Who are the big players on the Bulgarian press market at the moment? Here it is better to raise the question in Singular. The answer unconditionally is Westdeutche Algemaine Zaitung or WAZ – the German media group which possess the two most read daily newspapers in Bulgaria – “24 Hours” and “Trud”. The WAZ publications possess at about 50% of the advertising press market./50% of the advertisements in the press for 2001 is in their newspapers. The size of the advertising market for the press for the year 2001 in Bulgaria equals 77 216 760 DM. The increase from the year 2000 is by 10-15%. /Capital weekly, 5-11.01.2002, p.39, WAZ kept the hegemony on the advertising market Paulina Georgieva/. There are several other publications that take something from the pie of the press market in Bulgaria. However, most of the rest newspapers on the market are financed by a political party, business groups with vague origin of finances, or local press.
There is also one other sector that is successful on the Bulgarian press market and it is filled the niche for the specialised publications. In 1998 when the beginning of the decrease of readership was marked, the tendency for increasing of the audience for specialised publications has been traced. “The readers of publications for women, medicine or even parapsychology are increasing constantly.” /Manager magazine, 1998, 21, :The newspapers lose readership, Rumjana Bachvarova. The kind of specialisation is by industries as well as by target groups – women, teenagers, auto maniacs, pensioners, etc. As every successful product these publications have identified the needs for information of the specific target group and have learned how to keep the readers’ interest.
Exactly this is the case with “Construction and City” newspaper which took less than 1% of the advertising in the press for 2001. The publication is 100% self financing and has a real growth of 50% for the last year.
When we are talking about the media and the advertising market we must pay some attention to the advertising agencies that operate the budgets of the big advertisers. More than 50% of the advertising market in Bulgaria is controlled by the 15th biggest agencies, among wich are: Satchi & Saatchi, Ogilvi & Mather, Leo Burnet, EURO RSCG, BBDO, McCan Erickson, etc. “Regarding the press advertising there is one agency that operates the budgets of 9 from the Top 20 advertisers in the press”. /Media &Advertising, 15, p.39, the 50 biggest advertisers in the press/.
The data for the size of the advertising market in Bulgaria is gathered from the research agencies that monitor the press and television advertisement. One of these agencies is BBSS Gallup. The radio, outdoor, cinema, internet, PR and BTL advertising are not measured in Bulgaria. There has been serious growth in the advertising budgets in the last several years. Big multinational companies from the telecommunication, banking, FMCG, etc. have entered Bulgarian market and have started competing using as the crucial weapon – the advertisement.
After the economic crises in 1997, when the advertising market in Bulgaria was actually stopped for several months, there is a constant growth of the advertising spendings. Just for the first three months of year 1998 the TV advertising has risen with 254.87% /Media World, 16, 1998, Serios rise in the advertising market, Aleksey Lazarov.
Most of the advertising of the big multinational clients buy advertising time and space through agencies and media shops. For example more than 50% of the advertising in BNT for 2000 is bought through “Piero 97”, owned by the media baron in Bulgaria – Krassimir Gergov. The advertisers in the construction market aren’t so attractive for the big agencies and this fact makes the room for the consulting activities of specialists which may form small agency to consult companies from specific industries, such as construction.
When we talk about the specialised publication in the construction business we must have in mind that in Bulgaria even the biggest companies, representatives of European and World giants as Knauf, Ytong, Rigips, Hilti, Bosh, Henkel, etc work without advertising agencies and rely for their advertising strategy on the professionalism of the agents in the publication. Something very challenging and binding at the same time.
2. Construction industry – tendencies for development
When we are talking for advertising as a sole source of financing for “ASI”Ltd. and when the advertisers of the publication are concentrated in one industry and it is the construction industry, let’s see the economic situation in the branch.
The investment crises was the main reason for the crash of the Bulgarian Economy after 1989. For the period 1990-1997 the decreasing of the economic growth was with 29.5%. Similar crash the world economy remembers during the 4 years period of the Big depression 1929-1933, when the real GDP of USA falls with 30%. The crises in Bulgaria however has structural characteristics and there are sectors in which the indicators have been positive. Such example is the construction industry, in which, if we ignore the seasonal fluctuations, we may identify certain liveliness. The liveliness is observed not in terms of civil construction/the income of the population is too low for such big investments as buying a house, that’s why the prices of the civil construction fall dramatically/ but there is a boom in the building of business/class A/ and trade centres, which are part of big investment plans mainly made by foreign investors./Valeri Leviev, president of CEREAN for 2001, International Conference of CEREAN, Sofia, 2001/ To follow the tendencies in the industries, let’s see the statistics:
Number of constructed dwellings:
Source: Bulgarian Construction Chamber BCC, www.bcc.org
The reason for the decreasing demand for the construction production is due to the decreased income of the population, as well as the high rate of unemployment, the lack of good conditions for credits etc. Actually the negative tendency concerns just the sector for the dwellings construction. There is a positive tendency however, in the construction of business and trade centers that fulfill the highest requirements. The second sector in the construction industry that goes through rapid development theses years is the construction and renovation in the tourist industry. With the beginning of the private initiative a lot of small family hotels as well as small resort-villages on the Black Sea coast as well as in the mountains has been build. The construction investments in the tourist industry are going on and will go on in the future years.” Bulgaria has big potential for tourism development, however a great part of the material base do not answer the European requirements. Thus a lot of the hotels has to be renovated; a lot of investments in the infrastructure has to be done – the Sofia and Varna airport need to be enlarged, the ports of Varna and Bourgas also need restructuring; some yacht-ports need to be build, there is no single yacht port in Bulgaria yet.” /Dep.Minister of Economy, responsible for tourism Dimitar Hadjinikolov, First Conference on Tourism in Bulgaria, 9-11. January, 2002, Hilton Sofia/. As we see there is a lot of work to be done in the future years by the Bulgarian construction companies.
The last 2 years are considered as positive after the long 9 years stagnation. The Board for national Control over Construction has issued more than 7 000 permits for use, in 2000, which is much more than the permits issued in 1999. To prove once more the positive tendency comes the fact that “the employees and workers busy in the construction industry for December 2000 has been 64-65 000, while in April, the same year they have been just 61 500.” /Business Spectrum magazine, 29, pg.8, “The construction – light in the dark”, Petkan Iliev/.
The problems that still stay in front of the construction companies can not be underestimated, however a light in the tunnel can be observed.
3. Direct and indirect competition
“A market can be defined as a group of buyers and sellers involved in exchanges. This definition is rather vague...” /M. Moschandreas ”Business Economics” Business Press, Thomson Learning 2000/ As a market can be defined the whole Bulgarian consumer market, the media market, as well as the press market. Here we are going to analyze the market of the specialized publications for construction, architecture and investments.
This market can be separated into several subcategories:
- magazines for architecture, furniture and interior design that target the end consumers - Ideal Home; Our Home, The Home Today and Tomorrow; New Home;
- magazines for the specialists architects, constructors, engineers – Architecture, Details, Construction, AMS Aspects, Saloon;
- weekly newspapers for architecture and construction and real estate – Arch- Art Market, Construction and the City, Construction & Property; Property, Construction Market, ABC.
Data: National Catalogue for Subscription, Artefact, 2001
The first two subcategories represent the indirect competition of “Construction & City”. There is no official data for the size of the market. The analysis of the volume of the advertising in the publications shows that market leader in the first group is Ideal Home, in the second AMS Aspects, and in the third Construction and City. Such king of analysis is subjective, but the only one available. If we concentrate on the third subcategory, where Construction & City goes, and which is the direct competition/ we may say that there is only one publication that could be perceived as a real tread for the national weekly publication of “ASI” Ltd. It is Construction & Property. The newspaper follows closely the strategy and graphic design of Construction & City. There is no strict law in Bulgaria for protection of the intellectual property. In the beginning of the year 2002 the management of “Construction & City” has been forced to change the graphic design even of the “head” of the newspaper because the representatives of “Construction & Property” on purpose make readers and advertisers think that it one and the same publication. The other publications are far away to be called competitors, because some of them are regional, other are not in the same format and are not full colored. One of the distinctions of “Construction & City” with the other publications is that the newspaper that “ASI” Ltd. publishes tries to be not just a newspaper. It tries and succeeds to be consultant and a partner to the people in the construction business as well as to those in the institutions. More about the competitive strategy of the newspaper and the company as a whole will be presented in the last part of the publication.
The indirect competition takes some part of the advertising in the industry, however their target group is different, their content, graphics and circulation is different. Therefore, the competition between the subcategories exists, but is not so severe as within each of them.
In a consulting business to the construction company “ASI” Ltd. does not have a real competition at all. There are a lot of consulting and PR companies of course however no one of them is specialized in providing specific services for the construction industry.
4. Price and distribution policy
As in each market economy the price of the product is defined by the demand of the customers as well as by the existing competition in other words by the supply of substitutes. The principles of the market economy are fully in power on the market of specialized press for construction business in Bulgaria.
How was the price of the newspaper Construction & City was formed? In the beginning of 1998 when the newspaper was found the price of the newspaper was 0,20 BGN, which equals 0.20 DM. There is a currency board in Bulgaria since 1997 and the lev is fixed with the Deutche mark. In the beginning of 2002 the price of the newspaper is 0,90 BGN. As it was 0,80 BGN till the end of 2001. The price of 0,80 BGN was kept for two and a half years. And in the period 1998-mid 1999 the price was constantly growing to make the 4 times increase from 0,20 to 0,80 BGN. At that moment however, the newspaper Construction & City was a monopolist on the market and was in a position to dictate the price. The increase of the price however was not a speculation. There was high inflation rate in Bulgaria in these years and the prices of the paper which is the main material for the production of a newspaper was constantly growing. On the other hand the price of the labor in Bulgaria is too low which explains the low prices of the newspapers and magazines as well as of other products compared to the prices in other countries.
The distribution strategy of the newspaper is simple – subscription and sale. The good thing in the distribution strategy of the specialized press is that most of the customers/readers who are really interested in the profession subscribe to the publication, because it usually provides them with valuable information for their business. There is of course sale for those who are not so loyal to the publication.
PR and Advertising
How the publication attracts new readers? Through advertisement of course. There is a TV spot produced in 2001 which was aired on several Bulgarian TV stations. The publication has a web site which has connection to most of the biggest Bulgarian portals. The data base that the PR manager of the company develops is very important because according to it and with the data base of the subscribers the management of the publication may decide to issue free subscriptions to some of the organizations and architects or companies who should read the newspaper. For the year 2002, 800 free subscriptions have been issued. Why is it so important to have someone be part of your list with subscribers? It is simple. The advertisers are interested by the readers, if the readers are valuable, the publication will be sold in terms of advertising, thus it will be financially independent, which is the most important thing for a free publication.
Part 3
Macroeconomic Analysis
“A few major events marked the 1998-2000 period. After the change in Government in the beginning of 1997 and the introduction of the currency board agreement Bulgaria registered unparalleled economic parameters in comparison to the preceding years. Achieved was macroeconomic stabilization, growth was resumed and inflation was curbed to single digit levels. This has been made possible by a combination of the strong political will of the Government and the timely and adequate external support from the international financial institutions (EBRD, World Bank, etc.). Framework agreements liberalizing foreign trade between Bulgaria and the EU, EFTA and CEFTA countries, as well as with Turkey and Macedonia expanded the market reach of domestic manufacturers to over 550 million consumers”. /Foreign Investment Agency, “Why Bulgaria?”, report published in the bulletin of FIA/
The economy started to recover in 1998 as the year was marked by events with favorable impact on market reforms, e.g. the three-year IMF agreement and the accession to CEFTA. In 1998 practically all prices were liberalized, as only the household power consumption and industrial central heating utilities remained at their fixed levels. The centrally regulated prices in 1998 comprised 2.78% of GDP. Bulgaria achieved indubitable financial stabilization, 3.5% real GDP growth and 1% end-year inflation. Please see Attachment 2 for the Inflation rate and the GDP real growth.
Important steps were taken in the areas of privatization, banking sector reforms, agricultural liberalization. Structural reforms were continued on a wide front. Privatization was accelerated, recording the highest level of sale of state assets in Bulgaria’s history. The total financial effect of the work of the privatization bodies for the period June 1997-October 2000 has amounted to USD 4.4 billion, which includes contracted payments, paid and met obligations and contracted investments. The isolation program for commercial enterprises was brought to a successful conclusion.
Bulgaria successfully met the economic pressure arising from the regional conflicts and the lasting negative effects of the global financial crises in 1998. GDP growth reached 2.4%, whereas the level of inflation remained moderate at 6.2%. The external current account deficit was contained to an estimated 5.2% of GDP for the full year as exports recovered after midyear. Confidence in the Bulgarian national currency remained strong, with gross official reserves at USD 3.2 billion and the fiscal reserve account at USD 1.4 billion at end-1999. /”Money Plus”, weekly, 51, December 2000, pg. 8/,
The macroeconomic results in 2000 – 5.5% GDP growth and inflation close to 11% well address the company needs for medium- and long-term planning.
The cumulative value of all foreign direct investments in Bulgaria reached USD 3.929 billion in 2000. About 80.5% of them have been generated during the period 1997-2000.
The cumulative value of all foreign direct investments in Bulgaria reached USD 3.929 billion in 2000. About 80.5% of them have been generated during the period 1997-2000.
The structure of the gross value added (close to GDP) by economic sectors is given in the table in Attachment 3.
As it is obvious from the above data there is a positive trend in the Bulgarian economy in the last several years. If we have to move away from the data and to talk about the obstacles to the business there are two things to be mentioned – the first is the corruption and the second the hard bureaucratic procedures for registration and licensing.
The measures that are expected to be taken from the new government that has been elected in June 2001 concerning the stimulation of the small and medium enterprises. According to the Bulgarian Association of the Small and Medium Enterprises, , “Private Companies Cost of Dealing with the Government”, July 2000 as small firms in Bulgaria are determined the companies which have up to 100 employees. The medium size firms are between 101 and 250. With its 30 employees “ASI” Ltd. goes to the group of the small companies and expects impatiently the new government regulations in order to invest and enlarge its activities. The heavy regulations that affect the construction business include: Tax laws, Obligatory Social Insurance Code, Protection of Competition Act, Foreign Investment Act, Licensing procedures, Loan application procedures. /Administrative Barriers to Investment:Bulgarria, FIAS/World Bank, 1999/.
As it is can be seen in the Attachment 5 - 0,6 bln USD FDI are expected in 2002, according to Deutsche Bank. As large parts of the FDI in the last years have been part of privatization deals, for the future years some big green investments are expected in the country, the construction industry and those who serve it /part of which is “ASI” Ltd are expected to prosper./Veneta Krasteva, General manager of “ASI” Ltd, interview, 04.01.2002/.
“According to data provided from the State Employment Agency the percentage of unemployment for October 2001 has increased with 0,19% and is calculated to 16.6 %.”/United Bulgarian Bank monthly report, . The increase is due to the beginning of the winter period, during which a lot of the seasonal workers in tourism and construction are not occupied. The seasonality of he construction business has to be taken into consideration in the strategic planning of “ASI” Ltd.
IV. Competitive strategy
On the bases of the above information some analysis important for the future competitive strategy of the company may be done. However, before starting the analysis let’s see what is the mission statement that “ASI” Ltd. has identified.
Mission Statement: ASI Ltd. – a leader in the providing of information and consulting services in the construction, architecture and investment process.
SWOT Analysis
Large part of the employees in “ASI” Ltd. being professionals do not possess knowledge of English, including the top management. English language courses are crucially needed in “ASI” Ltd. “ Why English? “....the influence of the British Empire during the eighteenth to mid-twentieth centuries, the emergence of the United States as an economic and political superpower after World War II, and, finally, at the end of the twentieth century, a global economic and political structure that needs a common tongue and has appropriated English as the obvious choice.” /Global Communication in the Twenty First Century, Robert L. Stevenson, 1994, pg. 87/
From the above SWOT analysis we may identify that some of the strengths may be perceived as weaknesses or threats at the same time. For example the committed and experienced staff of “ASI” Ltd. is a plus , however the fact that there are no many young people working in the company is of course a weakness which influences the climate and the strategic development of the company.
In order to decide on the best strategy let’s analyze the existing resources:
- Human resources – as it is shown in Attachment 1 in the Organizational structure of the company there is no separate department for the consulting services. The activities are performed by the marketing department of “ASI” Ltd. as well as by part of the information department.
- Technical resources – the computers in the offices are enough as numbers however, not quipped with the last software. The telephone lines at the head offices are not enough and there is no ISDN connection , so when someone is connected to the Internet, another one is using the fax and a third person is talking by the phone, there are no more free lines at the office.
- Financial resources - taking into consideration the profitability of the company/50% growth in the last year/ there is capacity for innovation in “ASI Ltd.”, however not more than 1% of the profit is re-invested each year.
The implications for changes are simple:
- hire more young and energetic people into the team in order to form independent consulting department;
- re-invest larger percentage from the profit into technological innovations;
- make some product/service changes in order to comply with the requirements of the readers and clients of the company.
What kind of product/service improvements must be done depends on the short term and long term goals that the company sets:
Short term goals: till 2003
- Increase the circulation of the newspaper “Construction and City” to 10 000 and the subscribers to 6 000;
- Following of the above, the circulation of the magazine “Business Style” will also increase to 6 000;
- Developing of the consulting services and PR activities
- increasing of the clients who use the consulting services with 20 % till the end of 2002
- organizing 2 conferences on construction and architecture in 2002 as well as a contest “The Business Building of the Year”
Long term goals: till 2005
- Dividing the newspaper “Construction & City” into two separate publications – the first just for architecture and the second for construction;
- Publishing annual catalogue for architecture and construction companies;
- Creating a separate firm, /advertising agency for clients connected to the construction business/, enlarging “ASI Ltd.” to holding;
- Creating a separate firm within the holding to represent some of the trade construction companies that do not have offices in Bulgaria;
- Separating Business Style magazine as individual publication and selling it on the market.
How the above listed short term objectives are going to be implemented?
The increase of the circulation will be achieved with improving the quality of the information provided to the audience as well as by more aggressive advertising strategy and promotional activities and special price promotions for the subscribers.
The increase of the subscribers will lead to increase of the circulation of “Business Style” magazine and this will attract more advertising into the publication.
The consulting activities of the company may be developed by hiring more people into the team and identifying the needs of the construction companies for information and consultation services.
In terms of organization of the special events as architectural exhibitions, conferences, contests “ASI” Ltd. has experience and the trust of the architectural and construction spheres in Bulgaria. However, as the market develops the need for more events of these type, where the professionals can meet and discuss the problems of their business is appearing. Thus more young professionals are needed into the team of “ASI” Ltd. in order to create ideas for such events and organize them.
How the environmental factors my affect the implementation of the short term goals of the organization?
“The PEST analysis, which is one of the techniques in the Strategic Management for indicating the importance of political, economic, social and technological influences on organizations” /Exploring competitive Strategy, Gerry Johnson, Kevan Scholes, 4th edition, pg. 95/. Let’s see which of the political, economic, sociocultural and technological factors affect “ASI” Ltd. as organization.
PEST Analysis
Among the way to the strategy implementation PEST analysis should be taken into consideration with each of its points that affect the analyzed company.
There are three major points that must be observed during the process of strategic implementation. They are: 1. Organizational Structure and Design; 2. Resource Allocation and Control and 3. Managing Strategic Change.
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Organizational Structure – probably the right decision along with the enlargement of the company is the change of the organizational structure from functional to multidivisional structure. The structure of “ASI” Ltd. need to be subdivided into units, in terms of the goals for developing different activities except for the publishing business.
The organizational design of “ASI” Ltd. needs to be less centralized, the division of the responsibilities must be a priority of the top management, having in mind the diversified portfolio of activities of the company.
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Resource Allocation and Control - the most valuable resource at the company are the human resources, which apart from being increased as number must be better motivated. The salaries of the people are fixed their payment does not depend on the results. There is no training of the personnel of the company. These problems are present in most of the Bulgarian private companies.
Apart from the human resources of course the technological resources are crucial for the publishing and consulting business, because the information and the time are valuable. The information has to be acquired fast, for which quality technology is needed.
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Managing Strategic Change – Diagnosing strategic Change needs is the first step, the second is to identify the forces that block or facilitate change and the third to distribute the roles in the change process. As we have identified above what changes must be made in “ASI” Ltd., and the forces that block change – which is the conservative managing body, let’s propose for delegating the responsibility for implementing the change to a change agent, who “may or may not be the same as those who take a lead in the company” /Exploring competitive Strategy, Gerry Johnson, Kevan Scholes, 4th edition, pg. 484/.
At the end of the year 2001 when Bulgarian government are highly occupied with the preparation for membership in EC and NATO, the change in the thinking and thus in the way of working, in the way of management is crucial and it has to start from the bottom. It has to start from the small company from the single business enterprise.
It is hard to change the mentality of people overnight? Twelve years passed after the changes in the political and economic regime in Bulgaria. Before November, 10th 1989 it was easy, it was simple. “The communist regime is indeed equalled with a pervasive state bureaucracy. Functional agencies, such as the Planning office , the office of Prices, the Investment Bank, the Labor office, had to implement the kind of coordination tasks which the market economy realizes spontaneously in capitalist economies.” /”The Economics of Transition”, Marie Lavigne, 1995, pg. 4/. It became clear that twelve years are not enough for the transformation of the Bulgarian economy from planned to a fully working market economy. Lets’ hope that the professional work of the business and government together with the non-governmental organizations will clear the way for Bulgaria and Bulgarian products and services to the European and World markets.
Attachment 2
Data: National Institute for Market Research
Attachment 3
The structure of the gross value added (close to GDP) by economic sectors
Source: Foreign Investment Agency, Why Bulgaria, pg.10
Attachment 4
FOREIGN DIRECT INVESTMENT BY SECTORS IN USD m (1992-2000)
Source: Foreign Investment Agency, Why Bulgaria, pg.13
FOREIGN DIRECT INVESTMENT BY SECTORS AND BY YEARS IN USD m
Source: Foreign Investment Agency, Why Bulgaria, pg.15
Attachment 5
The economic forecast of Deutsche bank for 2001 and 2002 shows:
Source: Tema, weekly magazine, 16-25 November, 2001, pg. 40
References
- Construction & City weekly, 1998-2001.
- Statistical Yearbook of National Statistical Institute 2000, pg.40.
- Capital weekly, 5-11.01.2002, p.39, “WAZ Kept the Hegemony on the Advertising Market” Paulina Georgieva.
- Manager magazine, 1998, 21, “The Newspapers Lose Readership”, Rumjana Bachvarova.
- Media World, 16, 1998, “Serious Rise in the Advertising Market”, Aleksey Lazarov.
- Valeri Leviev, president of CEREAN for 2001, International Conference of CEREAN, Sofia, 2001.
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Bulgarian Construction Chamber BCC, .
- /Dep.Minister of Economy, responsible for tourism Dimitar Hadjinikolov, First Conference on Tourism in Bulgaria, 9-11. January, 2002, Hilton Sofia.
- Business Spectrum magazine, 29, pg.8, “The construction – light in the dark”, Petkan Iliev.
- M. Moschandreas ”Business Economics” Business Press, Thomson Learning 2000.
- National Catalogue for Subscription, Artefact, 2001.
- Foreign Investment Agency, “Why Bulgaria?”, report published in the bulletin of FIA
- ”Money Plus”, weekly, 51, December 2000, pg. 8.
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Bulgarian Association of the Small and Medium Enterprises, , “Private Companies Cost of Dealing with the Government”, July 2000.
- Administrative Barriers to Investment:Bulgarria, FIAS/World Bank, 1999.
- Veneta Krasteva, General manager of “ASI” Ltd, interview, 04.01.2002.
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“Exploring competitive Strategy”, Gerry Johnson, Kevan Scholes, 4th edition, pg. 95.
- Global Communication in the Twenty First Century, Robert L. Stevenson, 1994, pg. 87.
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Exploring competitive Strategy, Gerry Johnson, Kevan Scholes, 4th edition, pg. 484.
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United Bulgarian Bank monthly report, .
- ”The Economics of Transition”, Marie Lavigne, 1995, pg. 4.