the former state. When coming onto foreign markets. Strategy of Government of the RH for wood industry development should lead to reforms. manufacturers started independently. The project is implemented by: Deloitte Central Europe. Also.

a few domestic manufacturers manufacture parts or completed furniture pieces directly for renowned foreign manufacturers. for IKEA. Due to globally increased competition in furniture manufacture. as well. Main determining factors when choosing to buy furniture are design and price… According to some recent market research main determining factors when choosing to buy furniture are design and price. which additionally substantiates our conclusion. Bargaining power of buyers is. due to increased competition and hyper-production of furniture in some countries bargaining power of retail chain stores. because in so defined business relationship. especially Trend for more frequent direct co-operation between manufacturers themselves and retail chain stores has recently been evident… of Chinese manufacturers. even more emphasized.29 CARDS 2002 Project Development of Investment and Business Climate in Croatia furniture export growth. that bargaining power of buyers is considerably expressed in the concerned industry. trend for more frequent direct co-operation between manufacturers themselves and retail chain stores has recently been evident. buyers demand constant product unit price reductions while the agreement lasts. Raiffeisenbank Croatia and Emerging Markets Groups. 29 The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe. additionally had influence on pressure increase on domestic manufacturers to reduce theirs product prices. Besides. in order to avoid go-between agents and to reduce costs. is on the increase. decrease of furniture demand on our most important markets.d. . especially in Germany. Also. which insist on constant reduction of product prices. Likewise. like TVIN d. in this case. Domestic manufacturers manufacture according to the buyer's ready-made plans and designs and participate minimally in the product development phase itself.

While in Europe mostly plantation forests exist. There are firm foundations for further development of this industry in experienced and professional labour force. However. Raiffeisenbank Croatia and Emerging Markets Groups. Croatia abounds in high-quality raw material. 30 The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe. Especially due to high-quality timber products. i. when compared to its major competition. especially in assemblyline furniture manufacture prevail competition of countries with considerably lower labour costs than in Croatia and use of raw material of lower quality. but only in furniture manufacture with higher added value due to quality and/or product design. The SWOT analysis In the furniture manufacture we have defined the most significant advantages characteristic for Croatia as follows: Availability of quality timber products – due to lesser intensity of exploitation in the past and systematic care for forests. in other manufacture segments.e. which participate directly in manufacture. Tradition in furniture manufacture – long-time experience in highquality furniture manufacture both in large companies and small handcrafts. and engineers. as well as veneer manufacture. both workers. Croatia on the other hand abounds in autochthonous forests. Lower labour costs than in the EU countries – represent significant advantage of Croatia. Croatia has the biggest comparative advantage in manufacture of wood furniture. trees of lower quality are artificially planted.30 CARDS 2002 Project Development of Investment and Business Climate in Croatia 4. .

assembly-line manufacture represents products of lesser added value. The mentioned kind of manufacture completely disables exploiting of comparative advantages that Croatia has. where the most significant factor is product price. which hardly find market. . The project is implemented by: Deloitte Central Europe. due to bigger international competition in the concerned market. so-called small-volume manufacture. Technological obsolescence of manufacture plants– exactly due to termination of the former market. complex conditions and high capital price disable domestic manufacturers to modernize the plants in a shorter period. 31 The Project is financed by the European Union. At the same time. Raiffeisenbank Croatia and Emerging Markets Groups. Due to a long period of underinvestment. the level of technological equipment of domestic manufacturers is significantly bellow average of manufacturers in West European countries. Croatian furniture manufacture should exactly do the opposite and orientate towards manufacture of quality furniture in small volumes. domestic manufacturers were forced to invest in betterment of product quality and manufacture improvement. i. The most important disadvantages of Croatian furniture manufacture in comparison with other countries are: Current orientation towards low value added manufacture – result of the former orientation exclusively towards countries of former Yugoslavia. However.e. At the same time. the majority of domestic demand is covered by an increase in imports due to current orientation of domestic manufacturers towards export.31 CARDS 2002 Project Development of Investment and Business Climate in Croatia Consumption increase on domestic market– in the last few years. domestic demand records high increase of 8% per annum.

from raw material to the final product.e.32 CARDS 2002 Project Development of Investment and Business Climate in Croatia No specialization of domestic companies– the majority of domestic manufacturers participate in all phases of wood processing. which makes it impossible to specialize in individual production phase and they are not in the opportunity to improve theirs manufacture and to reduce costs. furniture. The mentioned company sells forests through tenders and price is determined by the book of rules. 32 The Project is financed by the European Union. Besides. i. which in some developed countries are leaders in furniture manufacture. for instance. The project is implemented by: Deloitte Central Europe. At the same time. which is then stored for a longer term. Raiffeisenbank Croatia and Emerging Markets Groups. which would take over the costs of storage and. Except for the financial loss by long-term storage itself. Non-existence of raw material market– the majority of raw material (approximately 80%) in Croatia is property of Hrvatske šume. which is reflected on the final product quality. Considering that quantity of furniture manufacture varies significantly in the majority of domestic companies and timber products is not always available from Hrvatske šume. term contracts on raw material purchase and timber products wholesalers are lacking. . as well. through clusters. timber products loose its quality. Likewise. many companies are buying significant quantities of raw material. The majority of manufacturers are not focused on only one segment of furniture manufacture. there is no necessity for merging and their mutual co-operation. Non-existence of product development – according to certain indicators even 65% of Croatian companied engaged in furniture manufacture do not have department for product development. this kind of manufacture organization negatively influences companies' flexibility and possibility to adapt to changes on market.

clusterizaton– would make it possible for domestic companies to specialize in individual phase of furniture processing and higher manufacture flexibility. there is a common phenomenon of. Raiffeisenbank Croatia and Emerging Markets Groups.would make it possible technologically to modernize manufacture and would bring access to new markets. Possibilities for further development of furniture manufacture are: Foreign investments of already renowned foreign investors . considering that nowadays furniture is not exclusively manufactured from wood and more and more various metals. glass and plastics are being used. not investing in product development makes it impossible to stay on current markets and to come onto new ones. Besides. At the same time members of 33 The Project is financed by the European Union. . Also. Considering that the demand for furniture is mostly defined by design. whereas the mentioned type of organization has proved very successful so far.e. while they have so far generally failed to come to Croatia.33 CARDS 2002 Project Development of Investment and Business Climate in Croatia and even 55% of them do not take designer services at all. quality management is quite neglected in domestic manufacture and only small number of companies holds international certificates (approximately 3% of the companies in wood industry hold ISO certificate). The industry of primary wood processing and furniture manufacture already has drawn a significant amount of foreign investments in the majority of transitional countries. even if manufacturer and interior designer manage to co-operation. Likewise. frequently the suggested ideas can not be realized in practice. i. due to an increase in quality and decrease in costs. The project is implemented by: Deloitte Central Europe. Acceptance of Austrian model of furniture manufacture. it is necessary for companies to specialize in certain segment of manufacture.

Costs increase due to necessity of harmonization with the EU standards – there is a realistic possibility that Croatian joining the EU will bring legal obligation to domestic companies to harmonize 34 The Project is financed by the European Union. However. the competition of the mentioned countries represents significant problem to domestic manufacturers. In medium-term period potential threats in furniture manufacture development are: Competition of countries with lower labour costs – considering the current structure of Croatian manufacture. pressures of the concerned competition should decline. especially it refers to electric power. indirect advertising of Croatian furniture and reduction of foreign trade deficit. Sales increase on domestic market– considering the recent high increase of the industry of tourism. by orientation of manufacture towards products with higher added value. Involvement of domestic furniture manufacturers into hotel supply chain would enable an increase in their sales. . The project is implemented by: Deloitte Central Europe. Proximity of the most important markets and joining the EU– represents significant advantage for Croatia. It enables processing and delivery to buyers in considerably shorter time and constant tracking of trends on the market.34 CARDS 2002 Project Development of Investment and Business Climate in Croatia wood cluster could profit both from favourable price of raw material through the system of mutual supply and from the supply of cheaper power. it is realistic to expect an increase of hotel industry investments in interior modernization and revival. Raiffeisenbank Croatia and Emerging Markets Groups. when compared to competition overseas.

that most investments will be made in the systems for environment protection and dangerous goods disposal. which will require additional investments. The project is implemented by: Deloitte Central Europe. It is considered. Raiffeisenbank Croatia and Emerging Markets Groups. . 35 The Project is financed by the European Union. like paint and varnish disposal.35 CARDS 2002 Project Development of Investment and Business Climate in Croatia their manufacture with the EU standards.

36 CARDS 2002 Project Development of Investment and Business Climate in Croatia 5. and products are unfamiliar to potential users. A growth industry environment 3. Five industry environments are identified in this model: 1. A mature industry environment 5. A declining industry environment 1. The project is implemented by: Deloitte Central Europe. 36 The Project is financed by the European Union. new technology. unprofitable stage. Competition is in the early. Market growth begins from an extremely small base and builds rapidly. Primary demand for the product begins to grow. An embryonic industry environment The industry environment in the introduction stage is characterized by market growth. A shakeout industry environment 4. heavy capital investment requirements. . and high prices. The industry’s life cycle The model we will refer to as the Industry lifecycle is the Hill and Jones model. little competition. An embryonic industry environment 2. This model is a useful tool for analyzing the effects of an industry's evolution on competitive forces. Raiffeisenbank Croatia and Emerging Markets Groups.

and the technology is not fully understood by the creators. Only a few pioneers explore the market. and competitors focus inward. This is a great time for a company introducing a new product because the company still enjoys a monopoly early in the growth stage. Unfortunately for the original firm. a sale begins to grow and profits usually start to follow.37 CARDS 2002 Project Development of Investment and Business Climate in Croatia Technological development involves a high level of product innovation and technological change. Dominant technological designs and standards have not been established. A growth industry environment As the early adopters begin to try the product. prices tend to be high but quite volatile. . Profits generally are negative. Sales are few and may be slow to build as new markets develop. Despite the high price and volatility. sales and profits sore. the competition has also noticed the new product's success. However. 2. the competition races to offer their own products and gain a share of a 37 The Project is financed by the European Union. The company is reaping all the sales and profits of the new product. Raiffeisenbank Croatia and Emerging Markets Groups. As the early adopters begin influencing the early majority. The ventures generate little revenue but incur high levels of expenses. as the industry develops. The capital investment requirements are significant. customers are willing to pay a high price for the new products and/or services and are willing to withstand explosions in the price level of the products and/or services. The project is implemented by: Deloitte Central Europe. sales volume grows. directing their attention to their product rather than their competitors. In addition. The competition has also been watching from the new product's inception. Investment is needed to support the costs of organizing a new venture and the development of its new products and/or services. Although they cannot be the first.

the competition for customers becomes fierce. producers are shaken off. the increased competition causes profits to peak at the end of the growth stage and beginning of the maturity stage. they are divided among many manufacturers. Although total industry profit is strong because sales are high and many units are sold.38 CARDS 2002 Project Development of Investment and Business Climate in Croatia growing market. 4. Besides many more manufacturers offering their products. After the initial mass entry. Profits 38 The Project is financed by the European Union. The number of competitors is still high. A shakeout industry environment This phase is characterized by many products on the market and multiple product variations. and this trend continues into the early period of the maturity stage. Competition is strong and companies are struggling for a bigger market share. Although total sales continue to grow during the first part of the maturity stage. The result is a market saturated with many manufacturers offering many models of the product. A mature industry environment By the end of the growth of the life cycle. 3. the producers continue the product-differentiation process begun in the growth stage. The project is implemented by: Deloitte Central Europe. Companies which revealed themselves as weak competitors’ leave the market and strong competitors take their place and challenge themselves in the next stage of the industry cycle. Although total sales and profits continue to grow throughout the growth stage. the market is beginning to become very competitive. With so many companies now in the market. This is the stage where exits via mergers and bankruptcies take place of the “frivolous”. . Raiffeisenbank Croatia and Emerging Markets Groups. profits per unit begin to decrease and the market growth is beginning to level off. in this phase.

Music industry continued its lifecycle. thereby killing the product group. but also the product category itself now becomes a factor." and it may no longer be in demand. Manufacturers begin to drop out as they see profits turn to losses.39 CARDS 2002 Project Development of Investment and Business Climate in Croatia then decline during the remainder of the maturity stage. even inefficient companies made money. Fight for a market share between companies is becoming over expensive. even the laggards will switch. 5. . The industry itself may continue to exist. and manufacturers who can profitably serve this niche will continue to do so. so the companies are forced to consolidate or to go bankrupt. the market may perceive the product as "old. not only does the efficiency of the company play a factor in the decline. By this time. The project is implemented by: Deloitte Central Europe. only now with new products. and the last companies producing the product will be forced to withdraw. However. whereas the product that “created“ the industry “becomes history”. Raiffeisenbank Croatia and Emerging Markets Groups. but new products. A declining industry environment The number of companies abandoning the market continues and accelerates in the decline stage. 39 The Project is financed by the European Union. replaced the vinyl record. For example: vinyl record created the music industry. In this phase. tapes and CDs. In the growth stage. Eventually. The laggards will resist switching to the alternative. The declining profits mean that the market is not as attractive to companies as it was in the growth stage. only the best companies and their products survive in the maturity stage. The product will continue to exist as long as a few manufacturers can maintain profitability.

lower margins). Bargaining power of buyers’ has been increasing due to international competition on the local market. Raiffeisenbank Croatia and Emerging Markets Groups. that is 35% lower than in the Slovenian case. so we expect further pressure on the margins. The EBITDA margin is stabile. The Croatian furniture manufacture industry is placed in a shakeout industry environment. . As a result of that we expect initiation of the M&A activities on a next 3-5 years period together with pressure on the present margins. Slovenian sample shows us an indication of the mature phase in the industrial life cycle (decrease in sales. The industry is placed in a shakeout industry environment 40 The Project is financed by the European Union.40 CARDS 2002 Project Development of Investment and Business Climate in Croatia Conclusion: We have done analysis based on the top 20 companies in the industry. and higher than the The industry is placed in a shakeout industry environment Slovenian peer. The growth rate of the industry round three times higher than the GDP growth in 2004. Average revenue per company amounts round 12 Mio Euro. The project is implemented by: Deloitte Central Europe.

D.O.O.O.O.O.O. DRVNA INDUSTRIJA GELI D. D.I.O.O. MUNDUS V. SEKULIĆ D.O. PROIZVODNJA I OPR ORIOLIK D.O. KRAGIĆ D.O. PRIMA COMMERCE D.O.O.41 CARDS 2002 Project Development of Investment and Business Climate in Croatia List of the top 20 companies in the industry based on revenues: List of companies A-G DINAS D. POŽEGA TVIN D.S. L&P TEHNOLOGIJE D.O. Raiffeisenbank Croatia and Emerging Markets Groups.O. GAJ-SLATINA D.O FINVEST CORP D. The project is implemented by: Deloitte Central Europe.O.O. BRESTOVAC TVORNICA NAMJEŠTAJA CALLIGARIS D.O.O. BOR D.O. D. DRVNA INDUSTRIJA NOVOSELEC D.O.O. ČAKOVEC SPIN VALIS D.O.O.O. KOSTEL PROMET D. HESPO D. . 41 The Project is financed by the European Union.T. D.O. CIPRIJANOVIĆ D. PROMMING D.D.

Competitiveness assessment – peer group Appendix 42 The Project is financed by the European Union. Raiffeisenbank Croatia and Emerging Markets Groups.42 CARDS 2002 Project Development of Investment and Business Climate in Croatia 6. The project is implemented by: Deloitte Central Europe. .

considering.43 CARDS 2002 Project Development of Investment and Business Climate in Croatia 7. that currently the number of the mentioned manufacturers in Croatia is negligible. especially Italy. which would make the quality of domestic raw material prominent. seats and chairs and tables and chest drawers. but there is also possibility of investment in companies participating in the supply chain.e. Also. Possibilities of investing in Croatia are not only limited to companies of Possibilities of investing in Croatia are not only limited to companies of direct furniture manufacture. Also. . The project is implemented by: Deloitte Central Europe. Currently the majority of primary wood processing in Croatia refers to small saw-mills. Conclusion Despite plenty of wood raw material Croatia recorded relatively low Croatia recorded relatively low level of foreign investments into the industry of furniture manufacture… level of foreign investments into the industry of furniture manufacture. which could hardly be internationally competitive as to quality and processing price. we see potential for investment in custom-made manufacture of high-quality furniture. as well. which would orientate themselves mostly towards manufacture of massive furniture. which could supply not only domestic manufacturers but also manufacturers in the neighbouring countries. door-handles and other metal parts used in furniture manufacture. It refers primarily to opening of high-capacity saw-mills. there is certain potential for investment in companies engaged in manufacture of metal pieces. but there is also possibility of investment in companies participating in the supply chain… direct furniture manufacture. especially in opening or buying of existing companies. but competition as well. Potential for realization of direct foreign investments exists. i. we expect development of furniture production and further growth of international demand. Raiffeisenbank Croatia and Emerging Markets Groups. 43 The Project is financed by the European Union. that could result in growing interest of foreign investment companies in Croatia. In the following years.

29% 7.753.83% 9.51% -11.35% 20.181 6.68% -4.323.49% 23.950.158 5.983 6.799.70% 6.846.08% 28.534 EBITDA 2003 10.69% 11.Appendix: 1 CARDS 2002 Project Development of Investment and Business Climate in Croatia CROATIA Company 1 Company 2 Company 3 Company 4 Company 5 Company 6 Company 7 Company 8 Company 9 Company 10 Company 11 Company 12 Company 13 Company 14 Company 15 Company 16 Company 17 Company 18 Company 19 Company 20 Simple average Without Company 17 .852.539.06% -0.outlayer Revenue in 2004 in € 40.89% 6.61% 11.88% 9.060.89% 0. .92% 9.43% 18.675 14.72% 26.72% -10.23% -11.60% 14.63% 9.49% 2.781.890 4.260.50% 10.78% 4.87% 14.00% 5.78% 6.69% 4.704 34.804.13% 24.67% 308.345.594 8.75% 43.931 7.12% 8.54% EBITDA 2004 6.323.74% 7.819 4.471 8.324 11.328 11.50% -4.485 13.75% -1.837.632 7.11% 22.22% 12.97% 0.108.31% -7.27% 1 The Project is financed by the European Union.28% 8.610 17.97% 51.82% 3. The project is implemented by: Deloitte Central Europe.89% Revenue growth 03/04 -3.71% 1.63% 22.05% 26.80% 11.338 20.13% 23.95% 10.774.182 5.44% 19.93% -4.20% 15.32% -2.185 4.297 8.86% 4.63% 25.565.893 4.14% 11.01% 2.48% 3.95% 24.744.45% 20.930.26% 6. Raiffeisenbank Croatia and Emerging Markets Groups.84% 5.348.951.

000 3.63% -6.86% 20.60% 27.000 21. ROGAŠKA LES d. D.000 17.82% Growth rates .69% -5.D.60% 7.800 EBITDA margin 15.o.695.51% 4.40% 4.94% 27..159. ŽELEZNIKI BREST-POHIŠTVO D.000 16. SLOVENJ GRADEC NOVOLES D.28% -4.D.26% 7.51% 34. D.08% -6.65% 6.06% Gross margin 39. CERKNICA GORENJE NO.000 39.48% 34.76% 3.63% 4. D. The project is implemented by: Deloitte Central Europe.95% 6.000 18.90% 0.o. D.000 10.32% 2.O.118.O.879.32% -0.260.570.d.O.984.D..74% 22.267. VELENJE-GORENJE KLI LOGATEC.06% 34.128. NOVA OPREMA D. Raiffeisenbank Croatia and Emerging Markets Groups.67% -1. ZAGORJE OB SAVI Simple average 2 The Project is financed by the European Union.2 CARDS 2002 Project Development of Investment and Business Climate in Croatia Revenue in 2004 in € 24. STRAŽA POHIŠTVO BREŽICE d.90% 39.D.03% 61.500.000 6. LIPA AJDOVŠČINA D.D.76% -9. D.57% 4. LIKO VRHNIKA.07% 1.92% -1.O. PODPLAT SVEA.D. .000 26.23% SLOVENIA ALPLES. LIK KOČEVJE D.718.last 5 years -1.D.D.10% 40.000 19.

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