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Pregled bibliografske jedinice broj: 450242

Medium sized enterprises in Croatia and their growth strategies

Bakotić, Danica
Medium sized enterprises in Croatia and their growth strategies, 2005., magistarski rad, Ekonomski fakultet, Ljubljana

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Medium sized enterprises in Croatia and their growth strategies

Bakotić, Danica

Vrsta, podvrsta i kategorija rada
Ocjenski radovi, magistarski rad

Ekonomski fakultet


15. 03. 2005



Prašnikar, Janez

Ključne riječi
enterprises; growth; strategies

Medium sized companies are too big to be small and too small to be big (Prašnikar, et al., 2003, p. 13). On the basis of their mixed features, some general characteristics of medium sized enterprises can be distinguished: • Adaptability and short reaction time, as well as greater productivity in comparison to large enterprises. • Personalized management. • In terms of relationships with customers, medium sized enterprises have a great advantage comparing to large companies. • Medium sized enterprises are highly motivated organizations, with a strong and stable organizational culture. • Limitations in personnel resources are relevant in management and functional experts. • Most medium sized enterprises are unlikely to be able to exert much influence on their market. They are usually price takers and face significant competition. • They often have problems raising capital, and this can significantly constrain their choice of strategies. • Medium sized enterprises can never produce the cheapest products as large enterprises can. In some situations this characteristic can be a strength, and in others, can be a weakness. Firstly, it depends on the situation complexity. Very often, one of the first medium sized enterprise long-term objective, or even vision, is their growth and development into a large company. Sometimes, it is their only way of survival in a turbulent environment, characterised by strong competition. To accomplish growth and development, medium sized enterprises should have adequate resources (human potential, finance capital, R&D), and pursue growth strategies. In order to apply adequate growth strategies, it is important to analyse internal characteristics and the external conditions and factors, which influence business activities, and company position in the market. These analyses can be conducted by different scanning techniques and methods, such as PEST analysis, SWOT analysis, Porter's model, BCG matrix, etc. The results and findings from these analyses should be used for the selection of adequate strategies. According to Byars, Rue and Zahra possible growth strategies are: concentration strategy, vertical integration and diversification. The main idea of concentration strategy is to focus on a single product/service, or on a small number of closely related products/services, and involves increasing sales, profits, or market share faster than in the past. Vertical integration is a growth strategy that involves extending an organization's present business in two possible directions. Forward integration moves the organization into distributing its own products or services, and on the other hand, backward integration moves an organization into supplying some or all of the products or services, used in producing its present products or services. Finally, the third type of growth strategy according to the authors mentioned above is diversification. It occurs when an organization moves into areas that are clearly differentiated from its current business (Byars, et al., 1996, p. 115). Medium sized enterprises are a category which can, on the basis of the achieved size and business functions development, in their right meaning, exploit growth strategies, as defined in the literature. If we turn to medium sized enterprises in Croatia, it can be pointed out that, in 2003 medium enterprises in Croatia represented 3.8 percent of the total number of economic entities, they employed 19.9 percent of total workforce, generated 18.4 percent of total revenues, 16.0 percent of total profit and 25.5 percent of total loss (FINA, 2003, p. 17). In observing the efficiency of medium sized enterprises in Croatia, some findings can be summarised: the liquidity ratios (current ratio) and asset management ratios (total assets turnover ratio) are at an unsatisfactory level, so the problems concerning liquidity can be expected. Besides this, the generation of sales is not sufficient, given total asset investment, and medium sized enterprises are highly indebted. On the other hand, profitability ratios ROA and ROE show better performance and efficiency of medium sized enterprises and also of the national economy. Furthermore, it is a similar situation with revenue per employee, and profit per employee, which have increased in all years. The empirical research of this thesis was directed at discovering a possible model of behaviour for medium sized enterprises in Croatia, concerning their development and growth into large companies with the main focus on the growth strategies they can apply. To achieve this goal, two Croatian companies were selected, and a case study analysis was conducted. The first case concerns a company called SMS d.o.o. Split, and the other is PIVAC d.o.o. Vrgorac. In the presentation of these cases, each individual case study consists of a "whole" study in which convergent evidence is sought regarding the facts and conclusions for the case ; then a cross case analysis was obtained and discussion and final findings are presented. Both companies have experienced rapid growth since 1990. They produce traditional Dalmatian products and have a similar number of employees and functional organisational structure. The management of both companies is in the hands of owners, and both companies are in debt. The differences of these companies lie in fact that PIVAC is much more profitable than SMS, its debt is mainly short term, and its distribution network could eliminate present liquidity problems. On the other hand, SMS has greater exports. In the comparison of growth strategies applied in the observed companies, it should be pointed out that both companies give a lot of consideration to the formulation and implementation of growth strategies and their evaluation shows that they pursue similar growth strategies. According to the developed model of the possible behaviour of medium sized enterprises and related hypotheses, research results can be summarized. In both companies, there is a close relationship between the entrepreneur and employees. Both companies focus themselves on the market as niche producers. They finance their growth with retained earnings or by bank loans. They have similar organizational structure and operational systems. The observed companies grow on the basis of adequate and sufficient resources, which include human potential, finance capital and R&D base. The inefficient legal and regulatory systems in Croatia seriously obstruct any business activities, and slow down the process of growth of medium sized companies. After the conducting the literature overview and the empirical research on two growing Croatian medium sized companies, some knowledge about these relevant issues can be offered. In order to grow, medium sized enterprises should satisfy two essential conditions: they should possess adequate resources and they should pursue adequate growth strategies. Regarding resources, there are often problems and obstacles concerning reaching sufficient and adequate resources. Financial resources are often deficient and obstacles to getting additional financial capital are regularly present. Besides these obstacles, which are common to all countries, financial barriers in Croatia are larger and deeper. They are firstly the consequence of the former political and economic system, and can be observed as the underdevelopments in banking culture (Koford and Tschoegl, 1999, p. 123) ; underdevelopments in the legal system ; the weak development of real estate markets ; the inefficiency of the court system ; the issue of recommendation which seems to be important in Croatian banking. Croatian companies try to overcome all these barriers, by close relationships with the banks through which money is deposited and all payments made. In this way a particular bank becomes a "house bank", and then getting a loan is much simpler. Another obstacle to medium sized enterprise growth is the managerial barrier. Croatian managers are mostly not capable of applying modern management in practice, because the control function of management is their priority, and the lack of knowledge and experience, and risk aversion present some barriers to their professionalism. The solution to this unfavourable situation in Croatia is employment of young well-educated mangers, with developed managerial skills, who are not burdened with the past system. For many Croatian medium sized companies, the common situation is that the entrepreneur is the owner/manager, or the family is at the top on the company. But the role of the owner/manager needs to be changed as the business develops, and professional management should replace the entrepreneurs, because the characteristics of managers, who run the company in its growing stage, are quite different from the characteristics of entrepreneurs who establish the company Additionally, Croatia has some specific obstacles which constrain medium sized enterprise growth, such as the unfavourable macroeconomic situation (a highly indebted economy, unfavourable effects of process of privatisation, low economic growth, high taxation and contributions on wages, an ageing labour force) ; the State concentrates on political issues rather than on economic ones ; there is a high level of bureaucracy in regulatory system ; inefficiency of judiciary and corruption. Some of these specific Croatian barriers cannot be solved easily, but with high-quality State activity and coordination with the economic sector, the solution to some of the problems could be initiated.

Izvorni jezik

Znanstvena područja



Ekonomski fakultet, Split


Avatar Url Danica Bakotić (autor)

Citiraj ovu publikaciju:

Bakotić, Danica
Medium sized enterprises in Croatia and their growth strategies, 2005., magistarski rad, Ekonomski fakultet, Ljubljana
Bakotić, D. (2005) 'Medium sized enterprises in Croatia and their growth strategies', magistarski rad, Ekonomski fakultet, Ljubljana.
@phdthesis{phdthesis, author = {Bakoti\'{c}, Danica}, year = {2005}, pages = {119}, keywords = {enterprises, growth, strategies}, title = {Medium sized enterprises in Croatia and their growth strategies}, keyword = {enterprises, growth, strategies}, publisherplace = {Ljubljana} }
@phdthesis{phdthesis, author = {Bakoti\'{c}, Danica}, year = {2005}, pages = {119}, keywords = {enterprises, growth, strategies}, title = {Medium sized enterprises in Croatia and their growth strategies}, keyword = {enterprises, growth, strategies}, publisherplace = {Ljubljana} }

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