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page 1 “Business and economic outlook”

Business and

economic outlook

Romanian companies

vs. foreign companies

Romania 2016

page 2 “Business and economic outlook”

About the survey

“Business and economic

outlook”

“Business and economic outlook” is a

survey that explores the perceptions

of top executives from major

companies operating in Romania

regarding the business outlook for

2016.

This report is based on an online survey of

421 C-suite level executives from

companies in various sectors, who provided

a perspective on how the domestic business

environment is perceived at the beginning of

2016 in Romania. This is an analysis of the

split between the aggregated results for

Romanian-owned companies and foreign-

owned companies operating in Romania.

40% foreign companies

60% domestic companies

421respondents

14 industries

45CEO of

foreign companies

86CEO of Romanian

companies

page 3 “Business and economic outlook”

Business and

economic outlook

Our research reflects companies

focus on sustainable growth in an

favorable economic environment

as perceived so by both local

entrepreneurs and investors.

page 4 “Business and economic outlook”

Indicate the main three elements that you think will define success in your industry in 2016? (only 3 responses)

31% of Romanian-owned

companies define their success by the number of years in the market

61% of foreign companies define

their success by their market share

In 2016, Romanian-owned companies primarily

measures their success through customer

satisfaction (82%). Second in the rank are the

financial results (65%), followed by brand

awareness (54%) and market share (52%). Foreign

companies in Romania (FDI) measure their

success by customer satisfaction (85%), financial

results (71%) and market share (61%).Total respondents: 421

(Skipped this question: 0)

1%

65%

52%

54%

12%

31%

4%

82%

4%

71%

61%

48%

14%

18%

3%

85%

0% 20% 40% 60% 80% 100%

Other elements

Financial results

Market share

Brand awareness

Number of employees

Number of years on themarket

Going public (IPO)

Customer satisfaction

FDI Romanian

page 5 “Business and economic outlook”

What is your level of confidence regarding the economic direction of Romania? (one answer)

11% of Romanian-owned

companies are very confident in the local business environment

17% foreign companies are very

confident in the Romanian business environment

Romanian-owned companies (66%) are more

confident than foreign-owned companies operating

in Romania (FDIs) with 61% regarding the current

economic direction of the country. The good

economic prospects and macroeconomic indicators

injected the local companies with optimism into the

positive economic evolution of the country.Total respondents: 421

(Skipped this question: 0)

5%

34%

48%

11%

2%

5%

29%

48%

17%

1%

0% 10% 20% 30% 40% 50% 60%

Not at all confident

Somehow confident

Confident

Very confident

Extremely confident

FDI Romanian

page 6 “Business and economic outlook”

How much do you expect your turnover to grow in 2016? (one answer)

11% of Romanian-owned

companies predict 20-30% growth in turnover for 2016

14% of foreign companies

predict 20-30% growth in turnover for 2016

42% of the Romanian-owned companies foresee a

significant growth of +10% to more than +30% for

their turnover in 2016 compared with 39% of the

FDIs, while 53% of FDI companies expect a growth

rate of +1% to +10% in 2016. A small percentage

of Romanian-owned companies (7%) and FDI

companies (8%) expect negative evolutions. Total respondents: 411

(Skipped this question: 10)

1%

1%

2%

3%

18%

33%

24%

11%

7%

4%

4%

23%

30%

20%

14%

5%

0% 10% 20% 30% 40%

-20% to - 30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

+1% to +5%

+5% to +10%

+10% to +20%

+20% to +30%

Exceeding 30%

FDI Romanian

page 7 “Business and economic outlook”

How much do you expect your profit to grow in 2016? (one answer)

16% of Romanian-owned

companies predict 10-20% profit growth in 2016

20% of foreign companies

predict 10-20% profit growth in 2016

34% of the Romanian companies foresee a

significant growth of +10% to more than +30% for

their company’s profit in 2016 compared with

30%% of the FDIs, while 58% of Romanian

companies expect a profit growth rate of +1% to

+10% in 2016, compared with 56% of FDIs. Still, a

marginal percentage of RO and FDI companies

expect negative evolutions. Total respondents: 411

(Skipped this question: 10)

1%

1%

2%

4%

28%

30%

20%

10%

4%

2%

1%

11%

30%

26%

16%

9%

5%

0% 10% 20% 30% 40%

Exceeding -30%

-20% to 30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

+1% to +5%

+5% to +10%

+10% to +20%

+20% to +30%

Exceeding 30%

FDI Romanian

page 8 “Business and economic outlook”

How much do you expect your investments to grow in 2016? (one answer)

28% of Romanian-owned

companies will increase their investments by 5-10% in 2016

26% of foreign companies will

increase their investments by 1-5% in 2016

54% of the Romanian companies foresee a

significant growth of +10% to +31% for their

company’s investments in 2015 compared with

28% of the FDIs, while 39% of Romanian

companies expect an investment growth rate of

+1% to +10% in 2015, compared with 55% of FDIs.

Still, a marginal percentage of RO and FDI

companies expect negative evolutions. Total respondents: 411

(Skipped this question: 10)

1%

1%

1%

12%

25%

28%

20%

5%

7%

2%

1%

1%

21%

26%

17%

22%

6%

4%

0% 10% 20% 30%

Exceeding -30%

-20% to -30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

+1% to +5%

+5% to +10%

+10% to +20%

+20% to +30%

Exceeding 30%

FDI Romanian

page 9 “Business and economic outlook”

How much do you expect your number of employees to grow in 2016? (one answer)

9% of Romanian-owned companies

expect an increase in the number of employees by 10-20% in 2016

12% of foreign companies expect

an increase in the number of employees by 10-20% in 2016

15% of the Romanian companies foresee a

significant growth rate of +10% to +30% for their

company’s number of employees in 2016

compared with 21% of the FDIs, while 56% of

Romanian companies expect a number of

employees growth rate of +1% to +10% in 2016,

compared with 50% of FDIs. Still, a 7% percentage

of RO and 12% of FDI companies expect negative

evolutions. Total respondents: 411

(Skipped this question: 10)

2%

5%

22%

39%

17%

9%

3%

3%

1%

3%

8%

17%

29%

21%

12%

5%

4%

0% 10% 20% 30% 40% 50%

Exceeding -30%

-20% to -30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

+1% to +5%

+5% to +10%

+10% to +20%

+20% to +30%

Exceeding 30%

FDI Romanian

page 10 “Business and economic outlook”

How much you expect the salary level in your company to grow in 2016? (one answer)

42% of Romanian-owned

companies expect salaries increase by 1-5% in 2016.

49% of foreign companies expect

salaries increase by 1-5% in 2016.

14% of the Romanian companies foresee a

significant growth rate of +10% to exceeding 20%

for their company’s salary level in 2016, compared

with only 7% of the FDIs, while 75% of Romanian

companies expect a salary growth rate of +1% to

+10% in 2016, compared with 77% of FDIs. Still,

10% of RO companies and 16% of FDI companies

expect a stagnation of salary level. Total respondents: 411

(Skipped this question: 10)

1%

10%

42%

33%

12%

2%

16%

49%

28%

7%

0 0.1 0.2 0.3 0.4 0.5 0.6

Exceeding -20%

-10% to -20%

-5% to -10%

-1% to -5%

0%

+1% to +5%

+5% to +10%

+10% to +20%

Exceeding 20%

FDI Romanian

page 11 “Business and economic outlook”

How confident do you feel regarding the growth of your industry for the next 12 months? (one answer)

14% of Romanian-owned

companies are very confident regarding the growth of their industry

20% of foreign companies are

very confident regarding the growth of their industry

64% of the Romanian respondent companies are

“confident” or “somewhat confident” regarding the

growth of their industry in 2016 compared with 55%

of FDIs, while 45% of Romanian companies are

“slightly confident” or “not at all confident”

compared with the 36% of FDIs.

Total respondents: 399

(Skipped this question: 22)

13%

32%

41%

14%

10%

26%

44%

20%

0% 20% 40% 60%

Not at allconfident

Slightlyconfident

Somewhatconfident

Veryconfident

FDI Romanian

page 12 “Business and economic outlook”

How confident do you feel regarding the growth of your company for the next 12 months? (one answer)

19% of Romanian-owned

companies are slightly confident regarding the growth of their companies in the next 12 months

20% of foreign companies are

slightly confident regarding the growth of their companies in the next 12 months

78% of the Romanian respondent companies are

“confident” or “somewhat confident” regarding the

growth of their company in 2016 compared with

76% of the FDIs, while 19% of Romanian

companies are “slightly confident” regarding the

growth of their company compared with 20% of the

FDIs . Total respondents: 399

(Skipped this question: 22)

3%

19%

44%

34%

4%

20%

40%

36%

0% 10% 20% 30% 40% 50%

Not at all confident

Slightly confident

Somewhat confident

Very confident

FDI Romanian

page 13 “Business and economic outlook”

Please select the main strength of your competitors in Romania. (one answer)

30% of Romanian-owned

companies consider the main strength of their competitors is low cost

39% of foreign companies

consider the main strength of their competitors is low cost

Domestic companies consider the 3 main strengths

of their competitors to be the following ones: low

cost and strong brand awareness (30% each), and

partnerships (19%). FDIs consider the top 3 main

strengths of their competitors to be: low cost (39%),

strong brand awareness (29%), and distribution

channel (14%). Total respondents: 399

(Skipped this question: 22)

30%

30%

19%

15%

6%

39%

29%

13%

14%

5%

0% 10% 20% 30% 40% 50%

Low cost

Strong brand awareness (trust)

Partnerships

Distribution channels

R&D

FDI Romanian

page 14 “Business and economic outlook”

To what extent do you expect your customers' demand to change in the next 12 months? (one answer)

56% of Romanian-owned

companies expect the customers’ demand to grow

66% dof foreign companies expect

the customers’ demand to grow

66% of the Romanian companies expect mainly

their customer’ demand to “somewhat increase” in

the next 12 months in 2016 compared with 56% of

the FDIs which mainly expect it to “somewhat

increase”. At the same time, 31% of Romanian

companies expect their customers’ demand to

“stay the same” or “decrease” compared with 40%

of the FDIs . Total respondents: 399

(Skipped this question: 22)

1%

4%

27%

66%

2%

6%

34%

56%

4%

0% 20% 40% 60% 80%

Decreasedramatically

Somewhatdecrease

Stay thesame

Somewhatincrease

Increasedramatically

FDI Romanian

page 15 “Business and economic outlook”

On a scale from 1 to 5 asses the importance of innovation for the performance of your company? (1 – no importance, 5 – very high

importance) (one answer)

37% of Romanian-owned

companies say that innovation have a high importance for their success

32% foreign companiessuccesul lor

say that innovation have a high importance for their success

For 73% of the Romanian respondent companies

innovation is of “very high importance” or “high

importance” for the successful performance of their

companies compared with 76% of the FDIs, while

for 26% of Romanian companies innovation is of

“medium importance” or “low importance”

compared with 23% of the FDIs . Total respondents: 348

(Skipped this question: 73)

1%

7%

19%

36%

37%

1%

5%

18%

44%

32%

0% 10% 20% 30% 40% 50%

Noimportance

Lowimportance

Mediumimportance

Highimportance

Very highimportance

FDI Romanian

page 16 “Business and economic outlook”

What was your company’s primary strategy for financing its investments in the past year? (one answer)

42% of Romanian-owned

companies used bank loans for financing investments

23% of foreign companies used

bank loans for financing investments

When it comes to financing investments in 2015,

42% of Romanian companies used mostly bank

loans vs. 23% of FDIs; intercompany loans, own

resources and reinvested profit used by 39% of

Romanian companies vs. 51% of FDIs, followed by

no investments 11% each for RO and FDI

companies. Share capital was used by 4% of

Romanian companies vs. 9% of FDIs on decrease

compared to the edition of similar period in 2015.Total respondents: 411

(Skipped this question: 10)

2%

11%

4%

2%

42%

39%

2%

11%

9%

4%

23%

51%

0% 20% 40% 60%

Other

No investments

Our company used sharecapital increase to finance its

investments

Our company used venturecapital to finance its

investments

Our company used bank loansto finance its investments

Our company usedintercompany loans, own

resources, or reinvested profitto finance its investments

FDI Romanian

page 17 “Business and economic outlook”

What’s your company's preferred strategy for financing its investments in the next 12 months? (one answer)

8% of Romanian-owned companies

have no investments planned in 2016

12% of foreign companies have

no investments planned in 2016

For the Romanian companies the main strategy for

financing investments in 2016 appears to be

through bank loans 42% vs. 23% for FDIs. The

intercompany loans, own resources and reinvested

profit with 39% Romanian companies vs 57% for

FDIs comes second as a strategy in financing

investments . Noteworthy the relative high

percentage of companies which don’t intend to

make investments 8% Romanian companies vs

12% FDIs.Total respondents: 339

(Skipped this question: 82)

3%

8%

1%

7%

42%

39%

1%

12%

2%

5%

23%

57%

0% 15% 30% 45% 60%

Other

No investments

Venture capital

Share capital increase

Bank loans

Intercompany loans, ownresources, or reinvested profit

FDI Romanian

page 18 “Business and economic outlook”

What was the reaction of your company to the business environment in the past year? (one answer)

32% of Romanian-owned

companies they increased their productivity in 2015

22% of foreign companies they

increased their productivity in 2015

Romanian businesses reacted to the pressures

coming from the business environment by

increasing productivity (32% RO vs 22% FDIs), by

reducing costs (21% RO vs. 20% FDIs), or by

releasing new products (17% RO vs. 22% FDIs).

Total respondents: 339

(Skipped this question: 82)

1%

1%

2%

2%

7%

4%

13%

17%

21%

32%

1%

1%

6%

1%

8%

19%

22%

20%

22%

0% 10% 20% 30% 40%

Other reaction

Reduced capital investment

Reduced market coverage

Mergers & Acquisitions

Attraction of EU funds

Talent acquisition

Restructure of theorganization

New products

Cost reduction

Productivity increase

FDI Romanian

page 19 “Business and economic outlook”

Which of the following actions will your company take to increase sales? (multiple answers)

56% of Romanian-owned

companies românești vor să introducă noi produse/servicii pe piață

63% dintre companiile străine vor

să introducă noi produse/servicii pe piață

For the Romanian companies the top 3 actions

to increase sales in 2016 will be: 56% to

introduce new products/services, 36% to increase

investment in marketing and sales, and 33% to

open new distribution channels. For FDIs the top

3 actions to increase sales will be: 63% to

introduce new products/services, 33% to enter new

geographic markets and 28% to increase

investment in marketing and sales. Total respondents: 339

(Skipped this question: 82)

1%

32%

56%

36%

20%

33%

5%

10%

11%

1%

33%

63%

28%

17%

27%

10%

7%

10%

0% 20% 40% 60% 80%

Other

Enter new geographic markets forexisting products/services

Introducing new products and/ orservices for existing client and to

attract new clients

Increase investment in marketingand sales

Adapting existing product/service fornew geographic markets

Opening new distribution channels/reorganizing distribution to use

multiple channels

Merging with and/or acquiringcompetitors to increase market

share

Increase prices

Cutting prices

FDI Romanian

page 20 “Business and economic outlook”

In case of stagnation/ decline in the market what will be the steps your company will pursue in the next 12 months? (multiple answers)

37% of Romanian-owned

companies intend to transform the market through innovation

40% of foreign companies intend

to transform the market through innovation

Romanian companies said that in case of

market stagnation/decline 56% would stay on

the market until is stable again in order to

secure it and increase the trust level, and 36%

would transform the market through innovative

approaches. For FDIs 56% would also stay on the

market, while 14% would seek to grow through

M&A. Total respondents: 339

(Skipped this question: 82)

56%

5%

37%

11%

9%

1%

56%

7%

40%

14%

6%

2%

0% 15% 30% 45% 60%

Stay on the market until isstable again in order to

secure it and increase thetrust level

Leave the market and seeknew ones

Transform the marketthrough innovative

approaches

Grow on the market throughM&A (Mergers &

Acquisitions)

Seek external funding tosecure our position on the

market

A state of stagnation in thecurrent market is impossible

FDI Romanian

page 21 “Business and economic outlook”

DemographicsThe results of this survey are

based on the 421 answers

received to our 25 questions

questionnaire from top

executives of companies

operating in between 27 January

and 12 February 2016.

page 22 “Business and economic outlook”

Is your company Romanian owned and controlled? (single answer)

255 of respondent companies are

Romanian-owned

166 of respondent companies are

foreign companies (FDI’s)

60%

40%

Yes

No

Total respondents: 421

(Skipped this question: 0)

page 23 “Business and economic outlook”

What is your company's revenue for 2015?(single answer)

8% of respondents are Romanian-

owned companies with over 100 million euro revenue

20% of foreign respondents are

foreign companies with over 100 millions euro revenue

17%

37%

31%

7%

8%

10%

34%

22%

14%

20%

0% 20% 40%

Less than 1 M EUR

1 - 10 M EUR

10 - 50 M EUR

50 - 100 M EUR

100 M EUR+

FDI Romanian

Total respondents: 421

(Skipped this question: 0)

page 24 “Business and economic outlook”

What is the main industry you operate in? (single answer)

17% of respondents are

Romanian-owned companies which operate in production

26% of respondets are foreign

companies which operate in production

8%

2%

2%

3%

3%

3%

5%

5%

4%

10%

9%

6%

9%

14%

17%

8%

2%

1%

2%

2%

3%

1%

4%

8%

4%

8%

12%

9%

10%

26%

0% 10% 20% 30%

Other

Publishing & Printing

R&D / New Technology

Pharmaceuticals / Healthcare

Telecommunication / Media

Chemicals

Tourism

Transportation

Power / Energy / Mining

Construction / Real Estate

Information Technology

Food & Beverages / Agriculture

Services

Retail & Wholesale Trade

Industry / Manufacturing

FDI Romanian

Total respondents: 421

(Skipped this question: 0)

page 25 “Business and economic outlook”

What does best describe your job title? (single answer)

34% of respondents are CEO or

managing directors of Romanian-owned companies

27% of respondents are CEO or

managing directors of foreign companies

7%

2%

3%

5%

6%

6%

6%

16%

15%

34%

5%

5%

5%

3%

4%

5%

14%

14%

18%

27%

0% 20% 40%

Other

CIO/Technology director

Head of business unit

Other C-level executive

Board member

SVP/VP/Director

CFO/Treasurer/Controller

Head of department

Manager

CEO/President/Managingdirector

FDI Romania

Total respondents: 421

(Skipped this question: 0)

page 26 “Business and economic outlook”

Business and

economic outlook

Top 5 conclusions

Romanian-owned companies

vs. foreign companies

Romania 2016

page 27 “Business and economic outlook”

Top 5 conclusions

“Business and economic

outlook”

This is a survey that explores the

perceptions of top executives from major

companies operating in Romania

regarding the business outlook for 2016.

In 2016, Romanian owned companies

primarily measures their success through

customer satisfaction (82%). Second in

the rank are the financial results (65%),

followed by brand awareness (54%) and

market share (52%). Foreign companies

in Romania (FDI) measure their success

by customer satisfaction (85%), financial

results (71%) and market share (61%).

42% of the Romanian-owned companies foresee a

significant growth of +10% to more than +30% for their

company’s turnover in 2016 compared with 39% of the

FDIs, while 51% of Romanian companies expect a

growth rate of +1% to +10% in 2016, compared with 53%

of FDIs. Still, a small percentage of Romanian-owned

companies (7%) and FDI companies (8%) expect

negative evolutions.

14% of the Romanian respondent companies foresee a

significant growth rate of +10% to exceeding 20% for

their company’s salary level in 2016, compared with only

7% of the FDIs, while 75% of Romanian companies

expect a salary growth rate of +1% to +10% in 2016,

compared with 77% of FDIs. Still, 10% of RO companies

and 16% of FDI companies expect a stagnation of salary

level.

15% of the Romanian companies foresee a significant

growth rate of +10 to +30% for their company’s number

of employees in 2016 compared with 21% of the FDIs,

while 56% of Romanian companies expect a number of

employees growth rate of +1 to +10% in 2016, compared

with 50% of FDIs. Still, a 7% percentage of RO and 12%

of FDI companies expect negative evolutions.

Romanian companies said that in case of market

stagnation/decline 56% would stay on the market until is

stable again in order to secure it and increase the trust

level, and 36% would transform the market through

innovative approaches. For FDIs 56% would also stay on

the market, while 14% would seek to grow through M&A.

1.

5.

2.

3.

4.

page 28 “Business and economic outlook”

Doingbusiness.ro srl

Kompass Romania srl

4-6 Prof. Ion Bogdan Street, 4th Floor

District 1, 010539, Bucharest

Phone. +40 21 317 03 90 | Fax +40 21 317 03 93

[email protected]; [email protected];

www.doingbusiness.ro; www.kompass.com;

www.kompass.ro