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

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

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 improve existing 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

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 SERBIAN MARKET 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)

I Chapter 1. Introduction Parent Company Mirotin doo consolidates its accounts with these Serbian companies: Mirotin-Tisa, Sava Kovaevi, Fabrika ulja Banat, R.G. Eka, Mirotin Invest, Mirotin Vet, and Mirotin Energo. The biggest impact on Group business operation has three companies: Sava Kovaevi JSC , Vrbas, 94% ownership , Banat JSC, Plant oils, Nova Crnja 73% ownership, Eka 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.

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 Companys 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 competitors 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).

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 Porters 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

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.

Production:

- Wheat and crops production ( Sava K) - Milk production and cattle breeding ( Milk farm Dana) - Oil and fats production ( FU Banat ) - Fish production ( Ecka)

Mirotin Group

Trade:

- Oil products ( Mirotin , FU Banat) - Grains ( Mirotin, Sava K) - Industrial crops ( Mirotin) - Feedstock for nitrogen fertilizers ( Mirotin) - Artificial fertilizers ( Mirotin)

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 year as 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

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 Porters 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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groups 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 highlydemanding 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 research) 7. Payments behaviour (desk research) 8. What is market trends in agro business (literary research, desk research ) 9. Profitability (desk research) Research Objectives: (literary research and primary

1. What cause indebtedness with interest rate over 7% (primary research) 2. To prove investment according market demands 3. 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 matrix

needs

Primary

Secondary

Quantitative

What

is

alternatives

for

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

refinancing expensive loans Midterm investment loan for finance new Silos with capacity 15.000 T

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 companys 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 Serbias 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 in individual 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, longterm 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. Serbias 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 Deltas system, and a considerable part of the money from sale is thus expected to be directed to the enterprise.
Delta Agrar Operating income 2012 in EUR 192.135.602

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Sales income Operating profit Net profit

185.037.115 12.463.106 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 Operating income Sales income Operating profit Net profit

2012 in EUR 78.115.796 77.233.478 9.340.788 6.287.965

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 Operating income Sales income Operating profit Net profit

2012 in EUR 55.660.504 54.943.000 4.740.053 1.405.788

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, Serbias agricultural exports increased five-fold. Now exporters need investment to continue expanding, yet capital has been scarce since the financial crisis. IFC is helping Serbian companies 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

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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 Maral 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

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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
WHEAT MAIZE PEA SUGAR BEET DAIRY (milk)

2011 1,020,000 2,800,000 1,080,000 1,300,000 3,000,000

2012 1,431,039 1,890,943 805,656 1,169,917 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

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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 Kovaevi 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

25

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 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 agricultural

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

26

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. Companys 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

27

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
28

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 own sources -already invested Borrowed (Midterm loan)
2.457.822 857.822 1.600.000

With structure of costs: EUR fixed assets material services total: already invested
632.205 70.140 155.476 857.821

new investment
820.000 150.000 630.000 1.600.000

Total
1.452.205 220.140 785.476 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 EBRDs participation is providing interested banks with comfort and will demonstrate that lending against agricultural commodities is feasible.

29

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 competitive advantage 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 firms strengths, weaknesses,
30

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 firms 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
OPPORTUNITIES

Indebtedness-

capital

investment performed in past few year

THREATS

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

31

success and expansion on foreign EU market as well as Greece. Mission: profitable revenue from local and foreign market with better financial structure. VisionQuality 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 )

32

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 Companys 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.

33

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

34

upcoming several years. Almex , Matijevic, MK Commerc, Dijamant. However, Deltas 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.
Gant chart - Operational activities: 2013
20-Aug 10-Nov 17-Nov 24-Nov 1-Dec 8-Dec 15-Dec 22-Dec 29-Dec 5-Jan 12-Jan 19-Feb 20-Mar 20-Apr 21-Apr 19-Jun 25-Sep 19-Jul

2014
25-Aug 31-Dec 20-Jun 25-Jul 1-Nov 1-Sep 1-Oct

Activity

Start Date 19-Jul

Resource End Date

BPD Project : FUTURE AGRICULTURE LEADER IN SERBIAN MARKET Meeting with the Banks Meeting with the business partners Financial analysis of whole Group Refinance existing loans Investment in Silos with capacitzy of 15.000T

31-Dec

BDP Team Owners CFOs CFOs Owners

Organisational consolidation Improved sales - joint production

BDP Team BDP Team

Milestone Task finished

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
35

25-Oct

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 Kovaevi, Fabrika ulja Banat, R.G. Eka, 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

36

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

37

result in a substantial cost saving of EUR 5.8 million. The biggest competitor on domestic market is Victoria Group.
Victoria Group consolidated Operating income Sales income Sales on foreign market EBITDA EBIT Net profit 2012 in EUR 487.786.000 465.419.000 206.025.000 78.186.000 46.880.000 15.217.000

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.

38

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:

Profit and Loss Statement Forecast In TEUR (1EUR = 114RSD) Sales Income Operating Expenses Financial Expenses Gross Profit Tax Net Profit Year 1 4,179 3,424 18 738 111 627 Year 2 4,263 3,509 0 754 113 641 Year 3 4,348 3,577 0 771 116 656

Project Financial Flow In TEUR (1EUR = 114RSD) Total Inflows Sales Financing Own sources External sources Remaining investment value 1,172 909 263 1,172 Year 0 1,172 Year 1 4,179 4,179 Year 2 4,263 4,263 Year 3 5,521 4,348

39

Total Outflows NWC Financing Other OPEX Tax Repayment of loan Net Inflow

1,172 1,172

3,635

3,834

3,904

3,544 91

3,606 94 134

3,667 98 140 1,616

544

429

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.

BCR Total Inflow per years Discount Factor NPV Inflow Total Outflows per years Discount Factor NPV Outflow

In TEUR 4,179 1.03 4,058 3,635 1.03 3,530 4,263 1.0609 4,018 3,700 1.0609 3,488 5,521 1.092727 5,052 3,765 1.092727 3,445

Total: 13,963

13,128

10,463 1.25476733

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

40

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 &

41

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.

42

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:

43

Risks

Mitigates

Market Risks Volatility of margins,

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 The company is constantly improving and developing its products and business processes, providing accordance sustainable with development in

input prices; output prices; F/X exchange rate; Strong agribusiness Serbia Potential new competition drought temperatures and high competitors market in

Environmental Risks Risk from Industrial

Accidents.

internationally

accepted

principles and trends in business.

Financial Risks Higher indebtedness Loans with F/X clause Short term expensive loans Managerial Risks Key -man risk

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. Management is well-organized and business is run by professionals

44

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.

45

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

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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

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