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| Adaugat in data de 01-04-2011 |
Romanian CEOs upbeat about the medium term perspectives of the local economy, according to the results of the PwC report Global CEO Survey for Romania
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As recession fears subside, optimism seems to return amidst the Romanian business community. The results of this year`s edition of the Global CEO Survey for Romania show that local CEOs are moderately confident about the short term growth perspectives of their companies, 43% stating that they are very confident about their company`s prospects for revenue growth in the next 12 months. These results are slightly better than the EU average, where 40% of the CEOs expressed confidence for revenue growth in the future year, yet more cautious than the Global and CEE averages, of 48% and 53% respectively.
However, on the medium and long term, the perspectives for growth in Romania seem highly appealing for the local CEOs, 70% of which state that they are very confident in their company’s prospects for revenue growth in the next three years, a significantly higher level of confidence than that shown by the CEOs from the more mature markets of the EU (47%). Quite remarkably, Romanian CEOs seem to mirror the medium term optimism of top managers from highly dynamic emerging markets such as China, where 72% of CEOs have expressed high confidence in the prospects for revenue growth in the next three years.
“In the past two years, the Romanian economy started a gradual restructuring process that is due to prepare it for sustainable development. Local CEOs are once again planning for a period of growth, rather than focus on the nitty-gritty of survival in a recession environment. Deleveraging and cost-cutting have been put in the background, while the focus is now on strengthening the position in the market, developing new products that would answer the recent evolutions in consumer behaviour, managing key talents and strategic changes in the organization in order to adapt to the industry dynamics”, stated Vasile Iuga, Country Managing Partner, PwC Romania.
When it comes to identifying potential sources for growth, 50% of local CEOs state that new product and service development is the main opportunity for business growth in the next 12 months, a percentage closer to China (46%) than to the Global (29%), EU (29%) and CEE (35%) ones. This highlights the perception of local CEOs that Romania has still untapped market potential and it is more worthwhile pursuing the opportunities for the overall growth of the market than waging competition wars for market share (only 23% of the Romanian CEOs see this as an opportunity for growth as opposed to the EU average of 27% and the CEE average of 36%), seeking out strategic alliances and joint ventures (10%), entering new geographical markets (13%), or striving for inorganic growth through mergers and acquisitions (just 3%, a striking distance from the EU average of 16%).
“Despite the recession, Romania is far from being an overcrowded market. There are still many market segments that have been insufficiently developed and overall the country is suffering from a deficit of offer rather than an excess of demand, a fact highlighted in the stubbornly high inflation rate”, explained Vasile Iuga.
In terms of geographic expansion, the responses reveal that CEOs are keen to develop their operations overseas, but overall cautious in pursuing such opportunities, as they still see the best prospects closer to home, right across the EU Common Market.
Traditional export markets for Romanian goods such as Germany are seen as the greatest growth opportunities. Excluding Romania, 20% of CEOs consider Germany as the most important country for growth prospects over the next three years (12% for Global CEOs), ahead of 17% in China (39% for Global CEOs). This comes as no surprise given that Germany is Romania’s most important trade partner, both for imports and for exports.
A majority of Romanian CEOs (87%) have changed their company’s strategy as a result of the new market conditions offset by the global economic crisis. Among the drivers, 62% believe industry dynamics have significantly influenced their need to change strategy, 31% believe customer demand had the biggest impact on their need to change strategy, against 27% for economic growth forecasts or uncertainty.
Deleveraging was not mentioned as a change driver by any Romanian CEO, while 5% of the Global CEOs have mentioned deleveraging and the transformation of the capital structure as major change factors. (see attached Graphic)
Attitude towards risk seems to have driven few changes for Romanian businesses, only 27% of the local CEOs indicating this as a major change factor for their company, whereas globally 41% of the CEOs have indicated this as a major change driver. Also, changes to the regulatory environment in Romania appear to have had little impact on the company’s strategy (19%), unlike the United States where changing attitudes towards risk have had a big impact on companies’ strategies (47%).
As a response to the recession, 90% of the Romanian CEOs have implemented a cost-reduction initiative, similarly to CEOs from other regions of the World – 84% for Global and 91% across EU. Furthermore, 37% have resorted to “Insourcing” a previously outsourced business process or function, above Global and EU (both 25%). Such restructuring activities are also likely to be initiated in the coming 12 months; still above other regions, albeit at more moderate levels – 70% for cost-reduction; 33% for insourcing.
Bearing in mind that 2010 was a year of major fiscal instability, during which the Romanian State was forced to take painful tax adjustment measures, 67% of CEOs put the increasing tax burden at the top of their list of potential threats to their growth prospects. When it comes to potential talent shortages, the recession seems to have eased the pressures on the labour market, with just 24% of CEOs stating that they will try to mitigate the risk of the availability of key skills in the next 12 months, whereas on a global level, 38% of the CEOs will focus on that issue in the future year. Access to financing, the rising energy costs and potential new competitors entering the market are also less worrisome for local CEOs than for their global counterparts.
“What the results of this year’s edition of the Global CEO Survey highlight, is that local business leaders are aware that global economic developments play a huge part in the evolution of the Romanian economy. The local business environment is becoming more and more interconnected, not just with the EU Common Market, but with the global economy as well, and Romanian CEOs share some of the worries and hopes of business leaders elsewhere”, concluded Vasile Iuga.
For PwC`s 14th Annual Global CEO Survey, 1,201 interviews were conducted in 69 countries during Q4 2010. By region, 420 interviews were conducted in Western Europe, 257 in Asia Pacific, 221 in Latin America, 148 in North America, 98 in Eastern Europe and 57 in the Middle East & Africa. Thirty interviews were conducted in Romania, while the global sample includes 15 interviews. All data on Romania was based on these 30 interviews.
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information..
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