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Romanian Companies Rely on Increasing Their Competitiveness in 2014

Date: 02/11/2014
Source: EY
Over 40% of business leaders in Romania are optimistic about their business growth this year, a significantly higher percentage compared to the 25% recorded last year. In terms of turnover, 67% of respondents expect to score a moderate growth, of 1% -10% in 2014, while 19% expect an increase of 10% -20%, according to EY Romania’s study "A vision for growth" released today.

Estimates of increased profits are also positive: 51% of respondents expect to have an increase of 1% -10%, while 19% estimate a double-digit increase in profits, up to 20%. Only 14% of respondents are very optimistic, counting on a 20%-30% or more pick-up in profits.

EY’s study is based on responses from 117 top executives and examines their perception on business prospects in Romania in 2014. Most respondents (52%) come from companies with turnover exceeding EUR 50mn. The survey was carried out between 23 January - 6 February this year.

"The focus on competitiveness and access to funding are the priorities for 2014 and 2015. For example, in aspects of competitiveness, the effects of rising energy prices, particularly gas prices, can raise the question of companies’ energetic efficiency and the necessary investments in energetic efficiency. On the other hand, access to funding, the ability to diversify funding sources and optimize funding costs become, to a larger extent, competitive advantages - as a result, every business strategy will have to consider them." says Bogdan Ion, Country Managing Partner, EY Romania
Focus on increasing productivity continues
22% of respondents say they will reduce costs, while 32% will increase productivity to meet the challenges of the local business environment in 2014.To compare, in 2013, 30% of surveyed business leaders said they turned to cost savings and 28% focused on increasing productivity.

Although low costs are still considered to be an important factor for the company's competitiveness on the market, according to the answers of 26% of the respondents, this option decreased by 5% compared to 2013.

A new factor is gaining ground. Local business community’s attention focuses on research and development (R&D) in 2014. Thus, from the mere 2% of respondents who saw in R&D an important competitive factor in 2013, over 7% of business leaders in Romania expect to take up the competitive battle on this front in 2014.

If the market continues to have a poor outcome in the next 12 months or will go into decline, only 56% of respondents said they intend to remain on the market until it stabilizes, down from 76% who mentioned having this intention in 2013. On the other hand, 56% say they want to adress the challenges through innovative approaches (compared to 46% in 2013), while 10% want to consolidate their position through mergers and acquisitions (compared to 15% in 2013).

Customer satisfaction defines success in the local market
Referring to the factors that define success in the local market in 2014, the three most important indicators remain: financial results - 96% (93% in 2013), customer satisfaction - 78% (77% in 2013) and market share - 63 % (64% in 2013). Along with them, 39% of business leaders also mention brand awareness, compared to 38% last year.
With respect to customer demand, it is noted that currently 60% (as to 66% in 2013) believe that there will be no major changes in the next 12 months, and 37% (compared to 32% in 2013) believe that customer demand will remain the same.

Skilled labor force makes the difference
Regarding the relationship between business success and employee skills, 31% of business leaders who participated in EY’s 2014 survey believe that their company’s success on the market depends heavily on the skills of employees, compared to only 16 % who affirmed this in 2013. Also , 82 % of respondents consider that the level of education of the labor force is essential for the success of the company.

Regarding staff, 14 % of respondents said they plan to increase the number of employees by 10% to over 30 % in 2014, an increase from 5% in 2013. 37% expect to maintain the same number of employees, compared to 56% who expressed this opinion in 2013. Unlike last year, when 55% of respondents said they would increase wages by 5% to 10%, only 19% have this intent in 2014. On the other hand, if 42% expected a wage stagnation in 2013, only 19% expect this in 2014.

Bank loans will continue to be main source for funding
In 2014, the main strategy for investment funding remains bank loans. Thus, 49% of respondents say they will resort to this source of funding, a rising percentage from 45% in 2013. At the same time, the issue of shares mark a decrease from 20% in 2013 to 12% in 2014.
A new option in financing methods poorly appears in the replies of business leaders in Romania’s, namely accessing European funds, mentioned only by 2% of respondents.
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In comparison to 2013, bank loans were the main source of funding for 54% of the surveyed respondents, an increase from 47% in 2012. Only 10% of business leaders resorted to issuing shares to finance investments in 2013, down from 18% in 2012.

Consumption habits – a determinant factor for the innovation strategy
The report also highlights that the majority of respondents pay a greater attention to innovation. This is considered to be a source of future growth and one of the main levers for generating new business opportunities. Business leaders establish a correlation between consumption habits and innovation, 56% of respondents believing that a change in consumer demand will lead to a major impact on developing their innovation strategy, and 48% believe that the major impact will be in the area of operations .
In terms of prices, only 10% of business leaders say they will continue the battle of lower prices in order to increase sales in 2014, down from 18% last year. In contrast, 80% reported their intention to bring to market new products/services for existing customers, an increase from 75% in 2013. Meanwhile, 32% say they intend to enter new market segments with the products/services they already have, while 22% say they redesigned their products to enter new geographic markets.
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About the "A vision for growth" study
EY Romania’s study on the perception of the Romanian business environment in 2014 is based on a survey examining the perceptions of 117 top executives from local organizations in various industries. Most respondents (52%) come from companies with turnover exceeding EUR 50mn. They answered EY Romania’s survey between 23 January - 6 February 2014.

About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.

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