bdp - milutin gajic 19.07.2013 - slanje

8/22/2019 BDP - Milutin Gajic 19.07.2013 - Slanje

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BUSINESS DEVELOPMENT PROPOSAL FOR BUILDING A FUTURE

AGRICULTURE LEADER IN SERBIAN MARKET

(The Business idea will set new objectives, modify existing, keep upward trend of

operations with comprehensive investment policy and adequate know-how)

By

MILUTIN GAJIC

LSC & UWIC STUDENT NUMBER: 0012gzgz0312

Presented as part of the requirement for the award of MBA at Cardiff Metropolitan

University (CMU)

December 2011



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Table of Contents

Executive summary ....................................................................................................... 3

I Chapter ........................................................................................................................ 5

1. Introduction ............................................................................................................... 5

1.1 Rationale for the business idea .................................................................... 5

1.2 For this final assignment chosen scenario ................................................... 6

1.3 Aims and objectives in BDP ....................................................................... 6

1.4 Structure of the work ................................................................................... 7

Chapter II ...................................................................................................................... 7

2. The business concept................................................................................................. 7

Chapter III ................................................................................................................... 11

3. Feasibility ................................................................................................................ 11 3.1 Primary and secondary market research ................................................... 11

3.2 Feasibility – product- market- organizational- financial ........................... 16

3.3 Resource requirement evaluation .............................................................. 26

Chapter IV ................................................................................................................... 30

4. Business Model ....................................................................................................... 30

4.1 Strategic Analysis of the business Idea: identification of sources of

competitive advantage and sustainability........................................................ 30

4.3 Development of appropriate Business Model ........................................... 34

Chapter V .................................................................................................................... 35

5. Business Plan .......................................................................................................... 35

5.1 Business Plan schedule ............................................................................. 35

5.2 Discussion of critical success/failure factors ............................................ 41

Conclusion .................................................................................................................. 45

Appendices .................................................................................................................. 46



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Executive summary

Main business idea is to improve business operation in Vojvodina region and to be

one of main company on the Serbian Market. Purpose of this BDP is to improveexisting business operation and achieve bigger market share on Serbian market. Aims

and objectives in BDP are to change capital structure and better employ assets in

order to gain more revenue. Second main objective is to make organisation more

efficient with significant cost cutting where it necessary for better business operation

– to be more productive. The business idea will set new objectives, modify existing

objectives in next period of 3 years (time frame), and in practice this mean to keep

upward trend of operations, comprehensive investment policy, adequate know-how,

secured distribution channels with main goal to become another agricultural giant on

the market.

Agriculture is also the only sector in Serbia with a positive foreign trade balance, and

it represents the core of foreign export development for our country. Serbian

agriculture has great potential and favourable trade conditions – with preferential

access to key foreign markets (CEFTA, EFTA, EU, Russia, Belarus, Turkey and the

USA)

For next 3 year Group will expand, with higher profit margin, business operation in

Serbia. Investment in new Silos capacity 15.000 T, organisational structure improved,

better funding source as well as increased sales with better sales channels. Financial

resources for this will be about 7 EUR mio. From this EUR 7 mio, EUR 5.5 mio need

to be refinanced with cheaper funds, and EUR 1.6 mio need to be borrowed for new

silos (long term investment loan).

Operation Plan prepared in order to improve current business operation as well as

better financial structure:

Meeting with the Banks

Meeting with the business partners

Financial analysis of whole Group



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Refinance existing loans with cheaper funds for financing purchase material

Investment in Silos with capacity of 15.000T

Organisational consolidation ( expanded sales region)

Improved sales - joint production to improve profitability

KPIs will be monitor weekly, monthly and at end of every business year. Analyzing

these indicators Mirotin Group will achieve objectives, and will be able to perform

correction in business operations. Beside KPIs, management of the Group need to be

aware of all identified risks and this is the best way to success and final goal of BDP:

MIROTIN GROUP - FUTURE AGRICULTURE LEADER IN SERBIANMARKET

Adopted competitive advantage which permanent improvement of business

operation, Group will be always ready to make necessary changes in business

operation and be a leader not a follower. This strategy will secure success and

expansion and resolve all problems which currently exist in business (indebtedness,

high leverage, low profit margin, new investment)



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I Chapter

1. Introduction

Parent Company Mirotin doo consolidates its accounts with these Serbian companies:

Mirotin-Tisa, Sava Kovačević, Fabrika ulja Banat, R.G. Ečka, Mirotin Invest, Mirotin

Vet, and Mirotin Energo. The biggest impact on Group business operation has three

companies:

- “Sava Kovačević” JSC , Vrbas, 94% ownership ,

- „Banat“ JSC, Plant oils, Nova Crnja 73% ownership,

- “Ečka” Fish farm, JSC Lukino Selo 47% ownership,

1.1 Rationale for the business idea is to achieve improvement in existing business

operation of the Company where I am currently employed. Members of the Board

chose me for this task in order to develop BDP for next 3 year to meet their

expectations. Company Mirotin need to fight to stay competitive and the only

alternative is constant struggle for every new customer-buyer and achieve savings in

business operations. It is obvious that the macroeconomic business conditions will

not improve over the short term. Improving profitability with cheaper source of funds

and better organization is something what will be the most important task for the

company in next 3 year. But also in time of crisis new investment need to be

completed in order to be market leader not the follower.



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1.2 For this final assignment chosen scenario is my employing organisation Mirotin

in managerial role where I am looking for opportunity to prove myself in eyes of

Company’s owners and prepare a 3-year business plan. These business plans need to

resolve all problems which are currently existing in business (indebtedness, high

leverage, low profit margin, new investment). Observing 2012 performance on the

Mirotin group level (FU Banat, Sava K, Mirotin), it is noticeable that despite harsh

weather conditions during the previous summer, the growth of operating income has

been preserved. With debt and operating liabilities that grew slower than the

operating activities, Total liabilities / Sales and Debt / Sales ratios had improved over

2012. But due to the fall in profitability, Debt / EBITDA surpassed tolerable level

reaching 7.5x marks in 2012. The Group is driven by heavy leverage (mainly

financial), and high, sustainable profitability is an absolute must for ensuring regular

debt servicing ability.

1.3 Aims and objectives in BDP are to change capital structure in favour of cheaper

cost of funds as well as to better employ assets in order to gain more revenue. Second

main objective is to make organisation more efficient with significant cost cutting

where it necessary for better business operation – to be more productive.

In first year goal is to reorganize funding sources – to eliminate all banks

loans with high price (interest rate over 7% p.a.) and finish new Silos with

capacity 15.000 T .

In second year goal is to change organisation in order to be more efficient and

to be able for better answer on competitor’s challenges (improved customer

care, and better supply chain).

Third year is crucial where profitability of the business operation need to be

on targeted level as well as to get bigger market share with better sales

channels (new buyers, new markets).



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1.4 Structure of the work - this BDP for improving existing business operations as

well as to change organisational structure will be explained in five separate chapters

as follows: I chapter: Introduction (idea, scenario, aims, and structure of BDP for

next 3 year), II chapter: The business concept (in this part whole business concept

will be discussed and explained), III chapter: Feasibility (feasibility studies, research

of the market in order to secure our success), IV chapter: Business Model (show

how improvement will be achieved in order to have successfully business operation

in next 3 year) and V chapter: Business plan (will be explain in detail)

Literature and concept used in this final work are:

Porter, M. (1980), Competitive Strategy

Porter, M. (1985), Competitive Advantage

McCarty, (1960) Basic Marketing

Ross, Westerfield and Jordan (2008), Fundamentals of Corporate

Finance,

Cavusgil, Knight & Riesenberger, (2008), International business

Porters 5 forces model

Porter’s value of chain

4Ps

SWOT analysis

BCG Matrix

Red Ocean Strategy

Pricing strategy

Chapter II

2. The business concept

Main business idea is to improve business operation in Vojvodina region and to be

one of main company on the Serbian Market. Purpose of BDP is to improve business



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relationship with existing and new successfully companies on market. When selecting

customers (dispersion of customers) company will apply adequate control, especially

over the limit and volume of business cooperation in order to check the credit

worthiness and secure its claims in the event of a problem with collections (bills,

compensation, factoring ....). The Business idea will set new objectives, modify

existing objectives and relate these to a future time frame of 3 years, and in practice

this mean to keep upward trend of operations, comprehensive investment policy,

adequate know-how, secured distribution channels with main goal to become another

agricultural giant on the market. Aim is profitable and safe business operation

secured with strong support from maximum three Banks (to have better negotiation

position, and to reduce dependent for only one creditor). The opportunity for

improvement is significant.

For the Company first priority are buyers and to keep them loyal we need

continuously to improve quality of products and services in line with their needs,

expectations and desires of its clients (Porter's five forces analysis: Industry

competitors, Buyers power , Suppliers , Threat of substitutes, Threat of new entrants).

According to Porter (1980) “the state of competition depends upon five basic

competitive forces”. Also new investment will be performed in new Silos with

storage capacity 15.000 T. This service will allow company to generate only form

rents additional income in amount of EUR 500.000 per year.

The Company together with subsidiaries operates in the market of Serbia and foreign

markets. Over 70 percent of its foreign operations are related to the export of dairy

products, primarily to the markets of former Yugoslav republics (Slovenia, Croatia,

Macedonia, Bosnia and Herzegovina, and Montenegro), as well as to the markets of

the EU countries: Italy, Hungary, Germany, and others. The Mirotin Group is the

fourth ranked agriculture system in Serbia measured by sales in three consecutive

years - higher income had had only Victoria Logistic and Delta Agrar.



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Crucial for 1st year is to refinance all expensive Banks loan what the company Sava

Kovacevic has, because this is too much weight for cash flow (interest expense is too

high as well as repayments of principal). With this reduced funding costs will be on

proper level and in line with the Company profit margin. To finish investment in

Silos (capacity 15.000T) with Market Value EUR 2.864.485,00. Increased storage

capacity will allow to the company to have always available products to sell when

price is higher and row material base for oil production during whole year. Also

additional storage space will generate income from rent to other companies. New

Silos 15.000T with MV (market value) EUR 2.864.485 will be finish in three phases

in next 6 months as follows: Phase I - the current MV in this phase of construction is

EUR 589.290, Phase II: MV EUR 987.685, Phase III: MV EUR 1.876.800.

In 2nd

year plan is to on Group level change organisation structure – actually to

improve some parts to be more efficient for new demands and challenges in third yearas well as to start preparation for development business operation on new foreign

market (Greece). Mirotin group will produce Oil Private Label for retail chains, and

in return they ask for good shelf positions for Banat and Sava Kovacevic brands. This

Production:

- Wheat and crops production ( Sava K)

- Milk production and cattle breeding ( Milkfarm “Dana”)

- Oil and fats production ( FU Banat )

- Fish production ( Ecka)

Trade:

- Oil products ( Mirotin , FU Banat)

- Grains ( Mirotin, Sava K)

- Industrial crops ( Mirotin)

- Feedstock for nitrogen fertilizers ( Mirotin)

- Artificial fertilizers ( Mirotin)

Mirotin Group



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will be achieved through exclusive arrangement with Veropulos Group as well as

active agreement with Delhaize Group, IDEA and Mercator S.

In 3th year goal will be increasing sales with much higher profitability in order to be

leading agricultural company on Serbian market, and will be analyzed every segment

in business operation – primarily activities and support activities in line with

Porter’s value of chain (Porter, 1985) , to improve efficiency .

SWOT analysis is the best way for screening about strengths and weaknesses inside

the Company, and what situation on the market are - opportunities and threats outside

of the company. Strong global demand for food is creating new markets for Serbian

agribusiness companies. Now exporters need investment to continue expanding, yet

capital has been scarce since the financial crisis. Based on all this, it can be

concluded that the enterprises in this sector recorded an enviable growth but not as a

result of primary production. This growth was launched by enterprises dealing with a

higher procession phase (milling and animal food), as well as trade in agricultural

products (milling enterprises have appropriate capacities for this, and the Group

intensifies organization of primary production and purchase of agricultural products).

Opportunity

increasing the market share

new markets - global demand for food

export

production activity helps to increase margin

Green energy - Power plant with the use of biogas from cattle manure

Fish farm Ecka that consumed vast amount of capital injections in the recent years

not showing yet the ability to retrieve these investments at a relatively fast pace.

However, from the long run perspective, this could turn out to be strong pillar of the



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group’s future growth having in mind Serbian market of fish products traditionally

lacking of stable, cheaper domestic supply. Because of consumers' requests and

market needs, with the price playing a decisive role, products are about 15 percent

cheaper than competitive ones.

Price strategy is very effective element of Group marketing strategy. With the

business motto "Quality above all", Mirotin Group has managed to enter on highly-

demanding market of Greece. Mirotin Group products already are in Roda markets

and the stores of market chains Valdi, Gomex, Metro, Delhiaze.

Biogas factory with the capacity of 1 megawatt (MW ), by building this plant, Sava

Kovacevic is the first company in Serbia to use biogas from livestock manure to

generate electric and heating energy. This investment was finished, and it is

reasonable to expect positive effects for the entire group through energy

independence and cost reduction. Power plant with the use of biogas from cattle

manure, produces electricity and thermal energy for needs Sava Kovacevic AD.

Chapter III

3. Feasibility

3.1 Primary and secondary market research

Purpose of this market research is to justify necessity for changing capital structure

(less expensive funding costs), improve/strengthen organisation and sales growth

with better profitability. This research will investigates and examines financial costs,

distribution channels as well as competition – main competitors on the market. The

result of this activities will be used in for achieve the objectives for BDP in next 3

year periods.

Research questions:



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1. Current financial structure (LTL vs. STL) and financial expenses (interest

rate structure )

2. Midterm investment loan for finance new Silos with capacity 15.000 T

(primary research)

3. What is alternatives for refinancing expensive loans (primary research )

4. Employees with low performance and with inadequate behaviour (desk

research)

5. Organizational chart – what need to change (primary research)

6. Client satisfaction with current products (literary research and primary

research)

7. Payments behaviour (desk research)

8. What is market trends in agro business (literary research, desk research )

9. Profitability (desk research)

Research Objectives:

1. What cause indebtedness with interest rate over 7% (primary research)

2. To prove investment according market demands3. Selecting new core Bank or Investment fund (new shareholder)

4. Reorganisation in order to achieve better performance

5. Logistic and supply value of chain

6. Product mix – improvement

7. Clients complaints and difficulty

8. Identify (if there any) gap in the market

9. Cost cutting , better profit margin



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Data needs

matrix

Primary Secondary

Quantitative What is alternatives for

refinancing expensive loans

Midterm investment loan for

finance new Silos with capacity

15.000 T

Current financial structure ( LTL vs.

STL) and financial expenses ( interest

rate structure )

Payments behaviour - invoices and

payments orders

What is market trends in agro business

Profitability

Qualitative Organizational chart – what need

to change

Client satisfaction with current

products

Employees with low performance and

with inadequate behaviour

With provided data and information will be presented to the owners of the company

and explain what cause current situation and what future actions need to be done. All

collected data and information first will be analyzed and compared in order to get real

picture. Intensive meetings with business owners and management who are

company’s major buyers in next period will be arranged in order to give answer about

their satisfaction with existing business relationship and collect all necessary

information. Final goal is to make clients satisfied and loyal as well as to achieve

higher sales. For this purpose first 50 buyers in total turnover and outstanding are

checked in order to have all necessary information. Through secondary research we

will get evidence about what factors inside the company what cause these low

performed payments (bad collection) and will be analysed account statement history,

invoices, as well as financial data.

For measure of financing two main ratios are crucial: debt ratio (debt/equity) as well

as debt vs. assets ratio (debt/assets). The company need to choose best solution for



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the capital structure so that the WACC is minimized’ (Ross, Westerfield and Jordan,

2008: p. 553)

Performed research shows us where the problem is and how we will find best

solution. Problem of availability, and the price of capital, i.e. illiquidity of the Serbian

economy, is still evident. The pressure of common illiquidity, which is characterized

by a general failure to settle liabilities leads to an irrational use of the borrowed

capital, which primarily means that fixed assets are financed from short-term sources.

The continual trend of a low common liquidity ratio shows that business entities have

to provide new indebting to settle their short-term liabilities. This consequently leads

to the further accumulation of liabilities and an increase in illiquidity. This shows that

the economy of Serbia, although already highly indebted, undertakes short-term loans

to mitigate the increasing illiquidity to a certain extent and maintain initial levels of

operation. Keeping in mind that for the amount of negative net working capital, fixed

assets were financed from short-term sources, this warns of a serious threat in the

settlement of current liabilities, i.e. insufficient liquidity of business entities. Besides,

operations of business entities in the Republic of Serbia are continuously burdened by

the high value of accumulated losses from the previous period. Payment of high

interests and coverage of exchange differences on the borrowed capital also indicate

that the economy of Serbia has become too sensitive to “shocks“ from the

environment, i.e. very dependent on changes imposed by creditors, meaning, very

inflexible when it comes to macroeconomic developments in the country. In the

structure of combined sources of financing, the biggest share belongs to short-term

liabilities (40.9 percent), capital (39.8 percent), and long-term liabilities (17.9

percent).



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Current financial structure of the Group: Frequent money spill-over is another

difficulty in assessment of the group overall performances, but this is mitigated with

the fact that there are undisputed synergy effects spanning across the group. It should

be noted that in 2012 there were no substantial crediting between the companies, but

neither existing debt decreasing.

Agriculture in Serbia represents an extremely powerful economic force, which is the

basis of the national economy and is the foundation for the development of rural

areas. Agriculture is also the only sector in Serbia with a positive foreign trade

balance, and it represents the core of foreign export development for our country.

Serbian agriculture has great potential, and it provides positive results for the national

economy due to the favourable geographic position of Serbia (in the central Balkans,

the centre of South-Eastern Europe). Serbia also offers favourable climatic conditions

and soil quality, and significant crop and food processing capacities, as well as

favourable trade conditions – with preferential access to key foreign markets.

Agriculture is Serbia’s most profitable export branch. Market trends in agro business:

The adopted measures are aimed at stopping further economic decline and then at

creating conditions for development and also to distribute the crisis burden evenly.



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The government has also taken measures aimed at boosting industry and agriculture,

with a minimal increase of taxes and excise taxes.

“Overall, the market is differentiated in the sense that there are clear market leaders inindividual sub-sectors. But some less known companies are becoming a more

dominant and unavoidable part of Serbia's agriculture. Together with leading

companies in the industry, it is expected that they will become the carriers of the

modernization of Serbia's agriculture industry with machinery and equipment

improvement, expansion of irrigation systems, further merger of parcels and other

measures” (Serbia Investment and Export Promotion Agency (SIEPA) - Newsletter,

Sep, 2011).

3.2 Feasibility – product- market- organizational- financial

“The Marketing Mix is the set of controllable, tactical marketing tool that the

Company combines to produce desirable response on the target market” (Kotler,

Armstrong, Wong and Saunders, 2008: p. 157). Mirotin Group could benefit from

Croatia entering the European Union on 1 July 2013. Officials at the Serbian

Chamber of Commerce have revealed they expect Croatian products to become too

expensive for the region and that therefore, there will be more demand for Serbian

products in the Balkan. In this part will be explained Group products/services:

Product, service: The main activity of the company Sava K . is cultivation of maize,

wheat, and other crops (industrial and forage crops, fruit), manufacture of cattle and

milk production and processing (Dairy Dana). The main crops they are growing are:

seed and mercantile wheat, maize, barley, soy and sugar rape. The Company possess

warehousing capacities for 21.000 tons of cereals. With new investment in Silos

capacity 15.000 T they will increase storage up to 36.000 T . Processing capacity of

the new dairy is 45,000 litres of milk a day, for which the milk from its own farm will

be provided on a daily basis. The dairy plant, with 1,800 square meters, producing



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sour pasteurized cream, yogurt made of pasteurized milk, full-fat semi-hard cheese,

Serbian cheese, crumbled cheese, fruit yogurt.

Oil Factory Banat products are: pressed virgin oil from sunflower seeds, salad and

spicy oil, „Cvet Banata“ sunflower edible oil is the most popular product. The

Company can maintain stable repayment capacity. Debt repayment ability remains

well preserved. Most inflows are from edible oil. The product range includes

sunflower edible oil known under the brand The Cvet Banata, and assortment of cold

freshly squeezed oil. This range of products reduces business risk, meet the demands

of the market and provide stable and increased sales year after year. Also almost 30%

of sales are income with foreign currency from foreign market.

Industry, market : The largest agricultural areas with oil plants are located in

Vojvodina (94%) due to convenient climate and soil conditions and the fact that the

processing capacities and supplier and purchaser network are located in this part of

the country. Also, Vojvodina is also suitable for the enlargement of the agricultural

parcels which facilitate the production. The Republic of Serbia is one of the largest

edible oil producers in Europe – among the top five in production of soya and among

the top seven in the production of sunflower oil. The domestic market is affected by

the regional market trends (Romania, Hungary, and Bulgaria) and others (Russian

Federation and Ukraine) in terms of making production decisions and price

regulation.

According to the Register of agricultural

households of the Republic of Serbia,

approximately 26,000 family households and

220 legal entities carry out soya production

whilst 22,000 family households and 190

legal entities carry out sunflower production. In terms of rape seed oil, there is still

little interest – 660 family households and 70 legal entities. The production of



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pumpkin seed oil is still in early stage; therefore there are only 600 registered

households and 8 legal entities producing this kind of edible oil. The agriculture

sector - the government adopted a bill on agricultural subsidies and rural development

and sent it to the parliament for urgent adoption. This bill will create a stable, long-

term and predictable agricultural policy. It will enable short and long-term

agricultural investments, make the sector more competitive, and introduce a

centralized record keeping system and better budget planning, alongside a higher

level of compliance with EU regulations. This decision is in tune with the Interim

Trade Agreement, made between the European Economic Community and Serbia,

and with the agreed implementation of customs duties for agricultural products.

Serbia is to fully liberalize imports of industrial products and most agricultural

products from the EU as of January 1, 2014. After the interim trade deal expires,

Serbia will keep its customs protection of some agricultural products until it joins the

EU, including all types of meat, meat products, some types of yogurt, butter, various

types of cheese, honey, vegetables, wheat, flour, fruit juices, tobacco, sugar, and

sunflower oil. Serbia and the EU signed the SAA in 2008, but the agreement has not

yet been ratified by all members of the bloc. In the meantime, Serbia is implementing

the interim trade deal. Serbia is in a final phase of accession to the WTO, adding that

the country is not required to allow the production of GMOs, but rather to change the

law provisions referring to trade in GMOs.

In 2013, the state will pay subsidies of RSD 12,000 per hectare and RSD 20,000 per

head of cattle, as well as meat production subsidies of RSD 10,000 per head of cattle

and RSD 1,000 per pig, he said. Also, the state will pay premiums of RSD 7 per litre

of produced and delivered milk, he said. Serbia’s agricultural budget for 2013 is

about RSD 40 billion, or 4.5% of overall budget spending.

Preliminary agreement on investment in agriculture between the Republic of Serbia

and the UAE with the Al Dahra Company in Abu Dhabi. According to this



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preliminary agreement, the Emirates' leading agro-industrial company Al Dahra is

going to invest about EUR 200 million in eight state-owned agricultural farms under

a joint investment project. Thanks to this arrangement, Serbia's agricultural sector

will obtain investors that currently have the biggest capital at their disposal in the

world, and capital and up-to-date agricultural practices are exactly what fertile land in

Serbia has been needing for decades to give maximum yields, reads the release.

Nine Serbian industrial sites are occupied with oil processing plants and organized

primary production. Six of them are located in Vojvodina (“Banat”, “Sunce”,

“Vital”, “Victoria Oil”, “Sojaproteini” and “Dijamant”) and three in Central Serbia

(“Bioprotein”, “Plima M” and “Dunavka”). Seven of these factories alternately

process of soya, sunflower and pumpkin oil during the production year whilst two of

them process only soya. The total processing capacities in Serbia are:

918,000 tons of sunflowers

745,000 tons of soya

588,000 tons of oil pumpkin

The purchase of the oil plants is realized according to the processing capacities of the

companies/factories. Generally, two thirds of the produced soya are purchased by

“Sojaproteini” Becej, the dominant companies in sunflower purchase are “Invej”

Belgrade that owns two oil factories in Vrbas and Sombor, “Victoria Oil” Sid and

“Dijamant” Zrenjanin. “Victoria Oil” Sid also does the processing of pumpkin oil.

The decision regarding the prices of oil plants is driven and regulated by price trends

in the regional and international markets. During the purchase some price

modifications are common and mostly affected by the demand/supply conditions in

the domestic market. According to the realized exports, soya and sunflower oil are

the most important export products derived from oil plants.



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Observed in cumulative terms, all enterprises in the sector can be divided into basic

agricultural enterprises (primary production), milling enterprises, and enterprises

focused on animal food production.

Victoria Logistics is focused on organization of primary production of plants and

grains (they organize production of soya on about 90,000 ha, sunflower on 80,000 ha,

and oilseed rape on about 10,000 ha) distribution of raw materials, and trade and

storage of all goods for the needs of Victoria Group . They carried out the purchase of

said products, wheat and maize in the total amount of about 900,000 tons. At the

same time, the enterprise is largely burdened by debts (almost 120 million Euros),

and it is thus forced to generate growth and development in the upcoming years in

order to settle all its liabilities on time . Victoria Group commissioned Sojaprotein's

new factory, with the capacity of 70,000 tonnes, in which about EUR 30 million was

invested. In that way, the total annual processing capacity was increased to 250,000

tonnes of soybeans. The new factory for producing traditional soybean protein

concentrates in Becej is a unique complex in Europe because it brings together all

phases of soybean processing. The products of the newly opened factory have the

widest application in the food industry, as well as in the pharmaceutical industry,

considering a high percentage of proteins they contain. Thanks to this investment

Sojaprotein will be exporting nearly 80 percent of products, which are mainly based

on non-genetically modified soybean

Enterprises focused on primary production recorded good results:

Delta Agrar - the real potential of this enterprise will be seen in the upcoming several

years. Namely, after the sale of Delta Maxi, Delta Agrar was recognized as the heart

of Delta’s system, and a considerable part of the money from sale is thus expected to

be directed to the enterprise.

Delta Agrar 2012 in EUR

Operating income 192.135.602

http://www.ekapija.com/website/sr/page/625458






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Sales income 185.037.115

Operating profit 12.463.106

Net profit 3.204.708

Almex : among other related enterprises, this company becoming more distinguished

for its results. For years already the enterprise has been taking over and consolidating

small agricultural enterprises and recording good growth rates and excellent

profitability.

Almex 2012 in EUR





Enterprises focused on the milling activity:

Mlinostep and Granexport and animal food Gebi, Erakovic, Farm Comerc, Konzul

and Sto Posto,. Besides milling, Mlinostep and Granexport also deal with trading of

agricultural products, and this is where the reasons for rapid growth and high return

on equity of these enterprises should be searched for. For Granexport it is necessary

to underline that the enterprise operates within MK Group, as its only representative

in the agriculture sector. Namely, MK Group is essentially focused on agriculture, but

its enterprises are not designated in a way that would clearly show the operating

results directed exclusively to agriculture. Among animal food producers Gebi has

already become the market leader. The remaining three enterprises will only struggle

for domination and the position of the closest follower.



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Gebi 2012 in EUR





Agriculture is the most important economic sector and a primary source of

employment in most emerging markets. Strong global demand for food is creating

new markets for Serbian agribusiness companies. In 2011, Serbia’s agricultural

exports increased five-fold. Now exporters need investment to continue expanding,

yet capital has been scarce since the financial crisis. IFC is helping Serbiancompanies convince sceptical investors that they offer good opportunities for

profitable business. Recent IFC transactions have provided more than €250 million in

direct financing for Serbian agribusiness companies, aiming to improve corporate

governance and introduce new standards in order to reach lucrative new markets.

Organisational : Owners’ of the company has full commitment and sufficient capital

to provide an acceptable level of equity risk funding. Djoko Vujicic (62 year old),

owner 33.34 %. – career start in Sava Kovacevic , and later continued as director of

procurement in company Poljooprema from Vrbas.. Aleksa Janicic (72 years old),

owner 33.33% He was the CEO of the company “Mepol” and commercial director of

the company “Vital” Vrbas. Zdravko Pavicevic (63 years old), owner 33.33% He

was director of procurement at the famous meat industry „Carnex“ Vrbas. They are

on top-managerial position because they are skilled people with high integrity (all of

them having clear background - double-checked and confirmed) and with experience

appropriate to the nature and scale of business and the markets in which they operate.

It should be noted that both CFOs (of Mirotin Group and of Sava Kovacevic) are

independent professionals both of them highly educated (PhD and MSc). The

headquarters and production units of Mirotin Group are in Vrbas and Nova Crnja. At



23

this location are also cattle farm and mechanic workshop. The cattle farm is on the

right side of Vrbas - Feketic highway. Dairy unit is in centre of the town Vrbas , in

Maršal Tito 121 Street.

Financial feasibility issues: Sava Kovacevic Financial Analysis

Revenue growth compared with the same period last year is a result of service

production: mostly drying and processing of maize seeds and diary production which

is increasing due to opening Dairy factory „Dana“. Operating income is higher than

in the previous period. Inventories are increased in line with the volume of business,

in the almost same percentage as trade receivables. Operating liabilities are increased

but financial liabilities are on lower level as well as financial expenses. The structure

of financial liabilities - long-term loans prevail. Term structure of debt continued to

improve, in favour of LT debt.

Profit and Loss

Operating revenues EUR 13.6 million are generated almost entirely from sales of

products on domestic market. Sales income EUR 11.9 mio are 14% higher related to



24

2011. They are generated almost entirely from sales of products on domestic market,

with a stable volume of business in year 2012. Revenue growth compared with the

same period last year is a result of service production: mostly drying and processing

of maize seeds and diary production which is increasing due to opening Dairy factory

„Dana“. Draught in summer 2012 is reflected in 2012 turnovers and results of the

company initial plans for 2012 have not been met completely. Maize production fell

short (negative effect of drought and high temperatures in summer 2012) by ca € 1mil

(in 2011 production value of maize was € 2.8mil, and in 2012 is € 1.9mil).This

actually reflect on lower profit rate than they planned, but growth rate stay stabile in

2012 (20% increase in sales). However, milk production that generates steady inflows

throughout entire year combined with the cattle breeding represents alternative source

of repayment available at any time. Biggest part in structure of sales has maize 33%,

milk 11%, wheat 8% and sugar beet 8%:

in EUR 2011 2012

WHEAT 1,020,000 1,431,039

MAIZE 2,800,000 1,890,943

PEA 1,080,000 805,656

SUGAR BEET 1,300,000 1,169,917

DAIRY (milk) 3,000,000 3,920,885

Sales in 2012 (after effect of drought and high temperatures)

Work performed by enterprise and capitalized EUR 0.34 mio. Increase in inventory

value EUR 1 mio. Other incomes EUR 0.5 mio are premiums from Ministry of

Agriculture for milk and rents. Operating expenses EUR 11.8 mio. Structure: value

of sold goods 27%, raw material 34%, salary 21%, amortization 13% and other

operating expenses (increased due to growth in gross wages and benefits under a

contract of temporary employment, as well as the cost of rent related to lease land,

transportation costs, insurance, etc) 5%. Related to 2011 this expenses are much



25

higher due to effect of drought and high temperatures in summer 2012. Operating

profit EUR 1.9 mio

Financial incomes EUR 0.7 mio are interest 75% and positive exchange rate

differences 25%. Financial expenses EUR 1.5 mio are interest expenses 68% and

negative exchange rate 32%. Other income EUR 0.65 mio from sale is from sale of

livestock and other expenses EUR 0.4 mio are related to impairment of breeding

stock and other expenses. Net Profit EUR 1.4 mio

EBIT Margin & Net profit margin – Sava Kovačević ad

Balance sheet

Fixed assets EUR 15 mio : land (EUR 3 mio), buildings (EUR 6.6 mio), equipment

(EUR 3 mio), fixed assets in preparation (EUR 1.5 mio) and breeding stock ( EUR

0.9 mio). Equity investments EUR 4k are related to the old shares in PIK Vrbas from

the period when it was a public company; long-term investments EUR 5 k are related

to housing loans for employees. Current assets EUR 16 mio : Inventories EUR 4.4

mio are finished products 41% (mostly maize and wheat), unfinished production of



26

36%, raw material 13%, given advances 7% ( to the company Radun Ing related to

construction on “Dana”), and goods 3%.

Receivables EUR 11.6 mio are from domestic customers EUR 7.5 mio, short term

fin. placement EUR 3.1 mio ( borrowings to the : Mirotin Tisa, Mirotin doo, Ecka,

Komercservis, Mirotin Energo, Aretol, Agrimax) and other receivables and delimited

exchange differences EUR 0.9 mio. The biggest buyers in turnover are: Aretol, Delta

Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko, ZZ

Agrodunav Karavukovo.

Capital EUR 12.5 mio. Share capital EUR 9.3 mio, reprovisions EUR 1.6 mio and

retained earnings EUR 1.6 mio. Long term loans EUR 7.4 mio (Intesa, Komercijalna,

OTP, Privredna Banka, Hypo,MArfin, Fond, Credit Argicole , Procredit , Univerzal)

Other long-term liabilities EUR 0.5 mio - leasing liabilities for agricultural

equipment and vehicles

Short-term liabilities EUR 6.9 mio are loans in Alpha Bank, Komercijalna i Univerzal

(EUR 1.6mio), part of long-term liabilities due within one year ( EUR 4.8mio), and

leasing liabilities.

Operating liabilities EUR 3.5 mio are from domestic l suppliers 70% related

companies 25%, received advances and others liabilities from business operations

5%. The biggest suppliers in turnover : ZZ Agrodunav, Aretol, Bankom, Delta

Agrar, Hajfer, KWS Seme, Merkator S, Naftachem , Promist, Sunoko,

Off balance record EUR 1 mio : others good on stock (peas , corn) and state land

3.3 Resource requirement evaluation

Organisational structure - this business concept will be realized with me in a role of

Project manager (with professional background in Banking sector, develop new

business lines, sales achievement , finance and corporate management) for BDP with



27

the selected team of very skilled and competent professionals: CFO Mirotin Ana

Marojevic (Msc), CFO Sava Kovacevic Mr. Boris Milovic (Phd). Also concept

predict to secure support from three bank (Alpha Bank, Komercijalna, and Credit

Agricole) ready to support our aims for better loan pricing, to get cheaper funding

sources.

Financial - Sava Kovacevic JSC need to pay whole process related to sowing /

harvesting: work force, fuel, spears parts for mechanisation. Most inflows from corn

seed are generated in late autumn and winter period (prior to spring sowing). This is

related to the very nature of the business (sawing, vegetation cycle, harvesting,

storing, processing are activities that precede the sale and all of those require huge

expenses) and it is of repetitive nature. Financial resources for this will be about 7

EUR mio. From this EUR 7 mio, EUR 5.5 mio need to be refinanced with cheaper

funds, and EUR 1.6 mio need to be borrowed for new silos (long term investment

loan).

CF analysis next 12 months: Repayment of the existing revolving lines approved by

Banks will be from operating income. The diversification of business (inclusion of

providing services – drying, corn seeds processing) and some vertical integration

have brought about improving sales & profitability, with higher-than-average sector

margins as well as , de-leveraging strategy for the next period are in line with their

business activities, with alternative source of repayment available at any time.

Company’s trade cycle is evaluated along with the Company liquidity, in conjunction

with any existing approved credit limits from other Banks. As liquidity and cash

flow are the lifeblood of any business, we are opinion that provided CF projection is

realistic and in line with their business activities



28

Timely settlement of interest and principal of existing liabilities with Alpha Bank

upon withdrawn tranches proved that the Company can maintain stable repayment

capacity. Debt repayment ability remains well preserved.

Since the vegetation cycle is one-year long what happened in 2012 had already been

locked in 2012 results and it could only lead to growth in 2013 (until new harvest is

ripped and collected). On the other side, such harsh weather conditions that not even

the most modern irrigation system could completely neutralize are not usual and



29

normal climate for Vojvodina / Serbia. Even if the draught happens again please bear

in mind that the way Sava Kovacevic land is equipped with irrigation system and all

the agro-technical measures that are employed at the company. Thus, when

estimating last year's losses on aggregate level, one should not take those estimations

as a benchmark applicable to Sava Kovacevic.

For finishing new Silos with capacity 15.000 T investment plan is like follows:

Investment plan in EUR

Funding sources - total 2.457.822

own sources -already invested 857.822

Borrowed (Midterm loan) 1.600.000

With structure of costs:

EUR

already

invested

new

investment Total

fixed assets 632.205 820.000 1.452.205

material 70.140 150.000 220.140

services 155.476 630.000 785.476

total: 857.821 1.600.000 2.457.821

Financial resources EUR 1.6 mio need to be borrowed for new silos (long term

investment loan). This investment will allow company to generate only form rents

additional income in amount of EUR 500.000 per year.

Refinance existing loans with long term loans approved from Alpha Bank,

Komercijalna or Credit Agricole will be performed in next 6 months. Beside

mentioned Banks BDP will analyzed possibility to get fund from EBRD who support private agribusiness companies in Serbia. This will facilitate private agribusinesses’

access to finance and thus support the expansion of a vital sector of the Serbian

economy. The EBRD’s participation is providing interested banks with comfort and

will demonstrate that lending against agricultural commodities is feasible.



30

TOTAL LIABILITIES TO BANKS in EUR on date on date 31.12.2012

Chapter IV

4. Business Model

This chapter will explain how existing business will be improved in order to achieve

final goal - profitable and safe business with dominant market position. On that way

revenue for the company owners will be much higher as well as future business

growth.

4.1 Strategic Analysis of the business Idea: identification of sources of competitiveadvantage and sustainability

For choosing strategy, beside all other tools, the SWOT Analysis of Mirotin Group

will help us to make right decisions. Cavusgil, Knight & Riesenberger (2008, p.

309) stated that “Once they understand the firm’s strengths, weaknesses,



31

opportunities, and challenges, they decide which customers to target, what product

lines to offer, how best to contend with competitors, and how generally to configure

and coordinate the firm’s activities around the world”

STRENGTHS WEAKNESSES

long business history

diversification of business activity

good and long relationships with

suppliers as well as buyers

strong management

know – how well know brand

nearness of the raw material base

Business support from Group

Long experience and tradition in this

area and knowledge of the market

the best quality soil in this part of

Europe, over 90% is under the pivot

irrigation system

Indebtedness- capital

investment performed in past

few year

OPPORTUNITIESTHREATS

increasing the market share

new markets

export

Major investment are finished

production activity helps to increase

margin

Power plant with the use of biogas

from cattle manure

New Silos with capacity 15.000T

economic crisis

drought

Government decision

Other strong Groups in

agribusiness

Adopted strategy is competitive advantage which permanent improvement of

business operation. With this strategy Group will always be ready to make necessary

changes in business operation and be a leader not a follower. This strategy will secure



32

success and expansion on foreign EU market as well as Greece. Mission: profitable

revenue from local and foreign market with better financial structure. Vision-

“Quality above all

All subsidiary companies under the guidance of Mirotin llc have successfully

business operation, with total number of employees 700. Analysis of own value chain

in order to get competitive advantage:

Evaluation of the Sava Kovacevic performance

Evaluation of the sales per Region

Risk analysis regarding drought in 2012, what crops to cultivate: maize, wheat,

and other crops (industrial and forage crops, fruit),

Product Analysis (Oil. Fish, Milk, Corn, Wheat, Maize)

Profitability Analysis (Oil. Fish, Milk, Corn, Wheat, Maize)

Technology & Operational issues: MIS, CRM, SAP

Organizational issues

Analysis of top 50 clients.

Financing Plan – Investment Plan ( break even, cost of funds, CF)

Marketing - planned activities ( media, presentation )



33

After performed analysis main elements of selected strategies are:

Management with integrity and experience, with best performing employees -

team of skilled hardworking people dedicated to their work..

Optimisation and improvement in logistic and sales network. This will be

reorganized and five regions will be established instead existing two as

follows: Belgrade region, Novi Sad region, South region East region and

Export Division (included new foreign market – Greece). New reorganization

will support our attentions to increase market share and better sales of Mirotin

Group products/services.

Customer perspective: “Quality above all" best product on the market Financial perspective: increased profitability with better financial structure

and less financial expenses

4.2 Selection of strategies for success

This strategy free huge potential of Mirotin group, as well as ideas for improvements.

Employees are crucial element of for the business performance and survival on the

competitive market, especially in rough time. Implementation of this strategy the

Group secure planed objectives. This actually means to transfer strategic objectives to

the operational level (clearly defined and measurable). This strategy is classics Red

Ocean concept (beat the rivals with better sales, costs, products, organisation ...etc)

on existing Serbian market, where market players struggle for increased market share

and better profit margin. Mirotin will be market leaders on Serbian market with

constant increase in market share and successful regional development strategy. The

Company’s growth allows expansion on foreign market. This decision will improve

logistics operations and reduce costs and increase production efficiency and

profitability. Decision to reduce financial costs and invest in new Silos is strategic

decision made after lots of planning and checked internal and external factors.



34

Great position of the Sava Kovacevic production facilities and excellent qualities of

the purchased raw material for FU Banat is the main advantages of the Mirotin

Group. With better prices of its products / services Mirotin Group is on right truck for

further expand, and increase market share as well as clients base. With new

investments and planned joint production with excellent business operation chosen

strategy will beat – wipe out current competition. The cheaper funds will be used by

the Mirotin Group companies: Sava Kovacevic, FU Banat and Mirotin to provide

advance payment to their main suppliers. Mirotin Group employ thousands of peoples

when comes time for harvest.

4.3 Development of appropriate Business Model

Here will be explained Business model like follows:

Identity: “Quality above all"

Main customers are one of the largest companies in agribusiness in Serbia. The

biggest buyers in total turnover are: Pantomarket Herceg Novi, Bimal Brcko, Studen

& Co Vienna, Gebi, Sto posto, Interkomerc, Delhaize, FSH Komponenta -. Aretol,

Delta Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko (MK

Commerce)

Added Value: The product range includes the best quality on teh Serbian Market

sunflower edible oil known under the brand The Cvet Banata, and assortment of cold

freshly squeezed oil. Green energy - Sava Kovacevic is the first company in Serbia to

use biogas from livestock manure to generate electric and heating energy and supply

free of charge general hospital in Vrbas.

The competition: all enterprises in the sector can be divided into basic agricultural

enterprises (primary production), milling enterprises, and enterprises focused on

animal food production. Delta Agrar - potential of this enterprise will be seen in the



35

upcoming several years. Almex , Matijevic, MK Commerc, Dijamant. However,

Delta’s focusing on agriculture, together with already recognized new pillars (Almex,

Mirotin, Gebi, Elixir Group, etc.) should contribute to the recovery of agriculture in

Serbia.

The channels: wholesale to other large companies and direct sales to business

partners as well as through discount shops.

Competitive Strategy: Red Ocean Strategy

Chapter V

5. Business Plan

5.1 Business Plan schedule

Gant chart - Operational activities with time period of 3 years.

For next 3 year – expand, with higher profit margin, business operation in Serbia,

investment in new Silos capacity 15.000 T, organisational structure improved, better

funding source, and increased sales with better sales channel. Financial resources for

Start

DateEnd Date

1 9 - J u n

1 9 - J u l

2 0 - A u g

2 5 - S e p

2 5 - O c t

1 0 - N o v

1 7 - N o v

2 4 - N o v

1 - D e c

8 - D e c

1 5 - D e c

2 2 - D e c

2 9 - D e c

5 - J a n

1 2 - J a n

1 9 - F e b

2 0 - M a r

2 0 - A p r

2 1 - A p r

2 0 - J u n

2 5 - J u l

2 5 - A u g

1 - S e p

1 - O c t

1 - N o v

3 1 - D e c

BPD Project : FUTURE AGRICULTURE

LEADER IN SERBIAN MARKET19-Jul 31-D ec

• Meeting with the Banks BDP Team

• Meeting with the business partners Owners

• Financial analysis of whole GroupCFOs

• Refinance existing loansCFOs

• Investment in Silos with capacitzy of 15.000TOwners

• Organisational consolidationBDP Team

• Improved sales - joint productionBDP Team

Milestone

Task finished

Gant chart - Operational activities:

Activity Resource

2013 2014



36

this will be about 7 EUR mio. From this EUR 7 mio, 5.5 mio need to be refinanced

with cheaper funds, and EUR 1.6 mio need to be borrowed for new silos.

1. Industry background, the company, the product/service: parent Company Mirotin

doo consolidates its accounts with 7 other Serbian companies: Mirotin-Tisa, Sava

Kovačević, Fabrika ulja Banat, R.G. Ečka, Mirotin Invest, Mirotin Vet, and Mirotin

Energo. The Company was established in august 19, 1992 and engaged in trading of

agricultural commodities and raw materials for primary production and food industry.

The company has good business connections with companies in EU (Hungary,

Austria) as well as Ukraine, Romania, Russian Federation.

Product/service:

• Wheat and crops production ( Sava K)

• Milk production and cattle breeding ( Milk farm “Dana”)

• Oil and fats production ( FU Banat )

• Fish production ( Ecka)

All subsidiary companies under the guidance of Mirotin llc have successfully

business operation. Number of employees 700



37

Improved sales division:

2. Market, market analysis, market research

Agriculture is the most important economic sector and a primary source of

employment.

In 2012 The European Bank for Reconstruction and Development's EUR 10 million

loans to the agricultural company Victoria for the installation of two biomass-fired

boilers at its oilseed crushing subsidiaries. It was estimated that overall the project

would help cut consumption of fossil fuels by 20,000 tonnes per year, which would









38

result in a substantial cost saving of EUR 5.8 million. The biggest competitor on

domestic market is Victoria Group.

Victoria Group consolidated 2012 in EUR



Sales on foreign market 206.025.000

EBITDA 78.186.000

EBIT 46.880.000


EBIT Margin & Net profit margin: Dark green: industry average / Light green:economy average

Strong global demand for food is creating new markets for Serbian agribusiness

companies. Because of consumers' requests and market needs, with the price playing

a decisive role, products are about 15 percent cheaper than competitive ones. Main

customers are: Sto posto, Interkomerc, Delhaize, FSH Komponenta -. Aretol, Delta

Agrar, Feed and Seed, Merkator S, Mlekara AD, Raiffaisen Agro, Sunoko ,

Veropulos.



39

3. cost/volume /profit analysis

For improved sales Mirotin doo and Mirotin Tisa doo will sign a Contract on joint

production of corn based products. Based on the Contract, Mirotin doo is obliged to

provide RSD 40mln for procurement of 1.6 metric tones of 2012 corn. Mirotin Tisa

doo is obliged to provide storage and production capacities, to perform technology

process and extend the produced output to final buyers. This contract does not specify

participation in profit. This is to be addressed through an addendum to the existing

contract. Economic and financial efficiency, feasibility and justifiability of the

project are analyzed. Based on the existing capacities (storage and producing) of

Mirotin Tisa doo and planned 1/3 of those capacities to be employed during this

project, our team performed the following calculation:

Project Financial Flow

In TEUR (1EUR = 114RSD) Year 0 Year 1 Year 2 Year 3

Total Inflows 1,172 4,179 4,263 5,521

Sales 4,179 4,263 4,348

Financing 1,172

Own sources 909

External sources 263

Remaining investment value 1,172

Profit and Loss Statement Forecast

In TEUR (1EUR = 114RSD) Year 1 Year 2 Year 3

Sales Income 4,179 4,263 4,348

Operating Expenses 3,424 3,509 3,577

Financial Expenses 18 0 0

Gross Profit 738 754 771

Tax 111 113 116

Net Profit 627 641 656



40

Total Outflows 1,172 3,635 3,834 3,904

NWC Financing 1,172

Other OPEX 3,544 3,606 3,667

Tax 91 94 98

Repayment of loan 134 140

Net Inflow 0 544 429 1,616

The investment payback period is 3 years. As shown in the CF projection, the

financial flow is neutral in the zero year of investment, while in the following 3 years

it is positive ranging between € 0.4 mln and € 1.6mln. Project NPV (at the discount

rate d = 3%) is cca € 1.5mln, with very high IRR (47%), and Benefit Cost Ratio

exceeding 1, all indicating acceptability and profitability of the project.

Breakeven point (in terms of minimum required capacity usage) is between 86% in

the first productive year, and 88% in the third year. Project sensitivity analysis reveals

that the project remain profitable with change in key variables (increase of expenses,

or decrease of output prices) up to 17% in average

4. Marketing plan- Despite increasing competition, with adopted strategy supported

by the necessary investment, the Company in next 3 year will be leader and take

BCR In TEUR Total:

Total Inflow per years 4,179 4,263 5,521 13,963

Discount Factor 1.03 1.0609 1.092727

NPV Inflow 4,058 4,018 5,052 13,128

Total Outflows per years 3,635 3,700 3,765

Discount Factor 1.03 1.0609 1.092727

NPV Outflow 3,530 3,488 3,445 10,463

1.25476733



41

above 30 % of market share. Strong advertising support beside top quality products

will give the Group a high level of recognition and clients loyalty.

5. Design and development plan - To be new agro business pillar on Serbian Market

However, milk production form Sava Kovacevic will generates steady inflows

throughout entire year combined with the cattle breeding represents alternative source

of repayment all liabilities available at any time. In practice this mean to keep upward

trend of business operations, better investment policy, know-how, secured

distribution channels with main goal to become agricultural giant on the Serbian

market. Aim is profitable and safe business operation secured with strong support

from first class commercial Banks

6. The management team - with the team of good people dedicated to their work and

hungry for success, everything is achievable. This people have all necessary

experience and knowledge.

7. Operation plan

In order to improve current business operation as well as better financial structure:

Meeting with the Banks

Meeting with the business partners

Financial analysis of whole Group

Refinance existing loans with cheaper funds for financing purchase material

Investment in Silos with capacity of 15.000T

Organisational consolidation ( expanded sales region)

Improved sales - joint production to improve profitability

5.2 Discussion of critical success/failure factors

Critical factors for success :

The diversification of business (inclusion of providing services – drying, corn seeds

processing) and some vertical integration have brought about improving sales &



42

profitability, with higher-than-average sector margins as well as, de-leveraging

strategy for the next period are in line with their business activities.

New reorganization will support our attentions to increase market share and better

sales of Mirotin Group products/services.

The Group need constantly improving and developing its products as well as business

processes, providing sustainable development. Profitability with enough capacity to

servicing all financial expenses and performed investment. To have always available

products to sell when price is higher and row material base for oil production during

whole year. Also additional storage space will generate income from rent to other

companies

Importance of modern irrigation systems, especially when having in mind an

unprecedented drought that hit Serbia last year, and climate changes bringing hot

summers or heavy rains, which imposes a growing need for efficient irrigation and

drainage systems.

Key Performance Indicators or KPIs

Sales per region ( Belgrade, Novi Sad, South, East , West , Export)

Profit from maize, milk, oil, fish

Profit from servicing activities ( mill, storage capacity)

Operational cost

Customer satisfaction (customer care)

These KPIs will be monitor weekly, monthly and at end of every business year.

Analyzing above mentioned indicators, the Mirotin Group will achieve objectives,

and will be able to perform correction in business operations.



43

Beside KPIs, management of the Group need to be aware of all identified risks. This

identified risk can be minimised but first need to be assessed like follows:

First we identify the risk

After that we measure and assess the risk

To be able for managing the risk

And on the end we keep our eyes on identified risk – monitoring

Range of products reduces business risk, meet the demands of the market and provide

stable and increased sales year after year. Also almost 30% of sales are income with

foreign currency from foreign market. For identified significant risk we will able to

apply mitigating factors:



44

Risks Mitigates

Market Risks

Volatility of margins,

input prices; output prices;

F/X exchange rate;

Strong competitors

agribusiness market in

Serbia

Potential new competition

drought and hightemperatures

Recognized brand

Good diversification/substitution of the products

Good storage capacity

Strong growing potential

Strong support from the Group

Long experience and tradition in this area and

knowledge of the market

Good relationship with both, suppliers and

buyers

Environmental Risks

Risk from Industrial

Accidents.

The company is constantly improving and

developing its products and business processes,

providing sustainable development in

accordance with internationally accepted

principles and trends in business.

F inancial Risks

Higher indebtedness

Loans with F/X clause

Short term expensive loans

Crucial investments were finished

Higher indebtedness is common for this type of

industry and is related with production cycle.

Good profitability with enough capacity to

serving additional financial expenses.

Managerial Risks

Key -man risk

Management is well-organized and business is

run by professionals



45

Conclusion

For Mirotin Group presented BDP is way (start from where are we now in 2013, and

where we will be in 2016) to success with adopted competitive advantage (Red

Ocean) which permanent improvement of business operation. This strategy will

secure success and expansion and resolve all problems which currently exist in

business (indebtedness, high leverage, low profit margin, new investment) Mirotin

Group will be always ready to make necessary changes in business operation and be a

leader not a follower.



46

Appendices

References:

Cavusgil, Knight & Riesenberger, (2008), International business: the new

realities, 2nd

edition, Prentice Hall

Porter, M. (1980), Competitive Strategy: Techniques for Analyzing Industries

and Competitors

Porter, M. (1985), Competitive Advantage: Creating and sustaining superior

Performance

Ross, Westerfield and Jordan (2008), Fundamentals of Corporate Finance,

(8th

edition), The McGraw-Hill

Kotler, Armstrong, Wong and Saunders, 2008: p. 157

Serbia Investment and Export Promotion Agency (SIEPA) - Newsletter, Sep,

2011.

www.ebrd.com

Bibliography

BCG Matrix (Boston Consulting Group, 1970)

Ciaran Walsh, 2006, “ Key Management Ratios”, fourth edition, Prentice Hall

McCarty, (1960) Basic Marketing: A managerial approach, Homewood IL:

Irwin

Harrison, S . (2006) Idea spotting: How to Find Your Next Great Idea,

Cincinnati: How Books.

www.mirotin.rs

London School of Commerce, Research Methodologies , Course manual

LSC, The Business Development proposal, Course Manual

LSC, Corporate Finance, Course Manual

http://www.ebrd.com/

http://www.mirotin.rs/

http://www.mirotin.rs/

http://www.ebrd.com/



LSC, Financial Management , Course Manual

LSC, Strategic Management , Course Manual

William F. Sharpe (1963), A Simplified Model of Portfolio Analysis,

Management Science

www.bloomberg.com

http://www.bloomberg.com/



bdp - milutin gajic 19.07.2013 - slanje

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