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.

3% of total export value of the Republic of Croatia (RH in further text).8%.e. According to other source.1) is grouped within the furniture manufacture group and other manufacturing industry (NACE 36). which accounts for 4. During 2004 the DN business group had share in gross added value (GVA) with approx. The project is implemented by: Deloitte Central Europe. 0. Raiffeisenbank Croatia and Emerging Markets Groups. i. At the same time production material amounted to 977 million kuna.3 billion kuna.15 billion kuna. At the same time the mentioned business group employed around 5% of the totally employed in manufacturing industry or nearly 14.5 CARDS 2002 Project Development of Investment and Business Climate in Croatia 1. i.e. 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. therewith realizing gross added value of 1. 5 The Project is financed by the European Union. whereas costs for remaining intermediary consumption amounted to barely less than 600 million kuna.5 thousand people. 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. which can be located in business group under the DN code. .3% of total commodity import value. During the same year amount of 545 million USD of concerned products was imported in Croatia. approximately 3. 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.

Out of other industries in the mentioned business. 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. 6 The Project is financed by the European Union.4 million USD. for instance.000 persons. the primary business of which was furniture manufacture.92 million USD 27. according to the amount of totally realized revenues. Raiffeisenbank Croatia and Emerging Markets Groups.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.92 million USD of foreign proprietary investments was recorded… of foreign proprietary investments were recorded in the Republic of Croatia. the sectors of other manufacturing industries and jewellery manufacture can be singled out. whereas the value of imports was greater and amounted to 287 million USD. At the same time the mentioned companies employed approximately 11.1). The project is implemented by: Deloitte Central Europe. Investments were made in 15 companies with furniture manufacture as their primary business. During 2004 there were 365 companies registered in the Republic of Croatia. . During 2004 furniture was exported in the amount of 217. 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. 27. In 2006. In the period from 1993 to the end of the third quarter.

7 The Project is financed by the European Union. segments and limits 2. Panelled furniture accounts for the majority of totally manufactured furniture.15) Each of the above mentioned sub industries can be further subdivided depending on kind. mostly veneer.12) Manufacture of miscellaneous kitchen furniture (NACE 36.13) Manufacture of miscellaneous furniture (NACE 36. tables and chests of drawers. The project is implemented by: Deloitte Central Europe. particleboard being the most used material coated with decorative materials.1. panelled and upholstered furniture… manufacture we include timber wood manufacture of seats. Industry definition. 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 36.11) Manufacture of miscellaneous furniture for business and sales premises (NACE 36. purpose and product's manufacturing material. . furniture can be divided into massive. which usually represents the most appreciated furniture segment. At the same time the above classification mostly matches international trading and customs classifications. furniture can be divided into massive.14) Manufacture of mattresses (NACE 36.1) itself can be additionally divided into following sub industries.7 CARDS 2002 Project Development of Investment and Business Climate in Croatia 2. depending on product kind: Manufacture of chairs and seats (NACE 36. dimensions. Raiffeisenbank Croatia and Emerging Markets Groups. Under massive furniture Considering the very manufacturing technology. panelled and upholstered furniture. Considering the very manufacturing technology.

2. but is primarily made of metal. The project is implemented by: Deloitte Central Europe. Also. considering the frequent mistake and mixing of secondary wood processing and furniture manufacture. furniture manufacture comprises manufacture of furniture. On the other hand.1). Secondary wood processing refers to manufacture of wood products. their primary business being furniture manufacture (NACE 36.2 Market size In Croatia during 2004 there were 365 registered companies. In 2004 total furniture export value amounted over 180. The same year mentioned companies realized total revenue of 340 million euro and employed 10. considering the fact that they are used in final fitting. . thus generating commodity trade deficit of 62 million euro. we deem it necessary to explain the difference between the two. plastics and/or glass. which do not need to be further processed in order to be used for their end-purpose. There are still disputes among professional circles whether parquetry and interior joinery (doors and windows) should be included. Raiffeisenbank Croatia and Emerging Markets Groups. 8 The Project is financed by the European Union. total of 242 million euro of furniture was imported. which does not consist of wood. all sub industries of furniture manufacture industry recorded positive trends and business revenue growth.920 workers. Simultaneously. but are not classified as furniture. their primary business being furniture manufacture… In Croatia during 2004 there were 365 registered companies. in spite of significant comparative advantages of Croatia.1 million euro.8 CARDS 2002 Project Development of Investment and Business Climate in Croatia Besides.

52.e. amounted to 23.6 million euros… industry. An average productivity. manufacture physical volume increased by 20.563 pieces) and nonupholstered wooden seats (641. Raiffeisenbank Croatia and Emerging Markets Groups. manufacture physical volume increased by 20. seats and chairs manufacture increased by 422. Manufacture structure shows that Croatian manufacturers make mostly upholstered and non-upholstered chairs and seats.6 million euro.602 pieces of chairs and seats manufactured mainly upholstered wooden chairs (1. FINA. in comparison with 2003.6%.. During 2004.470.202 pieces. At annual level.264 euro during the concerned year. number of companies and employees. twoseated and three-seated sofas was rather small.065 pieces). productivity according to furniture manufacture sub industries Source: CBS (State's institute for statistics).191 persons employed in the manufacture of seats and chairs. whereas the number of manufactured armchairs. i.6%.11) During 2004 there were 38 companies registered in the mentioned sub 38 companies registered realized business revenue in amount of approx.476.9 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 2: Revenues.. . In 2004 there were 2. Also. During 2004. the most significant increase was realized by 9 The project is implemented by: Deloitte Central Europe. 52. in comparison with 2003. there were a total of 2. which realized business revenue in amount of approx. calculated as business revenue per employee. The Project is financed by the European Union. author’s calculation Manufacture of seats and chairs (NACE 36. HGK (Croatian Chamber of Commerce).

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

Significant manufacture was realized in processing of shelves.35 million euro and employed 876.7 million euro and recently there has been an import increase trend of the concerned products. manufacturing majority of which was classified as miscellaneous wooden office furniture. as well (around 60. Also. Raiffeisenbank Croatia and Emerging Markets Groups.35 million euros and employed 876… for business premises including seats and chairs. The mentioned companies realized sales revenue in the amount of 37. including medical furniture. 11 The Project is financed by the European Union.6 million euro.11 CARDS 2002 Project Development of Investment and Business Climate in Croatia Manufacture of miscellaneous furniture for business and sales premises During 2004.6 million euro.273 pieces of furniture for business and selling purposes were manufactured during 2004. In 2004. The same year import value of the same products amounted to even 34. export value of furniture for business and selling purposes. .638 euro per employee was realized in furniture manufacture of the mentioned sub industry.000 pieces of annual manufacture capacity). productivity of 42. metal furniture and wooden wardrobes and wall-units. The project is implemented by: Deloitte Central Europe. 505.5 million euro) on foreign markets. where even 240. there were 71 companies registered in the concerned manufacture. Majority of Croatian export refers to wooden wardrobes sale (6 million euro) and metal household furniture sale (4. whereas importation of office tables accounts for 2. with their primary business being manufacture of furniture 71 companies realized sales revenue in the amount of 37. amounted to 13. More than half of imports refer to importation of unclassified metal household furniture.531 pieces of furniture was manufactured.

almost 15 million of which refers to built-in kitchen units.784). a total of 900. In kitchen furniture production structure the most represented were wooden cupboards production (43. Raiffeisenbank Croatia and Emerging Markets Groups. The same year's average productivity amounted to 21.8 million euro.12 CARDS 2002 Project Development of Investment and Business Climate in Croatia Table 4: Import and export of furniture for business and selling purposes. seats and chairs excluded. The project is implemented by: Deloitte Central Europe. During 2003 and 2004 export value of the mentioned segment sees a constant decrease. in 2004. EUR Source: CBS. .000 kitchen tables manufactured.550 pieces of exclusively kitchen furniture was manufactured. In the same year there were over 33.909 pieces) and wooden hanging units (42. In the same year kitchen furniture was imported in value of even 23. the import value of kitchen furniture has recently been on 12 The Project is financed by the European Union.237 euro. total of 129. there were 39 39 companies employed 511 workers and realized sales revenue in the amount of 10. The physical production indexes show a slight stagnation of the mentioned industry during 2004.8 million euros… companies registered in the Republic of Croatia. there business being kitchen furniture manufacture. Unlike export. The mentioned companies employed 511 workers and realized sales revenue in the amount of 10. In 2004. author's calculation Manufacture of the remainder kitchen furniture According to the latest information available.85 million euro.000 euro worth kitchen furniture was exported. In 2004.

978 pieces) and various kinds of wardrobes and beds. Raiffeisenbank Croatia and Emerging Markets Groups. In 2004. almost 40 million of which referred to export of wooden unclassified furniture and wooden parts.311 euro. Recently.838 and realizes productivity of 30. . considering that in 2002 export 13 The Project is financed by the European Union. beds. The biggest part of physical manufacture refers to manufacture of shelves (284. a total of 1. The mentioned companies realized business revenue in the amount of 207. Except for the highest number of companies and highest revenues realized. wooden footwear furniture (185. Most companies are engaged in the mentioned manufacture segment. In 2004.3 million euros… manufacture of wardrobes. in 2004. According to the latest information.13 CARDS 2002 Project Development of Investment and Business Climate in Croatia the increase.793 pieces). The project is implemented by: Deloitte Central Europe. author's calculation Manufacture of miscellaneous furniture Sub industry of manufacture of miscellaneous furniture comprises mostly In 2004. there has been a noticeable trend in export increase of the mentioned manufacture segment. domestic miscellaneous furniture manufacturers exported commodities in value of 52.09 million pieces of various furniture items was manufactured in the industry of manufacture of miscellaneous furniture. wall-units and mirrors. Table 5: Import and export of kitchen furniture. there were totally 212 registered companies and realized business revenue in the amount of 207. there were totally 212 registered companies.3 million euro.3 million euro. the concerned industry employs even 6. EUR Source: CBS.

mattresses and mattress supports export amounted to 14. the mentioned segment meets manufacture increase in all categories. The biggest share of manufacture refers to manufacture of mattress supports. 644. and there were totally 897. only five. 14 The Project is financed by the European Union. with realized business revenue of 32 million euro during 2004.000 pieces manufactured in 2004. author's calculation Manufacture of mattresses The least companies. When compared with 2002 and 2003. EUR Source: CBS. Commodities in value of 99 million euro were imported the same year.14 CARDS 2002 Project Development of Investment and Business Climate in Croatia amounted to less than 46 million euro. were registered in mattress manufacture Only five.2 million euro and in last few years it was stable. However.000 of which was manufactured. foam rubber mattresses and metal springs mattress. Raiffeisenbank Croatia and Emerging Markets Groups. They employed 504 persons. Majority of exports consisted of sales on foreign markets of mattress supports. spring mattresses and other bed equipment. .731 euro. The project is implemented by: Deloitte Central Europe. In 2004. majority of which referred to wooden household furniture and wooden furniture parts. The manufacture of mattresses itself divides into manufacture of mattress supports. the concerned industry realized the highest productivity within the entire furniture manufacture of 63. Table 6: Import and export of miscellaneous furniture. were registered in mattress manufacture sub industry… sub industry.

labour force was classified as specialists. forestry and agronomy engineers. manipulators/operators of wood processing machines manipulators/operators products. In the same time. majority of which referred to import of miscellaneous bed equipment and other mattresses. In analysis of labour market. Labour supply In analysis of labour force offered in the furniture production industry. in the mentioned period at the Croatian Central Employment 15 The Project is financed by the European Union. For example. For forecasting of future trend at the labour market. Table 7: Import and export of mattresses. EUR Source: CBS. of machines manufacturing wood In the end of 2005 there were 457 unemployed forestry and agronomy engineers in Republic of Croatia. author's calculation 2.3.15 CARDS 2002 Project Development of Investment and Business Climate in Croatia At the same time import amounted to 14.e. qualified labour force includes: wood converters (mainly wood processors. Raiffeisenbank Croatia and Emerging Markets Groups.007. it is important to point out official statistics on new registered persons in 2005 as well. total number of unemployed persons qualified for work in furniture production area accounted for 3.9 million euro. The project is implemented by: Deloitte Central Europe. and labour force qualified for work in furniture production. i. . carpenters for furniture and tuners and operators of wood processing machines). mainly unemployed wood converters.

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

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. The project is implemented by: Deloitte Central Europe. .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.

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. 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. 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.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.

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. 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. amounted to 31. according to address book of Croatian Chamber of Commerce (HGK). author's calculation 20 The Project is financed by the European Union. measured by business revenue per employee. . primarily deal in furniture manufacture.920 persons. As of the latest information on productivity levels. which. HGK. Industrial rivalry analysis The industrial rivalry analysis will be made on a sample of companies. According to the mentioned source. The project is implemented by: Deloitte Central Europe.140 euro.1. Table 10: Business revenues and number of employees of the 20 most significant furniture manufacturers in the RH Source: FINA. At the same time the mentioned companies realized business revenue in the amount of 340 million euro. during 2004 there were 364 companies engaged in furniture manufacture and they employed total of 10.20 CARDS 2002 Project Development of Investment and Business Climate in Croatia 3.

Hence. the 20 leading companies employ 7. and if it is over 1. competition pressures are distinct. CR10.1). i.000 the market is considered not to be concentrated. as to the realized business revenue for 2004. which indicates that there is low concentration in the concerned industry.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. on the Croatian territory there 21 The Project is financed by the European Union.9%. but if it approaches the level of 10. Besides. amounts to 486. Thus.000 it indicates the existence of monopoly in the concerned market segment. The project is implemented by: Deloitte Central Europe. . If the HHI is between 0 and 1. Raiffeisenbank Croatia and Emerging Markets Groups. The three leading companies (CR5) as to the realized revenues in 2004 realize 33. amounts to 55. for instance. can be concluded. according to domestic manufacturers experiences. that competition level varies between different furniture manufacture segments.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 . they realize almost 70% of total business revenue of all furniture manufacturers… According to business revenues of the biggest 20 companies.279 or 67% of the totally employed in this industry. At the same time. According to business revenues of the biggest 20 companies.5% of total revenues of the entire industry. 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. they realize almost 70% of total business revenue of all furniture manufacturers. Herfindahl Hirschman index (HHI) for the 20 most significant companies. however. their influence on employment trends in furniture manufacture industry is also significant. while concentration of the leading five accounts for 41.800 it is considered highly concentrated. that is.2%.e. revenue share of 10 leading companies.

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

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

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

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

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

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

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

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

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

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

timber products loose its quality.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. term contracts on raw material purchase and timber products wholesalers are lacking. Non-existence of raw material market– the majority of raw material (approximately 80%) in Croatia is property of Hrvatske šume. which would take over the costs of storage and. The mentioned company sells forests through tenders and price is determined by the book of rules. 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. Besides. through clusters. The project is implemented by: Deloitte Central Europe. 32 The Project is financed by the European Union. 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. this kind of manufacture organization negatively influences companies' flexibility and possibility to adapt to changes on market. Except for the financial loss by long-term storage itself. Likewise. as well.e. from raw material to the final product. . 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. many companies are buying significant quantities of raw material. which in some developed countries are leaders in furniture manufacture. Raiffeisenbank Croatia and Emerging Markets Groups. for instance. furniture. i. Considering that quantity of furniture manufacture varies significantly in the majority of domestic companies and timber products is not always available from Hrvatske šume. At the same time. which is reflected on the final product quality. which is then stored for a longer term.

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

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. Raiffeisenbank Croatia and Emerging Markets Groups. indirect advertising of Croatian furniture and reduction of foreign trade deficit. it is realistic to expect an increase of hotel industry investments in interior modernization and revival. 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. when compared to competition overseas. However. by orientation of manufacture towards products with higher added value. 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. The project is implemented by: Deloitte Central Europe.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. Sales increase on domestic market– considering the recent high increase of the industry of tourism. . especially it refers to electric power. Involvement of domestic furniture manufacturers into hotel supply chain would enable an increase in their sales.

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

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

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

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

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

The Croatian furniture manufacture industry is placed in a shakeout industry environment. so we expect further pressure on the margins. Raiffeisenbank Croatia and Emerging Markets Groups. The industry is placed in a shakeout industry environment 40 The Project is financed by the European Union. The project is implemented by: Deloitte Central Europe. The EBITDA margin is stabile. The growth rate of the industry round three times higher than the GDP growth in 2004. Bargaining power of buyers’ has been increasing due to international competition on the local market.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. lower margins). 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. and higher than the The industry is placed in a shakeout industry environment Slovenian peer. Average revenue per company amounts round 12 Mio Euro. that is 35% lower than in the Slovenian case. .

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

. 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.

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

22% 12.45% 20.704 34.89% 6.181 6.97% 51.60% 14.804.158 5.97% 0.323.28% 8. .753.12% 8.08% 28.675 14. The project is implemented by: Deloitte Central Europe.31% -7.51% -11.26% 6.93% -4.846.799.774.89% 0.338 20.13% 24.32% -2.49% 2.00% 5.78% 4.84% 5.27% 1 The Project is financed by the European Union.852.539.951.88% 9.323.297 8.893 4.71% 1.outlayer Revenue in 2004 in € 40.781.75% -1.23% -11.92% 9.632 7.70% 6.20% 15.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 .63% 9.182 5.49% 23.185 4.61% 11.69% 4.69% 11.72% 26.29% 7.43% 18.05% 26.260.83% 9.44% 19.950.78% 6.837.06% -0.345.48% 3.328 11.348.82% 3.11% 22.594 8.485 13.63% 22.35% 20.67% 308.75% 43.610 17.50% 10.54% EBITDA 2004 6.930.74% 7.80% 11.890 4.744.324 11.68% -4.86% 4.87% 14.534 EBITDA 2003 10.14% 11.819 4.89% Revenue growth 03/04 -3.565.01% 2.63% 25.471 8.060. Raiffeisenbank Croatia and Emerging Markets Groups.50% -4.13% 23.95% 10.983 6.108.931 7.72% -10.95% 24.

718..06% 34.51% 4. LIK KOČEVJE D.159. D.67% -1.260. ZAGORJE OB SAVI Simple average 2 The Project is financed by the European Union.D. . PODPLAT SVEA.65% 6.08% -6.000 39.40% 4.D.o.695.60% 27. ŽELEZNIKI BREST-POHIŠTVO D.000 19.57% 4. NOVA OPREMA D.94% 27.D.03% 61.69% -5. D.23% SLOVENIA ALPLES.000 10.128.000 21.07% 1.06% Gross margin 39. D.O.000 6.2 CARDS 2002 Project Development of Investment and Business Climate in Croatia Revenue in 2004 in € 24.O. STRAŽA POHIŠTVO BREŽICE d. SLOVENJ GRADEC NOVOLES D.000 16. The project is implemented by: Deloitte Central Europe.last 5 years -1.60% 7.879. LIKO VRHNIKA. VELENJE-GORENJE KLI LOGATEC..26% 7.O.o.28% -4. ROGAŠKA LES d.74% 22.95% 6.10% 40. D.000 18.D.d.48% 34. Raiffeisenbank Croatia and Emerging Markets Groups.000 26. LIPA AJDOVŠČINA D.000 3. D.51% 34.000 17.32% 2.570.32% -0.118.800 EBITDA margin 15.63% 4.63% -6.D.267.984.86% 20.D.90% 0. CERKNICA GORENJE NO.O.D.76% -9.500.76% 3.92% -1.D.82% Growth rates .90% 39.