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Romania CEO Survey

by PwC May 30, 2013

Romanian CEOs are more optimistic than their global counterparts when it comes to their companies’ prospects for revenue growth, according to the results of this year’s edition of the Romania CEO Survey

• The uncertain or volatile economic growth, the Government’s response to fiscal deficit and debt burden, exchange rate volatility – these are the CEOs’ main concerns

• Increasing the customer base, retaining customers, talent management and organizational structure are the main areas where CEOs anticipate changes in their strategies
• CEOs will focus on strengthening the relations with the main stakeholders: clients, suppliers, public authorities, the media and the local communities

 CEOs in Romania seem to have regained trust in their companies’ growth perspectives, both on short and medium term. 42% of the respondents declared to be very confident in their company’s growth during the next year and 60% of CEOs share this opinion when it comes to growth perspectives for the next three years (in comparison to 36% and 46% respectively, at the global level).
“This optimism seems somewhat out of touch with the global growth perspectives, as opinions on the general economic situation are rather reserved. Romanian CEOs show that they learned to rely only on themselves in order to generate revenue growth in the current economic environment”, stated Vasile Iuga, Country Managing Partner, PwC Romania.

47% of our respondents anticipate that the economy will stagnate this year, and 38% are even talking about a decline of the economic conjunction (compared to the global average of 28%).
Most CEOs will be focusing on opportunities for organic growth in internal market (33%) and on developing new products and services (29%), whereas only 5% of respondents are considering new external markets. On the other hand, 15% of respondents consider that the expansion of their operations in existent external markets is the best option for their future growth. At the same time, it seems there is an increased appetite for mergers and acquisitions, joint ventures and strategic alliances, as 18% of the respondents place their stakes on these growth strategies, compared to only 5% in last year’s edition.

The risks
On a frail market, which has many times deceived the business environment’s hopes for recovery, CEOs in Romania say that the economic volatility represents the main risk for their companies (87%, compared to only 64% last year). Even more so, our respondents are very preoccupied with the authorities’ potential response when it comes to the budgetary deficit (84% compared to 52% last year), as well as with the increasing fiscal burden (67%), while 62% indicated overregulation as a potential threat and 82% are worried about the volatility of the currency exchange rate.

Only 5% of CEOs anticipate a break of the Euro zone (compared to the 16% recorded in the USA and globally, as well as to the 12% in Europe). However, 58% of the participants in the survey are mentioning that such a scenario would have a significant impact on their companies (58%).

Changes in business strategy
In the current economic context, most respondents are trying to consolidate their market position and are not expecting major strategy changes during the next period of time (27% are not anticipating any change of strategy, while 58% are considering some adjustment). On the other hand, 15% are considering a radical change in their business strategy, as their current business model appears to have reached its limits.

Out of those who are considering some changes, the majority will focus on attracting and ensuring customers’ loyalty (84%). Other changes will be operated in the organizational structure (69%) and in talent management (69%). Moreover, 65% of companies will take measures in the field of mergers and acquisitions, joint-venture projects and strategic alliances.
During the past 12 months, 96% of the companies participating in the survey have implemented cost reduction measures, 36% of respondents have externalized some processes and functions, and 31% have entered strategic alliances and joint venture projects. Cost reductions remain on the CEOs’ agenda, as 85% of the respondents are considering several such initiatives. At the same time, 44% of CEOs are considering closing new partnerships and strategic alliances, while 35% are looking into mergers and acquisitions on the internal market.

CEOs consider clients and customers to be amongst the main stakeholders influencing the business strategy
Last year, 69% of the respondents considered the customer’s demand as one of the main factors influencing their business strategy. This year, there is a similar tendency: 96% of CEOs who participated in the survey consider the clients’ influence is defining the strategy, and 89% are taking into account developing some engagement programs for this category of stakeholders. Amongst the top investment priorities for the following 12 months, 55% of the respondents are considering enhancing customer services – a similar percentage to the global average (38%) and 51% see a priority in increasing their customer base. The constant shifts in consumer spending and behaviour are perceived by the Romanian CEOs as one of the main threats to their business’ growth perspectives (58%). 84% of the respondents estimate changes in their business strategy in order to increase the number of clients and to keep or increase the loyalty of the existent ones (a similar percentage to the one registered at the global level, of 82%). 42% of the interviewed CEOs place the increase of operational effectiveness at the top of their priority list (compared to 49% globally).

Similarly, CEOs are consolidating their partnership with suppliers in order to avoid potential risks on their companies’ growth perspectives that could be generated by disruptions in the supply chain.

CEOs in Romania are rather optimistic when it comes to headcount growth perspectives over the next 12 months. 73% of the Romanian respondents consider employees (including unions) to be a category of stakeholders with significant influence on their business strategy (83% globally), which determines an increased concern about their involvement (83% in Romania and 77% worldwide). One concern regarding growth perspectives, mentioned by 45% of respondents in Romania, is the lack of skilled personnel. Therefore, 69% are planning on increasing the investment in the next three years in order to develop and retain a skilled work-force.

CEOs intend to consolidate their engagement programs for media and social media users. 56% of CEOs perceive a strong influence of mass media on their business strategy, a relatively similar percentage to the global average (53%). Therefore, 71% of CEOs are considering an increase of their organization’s visibility in the media. Also, 31% of CEOs consider that social media users have an increasingly growing influence on the business strategy (compared to the 50% of respondents globally) and 76% of CEOs declare they will focus on increasing the visibility of their organizations on social platforms (a percentage which is similar to the global one, of 78%).

The CEOs we interviewed are planning to focus on several priorities that would contribute to sustainable development and to enhancing their relationship with the community. They are taking into consideration their involvement in philanthropic initiatives and social enterprise projects (22%), volunteering, community service (27%) or reducing their carbon footprint (47%).

89% of Romanian respondents believe that the Government and the regulatory authorities are amongst the most important stakeholders for their companies, in line with the global average (85%). In what concerns the CEOs’ expectations from the Government, most of them mentioned the issue of improving national infrastructure (82%), seen as one of Romania’s main vulnerabilities. Respondents are expecting public authorities to ensure the stability of the financial system (67%) and to invest in the educational system in order to secure a well-prepared workforce (44%).
“After many years of painful readjustments, Romania seems to have regained its macroeconomic stability. On the road to recovery, Romania is like a marathon runner that has gone half-way through the race, but the finish line is still not in sight. Yet, now is the most important moment to continue the structural reforms needed in order to transform the current crisis in an opportunity to realign the economy on healthy grounds”, added Vasile Iuga.

CEOs in Romania are also expecting improvements when it comes to simplifying the regulatory framework (75%). The business environment also has higher expectations for the Government to tackle social inequalities and poverty (33%).
About the survey

For the 16th edition of the PwC Global CEO Survey, we conducted a total of 1,330 interviews with CEOs in 68 countries during the fourth trimester of 2012. By region, 449 interviews were conducted in Asia Pacific, 312 in Western Europe, 227 in North America, 165 in Latin America, 95 in Central and Eastern Europe, 50 in Africa and 32 in the Middle East. The interviews were spread across a range of industries, with further details by region and industry, available on request. There were 55 interviews conducted in Romania.

About PwC

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services. Tell us what matters to you and find out more by visiting us at www.pwc.com/ro

PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2013 PwC. All rights reserved.

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