The Impact of the Financial Crisis in Central and Eastern Europe

According to a study made by Linea Directa Communications in CEE region, a reduced number of companies (3.85%) from Poland registered a drop in sales up to 30% in the first six months of this year, in comparison with same period in 2008, while Romania has the largest percentage 26,18%, followed by Hungary with 14.04% and Russia with 11.84%.

On the other hand, in Hungary 37,64% of respondents reported similar sales as in 2008 followed by Poland with 35.58% and the smallest percentages was registered in Romania (14,59%) and Slovakia (17,91%).

Due to the economic crisis, the number of companies that reported an increase of sales is extremely low 8, 84% In Czech, 9, 44% Romania and 10, 45% in Slovakia. The most affected industries are automotive, constructions, real estate and retail.

Product innovation, development of new services in accordance with real needs of existing clients is considered the key to overcome the financial crisis

o On o scale from 1-4 (4 being the most important), from a list with measures planning to overrise, companies take in consideration as key measure product innovation, new services development, customized products launch in accordance with actual needs of the existing clients – in Slovenia (3,60) and Hungary (3,53). The need to innovate to survive is often the mantra of those who are successful in business. This is due innovation by its very nature means doing things differently. Every company needs to innovate to maintain a competitive edge, which is all the more important in turbulent markets.

o Companies from Romania relatives on tapping into new customer segments, regional expansion (3.32). Entering new markets into which existing products can be sold – new industrial sectors or new geographical areas – offer opportunities to build cash flow, profits and market share.

o in Poland respondents pay much attention for new sales and distribution channels (3,29)

o Participants at survey do not take account on strategic partnerships during the crisis, although can bring long-term benefits. The focus is currently now placed on over the economic crisis. In Russia the score is only 1.78.

o Also marketing suffer a lot, companies reducing expenses.

Cost reduction program, revised budgets and hiring freeze, working with new suppliers or renegotiating prices with older partners are the most used measure in the countries analyzed.

Financial pressures force firms to cut costs on a wide range of investments, such as marketing, training and R & D. When the economy is in a downturn, many business expenditures such as promotional, sales and market research outlays are cut first because they do not show tangible and immediate results.

Moreover, reducing costs can be dangerously obvious to the market, producing a deterioration in customer service, an absence in sales reps, delayed delivery times or a lower quality product or service. In spite of tumultuous change, the customer's experience with the product must continue to live up to the promise of the brand, and management must not sacrifice its image and identity by cheapening its product.

Not surprisingly, the most common strategic responses involve cost reductions and product-related strategies (focusing on core products or services, the introduction of new products and the rationalization of product lines). The least common strategic responses to the recession are those that involve major structural changes to the organization, namely mergers, partnerships and acquisitions.

According to survey, companies started also to outsource operations that are not core activities.
For example, there are many small companies which are using external providers for activities related to accounting, IT or distribution, often because they want to decrease costs and they do not have another solution.

On the contrary, the main factor for multinationals in the outsourcing decision process is represented primarily by the decision of keeping in house the added value processes, focusing their efforts on the main activity, and also on developing specific seasonal projects. However, reducing marginal cost is playing, even if sometimes it does not recognize as a decision factor, an important role. Several studies showed that outsourcing can help reducing cost up to 40%, for all type of companies.

In the actual economic economic times, resizing cost is the main point of discussions between specialists in all companies. For various players that are developing internal operations like research, marketing, distribution or training, the high sales price of their products is often having the roots in the internal higher costs of producing that product. By outsourcing, some companies aim to resize their internal costs and so to create an important competitive advantage.

Recruiting and training costs are in many cases high and companies are making real sacrifices in order to pay them, but often employees do not raise expectations and this cost in some cases is not worthy to be paid. Outsourcing the HR services can be the solution to address this situation.

Also each investment in business may involve certain costs of risk. Market, competition, legislation and technology can change very quickly. The call center providers can assume these risks and on the other hand, their area of ‚Äč‚Äčexpertise helps in avoiding these risks.

"How we treat our customers?" is a key question that must be answered carefully. Some Customer Care services are made better by outsourcing, because these type of companies are specialized in providing services on specific markets and their experience in the implementation of these activities is provided.

"In CEE there is a number of companies that offer locally and international services. a company can give you better results and more quickly, "said Dejan Grbic, Head of International Business Development at Linea Directa Communications.

"Using outsourced services, companies can reduce the costs with 10% up to 40%. But they must not only think about the fact that outsourcing reduces the costs, because also these services help to increase also the revenue and the quality of services provided to customers ", added also Dejan Grbic.

The study was conducted in 7 countries: Czech, Hungary, Poland, Romania, Poland, Slovenia and Slovakia. Overall, participating managers from different industries active in IT, finance, FMCG, Pharma, auto, retail, telecommunications, tourism and utilities.

Linea Directa Communications is part of the Studio Moderna Group, one of the largest and fastest developing direct marketing and call center companies. The group coverage 19 markets in CEE providing services in 22 international languages. The main activities are databases management, loyalty and lead generation programs, telesales, Info-Line and Help Desk services, SMS campaigns, market researches, Lettershop and Pick & Pack and payment processing.