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WiththeautomotiveindustryonthemotorwayofgrowthAutomotivetrendsontheSlovak-Hungarianaxlewww.
pwc.
com/hu32TheEuropeanautomotiveindustryiscurrentlyunderrestructuringthatresultsintheincreasingshareoftheEast-CentralEuropeanregion.
TheresultsofthemostrecentSlovak,HungarianandGlobalCEOSurveymadebyPwCprovideanexcellentopportunitytodescribethecomprehensiveautomotivetrendsofthetwocountriesoftheEast-CentralEuropeanregion–HungaryandSlovakia–thatplayanimportantroleintheautomotiveindustry1.
Basedonthedatawecanalsoseehowtheexpectationsandbusinesspolicyoftheautomotiveindustryplayersdeviate,inrelationtobothcountries,notonlyfromtheothereconomicplayersofbothcountriesbutalsofromeachother,providingapictureofthecompanyshapingstrengthoftheeconomicpolicyandbusinessenvironment.
Thirdly,takingalsotheresultsoftheglobalCEOSurveyintoconsideration,wecanalsogetanswerstothequestionwhichdirectiontheCEOsoperatinginaninternationalenvironmentshalldefinefortheircompaniesandwhatkindoffuturetrendsitforecastsforthisimportantsub-segmentoftheEast-CentralEuropeanautomotiveindustry.
1AccordingtoPwCindustryclassificationfirstofallthecarmanufacturers,theOEMs(OriginalEquipmentManufacturers)andtheirsuppliersaswellastheautomotivemanufacturersingeneral(itmeansconsequentlythetruckandmachineproducersetc.
)aswellasthevehicledealersareclassifiedasautomotivecompanies.
ContentsAboutthestudy31.
AutomotivetrendsintheEast-CentralEuropeanregion52.
ReviewoftheHungarianautomotiveindustry6FeaturesoftheHungariansuppliernetwork83.
ReviewoftheSlovakautomotiveindustry104.
Prospectsforgrowth125.
Risksofthebusinessenvironment156.
Potentialfortheinternaloperation167.
Knowledge-basedstrategies18Howtocontinue19ThestudyisbasedondatatakenfromtheSlovak,HungarianandGlobalCEOSurveyofPwC,theworld'sleadingprofessionalservicesfirm,whichwasmadegloballythesixteenth,inHungarythesecond,andinSlovakia,incooperationwithForbesMagazine,thefourthtime.
Everyyear,thesesurveysaimatprovidinganopportunitytosummarizetheopinionofthemostimportantrepresentativesoftheindustry,theissuestheyareconcernedabout,aswellastheirmajorplansforthefuture.
ResearchesaremadebyPwC'sexpertsbymeansoftelephoneorpersonalinterviews,aswellasbyonlinesurvey.
Lastyear,totally1,330executiveofficersgloballyin68countriesexpressedtheiropiniononthemostimportantareasofthebusinesslife.
Inadditiontotheglobalresearch,totally171companiesparticipatedinthesurveyinHungary,and180CEOssharedtheiropinionwithusinSlovakia.
Intheautomotiveindustry,anarrowertargetgroupofthestudy,90companiestookpartintheresearchworldwide,29companiesinHungaryand19companiesinSlovakia.
Althoughtheabovefiguresdonotrepresentaconsiderablesizeascomparedtothoseoftheparticipantsintheglobalsurvey,wecanneverthelessconsidertheresultsasanimportantindicator,sincetheyreflecttheopinionoftheCEOsofthemostimportantplayersoftheindustry2.
ThepresentstudywasmadeintheprofessionalcooperationbetweentheautomotiveindustryexpertsofPwCHungaryandDr.
VendelLre,seniorlecturerofSzéchenyIstvánUniversity.
2Thefiguresindicatedonthechartsdonotadduptoatotalof100%ineverycase,asweroundeduppercentagedataanddidnotincludetheanswers"Neitheragreenordisagree"and"Don'tknow"inourcalculations.
Aboutthestudy54NothingshowsbettertheemergingroleoftheHungarianortheSlovakautomotiveindustrythanthefactthatnewsarepublishedalmostdailyinthepressconcerningautomotivefactoryextensions,greenfieldinvestmentsaswellastheimprovementofthesuppliernetworkrelatedtotheautomotiveindustry.
Inordertocomparetheautomotiveindustryofthetwocountriesunderreviewwiththepositionoftheinternationalplayers,weneedtoclearlyseetheroleoftheEast-CentralEuropeanautomotiveindustryintheglobaleconomy.
EuropeisthesecondmostimportantregionofvehicleandenginemanufacturersafterAsia.
SixmillionpersonshavedirectsubsistenceinEuropefromtheautomotiveindustryandfurthertwelvemillionareindirectlyconnectedtothesector.
Theimportanceoftheautomotiveindustryonthe"oldcontinent"isrightlyshownbythefactthat3percentoftheEuropeanGDPareprovidedbythisindustry3.
So,thequestioniswhatsharethewiderenvironmentofthetwocountries,i.
e.
theEast-CentralEuropeanregionshallhavewithintheEuropeanautomotiveindustry.
Statisticsconfirmthatlargequantitiesofbothvehiclesandtheircomponentsaremanufacturedintheregion.
Basedonthestatisticsof2010itcanbestatedthattheEuropeanautomotiveproductionismovedtowardstheEasternregions.
Whilein2000eightoftencarscamefromproductionlineinGermany,tenyearslaterthisratiowasonly64%.
Allinall,thesignificanceoftheCzechRepublicandSlovakiawasprincipallyincreasedintheregion4.
Itshowstheimportanceoftheautomotiveindustrythatitrunstoappr.
3.
9percent3GyrgyiBarta(2011):EuropeancorrelationsoftheEasternCentralEuropeanvehicleproduction,pp.
27.
4JánosRechnitzer–MelindaSmahó(2012):TheeffectofthevehicleandautomotiveindustryonthecompetitivenessoftheEasternCentralEuropeanregion,pp.
7.
oftheGDPinHungary(moreover,takingthesuppliersandrelatingindustriesintoconsiderationitamountsto10percent5)andto6.
7percentinSlovakia6.
ButwhatdotheabovefiguresmeanwheninterpretingthemforindustrialtrendsItcanbeseenthatarestructuringprocessoccurredandisoccurringintheEuropeanautomotiveindustryeventoday.
Primarily,therelocationofcompaniesproducingwell-knownautomotivebrandsandbasicallyassemblingtheirunits,i.
e.
theso-calledOEMs(OriginalEquipmentManufacturers)aswellasofthesuppliernetworkmainlytothenewmemberstatesoftheUnioncanbeobserved.
ThedeterminingfactorsoftherelocationaretheOEMcompanies,thentheyarecloselyfollowedbythesuppliers,ledbytheso-calledintegratorsorfirstroundsuppliersandthen,theyarefollowedbythesecondandthirdroundsuppliers.
So,thetopofthepyramidisbuilttypicallyfirst,andthen,thebasewillalsostarttogroworganically.
Itcanbeclearlystatedthat,duetotherestructuringintheautomotiveindustry,theEast-CentralEuropeanregionhasbeenthegreatwinnerofthe2000s.
However,thedifferentcountriesparticipatedintherelocationoftheautomotiveindustrytovaryingdegrees:thetwomostextremeexamplesofferSlovakiaandHungary.
SlovakiahasincreaseditssignificancetwoandhalftimesintheEast-CentralEuropeanregion,andin2010itprovidedround6percentoftheautomotiveproductionintheregion.
AlthoughHungaryhasalsoincreasedtheautomotiveproductioninanabsolutevalue,itsrelativepositionhas5AccordingtotheestimationoftheHungarianAuto-motiveAssociation(2012)6Owncalculation,basedonthedataretreivedfromksh.
huandstatistics.
sknotchangedessentially;itamountedto1.
8percentintheEast-CentralEuropeanregionin2010ItmeansgloballythatSlovakiaprovided0.
8percentandHungary0.
2percentofworldproduction.
Ontheotherhand,itservesfortheadvantageofHungarythatseverallargeinvestmentsarrivedatthefinalstagesimoultaneouslywiththestudy(i.
e.
enlargementoftheAudifactoryinGyraswellaslaunchingtheserialproductionofMercedes),sotheseratioswillconsiderablybechangedwithin1or2yearsasdescribedinthesubsequentchaptersofthestudy.
7So,thequestionis,whatisthereasonforthestrongeast-westmovementoftheautomobileindustry.
Themostimportantfactorisundoubtedlyliesinthedifferenceinwagecosts.
Itistruethatthewagecostshaveashareofonly10percentwithinthecostsoftheready-madeautomotive,andwhatismore,thisratioismerelysixtoeightpercentwithinthepremiumcategoryvehicles,but,duetothedifferencesinthewagelevelsthesesavingsbecomesignificantfortheautomotivecompaniesintheextentthatthecapacityexpansionisworthintheemergingcountriesoftheEast-CentralEuropeanregion.
However,thewagecostsrepresentonlyonesideofthequestion,sincekeepingthelogisticcostslowhinderstherelocationtogeographicallydistantregions.
Inaddition,itshouldnotbedisregardedthattheworkcultureofthestudiedcountriesisconsiderablyadvanced,andtheautomotiveindustryhastraditionswhichmeansthatthe"soft"humanfactorsarealsoavailable.
Therelativelyfavourableinfrastructureandthepotentiallyobtainablestatesubsidiesare7JánosRechnitzer–MelindaSmahó(2012):TheeffectofthevehicleandautomotiveindustryonthecompetitivenessoftheEasternCentralEuropeanregion,pp.
7.
1.
AutomotivetrendsintheEast-CentralEuropeanregionalsoattractivefortheOEMsandforthesuppliersoflowerleveltypicallysettlinginthesecondphase.
Akindofcompetition,primarilyfortheextensionofgreenfieldproductioncapacities,canbeexperiencedinthecountriesoftheEast-CentralEuropeanregion.
Intermsofattractiveness,HungaryandSlovakiaisapproximatelyatthesamelevel,whiletheCzechRepublicandPolandareconsiderablyaheadonthebasisofindicatorscalculatedonthebasisofcomplexeconomicfactors.
8.
Amongthelocationfactors,theprofessionalskills,theinnovationpotentialsandtheR&Dcapacitieshaveanoutstandingrole.
Industryexpertsareofthesameopinionthattheautomotiveproductionaccumulatesahugemassofknowledge,whichwillhaveanincreasinglyhighroleinthefuture.
Inthismassofindustrialknowledge,theintellectualaddedvalueofthesuppliersbecomesmoreandmoreimportant,moreover,itischaracterizedbythetendencythatrecentlythesignificantinnovationsappearnotonlyinpremiumbutalsoinlowerpricecategories.
Consequently,thequestionoftomorrowisfortheautomotivecompaniesoftheEast-CentralEuropeanregioniftheycanmanagetoincreasetheaddedknowledgevalueortheeconomicplayersintheregionstuckinthegroupofcountriescompetingbylowwages9Theknowledgeembodiedinqualifiedprofessionals,itmeansthequalificationisespeciallyofimportance,sincethequalifiedworkforceisinshortsupplyinthelargeautomotivecompanies;anditmaybecomeaseriousobstacleforthefuturedevelopment.
8AnitaFüzi–SzandraGombos–TamásTóth(2011)LocationfactorsforautomotivecompaniesinEasternCentralEurope9MelindaSmahó(2011)Systemsofknowledgetransfersandtheautomotiveindustry76HungaryandSlovakiaareessentiallyinsimilarpositionintermsofattractivenesstotheautomotivecompanies.
Thisisconfirmedbythefactthatneitherthewageratiosnorotherlocationfactorsdifferconsiderablyfromeachother.
Thesimilarityofthewagelevelintheautomotiveindustryisindicatedbythefactthatthewageofthemanualworkersoftheindustryamountedto718EUR/monthinaverage10inHungaryin2011,whiletheaveragewageinSlovakiatotallede.
g.
inmachineoperatorjob599EUR,inbodypainterjob695EURandinbodyironerjob758EUR.
Thefluctuatingexchangerateoftheforint,thedisparitiesarisingfromtheregionaldifferencesaswellasthedifferentcategorizationofthestatisticaldatahaveconsiderableinfluenceontheapparentdifference11.
Severalresearcheshavealsoinvestigatedthefactorsinfluencingthetheautomotivemanufacturersandsupplierstosettledown,andonthisbasis,itisobviousthattherearenonoessentialdifferencesbetweenthetwocountries:accordingtoarankingmadebytheBusinessMonitor,Slovakiarankedtothe9thandHungarytothe11thplaceintherankingsofbusinessenvironment.
12TheHungarianresearcherscamealsotosimilarresult:Hungaryrankedtothe32ndandSlovakiatothe39thplaceintheassessmentofthebusinessenvironmentoftheautomotivecompanies.
1310Calculatedonannualaveragerateof279EUR.
At300forint/EURexchangeratethementionedaveragewageamountstoonlyEUR669.
11InHungarytherearehugeregionaldifferencesintheaveragewageleveloftheautomotiveindustry;agoodexampleisthattheaveragewageofblue-collarworkersinWestern-TransdanubiaisexactlythedoubleofthoseinSouthTransdanubia.
(http://www.
ksh.
hu/docs/hun/xftp/idoszaki/regiok/gyorgepipar.
pdf,aswellashttp://www.
sario.
sk/userfiles/file/Ensario/PZI/sectorial/auto/automotive_industry.
pdf)12BusinessMonitor(2012)SlovakiaAutosReport,Q1201313AnitaFüzi–SzandraGombos–TamásTóth(2011)LocationfactorsforautomotivecompaniesinEasternCentralEuropeTheOEMssettledbyagreenfieldprojectrepresentthebasicpillaroftheHungarianautomotiveindustry.
Inrespectoftheaddedvalueillustratingwelltheeconomicrole,theAudiHungáriaMotorKft.
inGyristhemostimportantlinkintheHungarianautomotiveindustry.
Audibecomesadeterminantplayerprimarilyinthefieldoftheengineproductionandsecondlyinthefieldofthecompleteautomotiveproductionduetoanautomotivefactoryendingin2013aswell.
MuchbehindAudi,theSuzukifactoryinEsztergomisalsoasignificantplayeroftheHungarianautomotiveindustryinrespectofvalue-addedproductioncabability.
Consideringthenumberofemployees,themanufactureremploys2800employeesatpresent.
Currently,thecompanycannotutilizeitsproductioncapacitydevelopedupto300,000motorvehiclesin2008,sincethesalesofthetypicallylowandmediumcategoryautomotivesbelongingtothefactory'sprofilesufferedmostinthecrisisperiode.
AnincreaseintheproductionofthelargevehiclebrandMercedessettledinHungaryatthelatestwasexperiencedattheendof2012makingitseconomicimpactfeltfromthisyearonwards.
Thefactory'snominalcapacityamountstoabout100,000motorvehicles,whichcanmakethisplayerasignificantpoleofgrowthintheregionofKecskemétbytheexpecteddevelopmentofthesuppliers'network.
Inrespectoftheproduction,theRábaGroupseatedinGyrisconsideredarespectedandprestigiousplayerinHungary;accordingtodatafromtheendof2012thenumberofitsemployeestotalled1,939anditssalesrevenueexceeded135millionEUR.
Withintheoperationalprofileofthecompany,therunninggearsmarketisstrategicallydecisiveensuringnearly60percentoftherevenue.
Inaddition,thecompany'smarketportfolioincludesthevehiclepartsandcompletevehicleproduction.
Again,aconsiderableautomotivecapacityisrepresentedbythemotorfactoryofOpelSzentgotthárdAutóipari2.
ReviewoftheHungarianautomotiveindustryKft.
,which,asprojectedfor2013,settheproductionof336thousandmotorsasanaim;andemployednearly1,300workersattheendof2012.
Asitcouldbeseenfromthelist,theOEMproducershavedevelopedconsiderableproductioncapacitiesinHungary,butfurthersignificantgrowthcanbeexpectedin2013,becausethestatisticaldatawillshowtheincreaseintheproductiononlyfromthisyear.
ComparingtheautomotiveproductioncapacitiesinHungary-Slovakiadimension,wecansay,whileSlovakiahasnearlytripleditsautomotiveproductioncapacityin10yearsuntil2010,Hungarywasonlyabletoincreasethenumberofvehiclesmanufacturedfrom137thousandtonotmorethan168thousand.
BasedonthestatisticsofthetwothousandtenyearseventheHungariandatashowanimposinggrowththankstothementionednewlargeinvestmentsresultingintheincreaseofvehicleproductioncapacityto525thousandpiecesby2013.
Ontheotherhand,aconsiderablesuppliernetworkcanbeconnectedtotheprimaryproducersinHungary,too.
Itisgenerallyknownthatthelargeinternationalproducersareoverallnotexcessivelystronglyintegratedintheeconomy,orrathertheHungariansuppliernetworkwasnotyetabletointensivelyjoininthedivisionoflabour.
Itistruethattheproducershavedifferentparameters:Suzukihascurrentlyanestimated30percentofdomesticsupplyratio,whileAudiandOpelhave5%ratioeach.
AllthesemeanthattheHungariansuppliernetworkisadvancedinregionalrespectbutcomparedtotheWest-Europeanstandardsitisstillratherunderdeveloped.
1414MátyásKlauber(2011)ElaborationofstrategyonthestrengtheningofthesupplierroleoftheHungariansmallandmediumsizedenterprisesinthemechanicengineeringandtheautomotiveindustrysectorThetrendsoftheHungariansuppliernetworkreflecttypicallytheglobaltrends,i.
e.
amulti-level(3to4levels)networkwasdevelopedalsoherewheretheinternationalfirstroundsuppliercompaniescanonlybefirstinvolved.
TheHungarianenterprisesarebasicallypresentatthesecond,thirdorlowersupplierlevels.
Ontheotherhand,italsocreatestheproblemthattheHungarian-ownedcompaniesareatlevelsoflowerprofitabilityandtheyareinmajoritynotableorhardlyabletolaunchimprovementsthatcanincorporatehigheraddedvalueinthecomponentsbecausetherolloveroftheprofitisinsufficientfortheprogress.
Theso-calledclusteringprocessistakingplaceintheHungarianautomotiveindustrystilltodayandasaresulttheindustrialenterprisescanmakeuseoftheadvantagesarisingfromthegeographicalnearnessandtheexistenceofacriticalmass.
Theautomotiveclustersembracenotonlyenterprisesbelongingcloselytotheindustrybutalsotheplayersofsupplementaryindustries,e.
g.
logistic,engineeringdesignorconsultationcompaniesthatcandevelopprofitablebusinessrelations.
Theclusteringprocesshasfurthermoretheoutcomethatthegreatmassofcompaniesrepresentssufficientdemandforthesupplyofqualifiedjuniorprofessionalsconsideredotherwiseaproblemarea.
Thisprovidesaproperattractionfortheinstitutionsofhighereducationandforthecontinuationofstudiessothatthereplacementandtrainingofprofessionalscanbesupported.
However,theclusteringprocessmayfacilitatethedevelopmentofthesectornotonlyinthesefieldsbuttheautomotivecompanies,asakindofpole,mayattracttheresearchandinnovationcapacitiesoftheregion,whichmayimprovethechancesoftheHungariansuppliersandincreasetheshareofthedomesticsuppliesoftheOEMs.
Forthisreason,itisextremelyimportanthowtheinstitutionsofhighereducationcanjoininthecompanies'R&DprocessesandinthereplacementofprofessionalsInthisfield,wecanmeetexemplarycooperations,typicallyininstitutionsofhighereducationprovidingtechnicaleducation.
TheRegionalUniversityKnowledgeCenterforAutomotiveIndustryinGyrortheAudiDepartmentGroupseatedalsoinGyrattheSzéchenyiIstvánUniversityshouldbementionedbyallmeans.
AudiandRábaimplementasimilarlyclosecooperationwiththeBudapestUniversityofTechnologyandEconomicsaswell.
ItcanberankedasthestrengthoftheHungarianautomotiveindustrythattheproductionoftheautomotivecomponentsiswell-founded,theproductioniscost-effective,andtheforeign-ownedcompaniesproduceefficientoperation15.
Thecommitmentofthekeyplayersisincreasedbythefactthattheyinvestedconsiderableamountsintheindustry,furthermore,theratioofthelabourcostscomparedtothequalificationlevelremainedadvantageouswithintheCentralEastEuropeanregioninspiteofcrisiseffects.
Theimportanceoftheprimaryproducersandthatoftheautomotivesuppliersiswellindicatedbythefactthatevenintheweakestbusinessyearofthecrisis,in2008theautomotiveindustryhadashareof45.
4percentwithinthesalesoftheprocessingindustrywhileproducinganaddedvalueof2.
8billionEUR;thetotalsalesoftheautomotiveindustryamountedto13.
7billionEUR.
In2009,thesectoremployedtotally115,000persons.
Itcanonlybeestimatedbuttheinvestmentslaunchedatthebeginningofthe2010'swillconsiderablystrengthentheseratiosafterthestartupperiod,clearlyindicatingthatbesideSlovakia,HungarywillbecomeamajorautomotivepoweratEuropeanlevelatleast.
15BusinessMonitor(2010)HungaryAutosReport,Q42010KeyOEMsinHungary1CorporationHeadcountin2013(person)Netrevenuein2011(millionEUR)Valueaddedin2011(millionEUR)VolumeofproductionAudiHungáriaMotorLtd.
88885.
5821.
2141.
916thousandengines(2012)125thousandvehicles(2013)HungarianSuzukiCorporation28241.
581148172thousandvehicles(2011)Mercedes-BenzManufacturingHungaryLtd.
3182NotauthorativeNotauthorativeCapacityofproductionof100thousandvehiclesOpelSzentgotthárdAutomotiveLtd.
12927646336thousandengines(2013)RábaAutomotiveHoldingPlc.
19391353212ComposedonthebasisoftheNationalTaxAuthority'sdatabase,pressnewsandcompanyreports98FeaturesoftheHungariansuppliernetworkIn2012-2013,theResearchGroupforSpatialEconomicsandAutomotiveIndustryatSzéchenyiIstvánUniversity(JTK)performedanin-depthsurveyamongtheHungarianautomotivesuppliers.
Duringtheresearch,theexpertsvisitedtotally119enterprisesconnectedwiththeHungarianautomotiveproduction,usingaquestionnairedatarecordanddeepinterviewmethodology,andmappedtheeconomicandoperationalfeaturesofthenetwork,thedepthofthenetwork,theintegratedstatusofthecompanies,thestrategicgoalsandthemanagementmethodsappliedaswellastheinnovativecharacteristics.
Three-fourthofthesamplewascomposedofcompaniesfromthesectorofthesmallandmedium-sizedenterprises,andwithinit,one-thirdofthesamplewasconstitutedbycompanieswithsalesrevenuebetween50and500millionHUF.
Theresultsoftheresearchconfirmedthat,inadditiontothecompanysize,theownershipbackgroundisthefactormostlyinfluencingthebusinessoperationofthesuppliers.
Inbreakdownbycircleofsuppliers,nearlyhalfofthecompaniesparticipatingintheresearchwerecomposedofsecondroundsuppliersand,inaddition,further30%belongedtothefirstroundsuppliers.
Themaintrendsincludethat,inbusinesssense,thequality,priceandtheflexibledeliveryrepresentthemajorsuccesscriteriaofthesuppliers,whiletheR&Dortheinnovationwillbeconsiderablysubordinatedforthetimebeing.
Fortheobjectiveinterpretationoftheresults,itmustbenotedthatthehigherportionofthesample(70%)wascomposedofsecondroundorlowerlevelsuppliers.
Thehigherlevelsuppliersarestudied,themoretypicalistheinnovation.
Besides,itshallalsobenotedthattheCEOsinterpretthetriumvirateofquantity,priceandflexibilityasakindofminimumconditionwhereR&D,innovationandcooperationareratherincludedamonglong-termsuccessfactors.
Furthermore,itisalsocharacteristicthattherelationshipwiththeplayersactingwithinandoutsidetheindustry(e.
g.
universities,researchpoints)israndomandoccasional.
Atypicalresultisthattherelationsdirectlyconvertibleintocashe.
g.
theuniversitycapacitiesandprofessionalsupplyhaveaprioritywithintheCSR.
Although,inrespectofoperation,therootsofstrategicthinkingaretraceablebutthestrategiesaretypicallypreparedbyinvolvementofanarrowcircle.
Ontheotherhand,thelargercompanysizeandtheforeignownershipbackgroundmayinfluencetheadvancementofthestrategicthinking.
Astothebusinesspolicy,inadditiontothetrendsmentionedbefore,thestrongcustomerdefenselessnessistypical;andthefollow-upattitudecharacterizesboththepricesandthebusinessoperation.
Theexistingcustomers,themarketandtheextensionofthepotentialproductrangearemaindrivingforceoftheoperationandgrowth,thoughtheroleofthecooperationandinnovationlooksmallbesidethembuttheycannotbeignored.
Although90percentofthecompaniesindicatedthattheyconductcertaininnovationactivitiesineconomicsensebut,inmajority,theinnovationisofsecondaryimportancefortheaverageHungariansupplierofthe2010yearsandsoneitherthestrongcustomerpressurecanbeeasednortheprofitabilitycanbeimproved.
1616MelindaSmahó–JánosRechnitzer(2012)TheautomotiveindustrysuppliernetworkinEasternandCentralEuropeandHungary1110TheSlovakeconomicdevelopmentisbeinterwovenwiththedevelopmentoftheautomotiveindustry,whichcanbeproperlytracedbythesimilaritybetweentherateofchangeoftheGDPandtheconjuncturalrhythmoftheautomotiveindustry.
Asfrom1993,theinflowofForeignDirectInvestmentstartedalmostfromnull.
Theeconomicpoliciesoftheearly2000srecognizedtherapidgrowthpotentialofthefocusedeconomicdevelopment.
Theunconcealedaimofthefocusedeconomicpolicywastodeveloptheautomotiveindustrytobecomenationwidethebasisfortheeconomicprosperityandmodernisation.
Nothingproveathisbetterthantheautomotiveindustryattracted17percentoftheForeignDirectInvestmentinthe2000sandinthiscontextmetalworking(7%),automotive(16%)andchemicalindustry(13%)becamethemaintargetoftheforeigninvestments.
17Frompointofviewoftheautomotiveindustry,Slovakiastartedwith,andstillhas,similarcompetitiveadvantagesastheotherEast-CentralEuropeancountries:fundamentalfactorswereforthelocationtherelativelylowwagesandrawmaterialaaswellasthelowleveloftheenergycostsinadditiontothefavourablegeographicallocationTheimportanceofthislatteraswellasthepositiveeconomicbenefitsofthefixed-lineinfrastructureshowsthatprimarilytheWesternregionofthecountryattractedtheOEMsfollowedbythesuppliernetwork.
TheaxisoftheSlovakautomotiveindustryisbasedonthreegreenfieldautomotiveinvestments:thefactoryoftheVolkswagenGroupinBratislava,thefactoryofPSAPeugeot-CitroninTrnavaandthatofKiainZilina.
Thesignificantpartoftheindustrialproductionisconnecteddirectlytothesethreefactoriesorindirectlythroughthesuppliernetwork.
17ZoltánKovács(2011)AnalysisoftheSlovakautomotiveindustryThefactoryofVWstarteditsoperationintheearly90sandbecamethelargestmanufacturingcompanyofthecountry;in2004,forexample,20percentofthetotalSlovakexportsoriginatedfromhere.
EstablishmentofthefactoryinBratislavagaveaboosttothedevelopmentoftheautomotivesuppliernetwork:thesalesrevenueofthesuppliernetworkbecametenfoldhigherby2008,i.
e.
itrunto9billionEURthatyear.
Ofcourse,asfrom2006,thefactoriesKIAandPeugeot-Citronhaveactivelyparticipatedinthegrowthofthesector.
Astogeographicallocation,thesuppliersappearedintheagglomerationofthelargeautomotivefactoriesaswellasinKosice,mainlyasaresultofthegreenfieldprojectsofthethreeOEMcompaniesmentionedabove.
Withinthestructureofthesuppliernetwork,thefirstlevelsuppliersaretypicallythesubsidiariesofforeign-ownedcorporateenterprises.
AmongthesecondroundsupplierstheSlovak-ownedcompaniesarealreadypresent,however,themajorityofnationallyownedcompaniesoperateatthethirdlevelofthesupplierpyramid.
Themajorityofsupplierscanbegroupedintofivecategoriesaccordingtothescopeofactivities:electricsystemsandcables;productionofinteriorfittingsofmotorvehicles,drivinggearandexhaustsystem,bodyworkaswellasotherdrivers.
SlovakiabecameoneoftheleadingautomotiveproducersinEast-CentralEurope,duetotheappearanceofthethreeOEMsandthedevelopmentofsuppliernetworkbasedonthem.
Infiguresitmeansthatin2010,thenumberofthoseemployedintheautomotiveindustry,followingaslightdecline,exceededthethresholdof70,000personsagain,whichtotalssomewhatmorethan3percentofthetotalemployment.
Theimportanceofthesectorisprovedbythefactthatthevolumeofsomewhatlessthan200,000motorvehiclesproducedin2001wasincreasedto900,000by2012,whiletheperformanceofthecompanieshasconsiderablydecreasedinthecrisisperiod.
Accordingtoindustryforecasts,thevolumeoftheSlovakautomotiveproductionshallcontinuetoincreaseinthefuture.
18ConsideringtheautomotiveattractivenessofSlovakia,thecompetitivenessrelyinguponcostadvantageshallbeincreasinglyreplacedbytheproductinnovationprocess,theincreaseofknowledgevalueaddedaswellastheintegrationofthelocalR&Dintothevaluechain.
Thisstrategyshallincreasinglyprepossessthewholethesuppliernetwork.
Thisprocessiswellcharacterizedbyagrowingtrendofclusteringwheretheresearchinstitutesanduniversitiestakealsopartinthedevelopment.
ThecooperationbetweenVolkswagenandtheSlovakUniversityofTechnologyisexemplary,orlaunchingofnewprofessionalcoursesprovidingsoilforengineertrainingfortheautomotivecompaniesisalsoworthmentioning.
PSAPeugeot-Citronsupportedtheestablishmentandequippingofprofessionallaboratoriesinjointcooperationwiththeuniversitysphere.
18http://www.
zapsr.
sk,download:22.
03.
201310:08a.
m.
3.
ReviewoftheSlovakautomotiveindustry01000020000300004000050000600007000080000900002002200320042005200620072008200920102011NumberofemployeesinautomotiveindustryTheSlovakautomotiveindustryinfigures-6-4-20246810120100000200520062007200820092010201120122013forecast2000003000004000005000006000007000008000009000001000000Volumeofvehicleproduction(pieces)Economicgrowth(%)ThestrengthsofthecurrentSlovakautomotiveindustryincludethefavourablelocationandthestillrelativelylowlabourcostsbuttheknowledgeelementsencounteredincreasinglyshallbealsointegratedinthevaluechainofferingattractiveconditionsforthesuppliers.
However,forthetimebeing,theeducationsystemneedsimprovement:thecooperationinresearchbetweentheuniversityandtheprivatesphereandtheoutdatedequipmentoftheuniversitiesbelongtotheweaknessesoftheSlovakautomotiveindustry.
19Theindustryraisesthequestionhowmuchthestronglyexport-orientedandconcentratedSlovakindustrybasedbasicallyonthreebigfactories,oneofthemisthepillaroftheautomotiveindustry,representsastablebaseforthecountry'seconomy.
OneoftheshadysidesoftheSlovakeconomicpolicybecamevisibleduringthecrisisperiod:inotherwords,thecrackoftheautomotiveindustryshallhavedrasticimpactonthegrowthofthecountry.
Itisclearthatthedeclinecannotbepreventedtotallybuttheincreaseofaknowledge-basedaddedvalueandtheintegrationofthesuppliernetworkcanprobablyretaintheOEMsinthecountry.
AlthoughtheSlovakautomotiveindustryconfrontsbacklogsinthebusinessoperationcomparedtotheWesterncountries,thecompaniesseemtohaverecognizedthattheenlargementoftheaddedvalueofknowledge(R&D)atbothsupplierandOEMlevelcanbeaguaranteefordevelopment.
19ZoltánKovács(2011)AnalysisoftheSlovakautomotiveindustry1312Albeittheinternationalautomotiveindustryhadworseprospectsfor2012and2013thanothersectorshad,theautomotiveindustrywasamongtheover-performersinHungaryandSlovakiain2012and,consideringtheprognosisofCEOs,itwilllikelycontinuetokeepitsdrivingpower.
Intheeconomicstagnationandthetake-offperiodbothSlovakiaandHungaryareabletoincreasetheirimportanceintheautomotiveindustry.
TheresultsoftheCEOSurveyofPwCcomplementexcellentlythestatisticaldatapresentedattheautomotiveindustrypanoramaofSlovakiaandHungary,sincethedevelopmenttrendsaspreviouslydrawnby2012areexpandedbyupdatedfirst-handinformationaswellastingedbythelatesttrends.
2012wasayearofafter-crisisstagnationbothinHungaryandSlovakia.
Thereareimportantmacro-economicdifferencesbetweenthetwocountries,let'ssimplythinkoftheofficiallocalcurrenciesorthenationaldebts.
Consequently,Slovakiaperformedproportionatelybetterinrelationtotheeconomicgrowth:thememberstatesoftheEuropeanUnionessentiallystagnated;inHungarytheGDPdeclinedby1.
7percent,whileinSlovakiaaslightincrease(2%)couldbeexperienced.
Withinit,theresultsoftheCEOSurveythrowlightonhowdifferentiatedthesectorswereaffectedbytherecessionoftheeconomicenvironment:itisespeciallyworthofattentionthat52%oftheHungarianautomotivecompaniesreportedanimprovementintheirpositionin2012comparedtotheratioof41percentforthesector-neutralplayers.
Basedonthedata,theautomotiveindustryhassmartedlessthelastyear.
Independentlyoftheindustryonly17percentoftheHungariancompaniesreportedanimprovementinthedomesticmarket,and53percentexperiencedrecession.
Thisisprimarilyduetothegovernmentmeasurestakenforthereductionofthefiscaldeficit.
Awell-knownprocessamongtheeconomicanalystsishowthepossibletaxincreasesimplementedforreducingthebudgetdeficitandthereductioningovernmentpurchasesrestraintheeconomicdemand.
Thecompanieshadpromisingperformanceontheforeignmarketsin2012:intheopinionof42percentoftheautomotivecompanies,theexportopportunitiesbecamebetter.
Thisratiodoesnotdifferconsiderablyfromtheopinionoftheplayersoftheothersectors(45%).
Therelativelybetterresultsoftheautomotiveindustryarenotsurprisinginrespectoftheeconomicactivity,sincethemotorvehiclesarehigh-qualitydurableconsumergoods,itmeansthattheproductiondataaregoodindicatorsoftheeconomicnumbers.
Asecondsegmentoftheautomotiveindustry,namelytheproductionvolumeoftrucksworksexpresslyasacyclephaseforecaster.
Consequently,itisnotsurprisingifwecomparetheprognosisofnotonlytheHungarianbutalsotheglobalautomotiveindustrysegmentconcerningthepastyearswiththefiguresofothersectors:atgloballevel,theeconomicprospectsforecastedbytheCEOsoftheautomotivecompaniesfortheforthcomingyearsindicated,fromyeartoyear,extremerswingsthaninthecaseofallothersectors.
ThisiswellillustratedalsobythePwCGlobalCEOSurveyoflastyear.
Theresultsconfirmthattheautomotiveindustryshowsastrongcyclicalcharacter,fundamentallydeterminingtheprospectsoftheHungarianandSlovaksectoralcompaniesaswell.
Independentlyoftheindustry36percentoftheCEOsandglobally30percentoftheCEOsintheautomotiveindustryareconfidentintheincreaseoftherevenueoftheirowncompany.
Independentlyoftheindustryonly18percentoftheCEOsareoptimistic;thisratioisalittlebithigherintheautomotiveindustry,ittotals21percent.
ThesefiguresfairlyreflectthegeneralweaknessoftheHungariangrowthprospectsthathasanegativeeffectalsoontheautomotiveindustry.
InSlovakia,theshort-termprospectsoftheCEOsoftheautomotivecompaniesaresomewhatmorefavourable;26percentofthecompaniesstatedthattheywerestronglyconfidentinthegrowthofthesalesrevenues.
Theshort-termtrendsarefurthernuancedbytheopinionsaboutthedevelopmentofmedium-termcompanyrevenues.
TheSlovakautomotiveindustryisthemostconfidentinthemedium-termprospects,followedbytheSlovaksector-neutralsample.
Inthisrespect,theHungarianautomotiveindustryisgreatlyaheadoftheglobalautomotiveindustry,andfinallytheHungariansector-neutralsamplehastheweakestperspective.
ThisfairlyreflectstheCEOopinionthattheHungarianeconomyfaceslowergrowthprospectsbuttheautomotiveindustrycanbestillthedrivingsectorinHungary,presumablypartlyduetotheeffortsofthegovernmentandpartlyduetotheexpectedworldmarketgrowth.
Mid-termperspectivesfortheautomotiveindustryQ:Howconfidentareyouaboutyourcompany'sprospectsforrevenuegrowthoverthenext3yearsHungarianautomotiveindustry3%31%10%45%11%Hungariantotalsample4%46%17%25%8%Slovakautomotiveindustry0%37%11%53%0%Slovaktotalsample2%36%12%48%2%Globalautomotiveindustry1%51%13%33%2%Globaltotalsample1%44%8%46%1%NotconfidentatallNotveryconfidentSomewhatconfidentVeryconfidentDon'tknowSource:PwC's16thAnnualGlobalCEOSurvey,2ndHungaryCEOSurveyandSlovakCEOSurvey2013200853%50%21%13%31%20%52%48%40%32%36%30%20092010201120122013AutomotiveTotalsampleProspectsoftheautomotiveindustryoverthepastyearsQ:Howconfidentareyouaboutyourcompany'sprospectforrevenuegrowthoverthenext12months**Percentageofresponderswhoareveryconfidentabouttheircompany'sgrowthprospectsSource:PwC's16thAnnualGlobalCEOSurvey4.
Prospectsforgrowth1514Investmentscanbeconsideredasthelightsoftheeconomicgrowth:thecorporateinvestmentsnotonlypredictbutoftenformtheeconomicactivityasaself-fulfillingprophecyandtherefore,itisadvisabletoanalysetheautomotiveindustryalsofromthispointofview:62percentoftheplayersintheHungarianautomotiveindustryplanasignificantinvestmentin2013.
Independentlyoftheindustrythisratiototals52percentinthewholesample.
TheintentiontoinvestconfirmsthepreviousstatementthattheHungarianautomotivecompaniesare,inspiteoftheunfavourabletrends,inabetterpositionthantheplayersinothersectors.
Ontheotherhand,thesefigurespointoutthatthecompanymanagementprojectionsareratherpessimisticthanthosereflectedintheactualcompanyactivity.
Inadditiontotheresults,involvingprojectionsandinvestments,itisadvisabletocheckwhetherthechangesinthenumberofemployeesconfirmthepessimismoftheCEOsorratherreflecttheoptimismexperiencedattheinvestments.
ThedynamicsoftheTheevaluationoftheeconomicandpoliticalrisksintheautomotiveindustryreflectsthegeneralfearsoftheSlovakandHungarianeconomicplayers.
Partlyworldeconomictrendsandpartlycountry-specificeffectsaremanifested.
Theautomotiveindustrialspecificitiesarenotsignificantinthisquestion.
Mostoftheproblemsarecausedtypicallybytheeconomicgrowth,thefearofbudgetadjustmentsandtheincreaseintaxburdensfortheCEOsoftheautomotivecompanies.
Theautomotivetrendsarealreadymanifestedmuchstrongerforbusinessrisks:themostdynamicthreatistheshortageinresources.
Themajorcompetitionfactorsaretheenergyprices–similarlyfortheglobalplayers–andtheknowledgeresource–mainlyasregionalcharacteristics.
Fromamongthemacro-economicriskfactors,theHungarianautomotivecompaniesregard,atnearlythesamerate,theinflation(62%),theuncertaineconomicgrowth(62%),theexchangeratefluctuations(62%)andthepossiblerestrictivegovernmentmeasures(65%)asmainsourcesofrisk.
TheHungarianCEOsseemtobemoreafraidofthemacro-economicchangesthantheautomotivecompanies.
ThisprojectsarelativelesstroublesomeenvironmentfortheCEOsduetothestrongexport-orientationoftheautomotivecompaniesandthesupposedbetterperformanceoftheexternalmarkets.
Theconclusionisjustifiedsincetheenterprisesconsidertheeconomicgrowthandthethreatofgovernmentmeasuresmuchlesscriticalfactor,andalltogethertheymeanthattheprotectionismofothercountriesismuchmoreathreateningriskforthem.
TheSlovakautomotivecompaniesconsiderthemacro-economicenvironmentrelativelymorethreateningthantheirHungariancompetitors:theformerareafraidoftheuncertaineconomicgrowth(100%),therestrictivegovernmentmeasures(94%),thecapitalmarketinstability(79%)andtheprotectionism(75%)atmost.
Itisvisiblethattheuncertaineconomicgrowthandtheeconomicpoliciesrestrainingthestatebudgetdeficitaresourcesofriskinbothcountries,butthecountry-specificfactorsplayarole:TheproblemsarecausedinHungarybytheinflationandtheexchangeratefluctuations,whileinSlovakia,bytheprotectionismconfiningtheexternalmarketsandthecapitalmarkets.
Q:Howconcernedareyouaboutthefollowingpotentialeconomicandpolicythreatstoyourgrowthprospects*Slovaktotalsample(n=180)Slovakautomotiveindustry(n=19)Hungar-iantotalsample(n=171)Hungar-ianauto-motiveindustry(n=29)Inflation41%43%59%62%Protectionisttendenciesofthegovernment70%75%36%45%Uncertainorvolatileeconomicgrowth94%100%80%62%Over-regulation67%63%62%51%Lackofstabilityincapitalmarkets51%79%51%38%Exchangeratevolatility34%58%72%62%Governmentresponsetofiscaldeficitanddebtburden83%94%84%65%Briberyandcorruption73%63%47%38%Increasingtaxburden91%95%74%45%*PercentageofrespondentswhoareconcernedaboutthefactorinquestionSource:PwC's2ndHungaryCEOSurveyandSlovakCEOSurvey2013Changesinheadcount(2012)Q:Whathappenedtotheheadcountinyourorganisationoverthelast12monthsSlovaktotalsample23%42%35%0%Slovakautomotiveindustry16%47%37%0%Hungariantotalsample19%48%29%4%Hungarianautomotiveindustry31%31%34%4%DecreasingheadcountStaythesameheadcountIncreasingheadcountDon'tknowSource:PwC's2ndHungaryCEOSurveyandSlovakCEOSurvey2013Expectedchangesinheadcount(2013)Q:Whatdoyouexpecttohappentotheheadcountinyourorganisationoverthenext12monthsSlovaktotalsample33%31%36%0%Slovakautomotiveindustry33%40%27%0%Hungariantotalsample37%30%26%7%Hungarianautomotiveindustry45%17%28%10%DecreasingheadcountStaythesameheadcountIncreasingheadcountDon'tknowSource:PwC's2ndHungaryCEOSurveyandSlovakCEOSurvey2013employmentfiguresintheautomotiveindustryshowthattheautomotivecompanieswereforcedtorationalisationmuchrarely(30%)thantheSlovakcompetitors(47%)in2012.
TheHungariancompaniestypicallyworkedwithastagnatingheadcountinsteadofrationalisation,andtheratioofgrowingcompaniesispracticallysimilarinbothcountries(37%and39%).
Itisinterestingthatthemorepessimisticmarketprospectsandthemorenegativejudgementoftheyear2012werenotreflectedintherationalisationsinHungary.
Probably,thehighercorporateoperatingreservesandthepreviouslyenforcedrationalizationsmayhaveplayedaroleinthisnon-reflecting.
TheprognosisofCEOsforthisyearshowsasimilarpatternascomparedtothoseof2012:theplayersoftheSlovakautomotiveindustryplanconsiderabledismissals(40percentofthecompanies),whiletheirHungariancompetitorscountonamuchlowerrateofrationalisation(only17%plandismissal).
ThesetrendsarehoweverdifficulttobeexplainedinthelightofthefactthattheOEMsimplementedasignificantincreaseintheproductioninSlovakiainthepastyears,whileinHungaryanincreaseintheproductionisexpectedfor2013,amongothersinthefactoriesofAudiandMercedes.
Mostlikely,thereasonforthesomewhatparadoxresultsisthatthecompanieswelladaptabletotheenvironmentwereabletogrowbutthereareplayersbelongingtolaggardsandareforcedtocountonstagnationordecline.
StudyingthechartsitisvisiblethattheHungarianautomotivecompaniesfigureonastagnatingheadcountinsteadofrationalizationforthisyear;theratioofcompaniesforecastinganincreaseinheadcountisessentiallythesameinbothcountries(27%and28%).
Nevertheless,itshowsastrongeruncertaintyintheHungarianeconomythat10%oftheCEOsarenotabletoforecasttheirheadcountfigures,whileintheSlovaksampleallCEOswereabletoprognosticatethedirectionofchangesatleast.
Similarlytothepoliticalandeconomicrisks,theSlovakautomotivecompaniesassessalmostallmarketandbusinessfactorsmoreriskythantheHungariancompetitors.
InSlovakia,thefastchangesinconsumerhabits(74%),theincreaseofenergycosts(74%)andthelackofkeycapacities(73%)areonthetopoftheriskfactors.
Thepossibledrasticincreaseofenergypricesalsorepresentsaconsiderablethreatintheglobalautomotiveindustry,whichcanbeexplainedbythecompositionofcoststructureofthesectorintheautomotiveindustry.
ItisremarkablethatthecomparisonofthetotalSlovakandHungariansampleinadditiontotheautomotiveindustryindicatesamoresensibleriskassessmentinSlovakia.
IntheHungarianautomotiveindustry,theaccesstothekeycapacities(62%)andthepotentialchangesintheenergyprices(59%)areonthetopofthelist.
TheSlovakandHungariandatashowthatthekeycapacities,involvingfreshsupplyofprofessionalsrepresentabottle-neckinthesectorappearingasthreatsforthecompanies.
RewievingtheEast-CentralEuropeanregionthisconfirmsthestatementsconcerningtheprofessionaltrainingsandsupplyofprofessionals.
5.
RisksofthebusinessenvironmentQ:Howconcernedareyouaboutthefollowingpotentialbusinessthreatstoyourgrowthprospects*Slovaktotalsample(n=180)Slovakautomotiveindustry(n=19)Hungar-iantotalsample(n=171)Hungar-ianauto-motiveindustry(n=29)Newmarketentrants54%35%27%38%Availabilityofkeyskills62%73%46%62%Energycosts56%74%49%59%Securityofsupplychain48%53%21%20%Permanentshiftinconsumerspendingandbehaviours68%74%41%13%Speedoftechnologicalchange41%47%13%10%Lackoftrustinyourindustry45%37%28%6%InabilitytoprotectIntellectualPropertyandcustomerdata38%32%10%0%*PercentageofrespondentswhoareconcernedaboutthefactorinquestionSource:PwC's2ndHungaryCEOSurveyandSlovakCEOSurvey2013Toplistofthemostimportantpolitical,economicandbusinessfactors1716Inmanagementfield,boththeSlovakandHungarianautomotivecompaniesarestillbehindtheglobalautomotivecompanies,howevertheyarestilloutstandingwithregardtothedomesticeconomy.
Comparingtheglobalautomotiveplayerstotheautomotiveplayersofthebothinvestigatedregionswecanobservethatanoperativeapproachaspiringforshort-termanddirectreturnsdominatescontrarytointernalrestructuringfocusedonstrategyaswellastoalong-termsocialparticipation.
Withinthescopeofthemanagementapproachandpriorities,thereareanumberoffieldsthatcanserveasindicatorssothattheadvancementofthemanagerialapproachandmethodscanbeassessed.
BasedonthedataoftheCEOSurveys,wemadedeepsurveysinseveralfields:westudiedthestrategy,thestakeholderapproachaswellasthecorporatesocialresponsibility(CSR)becomingincreasinglyimportantfortheendconsumers.
Analysingtheinternalrestructuringdecisionswecanseethattheglobalautomotiveenterprisesweremuchmoreactiveintheinternalrestructuringandorganisationaldevelopmentactivities.
TheyarefollowedbytheSlovakautomotivecompaniesandtheactivityoftheHungarianenterprisesarebehindtheminalmosteveryfield.
Inbothcountriesandalsoworldwide,thecostreducinginitiationswereofmostimportanceandthen,ongloballevel,theformationofstrategicalliancesandthe"insourcing"processesweredeterminant.
Forthetimebeing,inSlovakiatheoutsourcingwaveisinprocessinboththeautomotiveindustryandinthewholeeconomy.
Intheformersector38percentofthecompaniesstartedoutsourcing,exceedingeventheglobalaverage.
InHungary,thesekindsofdecisionsplaymarginalrole,onlythecost-reducingprogramsaretypicalandthedecisiononoutsourcingwasreachedinsomecases.
Especiallysalientisthelowratioofthecooperation-basedstrategicdecisionsandthenon-organicgrowthstrategies(strategicalliancesaswellasmergersandacquisitions)inbothEast.
CentralEuropeancountries.
Whenthecorporatestrategiesarechecked,itismoretypicalfortheautomotivecompaniestoworkcentralizedthanthatfortheplayersofotherindustries.
InHungary,79%ofthecompanymanagersareoftheopinionthattheriskmanagementismadecentralized(contraryto65%ofthewholesample).
ItmeansthattheindependenceoftheHungariansubsidiariesislimited.
ThesecondstrategictrendintheHungarianautomotiveindustryistoconcentratethesupplychain:62%aspiretoestablishlessbutreliablepartnerrelations(contraryto47percentofthewholesample).
ThiscoincideswiththeresearchmadebytheSzéchenyiIstvánUniversityregardingthesuppliernetwork,showingthatthecustomerpressureisstrong,anditcannotbemitigatedbythediversificationofthesuppliercompanies.
Itis,ingeneral,typicalfortheHungariancompaniesinvolvedinthestudythattheyfocusoncertainstrategicinitiations(67%)andonly22%admitspaceforfreeproliferationofthestrategicinitiations.
IntheHungarianautomotiveindustrytheratioofcompaniessupportingthefloweringofstrategicalternatives,issomewhathigher(28percent).
Itistypicalthatglobally40%oftheautomotivecompanieschoosethislatterstrategy,which,basedonthestrategicmanagementbibliography,worksmoreefficientlyinadynamicandturbulentenvironmentthanthetraditionalconcentratedstrategyformation.
Atthesametime,itshowsthesecondaryroleoftheinformationtechnologyintheautomotiveindustrythatthecompaniesinvolvetheITmanagersinthestrategicdecisionsinamuchlessextent(onlyin7percent).
InHungary,thisratioamountedto35%inthewholesampleandthisratiowasthelowestintheautomotiveindustrywithits7percent.
Theassessmentoftheroleofstakeholdersalsoindicatesthelong-termthinkingoftheglobalautomotivecompanies:thisis,ingeneral,moreimportantamongtheglobalautomotiveplayersthanincaseoftheHungariancompetitors.
Thedifferenceisespeciallyconspicuousincaseoftheusersofsocialmedia(37percentagepointdifference),thecompetitors(24percentagepointdifference),thesuppliernetwork(23percentagepointdifference)andthecapitalsources(23percentagepointdifference).
BasedonthesefactsitcanbestatedthatthestakeholderapproachislessstrongamongtheHungarianautomotivecompanies.
AmongthoseinvolveditisconspicuousincaseoftheHungariancompaniesthattheemployeesarethefirstinthesequenceofimportance,which,atthesametime,indicatesthatthecompaniesstronglycompetewitheachotherforthequalifiedengineersandmechanicalprofessionalsinHungary,i.
e.
thisissuchabottle-neckthatmustbejointlymanagedbythegovernmentalplayers,thecompaniesandthelocaldecisionmakers.
Thecorporatesocialresponsibilitymeansalsooneoftheindicatorsofthedevelopmentofcorporategovernance,andsimilarlytheenforcementofthestakeholderapproach.
Astothecorporatesocialresponsibility,boththeglobalautomotiveandthedomesticplayersintendtoincreasetheirinvestmentsinthefieldsthatareabletoyieldprofitforthecompanyintheshorterterm(workforce,infrastructure).
TheHungariancompaniesconsidertheinvestmentinqualifiedworkforceasfirstprioritythatsupportsourpreviousstatement:thisareahasthetightestcrosssectionwhichthecompaniesface.
Inareaswherethereturnisindirectandthereforeslower,theHungariancompaniesarelesswillingtoincreasetheirefforts(climatechanges,povertyreduction,stabilityoffinancialsector,protectionofresources).
Managementdecisions,restructuringactivitiesin2012Q:Which,ifany,ofthefollowingrestructuring/improvementactivitieshaveyouinitiatedinthepast12monthsGlobalautomotiveindustry(n=90)Slovaktotalsample(n=180)Slovakautomotiveindustry(n=19)Hungariantotalsample(n=171)Hungarianautomotiveindustry(n=29)CompleteadomesticM&A18%11%11%16%3%Completeacross-borderM&A13%12%5%11%3%Divestmajorityinterestinabusinessorexitedasignificantmarket12%7%11%11%3%Outsourceabusinessprocessorfunction22%38%32%23%14%Insource"apreviouslyoutsourcedbusinessprocessorfunction26%14%16%8%3%Implementacost-reductioninitiative87%87%89%67%55%Enterintoanewstrategicallianceorjointventure28%17%11%17%7%Endanexistingstrategicallianceorjointventure18%2%0%5%0%Source:PwC's16thAnnualGlobalCEOSurvey,2ndHungaryCEOSurveyandSlovakCEOSurvey2013EffectsofstakeholdersoncorporatestrategyQ:Dothefollowingstakeholdershaveanyinfluenceonyourbusiness*Globalautomotiveindustry(n=90)Hungarianautomotiveindustry(n=29)Customersandclients78%98%Industrycompetitorsandpeers69%93%Yoursupplychainpartners69%92%Employees(includingtradeunions/workcounsils)83%88%Governmentandregulators76%83%Providersofcapital(e.
g.
Creditorsandinvestors)55%78%Localcommunities41%59%Usersofsocialmedia10%47%Themedia38%49%NonGovernmentalOrganisations(NGOs)10%23%*PercentageofrespondentswhosecompaniesareaffectedbythegivengroupSource:PwC's16thAnnualGlobalCEOSurveyand2ndHungaryCEOSurveyCSRQ:Doesyourcompanyplantoincreaseitsinvestmentoverthenext3yearstoachievethefollowingoutcomesinthecountryinwhichyouarebased*Globalautomotiveindustry(n=90)Hungarianautomotiveindustry(n=29)Creatingandfosteringaskilledworkforce66%63%Maintainingthehealthoftheworkforce41%47%Improvingthecountry'sinfrastucture28%33%Ensuringfinancialsectorstability17%33%Reducingpovertyandinequality10%32%Addressingtherisksofclimatechangeandprotectingbiodiversity10%29%Securingnaturalresourcesthatarecriticaltobusiness10%23%*PercentageofrespondentswhoareplanningtoincreasetheirinvestmentintheareagivenSource:PwC's16thAnnualGlobalCEOSurveyand2ndHungaryCEOSurvey6.
Potentialfortheinternaloperation1918AlthoughastagnationperiodisexperiencedintheEuropeaneconomyandstrongeconomicuncertaintyprevails,theEast-CentralEuropeanautomotiveindustry,asawhole,belongstothewinnersoftherecentperiodand,forthisreason,itisinarelativelygoodpositionascomparedtotheothersectorsTherelocationofthelargeautomotivemanufacturerstotheregionseemstocontinue,whereSlovakiaandHungarywillalsobeindicatedontheworldmapoftheautomotiveindustry.
Currentlytheregionstillhascost-basedcompetitiveadvantages,and,basedonPwCCEOSurvey,itsautomotiveindustryischaracterisedbyarelativelyadvancedbusinessapproach.
Furthermore,itisofimportance,thateventheeconomicpoliciessupportthegrowthofthesector,sincethegovernmentrecognizedthatthesectormightbecomeacornerstonefortheconvergence.
Itdependsaboveallonthesuppliercompanieswhetherthedomesticplayerscanmanagetoincreasetheratiooftheirdeliveriestothelargeautomotivemanufacturers.
Thesourceforgrowthcan,partly,bethedevelopmentofthemanagementthinking:forinstancethestakeholderapproachorthestrengtheningofthesocialresponsibility.
Wemaystatethattheyonlygrantcompetitiveadvantageintheregionthesedaysbuttomorrow,however,itispossiblethattheirabsencewillresultincompetitivedisadvantagetocompanies.
Theglobalautomotivetrendssuggestanyhowthatthelong-termcorporateapproachandtheopennessarethepotentialsthatmaybeanimportanteconomicfactorforthefuturealsointheautomotiveindustry.
Itisalsoclearwherethebiggestthreatcanbefoundandwhatisthemajorbottle-neckofthesector:ontheshortrun,theautomotiveskilledworkandthehighlyqualifiedtechnicalexpertswillbethemajorhindrancesinthesector.
Itssignscanbealreadyexperiencedregionally.
Alonger-termtaskofthecompaniescannotbedisregardedeither.
Theresultswilldrawattentiontotheareaswhattheinternationalautomotivecompaniesfocuson:inadditiontothelong-termgoalsoftheCSR,thestrengtheningofstakeholderapproachrepresentsadevelopmentpotential.
AsthefinalandmostimportantmessagewesaythattheR&DandinnovationarestrategickeyelementsthatdominantlydetermineeventhegrowthofthenearfutureintheautomotiveindustryoftheEast-CentralEuropeanregion.
ThisiswellillustratedbytheprojectionsoftheCEOsstatingthattheR&DandinnovationareincludedinthethreeprimaryfocusesinthelistofinvestmentprioritiesfortheforthcomingyearinbothHungaryandSlovakia.
Thebigissueofthefutureiswhetherthemanufacturers–andmainlythesuppliers–willbeabletoincreasetheaddedknowledgevalue.
Iftheysucceed,thesupplierswillincreasenotonlytheprofitandthenumberofjobsbuttheywillalsobecomethemotorsofgrowthinthetwoconvergingcountriesatnationaleconomylevel.
Theenginesofcorporategrowthin2013Q:Whatdoyouseeasthemainopportunitytogrowyourbusinessinthenext12monthsSlovaktotalsample(n=180)Slovakautomotiveindustry(n=19)Slovakautomotiveindustry(n=19)Hungarianautomotiveindustry(n=29)Newproductorservicedevelopment43%47%33%41%Organicgrowthinexistingdomesticmarket21%0%22%7%Organicgrowthinexistingforeignmarket17%32%10%17%Newoperation(s)inforeignmarkets9%16%12%17%NewM&A/jointventures/strategicalliances7%5%12%6%Source:PwC's2ndHungaryCEOSurveyandSlovakCEOSurvey2013InvestmentprioritiesQ:Whatareyourtop3investmentprioritiesoverthenext12monthsGlobalauto-motiveindustry(n=90)Slovaktotalsample(n=180)Slovakautomotiveindustry(n=19)Hungariantotalsample(n=171)Hungarianautomotiveindustry(n=29)R&Dandinnovation34%31%42%31%56%Manufacturingcapacity38%17%37%31%71%Securingrawmaterialsorcomponents14%5%0%7%11%Enhancingcustomerservice43%61%32%34%17%NewM&A/jointventures/strategicalliances18%13%0%13%0%Fillingtalentgaps20%8%16%10%6%Growingyourcustomerbase42%37%32%27%17%Implementingnewtechnology31%32%32%37%50%Improvingoperationaleffectiveness46%56%68%48%33%Other1%2%5%10%6%Source:PwC's16thAnnualGlobalCEOSurvey,2ndHungaryCEOSurveyandSlovakCEOSurvey2013ThebigissueforthefutureiswhethertheCEOsurveysconfirmtheindustryexpertsviewstatingthattheEast-CentralEuropeanenterprisesmovetowardstheeraoftheknowledge-basedaddedvaluefromtheeraoflabourcostbasedcompetitiveadvantages.
However,onecanseethesignsthattheHungarianandSlovakenterprisesmovetowardstheinnovation-basedstrategies:ontheonehand,basedontheopinionoftheCEOsatboththeSlovakandHungarianautomotivecompanies,thedrivingpowerforgrowthliesinthedevelopmentofnewproductsandservicesand,ontheotherhand,itsimprintscanalsobefoundinthespecificinvestmentperspectives.
In2013,theinvestmentprioritiesmovetowardstheR&Dandtheinnovativeinvestments.
43percentoftheSlovakCEOsand41percentoftheirHungariansectorpartnersareconfidentabouttheinnovationofnewproducts/services;thereby,thisgrowthpriorityheadsthelist"withabodylength"beforeothergrowthresources.
ItisworthmentioningthatboththeHungarianandtheSlovakCEOsfeelmoreoptimisticabouttheinnovationofnewproductsandtheexpansionofexternalmarketsintheautomotiveindustrythaninanyothersector.
Thethreemajorprioritiesintheglobalautomotiveindustryare:raisingthelevelofservicesprovidedtoclients,improvingtheoperatingefficiency,andincreasingthenumberofclients.
FromamongthethreetopinvenstmenttargetstheR&DandinnovationaswellextensionoftheproductioncapacitiesenjoypriorityinHungaryandSlovakia.
Theresultconfirmsatthesametimeourpreviousstatementsthatthetwoexaminedcountriesoftheregionarebasicallyinasimilarpositioninrespectoftheautomotiveindustry;ontheotherhand,theincreaseoftheknowledge-basedaddedvaluewillbeadominantelementofgrowthstrategiesinthenearfuture.
Thirdly,itisworthemphasizingthat,7.
Knowledge-basedstrategiesHowtocontinueInadditiontotheindustrylevel,thesurveyhasfurthermessageforthoseformingtheeconomicpolicies:duetothesignificanceoftheindustryinHungaryandSlovakia,itisofspecialimportanceforthepurposeofboththeemploymentandthevaluecreationability.
TheSlovakexampleshows,thatevenwithinaten-yearperiodwhatamajorgrowthcantheindustrydemonstrate,whichispriorisedandproperlysupportedbytheeconomicpolicies.
althoughtheCEOprojectiondidnotshowaneffusingoptimism,mainlyintheshortterm,thereisachanceinthemid-terminanycaseforgrowthandextensionofcapacities,primarilyinHungary.
Probably,therisingcapacitiesarebehindallthis.
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