UNIVERSITY OF NOVI SAD - FACULTY OF TECHNICAL SCIENCES and UNITED BUSINESS INSTITUTES – UBI, BRUSSELS, BELGIUM

IIM/EURO International Postgraduate School of Engineering and Management

MBA Major: Corporate Intelligence and Project Management

Course: Business Intelligence Concepts

CASE STUDY

Topic: BUSINESS CASE SERBIA

Mentor: Professor Joseph Rodenberg

Team of candidates: Branko Kurilic (team leader), Masa Cvjeticanin, Milos Boskovic, Kristina Lazarevic, Dragan Milinkovic, Ivan Milic and Boban Joksic

Novi Sad, June 2009

IIM/EURO International Postgraduate School objectives:

Developing the approach for UNDERSTANDING the process of

technological, industrial, social, market, cultural, economic-financial,

and overall living reality in the sense of achieving professional

perspective to and behind the horizon,

Increasing the capability to identify a problem, select relevant data,

form and valuate alternative solutions and apply the ―best‖ solution,

Achieving interdisciplinary approach while working and preparing the

foundation for effective cooperation with surrounding,

Encouraging students for wider comprehension of reality and

developing abilities for coordinating theoretical approaches with the

needs of practical processes.

STRATEGIC LOCATION FOR BUSINESS DEVELOPMENTCROSSROAD OF SOUTHEAST EUROPE

PAN-EUROPEAN CORRIDOR NO. 10; connecting Salzburg, Thessalonica and Istanbul; 2.300km roads; 2.528km railways; 12 airports; 4 sea-& river-ports;http://www.unece.org/trans/seminars/docs/Thessaloniki_Item3CT.pdf

PAN-EUROPEAN CORRIDOR NO. 7; DANUBE; connecting Atlantic and Black Sea; http://www.tinavienna.at/service/upload/MoU.pdf

65 MILLION CONSUMERS IN SOUTHEAST EUROPE

EASY ACCESS TO INTERNATIONAL MARKETSSOUTHEAST EUROPE FREE TRADE AREA

FREE TRADE AGREEMENT WITH RUSSIA

TRADE PREFERENCES WITH EU AND USA

LOWEST CORPORATE TAX RATE IN EUROPE OF 10%

REGIONAL LEADER IN SOUTHEAST EUROPE

Invest and move your business in Serbia

Position your business at the crossroad

between European North/West and

Euro/Asian South/East

Make your products and services ―made in

Serbia‖ and get free access to both South-

East Europe/Asia and Russian markets

Ensure business friendly environment

Introduce and apply EU standardization

and certification procedures

Utilize its crossroad position and facilitate

business partnerships and cooperation

between East and West

EU does not face migrations from/through Serbia

Serbia is prosperous and attractive meeting and business point

There is no visa regime, there is free exchange of people, goods and services between EU and Serbia

Stronger Serbia = Stronger EU

Geo-strategic position at the crossroads of Pan-European Corridors 7 and 10

Major link between Europe and Asia

8 neighbouring countries: Hungary, Bulgaria, Romania, FYR Macedonia, Albania, Bosnia-Herzegovina, Croatia, and Montenegro

7.5 mn consumers in Serbia, 2nd largest market in the region

30 mn consumers in South East Europe with duty-free access

150 mn consumers in the Russian Federation with customs-free access

Preferential trade status with USA and the EU

Overall duty-free exporting potential: 1 bn consumers

Serbia – number 1 business reformer in the world (World Bank 2006 report); http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/0,,contentMDK:20657324~menuPK:258614~pagePK:2865106~piPK:2865128~theSitePK:258599,00.html

GDP per capita, from $2,200 in 2002 to $6,782 in 2009; http://www.globalpropertyguide.com/Europe/Serbia/gdp-per-capita

6.57 % GDP per capita growth rate in last 5 years (2004-2009); http://www.globalpropertyguide.com/Europe/Serbia/gdp-per-capita-growth-5-years

Poverty decrease: 10.6% in 2002, 10.5% in 2003, 8.8% in 2006, 6.6% in 2007; (no data available for 2008); http://www.prsp.sr.gov.yu/engleski/index.jsp

Reduced inflation – From 111.9% in 2000; ―Inflation was down to 6.8% in 2007, the first singe-digit figure for two decades. But inflation was back at 15.9% in June 2008, with full-year inflation expected to reach 11.5%.‖; http://www.globalpropertyguide.com/Europe/Serbia/Price-History

€500 mil. National Investment Plan funds from state budget surplus in 2008; http://www.mnip.gov.rs/

$9 bn foreign currency reserves, May 2009; http://www.nbs.rs

Exports € 5.98 bn in 2007; € 7.79 bn in 2008 (30.2 % growth) most to Italy, CEFTA, Germany, and Russia; http://webrzs.statserb.sr.gov.yu/axd/spoljna/indexsp21.php?ind1=0

State grants from €2,000 to €10,000 per new job created for greenfield/brownfield projects

10 % corporate profit tax rate – among the lowest in Europe

8 to 18 % VAT rate – among the lowest in CEE

10-year corporate profit tax holiday for large investments

Tax credits up to 80 % of the amount invested in fixed assets

5-year corporate profit tax holiday for concessions

Duty-free import of raw materials, semi-products, components, and equipment

$13.5 bn total inward FDI inflow since 2001, 90 % average annual Foreign Direct Investment (FDI) growth rate

Serbia – The place of largest greenfield investments in SEE 2004-2006 (OECD)

Belgrade – The City of the Future and top FDI location in South Europe 2006/07 (Financial Times)

Major investors: Telenor, Philip Morris, Mobilkom, Banca Intesa, Coca-Cola, Microsoft, Stada, InBev, Lukoil, U.S. Steel and many others

Labor force (age 15-64) exceeds 5 mn, 52 % with secondary or higher education (2008)

Vast labor pool – unemployment rate from 21.6 % in 2007 decreased to 13.5 % in 2008

Competitive labor costs – €484 average gross per month (2008)

11. 7 % average annual growth of industrial productivity in 5 years (2003-2008)

700,000 university or college graduates, 1/3 from technical faculties (2008)

42 % of the population speaks English (Gallup International, 2008)

Maintaining macroeconomic stability

Promoting dynamic economic growth, through accelerated implementation of economic reforms

Increased employment and living standards

More balanced regional development

And above all:STRONG AND CONTINUOUS NATIONAL AND INTERNATIONAL ―BUSINESS CASE SERBIA‖ MEDIA CAMPAIGN

“Serbia is well positioned to continue its strong economic performance and make progress toward the goal of full European integration.”

“The Government has demonstrated a degree of commitment to undertake difficult but necessary “second generation” reforms that should help to ensure a sustainable growth path for the economy led by a dynamic private sector.”

CONCLUSION SOURCE: World Bank Report No. 41310 – YF; International Bank for Reconstruction and development, International Finance Corporation, and Multilateral Investment Guarantee Agency; Country Partnership Strategy for the Republic of Serbia for the Period FYO8-FYll; November 13,2007

―The European Union will not go away and will not close its doors, but it would be a shame if Serbia was to lose several more years and it would also be a loss for the European Union.‖

―Serbia is crucial for the establishment of peace and prosperity in this part of the continent.‖

CONCLUSION SOURCE: Professor Danuta Hübner, EU Commissioner for Regional Policy; "Serbia's contribution to a prosperous Europe―; University of Kragujevac, 23 April 2008

―The Council of the European Union encourages the European Commission to present as soon as possible a legislative proposal amending Regulation 539/2001, as it applies to the Member States, in order to achieve a visa free regime ideally by the end of 2009 with those countries that will have met all the benchmarks.‖; 2951st EXTERAL RELATIOS Council meeting Luxembourg, June 15, 2009; http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/gena/108515.pdf

―Contrary to 25 EU member states, the Netherlands, together with Belgium showing neighboring solidarity, for more than a year has been conditioning defrosting SAA (Stabilization and Association Agreement) with Serbia with the full cooperation with the Hague and arrest of Ratko Mladic.‖; Serbian daily newspaper Politika, June 16, 2009, http://www.politika.rs/rubrike/Svet/Podrshka-EU-ukidanju-viza.sr.html

SERBIAThe

NETHERLANDS

STRASBURG

BUSINESS CASE SERBIAThe Netherlands is blocking both

EU and Serbia

The Netherlands is blocking EU visa free regime for Serbia and defrosting the implementation of EU SAA (Stabilization and Association Agreement) with Serbia because of its own trauma and trauma of Dutch UN battalion based in Srebrenica 14 years ago

DutchNews.nl - June 16, 2009: Dutch European affairs minister Frans Timmermans told the paper he saw absolutely no reason to change the Netherlands' position. ―Serbia holds the key to solving this,‖ he told the paper. ―It is not a question of taking hostages, but a country which is not keeping to agreements,‖ he said.; http://www.dutchnews.nl/news/archives/2009/01/holland_under_pressure_over_se.php

Trauma of Dutch UN battalion based in Srebrenica 14 years agoFormer Dutch peacekeeper Rob Zomer on June 17, 2009: "In the Netherlands, the media was constantly reproaching us for letting Serbs massacre Muslims.―; http://www.expatica.com/nl/life-in-netherlands/news_focus/_Haunted_-ex_peacekeeper-moves-to-Srebrenica_14195.html

Trauma of the NetherlandsIn 2002, the Dutch government resigned over an official report that stated its peacekeepers had been sent on an "impossible" mission.In 2008, a Dutch court dismissed a bid by survivors to hold the Netherlands responsible for its troops' failure to protect their families, saying the "actions must be attributed exclusively to the UN".

Trauma of International communityThe United Nations admitted it failed to protect Srebrenica Muslims from mass murder, but none of its officials were held responsible.

John R. Schindler, author of the book ―Unholy terror ‖

John R. Schlinder is professor of strategy at the Naval War College and a former National Security Agency analyst who served for nearly a decade with NSA — work which took him to many countries in support of U.S. and allied forces operating in the Balkans— and was NSA’ s top Balkans expert. He is uniquely qualified to demonstrate:

How the Bosnian conflict has been misrepresented by the mainstream media, covering up the large role played by radical Islam and al-Qa’ ida.

Detailed examination of Srebrenica rapidly uncovers facts that are incompatible with the standard version of events, resulting in a portrayal that is disturbing and deeply critical of all parties involved. The real story of Srebrenica is a tale of cynicism.

Schindler points out that the Izetbegovic government had been impudently using this safe zone to stage attacks on Serbs in the neighboring villages for three years, despite Serbian protests; in all, over 3,000 Serbs, including 1,300 civilians were massacred by Muslims in Srebrenica municipality, in many cases butchered, tortured, mutilated, burned alive, or decapitated.

Phony and deceitfully comparisons of the plight of Jews in the Second World War with that of Bosnian Muslims today have been institutionalized to the extent that anyone who does not agree, or who calls for a more objective and fact-oriented investigation, is denounced immediately as a ―Holocaust denier‖. As Schindler mentions, the simple utterance of the word ―Srebrenica‖ is a ―conversation stopper amongst polite society today.

Serbia shall help both the Netherlands Government and Dutch people by continuously visiting the Netherlands and helping Dutch public opinion to understand the difference between Serbia 14 years ago and today

Serbia shall continue demonstrating its efforts in prosecuting war crimes, and present it to the Netherlands

Serbia shall continuously host Dutch media aiming to achieve positive impression of Serbia amongst Dutch Government and the people

Serbia shall support conflict mitigation experts’ panels in the Netherlands, with Dutch media, where internationally recognized experts will discuss their relevant findings e.g.

John R. Schindler, author of the book ―Unholy terror ‖; http://www.amazon.com/Unholy-Terror-Bosnia-Al-Qaida-Global/dp/0760330034/ref=sr_1_1?ie=UTF8&s=books&qid=1243790253&sr=1-1Edward S. Herman, writer of Global Research; http://www.globalresearch.ca/index.php?context=va&aid=13130

Conclusion:Business Case Serbia is heavily affected by a deadlock position taken by both the Netherlands and Serbia

Recommendation:There is a need for strong Business Case Serbia International conflict mitigation process and awareness campaign

Action:Business Case Serbia Press Release will be distributed to Dutch media; conflict mitigation experts’ panels organized in the Netherlands, hopefully mitigated by professor Jan Oberg; http://www.transnational.org/About/j_oberg.html

Conclusion:Business Case Serbia is heavily affected by a very bad image of Serbia, primarily due to extremely passive performance by Serbia itself

Recommendation:Creating positive image of Serbia = National priority

Action: emphasizing that Serbia is:Safe and peaceful crossroad between East and WestCooperative and reliable partnerMulticultural-multiethnic-multiconfession society

―It’s not the strongest of the species that survive, nor the most

intelligent, but the one most responsive to change‖.

(Charles Darwin)

Peripheral Vision Scoring Tool considers 8 factors of influence

Need for Peripheral Vision:

I Nature of strategy

II Complexity of the business environment

III Volatility of the business environment

Capability for Peripheral Vision:

IV Leadership orientation

V Knowledge management

VI Strategy making

VII Organizational configuration

VIII Culture

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

Legend:

EU states

Out of EU region

Candidate states

The rest of Europe

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

I Nature of Government StrategyA) Focus on strategy 5

Narrow (Protected niche) 1 2 3 4 5 6 7 Broad (global)B) Growth orientation 3

Modest 1 2 3 4 5 6 7 AggressiveC) Number of businesses to integrate 3

Few 1 2 3 4 5 6 7 ManyD) Focus on reinvention 3

Minor 1 2 3 4 5 6 7 Major (50% of revenue must come from new products in three years)Total = 14

II Complexity of Environment A) Industry structure 4

Few, easily identifiable competitors 1 2 3 4 5 6 7 Many competitors from unexpected sourcesB) Channel structure 6

Simple and direct 1 2 3 4 5 6 7 Long and complexC) Market structure 4

Fixed boundaries and simple segmentation 1 2 3 4 5 6 7 Fuzzy boundaries and complex segmentationD) Enabling technologies 3

Few and mature (simple systems) 1 2 3 4 5 6 7 Many converging (complex systems)E ) Regulations 6

Few or stable 1 2 3 4 5 6 7 Many or changing rapidlyF ) Public visibility of industry 2

Largely ignored 1 2 3 4 5 6 7 Closely watched by media or special interest groupsG) Dependence on government funding and political access 6

Low: largely independent of government 1 2 3 4 5 6 7 High: sensitive to politics and the funding climateH) Dependence on global economy 6

Low: Affected principally by domestic conditions 1 2 3 4 5 6 7 High: affected by global conditionsTotal = 37

Needs for peripheral vision

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

Needs for peripheral vision

III Volatility of EnvironmentA) Number of surprises by high impact events in three years 7

None 1 2 3 4 5 6 7 Three of more

B) Accuracy of past forecasts 2

High: small deviations to actual forecasts 1 2 3 4 5 6 7 Low: results differ greatly from forecasts

C) Market growth 4

Slow and stable 1 2 3 4 5 6 7 Rapid and unstable

D) Growth opportunities 2

Decreased dramatically in past three years 1 2 3 4 5 6 7 Increased dramatically in past three years

E) Speed and direction of technological change 3

Very predictable 1 2 3 4 5 6 7 Highly unpredictable

F) Behavior of key competitors, suppliers, and partners 5

Very predictable 1 2 3 4 5 6 7 Highly unpredictable

G) Posture of key rivals 5

Live-and-let-live mentality 1 2 3 4 5 6 7 Hostile (aggressive)

H) Susceptibility to macroeconomic forces 6

Low sensitivity to price changes, currencies, business cycles, tariffs, etc. 1 2 3 4 5 6 7 High sensitivity

I ) Dependence on financial markets 5

Low 1 2 3 4 5 6 7 High

J ) Costumer and channel power 3

Low 1 2 3 4 5 6 7 High

K) Sensitivity to social changes 3Low: mostly gradual changes from the past 1 2 3 4 5 6 7 High: good chance of major disruptions and

changes in business models

L ) Potential for major disruptions in the next five years 6

Low; few surprises expected mostly things we can handle 1 2 3 4 5 6 7 High: several significant business

shocks are expected, without knowing which in particular

Total = 51

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

IV Leadership OrientationA) Importance of the periphery in the leader’s agenda 3

Low priority 1 2 3 4 5 6 7 High priorityB) Time horizon overall 2

Emphasis on short term (two years or less) 1 2 3 4 5 6 7 Emphasis on long term (more than five years)C) Organization’s attitude toward periphery 3

Limited and myopic: few people care 1 2 3 4 5 6 7 Active and curious: systematic monitoring of peripheryD) Willingness to test and challenge basic assumption’s 2

Mostly defensive 1 2 3 4 5 6 7 Very willing to test critical premises or widely held views

Total = 10

V Knowledge Management SystemsA) Quality of data about events and trends at the periphery 2

Poor: limited coverage and often out-of-date 1 2 3 4 5 6 7 Excellent: broad coverage and timelyB ) Access to data across organizational boundaries 2

Difficult: limited awareness of what is available 1 2 3 4 5 6 7 Relatively easy: wide awareness of what is

availableC) Use of data base for existing business 3

Limited 1 2 3 4 5 6 7 ExtensiveD) Technologies for posting queries to databases 3

Old and difficult to use 1 2 3 4 5 6 7 State-of-the-art inquiry systems

Total = 10

Capability for peripheral vision

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

VII Organizational Configuration (Structure and Incentives)A) Accountability for sensing and acting on week signals 3

No one is responsible 1 2 3 4 5 6 7 Responsibility is clearly assigned to project team or dedicated group

B) Early warning systems and procedures 2

None 1 2 3 4 5 6 7 Extensive and effective

C) Incentives to encourage and reward wider vision 2

None 1 2 3 4 5 6 7 Recognition from senior management and direct rewards

Total = 7

VIII Culture (Values, Beliefs, and Behaviors)A) Readiness to listen to reports from scouts on the periphery 3

Closed: listening discouraged 1 2 3 4 5 6 7 Open: listening encouraged

B) Willingness of customer-contact people to forward market information 3

Poor 1 2 3 4 5 6 7 Excellent

C) Sharing of information about the periphery across functions 3

Poor: information ignored or hoarded 1 2 3 4 5 6 7 Excellent: ongoing information sharing at multiple levels

Total = 9

Capability for peripheral visionVI Strategy MakingA) Experience with uncertainty–reducing strategies 2

Limited 1 2 3 4 5 6 7 Extensive

B) Use of scenario thinking to guide strategy process 3

Never 1 2 3 4 5 6 7 Frequent

C) Number of alliance partners 2

Few 1 2 3 4 5 6 7 Many

D) Flexibility of strategy process 3

Rigid, calendar driven 1 2 3 4 5 6 7 Flexible, issues oriented

E) Resources devoted to scanning the periphery 3

Negligible 1 2 3 4 5 6 7 Extensive

F) Integration of customer and competitor into future technology platforms and new product development plans 2

Poorly and sporadically Integrated 1 2 3 4 5 6 7 Systematically and fully integrated

Total = 15

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

I 14

II 37

III 51

Needs for peripheral vision

Total = 102

IV 10

V 10

VI 15

VII 7

VIII 9

Capability for peripheral vision

Total = 51

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

140

120

100

80

60

40

20

0

0 40 60 80 100 120

140

IT SHOULD BE MUCH BETTERNEEDS

VISION

vulnerable

vigilant

focused neurotic

Note: Final scoring represents the average scoring value done by Case Study Team.

Appendices:

BUSINESS CASE SERBIA - Peripheral Vision Scoring

Appendices: Key dates in Serbia's path towards the EU► 15 June 2009 - “The Council of the EU encourages the European Commission

to present as soon as possible a legislative proposal amending Regulation

539/2001, as it applies to the Member States, in order to achieve a visa free

regime ideally by the end of 2009 with those countries that will have met all the

benchmarks.”; 2951st EXTERAL RELATIOS Council meeting Luxembourg

► 4 June 2009 - International Criminal Tribunal for the former Yugoslavia (ICTY) Chief Prosecutor Serge Brammertz Address Before The UN Security Council :

“Serbia had made additional progress in its cooperation with the Office of the

Prosecutor, as the large majority of requests for assistance, including requests

for access to documents and archives, had been complied with.”

► 7 July 2008 - European integration set as a key priority by Serbian Government

► 7 May 2008 - Commission delivered the Road map on Visa liberalization

► 29 April 2008 - Serbia and the EU signed The Stabilization and Association Agreement (SAA) and Interim Agreement on Trade and Trade-related issues

► 18 February 2008 - Council adopts the revised European partnership for Serbia

► 1 January 2008 – Effective Visa Facilitation and Readmission Agreement

► 7 November 2007 - Initiated SAA with Serbia► October 2005, Launched negotiation on Stabilization and Association

Agreement► October 2004 - Council started process for Stabilization and Association

Agreement► June 2003 – at Thessalonica European Council, the Stabilization and

Association Process (SAP) is confirmed as the EU policy for the Western Balkans► 1999 - The EU proposes the new Stabilization and Association Process (SAP) for

five countries of South-Eastern Europe, including Serbia

World Bank – Serbia Country Brief 2009,http://www.worldbank.org.yu/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/SERBIAEXTN/0,,contentMDK:20630647~menuPK:300911~pagePK:141137~piPK:141127~theSitePK:300904,00.htmlSEE Business - Doing Business in South East Europe Markets,http://www.see-business.biz/Serbia Business – Country Business Gateway, http://www.serbia-business.com/World Bank Report No. 41310 – YF; International Bank for Reconstruction and development, International Finance Corporation, and Multilateral Investment Guarantee Agency; Country Partnership Strategy for the Republic of Serbia for the Period FYO8-FYll; November 13,2007, http://siteresources.worldbank.org/INTSERBIA/Resources/CPSnov2007.pdfProfessor Danuta Hübner, EU Commissioner for Regional Policy; "Serbia's contribution to a prosperous Europe―; University of Kragujevac, 23 April 2008, http://ec.europa.eu/commission_barroso/hubner/speeches/pdf/2008/042008_serbia.pdf