Open Regional Fund for South East Europe Consultancy Services for Export Promotion A Big Chance for Small Business By the late 1990s, the free market economy had caught up with companies in the Balkans. Many small and medium-sized enterprises (SMEs) were supplying their products to the local market, but were not improving their product design or technologies. Soon, international suppliers were flocking into these countries, offering customers better products and service, higher quality, more attractive packaging and, in many cases, lower prices. This not only put paid to many local firms’ hopes of exporting their products; it also put a question mark over their survival. A SME consultant can often provide the rescue package that these companies need. Working with regional consultancy associations, the Open Regional Fund (ORF) established by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) has developed a programme to support this process. ‘Three out of five new SMEs go bankrupt within the first five years,’ explains Anton Florijan Barisic, President of the Croatian Association of Management Consultants (AMC), whose own consultancy − Chronos Info Ltd − operates in this sector. ‘Small businesses are completely dependent on their owners’ skills. And although they generally have the technical expertise they need to deliver services, many of them have no idea how to devise a strategy to break into new markets. They don’t understand their own market position, they have no idea how to select and train specialist staff, and they have no business plan or marketing structures.’ After studying engineering, economics and political science, Barisic worked in a state-owned company for 15 years. Then in 1990, accurately predicting what the future held for business in the Balkans, he set up his own management consultancy. He started out with just two members of staff, offering a range of consultancy services. ‘After 15 years in the state sector, I became a capitalist,’ smiles Barisic. The impetus came from former customers and business contacts from the Yugoslav era. Urbane and well-travelled, Barisic was shocked that Croatia’s fledgling entrepreneurs lacked basic business management skills. So he set about expanding his consultancy company. It now employs six staff, and specialises in four areas: organisational development, human resources management, change management, and management of strategic processes. Customer-oriented services The difficulties facing SMEs in Croatia were similar to those encountered in the other Balkan countries. The challenge facing entrepreneurs everywhere was to manage their companies successfully – and quite a number of them failed. So in 2008, in an effort to give these companies access to consultancy services tailored to their needs, the associations of management consultants in the region formed a network, with support from the ORF. Recognising that consultancies can only provide useful services if they themselves are at the top of their game, the network and the ORF developed a training programme, covering topics such as export marketing, intellectual property, strategic development for SMEs, financing and CEFTA compliance. Barisic is satisfied with the outcome: ‘I developed the training programme together with ORF and introduced it to the partner associations. The response was extremely positive, and to date, 150 of the region’s consultants have taken part in the programme. We also hold regular regional conferences where we plan further activities and have a chance to discuss our clients’ specific needs.’ Each country has a different legal framework, and each consultant has specific skills to offer. The network pools this know-how and has set up a website, www.see-consultancy.net, which consultants in the region use to advertise their services. When searching the website, SMEs can input search criteria in order to identify a suitable consultant from the extensive database. This is a major benefit, in Barisic’s view: ‘If one of my customers in Croatia wants to export to Macedonia, we help him prepare for this step. I then identify a partner in Macedonia who knows the market much better than I do. He understands which marketing strategies will work and can also advise on the legal framework in Macedonia. Thanks to our network, this teamwork has become much more effective.’ By opting to focus on SMEs, Barisic and his colleagues have certainly not chosen an easy client group. Many small businesses do not appreciate the value that can be added by a consultancy. After all, consultancy services do not offer a new product for their portfolio, so it is difficult for many of them to see what consultancy can bring to the table. Barisic is very grateful to the ORF and other international donors: ‘The work carried out by ORF and the other organisations makes it clear to the SMEs from the outset what they need to do to survive and be successful. They create the awareness among our clients that we actually offer value for money.’ Breaking into new markets Many small businesses do not capitalise on their potential because they fail to break into the export markets. Their owners often lack foreign language skills, are unfamiliar with customs law and other legislation, and need mediation, advice and contacts. Nonetheless, there are some SME success stories, as the Steiner company from Zagreb proves. Ivica Steiner started out with five staff in 1992, providing IT systems and networks for companies and institutions. His company offers complete solutions tailored to his clients’ specific needs. The company expanded and the workforce grew to 35. Steiner was keen to break into the international markets, but encountered an unexpected obstacle. ‘Everyone in the company was a technical expert, but no one had any management skills. Until 2007, I was the only one developing and marketing new ideas and taking decisions. But because the company had expanded, and in view of our plans to set up a network of representatives abroad, that just didn’t work. So I called in Mr Barisic.’ Barisic began to completely restructure the company, setting up various departments, each run by departmental managers, to deal with areas such as sales, research and development, service and support. The departments now have much more independence to manage their projects and take decisions in their field of work. Barisic sums up the outcomes of two years of cooperation: ‘We started off by analysing what Steiner, as a company, is actually trying to achieve. Clearly, the target was to break into new markets. So we developed an export strategy, identified commercial partners and contacted chambers of commerce.’ The process of preparing for the export markets takes about two years. Each country has its own standards and specifications for product compliance, requiring tests, certification, inspections and final approval before the required import permit is granted. Then there are customs formalities and political issues to be clarified. The competition in the target market also has to be evaluated and distribution channels established. ‘Once we had worked through all these issues for Russia, Macedonia and Montenegro, we had to calculate how much investment Steiner needed to make in order to position itself successfully in the target markets. After all, the effort only pays off if the company gets an adequate financial return on its exports,’ explains Barisic. For Steiner, the sums added up, and the company set up an office in Montenegro in 2007 and in Moscow in 2009. The next target is Macedonia. Steiner has three permanent staff working in sales in Russia, with a further six fluent Russian speakers providing technical support in the Zagreb office. In the internet age, this is a straightforward process. Heading for success For Steiner, the consultancy services provided by Barisic have made its export vision a reality. What’s more, marketing, sales development and a professional approach to new project development now take place as a matter of course. All Steiner’s staff have bought into the consultancy concept, and the company frequently asks Barisic to advise on major decisions. One of these arose in 2009. Steiner and his heads of department agreed that the company needed a call centre to respond to customer enquiries. As he recalls, the decision was fraught with uncertainty: ‘We couldn’t decide whether we should use an external call centre provider or set up our own centre as a new department.’ It was a difficult decision, but finally, the company opted to open its own call centre. Barisic sums up the reasons why: ‘With its own call centre, Steiner retains full quality control. It can continue to build a relationship with customers and guarantee quality of service, and this helps to reinforce its reputation for excellence.’ The call centre is open 24 hours a day, offering capacity to take on other tasks as well. So Steiner developed a new project: an emergency call system for the elderly. Subscribers to the service can call an emergency number – 144 – in order to ask for help, with the message being passed on by the call centre. Steiner explains how it works: ‘Families can register their elderly relatives with us and pay a subscription. We then keep a list of contacts – such as neighbours or friends – who we contact and send over to help the caller. Often, elderly people call us because they can’t remember their doctor’s telephone number, for example. So they call us and we connect them.’ Barisic is fully involved in this new project. He is helping to market the Imprint Published by: Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Dag-Hammarskjöld-Weg 1-5 65760 Eschborn T +49 61 96 79-0 F +49 61 96 79-11 15 E [email protected] I www.giz.de concept, identify funding and put suitable management systems in place. Steiner has an ambitious goal for the ‘144 project’: 100,000 customers within two years. For Steiner, the investment in consultancy has more than paid off. Thanks to Barisic’s good contacts in the consultancy network – initiated by the ORF – establishing the right partnerships posed no problems. The message is clear: with the right support, the export sector offers exciting new prospects for small and medium-sized companies.