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Executive Report on Strategies in Croatia
ICON Group International, June 2007, Pages: 384
How to Strategically Evaluate Croatia
Perhaps the most efficient way of evaluating Croatia is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”).
Framework for Prioritizing Countries
Demand/Market Potential Driven Firm
Relative Accessibility
Accessibility/Supply Averse Firm
Relative Accessibility
In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities.
Latent Demand and Accessibility in Croatia
This report provides an extremely detailed overview of factors driving latent demand and accessibility in Croatia. Latent demand is largely driven by economic fundamentals. But, latent demand only represents half of the picture. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks.
Chapter 2 deals with macro-accessibility. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Croatia:
Openness to Trade in Croatia
Openness to Direct Investment in Croatia
Local Marketing and Entry Strategy Alternatives
Local Human Resources
Local Risks
Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are also covered in Chapter 2, which is presented from the perspective of an American firm, though it is equally applicable to most firms entering Croatia. This chapter has been authored by local offices of the U.S. Government. I have included a number of edits to clarify the provided information as it relates to the general strategic framework.
In Chapter 3, I summarize the economic potential for Croatia over the next five years for hundreds of industries, categories, and products. The goal of this chapter is to report my findings on the real economic potential, or latent demand, represented by Croatia when defined as an area of dominant influence. The data presented are the result of various spatial econometric and time-series forecasting models which, for each category presented, are applied to forecast and allocate latent demand across all countries of the world and major distribution centers or centers of dominant influence within each country. This is accomplished knowing that economic fundamentals (e.g. income) generally vary from one country to another within a given country over time. In this chapter, I report the allocation for each category for Croatia as an area of dominant influence in Europe and, potentially, the world.
The report concludes with trade indicators for Croatia. Often, the amount of trade flowing into and out of a country is a strong indicator of trading partners, trade openness, and related latent demand. Trade indicators are purely statistical in nature. Although international trade is not a direct measure of latent demand, it does provide an indicator of general market conditions with respect to trade flows and trade openness in Croatia.
As a whole, this report presents a strategic assessment of Croatia by considering an extremely broad set of factors affecting both latent demand and accessibility, as outlined in the following chapters.
MACRO-ACCESSIBILITY IN CROATIA
Economic Fundamentals and Dynamics
Infrastructure Development
Croatia’s infrastructure is fairly well developed, especially when compared to standards elsewhere in the region. However, war damage was significant. Loans from the World Bank and the European Bank for Reconstruction and Development (EBRD) target the repair, upgrade and expansion of existing infrastructure in the transport, energy and telecom sectors. Information and lists of projects are found on the Internet Web sites of these two organizations: http://www.worldbank.org and http://www.ebrd.com, as well as at www.mjr.hr (Ministry of Public Works and Construction).
Roads and Motorways
Highway and housing construction are dominant sub-sectors. Croatia had 28,275 kilometers of roads (expressways, regional and local roads) of which 429 kilometers were highways and 197 kilometers were “fast-roads.” The improvement in road transport has forced the local air carrier (Croatia Airlines) to reduce prices for domestic flights to make them competitive with bus and train transportation. In general, road transport has developed faster than other forms of transport because of its relative importance. Due to geography, in many parts of Croatia roads are the only viable means to connect parts of the country and abroad. There is still a considerable discrepancy between needs in this area and infrastructure capacity. In 2001 the government adopted amendments to the basic Law on Transport in Road Traffic (1998) that aimed to harmonize regulations on passenger transport, distribution of international permits for transporting goods, and other areas with European Union standards.
The reconstruction of communal infrastructure in war-affected regions is still a priority of the government. According to the Ministry of Public Works and Construction (www.mjr.hr), the government reconstructed 118,580 damaged housing units, spending HRK 13.3 billion ($2.1 billion) from the budget. Another 9,000 units, or 7 percent of reconstructed properties, was financed by international donors (international donors believe their share of the total reconstruction is higher than the government figures indicate).
Railways
There are 2,726 kilometers of railways in Croatia, of which 36 percent are electrified. Until the break-up of the SFRY, the major direction of rail transport was east-west. This changed, however, because of the war and reduction of intra-regional trade. Despite a 50 percent reduction in railroad employees, the productivity of the remaining workers remains low. Half the total income of Croatian Railways was provided from the government budget in the last few years. The EBRD is providing a $35 million loan for a $219 million modernization and restructuring program begun under the Tudjman government. This, along with a World Bank project, aims at separating the rail infrastructure from transport activities, re-training redundant workers, as well as privatizing certain services connected with rail travel. At later stages of this transformation, the operation of the modernized rail system will be made compliant with EU directives.
Harbors and Ports
Because of Croatia’s geography and the importance of the tourism industry, the development of both maritime and river port infrastructure is a high priority. The condition of navigation on inland waterways (Danube, Sava, Drava and Kupa rivers) is also not satisfactory. The total length of inland waterways for ships up to 150 tons is 922 kilometers, of which 502 kilometers are usable for ships weighing up to 1,500 tons. Croatia is included in the European Danube-Rhine navigable network, and is thus connected to the Black and North Seas.
Civil Aviation
There are ten airports in Croatia, of which seven (Zagreb, Split, Dubrovnik, Pula, Zadar, Rijeka and Osijek) can accommodate medium to large commercial aircraft. Three additional airports can accommodate smaller commercial planes, while there are a number of smaller (sports) airports scattered inland and among some of Croatia’s 1,185 islands. More than 1.8 million passengers were transported via regular flights, and some 650 thousand via charter flights, with increasing number of charters from Russia (Moscow to Pula, Split, Dubrovnik), Ireland, and Serbia and Montenegro during the tourist season. Low-cost carrier Ryanair is negotiating with smaller Croatian airports (Zadar, Rijeka, Osijek) but commencement of operations is subject to Croatia signing an Open Skies agreement.
Croatia Airlines (www.croatiaairlines.hr), a state-owned carrier, has a fleet consists of four Airbus A 319s, three Airbus A320s, three ATRs and one leased Bae 146 (90-seater “jumbolino”).
Telecommunications
Croatia’s telecom network is quite advanced both in terms of penetration and equipment (including optical cables, digital equipment, and mobile telephones). There are over 2 million installed fixed telephone lines, or 37 telephone subscriber lines per every 100 inhabitants. International and transit ATM switches are installed in four main centers, which are connected among themselves and with international networks via 7,000 kilometers of fiber optic cables. About 80 percent of switching capacity and about 90 percent of the transmission capacity is digitized, with ISDN and DSL being introduced to households.
Internet development has been slowed by high interconnection costs for Internet Service Providers (ISPs) and nontransparent regulations. The entire list of legislation is available on line at www.telekom.hr or www.mppv.hr. Thanks to the financial backing of U.S. and Austrian investors, several ISPs managed to become competitive to HT’s HT Hinet internet provider. HT’s Hinet dominates the market, while second place is held by Iskon, owned by Adriatic Net Investors Ltd. and CALPers. All ISPs must use HT’s infrastructure for customers to access the Internet.
The most popular sites are Google, Yahoo, and two local ISP’s sites, Klik.hr and Hinet.hr. According to an on-line survey conducted by www.monitor.hr, over 320,000 Croatians have purchased goods via the Internet, and this figure does not include banking transactions (several banks offer online banking services to individual customers). Most of the purchases were made with tourist agencies, IT equipment distributors, bookstores and electronic equipment stores.
One of the cable TV operators, U.S.-owned Digital City Media (DCM), rolled out an alternative Internet access option, via cable TV infrastructure. The offer first became available to 4,800 subscribers in Osijek at a price of HRK 170 - HRK 965 ($27-150) per month depending of the package plus a one-time fee of HRK 400 ($63). Cable modems can be purchased, rented or leased through DCM.
Energy
Croatia meets its energy needs by a combination of domestic and imported sources. Domestic production of liquid fuels meets around 30 percent of demand, while domestic production of natural gas, including in the northern Adriatic, covers 60 percent of need.
The exploration, production, transport and storage of natural gas and crude oil, as well as the production of petroleum products and most trading activities is organized by the state-owned INA company.
The Adriatic Oil Pipeline company, JANAF, is a state-owned company responsible for an international pipeline system that delivers crude oil to domestic and foreign refineries (in Central Europe as well as to Bosnia and Herzegovina and Serbia and Montenegro). The company’s sea terminal in Omisalj can accommodate tankers up to 500,000 DWT year round. The pipeline has the capacity to transport 20 million tons annually through its 759-kilometer length (of which 610 km are in Croatia), with storage facilities totaling 820,000 cubic meters at three facilities in Omisalj, Sisak and Virje. The total potential (designed) capacity of JANAF is 34 million tons per year.
Croatia generates electricity by hydropower (46 percent), thermal power plants (33 percent), by the Krsko nuclear power plant in Slovenia, 50 percent owned by Croatia (7 percent), and by a few industrial energy plants. Around 14 percent of power comes from outside Croatia. The Croatian Electricity Company (HEP) is responsible for electric power generation, transmission and distribution of heat as well as for managing the power system. It is still state-owned, but in 2001 the Croatian Parliament adopted a law to privatize the company and the government chose Norton Rose and Ernst and Young as advisers for privatization and restructuring, respectively.
The Croatian laws covering the energy sector are being harmonized with EU directives. Major laws include: the energy law, the law on the electricity market, the law on the gas market, the law on the oil and derivatives market, and the law on regulation of energy sector activities.
Political Risks
Economic Relationship with the United States
Since independence, the framework of U.S.-Croatian cooperation has been the effort to build a democratic, secure, and market-oriented society within a stable Southeastern Europe region. Croatia’s main political objectives are integration into Western institutions such as NATO, the European Union, the Central Free Trade Agreement (CEFTA) and the World Trade Organization (WTO). The United States supports Croatia’s movement in these directions.
With the democratic election of a reform-minded government in early 2000, the United States has been steadily building solid ties with Croatia. The U.S. Agency for International Development (USAID) has an active assistance program in Croatia, providing technical assistance and training to develop Croatia’s democratic institutions and economy and to help the government manage the social aspects of transition to a market economy. As in other countries in the region, USAID is working to alleviate the legacy of the war in Croatia with programs encouraging the sustainable return and reintegration of refugees and displaced persons. Croatia has received U.S. humanitarian aid and technical assistance. The U.S. government has provided assistance to Croatia’s military to support civilian control of military forces and preparations for eventual NATO membership.
Croatia is already a member of the Council of Europe (October 1996), signed a Stabilization and Association Agreement (SAA) with the EU in October 2001 and formally presented its application for membership to the EU in February 2003. The United States actively supported Croatia’s entry into NATO’s Partnership-for-Peace (May 2000), entry into NATO’s Membership Action Plan (May 2002), and accession to the WTO (November 2000). In the context of the Stability Pact, the United States supports Croatia’s endeavors to increase intra-regional trade through the signing of free trade agreements with other countries in Central and Southeastern Europe.
The United States, along with its European allies, is working with Croatia to help it to fulfill its commitments pursuant to the Dayton Peace Accords and to play a positive role in regional cooperation. With business-to-business contacts leading the way, Croatia has made important progress toward normalizing its relations with Serbia and Montenegro. Croatia has supported the policies and activities of the international community in Bosnia and Herzegovina and is actively encouraging Bosnian Croats to play a constructive role in building their country together with other ethnic groups. The government’s cooperation with the International Criminal Tribunal on the Former Yugoslavia (ICTY) at the Hague has been generally good, but uneven at times.
Marketing Strategies
Distribution Channel Options
Croatia’s distribution system is formalized by the Law on Trade which regulates the activities of wholesalers and retailers. Stringent application of customs and tax administration regulations reduced illegal imports and unlicensed business activities which previously flourished. Wholesalers operate as a distribution intermediary to retailers. For the most part, the wholesale sector is completely privatized. Some wholesalers specialize in particular sectors such as pharmaceuticals or medical supplies/equipment. Restructuring of the retail segment also occurred as retail chains were privatized and acquired by larger groups and new private retailers emerged on the market. Retail is now dominated by private companies such as Getro, Konzum (Agrokor), Diona (Globus Holding) and Prehrana (Brodokomerc). Foreign retailers (Bila, DM, Merkator, Mercatone, Metro, Ikea, etc.) have started to enter the market as well, creating more competition. Some wholesalers have also ventured into the retail sector. Including kiosks, small shops and open markets, Croatia’s total retail market numbers an estimated 7,500 retail outlets.
Capital goods are normally sold directly to manufacturers and businesses. When selling capital goods or machinery to businesses, a good agent is essential.
Agents and Distributors
A carefully chosen local agent or distributor is the most effective method for entering this market. Reliable and capable representatives can be found. Some firms may lack sufficient capital to handle product marketing and wide distribution. It is recommended that a confirmed letter-of-credit be used in conducting business with a new local partner since some firms may have payment problems.
The Financial Agency (FINA), the successor of the Croatian Bureau of Payments (ZAP), provides information on the creditworthiness of local companies. U.S. companies can contact FINA to request a copy of a Croatian firm’s BON-IN, a credit report prepared in English that provides information on the local firm’s credit history. The report costs $60.00 and can be obtained by writing to:
FINA
Podruznica Zagreb
Odjel Analiza
Ulica Grada Vukovara, 70
10000 Zagreb Croatia
Ms. Nevenka Brkic
Tel: (385) (1) 612-7422
Ms. Mirjana Mrcela
Tel: (385)(1) 612-7426
Fax: (385)(1) 612-7063
The Financial Agency (FINA) can also provide a copy of financial reports of the registered companies but only in Croatian language.
The following local organizations may also be useful in verifying credibility of a potential local partner:
BONLINE d.o.o.
The representative of Dun & Bradstreet
Ms. Nina Krznaric
Tel: (385)(1) 3707-009
Fax: (385)(1) 3776-415
Email: bonline@bonline.hr
www.bonline.hr
Chamber of Economy:
Attn: Ms. Vesna Pap
Tel: (385)(1) 4606-770; 4606-700;
Fax: (385)(1) 4606-782
E-mail: vpap@hgk.hr
The Chamber of Economy also has available a business opportunity exchange database of local companies interested in working with U.S. partners. The database is available from:
Attn: Ms. Andrijana Rakaric
Tel: (385)(1) 4606-778
Fax: (385)(1) 4606-782
E-mail: arakaric@hgk.hr
Franchising Activities
American Express Privredna Banka and Diners Club Adriatic are the two best-known U.S. franchisees in Croatia. McDonald’s opened three restaurants in 1996, initially as a direct investment and not under franchise. Hertz and Budget rental car agencies are also in Croatia.
Franchising is an optimal method for the transfer of technology and know-how. The business climate in Croatia is inviting for franchises. Best prospects for franchising opportunities are likely in the following sectors: restaurant, catering, automobile servicing/equipment and apparel.
Direct Marketing Options
Since direct marketing is not common, the sale of mailing lists is very limited. Mail-order houses are relatively rare compared with other Western countries. There are several Croatian business directories available on diskettes or CD-ROMs, so target customers can be selected by product, type, size, sales, location, and/or year of establishment.
Joint Ventures and Licensing Options
The Law on Companies regulates the establishment of joint ventures, investment in companies with mixed ownership, as well as other types of foreign or domestic investment. This law, adopted in 1994, is very similar to the German Company Law. Establishment procedures require a Croatian lawyer, a notary public, and registration with the local Commercial Court.
There are no specific laws regulating licensing other than the Law on Obligations (“Commercial Code”) which addresses contract law. The licensing contract should also cover intellectual property rights issues (trademark, model, patent or copyright), payments/royalties, the term of the contract, restrictions on using trademarks, etc. A Croatian lawyer should be consulted to ensure that provisions of the contract do not contravene Croatian law, making the agreement null and void.
American companies have established licensees in Croatia such as Eurocard/Mastercard and Zagrebacka Banka, Croatia’s largest bank; Levi Strauss and Varteks, a leading local textile manufacturer; and Phillip Morris with Rovinj Tobacco Company.
Creating a Sales Office
The Law on Trade (Article 53) regulates establishing a representative office. A representative office is not considered a legal entity under Croatian law. Rep offices are not permitted to conclude contracts in their names, but only in the name of the parent company and must have their own local bank accounts. Rep office activities are limited to market research, contract or investment preparations, technical cooperation and similar business facilitation activities.
Prior to opening, the rep office must be recorded with the Registry of Representative Offices, maintained by the Ministry of Economy. Registration procedures and establishment are regulated by the governmental Decree on Conditions for Establishment & Operation of Foreign Representative Offices (1996). Updated instructions for registering a representative office were published in the Official Gazette in January 1997 (number 7/97). The following documentation must be submitted to the Ministry of Economy:
An application must be submitted to the Ministry which contains the following information:
Name and address of the founder;
Address of the office (in Croatia);
Scope of activities of the office;
Names of persons managing the office;
A certified document proving registration of the parent company in the home country;
Decision of the founder (parent company) to establish the rep office;
Appointment of the person in charge of the office (in Croatia);
Photocopy of passports of designated person(s) in charge;
Copy of payment slip documenting that a tax amounting to KN 300 has been paid on the account of the Ministry:
Payee: Drzavni Proracun
Purpose of Payment: Upravna Pristojba
Account Number: 1001005-1863000160
“Poziv na broj”: 5002-(company’s registration number)
Accompanying the documentation should be the last annual financial statement (not more than 6 months old) certified by a public notary. All documents must be originals or copies certified by a notary public. Also, an authorized court translator must translate the documents into Croatian. If documentation is complete and correct, the registration procedure can be finished within a few weeks.
More information on the registration process can be obtained from:
Ministry of Economy
Ulica grada Vukovara 78
10000 Zagreb, Croatia
Ms. Djema Bartulovic
Tel: (385)(1) 610-6979
Fax: (385)(1) 610-9112
A rep office is permitted to hold both foreign exchange and domestic currency accounts with authorized Croatian banks. Office equipment can be imported free of customs duties, on the basis of a temporary permit with the possibility for extensions. Office vehicles may be similarly imported but only for the foreign employees. Foreign employees at a representative office are not required to pay local income taxes and contributions. Residence and work permits are required for foreign employees.
Selling Strategies
Due to the tight credit situation, the ability to provide financing is a key factor in selling both industrial and consumer goods. Most Croatian buyers prefer to pay monthly installments, even for low-cost goods. Other factors/techniques critical to success are close and frequent contact with buyers, motivated and trained middlemen, and aggressive market promotion.
Selling to state-owned companies and other state entities depends on establishing your company or product creditability. Internationally financed public procurements offer the best opportunity for transparent purchasing decisions.
Croatia’s private sector should be targeted. Private sector growth augers well for western businesses that are accustomed to selling products based on pricing, product quality and servicing ability. The government states that the private sector accounts for more than 50% of GDP. Marketing techniques will not vary greatly with this business segment.
Advertising and Trade Promotion
Advertising is a key marketing tool in Croatia. Nearly all companies engage in some form of advertising. While the number of publications is growing, television is the most important media in Croatia. Outdoor advertising is also expanding. In fact, 59 % of advertising expenditure went to TV, 14 % on newspapers, 10 % on magazines, and 7 % to outdoor billboards. Radio is experiencing growing interest, currently receiving 10 % of advertising expenditure.
Television, which reaches 90 % of the market, has the broadest reach of all media. Croatia has two state-owned and two private TV channels as well as five regional and six local channels. The law restricts advertising on state television to nine minutes per hour for the first two national channels. Advertising on privately-owned (regional and local) television stations can not exceed 25 percent of total program length.
The advertising sector experienced 12 % growth because of the extensive advertising campaigns of the mobile telecommunications firms. The most advertised products are telecommunications, vehicles, financial institutions, beverages and newspapers. Croatian regulations prohibit television advertisement of tobacco, alcohol, and spirits.
Magazines, particularly specialized magazines, are growing in circulation. The six national daily newspapers account for 62 % of advertising expenditures for print periodicals. The balance of the revenue is shared among the sixteen high circulation periodicals and over 45 other specialized magazines.
More than 6,000 billboards populate Croatia. Prices range from $150 per month to $250 per month depending on frequency and category. It is recommended that 15-200 billboards be used for a nationwide launch campaign.
Currently, there are five foreign advertising firms with offices in Croatia: BBDO, DDB (Futura-DDB), McCann-Erikson, Ogilvy & Mather and Gray.
There are a substantial number of domestic agencies, but most are very small. Also 90 % of international agencies are in partnership with domestic agencies. (i.e. McCann is 50 % local and 50 % international). Typically, domestic agencies are too small to have enough clients for the biggest discounts on media buying.
Croatian Television
HTV - Marketing
Prisavlje 3
10 000 Zagreb, Croatia
Tel:(385)(1)634-3785; (385)(1)634-2322
Fax:(385)(1)634-3791
E-mail: nives.skara@hrt.hr ; jelena.runjic@hrt.hr
Web site: www.hrt.hr
Newspapers and Business Journals
Vecernji List
Slavonska avenija 4
10000 Zagreb, Croatia
Tel: (385)(1)630-0600
Fax: (385)(1)630-0675
E-mail: vecernji@vecernji.net
Web site: www.vecernji-list.hr
Jutarnji list
Odranska 1/I
10000 Zagreb, Croatia
Tel: (385)(1) 610-3100; 610-3101
Fax: (385)(1) 610-3148; 610-3115
E-mail: jutarnji_list@eph.hr
Vjesnik
Slavonska avenija 4
10000 Zagreb, Croatia
Tel: (385)(1) 616-6666; 364-1111
Fax: (385)(1) 616 1650; 616 1602
E-mail: vijesnik@vijesnik.hr
Web site: www.vijesnik.com or www.vijesnik.hr
Slobodna Dalmacija
Hrvatske mornarice 4
21000 Split, Croatia
Tel: (385)(21)352-888
Fax: (385)(21)383-102
E-mail: glavniurednik@slobodnadalmacija.hr
Web site: www.slobodnadalmacija.com or www.slobodnadalmacija.hr
Novi List
Zvonimirova 20a
p.p.130
51000 Rijeka, Croatia
Tel: (385)(51)650-011
Fax: (385)(51) 672-114; 672-118
E-mail: nl-redakcija@novi-list.tel.hr
Web site: www.novilist.hr
Banka
MZB d.o.o.
Savska 28
10000 Zagreb
Tel: (385)(1) 488-2600
Fax: (385)(1) 484-3083
E-mail: vlatka.tomasevic@bankamagazine.hr
Web site: www.bankamagazine.hr
Privredni Vjesnik
Kaciceva 9
10000 Zagreb
Tel: (385)(1) 4846-665
Fax: (385)(1) 4846-656
E-mail: redakcija@privredni-vjesnik.hr
Web site: www.privredni-vjesnik.hr
Trade Events and Trade Fairs
Trade events and fairs continue to be popular in Croatia. The single largest event in Croatia is the annual Zagreb Fall Fair (September) which attracts nationwide attention and includes numerous foreign exhibitors.
The Zagreb Fair Authority also organizes a number of industry-focused or specialty exhibitions during the year in sectors such as consumer goods, food processing, environmental technology, medical equipment, pharmaceuticals, automobiles and automotive parts, information technology, textiles and apparel, wine, etc. For more information on these events:
Zagreb Fair
Avenija Dubrovnik 15
10 020 Zagreb, Croatia
Tel: (385)(1) 650-3111
Fax: (385)(1) 652-0643
E-mail: zagvel@zv.hr
Internet: http://www.zv.hr
Pricing Issues
Consumer demand is price elastic in Croatia. With nearly 30% of gross wages being transferred to the government in the form of taxes, disposable income is limited. However, quality appears to be an equally important selling factor, especially among the more upscale consumers.
Liberalization of the market has put pressure on domestic producers to bring pricing down and more in line with costs. The level of prices in Croatia is generally high, even compared to prices of similar products/services in Western European countries and the United States thus making imported products price competitive.
Price supports and subsidies have been stripped away and price competition has intensified. Although prices are generally determined by the market, certain necessities are still subject to government control. For example, price changes for milk and bread must be notified two weeks in advance to the Ministry of Economy. Price alterations on approximately 30 products must be reported to the Ministry of Economy within three days of modifications. The government retains the right to disapprove price changes although in practice this has been rare during the last few years. The government has the ability to influence pricing policy at companies under its direct or indirect control.
Supplying Customer Service
Sales service and customer support is developing as a marketing tool in Croatia. Emphasis on customer support is an initial step in developing consumer loyalty.
Public Sector Marketing
The Law on Procurement, which was published in the Official Gazette (No. 142/97) on December 31, 1997, regulates public procurements.
The Law on Procurement is applied to all purchases made by government bodies including those of the local government and majority state-owned legal entities (e.g., state-owned companies). The law applies to all investments financed by the central budget, payments guaranteed by the government, or funds secured by loans taken out by the government. Procurements above the threshold amount of HRK 200,000 are subject to the requirements of the law. According to the decree, such purchases should be done via public tender published in the local press or in the Official Gazette. Public tenders for purchases over HRK 6 million for services and HRK 12 million for goods and works should be published also in the international press. For large purchases, foreign competitors compete on an equal footing with local firms. The Ministry of Finance is responsible for ensuring that procurement is done in conformity with the legislation. The decree does not apply to procurement based on loans obtained from multilateral development banks, when procurement procedures are a part of the contract.
The law provides for “national preference.” An official preference may be given to companies that are registered in Croatia. However, this clause stipulates that the bid prices include 50 % of locally value-added for procurement of goods, or that the
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