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Sustainable development prospects for properly managed companies
English Section Publicat de AG&F 20 Feb 2012 08:00
The local insulating joinery market has reached a financial results level from which the only possible trend for the near future is exclusively a growing one. The recovery process pace is questionable, potential growths not being expected to record a very flying or uniform pace. This year as well, it is rather very likely to witness a continuation of the sector industry reorganization and placing on efficacy and professional management basis. The handicap to make up for is enormous. According to the information on the sector’s turnover reached in 2011, such level might not exceed EUR 300 million. That is to say, the 50% drops recorded in 2009 and 25% in the following year, were followed by a new contraction of approximately 25%, which, in terms of value, indicates an almost four times reduction of insulating joinery and certain façade sales in Romania.
 
An attempted objective analysis of this data, without benefiting from information from within the targeted market, could lead an economy specialist to the conclusion either that the respective sector is completely inefficient and therefore irrecoverable in terms of profit, or that it was the "victim" of an unfavourable conjuncture which inevitably lead to such counter-performances. Reality is somewhere in the middle and could be outlined precisely by taking into account the respective sector’s specific data. In fact, the presented results were generated - on the one hand - by subjective factors, related to the sector company managers’ lack of technical-economic expertise and - on the other - by the extremely unfavourable economic conditions generated by the recession manifested worldwide. If the first elements, through their nature, cannot be controlled, as they exercise immediate effects consisting - in most cases - in company bankruptcy, as a consequence of the objective economic mechanisms (competition, failure to adapt to consumers’ requirements, random investment programs or complete lack thereof, financial indiscipline etc.), as regards the second group, the impact of single actions and managerial abilities unfortunately exercises a minor influence on the balance re-establishment efforts. However, prospects are optimistic, if certain rules are observed both in private business, and in terms of public strategies.
System suppliers market, placed between the "economic" and "premium" variants
In order to define the future development opportunities, we need to define the current situation with maximum accuracy. A first analysis is imposed for system suppliers. The trend outlined ever more clearly for companies specialized in the delivery of PVC marks is that of a bi-directional orientation, their offer including either economic range profiles (in certain cases, even C class systems, according to the classification provided in the SR EN 12608 standard, inappropriate for the weather conditions in Romania), or premium category marks, mainly intended for companies performing export operations. It doesn’t take much wit to conclude that the first group products currently hold an overwhelming share of the suppliers’ turnover. Obviously, there are exceptions, in the sense that certain companies are loyal to their tradition and the promoted brand prestige, trying to maintain on the market with the offer they had before the beginning of the economic crisis. In terms of offer structure, we also acknowledge significant hierarchy changes. Thus, if the top chart first positions have somehow remained unchanged, in the sense that market leaders are the same, interesting mutations were recorded in the top chart middle-part. Generally, two supplier categories have recorded significant increases. Firstly, those who, adapting to the requirements of a market mainly oriented towards low prices have dropped their "emblem" (sometimes ostentatiously) and included in their offer borderline models in terms of performance characteristics. However, they did not drop the premium series and even completed their portfolio with models intended for the execution of joinery for passive houses. Second, an extraordinary evolution was recorded by companies having chosen to implement aggressive sales strategies, managing, by means of irrefutable promotional offers, to co-opt a high number of partners dissatisfied with their current partnerships. In the end, it all comes down to the intensification of competition, sometimes the limits of loyal competition being even ignored, but the targeted purpose - namely increasing efficiency and resisting on the market in the current situation, not exactly favourable - may justify the use of less fair means. For a complete picture, we should mention that a series of suppliers have disappeared from the market, their place being taken however by occasional dealers, usually phantom-companies from non-European Union countries, promoting systems completely inadequate for window execution and managing to mainly "penetrate" rural regions, where conformity requirements are seldom verified.
Oligopoly ensures product conformity to a higher extent
As regards hardware systems, the situation is much clearer, in the sense that it is an oligopoly-type of market, over 90% of the products being commercialized by a group of five big international companies. As in the previous case, most suppliers have chosen to adapt promoted products to the current demand characteristics. Thus, with small exceptions, the massive sales share is currently held by simplified ranges, with the mention that they still hold the properties necessary to render them appropriate in terms of the provisions of sector harmonized standards. Furthermore, new companies have emerged in this sector, betting precisely on the current market trend, delivering minimally equipped models, but ensuring the safe operation of insulating joinery units. Finally, the situation of the architectural glass suppliers segment is very clear, the sector being dominated by the main four specialized international companies (with an obvious advantage in terms of the share held by the company with a production unit in Romania).
Professional business management - joinery companies’ only chance
Trends defining suppliers are directly mirrored in the situation recorded by companies specialized in joinery execution. We could state that influences are mutual, in the sense that if companies delivering parts mainly focus on economical solutions, this was the case also because partners’ requests were such. In fact, the most important element having influenced the choice of such a trend was the objective demand of beneficiaries - individual or institutional - which no longer held the financial resources necessary for purchasing higher performance ranges. Back to joinery companies, their current trend is very clear, there being few exceptions from the general trend: the characteristics of the offer intended for the domestic market are dictated by the price constraints, and products sold for export are manufactured with high performance systems, in line with the demands of a better informed audience holding more financial resources. According to the opinion of several sector experts, it is wrong to divide sector companies according to their dimension, indicating on the contrary, a classification based on their management. Against the current background, it is almost a fact that companies lead chaotically without considering the basic principles of modern management have minimum chances of overcoming recession, irrespective of their dimension. That is to say, a company currently below the profitability threshold (set as the balance point between costs and revenues) will have no chance of maintaining the activity, even if it holds additional financial resources able to compensate the respective differences. This situation is positive though, as such a filtration could definitely lead to system optimization, even if painful. The efficient business management condition will probably still not be enough for saving from bankruptcy certain economic entities caught up in the challenges of recession and however not holding sufficient funds to apply the correct strategies.
 
Article published in the January/February 2012 issue of the FEREASTRA Magazine. For detailed information click here!
 
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