BusinessMagazin

Category: Bm english

  • Mall-mania is a thing of the past

    After a hectic week in Grenoble – a small town in the French Alps, of about 150,000 people, which also attracts several tens of thousands of students every year, two young people from Bucharest, who were attending college in France, realised they had almost no food left in the fridge. They decided to go to the Carrefour hypermarket on the outskirts of the Grenoble, one of the two big shopping centres of that town the next day, on Sunday.

    When they got there they saw the car park was empty and the hypermarket was closed. ”I was shocked maybe. I thought I was in a movie, I couldn’t understand what was happening,” one of the two remembers today, almost a year after that incident. As they would later find out, the hypermarket was rarely open on Sundays, like other big stores in France. The legislation in force in several countries in Western Europe until the end of the nineties prohibited large stores to open for business on Sundays, partly for religious reasons and partly because of the negotiating power of the unions, which wanted Sunday to be a day off for employees.

    Fiercer and fiercer competition among store chains and developers of shopping centres led to the dropping of such laws in many places, while in others a special permit is still needed to open a large store on Sundays – something that can seem at least surprising to a Romanian used to see the supermarket or the hypermarket allow them to do their shopping on Saturdays and Sundays, when the rest of the stores are closed. What happened to the two young people is relevant precisely because of this: after almost half a century of communist regime, when those who could not get out of the county, namely most of the people, actually, had only general stores to deal with instead of malls and hypermarkets, the opening of the first Western-type shopping centres stimulated a consumer spending appetite that almost defied economic conditions.

    The desire to adopt the Western cultural model and the pleasure to set foot into a ”temple of consumer spending” as abroad, turned the first malls in the country into an instant attraction. The willingness of a consumer sometimes fresh out of the grey retail (in the true sense of the word) to shop and spend their free time in modern shopping centres has encouraged developers to announce project after project, and retailers to expand at the same pace, driven by the good results in Bucharest and in the first such centres opened outside the capital city. The mall-mania, if we can call it that, both in terms of consumers and in terms of frantically announced plans by developers and retailers, has also led to poorly thought out projects, as they are considered today or to unrealistic rents paid for a retail space.

    Such times, when the newly opened shopping centres would become genuine pilgrimage places for consumers are gone, both because of the economic crisis, and as a result of the novelty of the mall concept wearing off, after such centres mushroomed, even excessively in some places. ”A great deal of money has been made in Romania without actually producing something – from real estate, from foreign investments. An atmosphere where everyone made profit was created but now everyone must suffer,” comments Ali Ergun Ergen, the man who coordinated the building of Bucuresti Mall and then of Plaza Romania and later supervised the development of the shopping area in the Baneasa project. He admits the market has developed like crazy over the last few years because all retailers had the same constant increase expectations for consumer spending. ”It’s like a balloon that you keep inflating; it will eventually burst.”

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Cash is King

    The trouble is that all companies are trying to put off their own payments as much as possible and collect money from clients even in advance, if possible, although this is now very seldom achievable, due to the financial blockage. But can companies avoid this blockage although their sector is affected or will one player defaulting on its payments cause a chain reaction?

    Marius Ghenea, an entrepreneur who prefers to invest in start-ups, and has eight companies in his portfolio, says a company with losses and a positive cash flow is more solid than one which makes a profit, but which has its cash blocked, and is unable to pay its employees and its debts (most Romanian companies finance their operations via loans). In order to maximise cash inflows and minimise outflows, Ghenea believes the firm needs to increase sales and cut costs.

    Although it sounds simple, it isn’t. Sales should not be boosted at all cost: if the markup is cut too much, companies and entire sectors can be hurt. Cost cuts are also problematic, because such measures can generate significant subsequent costs; for instance, layoffs can give rise to immediate compensatory costs – i.e. unwanted expenses. Ioana Constantinescu, general manager of Chimtotal, in turn believes there are strategies to avoid a liquidity shortage. It is essential to keep a firm eye on the cash flow, especially the forecast one.

    ”We should be able to keep a strict record both of payments made to us and by us.” The company, a distributor of raw material for the cosmetics and the furniture industries, ended last year with 700,000 euros in turnover. Now, payments tend to be about two weeks late, and Constantinescu is getting increasingly more requests for a rescheduling of payment, especially when large sums are involved, but, at least for some products, the company is not willing to accept late payment. The explanation for this is that, although for the time being the balance between sums coming in and those going out is reasonable, both in terms of value and in terms of deadlines, there is always the risk, including for a profitable company, to default on its payments. One thing is certain right now: not all companies have a strategy that can shield them from problems, so the advantage of those that have a ”map” to avoid a liquidity shortage is all the more important.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Art Cinemas

    Although their budgets at best compete with the price of a Ferrari, they boast awards at the Cannes or Berlin film festival, and their storylines observe all the rules of the cinematographic art. Up until recently, the only Bucharest stage for art films was the Romanian Cinematheque, with its two halls, but more such places have appeared lately. The latest project of this kind is that of the Romanian Peasant’s Museum (MTR), which launched the ”The New Cinema Hall of Romanian Directors” in April, featuring films awarded in festivals, documentaries and cartoons, either in an outdoor location or in the Horia Bernea studio.

    The idea for the project emerged last year, after the museum hosted the European Film Festival, which featured film projections in its inner court. ”From the very start, we thought of it as an art cinema, which could feature films of the young generation of Romanian and European directors,” says Mihai Gheorghiu, who is in charge of cultural management at the MTR. From Tuesday to Sunday, films chosen by a ”jury” formed of ten Romanian directors are shown. ”Each month one of the directors selects a list of films,” explains Gheorghiu.

    The director in charge of the May films, Radu Munteanu, has proposed a selection of Cannes festival winners of the 2005 – 2008 editions, such as ”Lorna’s Silence”, for which the Dardenne brothers won the best screenplay category in 2008, ”Three Monkeys”, which earned N.B. Ceylan the award for best director last year, and ”Gomorra,” which won the Grand Prix in 2008. ”There is an audience for such films, this was proven by the fact that the festival drew large crowds (The European Film Festival i.e.). It was attended by around 4,000 viewers,” says Gheorghiu, adding that amateurs of art films are knowledgeable about films, know what is new and have high expectations.

    According to him, the largest number of viewers has been attracted by films within the festival, such as ”Three Monkeys,” ”Lorna’s Silence,” and by Romanian films. The initiators of the project give assurances to art film buffs that the cinema will not be just a summer project, but a ”long-term one, among other cultural projects of the MTR, which intends to prove itself also as a cultural centre, and not just as a museum.” As for the future, the representative of the museum targets films awarded in festivals, including productions receiving accolades this year, a ”best of” TIFF (Transilvania International Film Festival) retrospective, and documentary films, which will be shown in partnership with foreign cultural centres in Bucharest.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • The Year of Spas

    This year alone 10 million euros have been invested in Romania in opening new spa facilities, with players on the market announcing they will continue to allocate money for developing the existing locations. May appears to be the month of spa businesses, considering that the record for the largest spa on the Romanian market has been broken twice in a week’s time. At the beginning of the month Eden Spa announced a 4 millioneuro investment in The Spa within the future Hilton Sibiu hotel, a 2,000 square-metre location.

    One week later, the Cocor Turism group launched Cocor Spa in Neptun Black Sea coast resort, a 6 million-euro investment in a 3,000 square-metre area, which has become the largest such centre in Romania. ”The spa covers the 3 floors of a newly-built area and occupies 3,000 square metres, whilst services include four different segments – clinique medical spa, wellness aging, spa suite and thermarium & pool,” says Lacramioara Moroianu, general manager of Cocor Spa.

    The spa, the only Romanian spa affiliated to the International Spa Association, occupies 3 floors of a newly-built wing, and is part of the 18 million-euro investment in renovating the hotel. The former 2-star Galati hotel has been turned into the 4-star Cocor hotel. As for the spa, it offers spa services, traditional treatments, facial therapies, exfoliations and wraps. The third floor accommodates the pool that overlooks the sea, a jacuzzi, showers and saunas. Representatives of the spa say they target 25 to 60 year-olds with higher education, average and above average incomes looking for health, relaxation and wellness services. Additionally, they want to turn Romanians using spa services into clients of the Neptun spa, and also make foreign tourists perceive Romania as a potential destination for a spa holiday.

    Apart from Cocor Spa, the Cocor hotel also includes an underground two-level club, Club Vision, a 350-seat conference hall and a restaurant that can accommodate 500 people. ”We plan to expand Cocor Spa in Bucharest with a Day Spa on the 3rd floor of Cocor Luxury Store, which will open on November 15th 2009,” the general manager concluded. The other investment, officially launched in May is in Sibiu – the future Hilton Sibiu hotel has seen the opening of The Spa, managed by Eden Spa, which also operates a spa in Bucharest, after closing down the one in Monte Carlo Palace. The relaxation offer includes hot stone and essential oil massages, milk and honey baths, rose, lavender and honey wraps, facial treatment with organic ingredients, Finnish and steam sauna. The Spa is part of a five-star complex with 115 rooms and apartments, four restaurants, a bar, five conference rooms and an executive lounge.

  • Hunting for Managers

    Secretaries and assistants of executives in some of the large multinationals on the market receive clear instructions when they are hired: they are not to give any phone number, email address to someone who phones and uses an argument of the type ”I am a former college mate of your boss, I am getting married and didn’t know how to contact X” or ”I met your boss at a selling presentation, I was supposed to make him an offer but I lost his business card.”

    One of the main sources of such a strategy is the companies’ fear of losing their top employees, who might end up in the headhunters’ databases. Indeed, one of the sayings that best define top executive recruitment is ”It doesn’t matter what you know, what matters is who you know.” Any consultant with a few years’ experience on the market has a considerable list of contacts, which is essential when they get a recruitment mission from a client.

    ”I have 2,000 phone numbers in my agenda – people I have recruited, people for whom I have recruited, or people I have worked with over time. Sometimes they phone me to ask for advice,” says Razvan Soare, who worked for two years for Stanton Chase, one of the largest executive search companies on the Romanian market. Soare set up his own firm, Gerissen Strategic Solutions a few months ago, which also specialises in headhunting.

    After the database, the second option when searching for an executive is through personal relations. ”One tries to get to people using an honest approach, by phoning them directly at their office. Secretaries in some companies act as watchdogs, and sometimes it’s very difficult to reach the manager you are looking for, in order to suggest a meeting or an opportunity,” says Radu Manolescu, managing partner of executive search company K.M. Trust & Partners.

    Challenged by some, approaching managers directly is considered by consultants to be a guarantee that the clientcompany which does the recruitment will have the best possible candidates to choose from. ”On a market such as the Romanian one, extremely good executives are very rare and in order to serve your client, you need to scan the market as much as possible. Basically all variants and all companies on the targeted market need to be explored,” says Manolescu.

  • What to do about Romania?

    If, however, the managers and Romanian businessmen who had the chance to experience both the education system and business environment here and abroad say this, their verdicts sound not only realistic, but also more encouraging. Let us see what they have to say.

    Let us imagine Romania as a castle built from playing cards, in a contest where what matters is to use as many cards in the shortest time possible. We, the creative people that we are, put cards wherever we could, as fast as we could. The other competitors, Germany, France or maybe even Poland, had the advantage of getting into the game early and built solid castles; our only chance was to build fast. But the crisis changed the rules of the game in the meantime. Now, whoever wants to stay in the competition has to have a solid, stable structure, with infrastructure, education and industry, with a simple and consistent fiscal and legal system. And this is where we start with a handicap again.

    Moving beyond figures of speech, we will say again, as many other commentators have, that for Romania, the crisis is an opportunity to take a little break from the rush of the last four or five years and to be forced to think long term. For such an exercise in thinking, we need the people who got an education and worked in other economies, those of the solid castles. They can see Romania objectively and critically but can also contribute to the change of the local business environment and maybe even of the society.

    ”Has anybody said it, that normality in Romania is a luxury?” Anca Podoleanu asked us about a statement of hers. Yes, others did, as well, or at least thought about it. They are very well aware that in the countries where they studied and worked, it is normal to get fair public services and a fiscal regime that does not change every year.

    Anca Podoleanu is the former human resources manager of telecommunications operator Vodafone. Today she has her own HR consultancy, Choice Consulting. She went to elementary school in New York and got an MBA in Canada, where she worked after that. She says that the Romanian economy does not know what its specialities are and this is where many problems stem from. The advantage of Romanians, on the other hand, compared to others, is that they are faster, more dynamic and often have a more developed entrepreneurial spirit, because the economy forced them to. This is what Andrei Caramitru, partner with McKinsey advisory firm, who runs the office in Bucharest, believes. Caramitru went to college in Switzerland and worked there until he returned to the country in 2007, when the local McKinsey office opened.

    Another consultant how knows the difference between our and ”their” managers is Codrut Pascu, managing partner of Roland Berger Romania. He joined the British company after completing his education in economics at the ASE (Academy of Economic Studies) in Bucharest. He then attended a master programme at Fontainebleau, one of the most powerful schools of business in Europe and worked for the company’s offices in France and at the headquarters in London for more than four years, before returning to the Bucharest office. He says managers have changed a lot for the better over the last few years and results will become visible in society in the medium and long run. He too feels that Romania can change for the better with the help of the private sector, where organisations can instil healthy values and value systems in people. ”Education plays an important part here, too, though,” Pascu says. He means the pragmatism instilled by colleges abroad.

  • First Business is Never Forgotten

    He wants to turn Madrid Open into the most elitist tournament in the world. He set a five-year deadline for himself to reach a 30 million euro net profit. Until then, he is waiting for the crisis to pass, a crisis that saddens him ”greatly”, but he has a lot of consolidating to do for the businesses in Romania. Together with Ion Ion. Ion Tiriac concentrates on tennis 5% of his time. As for the rest, he says that his businesses in Romania take up ”too much time”.

    Business grew very fast in Romania, Ion Tiriac now feels. He admits, though, that his group has to go through a process of consolidation, and in parallel, of gaining market share, for which the crisis is quite a good time. Consolidation started for Ion Tiriac a few years ago, when he says he sold everything he had in the US and France to focus on Romania, because he could not have controlled his businesses otherwise. Now he is successfully sharing the control. ”I have high hopes for Ion Ion – thank God he has 8,300 people working for him and he is a down to earth person. The boy has an education: he went to college in the US, has an MBA from Irwin; as for me, what did I do, I was an athlete and went to college in Romania in the ‘60s?”

    The crisis caught most people unprepared, the businessman believes, who congratulates himself that he prepared in good time and opened lines of credit to have access to money, and also saved something up. Otherwise, he would have had a really hard time, considering his fields of business. ”Cars? Real estate? Nothing sells anymore. Fortunately, I am not afraid, I saw the crisis coming and I have enough cash to swallow the pill; the crisis does cost me money, but I can survive without having to sell an apartment; I can’t sell the 4,000 euro/sqm ones, and I can’t sell the other – 1,000 euro/sqm ones, either.”

    As for his tennis tournament in Madrid, in 2002, when he first organised it, Ion Tiriac had to come up with three million euros. He regarded it as an investment instead of a loss. The following year, he came up with one million. He broke even in the third and starting making profit in the fourth. ”After three years, this tournament became the most important social event in Madrid: there is not one important person who wouldn’t get a box at Madrid Open,” Tiriac says. Though he did not sell all the tickets, Ion Tiriac is optimistic, because his system will start generating more money in just a few years.

  • Don’t Blame the Economists

    The others could not see – or would not see the signs suggesting that things would go from bad to worse. Now, that businesses are going down, companies are posting losses, and the state is collecting less and less money, everybody is wondering: what good are economists if they did not warn before it was too late that the economic typhoon was coming?

    Although economists throughout the world had the same data at their disposal, few were able to predict the most serious economic crisis in history, and Romania has been no exception. After several years of economic growth, only a few of them have ventured at the beginning of 2008 to say that things would take a turn for the worse. Why has the economic crisis slipped through the economists’ fingers?

    The first explanation given by the analysts is simple and surprising: even those who would have wanted to say that things would worsen did not take the risk of sounding crazy among all the optimism that had become common among analysts in the last few years.

    ”There is a very interesting, though littleresearched phenomenon that occurs – group behaviour. If an analyst makes the same growth prediction as another three hundred analysts and they all turn out to be wrong, nobody blames him. But if he is alone in being wrong, everybody points a finger. Nobody takes the risk of straying from the crowd. It’s better to be wrong when the whole group is wrong than to be the only one who is right,” says economic analyst Aurelian Dochia, 59, a member of Board of Directors of BRD-SocGen bank and a former advisor to the World Bank, the EBRD and the OECD.

    Another supporter of the ”herd mentality” theory is the chief economist of the BNR (National Bank of Romania). ”It’s not easy to stand out from the crowd as the only one with negative opinions, it takes courage and flawless arguments,” Valentin Lazea says. Another reason for the economists’ failure to predict the crisis has to do with the fact that most of them work for banks and have to abide by their employer’s communication policy. ”Many have had to keep silent because their job wouldn’t let them talk,” says Lazea. As a bank analyst, you cannot say there will be no more money on the market, credits will freeze and, even worse, that the bank you are working for is making transactions with financial instruments that are too difficult to be understood by everyone involved, which will lead to significant losses.

  • Is There Room for Comparison?

    ”Comparing prices in online stores is still a burgeoning business” – this is how Arthur Radulescu describes the market in Romania. This observation is based, on the one hand, on his experience as managing director of Asesoft Net, the company that holds the ShopMania.ro portal, and on the other hand, on comparisons with other countries. After being launched in Romania in 2006 and expanded over the last two years to a further 24 countries, ShopMania is among the few major price comparison websites in Romania, which is attracting the most consumers who search for the lowest-priced products and services.

    ”On the market, there are less than 10 major websites of this kind, but the overall number is in the range of dozens of websites,” says Radulescu. Lately, seeking to speculate the difficult economic situation, which could push people to be more careful about how they spend their money, increasingly more entrepreneurs have tapped into this niche. Examples include ListaPreturi.ro and PricesDB.ro, the latter being a search engine for products of several hundreds of online stores, which uses price as a criterion for the search. The engine was launched at the end of last year following an investment of a little more than 1,000 euros made by Adrian Dimian.

    ”Romania is a market with a very big potential and which could in fact also be considered a launch pad for the region,” believes Paul Condila, representative of the Romanian version of the GoShopping. com American portal, launched at the end of last month on the Romanian market. GoShopping has prepared a 5 milliondollar (3.75 million-euro) investment, largely funded via bank loans, in order to expand onto the European market, first to Romania, and proceeding with the UK, Germany and France in the second half of this year with. ”In a first stage, the budget allocated for Romania is 600,000 euros, but the company will support the Romanian portal financially for two years, with the investment to probably be recouped in 2011,” explains Paul Condila.

    Romania has been chosen because 68% of the portal’s users outside the USA come from Romania, according to Alexa.com statistics, while the second largest market is the UK, which accounts for almost 10% of foreign visitors.

  • Saved by the Parties

    The year 2009 is the first when JW Marriott, the hotel with the highest revenues on the market, will see a two-digit decline. After having ended last year with 40 million euros in revenues, the owners of SCH Grand see 10% lower figures for this year.

    ”There have been years of decline before, but we were talking about a few percentage points then,” says Meda Vasiliu, the hotel’s sales manager. Promoted to a top management position at the hotel in 2006, Meda Vasiliu says that it is difficult and dangerous to talk about decline at this time: ”I believe that by talking about the crisis we are making it worse, instead of looking for alternative solutions to drive it away.”

    The marketing and sales manager, however, says that the decline of demand on the five-star hotel market as a result of the cut in the spending budgets of the corporate clients applies both to room bookings and to conferences and events. Marriott derives 50% of its revenues from room bookings and the other half from conferences and events, and bar and restaurants, which seem to be less affected by the economic crisis, at least for the time being. Intercontinental hotel, now under refurbishment, anticipates one of the most serious declines on the market, by almost 27%.