Serbian CEO Survey as part of 18th AnnualGlobal CEO Survey

www.pwc.com/ceosurvey

PwC

Emmanuel Koenig

We want to thank the 39 CEOs whotook part in the first Serbian CEOSurvey, and for sharing their viewswith us. We hope that our surveyresults contribute to the futuresuccess of your business.

Thank you to the company leaders who shared their views with us. Theiractive and candid participation is the single greatest factor in the success ofPwC’s Annual Global CEO Survey. We greatly appreciate our respondent’swillingness to take the time and make this survey as comprehensive andaccurate as possible.

The Survey is now in its 18th year, and we are proud to present the firstSerbian edition of the Survey. This report provides an insight into theSerbian corporate boardroom thinking, and defines current issues thatCEOs face.

I strongly believe we will continue to publish this survey and share CEOsinsights relevant for the Serbian market.

Country Managing PartnerPwC Serbia

Growth, but not as we know it63% of Serbian CEOs expect that the global economy will stagnatein the upcoming 12 months, while 89% is confident in theircompany’s revenue growth over the next three years.

Focus on Government priorities76% of Serbian CEOs think that internationally competitive andefficient tax system should be a top priority.

Rethinking what business means50% Serbian CEOs recognise that organisations will increasinglycompete outside of their current businesses.

Digital innovation – creating new valuethrough digital transformation87% of Serbian CEOs aim to lead by example in theirorganisations by championing the use of digital technologies. Onthe other hand they are not very concerned about cyber threatsand the lack of data security as only 26% cited this as a threat totheir business.

Talent diversity and adaptability32% of Serbian CEOs expects that the headcount in theircompanies will increase in the next 12 months.

For the first year, we have surveyed the CEOs of leading firmsactive in the Serbian market. A total of 39 Serbian businessleaders participated in the first Serbian CEO Survey and sharedwith us their views, concerns and vision.

This report compares and analyses local views with the PwC’sGlobal CEO Survey, presented annually for the last 18 years atthe World Economic Forum in Davos, Switzerland.

The Serbian CEO Survey shows that Serbian business leaders, astheir global peers, are pessimistic about prospects for globaleconomic growth. However, they have great deal of optimismwhen it comes to growth of revenue in their companies. Althoughthe majority of them have cost reduction on their restructuringagenda they will be focusing on creating new opportunities andpartnerships that will keep their businesses competitive in arapidly changing business landscape. In addition, the researchshows that our business leaders are particularly concerned aboutgovernment response to fiscal deficit and debt burden,geopolitical uncertainty and growth-restricting effects of over-regulation.

We are very confident that Serbian CEOs have what it takes tomeet upcoming challenges and position their businesses to growin a world where continual change and disruption are simply thenorm.

Thank you to the CEOs who took part in our survey. Yourwillingness to share your thoughts benefits us all.

Emmanuel KoenigCountry Managing PartnerPwC Serbia

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CEOs are less optimistic about globaleconomic growth and more confidentabout their company’s prospects. Theability to see the upside even in mostdifficult of times may account for thisdivergence, where 61% of the CEOsglobally see more opportunities for theirbusiness today than in the last three years.

Globally, 37% of CEOs think the economicoutlook will improve over the next 12months. Contrary to that, 17% think theoutlook will worsen (compared to only 7%last year).

Serbian CEOs seem to share a morepessimistic view than their global peers,where 24% believe that the globaleconomy will improve in the upcoming 12months, while 63% expect the economicgrowth will stagnate. This may be impactedby Serbia’s own stagnation in 2014 andmeagre prospects for 2015. Geopoliticaluncertainty and the impact of theRussia/Ukraine conflict also have an effecton CEO’s sentiments in Serbia as well asCEE overall, which as a region is especiallydownbeat.

Do CEOs believe that the global economy will improve, stagnate or decline in the next 12month, and what is the correlation with their company’s growth prospects?

CEOs very confident in business growth prospects

CEOs confident global economic growth will improve

Serbia CEE Global

How do the Serbian CEOs see the global economic outlook in the next 12 months,compared to their CEE and global peers?

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Improve Stay the same Decline

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While the economic and business climateisn’t giving CEOs anywhere great cause forcelebration, Serbian as well as global CEOsare quite confident about growthprospects.

As much as 92% of global respondentsanswered that they are confident abouttheir company’s revenue growth over thenext three years. In line with this, SerbianCEOs are almost as optimistic as theirglobal colleagues since 89% of them haveresponded that they are confident inrevenue growth.

This positive attitude may lie in CEO’sfocus to create opportunities rather than torely on market-driven growth inanticipation of improved marketconditions. CEOs seem to have accepteduncertainty and disruption as the neweconomic reality and redirect their ownenergy and the energy of theirorganisations towards identifyingalternative sources of revenue,reconsidering their value proposition andtransforming their operating model toensure growth.

89%

11%

Somewhat/Very confident

Not at all/ not very confident

How confident are CEOs about their company’s prospects for revenue growthover the next 3 years?

SerbiaGlobal

Somewhat/Very confident

Not at all/ not very confident

No opinion

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92%

6%

2%

“CEOs and businesses are relying less and less on macroeconomic and marketdynamics for their own growth and much more on the agility andentrepreneurship in their organisations. All the low-hanging fruits havebeen picked and these days it’s all about knowing your own competitivestrengths, spotting new opportunities, recognising disruptive patterns and bequick and resolute in adopting change. The fact that Serbian businessesrecognise and live by these principles is very good news!”

Albena MarkovaPartner, Consulting Leader, PwC Serbia

PwC

When asked which countries (excluding theirown) do CEOs consider most important foroverall growth prospects over the next 12months, they gave advantage to the USA, aftermore than 5 years of domination of China.This re-discovery of mature markets (also withUK beating Brazil) reflects a cautioussentiment towards the challengingenvironment offered by BRICS and otheremerging markets with complex structural andpolitical issues.

Unlike their global colleagues, 29% of SerbianCEOs consider Russia as a country of majorimportance for their companies growth in thenext 12 months. This reliance may exertpressure on their growth prospects if Russia’smarket enters steep recession triggered bygeopolitical and economic issues.

As expected, surrounding countriestraditionally proved to be markets of greatinterest. Second ranked is Croatia, which 26%of the CEOs find very important, followed byBosnia & Herzegovina with 24%.

Which countries (excluding the one in which they are based) do CEOs considermost important for your overall growth prospects over the next 12 months?

38%

USChina

Germany UK11%

Brazil10%34%

ChinaUS

Germany

Brazil12%

UK10%

30%33%

19%

17%

2014

2015

As expected, Serbian CEOs find Russia and surrounding countries of greatimportance

24%26%

29%

Russia CroatiaBosnia&

Herzegovina

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The Government has a big role to playwhen it comes to creating a businessenvironment that is conductive to longterm growth. At the same time, it can bechallenging for governments to determinewhat priorities should take precedenceover others when taking regulatory andpolicy decisions.

76% of CEOs believe that Serbiangovernment should make creating a moreinternationally competitive and efficienttax system a key priority. Unfortunately,only 13% believe that the Governmenthas been effective at achieving thispriority, which suggest room forimprovement.

Other Government priorities in the eyesof Serbian CEOs include creating a skilledand adaptable workforce and adequatephysical infrastructure.

While innovation is considered a keybuilding block for many successfulbusinesses, only 32% of Serbian CEOsbelieve that developing an adequatedigital infrastructure should beGovernment priority.

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Which of the outcomes do CEOs think should be government priorities?How effective has government been in achieving these outcomes?

58%61%

58% 58%

32%

13% 13% 11% 11%18%

Greatly ineffective/ineffective Effective/greatly effective

76%63% 61%

45%

16%

An internationallycompetitive and

efficient tax system

A skilled andadaptable workforce

Adequate physicalinfrastructure

Access to affordablecapital

Adequate digitalinfrastructure

There is a mixed sentiment of CEO’s regarding the role of Government andits effectiveness in Serbia. Even though the level playing field, the buildingof institutions and business climate improvement is evident, some believepolitical leadership should be more supportive of the business community .

Vladislav CvetkovicDirector, Markets Leader, PwC Serbia

PwC

In the area of constant change, it is notsurprising that Serbian CEOs are concernedabout a wide variety of economic, policy, andsocial threats. 55% of Serbian CEOs say thereare more threats to their business todaycompared to three years ago. However, thereis also some optimism as 66% of CEOs seemore opportunities today, which is in linewith 61% on global level but more optimisticthan colleagues in Western Europe, CEE orRussia.

On the economic and policy side, SerbianCEOs are most concerned about theGovernment’s response to fiscal deficit anddebt burden and geopolitical uncertainty,although over-regulation and the increasingtax burden are also recognised as significantthreats.

The CEOs (74%) also feel that governmentsare increasingly implementing morecompetitive tax policies, which areinfluencing organisations’ decisions on whereto operate.

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Serbian CEOs are most anxious about Government response to fiscal deficit and debtburden, as 89% of them cited this as a top threat.

55%

55%

55%

63%

63%

66%

89%

65%

34%

49%

81%

49%

77%

70%

70%

50%

59%

70%

44%

78%

63%

72%

53%

69%

64%

34%

86%

51%

Increasing tax burden

Inadequate basic infrastructure

Social instability

Over-regulation

High unemployment/underemployment

Geopolitical uncertainity

Government response to fiscal deficit and debt burden

Serbia Western Europe CEE Russia

66%see moreopportunities

35%see only moreopportunities

31%see both moreopportunities

and more threats

24%See only more

threats

55%see morethreats

Global Serbia

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76% of CEOs feel that changes in industryregulation will be heavily impacting theSerbian business climate. Changes incustomer behaviour are also found to bevery disruptive, followed by the increasingnumber of both direct and indirectcompetitors, as well as changes indistribution channels.

Serbian CEOs are also very concernedabout high or volatile energy costs (53%)and availability of key skills (50%). Theseare common concerns among CEOs ingeneral. However, unlike their colleaguesin CEE and globally, Serbian CEOs are notvery concerned about cyber threats andlack of data security as only 26% cited thisas a threat to their business, opposite to61% on global level and 53% in the CEE,respectively.

Technology is altering business from theinside out, so it is no wonder thattechnology is the field where significantcompetitors are expected to emerge in theupcoming five years.

39%

53%

53%

55%

76%

47%

32%

34%

26%

18%

Changes in core technologies of production orservice provision

Changes in distribution channels

Increase in number of significant direct andindirect competitors – traditional and new

Changes in customer behaviours

Changes in industry regulation

Somewhat/ very disruptive Not at all/ not very disruptive

How disruptive do CEOs think the following trends will be their industry over the next 5 years?

From which industry or industries outside of their own do CEOs think a significantcompetitor is emerging or could emerge?

Serbia Global

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More and more companies recognise thattheir competition is extending beyond theirtraditional competitors.

50% of Serbian CEOs recognise thatorganisations will increasingly competeoutside of their current businesses. Thisaccounts for CEOs globally, as well (56%).

34% of surveyed organisations have entereda new industry in the past three years, while16% are planning such move in the followingthree years.

When it comes to redefining business,Serbian companies appear to see significantvalue in forging partnerships andcollaborations for advancing their business.52% of CEOs are either engaged or considerengaging with their competitors andcustomers on the market. Partnerships withacademic institutions are currently ongoing,as well.

On the other hand, Serbian CEOs arereluctant to form alliances with government,non-government organisations and start-ups.

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Manufacturing – Consumerproducts

26%

Technology

26%

Financial services,including Real Estate

21%

have entered a newindustry in the pastthree years

34%

It is encouraging to see thatbusiness leaders recognise theimportance of lookingbeyond their industry for newbusiness ventures andopportunities.

Maja AndjelicDirector, Assurance, PwC Serbia

PwC

Following the global trend, 76% of SerbianCEOs plan to introduce a cost cutting initiativein 2015.

However, not all activities are aimed at costreduction, as Serbian CEOs are seriouslylooking at how they can grow their business –from restructuring to find more effective waysto conduct work.

Restructuring options, including developingstrategic alliances and joint ventures aregaining priority on the corporate agenda.

37% of Serbian CEOs plan to enter into a newstrategic alliance or joint venture in the next 12months. In addition, 39% understand theneed to outsource certain business processesor functions.

35% of their colleagues in Western Europeshare the same plans, while in Russia thisinitiative is recognised by only 22% of theleading CEOs.

Which, if any, restructuring activities do CEOs plan to initiate in thecoming 12 months

71% globally

51% globally

31% globally

Implement costcutting measures

Outsource a businessprocess or function

Enter into a new strategicalliance/joint venture

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With new innovations being announced every day,it is not surprising that CEOs in Serbia see a widevariety of digital technologies as strategicallyimportant to their business. In fact, 92% ofSerbian CEOs believe that data mining andanalysis are strategically important. Otherimportant digital solutions include mobiletechnologies for customer engagement, cybersecurity and internet of things. On the other hand,although 71% of local CEOs consider cybersecurity as strategically important, they are notvery concerned about cyber threats and the lack ofdata security as only 26% cited this as a threat totheir business.

Digital technologies may be strategicallyimportant and have high value to organisations,but without understanding of how to implementthe technologies effectively, Serbian companiesmay not be able to achieve desired outcomes.

It is encouraging to that 89% of CEOs have a clearvision on how digital technologies can helpachieve competitive advantage, in order fororganisations to get the most of its digitalinvestments.

One capability that would be the most critical fortomorrow’s CEO’s is the ability to focus on vision,strategy and staying on top of industry trends, thiswill lead to innovation and change.

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Data mining andanalysis

92%

Technologies considered to be strategically important to Serbian CEOs

Mobiletechnologiesfor customerengagement

84%

Cyber security

71%

Internet of things

68%

Socially enabledbusinessprocesses

63%

Cloud computing

55%

76%

82%

87%

89%

Ensuring that executing on plans to leverage digitaltechnologies is everyone's responsibility

Specific hiring and training strategies to integratedigital technologies throughout the enterprise

You as CEO champion the use of digitaltechnologies

A clear vision of how digital technologies can helpachieve competitive advantage

Somewhat/very important

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Global CEOs continue to focus on increasingheadcount over the next 12 months whileSerbian CEOs are quite cautious.

Of Serbian CEOs, 32% expect to hire in biggernumbers in 2015, while 39% think thatheadcount in their companies will decrease.

Many companies in Serbia recognise theimportance of having different viewpoints andperspectives when it comes to building successas an organisation. In fact, 50% of CEOs inSerbia said that their organisations have astrategy to promote talent diversity andinclusiveness which is aligned with CEOsanswers from all over the world (64%).

In addition, CEOs who have D&I strategy inplace believe their strategies have resulted insignificant benefits, such as strengtheningtheir brand and reputation, attracting talentand improving collaboration.

Skills are also at the top of CEO’s agenda. 84%of Serbian CEOs say they are continuouslytrying to equip employee with new skills. Inaddition, 71% say their organisations are nowlooking for a much broader range of skills thanin the past.

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Do CEOs expect headcount at your company to increase, decrease orstay the same over the next 12 months?

Serbia Globally

84%89%

84%79% 79%

Improvedcollaboration

Strengthenbrand andreputation

Attracttalent

Innovation Improvedbusiness

performance

Which of the following benefits, if any, has your organisation obtained fromits strategy to promote talent diversity and inclusiveness?

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is doneface-to-face

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interviews completed withSerbian business leaders

of participants areoperating withinCIPS sector

of participants areoperating withinFinancial Servicessector

of participants areoperating withinTechnology &Communications sector

interviews completed in across

countries between Sep and Dec 2014

Serbia Global

female male

< 49 50-59 60+

61%

16%

8%

Gender Age span Industry span

number of employees led byCEOs interviewed

total revenue of companiesled by CEOs interviewed

PwC

Research and project team

Dunja SuttnigAleksandar StevanovićJelena Miletić

Research and data analysis

The research was coordinated by PwC UK,located in Belfast, Northern Ireland

Marketing and editorial

Jelena MiletićMaja VučinićMirjana Simović

We would also like to thank the followingcolleagues for their guidance and expert insight:

Emmanuel KoenigAlbena MarkovaBranka RajičićVladislav CvetkovićTanja GligorevićBiljana BogovacMaja AnđelićIvan Stanković

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Find out what global business leaders had to say by visitingwww.pwc.com/ceosurvey. Here, you can dig deeper and uncovercurrent perspectives.

Want to take part in the discussion next year?

If you are a CEO interested in participating in next year’s survey, pleasecontact Jelena Miletić (jelena.miletic@rs.pwc.com) and share yourthoughts with us.

About the methodology

For the Serbian CEO Survey we conducted 39 interviews with CEOsoperating in wide range of industries. Globally, we conducted 1322interviews in over 77 countries. The lower threshold for inclusion in thetop 10 countries (by GDP) was 500 employees or revenues of morethan $50 million. The threshold for inclusion in the next 20 countrieswas companies with more than 100 employees or revenue of more than$10 million.

© 2015 PwC Serbia. All rights reserved.

“PwC” refers to Serbian member firm, and may sometimes refer to the PwC network of member firms.Each member firm is a separate and independent legal entity.

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