Serbia: building competitiveness in transition economy

It is well known that Serbia-s economy ranks poorly on the international competitiveness scorecard. This becomes particularly worrying when you start screening the state of local enterprises. Owners and managers lack business knowledge and ambition to build competitive organisations which could offer superior brands to domestic and export markets. They neglect business efficiency and strategy development either relaying on own monopolistic position and/or corruption or just keep-on going and struggling for survival on a day-to-day basis. Most of them usually complain about lack of funding, corruption and technological disadvantages to find excuse for own inferiority or lack of ambition.

Enterprises in such poor/ uncompetitive position are not attractive for foreign companies to invest in them. Instead of investing in existing Serbian firms which would need a good deal of costly and unpopular restructuring foreigners prefer to start new facilities where their competitive organisational structure could be copied utilising local (cheap) labour and raw materials. If business know-how was on offer and sold it would have to be paid much more. Why local managers failed?

Main exporters from Serbia are Italian and German businesses, but they brought competitiveness from home and hardly want to pass it around. Serbian government try to change the situation by accelerated adoption of few laws during this summer that should attract foreign direct investment and improve trading conditions for thousands of small and medium enterprises what would finally result in new jobs.

Who should be that driving force in this bleak situation and who has the power to make thousands of Serbian enterprises competitive, employing more people, exporting and running profitably? The law makers or entrepreneurs themselves? Even if Serbia’s law environment improves and becomes less an obstacle for doing business, will foreign companies who look for competitive locations and good opportunities in the region find more local enterprises and their products attractive? It is not the case at the moment. This is why the government have to use a lot of deal sweetening with foreign investors during its marketing and deal-making activity. Unfortunately local business bosses hardly move to change anything in their own yards and make government’s job easier.

Serbia’s poor industrial environment and inefficient enterprises still remain the main source of uncompetitiveness for efficiency-seeking foreign investors. Huge amount of waste is hidden and lost in production and business processes. For any foreign buyer, taking over a Serbian company, being it state owned or private, under formal restructuring or not, means a lot of unprofitable turnaround work before the organisational structure, business efficiencies, company’s brands and its marketing strategy all become the source of competitiveness.

This will have to change. Local entrepreneurs must start business turnaround in their own yards immediately. Either on their own or with a help from external experts a situation analysis is a good step to start with. From business model to strategy, structure and operations. Focus must be on product portfolio, market share and internal business and production processes. Firms must analyse own competitors and customers and chose targets and benchmarks – practically perform own competitive intelligence (CI) which has yet to occupy a more strategic role in business, even in developed economies. A growing number of firms have begun to take a closer look at the benefits of implementing a CI programme. However, it will take a while because those firms still don’t really have a sense of what it is all about and how to go about it.

In the same time, but only as a support, the state must keep relaxing business law environment and fight corruption.

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