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Companies applying the expectant policy, for sustainable growth
English Section Publicat de AG&F 06 Iul 2011 08:00
The signals sent by the local insulating joinery industry halfway through 2011 are contradictory, some elements indicating a firm resumption of this sector’s ascending trend, and others confirming a continuation of the activity depreciation. Local companies, irrespective of their dimension or specialization, have approached the recession issue differently, some strategies turning out to be correct, and others having generated negative results. It is clear that the current crisis like in fact any similar phenomenon having defined the economic environment since the beginning of the industrial age has had winners and losers. The first category includes companies having successfully overcome obstacles and having managed to consolidate their market shares, and the second companies having been constrained, for various reasons, to reduce or even reorganize their business. In the end, this is positive, recession having a sanatory and even immunative role for capitalist structures.
 
The basic criteria based on which selection was made were not notoriety, turnover level, distribution network dimension etc., as estimated at the beginning of recession. It was noticed that companies with a disadvantaged position in 2008 - a year defined by maximum results at the level of the analyzed branch - have managed, by adopting intelligent measures, to reposition and thus obtain spectacular increases of their own products share on the sector market. At the same time, solid companies from all points of view recorded major losses, despite their having adopted apparently coherent strategies. In fact, the difference was made by sector company managers’ capacity of being proactive, of firmly applying austerity plans, cost adjustments, many time painful (also aimed at reducing personnel schemes), of becoming involved in innovating actions, in sectors for which experience did not seem to be sufficient, etc. To put it in a nutshell, all these elements may be synthesized in the phrase „entrepreneurial courage” and, in the end even by adopting decisions based on intuition. Even if sometimes such a method may not be accompanied by the expected results, an expectant policy is preferable, allowing at most a deterioration of their own position. In demographic terms, the current situation is similar to the evolution of civilizations: peoples benefiting from a stable territory face an acute aging phenomenon and risk disappearance within a relatively short timeframe, and active populations with high mobility gain ground, despite an apparent handicap due to technological differences.
Export deliveries and rehabilitation works represent possible recovery solutions
As previously pointed out, certain signals launched on the market at the beginning of the summer season were intended to somehow encourage local windows branch representatives. Despite the maintaining of the beneficiaries’ trust degree at low levels (which continues to lead to a standoffish investment attitude, even if they refer to the acquisition of long term assets) and the maintaining of a rigid crediting system, some sector producers reported significant increases as against the similar period of 2010. For many of them, it has become very obvious that the market structure will no longer be similar to that from the period previous to the start of recession, the ratio changing consistently in favour of technical rehabilitation works. Not only does the community legislation encourage this type of actions, but local beneficiaries have started to become much more open to the clear advantages to be obtained by installing high performance enveloping systems. The local market demand is still low, but the good news is that the number of orders has started to grow, but at a pace clearly slower than that corresponding to the years before recession. However, we cannot forget the potential of the internal market - where the necessary number of insulating joinery units to be replaced is very high. Another positive element was the relatively high success recorded by the offer of certain local companies on markets such as those from Italy, Switzerland, Belgium, France etc. The explanation is simple and consists in promoting models with performance characteristics similar to those offered by national competitors, for considerably lower prices. Differences are generated by the lower level of labour costs, as well as the much more advantageous installation costs practiced by Romanian companies. Another stimulus was given by the deterioration of certain East-European competitor companies’ image, due to the provision of non-conformous products. Finally, one of the strengths defining local companies’ offer is their short delivery timeframes, still representing an element often taken into consideration by Western beneficiaries.
Suppliers compelled to adapt their offer
In their turn, negative perceptions have not ceased to appear, although estimations made by professional organizations’ representatives are rather optimistic, indicating a growth of several percentages, even starting this year. Unfortunately reality is different, particularly from the point of view of well-known suppliers, facing special problems, such as: raw material price growth, pressures on the delivery prices, the migration of certain important partners, the growth of financial indiscipline, etc. Whether or not this reality is accepted, most companies specialized in system sale have adapted to the existing market conditions, most of the times simplifying to the minimum promoted products’ characteristics. This inevitably generated a drop in the performance of joinery obtained with these materials, with negative effects on the respective companies’ image. Up to a certain point, such strategies are understandable, if we consider that raw material expenditure growth generated by the increase of international commodities exchange quotations cannot be fully compensated by reducing profit margins, the only chance of maintaining above the profitability threshold is simplifying the finished product. The risks undertaken in such situations are quite high, as any such action may have negative effects on the performance characteristics, potentially - in the worst case scenario - irremediably compromising the respective brand. Back to the initial idea, there are recession winners and losers, respectively companies having taken advantage from the imbalances recorded by the economy and companies having lacked such ability, and lost significant market shares. As regards the first category, the crisis was concluded and is now followed by a new sustained growth stage, while managers from the second group still face the recession constraints and will have to make consistent efforts in the near future to reach the initial shares again (if that will still be a possibility).
The legislative system incoherence represents a real obstacle for the branch
If for companies operating in the economy production sector, things are starting to clarify, as regards authorities’ actions, they are doubtful, being still subject to mentalities originating in the centralized economy period. However, it seems that at an administrative level, the need to adopt much more liberal financial, fiscal and monetary strategies is still not understood, this however not being intended as a complete lack of regulations.
 
Article published in the July/August 2011 issue of the FEREASTRA Magazine. For detailed information click here!
 
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