7. GROW EAST CONGRESS - 17TH MARCH 2016

Prof. Arnold SchuhCompetence Center for Emerging Markets & CEEWU Vienna

WINNING BUSINESS CONCEPTS IN TURBULENT TIMES IN CEE

7th Grow EastCongress – 17th March2016WKOVienna

Turbulent times in CEE

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Repercussions of global & financial crisis can befelt until today

§ Ongoing industry consolidation (e.g., retailing, banking)

§ Host governments turn from welcoming tounfriendly attitude towards foreign investors

§ Russia-Ukraine conflict§ Europe‘s migration crisis§ Shattered expectations & uncertainty among

foreign investors

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CEE needed five years to regainpre-crisis economic level

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Source: Roland Berger, 2015

Turbulent times in CEE

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Repercussions of global & financial crisis can befelt until today

§ Ongoing industry consolidation (e.g., retailing, banking)

§ Once welcoming host governments become moreunfriendly towards foreign investors

§ Russia-Ukraine conflict§ Europe‘s migration crisis§ Shattered expectations & increased uncertainty

among foreign investors

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Changing nature of growth andcompetition

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Slower growing markets than before 2009§ Polarization of markets with widening „bottom-of-

the-pyramidҤ Government interventions are tilting the playing

field towards local competitors§ Emergence of strong local competitors§ New competitors & investors from Turkey, Russia,

China and Middle East appear on the scene

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Western regional players have totackle many issues at once

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Shrinking edge as „innovators“ & “modernizers“§ Focusing on optimization of existing network

§ Centralization / Regrouping§ Leaner / Nearshoring (Shared Service Centers)

§ Shifting perspective from market to sourcing/ pro-duction

§ How to deal with less-friendly and nationalistic host governments?

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„Betting on the natural competitiveedge“: Innovation & brands

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„Being on the safe side“: Multi-tier brand strategies

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„Bucking the trend“: Manufacturing in „protected“ markets

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NEUSICHT

„Made in CEE“: Thriving on localstrengths

107. GROW EAST CONGRESS - 17TH MARCH 2016

Foreign investor‘s view Local firm‘s view

Local players look for growth at home and abroad

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Local firms have moved up the learning curve andbecome more competitive

§ „Big idea“ or „quality product at a lower cost“ asstarting points for strategy

§ Leveraging lower cost base, educated workforceand other „regionally-rooted assets“

§ Local governments create space for their growth§ Growth via expansion to foreign markets§ However, profitability varies by industries and

strategies

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“Local Heroes”: Industry and strategy type influence profitability

ROS = Return on sales (Ø EBIT/Sales 2010-13)

„Ahead of the market“: Visionaries & game changers

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„Smart specialization“:Hidden champions & niche players

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Conclusions

7. GROW EAST CONGRESS - 17TH MARCH 2016

§ Winning in CEE markets has become morechallenging

§ Western firms may be surprised by the way howmarkets and competitive constellations changed

§ Local firms have to find out how to nurture futuregrowth – alone, via investors or by teaming-up

§ All firms – foreign & local ones – have to addressin their strategies the political environment too

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Contact

Prof. Dr. Arnold SchuhDirector of the Competence Center for Emerging Markets & CEEWUWelthandelsplatz 1, Building D11020 Vienna, Austriaarnold.schuh@wu.ac.atwww.wu.ac.at/emcee