A New Generation of Businesses from South and Southwest Serbia Emerges
Tuesday, 30 June 2009 16:19
While the economies of Southern and Southwestern Serbian municipalities continue to struggle with the lingering effects of the “old economy” winding down – slow economic growth, high unemployment, the continued closure of state-owned factories and failed privatization deals – small and medium-sized enterprises have managed to flourish. A common trait shared by the best of these businesses is that they have successfully managed to find a market niche for their products by providing affordable, high-quality products to match customer expectations in both domestic and international markets.
Two of these new “Stars of the South” are:
• Tobler-Skele, which specializes in the production of scaffolds; and,
• Stilex, a textile company specialized in finished wool products.
Both of these companies have been successful, despite the recent economic downturn, in capturing new markets both within and outside their region and developing new product lines to differentiate themselves from their competitors.
Tobler-Skele – A Young Scaffolding Company from Preševo Reaches New Heights
Tobler-Skele, based in the municipality of Preševo, was founded in 2006. The company specializes in the production, selling and renting of scaffolding. Although some of Tobler-Skele’s clients still rent iron masonry frames with wooden decks, the company recently started offering frames and decks made from aluminum. These new frames were an immediate hit (as they provide technical and safety advantages) and soon orders for aluminum scaffolding started pouring in. Despite recognizing the market potential for aluminum scaffolds, the company did not have the machinery needed to produce such products at the required scale.
In 2008, Tobler-Skele was one of eight winners of a Business Plan Competition sponsored by USAID’s Preparedness, Planning and Economic Security Program. As part of the award, the company qualified for a grant that was used to purchase hydraulic metal-cutting scissors. The new equipment enabled the company to produce aluminum-based scaffold decks at scale as well as a range of other products, such as horizontal, straddle and cross braces used to construct frames for fair exhibition stands and booths. As a result, not only were they able to offer new products to their customers, but they were also able to add production capacity while at the same time decreasing operational costs by 10 to 15 percent, as they no longer needed to outsource parts of their production. The company, which originally started with seven workers and 360 m2 of production space, has grown to 47 employees and 610 m2 of production space. Says the owner, Qabil Jahiu, “My plan is to employ around 100-120 workers and build a new production hall of up to 4,000 m2.”
The production of aluminum decks and other aluminum parts has allowed Tobler-Skele to expand its sales throughout the region. While the target market for renting scaffolds is primarily southern Serbia, Tobler sells scaffolds and other construction products throughout Serbia, Albania, Bulgaria, Kosovo, Macedonia, Montenegro and Russia through its branch offices in Belgrade, Varna, Priština, Skopje, Podgorica, Tirol and St. Petersburg, respectively. Last year, about 30 percent of its production was sold to these CEEFTA countries and Russia (taking advantage of all available free trade agreements). In addition, about 70 percent of its production run last year was sold through its Switzerland-based partner Baugerüste Tobler AG, which re-sells the products throughout the EU.
Asked whether the global financial crisis will affect his company, Mr. Jahiu says, “Everybody is talking about the crises and people generally are afraid for their businesses. As for Tobler, we have new orders to keep our production going for the remainder of this year. I would be satisfied if we continue to maintain the same level of production as last year.” In the current economic environment, maintaining last year’s results will be an extraordinary achievement, as the company managed to more than double their revenue in 2008 compared to 2007.
Tobler-Skele has also participated in and benefitted from PPES support for trade fair attendance and marketing and management training. “Marketing was ‘my cup of tea,’ as I studied marketing at university, but I still learned new things at the trainings, which helped me understand how markets function, particularly the Belgrade market, and how to approach clients more effectively,” said Arsim Ilazi, production manger and a participant at the trainings. Such support has helped Tobler gain greater access to the lucrative Belgrade market. Tobler’s scaffolds are used at five construction sites throughout Belgrade at the moment. In addition, Tobler’s scaffolds were used at three building sites during the construction of the University Village for the upcoming 25th Universiade in 2009. With such success already behind a company barely three years old, there is no telling how high the scaffolding business might take them next!
Stilex – Textile Company from Prijepolje Blankets the Region
Another successful company, from Southwestern Serbia, is Stilex. The company, based in Prijepolje and founded in 1991, has managed to reinvent itself and grow as the textile market has changed over the past 18 years. The company, which specializes in home-made style wool products, began by producing traditional wool furniture covers and over the years diversified its production to include a variety of products such as pillows, bed covers, quilts, furniture covers and blankets, as well as protective work-wear and other garments made from wool. In the past, the company also cleaned and re-sold wool to other producers.
In 2007, Stilex was one of 41 Business Plan Competition winners supported by USAID’s Preparedness, Planning and Economic Security Program. Stilex’s winning plan laid out an ambitious strategy to expand both production capacity and its retail and wholesale outlets to enable it to reach new, higher value (and higher margin) markets. As part of its award, the company received assistance in financing the procurement of a new weft machine that produces higher quality yarn (an input the company previously had to buy abroad, ironically, from some of the same companies that they were selling raw, cleaned wool to). The company also received support in upgrading its marketing and promotional materials (such as updating the company logo and the creation of a new web site).
“Our plan is to increase our production capacities and introduce a number of new products. The [raw] wool that we used to process and sell was not very profitable, which is why we sought to acquire a weft machine. The new equipment has enabled us to produce much finer wool yarn that will provide better profit margins, but also to expand our product offering,” said Esad Hodžić, owner of Stilex. Soon after acquiring the new machinery, the company launched a number of new products, like furniture upholstery, covers and carpets, as well as wool pillows and comforters (for which there is strong demand from consumers seeking bedding made from natural fibers and that have never been produced by domestic companies in Serbia before). Now, Stilex, with relatively lower costs, is successfully competing with foreign-made imports, as their wool pillows and comforters are of similar quality but are more competitively priced.
Not only did the weft machine allow Stilex to stop importing fine yarn, but it also enabled it to start exporting yarn to Hungary, Germany, Turkey, and Italy. So much so, that out of all the processed wool the company produces, 30 percent is used to produce their own products and 70 percent is sold as a semi-processed product to other producers. The increased production of finished products has enabled them to expand their retail outlet network. Stilex has opened several retail shops in Priboj, Nova Varoš, Sjenica, Novi Pazar, Zlatibor, Užice, Požega, Čačak and Bijelo Polje. During 2008, Stilex opened new offices in Sarajevo (Bosnia and Herzegovina) and Bijelo Polje (Montenegro), and a new office will be opened soon in Bar (Montenegro). In its most ambitious expansion effort to date, Stilex opened a wholesale shop and branch office in Belgrade last April. Entry into the Belgrade market has already yielded results, as Stilex has managed to secure a number of new clients there. This one expansion move itself has increased the company’s sales by over 12 percent and its overall revenue for 2008 was 20 percent higher than in 2007.
When asked about future plans for the company in light of the financial crises, Elvir Kamberović, Stilex’s export-import manager, said “If we continue to maintain this pace of production [in 2009], we will be very satisfied. We like to take one step at a time. After developing our retail network in Serbia, we will work on building our image and presence in Bosnia and Herzegovina and Montenegro. Our mid-term plans include expansion into the Croatian and Macedonian markets.” Stilex employs 62 full-time workers and 15 seasonal workers and, despite the economic situation this year, plans to hire an additional five people.
Stilex has also benefited from participating in PPES supported trade fairs. The company took part in the 5th International Fashion and Equipment Fair in Novi Pazar (March 28-30, 2008) and the 84th International Zagreb Autumn Fair (September 16-18, 2008), both of which were sponsored by USAID’s PPES program. According to Stilex, participation at international fairs is an opportunity to display their products, get acquainted with current trends and fashions in the industry and learn about new production innovations, as well as create market linkages and new business contacts. The company’s participation at the Heimtextile Fair in Frankfurt, Germany last January (which was self-financed), proved to be especially successful. “We learned that a significant demand existed for wool products in Europe, which we will look to take advantage of in the near future,” said Esad Hodžić. Given the company’s recent rate of expansion, it won’t be long before Stilex comforters and blankets cover all of Europe.