How will Arctic cope with the challenges of financial crisis?

Monica Iavorschi is the first Romanian woman appointed at the helm of the biggest home appliance producer, Arctic, after its takeover by Turkish-based Arcelik. In the midst of a wrenching economic crisis, Iavorschi takes into account the likelihood of two variants – a best case scenario that involves a 5% growth from prior year and a worst case scenario wherein the turnover would shrink 10%.

Romania is the second biggest marketplace for Arcelik group in terms of market share

After six year experience in Arctic Romania, Monica Iavorschi, 35 (photo) stepped in last year as managing director of the company.

“There is a six-year experience, when I achieved insight on Arcelik group’s operations and local know-how. It was a daring decision of the group to appoint a Romanian at the helm of the company, but there is a strategy they apply more often at the international level. They have ultimately reached the conclusion that people from the local markets successfully manage to guide the company through ups and downs because they are much more familiar with the local economic environment, culture and so on and so forth. For Romania, the core objective is sales, and maybe this was the underlying reason for this decision. The up-to-date performance was positive”, Monica Iavorschi told Wall-Street.

Arctic holds a comfortable market share of 31.5%, which sends Romanian marketplace to No2 spot after Turkey for Arcelik group, the Europe’s third largest home appliance manufacturer.

If in 2008, Arctic reported a 3% increase in market share from a year earlier, for this year, the company deems a 1-3% increase as an “ambitious” goal.

“This first and core objective is to strengthen our position in the local market. We are the market leaders by far. Last year we recorded a roughly 3% hike in market share. A 1-3% increase for this year is however, an ambitious goal. When you hold a comfortable leading market share you are broadly exposed and it is hard to grow stronger. Nevertheless, last year we proved it is not something impossible to attain. Therefore, we will lay our odds on positive results this year,” says Iavorschi.

One of the appliance maker’s long-term plans, she said, is to turn Arctic into one of the biggest and most competitive producers in Central and Eastern Europe. This year we will try to cope well with this “different” market trend, I won’t call it devastating or profit making, because as in any other business we have to go through ups and downs. The important thing is to have a strict control on your business and to reduce spending enough to balance sales with costs”, says Monica Iavorschi.

Protection measures on a dwindling market

Romanian home appliance market nosedived 10% last year, while Arctic business fell 5%.

“In early 2008, nobody knew where the macroeconomy was headed; therefore we made plans for a regular year. The decline of the market was higher than we had expected. By achieving an important share, we partially managed to outperform the market. We had a mere 5% decrease. As long as you succeed to outperform the market, it is a great achievement”, said Monica Iavorschi.

As she notes, it is very important to “save every penny”, which would perfectly fit as the motto of a year marked by economic turmoil. The local home appliance maker has adopted a set of measures to improve the efficiency of its operations, such as spending cut by renegotiation of contracts.

“Spending cut meant the renegotiation of all contracts we have, starting with raw material suppliers to office suppliers. It is a great help for us to be able to convert euro-denominated costs into local-currency-denominated costs. We are also examining solutions to optimize process. If process optimization will help us survive, then that’s what we will do”, said Iavorschi.

The company has no intention to invest in production capacity increase or in the launching of new production line.

“The investment budget is roughly similar to that agreed last year, namely around 5 mln euros. We will keep our projects running, especially those designed to improve manufacturing efficiency. Some other projects were put off until June-July. We hope to have a clearer image on what is happening by then. If in 2009 proves to be not as bad as worse case scenarios set forth, we will start the engine for the other projects as well,” says the managing director of Arctic.

As for the marketing budget, Arctic allocated last year nearly 3% of its turnover for promotion and will keep investing in this field this year.

“Our marketing efforts could help us boost market share, but will not help us increase demand. We will continue investing in this segment, the strategy remains the same, and we will not increase our marketing spending.”

The company has 2,150 employees and for the moment it said it didn’t take into account any workforce or pay cut.

“A pay or staff cut is not an option for us. We have frozen recruitment drive for the moment. The salaries increased by a narrow margin, only inflation rate was covered”, Iavorschi explained.

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