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.

e. which can be located in business group under the DN code. At the same time the mentioned business group employed around 5% of the totally employed in manufacturing industry or nearly 14. 5 The Project is financed by the European Union. therewith realizing gross added value of 1. i. i. which accounts for 4. During the same year amount of 545 million USD of concerned products was imported in Croatia. . The project is implemented by: Deloitte Central Europe.1) is grouped within the furniture manufacture group and other manufacturing industry (NACE 36).e.3% of total commodity import value. 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 36.15 billion kuna. 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. whereas costs for remaining intermediary consumption amounted to barely less than 600 million kuna.5 CARDS 2002 Project Development of Investment and Business Climate in Croatia 1.3 billion kuna. Raiffeisenbank Croatia and Emerging Markets Groups. At the same time production material amounted to 977 million kuna. 0. 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.8%. approximately 3.3% of total export value of the Republic of Croatia (RH in further text).5 thousand people. According to other source. During 2004 the DN business group had share in gross added value (GVA) with approx.

6 The Project is financed by the European Union. whereas the value of imports was greater and amounted to 287 million USD. according to the amount of totally realized revenues. 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. In the period from 1993 to the end of the third quarter. the primary business of which was furniture manufacture. 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.000 persons. 27. . Investments were made in 15 companies with furniture manufacture as their primary business.92 million USD of foreign proprietary investments was recorded… of foreign proprietary investments were recorded in the Republic of Croatia. Raiffeisenbank Croatia and Emerging Markets Groups.92 million USD 27. During 2004 there were 365 companies registered in the Republic of Croatia. During 2004 furniture was exported in the amount of 217.4 million USD.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. In 2006. At the same time the mentioned companies employed approximately 11.1). the sectors of other manufacturing industries and jewellery manufacture can be singled out. The project is implemented by: Deloitte Central Europe.

Industry definition.1. segments and limits 2. which usually represents the most appreciated furniture segment. particleboard being the most used material coated with decorative materials. furniture can be divided into massive. .1) itself can be additionally divided into following sub industries.11) Manufacture of miscellaneous furniture for business and sales premises (NACE 36. mostly veneer. panelled and upholstered furniture. purpose and product's manufacturing material.7 CARDS 2002 Project Development of Investment and Business Climate in Croatia 2. At the same time the above classification mostly matches international trading and customs classifications.13) Manufacture of miscellaneous furniture (NACE 36. Raiffeisenbank Croatia and Emerging Markets Groups. tables and chests of drawers. 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 36.14) Manufacture of mattresses (NACE 36. Under massive furniture Considering the very manufacturing technology. The project is implemented by: Deloitte Central Europe. panelled and upholstered furniture… manufacture we include timber wood manufacture of seats. furniture can be divided into massive. dimensions. depending on product kind: Manufacture of chairs and seats (NACE 36.15) Each of the above mentioned sub industries can be further subdivided depending on kind. 7 The Project is financed by the European Union. Considering the very manufacturing technology. Panelled furniture accounts for the majority of totally manufactured furniture.12) Manufacture of miscellaneous kitchen furniture (NACE 36.

Also. furniture manufacture comprises manufacture of furniture. considering the fact that they are used in final fitting.1). Secondary wood processing refers to manufacture of wood products. The project is implemented by: Deloitte Central Europe. considering the frequent mistake and mixing of secondary wood processing and furniture manufacture. which does not consist of wood. their primary business being furniture manufacture (NACE 36. in spite of significant comparative advantages of Croatia.1 million euro. In 2004 total furniture export value amounted over 180. but is primarily made of metal. Simultaneously. total of 242 million euro of furniture was imported. their primary business being furniture manufacture… In Croatia during 2004 there were 365 registered companies. The same year mentioned companies realized total revenue of 340 million euro and employed 10. which do not need to be further processed in order to be used for their end-purpose.920 workers. .2 Market size In Croatia during 2004 there were 365 registered companies. 2. Raiffeisenbank Croatia and Emerging Markets Groups. thus generating commodity trade deficit of 62 million euro. There are still disputes among professional circles whether parquetry and interior joinery (doors and windows) should be included. we deem it necessary to explain the difference between the two. but are not classified as furniture. On the other hand. plastics and/or glass. 8 The Project is financed by the European Union. all sub industries of furniture manufacture industry recorded positive trends and business revenue growth.8 CARDS 2002 Project Development of Investment and Business Climate in Croatia Besides.

563 pieces) and nonupholstered wooden seats (641. i. Also. manufacture physical volume increased by 20. 52. calculated as business revenue per employee.6 million euro. 52. there were a total of 2. number of companies and employees. in comparison with 2003.065 pieces). seats and chairs manufacture increased by 422.11) During 2004 there were 38 companies registered in the mentioned sub 38 companies registered realized business revenue in amount of approx.264 euro during the concerned year.476. . In 2004 there were 2. Raiffeisenbank Croatia and Emerging Markets Groups. Manufacture structure shows that Croatian manufacturers make mostly upholstered and non-upholstered chairs and seats. author’s calculation Manufacture of seats and chairs (NACE 36.6 million euros… industry. amounted to 23..202 pieces. twoseated and three-seated sofas was rather small. productivity according to furniture manufacture sub industries Source: CBS (State's institute for statistics). During 2004. manufacture physical volume increased by 20. An average productivity.470. in comparison with 2003. the most significant increase was realized by 9 The project is implemented by: Deloitte Central Europe. whereas the number of manufactured armchairs.191 persons employed in the manufacture of seats and chairs.602 pieces of chairs and seats manufactured mainly upholstered wooden chairs (1. HGK (Croatian Chamber of Commerce)..6%.6%.e. During 2004. which realized business revenue in amount of approx.9 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 2: Revenues. The Project is financed by the European Union. At annual level. FINA.

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

manufacturing majority of which was classified as miscellaneous wooden office furniture. there were 71 companies registered in the concerned manufacture. The project is implemented by: Deloitte Central Europe.7 million euro and recently there has been an import increase trend of the concerned products.638 euro per employee was realized in furniture manufacture of the mentioned sub industry. productivity of 42.000 pieces of annual manufacture capacity). Significant manufacture was realized in processing of shelves. including medical furniture.273 pieces of furniture for business and selling purposes were manufactured during 2004. Majority of Croatian export refers to wooden wardrobes sale (6 million euro) and metal household furniture sale (4. export value of furniture for business and selling purposes. metal furniture and wooden wardrobes and wall-units.5 million euro) on foreign markets. 11 The Project is financed by the European Union. Also. . 505. amounted to 13. Raiffeisenbank Croatia and Emerging Markets Groups.6 million euro.6 million euro. The mentioned companies realized sales revenue in the amount of 37.11 CARDS 2002 Project Development of Investment and Business Climate in Croatia Manufacture of miscellaneous furniture for business and sales premises During 2004.35 million euro and employed 876.35 million euros and employed 876… for business premises including seats and chairs. where even 240.531 pieces of furniture was manufactured. More than half of imports refer to importation of unclassified metal household furniture. as well (around 60. whereas importation of office tables accounts for 2. In 2004. The same year import value of the same products amounted to even 34. with their primary business being manufacture of furniture 71 companies realized sales revenue in the amount of 37.

almost 15 million of which refers to built-in kitchen units. the import value of kitchen furniture has recently been on 12 The Project is financed by the European Union.000 kitchen tables manufactured. in 2004.784). In 2004. a total of 900. Unlike export. there were 39 39 companies employed 511 workers and realized sales revenue in the amount of 10. seats and chairs excluded. The project is implemented by: Deloitte Central Europe. EUR Source: CBS. there business being kitchen furniture manufacture.550 pieces of exclusively kitchen furniture was manufactured.85 million euro. Raiffeisenbank Croatia and Emerging Markets Groups.237 euro. author's calculation Manufacture of the remainder kitchen furniture According to the latest information available. In the same year kitchen furniture was imported in value of even 23.12 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 4: Import and export of furniture for business and selling purposes. The physical production indexes show a slight stagnation of the mentioned industry during 2004.8 million euros… companies registered in the Republic of Croatia. The mentioned companies employed 511 workers and realized sales revenue in the amount of 10. In kitchen furniture production structure the most represented were wooden cupboards production (43.000 euro worth kitchen furniture was exported. total of 129. In 2004. . The same year's average productivity amounted to 21. During 2003 and 2004 export value of the mentioned segment sees a constant decrease.909 pieces) and wooden hanging units (42. In the same year there were over 33.8 million euro.

838 and realizes productivity of 30. domestic miscellaneous furniture manufacturers exported commodities in value of 52.3 million euros… manufacture of wardrobes. in 2004. EUR Source: CBS. there has been a noticeable trend in export increase of the mentioned manufacture segment. considering that in 2002 export 13 The Project is financed by the European Union.311 euro.978 pieces) and various kinds of wardrobes and beds. According to the latest information.793 pieces). there were totally 212 registered companies. a total of 1. wall-units and mirrors.09 million pieces of various furniture items was manufactured in the industry of manufacture of miscellaneous furniture. Recently. author's calculation Manufacture of miscellaneous furniture Sub industry of manufacture of miscellaneous furniture comprises mostly In 2004. the concerned industry employs even 6.3 million euro. The mentioned companies realized business revenue in the amount of 207. wooden footwear furniture (185. Raiffeisenbank Croatia and Emerging Markets Groups. The biggest part of physical manufacture refers to manufacture of shelves (284. Table 5: Import and export of kitchen furniture. almost 40 million of which referred to export of wooden unclassified furniture and wooden parts.3 million euro. The project is implemented by: Deloitte Central Europe. Most companies are engaged in the mentioned manufacture segment. . In 2004. beds. Except for the highest number of companies and highest revenues realized. In 2004.13 CARDS 2002 Project Development of Investment and Business Climate in Croatia the increase. there were totally 212 registered companies and realized business revenue in the amount of 207.

were registered in mattress manufacture Only five. EUR Source: CBS. were registered in mattress manufacture sub industry… sub industry. The biggest share of manufacture refers to manufacture of mattress supports. The project is implemented by: Deloitte Central Europe. foam rubber mattresses and metal springs mattress. .731 euro. only five. Commodities in value of 99 million euro were imported the same year. Table 6: Import and export of miscellaneous furniture. mattresses and mattress supports export amounted to 14. 644. spring mattresses and other bed equipment. 14 The Project is financed by the European Union.2 million euro and in last few years it was stable. The manufacture of mattresses itself divides into manufacture of mattress supports. In 2004.000 of which was manufactured. majority of which referred to wooden household furniture and wooden furniture parts.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. They employed 504 persons. with realized business revenue of 32 million euro during 2004. When compared with 2002 and 2003. the mentioned segment meets manufacture increase in all categories. However. author's calculation Manufacture of mattresses The least companies. Raiffeisenbank Croatia and Emerging Markets Groups. and there were totally 897. Majority of exports consisted of sales on foreign markets of mattress supports.000 pieces manufactured in 2004.

For forecasting of future trend at the labour market.9 million euro. Labour supply In analysis of labour force offered in the furniture production industry.3.007. forestry and agronomy engineers. in the mentioned period at the Croatian Central Employment 15 The Project is financed by the European Union. Raiffeisenbank Croatia and Emerging Markets Groups. majority of which referred to import of miscellaneous bed equipment and other mattresses. For example. author's calculation 2. total number of unemployed persons qualified for work in furniture production area accounted for 3. Table 7: Import and export of mattresses. qualified labour force includes: wood converters (mainly wood processors. In analysis of labour market. of machines manufacturing wood In the end of 2005 there were 457 unemployed forestry and agronomy engineers in Republic of Croatia.15 CARDS 2002 Project Development of Investment and Business Climate in Croatia At the same time import amounted to 14. EUR Source: CBS. manipulators/operators of wood processing machines manipulators/operators products. . carpenters for furniture and tuners and operators of wood processing machines). and labour force qualified for work in furniture production. The project is implemented by: Deloitte Central Europe. mainly unemployed wood converters. it is important to point out official statistics on new registered persons in 2005 as well.e. In the same time. labour force was classified as specialists. i.

Similar trend were noticeable in 2005 and if number of new registered unemployed persons qualified for furniture production is analysed. there was total of 2. Human resources in this branch of industry are also unused in most of other counties. which is expected taking into account location of faculties of forestry and agronomy. Taking into account current inflexibility. at level of a county. then the highest number of new unemployed persons was recorded in the city of Zagreb and the counties in Slavonia region. i. During the same year. The highest number of unemployed graduated engineers is recorded in Osječko-baranjska County and in the city of Zagreb. but also inflow of new labour force. 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.e. 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. In 2005 in these regions inflow of the mentioned labour force was also the highest. Raiffeisenbank Croatia and Emerging Markets Groups. 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.427 new registered unemployed persons qualified for work in furniture production sector. Splitsko-dalmatisnka County and the city of Zagreb. 16 The Project is financed by the European Union. .

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. The project is implemented by: Deloitte Central Europe.17 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 8: Number of unemployed persons. 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. .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. 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. 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. 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. Raiffeisenbank Croatia and Emerging Markets Groups.18 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 9: Number of registered new unemployed persons. .

The project is implemented by: Deloitte Central Europe.19 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3. Raiffeisenbank Croatia and Emerging Markets Groups. . 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.

HGK. according to address book of Croatian Chamber of Commerce (HGK). As of the latest information on productivity levels.20 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3. during 2004 there were 364 companies engaged in furniture manufacture and they employed total of 10.140 euro. amounted to 31. Raiffeisenbank Croatia and Emerging Markets Groups. which. primarily deal in furniture manufacture. . According to the mentioned source. Industrial rivalry analysis The industrial rivalry analysis will be made on a sample of companies. author's calculation 20 The Project is financed by the European Union. measured by business revenue per employee. At the same time the mentioned companies realized business revenue in the amount of 340 million euro. The project is implemented by: Deloitte Central Europe.920 persons. Table 10: Business revenues and number of employees of the 20 most significant furniture manufacturers in the RH Source: FINA.1.

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 36.9%. however.2%. they realize almost 70% of total business revenue of all furniture manufacturers. for instance. Besides. If the HHI is between 0 and 1. CR10.21 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 .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. Thus. as to the realized business revenue for 2004. competition pressures are distinct. on the Croatian territory there 21 The Project is financed by the European Union. that competition level varies between different furniture manufacture segments. According to business revenues of the biggest 20 companies. amounts to 486. which indicates that there is low concentration in the concerned industry. while concentration of the leading five accounts for 41. and if it is over 1. i. can be concluded. according to domestic manufacturers experiences. the 20 leading companies employ 7. The project is implemented by: Deloitte Central Europe. revenue share of 10 leading companies. Raiffeisenbank Croatia and Emerging Markets Groups. they realize almost 70% of total business revenue of all furniture manufacturers… According to business revenues of the biggest 20 companies. The three leading companies (CR5) as to the realized revenues in 2004 realize 33. .800 it is considered highly concentrated. At the same time.5% of total revenues of the entire industry.279 or 67% of the totally employed in this industry. Hence. Herfindahl Hirschman index (HHI) for the 20 most significant companies. their influence on employment trends in furniture manufacture industry is also significant. that is.e.1). but if it approaches the level of 10.000 it indicates the existence of monopoly in the concerned market segment.000 the market is considered not to be concentrated. amounts to 55.

However. as well. thus having a strong influence on the growth of industrial rivalry within the industry. The project is implemented by: Deloitte Central Europe. Besides. which increases fixed costs and makes it difficult to leave the market. in the concerned furniture manufacture segment concentration rate is higher and in this way competition pressures on companies are reduced. 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. 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. Raiffeisenbank Croatia and Emerging Markets Groups. too. Likewise. . being engaged both in all wood processing phases and in furniture production demands higher level of investments needed. two companies additionally stand out as to the realized business revenue amount. This includes primary processing. that concentration rate is the lowest in this very manufacture segment. where three companies stand out as far as business results are concerned. Likewise. mostly due to a surplus of demand for hard timber over supply. Hence. Similar concentration rate level is present in kitchen furniture manufacture. Lower rate of market concentration and more powerful competition are more distinct in the segment of manufacture of office furniture and seats and chairs.22 CARDS 2002 Project Development of Investment and Business Climate in Croatia are only a few manufacturers in the mattress manufacture segment. Domestic companies are usually not specialized in only one segment or in the very furniture production. This manner of unspecialized manufacture of most of domestic companies takes effect on intensifying of competition pressures among them. it can be concluded. but they are usually engaged in all phases of wood processing. 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.

we can conclude that industrial rivalry rate is high in almost every segment of furniture manufacture. HEP d. .e. as process of joining of the Republic of Croatia into the European 23 The Project is financed by the European Union. 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. which includes investments increase and high fixed costs. Raiffeisenbank Croatia and Emerging Markets Groups.. force companies into engagement in almost every phase of wood processing. Non-existence of developed timber products market and primary processed lumber in Croatia. The project is implemented by: Deloitte Central Europe.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. Also.e.d.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. 3. there is a monopoly in the supply of timber products. i.). i. Market permeability. the current system of timber products price fixing is not entirely grounded on market principle. This has discouraging effect on entry of new companies into furniture manufacture. because it warranties only mid-term timber products supply and only if strict conditions are met. Likewise. regardless of somewhat lesser number of domestic manufacturers in certain sub industries.2. We can conclude that industrial rivalry rate is high in almost every segment of furniture manufacture… Due to everything that was mentioned above.

puts pressure on furniture price cuts at global level. The mentioned higher initial costs could discourage potential foreign investors and could redirect their investments into neighbouring countries. there are currently two institutions in Croatia. . Raiffeisenbank Croatia and Emerging Markets Groups. 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. especially Competition of countries with lower labour costs puts pressure on furniture price cuts at global level… China. It is expected that most funds will need to be invested in systems for environment protection. 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. Otherwise. the starting investment costs will be on the increase.e. 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. Similarity and already existing harmonization of domestic furniture quality standards with those of West European countries. in order to lower the limited fixed costs and to increase international competition. i. The project is implemented by: Deloitte Central Europe.24 CARDS 2002 Project Development of Investment and Business Climate in Croatia Union intensifies. and Šumarski fakultet. it is very important nowadays to manufacture furniture in assembly-line and in large quantities. Hence. positively influences the entry of new companies on domestic market. In spite of the fact. that entry barriers are currently distinct. especially on panelled furniture. International trend towards assembly-line manufacture orientation represents one of entry barriers because it implies production in big series. Recently. Euroinspect d. due to harmonization to European manufacture standards. paint and varnish disposal. competition of countries with lower labour costs. due to harmonization to European manufacture standards… drying and storage of timber products and dangerous goods disposal. mostly because 24 The Project is financed by the European Union.d. authorized to issue necessary certificates.

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

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

the most important energy supplier used in the process of furniture manufacture. if we take the investment return period into consideration. because it discourages investments in manufacture modernization and in this way disables productivity increase and catching up with international competition. Also.27 CARDS 2002 Project Development of Investment and Business Climate in Croatia Likewise. which has negative effect on the manufacturers themselves making long-term planning of manufacture and costs calculation impossible for them. negatively effects on manufacture development with the approval of agreement. For instance. which have unfavourable influence on investment growth and on development of the very industry of furniture manufacture in Croatia. The mentioned paragraph has direct negative effect on realization of possible 'Brownfield' foreign investments in the concerned industry. the current agreement structure comprises some paragraphs. quick changes of administratively determined price levels have an unfavourable effect on domestic manufacturers and their business. which states. The project is implemented by: Deloitte Central Europe. 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. which is very important. 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. Likewise. 27 The Project is financed by the European Union. especially in short-term. Raiffeisenbank Croatia and Emerging Markets Groups. Domestic manufacturers’ experiences show sudden electric power price Domestic manufacturers’ experiences show sudden electric power price changes… changes. Price changes mostly occur due to tariff model changes. agreement with HŠ on raw material supply includes a paragraph. that the agreement would be terminated if companies owners structure changes. . the criterion on the number of employees in companies.

manufacturers did not realize direct contact with foreign wholesalers and retailers. The project is implemented by: Deloitte Central Europe. which would reduce manufacturers' costs and would enable faster adaptation to current market demand. low level of managerial skills. manufacturers started independently. but exported their products through the distributor company of 'Exportdrvo'. 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. However. with the help of Croatian Chamber of Commerce. Strategy of Government of the RH for wood industry development should lead to reforms. which would eliminate the momentary negative effects of monopoly on domestic manufacturers. Raiffeisenbank Croatia and Emerging Markets Groups.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.5. However. after the 'Exportdrvo' heavily reduced furniture export volume of domestic manufacturers. Also. the liberalization of electric power supply should have a positive effect on further development of the industry of furniture manufacture in Croatia. When coming onto foreign markets. In spite of currently unfavourable effects of powerful bargaining power of suppliers on trends in furniture manufacture. 3. This primarily refers to the proposition of raw material market re-establishment. inexperience and poor foreign language knowledge unfavourably reflected on business co-operation intensification and 28 The Project is financed by the European Union. . After declaring independency and loss of the former markets there were more intense endeavours to come onto new markets. to visit fairs and make contacts with foreign buyers.

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

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

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

there is no necessity for merging and their mutual co-operation. At the same time. 32 The Project is financed by the European Union. from raw material to the final product. The majority of manufacturers are not focused on only one segment of furniture manufacture. Raiffeisenbank Croatia and Emerging Markets Groups. many companies are buying significant quantities of raw material. which in some developed countries are leaders in furniture manufacture. i. which is reflected on the final product quality. Non-existence of raw material market– the majority of raw material (approximately 80%) in Croatia is property of Hrvatske šume. The mentioned company sells forests through tenders and price is determined by the book of rules. which is then stored for a longer term. Except for the financial loss by long-term storage itself. 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. .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. for instance. The project is implemented by: Deloitte Central Europe. term contracts on raw material purchase and timber products wholesalers are lacking. Considering that quantity of furniture manufacture varies significantly in the majority of domestic companies and timber products is not always available from Hrvatske šume. through clusters.e. Likewise. this kind of manufacture organization negatively influences companies' flexibility and possibility to adapt to changes on market. as well. which would take over the costs of storage and. Besides. timber products loose its quality. furniture. 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.

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

. Proximity of the most important markets and joining the EU– represents significant advantage for Croatia. the competition of the mentioned countries represents significant problem to domestic manufacturers. It enables processing and delivery to buyers in considerably shorter time and constant tracking of trends on the market. 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. 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. Involvement of domestic furniture manufacturers into hotel supply chain would enable an increase in their sales. pressures of the concerned competition should decline. Sales increase on domestic market– considering the recent high increase of the industry of tourism. indirect advertising of Croatian furniture and reduction of foreign trade deficit.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. especially it refers to electric power. when compared to competition overseas. it is realistic to expect an increase of hotel industry investments in interior modernization and revival. Raiffeisenbank Croatia and Emerging Markets Groups. However. The project is implemented by: Deloitte Central Europe. by orientation of manufacture towards products with higher added value.

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

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

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

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

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

and higher than the The industry is placed in a shakeout industry environment Slovenian peer. The Croatian furniture manufacture industry is placed in a shakeout industry environment. . lower margins). Slovenian sample shows us an indication of the mature phase in the industrial life cycle (decrease in sales. Bargaining power of buyers’ has been increasing due to international competition on the local market. 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. The industry is placed in a shakeout industry environment 40 The Project is financed by the European Union. Average revenue per company amounts round 12 Mio Euro. The project is implemented by: Deloitte Central Europe. The EBITDA margin is stabile. so we expect further pressure on the margins. Raiffeisenbank Croatia and Emerging Markets Groups. The growth rate of the industry round three times higher than the GDP growth in 2004.40 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. that is 35% lower than in the Slovenian case.

O.O.O.D.O.O.O.O. ČAKOVEC SPIN VALIS D.O. MUNDUS V. D. L&P TEHNOLOGIJE D.O.O.O.O. 41 The Project is financed by the European Union. KOSTEL PROMET D. BOR D. DRVNA INDUSTRIJA NOVOSELEC D.O FINVEST CORP D. CIPRIJANOVIĆ D. PRIMA COMMERCE D.O. D. Raiffeisenbank Croatia and Emerging Markets Groups. SEKULIĆ D.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.O.O. GAJ-SLATINA D. .O. KRAGIĆ D. BRESTOVAC TVORNICA NAMJEŠTAJA CALLIGARIS D.O.O. D. PROIZVODNJA I OPR ORIOLIK D.O. POŽEGA TVIN D.O.O.O. The project is implemented by: Deloitte Central Europe. D. DRVNA INDUSTRIJA GELI D.O.T.I.O.O. HESPO D. PROMMING D.S.

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. Competitiveness assessment – peer group Appendix 42 The Project is financed by the European Union.

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

774.12% 8.69% 11.89% 0.485 13.951.13% 23.338 20.95% 10.80% 11.32% -2.51% -11.060.86% 4.70% 6.328 11.185 4.50% -4.60% 14.45% 20.983 6.610 17.348.44% 19.75% -1.471 8.43% 18.63% 9.632 7.158 5.83% 9.67% 308.outlayer Revenue in 2004 in € 40.28% 8.49% 23.29% 7. The project is implemented by: Deloitte Central Europe.06% -0.345.27% 1 The Project is financed by the European Union.95% 24.63% 22.82% 3.950.893 4.14% 11.31% -7.781.50% 10.260.181 6.675 14.297 8.48% 3.87% 14.61% 11.22% 12.97% 0.74% 7.35% 20.744.20% 15.324 11.539.565.01% 2.72% -10.84% 5.69% 4.13% 24.26% 6.05% 26.323.819 4. Raiffeisenbank Croatia and Emerging Markets Groups.799.323.00% 5.49% 2.54% EBITDA 2004 6.704 34.08% 28.11% 22.63% 25.71% 1.890 4.930.89% 6.72% 26.846.804.88% 9.78% 6. .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 .108.837.93% -4.92% 9.534 EBITDA 2003 10.89% Revenue growth 03/04 -3.78% 4.97% 51.23% -11.852.753.75% 43.594 8.68% -4.182 5.931 7.

92% -1.000 10.570.65% 6. D.D. LIKO VRHNIKA.000 26.10% 40.O. VELENJE-GORENJE KLI LOGATEC.40% 4.000 17. Raiffeisenbank Croatia and Emerging Markets Groups..last 5 years -1. The project is implemented by: Deloitte Central Europe. D. PODPLAT SVEA.879.718.267.95% 6.500. .o.000 19.07% 1. LIPA AJDOVŠČINA D.D.260.06% Gross margin 39.03% 61.26% 7.90% 39.63% -6.48% 34.08% -6.D. NOVA OPREMA D.d.69% -5.23% SLOVENIA ALPLES.159..D. STRAŽA POHIŠTVO BREŽICE d.94% 27.000 6.51% 34.O.O.000 21. LIK KOČEVJE D.86% 20.06% 34.28% -4.82% Growth rates .000 39.32% 2.000 18.57% 4.984.D. D.51% 4.D.90% 0. D.D.74% 22.67% -1.800 EBITDA margin 15.76% -9. ROGAŠKA LES d. ŽELEZNIKI BREST-POHIŠTVO D.000 3.O.60% 7.76% 3.000 16.32% -0.2 CARDS 2002 Project Development of Investment and Business Climate in Croatia Revenue in 2004 in € 24.63% 4.60% 27.128.695.o.D. CERKNICA GORENJE NO. SLOVENJ GRADEC NOVOLES D.118. ZAGORJE OB SAVI Simple average 2 The Project is financed by the European Union. D.

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