Industry Analysis: Furniture Manufacture

INDUSTRY ANALYSIS
«Furniture manufacture»
2 CARDS 2002 Project
Development of Investment and Business Climate in Croatia
CONTENTS:
Foreword ___________________________________________3
1. Introduction ______________________________________5
2. Industry definition, segments and limits _________7
2.1. Industry products definition-segmentation_____________7
2.2 Market size ______________________________________8
2.3. Labour supply___________________________________15
3. Porter's model ______________________________________19
3.1. Industrial rivalry analysis _________________________20
3.2. Market permeability, i.e. entry barriers _____________23
3.3. Threat of substitutes, i.e. substitute products _________25
3.4. Bargaining power of suppliers ____________________26
3.5. Bargaining power of buyers ______________________28
4. The SWOT analysis _________________________________30
5. The industry’s life cycle _________________________36
6. Competitiveness assessment – peer group _______________42
7. Conclusion _________________________________________43
The Project is financed by The project is implemented by: Deloitte Central Europe, Raiffeisenbank Croatia and Emerging
the European Union. Markets Groups.
Foreword
Many transition countries, such as Poland, experienced direct foreign
investments in the primary wood processing and furniture production
industry at the very beginning of their transition way. Lower labour costs,
but also high quality timber, which is rather rare in most countries of
Western Europe due to high utilisation rate, have been the key element to
international companies to make investments in transition countries. The
mentioned foreign investments had favourable impact on growth of wood
processing industry and export of furniture in countries – recipients of
foreign investments, such as Poland. On the other side, in spite of
abundant supply of high quality wood raw materials and experience in
furniture production, in recent years Croatia does not meet growing local
demand for furniture but it has been experiencing growing shortage in
commodity trade within the mentioned industry. In addition, considerable
foreign investments in furniture production area failed to occur and not
earlier than last years there are some more positive trends. At the same
time, most companies in wood processing industry are still in restructuring
stage resulting in non-specialised production, lack of recognizable local
brands and lagging behind current trends at market. Current low level of
technology and high fixed costs has detrimental effect on international
competitiveness of Croatian manufacturers, especially under conditions of
growing competition from other transition countries and China. However,
restructuring process within the industry has been lately intensified in
Croatia and the Government strategy of development of wood processing
industry and implementation of operational plans will also contribute to
these efforts. The Government still has significant influence on trend in
furniture production industry, especially because the major portion of
wood stock in Croatia is owned by the state company. Further
liberalisation of the timber market will result in growing interest of
potential foreign investors in furniture production in Croatia, especially
after abolishing of some provisions having disincentive impact on
investments and specialisation of production in the current transition
period. If comparable advantages of the main competitors are taken into
account, production of high-quality panel furniture in small series is
considered as the largest potential area for implementation of foreign
investments. Additionally, there are possibilities for investments in plants
for primary wood processing, i.e. in saw-mills and high capacity dryers.
In the following years, we expect development of furniture production and
further growth of international demand, but competition as well, that could
result in growing interest of foreign investment companies in Croatia.
1. Introduction
According to Classification of Economic Activities in the European
Community (NACE) the industry of furniture manufacture (NACE 36.1) is
The industry of furniture
manufacture is grouped within the furniture manufacture group and other manufacturing
grouped within the
furniture manufacture industry (NACE 36), which can be located in business group under the
group and other DN code. During 2004 the DN business group had share in gross added
manufacturing
industry… value (GVA) with approx. 0.8%. At the same time the mentioned business
group employed around 5% of the totally employed in manufacturing
industry or nearly 14.5 thousand people.
According to other source, a hundred companies with more than 10

employees dealing primarily in the business activity of furniture
manufacture and the rest of manufacturing industries realized during
2004 sales revenue in the amount of 2.3 billion kuna. At the same time
production material amounted to 977 million kuna, whereas costs for
remaining intermediary consumption amounted to barely less than 600
million kuna, therewith realizing gross added value of 1.15 billion kuna.
In the commodity trade of the Republic of Croatia with foreign countries

the group of furniture manufacture business and other manufacturing
industries (NACE 36) realized during 2004 commodity export in the
amount of 346 million USD, i.e. which accounts for 4.3% of total export
value of the Republic of Croatia (RH in further text). During the same year
amount of 545 million USD of concerned products was imported in
Croatia, i.e. approximately 3.3% of total commodity import value.
Table 1: GVA and number of the employed in the group of furniture
manufacture business and other manufacturing industries (NACE DN)
Source: wiiw, calculated by author
Among the business group under NACE 36 code furniture manufacture is
Among the business the most significant one (NACE 36.1). In 2006, for instance, the furniture
group under NACE 36
manufacture industry only realized approximately 80% of total revenues
code furniture
manufacture is the most and employed over 90% of totally employed in the entire business group
significant one…
under the NACE 36 code. Out of other industries in the mentioned
business, according to the amount of totally realized revenues, the sectors
of other manufacturing industries and jewellery manufacture can be
singled out.
During 2004 there were 365 companies registered in the Republic of

Croatia, the primary business of which was furniture manufacture. At the
same time the mentioned companies employed approximately 11,000
persons.
In the period from 1993 to the end of the third quarter, 27.92 million USD
of foreign proprietary investments were recorded in the Republic of
27.92 million USD of
foreign proprietary Croatia. Investments were made in 15 companies with furniture
investments was
recorded… manufacture as their primary business. During 2004 furniture was
exported in the amount of 217.4 million USD, whereas the value of
imports was greater and amounted to 287 million USD.
2. Industry definition,
segments and limits
2.1. Industry products definition-
segmentation
According to National Classification of Business the furniture manufacture
The furniture
manufacture itself (NACE 36.1) itself can be additionally divided into following sub
can be additionally
industries, depending on product kind:
divided into
following sub
industries…
¾ Manufacture of chairs and seats (NACE 36.11)
¾ Manufacture of miscellaneous furniture for business and sales
premises (NACE 36.12)
¾ Manufacture of miscellaneous kitchen furniture (NACE 36.13)
¾ Manufacture of miscellaneous furniture (NACE 36.14)
¾ Manufacture of mattresses (NACE 36.15)
Each of the above mentioned sub industries can be further subdivided

depending on kind, dimensions, purpose and product's manufacturing
material. At the same time the above classification mostly matches
international trading and customs classifications.
Considering the very manufacturing technology, furniture can be divided

into massive, panelled and upholstered furniture. Under massive furniture
Considering the very manufacture we include timber wood manufacture of seats, tables and
manufacturing
technology, furniture chests of drawers, which usually represents the most appreciated furniture
can be divided into
massive, panelled segment. Panelled furniture accounts for the majority of totally
and upholstered manufactured furniture, particleboard being the most used material coated
furniture…
with decorative materials, mostly veneer.
Besides, considering the frequent mistake and mixing of secondary wood
processing and furniture manufacture, we deem it necessary to explain the
difference between the two. Secondary wood processing refers to
manufacture of wood products, which do not need to be further processed
in order to be used for their end-purpose. There are still disputes among
professional circles whether parquetry and interior joinery (doors and
windows) should be included, considering the fact that they are used in
final fitting, but are not classified as furniture. On the other hand, furniture
manufacture comprises manufacture of furniture, which does not consist of
wood, but is primarily made of metal, plastics and/or glass.
2.2 Market size

In Croatia during 2004 there were 365 registered companies, their
In Croatia during
2004 there were primary business being furniture manufacture (NACE 36.1). The same
365 registered year mentioned companies realized total revenue of 340 million euro and
companies, their
primary business employed 10,920 workers. Also, all sub industries of furniture
being furniture
manufacture… manufacture industry recorded positive trends and business revenue
growth.
In 2004 total furniture export value amounted over 180.1 million euro.
Simultaneously, total of 242 million euro of furniture was imported, thus
generating commodity trade deficit of 62 million euro, in spite of
significant comparative advantages of Croatia.
Table 2: Revenues, number of companies and employees, productivity
according to furniture manufacture sub industries
Source: CBS (State's institute for statistics), HGK (Croatian Chamber of Commerce), FINA, author’s
calculation
Manufacture of seats and chairs (NACE 36.11)
During 2004 there were 38 companies registered in the mentioned sub

38 companies
industry, which realized business revenue in amount of approx. 52.6
registered realized
business revenue in million euro. Also, there were a total of 2,191 persons employed in the
amount of approx.
52.6 million euros… manufacture of seats and chairs. An average productivity, calculated as
business revenue per employee, amounted to 23,264 euro during the
concerned year.
In 2004 there were 2,476,602 pieces of chairs and seats manufactured

mainly upholstered wooden chairs (1,470,563 pieces) and non-
upholstered wooden seats (641,065 pieces). Manufacture structure shows
that Croatian manufacturers make mostly upholstered and non-upholstered
chairs and seats, whereas the number of manufactured armchairs, two-
seated and three-seated sofas was rather small.
During 2004, in comparison with 2003, seats and chairs manufacture

During 2004, in
comparison with increased by 422,202 pieces, i.e. manufacture physical volume increased
2003, manufacture
physical volume by 20.6%. At annual level, the most significant increase was realized by
increased by
9
20.6%...
manufacture of upholstered chairs with wooden frame and two-seated
sofas.
Along with production increase during 2004, an increase in seats, chairs

and specialized stools was recorded, as well. In the concerned year it
amounted to 105.2 million euro. In the export structure export of so-called
miscellaneous parts of seats and chairs prevails (44 million euro) and
chairs with wooden frame (nearly 27 million euro). During 2002 and
2003 positive trends in commodity trade with foreign countries were
recorded, as well, i.e. an increase in export of concerned products.
At the same time, seats and chairs import reached the value of 69.75
million euro during the observed year, out of which the most imported
were upholstered seats with wooden frame (26.1 million euro) and multi-
purpose seats (10 million euro). In recent years import has recorded an
increase, but with lesser intensity than export.
In spite of positive balance of foreign trade it is apparent that mostly parts

It is apparent that
mostly parts are are exported, i.e. incomplete products, while more expensive completed
exported, i.e. chairs and seats, i.e. upholstered and multi-purpose seat elements are
incomplete
products… mostly imported.
Table 3: Import and export of seats and chairs, EUR
Source: CBS, author's calculation
10
Manufacture of miscellaneous furniture for business and sales premises
During 2004, there were 71 companies registered in the concerned

manufacture, with their primary business being manufacture of furniture
71 companies
for business premises including seats and chairs. The mentioned
realized sales
revenue in the companies realized sales revenue in the amount of 37.35 million euro
amount of 37.35
million euros and and employed 876. Also, productivity of 42,638 euro per employee was
employed 876…
realized in furniture manufacture of the mentioned sub industry.
505,273 pieces of furniture for business and selling purposes were

manufactured during 2004, manufacturing majority of which was
classified as miscellaneous wooden office furniture, where even 240.531
pieces of furniture was manufactured. Significant manufacture was
realized in processing of shelves, metal furniture and wooden wardrobes
and wall-units, as well (around 60,000 pieces of annual manufacture
capacity).
In 2004, export value of furniture for business and selling purposes,

including medical furniture, amounted to 13.6 million euro. Majority of
Croatian export refers to wooden wardrobes sale (6 million euro) and
metal household furniture sale (4.5 million euro) on foreign markets.
The same year import value of the same products amounted to even 34.7
million euro and recently there has been an import increase trend of the
concerned products. More than half of imports refer to importation of
unclassified metal household furniture, whereas importation of office
tables accounts for 2.6 million euro.
11
Table 4: Import and export of furniture for business and selling purposes,
EUR
Manufacture of the remainder kitchen furniture
According to the latest information available, in 2004, there were 39

39 companies companies registered in the Republic of Croatia, there business being
employed 511
workers and realized kitchen furniture manufacture, seats and chairs excluded. The mentioned
sales revenue in the
companies employed 511 workers and realized sales revenue in the
amount of 10.8
million euros… amount of 10.8 million euro. The same year's average productivity
amounted to 21,237 euro.
In 2004, total of 129,550 pieces of exclusively kitchen furniture was

manufactured. In kitchen furniture production structure the most
represented were wooden cupboards production (43,909 pieces) and
wooden hanging units (42,784). In the same year there were over
33,000 kitchen tables manufactured. The physical production indexes
show a slight stagnation of the mentioned industry during 2004.
In 2004, a total of 900,000 euro worth kitchen furniture was exported.

During 2003 and 2004 export value of the mentioned segment sees a
constant decrease.
In the same year kitchen furniture was imported in value of even 23.85
million euro, almost 15 million of which refers to built-in kitchen units.
Unlike export, the import value of kitchen furniture has recently been on
12
the increase.
Table 5: Import and export of kitchen furniture, EUR
Manufacture of miscellaneous furniture
Sub industry of manufacture of miscellaneous furniture comprises mostly

In 2004, there were
manufacture of wardrobes, beds, wall-units and mirrors. Most companies
totally 212 registered
companies and are engaged in the mentioned manufacture segment. According to the
realized business
revenue in the latest information, in 2004, there were totally 212 registered companies.
amount of 207.3
The mentioned companies realized business revenue in the amount of
million euros…
207.3 million euro. Except for the highest number of companies and
highest revenues realized, the concerned industry employs even 6,838
and realizes productivity of 30,311 euro.
In 2004, a total of 1.09 million pieces of various furniture items was

manufactured in the industry of manufacture of miscellaneous furniture.
The biggest part of physical manufacture refers to manufacture of shelves
(284,793 pieces), wooden footwear furniture (185,978 pieces) and
various kinds of wardrobes and beds.
In 2004, domestic miscellaneous furniture manufacturers exported

commodities in value of 52.3 million euro, almost 40 million of which
referred to export of wooden unclassified furniture and wooden parts.
Recently, there has been a noticeable trend in export increase of the
mentioned manufacture segment, considering that in 2002 export
13
amounted to less than 46 million euro.
Commodities in value of 99 million euro were imported the same year,

majority of which referred to wooden household furniture and wooden
furniture parts.
Table 6: Import and export of miscellaneous furniture, EUR
Manufacture of mattresses
The least companies, only five, were registered in mattress manufacture

Only five, were sub industry. They employed 504 persons. However, with realized
registered in mattress
manufacture sub business revenue of 32 million euro during 2004, the concerned industry
industry…
realized the highest productivity within the entire furniture manufacture of
63,731 euro.
The manufacture of mattresses itself divides into manufacture of mattress

supports, foam rubber mattresses and metal springs mattress, and there
were totally 897,000 pieces manufactured in 2004. The biggest share of
manufacture refers to manufacture of mattress supports, 644,000 of which
was manufactured. When compared with 2002 and 2003, the mentioned
segment meets manufacture increase in all categories.
In 2004, mattresses and mattress supports export amounted to 14.2
million euro and in last few years it was stable. Majority of exports
consisted of sales on foreign markets of mattress supports, spring
mattresses and other bed equipment.
14
At the same time import amounted to 14.9 million euro, majority of which
referred to import of miscellaneous bed equipment and other mattresses.
Table 7: Import and export of mattresses, EUR
2.3. Labour supply

In analysis of labour force offered in the furniture production industry,
labour force was classified as specialists, i.e. forestry and agronomy
engineers, and labour force qualified for work in furniture production. In
analysis of labour market, qualified labour force includes:
- wood converters (mainly wood processors, carpenters for furniture
and tuners and operators of wood processing machines);
- manipulators/operators of wood processing machines
- manipulators/operators of machines manufacturing wood
products.
In the end of 2005 there were 457 unemployed forestry and agronomy
engineers in Republic of Croatia. In the same time, total number of
unemployed persons qualified for work in furniture production area
accounted for 3,007, mainly unemployed wood converters.
For forecasting of future trend at the labour market, it is important to point

out official statistics on new registered persons in 2005 as well. For
example, in the mentioned period at the Croatian Central Employment
15
Office (HZZ) there were new 477 graduated forestry and agronomy
engineers registered. During the same year, there was total of 2,427 new
registered unemployed persons qualified for work in furniture production
sector.
Taking into account current inflexibility, i.e. low mobility of labour force in
Croatia we consider that it is necessary to analyse the number of
unemployed persons, but also inflow of new labour force, at level of a
county. The highest number of unemployed graduated engineers is
recorded in Osječko-baranjska County and in the city of Zagreb. In 2005
in these regions inflow of the mentioned labour force was also the highest,
which is expected taking into account location of faculties of forestry and
agronomy. The largest number of unemployed persons qualified for work
in furniture production and wood processing industry was recorded in
Osječko-baranjska County, Splitsko-dalmatisnka County and the city of
Zagreb. Human resources in this branch of industry are also unused in
most of other counties, while the lowest number of registered unemployed
persons was recorded in the counties located in the northern part of
Croatia and in the counties along the sea. Similar trend were noticeable
in 2005 and if number of new registered unemployed persons qualified
for furniture production is analysed, then the highest number of new
unemployed persons was recorded in the city of Zagreb and the counties
in Slavonia region.
16
Table 8: Number of unemployed persons, end of 2005
Graduated Qualified
County engineers working force
Zagrebačka 21 130
Krapinsko-zagorska 2 111
Sisačko moslovačka 20 223
Karlovačka 16 158
Varaždinska 10 122
Koprivničko-križevačka 5 210
Bjelovarsko-bilogorska 10 143
Primorsko-goranska 11 127
Ličko-senjska 6 55
Virovitičko-podravska 25 248
Požeško-slavonska 8 54
Brodsko-posavska 16 81
Zadarska 11 81
Osječko-baranjska 118 304
Šibensko-kninska 7 63
Splitsko-dalmatinska 28 260
Istarska 5 29
Dubrovačko-neretvanska 11 47
Međimurska 3 52
Vukovarsko-srijemska 27 252
Grad Zagreb 97 257
Total: 457 3,007
Source: CES, calculated by author
17
Table 9: Number of registered new unemployed persons, 2005
Graduated Qualified working
County engineers force
Zagrebačka 30 108
Krapinsko-zagorska 5 82
Sisačko moslovačka 18 151
Karlovačka 15 99
Varaždinska 7 153
Koprivničko-križevačka 11 110
Bjelovarsko-bilogorska 31 135
Primorsko-goranska 17 120
Ličko-senjska 6 29
Virovitičko-podravska 20 182
Požeško-slavonska 9 99
Brodsko-posavska 15 155
Zadarska 27 86
Osječko-baranjska 107 267
Šibensko-kninska 5 43
Splitsko-dalmatinska 22 25
Istarska 10 46
Dubrovačko-neretvanska 7 42
Međimurska 6 73
Vukovarsko-srijemska 31 167
Grad Zagreb 78 255
Total: 477 2,427
Source: CES, calculated by author
18
3. Porter's model
Power of
suppliers
HIGH
Industrial Threat of
Entry barriers rivarly substitutes
HIGH HIGH WEAK
Power of
buyers
HIGH
19
3.1. Industrial rivalry analysis

The industrial rivalry analysis will be made on a sample of companies,
which, according to address book of Croatian Chamber of Commerce
(HGK), primarily deal in furniture manufacture. According to the
mentioned source, during 2004 there were 364 companies engaged in
furniture manufacture and they employed total of 10,920 persons. At the
same time the mentioned companies realized business revenue in the
amount of 340 million euro. As of the latest information on productivity
levels, measured by business revenue per employee, amounted to 31,140
euro.
Table 10: Business revenues and number of employees of the 20 most

significant furniture manufacturers in the RH
Source: FINA, HGK, author's calculation
20
For a more detailed industrial rivalry analysis we chose method of
calculating the concentration rate (CR) and Herfindahl - Hirschman index
(HHI) of realized business revenue during the concerned year on the
sample of 20 leading companies engaged primarily in furniture
manufacture and registered on the territory of the RH. If the HHI is
between 0 and 1,000 the market is considered not to be concentrated,
and if it is over 1,800 it is considered highly concentrated, but if it
approaches the level of 10,000 it indicates the existence of monopoly in
the concerned market segment.
According to business
revenues of the biggest According to business revenues of the biggest 20 companies, they realize
20 companies, they
realize almost 70% of
almost 70% of total business revenue of all furniture manufacturers.
total business revenue
Besides, their influence on employment trends in furniture manufacture
of all furniture
manufacturers… industry is also significant. Thus, the 20 leading companies employ 7,279
or 67% of the totally employed in this industry.
The three leading companies (CR5) as to the realized revenues in 2004

realize 33.5% of total revenues of the entire industry, while concentration
of the leading five accounts for 41.9%. At the same time, CR10, i.e.
revenue share of 10 leading companies, amounts to 55.2%. Herfindahl -
Hirschman index (HHI) for the 20 most significant companies, as to the
realized business revenue for 2004, amounts to 486, which indicates that
there is low concentration in the concerned industry, that is, competition
pressures are distinct.
That competition level

The mentioned concentration rate results and the HHI identify competition
varies between different
pressures on the level of entire furniture manufacture industry (NACE
furniture manufacture
segments… 36.1), however, according to domestic manufacturers experiences, can
be concluded, that competition level varies between different furniture
manufacture segments. Hence, for instance, on the Croatian territory there
21
are only a few manufacturers in the mattress manufacture segment.
Likewise, two companies additionally stand out as to the realized business
revenue amount. Hence, in the concerned furniture manufacture segment
concentration rate is higher and in this way competition pressures on
companies are reduced. Similar concentration rate level is present in
kitchen furniture manufacture, where three companies stand out as far as
business results are concerned. Lower rate of market concentration and
more powerful competition are more distinct in the segment of
manufacture of office furniture and seats and chairs. Considering that the
majority of manufacturers is engaged in the very segment of miscellaneous
furniture manufacture and that none of the companies significantly stands
out by the amount of business revenue, it can be concluded, that
concentration rate is the lowest in this very manufacture segment.
However, the above mentioned levels of market concentration and

competition pressures in segments of furniture manufacture should be
taken with certain reservation, due to the fact that the majority of domestic
manufacturers are not specialized in one segment of furniture
Domestic companies
manufacture. Domestic companies are usually not specialized in only one
are usually not
segment or in the very furniture production, but they are usually engaged
specialized in only one
segment or in the very in all phases of wood processing, as well. This includes primary
furniture production…
processing, too. This manner of unspecialized manufacture of most of
domestic companies takes effect on intensifying of competition pressures
among them, mostly due to a surplus of demand for hard timber over
supply. Besides, being engaged both in all wood processing phases and
in furniture production demands higher level of investments needed, which
increases fixed costs and makes it difficult to leave the market, thus having
a strong influence on the growth of industrial rivalry within the industry.
Likewise, high storage costs and low differentiation rate of domestic
furniture additionally influence the growth of competition pressures among
22
the companies themselves.
We can conclude that Due to everything that was mentioned above, we can conclude that
industrial rivalry rate is
industrial rivalry rate is high in almost every segment of furniture
high in almost every
segment of furniture manufacture, regardless of somewhat lesser number of domestic
manufacture…
manufacturers in certain sub industries. Only in mattress manufacture the
intensity of competitive powers is somewhat lesser expressed due to only a
few firms that currently produce mattresses in Croatia.
3.2. Market permeability, i.e. entry
barriers
The strongest barrier to come onto market of furniture manufacture in the

The strongest barrier is
extraordinary powerful Republic of Croatia is extraordinary powerful bargaining power of
bargaining power of
suppliers (such as Hrvatske šume d.d., HEP d.d.), i.e. there is a monopoly
suppliers…
in the supply of timber products. Current timber products supply system
has a discouraging effect on entry of new furniture manufacturers to the
territory of Croatia, because it warranties only mid-term timber products
supply and only if strict conditions are met. Likewise, the current system of
timber products price fixing is not entirely grounded on market principle.
Non-existence of developed timber products market and primary

processed lumber in Croatia, force companies into engagement in almost
every phase of wood processing, which includes investments increase and
high fixed costs. This has discouraging effect on entry of new companies
into furniture manufacture.
Also, as process of joining of the Republic of Croatia into the European
23
Union intensifies, the starting investment costs will be on the increase, due
to harmonization to European manufacture standards. It is expected that
most funds will need to be invested in systems for environment protection,
The starting investment drying and storage of timber products and dangerous goods disposal, i.e.
costs will be on the
increase, due to paint and varnish disposal. The mentioned higher initial costs could
harmonization to
European manufacture discourage potential foreign investors and could redirect their investments
standards…
into neighbouring countries, which have not yet been candidates for the
European Union membership and are not obliged to adapt their laws to
standards of the European Union.
Recently, competition of countries with lower labour costs, especially

China, puts pressure on furniture price cuts at global level, especially on
Competition of
countries with lower panelled furniture. Hence, it is very important nowadays to manufacture
labour costs puts
pressure on furniture furniture in assembly-line and in large quantities, in order to lower the
price cuts at global
level… limited fixed costs and to increase international competition. International
trend towards assembly-line manufacture orientation represents one of
entry barriers because it implies production in big series.
Similarity and already existing harmonization of domestic furniture quality

standards with those of West European countries, especially with the
Similarity and already

German, positively influences the entry of new companies on domestic
existing harmonization
market. Otherwise, there are currently two institutions in Croatia,
of domestic furniture
quality standards with Euroinspect d.d. and Šumarski fakultet, authorized to issue necessary
those of West
European countries… certificates. Companies which already do business on markets of the
European Union countries and the mentioned harmonization of domestic
regulations with the EU standards should give an additional impulse to
realization of investments in the industry of furniture manufacture in
Croatia.
In spite of the fact, that entry barriers are currently distinct, mostly because
24
there is monopoly of state-owned enterprise in timber sale, it can be
We can conclude that expected, that liberalization of the mentioned business is about to come.
intensity of entry
barriers is high… Current system of selling of timber is just a phase towards fully liberalized
market. This will have a positive influence on barrier reduction in entry of
companies into furniture manufacture in Croatia. But for now we can
conclude that intensity of entry barriers is high in the industry of furniture
manufacture in Croatia.
3.3. Threat of substitutes, i.e. substitute

products
In the industry of furniture manufacture probability of substitutes is almost

impossible. Current global trends have a favourable influence on increase
In the industry of
furniture manufacture in demand for furniture, due to ever faster obsolescence and shorter
probability of
substitutes is almost furniture lifetime, i.e. due to frequent changes in design and manufacture
impossible…
technology.
Possible threat of trend changes exists, i.e. there is growing orientation

towards greater manufacture of furniture made from other materials than
wood, that is, various metals, plastics and glass, where one of Croatian
major advantages-high-quality timber products-is not expressed so much.
However, despite the reduction of wood in furniture manufacture in the
past years, wood is expected to stay one of the most important raw
materials for furniture manufacture, because of its advantages when
compared with other materials.
25
3.4. Bargaining power of suppliers

Strongly expressed bargaining power of suppliers has currently the most
Strongly expressed
bargaining power of significant influence on domestic furniture manufacture. This refers
suppliers has currently
the most significant primarily to suppliers of raw material and electric power, i.e. to the most
influence on domestic
important goods, which are used in intermediary consumption during
furniture manufacture…
furniture manufacture. Considering that business in the mentioned
activities has not still been liberalized and there are state monopolies,
unfortunately, the current influence on domestic furniture manufacture is
negative.
According to the latest information, there are 2,485 hectares of forest on

the territory of the Republic of Croatia, which are intended for economic
exploiting, 81% of which is government property, mostly under the
management of Hrvatske šume d.d. (HŠ-Croatian Forests). Hence, as it
can be expected, majority of raw material in Croatia is sold by HŠ
Administratively
determined price of through public tenders, while ordinance established formula determines
raw material does not
entirely represent ratio the price. Exactly this, administratively determined price of raw material,
of demand and supply
on the market… which does not entirely represent ratio of demand and supply on the
market, has the most significant negative influence on the industry of
furniture manufacture, but on the entire wood industry, as well. Also, the
raw material distribution system is insufficiently transparent, if demand is
higher than supply, and it disables companies to plan long-term
manufacture.
Currently, the price of oak is bellowing the global level, which leads to
significant demand both domestic and international, which, in spite of
proportional forest resources, can not be satisfied. At the same time,
prices of fir and spruce, despite low demand and poor sales, do not
change and are above the global price level, which leads to fact that
Croatia imports the mentioned kinds of timber from other countries.
26
Likewise, quick changes of administratively determined price levels have
an unfavourable effect on domestic manufacturers and their business,
especially in short-term, because they do not manage to adapt at such
short notice to new market conditions and/or to transfer one share of costs
to its buyer.
Impossibility of making a contract of agreement with HŠ for term longer

than five years we consider one of the biggest obstacles in realization of
Impossibility of making
a contract of agreement
foreign investments into the industry of furniture manufacture in Croatia,
with HŠ for term longer
which is very important, if we take the investment return period into
than five years we
consider one of the consideration. Also, the current agreement structure comprises some
biggest obstacles in
realization of FDI… paragraphs, which have unfavourable influence on investment growth and
on development of the very industry of furniture manufacture in Croatia.
For instance, agreement with HŠ on raw material supply includes a
paragraph, which states, that the agreement would be terminated if
companies owners structure changes. The mentioned paragraph has direct
negative effect on realization of possible 'Brownfield' foreign investments
in the concerned industry. Likewise, the criterion on the number of
employees in companies, negatively effects on manufacture development
with the approval of agreement, because it discourages investments in
manufacture modernization and in this way disables productivity increase
and catching up with international competition.
Domestic manufacturers’ experiences show sudden electric power price

Domestic
changes, the most important energy supplier used in the process of
manufacturers’
experiences show furniture manufacture. Price changes mostly occur due to tariff model
sudden electric power
price changes… changes, which has negative effect on the manufacturers themselves
making long-term planning of manufacture and costs calculation
impossible for them.
27
We can conclude that extraordinary powerful bargaining power of
suppliers in the industry of furniture manufacture has the most significant
influence on determination of development perspective of the concerned
industrial branch. In spite of currently unfavourable effects of powerful
bargaining power of suppliers on trends in furniture manufacture, Strategy
of Government of the RH for wood industry development should lead to
reforms, which would eliminate the momentary negative effects of
monopoly on domestic manufacturers. This primarily refers to the
proposition of raw material market re-establishment, which would reduce
manufacturers' costs and would enable faster adaptation to current market
demand. Also, the liberalization of electric power supply should have a
positive effect on further development of the industry of furniture
manufacture in Croatia.
3.5. Bargaining power of buyers
Up to the declaration of independence of the Republic of Croatia the

majority of domestic manufacturers were mainly orientated towards
product sales on markets of the former state. When coming onto foreign
markets, manufacturers did not realize direct contact with foreign
wholesalers and retailers, but exported their products through the
distributor company of 'Exportdrvo'. After declaring independency and
loss of the former markets there were more intense endeavours to come
onto new markets. However, after the 'Exportdrvo' heavily reduced
furniture export volume of domestic manufacturers, manufacturers started
independently, with the help of Croatian Chamber of Commerce, to visit
fairs and make contacts with foreign buyers. However, low level of
managerial skills, inexperience and poor foreign language knowledge
unfavourably reflected on business co-operation intensification and
28
furniture export growth.
Due to globally increased competition in furniture manufacture, especially
Trend for more frequent of Chinese manufacturers, trend for more frequent direct co-operation
direct co-operation
between manufacturers themselves and retail chain stores has recently
between manufacturers
themselves and retail been evident, in order to avoid go-between agents and to reduce costs.
chain stores has
recently been evident… Likewise, due to increased competition and hyper-production of furniture
in some countries bargaining power of retail chain stores, which insist on
constant reduction of product prices, is on the increase, as well. Also,
decrease of furniture demand on our most important markets, especially in
Germany, additionally had influence on pressure increase on domestic
manufacturers to reduce theirs product prices.
Besides, a few domestic manufacturers manufacture parts or completed

furniture pieces directly for renowned foreign manufacturers, like TVIN
d.d. for IKEA. Domestic manufacturers manufacture according to the
buyer's ready-made plans and designs and participate minimally in the
product development phase itself. Bargaining power of buyers is, in this
case, even more emphasized, because in so defined business
relationship, buyers demand constant product unit price reductions while
the agreement lasts.
Main determining According to some recent market research main determining factors when
factors when choosing
to buy furniture are choosing to buy furniture are design and price, which additionally
design and price…
substantiates our conclusion, that bargaining power of buyers is
considerably expressed in the concerned industry.
29
4. The SWOT analysis

In the furniture manufacture we have defined the most significant
advantages characteristic for Croatia as follows:
¾ Availability of quality timber products – due to lesser intensity of
exploitation in the past and systematic care for forests, Croatia
abounds in high-quality raw material. While in Europe mostly
plantation forests exist, i.e. trees of lower quality are artificially
planted, Croatia on the other hand abounds in autochthonous
forests. Especially due to high-quality timber products, Croatia has
the biggest comparative advantage in manufacture of wood
furniture, as well as veneer manufacture, when compared to its
major competition.
¾ Tradition in furniture manufacture – long-time experience in high-

quality furniture manufacture both in large companies and small
handcrafts. There are firm foundations for further development of
this industry in experienced and professional labour force, both
workers, which participate directly in manufacture, and engineers.
¾ Lower labour costs than in the EU countries – represent significant

advantage of Croatia, but only in furniture manufacture with
higher added value due to quality and/or product design.
However, in other manufacture segments, especially in assembly-
line furniture manufacture prevail competition of countries with
considerably lower labour costs than in Croatia and use of raw
material of lower quality.
30
¾ Consumption increase on domestic market– in the last few years,
domestic demand records high increase of 8% per annum.
However, the majority of domestic demand is covered by an
increase in imports due to current orientation of domestic
manufacturers towards export.
The most important disadvantages of Croatian furniture manufacture in

comparison with other countries are:
¾ Current orientation towards low value added manufacture – result
of the former orientation exclusively towards countries of former
Yugoslavia. The mentioned kind of manufacture completely
disables exploiting of comparative advantages that Croatia has.
At the same time, assembly-line manufacture represents products of
lesser added value, which hardly find market, due to bigger
international competition in the concerned market, where the most
significant factor is product price. Croatian furniture manufacture
should exactly do the opposite and orientate towards manufacture
of quality furniture in small volumes, i.e. so-called small-volume
manufacture.
¾ Technological obsolescence of manufacture plants– exactly due to

termination of the former market, domestic manufacturers were
forced to invest in betterment of product quality and manufacture
improvement. Due to a long period of underinvestment, the level of
technological equipment of domestic manufacturers is significantly
bellow average of manufacturers in West European countries. At
the same time, complex conditions and high capital price disable
domestic manufacturers to modernize the plants in a shorter
period.
31
¾ No specialization of domestic companies– the majority of
domestic manufacturers participate in all phases of wood
processing, from raw material to the final product, i.e. furniture.
The majority of manufacturers are not focused on only one
segment of furniture manufacture, which makes it impossible to
specialize in individual production phase and they are not in the
opportunity to improve theirs manufacture and to reduce costs. At
the same time, this kind of manufacture organization negatively
influences companies' flexibility and possibility to adapt to
changes on market. Besides, there is no necessity for merging and
their mutual co-operation, for instance, through clusters, which in
some developed countries are leaders in furniture manufacture.
¾ Non-existence of raw material market– the majority of raw

material (approximately 80%) in Croatia is property of Hrvatske
šume. The mentioned company sells forests through tenders and
price is determined by the book of rules. Considering that quantity
of furniture manufacture varies significantly in the majority of
domestic companies and timber products is not always available
from Hrvatske šume, many companies are buying significant
quantities of raw material, which is then stored for a longer term.
Except for the financial loss by long-term storage itself, timber
products loose its quality, which is reflected on the final product
quality, as well. Likewise, term contracts on raw material purchase
and timber products wholesalers are lacking, which would take
over the costs of storage and.
¾ Non-existence of product development – according to certain

indicators even 65% of Croatian companied engaged in furniture
manufacture do not have department for product development,
32
and even 55% of them do not take designer services at all.
Besides, there is a common phenomenon of, even if manufacturer
and interior designer manage to co-operation, frequently the
suggested ideas can not be realized in practice. Considering that
the demand for furniture is mostly defined by design, not investing
in product development makes it impossible to stay on current
markets and to come onto new ones. Also, quality management is
quite neglected in domestic manufacture and only small number of
companies holds international certificates (approximately 3% of
the companies in wood industry hold ISO certificate).
Possibilities for further development of furniture manufacture are:

¾ Foreign investments of already renowned foreign investors - would
make it possible technologically to modernize manufacture and
would bring access to new markets. The industry of primary wood
processing and furniture manufacture already has drawn a
significant amount of foreign investments in the majority of
transitional countries, while they have so far generally failed to
come to Croatia.
¾ Acceptance of Austrian model of furniture manufacture, i.e.

clusterizaton– would make it possible for domestic companies to
specialize in individual phase of furniture processing and higher
manufacture flexibility, whereas the mentioned type of
organization has proved very successful so far. Likewise,
considering that nowadays furniture is not exclusively
manufactured from wood and more and more various metals,
glass and plastics are being used, it is necessary for companies to
specialize in certain segment of manufacture, due to an increase
in quality and decrease in costs. At the same time members of
33
wood cluster could profit both from favourable price of raw
material through the system of mutual supply and from the supply
of cheaper power, especially it refers to electric power.
¾ Proximity of the most important markets and joining the EU–

represents significant advantage for Croatia, when compared to
competition overseas. It enables processing and delivery to buyers
in considerably shorter time and constant tracking of trends on the
market.
¾ Sales increase on domestic market– considering the recent high

increase of the industry of tourism; it is realistic to expect an
increase of hotel industry investments in interior modernization and
revival. Involvement of domestic furniture manufacturers into hotel
supply chain would enable an increase in their sales, indirect
advertising of Croatian furniture and reduction of foreign trade
deficit.
In medium-term period potential threats in furniture manufacture

development are:
¾ Competition of countries with lower labour costs – considering the
current structure of Croatian manufacture, the competition of the
mentioned countries represents significant problem to domestic
manufacturers. However, by orientation of manufacture towards
products with higher added value, pressures of the concerned
competition should decline.
¾ Costs increase due to necessity of harmonization with the EU

standards – there is a realistic possibility that Croatian joining the
EU will bring legal obligation to domestic companies to harmonize
34
their manufacture with the EU standards, which will require
additional investments. It is considered, that most investments will
be made in the systems for environment protection and dangerous
goods disposal, like paint and varnish disposal.
35
5. The industry’s life cycle

The model we will refer to as the Industry lifecycle is the Hill and Jones
model. This model is a useful tool for analyzing the effects of an industry's
evolution on competitive forces. Five industry environments are identified
in this model:
1. An embryonic industry environment

2. A growth industry environment
3. A shakeout industry environment
4. A mature industry environment
5. A declining industry environment
1. An embryonic industry environment
The industry environment in the introduction stage is characterized by

market growth, little competition, new technology, heavy capital
investment requirements, and high prices. Market growth begins from an
extremely small base and builds rapidly. Primary demand for the product
begins to grow, and products are unfamiliar to potential users.
Competition is in the early, unprofitable stage.
36
Technological development involves a high level of product innovation
and technological change. Dominant technological designs and standards
have not been established, and the technology is not fully understood by
the creators. Only a few pioneers explore the market, and competitors
focus inward, directing their attention to their product rather than their
competitors.
The capital investment requirements are significant. Investment is needed

to support the costs of organizing a new venture and the development of
its new products and/or services. In addition, prices tend to be high but
quite volatile. Despite the high price and volatility, customers are willing to
pay a high price for the new products and/or services and are willing to
withstand explosions in the price level of the products and/or services.
Sales are few and may be slow to build as new markets develop.
However, as the industry develops, sales volume grows. Profits generally
are negative. The ventures generate little revenue but incur high levels of
expenses.
2. A growth industry environment
As the early adopters begin to try the product, a sale begins to grow and
profits usually start to follow. This is a great time for a company
introducing a new product because the company still enjoys a monopoly
early in the growth stage. The company is reaping all the sales and profits
of the new product.
As the early adopters begin influencing the early majority, sales and
profits sore. The competition has also been watching from the new
product's inception. Unfortunately for the original firm, the competition has
also noticed the new product's success. Although they cannot be the first,
the competition races to offer their own products and gain a share of a
37
growing market. Although total sales and profits continue to grow
throughout the growth stage, they are divided among many
manufacturers.
3. A shakeout industry environment
This phase is characterized by many products on the market and multiple

product variations. Competition is strong and companies are struggling for
a bigger market share. Although total industry profit is strong because
sales are high and many units are sold, profits per unit begin to decrease
and the market growth is beginning to level off.
After the initial mass entry, in this phase, producers are shaken off. This is
the stage where exits via mergers and bankruptcies take place of the
“frivolous”. Companies which revealed themselves as weak competitors’
leave the market and strong competitors take their place and challenge
themselves in the next stage of the industry cycle. The number of
competitors is still high.
4. A mature industry environment
By the end of the growth of the life cycle, the market is beginning to
become very competitive, and this trend continues into the early period of
the maturity stage. Besides many more manufacturers offering their
products, the producers continue the product-differentiation process begun
in the growth stage. The result is a market saturated with many
manufacturers offering many models of the product.
With so many companies now in the market, the competition for customers
becomes fierce. Although total sales continue to grow during the first part
of the maturity stage, the increased competition causes profits to peak at
the end of the growth stage and beginning of the maturity stage. Profits
38
then decline during the remainder of the maturity stage. The declining
profits mean that the market is not as attractive to companies as it was in
the growth stage.
In the growth stage, even inefficient companies made money. However,

only the best companies and their products survive in the maturity stage.
Manufacturers begin to drop out as they see profits turn to losses.
5. A declining industry environment
The number of companies abandoning the market continues and

accelerates in the decline stage. Fight for a market share between
companies is becoming over expensive, so the companies are forced to
consolidate or to go bankrupt. In this phase, not only does the efficiency
of the company play a factor in the decline, but also the product category
itself now becomes a factor. By this time, the market may perceive the
product as "old," and it may no longer be in demand.
The product will continue to exist as long as a few manufacturers can

maintain profitability. The laggards will resist switching to the alternative,
and manufacturers who can profitably serve this niche will continue to do
so. Eventually, even the laggards will switch, and the last companies
producing the product will be forced to withdraw, thereby killing the
product group.
The industry itself may continue to exist, whereas the product that
“created“ the industry “becomes history”. For example: vinyl record
created the music industry, but new products, tapes and CDs, replaced the
vinyl record. Music industry continued its lifecycle, only now with new
products.
39
Conclusion:
We have done analysis based on the top 20 companies in the industry.
The growth rate of the industry round three times higher than the GDP
growth in 2004. The EBITDA margin is stabile, and higher than the
The industry is Slovenian peer. Average revenue per company amounts round 12 Mio
placed in a shakeout Euro, that is 35% lower than in the Slovenian case. Slovenian sample
industry environment
shows us an indication of the mature phase in the industrial life cycle
(decrease in sales, lower margins). Bargaining power of buyers’ has been
increasing due to international competition on the local market, so we
expect further pressure on the margins. The Croatian furniture manufacture
industry is placed in a shakeout industry environment. As a result of that
we expect initiation of the M&A activities on a next 3-5 years period
together with pressure on the present margins.
The industry is
placed in a
shakeout industry
environment
40
List of the top 20 companies in the industry based on revenues:
List of companies
A-G DINAS D.O.O.
BOR D. D.
BRESTOVAC TVORNICA NAMJEŠTAJA
CALLIGARIS D.O.O.
CIPRIJANOVIĆ D.O.O.
D.I. SEKULIĆ D.O.O.
DRVNA INDUSTRIJA GELI D.O.O.
DRVNA INDUSTRIJA NOVOSELEC D.O
FINVEST CORP D. D.
GAJ-SLATINA D.O.O.
HESPO D.O.O.
KOSTEL PROMET D.O.O.
KRAGIĆ D.O.O.
L&P TEHNOLOGIJE D.O.O.
MUNDUS V.T.S. PROIZVODNJA I OPR
ORIOLIK D.D.
PRIMA COMMERCE D.O.O.
PROMMING D.O.O. ČAKOVEC
SPIN VALIS D. D. POŽEGA
TVIN D.O.O.
41
6. Competitiveness assessment –
peer group
Appendix
42
7. Conclusion
Despite plenty of wood raw material Croatia recorded relatively low
level of foreign investments into the industry of furniture manufacture.
Croatia recorded
relatively low level of In the following years, we expect development of furniture production
foreign investments into
the industry of furniture and further growth of international demand, but competition as well,
manufacture…
that could result in growing interest of foreign investment companies in
Croatia. Potential for realization of direct foreign investments exists,
especially in opening or buying of existing companies, which would
orientate themselves mostly towards manufacture of massive furniture,
i.e. seats and chairs and tables and chest drawers. Also, we see
potential for investment in custom-made manufacture of high-quality
furniture, as well, which would make the quality of domestic raw
material prominent.
Possibilities of investing in Croatia are not only limited to companies of

Possibilities of investing direct furniture manufacture, but there is also possibility of investment
in Croatia are not only
limited to companies of in companies participating in the supply chain. It refers primarily to
direct furniture
manufacture, but there opening of high-capacity saw-mills, which could supply not only
is also possibility of
investment in domestic manufacturers but also manufacturers in the neighbouring
companies
participating in the
countries, especially Italy. Currently the majority of primary wood
supply chain…
processing in Croatia refers to small saw-mills, which could hardly be
internationally competitive as to quality and processing price. Also,
there is certain potential for investment in companies engaged in
manufacture of metal pieces, door-handles and other metal parts used
in furniture manufacture, considering, that currently the number of the
mentioned manufacturers in Croatia is negligible.
43
Appendix: 1 CARDS 2002 Project
CROATIA Revenue in 2004 in € EBITDA 2003 EBITDA 2004 Revenue growth 03/04
Company 1 40.260.704 10,78% 6,61% -3,74%

Company 2 34.744.338 6,95% 11,20% 7,63%
Company 3 20.930.610 10,45% 15,11% 25,08%
Company 4 17.951.675 20,28% 22,88% 28,72%
Company 5 14.804.485 8,83% 9,29% -10,51%
Company 6 13.846.324 9,92% 7,43% -11,95%
Company 7 11.753.471 9,70% 18,89% 24,26%
Company 8 8.950.594 6,89% 0,86% 6,35%
Company 9 8.565.297 6,13% 4,05% 20,97%
Company 10 8.348.931 24,50% 26,80% 51,13%
Company 11 7.837.632 10,49% 11,78% 23,48%
Company 12 7.060.181 2,82% 4,06% 3,97%
Company 13 6.539.983 3,75% -0,93% 0,50%
Company 14 6.323.182 -1,44% -4,22% -4,49%
Company 15 5.799.158 19,87% 12,60% 23,69%
Company 16 5.781.819 14,63% 14,69% 4,67%
Company 17 4.774.893 22,68% 11,71% 308,75%
Company 18 4.345.890 -4,00% 1,84% 43,31%
Company 19 4.323.185 5,01% 5,32% -7,23%
Company 20 4.108.328 2,63% -2,12% -11,72%
Simple average 11.852.534 9,54% 8,89% 26,14%
Without Company 17 - outlayer 11,27%
SLOVENIA Revenue in 2004 in € EBITDA margin Gross margin Growth rates - last 5 years
ALPLES, D.D., ŽELEZNIKI 24.159.000 15,32% 39,60% -1,76%

BREST-POHIŠTVO D.O.O. CERKNICA 17.128.000 2,60% 27,03% -9,76%
GORENJE NO, D.O.O. VELENJE-GORENJE 39.118.000 7,63% 61,90% 3,28%
KLI LOGATEC, D.D. 19.260.000 4,26% 39,51% -4,32%
LIK KOČEVJE D.D.
LIKO VRHNIKA, D.D. 21.718.000 7,08% 34,74% -0,95%
LIPA AJDOVŠČINA D.D. 10.879.000 -6,40% 22,48% 6,63%
NOVA OPREMA D.D. SLOVENJ GRADEC
NOVOLES D.D. STRAŽA 26.695.000 4,51% 34,86% -6,92%
POHIŠTVO BREŽICE d.d. 6.267.000 4,69% 20,10% -1,07%
ROGAŠKA LES d.o.o. PODPLAT 3.500.000 -5,65% 40,94% 1,90%
SVEA, D.D., ZAGORJE OB SAVI 16.984.000 6,57% 27,06% 0,67%
Simple average 18.570.800 4,06% 34,82% -1,23%

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INDUSTRY ANALYSIS

According to other source, a hundred companies with more than 10

In the commodity trade of the Republic of Croatia with foreign countries

Source: wiiw, calculated by author

Among the business group under NACE 36 code furniture manufacture is

During 2004 there were 365 companies registered in the Republic of

Each of the above mentioned sub industries can be further subdivided

Considering the very manufacturing technology, furniture can be divided

2.2 Market size

Manufacture of seats and chairs (NACE 36.11)

During 2004 there were 38 companies registered in the mentioned sub

In 2004 there were 2,476,602 pieces of chairs and seats manufactured

During 2004, in comparison with 2003, seats and chairs manufacture

Along with production increase during 2004, an increase in seats, chairs

In spite of positive balance of foreign trade it is apparent that mostly parts

Table 3: Import and export of seats and chairs, EUR

Source: CBS, author's calculation

During 2004, there were 71 companies registered in the concerned

505,273 pieces of furniture for business and selling purposes were

In 2004, export value of furniture for business and selling purposes,

Source: CBS, author's calculation

Manufacture of the remainder kitchen furniture

According to the latest information available, in 2004, there were 39

In 2004, total of 129,550 pieces of exclusively kitchen furniture was

In 2004, a total of 900,000 euro worth kitchen furniture was exported.

Table 5: Import and export of kitchen furniture, EUR

Source: CBS, author's calculation

Manufacture of miscellaneous furniture

Sub industry of manufacture of miscellaneous furniture comprises mostly

In 2004, a total of 1.09 million pieces of various furniture items was

In 2004, domestic miscellaneous furniture manufacturers exported

Commodities in value of 99 million euro were imported the same year,

Table 6: Import and export of miscellaneous furniture, EUR

Source: CBS, author's calculation

The least companies, only five, were registered in mattress manufacture

The manufacture of mattresses itself divides into manufacture of mattress

Table 7: Import and export of mattresses, EUR

Source: CBS, author's calculation

2.3. Labour supply

For forecasting of future trend at the labour market, it is important to point

Source: CES, calculated by author

Source: CES, calculated by author

HIGH HIGH WEAK

3.1. Industrial rivalry analysis

Table 10: Business revenues and number of employees of the 20 most

Source: FINA, HGK, author's calculation

The three leading companies (CR5) as to the realized revenues in 2004

That competition level

However, the above mentioned levels of market concentration and

3.2. Market permeability, i.e. entry

The strongest barrier to come onto market of furniture manufacture in the

Non-existence of developed timber products market and primary

Also, as process of joining of the Republic of Croatia into the European

Recently, competition of countries with lower labour costs, especially

Similarity and already existing harmonization of domestic furniture quality

Similarity and already

3.3. Threat of substitutes, i.e. substitute

In the industry of furniture manufacture probability of substitutes is almost

Possible threat of trend changes exists, i.e. there is growing orientation

3.4. Bargaining power of suppliers

According to the latest information, there are 2,485 hectares of forest on

Impossibility of making a contract of agreement with HŠ for term longer