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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 DEVELOPMENT
CROSSROAD 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 MARKETS


SOUTHEAST 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,,conte
ntMDK:20657324~menuPK:258614~pagePK:2865106~piPK:2865128~theSite
PK: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/pressd
ata/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
BUSINESS CASE SERBIA
The Netherlands is blocking both
EU and Serbia

The
SERBIA NETHERLANDS

STRASBURG
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_un
der_pressure_over_se.php
Trauma of Dutch UN battalion based in Srebrenica 14 years ago
Former 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 Netherlands
In 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 community


The 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=1243790
253&sr=1-1
Edward 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 West
Cooperative and reliable partner
Multicultural-multiethnic-multiconfession society
Appendices:
BUSINESS CASE SERBIA - Peripheral Vision Scoring
―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
Needs for peripheral vision

I Nature of Government Strategy


A) 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 Aggressive
C) Number of businesses to integrate 3
Few 1 2 3 4 5 6 7 Many
D) 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 sources
B) Channel structure 6
Simple and direct 1 2 3 4 5 6 7 Long and complex
C) Market structure 4
Fixed boundaries and simple segmentation 1 2 3 4 5 6 7 Fuzzy boundaries and complex segmentation
D) 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 rapidly
F ) Public visibility of industry 2
Largely ignored 1 2 3 4 5 6 7 Closely watched by media or special interest groups
G) 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 climate
H) Dependence on global economy 6
Low: Affected principally by domestic conditions 1 2 3 4 5 6 7 High: affected by global conditions
Total = 37
Appendices:
BUSINESS CASE SERBIA - Peripheral Vision Scoring
Needs for peripheral vision

III Volatility of Environment


A) 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 3
Low: 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
Capability for peripheral vision

IV Leadership Orientation
A) Importance of the periphery in the leader’s agenda 3
Low priority 1 2 3 4 5 6 7 High priority
B) 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 periphery
D) 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 Systems


A) 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 timely
B ) 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
available
C) Use of data base for existing business 3
Limited 1 2 3 4 5 6 7 Extensive
D) 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
Appendices:
BUSINESS CASE SERBIA - Peripheral Vision Scoring
VI Strategy Making
A) Experience with uncertainty–reducing strategies 2 Capability for peripheral vision
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
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
Appendices:
BUSINESS CASE SERBIA - Peripheral Vision Scoring

Needs for peripheral vision

I 14
II 37
III 51

Total = 102

Capability for peripheral vision

IV 10
V 10
VI 15
VII 7
VIII 9
Total = 51
Appendices:
BUSINESS CASE SERBIA - Peripheral Vision Scoring
NEEDS IT SHOULD BE MUCH BETTER
140

120

100 vulnerable

80 vigilant

60 focused neurotic

40

20

0
0 40 60 80 100 120
140 VISION
Note: Final scoring represents the average scoring value done by Case Study Team.
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/ECAE
XT/SERBIAEXTN/0,,contentMDK:20630647~menuPK:300911~pagePK:
141137~piPK:141127~theSitePK:300904,00.html
SEE 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
.pdf
Professor 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/2008/042
008_serbia.pdf