Survey on Competitiveness in the TextileClothing and Leather

Survey on Competitiveness in the Textile/Clothing and Leather Sectors of the New Member Countries and Bulgaria and Romania Results of Company Questionnaires in the 10 Participating Countries Sofia, 17 May 2005 2/24/2021 This document has been produced with the financial support of the European Community’s BSP 2 programme. The views expressed herein are those of CAST and can therefore in no way be taken to reflect the official opinion of the European Commission 1

The sample Total number of questionnaires: 1. 007 • 691 companies of the Textile/Clothing sector, or 69% of the total • 316 companies of the Leather/Shoes sector or 31% o the total Companies per country: • Minimum: 22 companies from Slovenia • Maximum: 314 companies from Bulgaria. The non homogeneity of the sample requested an analysis on “normalized” data; all figures of each country have been transformed in %. 2

The sample Total Questionnaires: 314 Textile/Clothing: 151 Leather/Leather Goods 163 textile clothing TOTAL T/C 20, 7% average 27, 3% average 48% TOT AV. 29, 5% 48, 3% 77, 8% leather goods TOTAL L/LG 7, 6% average 44, 2% average 52% TOT AV. 3, 2% 19, 0% 22, 2% 3

The 10 countries The countries surveyed are: - Bulgaria - Czech Republic - Estonia - Hungary - Latvia - Lithuania - Poland - Romania - Slovakia - Slovenia 4

Part One 5

1. 1 In which sector does your company operate? LV SL RO CZ SK BG EE HU LT PL AV 20, 7 20, 0 27, 4 77, 5 16, 7 38, 8 19, 5 29, 5 39, 7 57, 5 58, 5 48, 3 Textile (spinning/weaving) 28, 3 45, 5 21, 6 60, 0 23, 8 Clothing (apparel) 71, 7 27, 3 60, 8 34, 5 28, 6 0, 0 4, 5 0, 0 7, 1 7, 6 2, 5 1, 7 3, 8 4, 1 3, 1 0, 0 22, 7 17, 5 5, 5 40, 5 44, 3 0, 0 42, 0 0, 0 17, 9 19, 0 100, 0 100, 0 100, 0 Leather products Total 100, 0 Bulgaria includes (like Slovakia) a larger share of companies of the leather chain compared to the 10 -country sample. Bulgarian textile and clothing companies are more or less in the same proportion. 6

1. 2 Products sold LV SL RO CZ SK BG EE HU Yarns and fabrics (textile) 13, 3 26, 1 18, 6 29, 1 12, 5 23, 0 2, 5 Apparel 35, 0 21, 7 54, 6 32, 7 25, 0 24, 0 Technical 15, 0 4, 3 5, 2 14, 5 0, 0 Knitwear 28, 3 13, 0 2, 1 1, 8 Home/Household textiles 6, 7 8, 7 2, 1 Leather 0, 0 4, 3 Leather Products 0, 0 Others 1, 7 Total LT PL AV 10, 3 31, 3 11, 8 17, 8 70, 0 39, 7 37, 5 55, 5 39, 6 2, 8 2, 5 0, 0 4, 7 10, 0 9, 1 10, 0 5, 0 3, 4 8, 3 16, 4 2, 5 0, 0 7, 5 0, 0 1, 7 5, 5 3, 1 0, 0 7, 5 3, 8 0, 0 1, 7 1, 3 4, 2 2, 6 17, 4 13, 4 3, 6 42, 5 32, 6 5, 0 42, 0 2, 5 16, 0 17, 5 4, 3 1, 0 1, 8 0, 0 4, 8 2, 5 6, 3 10, 0 7, 6 4, 0 100, 0 100, 0 100, 0 The composition of the Bulgarian sample is confirmed with a stronger presence of leather product companies 7

1. 3 Origin of products sold LV SL RO CZ SK BG EE HU LT PL AV Own Production 98, 3 86, 4 82, 5 94, 5 76, 2 73, 9 40, 0 100, 0 88, 0 91, 3 83, 1 Traded product (outsourced or imported) 1, 7 13, 6 17, 5 5, 5 23, 8 26, 1 60, 0 12, 0 8, 7 16, 9 Compared to the 10 -country sample less Bulgarian companies are manufacturing for “themselves”. 8

1. 4. 1 Size Turnover LV SL RO CZ SK BG EE HU LT PL AV <5 83, 3 22, 7 28, 4 47, 3 57, 1 71, 5 70, 0 73, 6 43, 4 61, 8 55, 9 5 -20 13, 3 45, 5 40, 0 23, 6 33, 3 27, 2 17, 5 13, 2 33, 7 30, 9 27, 8 20 -50 3, 3 22, 7 15, 8 23, 6 2, 4 1, 3 10, 0 1, 1 22, 9 5, 7 10, 9 >50 0, 0 9, 1 15, 8 5, 5 7, 1 0, 0 2, 5 12, 1 0, 0 1, 6 5, 4 Total 100, 0 100, 0 100, 0 The Bulgarian sample has one of the largest share of small enterprises (in terms of turnover) compared to the 10 -country sample and no large companies 9

1. 4. 2 Number of Employees LV SL RO CZ SK BG EE HU LT PL AV <10 1, 7 9, 1 0, 0 1, 8 7, 1 12, 1 10, 0 12, 0 3, 3 5, 7 10 -50 21, 7 4, 5 8, 2 21, 8 14, 3 41, 8 45, 0 10, 3 9, 6 30, 1 20, 7 50 -250 51, 7 27, 3 45, 4 49, 1 47, 6 36, 9 20, 0 71, 8 37, 3 48, 8 43, 6 >250 25, 0 59, 1 46, 4 27, 3 31, 0 9, 2 25, 0 17, 8 41, 0 17, 9 30, 0 Total 100, 0 100, 0 100, 0 The number of Bulgarian micro-enterprises as well as those in the 10 -50 group is more than double the 10 -country sample, while the number of large companies (>250 employees) is by far the lowest. 10

1. 5 Sales (markets) LV SL RO CZ SK BG EE HU LT PL AV Domestic 28, 3 0, 0 23, 4 43, 6 50, 0 47, 1 15, 0 68, 4 24, 1 69, 2 41, 0 EU 15 53, 3 0, 0 72, 3 52, 7 45, 0 22, 5 82, 5 31, 6 61, 4 22, 2 49, 3 EU NMS 8, 3 0, 0 2, 1 0, 0 5, 0 10, 6 0, 0 9, 6 1, 7 4, 2 Rest of the world 10, 0 2, 1 3, 6 0, 0 19, 8 2, 5 0, 0 4, 8 6, 8 5, 5 Total 100, 0 100, 0 100, 0 Bulgaria deviates from the average in almost all parameters; sales to the EU 15 are less than half the average, sales to the EU new member states are more than double and sales to the rest of the world are 19, 8% compared to 5, 5% in the 10 country sample. 11

Conclusions Part One The Bulgarian sample has one of the highest proportion of small companies both in term of turnover and employment. Differently from the other countries in the survey, the Bulgarian sample has more leather and shoes companies than textile/clothing companies. Also regarding sales, Bulgarian companies deviate from the average with sales to the EU 15 one of the lowest of the sample. 12

Part Two 13

2. 1. 1 Your company’s sales (QUANTITY) are: LV SL RO CZ SK BG EE HU LT PL AV Increasing 41, 7 13, 6 36, 1 18, 2 31, 0 41, 8 47, 5 8, 0 37, 2 35, 7 31, 1 Decreasing 21, 7 59, 1 19, 6 50, 9 54, 8 25, 5 12, 5 73, 0 39, 7 34, 8 39, 2 Stable 36, 7 27, 3 44, 3 30, 9 14, 3 32, 7 40, 0 19, 0 23, 1 29, 6 29, 8 Total 100, 0 100, 0 100, 0 The largest share of Bulgarian companies in the sample surveyed has increasing sales (in quantity); 10 percentage point more than in the 10 -country sample. 14

2. 1. 2 Your company’s sales (VALUE) are: LV SL RO CZ SK BG EE HU LT PL AV Increasing 41, 7 18, 2 34, 0 14, 5 26, 2 28, 1 52, 5 8, 0 51, 4 34, 2 30, 9 Decreasing 21, 7 54, 5 24, 7 43, 6 45, 2 30, 8 7, 5 68, 4 31, 9 35, 9 36, 4 Stable 36, 7 27, 3 41, 2 41, 8 28, 6 41, 1 40, 0 23, 6 16, 7 29, 9 32, 7 Total 100, 0 100, 0 100, 0 …. but they mostly have stable or decreasing turnover. This indicates that prices may be decreasing. 15

2. 2 Do you think that the current strengths of your company are sufficient to cope with competition or they need change LV SL RO CZ SK BG EE HU LT PL AV No changes 13, 3 0, 0 18, 4 5, 5 2, 4 5, 2 5, 0 8, 6 0, 0 4, 9 6, 3 Minor changes 33, 3 22, 7 44, 9 41, 8 57, 1 60, 8 50, 0 32, 8 61, 4 40, 7 44, 6 Major changes 53, 3 77, 3 36, 7 52, 7 40, 5 34, 0 45, 0 58, 6 38, 6 54, 5 49, 1 Total 100, 0 100, 0 100, 0 According to the majority of Bulgarian companies only minor changes are needed to cope with competition; together with the Latvians they are the most confident group of the survey. 16

2. 3 In the next two years the competitive position of your company will be…. ? LV SL RO CZ SK BG EE HU LT PL AV Stronger 20, 0 13, 6 40, 2 14, 5 35, 0 30, 2 27, 5 1, 1 25, 3 32, 8 24, 0 Weaker 38, 3 50, 0 17, 5 69, 1 20, 0 27, 2 20, 0 44, 8 21, 7 22, 7 33, 1 Similar 41, 7 36, 4 42, 3 16, 4 45, 0 42, 6 52, 5 54, 0 53, 0 44, 5 42, 8 Total 100, 0 100, 0 100, 0 The Bulgarian companies surveyed are among the most optimistic group (only 27, 2% foresee a weaker position). Czech entrepreneurs are pessimistic, by far the most pessimistic among their colleagues of the 10 countries. 17

2. 4 Who are the most threatening competitors? LV SL RO CZ SK BG EE HU LT PL AV Domestic 5, 0 8, 1 23, 0 9, 1 9, 7 19, 3 22, 9 25, 2 6, 3 13, 5 14, 2 EU 10 NMS 35, 0 13, 5 23, 0 6, 1 12, 9 9, 5 25, 7 16, 6 8, 0 5, 2 15, 5 European Union 15 0, 0 27, 0 3, 6 16, 1 15, 0 10, 0 11, 3 5, 7 7, 3 11, 0 South Mediterranean 0, 0 8, 1 3, 6 3, 0 6, 5 14, 5 4, 3 0, 0 13, 7 10, 4 6, 4 Chinese 60, 0 43, 2 44, 6 60, 6 54, 8 30, 0 47, 0 37, 1 55, 4 46, 8 Other (specify) 0, 0 2, 2 7, 6 0, 0 7, 1 0, 0 29, 1 8, 3 6, 1 Total 100, 0 100, 0 100, 0 In Dec. 2004 Bulgarian companies seemed to fear Chinese competitors far less than the 10 -country average. Is this still the case? 18

Outcomes Part Two So far Bulgarian companies seem to have coped with increased competition by decreasing prices. This allowed them to maintain high sales Interviewed Bulgarian companies remain one of the most self-confident group in the 10 countries surveyed. 19

Part Three 20

3. 1 Did your company have DIRECT consequences of the recent increase in Chinese competition? LV SL RO CZ SK BG EE HU LT PL AV YES 3, 3 77, 3 67, 4 90, 9 64, 3 80, 9 52, 5 97, 1 81, 9 70, 2 68, 6 NO 96, 7 22, 7 32, 6 9, 1 35, 7 19, 1 47, 5 2, 9 18, 1 29, 8 31, 4 Total 100, 0 100, 0 100, 0 . . . but far more Bulgarian companies than companies in the other countries surveyed have felt direct consequences of Chinese competition. 21

3. 2 Consequences were: LV SL RO CZ SK BG EE HU LT PL AV loss of clients 0, 0 20, 6 19, 3 22, 3 27, 3 40, 9 24, 4 23, 4 29, 9 23, 7 23, 2 reduction of sales 100, 0 26, 5 27, 2 28, 6 24, 2 23, 7 26, 8 26, 9 29, 2 20, 5 33, 4 decrease of own prices 0, 0 20, 6 28, 9 21, 4 25, 8 10, 7 26, 8 20, 4 22, 1 23, 1 20, 0 reduction of quant. and price 0, 0 32, 4 24, 6 26, 8 22, 7 23, 4 17, 1 22, 4 18, 8 31, 4 22, 0 Other (specify): 0, 0 0, 9 0, 0 1, 3 4, 9 6, 8 0, 0 1, 3 1, 5 Total 100, 0 100, 0 100, 0 Almost twice as many Bulgarian companies compared to the 10 -country sample average have lost clients due to rising Chinese competition. But this did not seem to cause reduction of sales or prices or quantities sold. This inconsistency should be further 22 investigated.

3. 3 The negative impact on your business was: LV SL RO CZ SK BG EE HU LT PL AV very remarkable 0, 0 29, 4 10, 8 30, 0 18, 5 10, 9 0, 0 35, 5 12, 9 15, 3 16, 3 significant 0, 0 58, 8 63, 1 56, 0 63, 0 76, 8 57, 1 64, 5 65, 7 71, 8 57, 7 minor 100, 0 11, 8 26, 2 14, 0 18, 5 12, 3 42, 9 0, 0 20, 0 12, 9 25, 9 Other (specify): 0, 0 0, 0 1, 4 0, 0 0, 1 Total 100, 0 100, 0 100, 0 The negative impact is high for almost 88% of Bulgarian companies. Bulgarians are together with Czechs, Hungarians and Slovenians in the very affected “cluster”. On the opposite side we find the cluster of the Baltic countries (with Lithuania in a less extreme position). 23

3. 4 In which segment of your clients did your company suffer most the Chinese competition? Domestic traders (R/W) European 25 traders (imp/w/r) Rest of the world traders Domestic manufacturers European 25 manufacturers Rest of the world manufacturers Total LV SL RO CZ SK BG EE HU LT PL AV 0, 0 9, 4 16, 4 35, 4 46, 3 55, 9 24, 0 38, 3 18, 0 42, 1 28, 6 100, 0 40, 6 48, 2 35, 4 31, 7 21, 0 52, 0 16, 8 29, 5 18, 0 39, 3 0, 0 18, 8 5, 5 6, 3 9, 8 7, 2 8, 0 4, 7 10, 7 15, 8 8, 7 0, 0 3, 1 4, 5 16, 7 7, 3 3, 1 0, 0 27, 4 13, 1 15, 8 9, 1 0, 0 15, 6 24, 5 4, 2 4, 9 4, 8 16, 0 12, 8 18, 9 6, 8 10, 8 0, 0 12, 5 0, 9 2, 1 0, 0 7, 9 0, 0 9, 8 1, 5 3, 5 100, 0 100, 0 100, 0 Bulgarian domestic traders have significantly decreased their buying from Bulgarian producers. EU 25 traders and importers do not seem so affected. This is very different from the situation in the other 24 countries surveyed.

3. 5 Which of your products were hit the most by Chinese competition? LV SL RO CZ SK BG EE HU LT PL AV Upper range 0, 0 22, 1 51, 9 22, 6 6, 7 9, 5 0, 0 16, 5 9, 3 13, 8 Middle range 100, 0 58, 3 47, 7 40, 7 45, 2 55, 8 47, 6 71, 6 53, 8 49, 1 57, 0 Lower range 0, 0 41, 7 30, 2 7, 4 32, 3 37, 5 42, 9 28, 4 29, 7 41, 7 29, 2 Total 100, 0 100, 0 100, 0 The same proportion of Bulgarian middle-range producers as in the other countries surveyed was hit by the Chinese competition. Bulgarian upper and lower-range producers were affected differently. 25

3. 6 What are the strongest competitive factors of the Chinese exporters? LV SL RO CZ SK BG EE HU LT PL AV Price 85, 0 60, 0 68, 3 94, 6 63, 3 61, 2 67, 3 66, 9 50, 0 57, 7 67, 4 Price/quality ratio 15, 0 8, 6 9, 9 1, 8 8, 3 14, 4 15, 4 23, 5 22, 7 22, 4 14, 2 0, 0 8, 6 2, 8 11, 7 4, 7 3, 8 0, 0 19, 7 5, 8 5, 9 0, 0 22, 9 19, 0 1, 8 16, 7 19, 7 5, 8 7, 3 7, 6 14, 1 11, 5 Other (specify): 0, 0 0, 0 7, 7 2, 3 0, 0 1, 0 Total 100, 0 Customisation and Flexibility Scope of product range 100, 0 100, 0 100, 0 Price is considered the winning factor as by all companies in the countries surveyed. For almost 1/5 of Bulgarian companies the product range 26 of Chinese competitors is one of their strong points

3. 7 Do you think that the Chinese manufacturers adopt unfair competitive practices? LV SL RO CZ SK BG EE HU LT PL AV Only sometimes 11, 7 18, 2 28, 7 10, 9 2, 8 19, 7 30, 6 4, 0 4, 3 11, 4 14, 2 Often 53, 3 40, 9 33, 3 29, 1 55, 6 45, 6 33, 3 47, 1 75, 4 26, 3 44, 0 All Chinese make unfair practices 35, 0 40, 9 37, 9 60, 0 41, 7 34, 8 36, 1 48, 9 20, 3 62, 3 41, 8 Total 100, 0 100, 0 100, 0 The Bulgarian companies surveyed think alike companies in the 10 -country sample: most Chinese competitive practises are unfair (appr. 80%) 27

3. 8 Do you have evidence of unfair practices? LV SL RO CZ SK BG EE HU LT PL AV Yes, direct evidence 0, 0 83, 3 7, 1 7, 8 9, 1 10, 3 0, 0 8, 1 12, 8 23, 6 16, 2 No direct evidence 20, 0 41, 7 15, 9 47, 1 42, 4 51, 4 45, 5 13, 7 32, 6 40, 6 35, 1 Only Clues 56, 7 16, 7 31, 9 52, 9 39, 4 13, 5 21, 2 60, 2 36, 0 18, 9 34, 7 Rumours of the market 23, 3 41, 7 52, 2 0, 0 18, 2 35, 1 33, 3 26, 1 31, 4 40, 6 30, 2 Total 100, 0 100, 0 100, 0 Far more Bulgarian companies than the companies in the other countries do not have direct evidence of unfair practices. 28

3. 9 In your opinion, which kind of unfair commercial practises are adopted by the Chinese? LV SL RO CZ SK BG EE HU LT PL AV 0, 0 5, 9 17, 8 15, 8 27, 0 19, 9 4, 3 25, 3 12, 4 18, 7 14, 7 28, 3 11, 8 15, 7 21, 1 21, 0 24, 5 14, 9 25, 3 15, 2 21, 1 19, 9 Dumping 53, 3 44, 1 38, 2 37, 7 34, 0 38, 4 34, 0 23, 2 37, 9 24, 8 36, 6 Counterfeited products 18, 3 38, 2 27, 7 23, 7 18, 0 16, 6 42, 6 25, 7 34, 5 34, 0 27, 9 Other (specify) 0, 0 0, 5 1, 8 0, 0 0, 5 4, 3 0, 6 0, 0 1, 4 0, 9 Total 100, 0 False custom declarations Unregistered imports smuggling 100, 0 100, 0 100, 0 Dumping is the most allegged unfair practice for all. In Bulgaria counterfeiting does not seem to be a big problem like in the other countries. 29

3. 10 Who are the strongest allies of Chinese products? LV Local consumers 33, 3 SL RO CZ SK BG EE HU LT PL AV 13, 2 23, 1 21, 5 27, 1 26, 6 12, 1 25, 1 24, 4 3, 5 21, 0 Local manuf. s outsourcing 0, 0 15, 8 13, 7 7, 5 12, 9 4, 2 24, 2 7, 5 13, 1 19, 5 11, 8 International brands 0, 0 10, 5 9, 3 10, 3 4, 8 10, 6 6, 8 4, 0 10, 9 7, 1 Large retailers in 23, 3 your countries 21, 1 19, 2 17, 8 17, 1 25, 2 19, 7 18, 8 21, 6 31, 1 21, 5 Traders importers 43, 3 39, 5 34, 6 40, 2 38, 6 38, 9 30, 3 39, 2 36, 9 33, 5 37, 5 0, 0 2, 8 0, 0 0, 3 3, 0 2, 6 0, 0 1, 6 1, 0 Other (specify ) Total 0, 0 100, 0 100, 0 100, 0 Local consumers and Importers/Traders are the strong allies of Chinese competitors, as well as international brands present in Bulgaria. Outsourcing used by local producers is considered far less important by Bulgarian producers than by producers in other countries. 30

3. 11 Do the Chinese manufacturers have weak points? LV SL RO CZ SK BG EE HU LT PL AV Quality 45, 0 37, 5 60, 4 41, 2 57, 1 72, 2 51, 1 44, 9 41, 0 53, 8 50, 4 Delivery/service 38, 3 40, 6 25, 9 32, 9 28, 6 9, 9 38, 3 29, 2 38, 1 28, 8 31, 1 Product design 16, 7 21, 9 12, 9 14, 1 14, 3 16, 4 8, 5 23, 1 20, 9 9, 4 15, 8 Other (specify) 0, 0 0, 7 11, 8 0, 0 1, 5 2, 1 2, 9 0, 0 8, 1 2, 7 Total 100, 0 100, 0 100, 0 The vast majority of Bulgarian companies still thinks that Chinese competitors have weaknesses in quality (wishful thinking? ). Many more than the 10 -country average. 31

3. 12 Under the current general conditions, how large is the competitive advantage of Chinese producers in the: Price LV SL RO CZ SK BG EE HU LT PL AV large 38, 3 90, 9 95, 6 86, 8 93, 4 86, 1 88, 5 82, 4 94, 3 84, 3 significant 51, 7 9, 1 2, 2 11, 3 13, 2 6, 6 8, 3 11, 5 15, 3 5, 7 13, 5 minor 10, 0 0, 0 5, 6 0, 0 1, 6 no 0, 0 2, 2 1, 9 0, 0 2, 4 0, 0 0, 6 Total 100, 0 100, 0 100, 0 A widespread conviction: price is the MAIN competitive advantage of Chinese manufacturers! Bulgarian companies show one of the highest percentages. 32

Price/Quality ratio LV SL RO CZ SK BG EE HU LT PL AV large 0, 0 9, 1 22, 9 10, 4 23, 1 24, 3 14, 3 4, 0 18, 9 21, 4 16, 5 significant 0, 0 63, 6 48, 2 72, 9 34, 6 49, 6 51, 4 90, 8 62, 3 52, 0 58, 4 minor 0, 0 18, 2 22, 9 16, 7 38, 5 22, 5 31, 4 4, 6 15, 1 20, 4 21, 1 no 0, 0 9, 1 6, 0 0, 0 3, 8 3, 5 2, 9 0, 6 3, 8 6, 1 4, 0 Total 100, 0 100, 0 100, 0 According to all companies in all countries Chinese products give “value for money”, that is they have a satisfactory price/quality ratio. 33

Customisation LV SL RO CZ SK BG EE HU LT PL AV large 0, 0 13, 6 6, 4 6, 7 25, 0 10, 0 3, 1 0, 0 67, 1 27, 2 17, 7 significant 0, 0 18, 2 23, 1 22, 2 60, 7 23, 3 25, 0 5, 2 26, 0 42, 4 27, 3 minor 0, 0 63, 6 42, 3 62, 2 14, 3 27, 5 46, 9 22, 4 4, 1 23, 9 34, 1 no 0, 0 4, 5 28, 2 8, 9 0, 0 39, 2 25, 0 72, 4 2, 7 6, 5 20, 8 Total 0, 0 100, 0 100, 0 100, 0 For most Bulgarian companies customisation plays a minor role in providing a competitive advantage to Chinese competitors. For Lithuanians and Slovak it is just the opposite. 34

Product Range LV SL RO CZ SK BG EE HU LT PL AV large 0, 0 59, 1 4, 3 24, 4 29, 0 15, 5 12, 5 9, 2 20, 5 48, 0 24, 7 significant 0, 0 18, 2 25, 7 44, 4 51, 6 33, 1 40, 6 40, 2 59, 1 43, 1 39, 6 minor 0, 0 13, 6 47, 1 31, 1 16, 1 5, 6 34, 4 28, 2 20, 5 6, 9 22, 6 no 0, 0 9, 1 22, 9 0, 0 3, 2 45, 8 12, 5 22, 4 0, 0 2, 0 13, 1 Total 0, 0 100, 0 100, 0 100, 0 Bulgarian companies are equally divided among those who think that product range is not one of the competitive advantages of Chinese producers, and those who think it is. 35

Conclusions Part Three Bulgarian producers have felt the impact of Chinese competition and have suffered mainly loss of local clients. According to Bulgarian companies the main competitive advantage of Chinese producers is price. and, mostly, it is not considered a fair advantage since it seems to be result of dumping practices. 36

Part Four 37

4. 1 In the next years the Chinese presence in European markets will: LV SL RO CZ SK BG EE HU LT PL AV Increase 88, 3 95, 5 73, 2 96, 4 95, 0 88, 6 94, 7 100, 0 89, 1 91, 6 91, 2 Remain as today 11, 7 4, 5 17, 5 3, 6 5, 0 11, 1 5, 3 0, 0 5, 5 6, 7 7, 1 Decrease 0, 0 9, 3 0, 0 0, 3 0, 0 5, 5 1, 7 Total 100, 0 100, 0 100, 0 No great deviation from the average for Bulgarian companies: this is only the beginning!!. 38

4. 2 What factor may be effective to counter Chinese competition under the current general trade conditions LV SL RO CZ SK BG EE HU LT PL AV Productivity costs reduction 28, 3 11, 9 33, 0 16, 3 25, 0 26, 8 17, 5 20, 1 18, 6 20, 0 Quality 45, 0 18, 6 26, 8 15, 6 19, 4 22, 7 27, 2 16, 2 22, 0 20, 7 23, 4 Fashion/Design 8, 3 23, 7 12, 9 14, 8 16, 7 24, 5 16, 5 14, 2 15, 9 17, 1 16, 5 Brand/Comm. 10, 0 25, 4 10, 5 14, 1 15, 3 12, 5 12, 6 30, 9 17, 7 18, 6 16, 8 Service/delivery 8, 3 18, 6 14, 8 19, 3 19, 4 9, 6 20, 4 27, 5 17, 1 14, 9 17, 0 No factor is effective 0, 0 1, 7 1, 4 9, 6 4, 2 3, 1 4, 9 4, 3 6, 7 8, 8 4, 5 Other (specify ) 0, 0 0, 5 10, 4 0, 0 0, 8 1, 0 4, 5 0, 6 1, 2 1, 9 Total 100, 0 100, 0 100, 0 The answer is fairly dispersed as for the 10 -country sample. More Bulgarian companies seem to think that 39 fashion and design is the answer.

4. 3 In your opinion what are the levers that should be supported to enhance the competitiveness of EU manufacturers? LT SL RO CZ SK BG EE HU LT PL AV Support innovation 61, 7 27, 9 22, 4 25, 0 30, 7 36, 6 33, 7 22, 9 27, 3 24, 0 31, 2 Support finance 38, 3 16, 4 24, 7 21, 8 22, 7 10, 5 26, 0 19, 5 30, 1 23, 3 Support human resource development 0, 0 24, 6 17, 0 7, 3 5, 7 15, 6 24, 2 13, 0 20, 3 10, 6 13, 8 Lower taxes, lower social costs 0, 0 31, 1 35, 9 38, 7 37, 5 24, 4 29, 5 35, 5 31, 3 33, 9 29, 8 Other (specify) 0, 0 7, 3 3, 4 0, 6 2, 1 2, 6 1, 4 1, 9 Total 100, 0 100, 0 100, 0 Two directions: innovation and lower taxes seem to be the levers of choice for Bulgarian companies as well as for those in the other countries surveyed. 40

4. 4 Does your company have a strategy to deal with the new competition LV SL RO CZ SK BG EE HU LT PL AV Not yet 38, 3 27, 3 14, 9 5, 5 9, 3 19, 0 27, 8 39, 7 12, 4 19, 6 We have been thinking about 40, 0 40, 9 65, 3 40, 0 34, 9 68, 9 52, 8 51, 7 56, 9 65, 5 51, 7 Yes 21, 7 27, 3 19, 8 36, 4 46, 5 12, 1 19, 4 8, 6 36, 2 22, 1 25, 0 Other (specify ) 0, 0 4, 5 0, 0 18, 2 9, 3 0, 0 5, 2 0, 0 3, 7 Total 100, 0 100, 0 100, 0 . . . a lot of thinking. …but most of them are not ready with a counter-attack strategy. Far less Bulgarian companies have worked out a strategy to deal with the current situation than companies 41 in the other countries suveyed.

4. 5 If you have been thinking about a new competitive strategy what are the actions that you envisaged? Price reduction through cost reduction and increased productivity LV SL RO CZ SK BG EE HU LT PL AV 1 (low importance) 0, 0 10, 0 32, 1 63, 3 10, 7 12, 2 20, 0 30, 6 13, 8 27, 5 22, 0 2 0, 0 21, 4 6, 7 14, 3 29, 3 40, 0 14, 3 20, 7 15, 0 20, 2 3 0, 0 40, 0 10, 7 10, 0 3, 6 22, 0 6, 7 50, 0 6, 9 30, 0 18, 0 4 0, 0 10, 7 3, 3 21, 4 19, 5 33, 3 5, 1 41, 4 5, 0 15, 0 5 (high importance) 0, 0 25, 0 16, 7 50, 0 17, 1 0, 0 17, 2 22, 5 16, 8 Total 100, 0 100, 0 100, 0 A much dispersed set of answers. 42

Price reduction through outsourcing of some production processes/products LV SL RO CZ SK BG EE HU LT PL AV 1 (low importance) 0, 0 30, 4 58, 3 7, 7 18, 5 14, 3 17, 5 31, 6 33, 3 21, 2 2 22, 2 0, 0 16, 1 16, 7 15, 4 3, 7 14, 3 17, 5 0, 0 15, 4 12, 1 3 0, 0 33, 3 33, 9 0, 0 30, 8 16, 7 28, 6 64, 9 21, 1 30, 8 26, 0 4 55, 6 50, 0 10, 7 8, 3 7, 7 13, 0 14, 3 0, 0 26, 3 15, 4 20, 1 5 (high importance) 22, 2 16, 7 8, 9 16, 7 38, 5 48, 1 28, 6 0, 0 21, 1 5, 1 20, 6 Total 100, 0 100, 0 100, 0 Outsourcing seems to be considered as a possible future option by almost 50% of Bulgarian producers. More than double the 10 -country average. 43 Maybe outsourcing in China …. ?

Quality improvement (materials and manufacturing processes) LV SL RO CZ SK BG EE HU LT PL AV 1 low importance 0, 0 18, 1 52, 2 0, 0 4, 7 15, 0 13, 0 2, 5 13, 9 11, 9 2 0, 0 16, 7 30, 6 4, 3 18, 2 27, 9 5, 0 0, 0 22, 5 20, 8 14, 6 3 3, 4 41, 7 11, 1 21, 7 27, 3 34, 9 30, 0 16, 7 21, 7 4 17, 2 25, 0 18, 1 17, 4 36, 4 9, 3 15, 0 82, 6 30, 0 23, 6 27, 5 5 high importance 79, 3 16, 7 22, 2 4, 3 18, 2 23, 3 35, 0 4, 3 15, 0 24, 3 Total 100, 0 100, 0 100, 0 Quality improvements do not seem so important…… 44

Improvements in design and fashion LV SL RO CZ SK BG EE HU LT PL AV 1 low 0, 0 12, 5 18, 0 83, 3 14, 8 10, 6 10, 0 14, 1 16, 3 2 0, 0 18, 8 10, 0 5, 6 3, 7 17, 7 10, 0 20, 0 15, 5 10, 1 3 0, 0 25, 0 32, 0 11, 1 23, 9 30, 0 64, 4 15, 0 25, 4 23, 8 4 12, 9 12, 5 22, 0 0, 0 33, 3 10, 6 25, 0 5, 1 20, 0 12, 7 15, 4 5 high 87, 1 31, 3 18, 0 0, 0 37, 2 25, 0 30, 5 45, 0 32, 4 34, 3 Total 100, 0 100, 0 100, 0 Also design and fashion are factors on which to invest… as in the other countries surveyed. 45

Improvement of service component (delivery, etc ) LV SL RO CZ SK BG EE HU LT PL AV 1 low 0, 0 7, 1 68, 6 15, 4 12, 9 9, 1 13, 4 3, 6 26, 0 15, 6 2 0, 0 8, 3 32, 1 5, 7 0, 0 22, 6 22, 7 13, 4 0, 0 12, 0 11, 7 3 0, 0 25, 0 26, 8 2, 9 30, 8 25, 8 9, 1 32, 9 32, 1 18, 0 20, 3 4 63, 6 41, 7 19, 6 14, 3 11, 5 29, 0 9, 1 8, 5 35, 7 18, 0 25, 1 5 high 36, 4 25, 0 14, 3 8, 6 42, 3 9, 7 50, 0 31, 7 28, 6 26, 0 27, 2 Total 100, 0 100, 0 100, 0 Services are far less important than in the other countries surveyed 46

Improvement of customer satisfaction through customisation LV SL RO CZ SK BG EE HU LT PL AV 1 low 0, 0 12, 5 11, 6 57, 5 4, 5 17, 0 0, 0 6, 3 0, 0 18, 7 12, 8 2 0, 0 18, 8 11, 6 7, 5 13, 6 7, 5 16, 7 0, 0 44, 4 11, 0 13, 1 3 0, 0 18, 8 16, 3 10, 0 9, 1 11, 3 11, 1 9, 4 22, 2 13, 2 12, 1 4 0, 0 18, 8 34, 9 10, 0 27, 3 11, 3 61, 1 20, 8 22, 2 25, 3 23, 2 5 high 0, 0 31, 3 25, 6 15, 0 45, 5 52, 8 11, 1 63, 5 11, 1 31, 9 28, 8 Total 0, 0 100, 0 100, 0 100, 0 For Bulgarian companies customisation is by far the most critical factor for counteracting Chinese competition. This should be clarified… 47

Investments in image, brand communication LV SL RO CZ SK BG EE HU LT PL AV 1 low 0, 0 16, 7 11, 8 68, 0 0, 0 11, 9 0, 0 23, 8 11, 3 14, 3 2 0, 0 8, 3 17, 6 12, 0 16, 0 10, 2 27, 3 9, 2 23, 8 6, 5 13, 1 3 0, 0 17, 6 12, 0 16, 0 33, 9 9, 1 15, 8 9, 5 21, 0 13, 5 4 0, 0 58, 3 11, 8 8, 0 20, 0 8, 5 36, 4 60, 5 9, 5 35, 5 24, 8 5 high 0, 0 16, 7 41, 2 0, 0 48, 0 35, 6 27, 3 14, 5 33, 3 25, 8 24, 2 Total 0, 0 100, 0 100, 0 100, 0 As well as branding strategy… 48

Conclusions Chinese competition is expected to increase and its effects are already felt throughout. Bulgarian companies are more undecided on what to do to counteract this situation than companies in the other countries surveyed. An effective counterstrategy is difficulty to define. Elements such as innovation, fashion, customisation should all be included. Peculiarly also outsourcing in less costly countries 49 is considered.