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up their wallets for SEE countries. Lack of
resources from investments has in many cases
also hurt the development opportunities for
SEE companies which must now rely more
on organic growth and look for internal
resources in order to achieve their revenue
targets.
SEE must look for their growth opportunities
mainly in three areas: regional consolidation,
innovation and organic growth. Whilst
companies are still able to maintain some
organic growth which is the
result of unutilised internal potential
for growth stemming
from existing demand, which is
not fully satisfied, and current
capacities which are not used
to their maximum.
The areas of regional consolidation and innovation
have been somewhat neglected. The
current crisis also offers ample opportunities
in these two areas. The value of companies
has decreased over the past two years making
M&A a much more viable option for SEE
companies which previously did not have
the financial power to compete with the
stronger global counterparts. Past times of
crisis have also been strong on innovation as
companies have to become more resourceful
in finding new opportunities for growth
within their existing limitations. The three
pillars mentioned above will be crucial for
the further growth of the top SEE companies
THE CEO PERSPECTIVE
A quick research amongst the CEOs of 50
companies in SEE shows that growth is still
their main focus. Investments in innovation
and in new business development have
not been reduced, but have in fact been
increased significantly. Chief executives
are spending more on marketing and
supporting their managers to meet higher
market demands by increasing their skills.
Training is not an area to reduce cost.
Although overall competition has increased,
with many companies chasing volume, SEE
companies clearly see opportunities, since
“cheap money” is no longer polluting the
competition. The leading companies are
planning to expand with new products
and enter new market segments based
on their core strengths. The number of
internal SEE deals is still modest compared
to international companies entering SEE.
However companies in
countries like Slovenia
and Bulgaria are striving
to become regional
champions not leaving
the consolidation to
multinationals. The
average deal size is small thereby reducing
the risk of failure but we expect the deals
to become larger as soon as the capital
markets show more
M&A is a viable
option for SEE
companies
80,0%
70,0%
60,0%
50,0%
40,0%
30,0%
20,0%
10,0%
0,0%
-10,0%
� GDP % change
� Gross external debt as % of GDP
� Unemployment in%
Low utilisation will
lead to lower prices and
margins, focus on value
added services
willingness to accept
reasonable risks.
Market dynamics
alone are not enough
anymore for our SEE
companies to grow. The fragile domestic
financial markets are reluctant to supply
money for investments. SEE
is in transition, partly going
from “emerging” into a more
mature stage. The crisis came
at exactly the wrong moment
with many SEE companies
gathering strength to pay back heavy debts
and to improve bad finance structures with
too much short term debt.
SEE companies heavily invested in modern
production capacity and new technologies.
Now at least in the short term they are facing
low utilisation, not generating enough cash
flow to pay back the investments. The
Crucial is a rapid
improvement of the
sales function
SEE Main Economic Indicators
SEE TOP 100
logical cosequence is price and margin
pressure, in all industries, leading to cost
reduction and further
standardisation.
Commoditisation is
a real threat thereby
not generating
enough cash to
invest enough in
innovation. The answer is offering value
added services, becoming more valuable,
less dispensable for the customer. Using
exactly the strength of being local and
building on the strong manufacturing
and logistics capabilities, tailored to the
local needs, has become the road to higher
margins.
The overall performance of the chain is as
strong as the weakest element. As many
CEOs report, their main
concern is to bring the
sales force to the next
level. In Sales the main
topics are realising faster
organic growth and avoiding further price
erosion by better segmentation, providing
tailor-made offers to even better serve the
customers. This approach calls for new
skills and the managers are investing more
in training, better educated managers and
temporarily in external expertise.
2007 2008 2009
� Household consumption as % of GDP
� FDI as % of GDP
SEE TOP 100
Source: A.T. Kearney
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