- Establishing an Office
- Franchising
- Direct Marketing
- Joint Ventures/Licensing
- Selling to the Government
- Distribution and Sales Channels
- Selling Factors/Techniques
- Electronic Commerce
- Trade Promotion and Advertising
- Advertising
- Pricing
- Sales Service/Customer Support
- Protecting Your Intellectual Property
- Due Diligence
- Local Professional Services
- Web Resources
Chapter 3: Selling U.S. Products and Services
Using an Agent or Distributor
A carefully chosen local agent or distributor is the most
effective method for entering this market. Reliable and capable
representatives can be found. Some firms may lack sufficient
capital to handle product marketing and wide distribution. It is
recommended that a confirmed letter-of-credit be used in
conducting business with a new local partner since some firms may
have payment problems.
Financial Agency (FINA), the state-owned successor of The
Croatian Bureau of Payments (ZAP) provides information on the
creditworthiness of local companies. U.S. companies can contact
FINA to request a copy in English language of a Croatian firm's
BON-1, a credit report that provides information on the local
firm's credit history. The report costs HRK 215.00 (about $35.00)
and can be obtained by writing to:
FINA
Podruznica Zagreb
Odsjek boniteta
Ulica Grada Vukovara 70
10000 Zagreb, Croatia
Fax: (385)(1) 612-7522
Contact: Ms. Nevenka Brkic, tel: (385) (1) 612-7422
or Ms. Mirjana Mrcela, tel: (385)(1) 612-7426
FINA can also provide a copy of the end-of-year financial report
of the registered companies, but only in local language.
The report costs HRK 65.00 (about $10.00).
The U.S. Commercial Service at the American Embassy in Zagreb can
provide
International Company Profiles (ICPs) that encompass a
thorough background check on potential clients and
representatives. Reports include up-to-date information on
potential partners, such as: bank and trade references,
principals, key officer and managers, product lines, number of
employees, financial data, sales volume, reputation and market
outlook.
The following local organizations may also be useful in verifying
credibility of a potential local partner:
BONLINE d.o.o.
The representative of Dun & Bradstreet
Ms. Sanja Begovic
Tel: (385)(1) 3707-009
Fax: (385)(1) 3776-415
Email: bonline@bonline.hr
Croatian Chamber of Economy:
Attn: Ms. Anita Simac
Tel: (385)(1) 4606-771
Fax: (385)(1) 4606-782
E-mail: asimac@hgk.hr
The Chamber of Economy also has available online and in English
language a Croatian Company Directory and a Business Opportunity
Exchange database of local companies interested in working with
foreign partners (http://www2.hgk.hr/en/).
Establishing an Office
A representative office is not considered a legal entity under Croatian law. Rep offices are not permitted to conclude contracts in their names but only in the name of the parent company and must have their own local bank accounts. Rep office activities are limited to market research, contract or investment preparations, technical cooperation and similar business facilitation activities. A rep office is permitted to hold both foreign exchange and domestic currency accounts with authorized Croatian banks. Office equipment can be imported free of customs duties, on the basis of a temporary permit with the possibility for extensions. Office vehicles may be similarly imported, but only for the foreign employees. Foreign employees at a representative office are not required to pay local income taxes and contributions. Residence and work permits are required for foreign employees.
To open a representative office, the founder must register the
office at the Croatian Ministry
of Economy, Labor, and Entrepreneurship. The following
documentation must be submitted to the Ministry:
1) An application which contains the following information:
- name, address and business activity of the founder
- name and address of the representative office in Croatia
- name of the person that will be responsible for operation of representative office (evidence of citizenship required – certificate of citizenship or certified copy of foreign passport )
2) A decision of the founder (parent company) to establish the rep office;
3) A certified document proving registration of the founder in
the home country;
4) A decision of the founder to appoint the person in charge of
the rep office;
5) A copy of payment slip documenting that a fee of HRK 1,000
(about $160) has been paid (note: the fee for deleting the
representative office from the registry is also HRK 1,000 and the
fee for changing data in the registry is HRK 300):
Account Number: 1001005-1863000160
Payee (korisnik): Drzavni proracun
Purpose of Payment (svrha doznake): Upravna pristojba
Reference number (poziv na broj): 5002-company’s registration
number
6) A copy of the latest annual financial report of the founder;
7) A statement of the founder that it will be responsible for all of the financial obligations arising from the activity of the representative office.
All documents must be originals or copies certified by a notary
public and an authorized court translator must translate them
into Croatian. All signatures on the decisions (items 2 and 4)
and on the statement (item 7) must be certified by the public
notary or by appostilles. If documentation is complete and
correct, the registration procedure is a matter of not more than
a few weeks. The registration process is handled by:
Ms. Visnja Bengez
Ministry of Economy, Labor, and Entrepreneurship
Ulica grada Vukovara 78
10000 Zagreb, Croatia
Tel: (385)(1) 610-6981
Fax: (385)(1) 610-9150
E-mail: visnja.bengez@mingorp.hr
For information on establishing a Croatian company: The Croatian government established a One-Stop-Shop service in 2005 named “Hitro” (in English – quickly) to assist investors with handling the administrative procedures for establishing a company and related issues (www.hitro.hr).
Franchising
While some franchises already operate in Croatia, this business concept is relatively new and is attracting interest among local entrepreneurs. Opportunities for U.S. companies in this sector will be rapidly increasing in the years to come. To obtain an updated franchise sector report on Croatia, please contact Damjan Bencic, Senior Commercial Specialist, at American Embassy Zagreb at Damjan.Bencic@mail.doc.gov .
Direct Marketing
Although direct marketing is becoming more common in Croatia, it is still in its early stages compared with developed Western countries. An average potential customer is unlikely to get more than a few phone calls a year to his home number made by companies to market their services or products. For the time being, local banks and insurance companies are making most of these calls. Direct marketing by mail is far more common and households receive such mail on a daily basis, typically from local supermarket chains, restaurants, and personal services providers. Credit card companies regularly include in their bills special offerings of various consumer goods in partnership with other companies. However, the sale of mailing lists is still rather limited. Mail-order houses are also relatively rare.
Joint Ventures/Licensing
The Law on Companies regulates the establishment of joint-ventures, investment in companies with mixed ownership, as well as other types of foreign or domestic investment. This law, adopted in 1994, is very similar to the German Company Law. Establishment procedures require a Croatian lawyer, a notary public, and registration with the local Commercial Court
There are no specific laws regulating licensing other than the Law on Obligations ("Commercial Code") which addresses contract law. The licensing contract should also cover intellectual property rights issues (trademark, model, patent or copyright), payments/royalties, the term of the contract, restrictions on using trademarks, etc. (See Chapter 7 for more information on intellectual property rights.) A Croatian lawyer should be consulted to ensure that provisions of the contract do not contravene Croatian law, making the agreement null and void.
Selling to the Government
The Public Procurement Law is applied to all purchases made by government bodies including those of the local government and majority state-owned companies and institutions (Official Gazette No. 117/01; the unofficial English translation is available from the Commercial Service of the American Embassy Zagreb). These institutions, (which also include some of the key utility and transportation companies, such as INA, Plinacro, HEP, JANAF, Hrvatske vode, Hrvatske sume, Hrvatska posta, Hrvatske zeljeznice, Hrvatske ceste, most hospitals, schools, some banks and insurance companies, etc.), are obliged by law to perform most of their procurement by public tenders.
According to the law, tenders for regular, small-scale procurement of equipment, spare parts, supplies, and services with a value not exceeding HRK 200,000 (about $30,000) in the fiscal year do not have to be published in the Official Gazette, but the purchaser is required to request offers from at least five vendors, except when the value is less than HRK 20,000 (about $3,000). For procurements of a value exceeding HRK 200,000, tenders have to be published in the Official Gazette, and usually (but not always) they are also published in local newspapers and on the companies’ websites (sometimes also in English language). Tenders for procurements of over EUR 5,000,000 have to be published in the Official Journal of the European Communities.
Because these tenders are often written only in the Croatian language and are not automatically available on these companies’ websites, U.S. exporters will not learn about them unless they have a local, Croatian-speaking representative that monitors the Official Gazette on a daily basis and alerts the company of the tender (an excellent public-tenders-tracking tool is available on-line for a fee, by automatic daily e-mail notification based on key-word search, at www.croatiabiz.com). Also, the representative can purchase the tender documentation on behalf of the U.S. exporter, discuss issues with the buyer, deliver the U.S. exporter’s bid, participate in the bids opening, etc (alternatively, these services are available from the American Embassy in Zagreb, for a full-cost-recovery fee).
For larger and more complex projects, it is of critical importance that the local representative, through frequent and personal contact, develops close relationships not only with the middle and top management of the client company, but also with its technical staff that is/will be preparing the tender documentation, to assure that the technical specifications are written fairly. Complaints on a specific tender should first be filed with the institution that had issued the tender, and then with the State Commission for Supervision of Public Procurement Procedure (http://www.dkom.hr) that is in charge of processing formal complaints concerning specific tenders. It is important to note that only a company that has actually submitted a bid can file a complaint regarding the tender, precisely following the procedure described in the Article 70 and 71 of the Public Procuement Law. No other complaints will be considered by the Commission.
Distribution and Sales Channels
Croatia's distribution system is formalized by the Law on Trade which regulates the activities of wholesalers and retailers. Stringent application of customs and import and tax administration regulations and rapid modernization of the domestic distribution sector significantly reduced illegal imports, unlicensed business activities and cross-border shoping which previously flourished.
The privatization of the distribution sector has been very
successful and the sector is now almost completely privately
owned, with many “green-field” investments made in the past
decade. Numerous small, old-fashioned, neigbourghood-type retail
shops have bancrupted as consumers switched to buying at the
newly developed shopping centers (such as Importanne, King Cross,
and Kaptol Centar in Zagreb), modernized or newly-established
domestic supermaket and retail chains (such as Getro, Konzum,
Diona, Prehrana, Pevec), and foreign chains that have entered the
market (such as Billa, DM, Merkator, Mercatone, Metro, Bauhaus,
Baumax, Kaufland). There are estimated total 7,500 retail
outlets in Croatia’s (including kiosks, small shops, and open
markets).
Capital goods and specialized equipment are normally sold
directly to manufacturers and businesses. When selling capital
goods or equipment to businesses, a good agent is essential
(American Embassy in Zagreb assists U.S. exporters finding an
agent through International Partner Search or Gold Key Matching Service).
Selling Factors/Techniques
Factors/techniques critical to success in Croatia are not different than from most other countries: a product/service that offers value for money, close and frequent contact with buyers, motivated and trained middlemen, aggressive market promotion, and, for technical products, a professional and customer friendly after-sales service network in place. The ability to provide financing is still important, but no longer the key selling factor since the financing from local banks became more easily available.
The size of the Croatian market is a limiting factor for many highly specialized products. For such products, it is very difficult to find a local representative as, whatever the margin, the potential sales volumes usually do not justify the costs of putting those products on the market.
Electronic Commerce
While the retail online transactions in Croatia still represent less than 1 percent of total retail trade in the country, e-commerce in Croatia is considered to be a common occurrence. The total value of e-commerce transactions is approximately USD 500 million per year, with around 85 percent of the figure attributable to business-to-business transactions
Trade Promotion and Advertising
The American Embassy in Zagreb provides valuable assistance to U.S. exporters promoting their products through the Single Company Promotion service.
Trade Promotion
Trade events and fairs continue to be popular in Croatia. The
single largest event in Croatia is the annual Zagreb Fall Fair
(September) which attracts nationwide attention and includes
numerous foreign exhibitors.
The Zagreb Fair authority also organizes a number of
industry-focused or specialty exhibitions during the year in
sectors such as consumer goods, food processing, environmental
technology, medical equipment, pharmaceuticals, automobiles and
automotive parts, information technology, textiles and apparel,
wine, etc. For more information on these events, please
contact:
Zagreb Fair
Avenija Dubrovnik 15
10 020 Zagreb, Croatia
Tel: (385)(1) 650-3111
Fax: (385)(1) 652-0643
E-mail: zagvel@zv.hr
Internet: http://www.zv.hr
Advertising
Advertising is a key marketing tool in Croatia. Nearly all
companies engage in some form of advertising. While the number of
publications is growing, television is the most important media
in Croatia. Outdoor advertising is also expanding. In fact, 59 %
of advertising expenditure went to TV, 14 % on newspapers, 10 %
on magazines, and 7 % to outdoor billboards. Radio is
experiencing growing interest, currently receiving 10 % of
advertising expenditure.
Television, which reaches 90 % of the market, has the broadest
reach of all media. Croatia has two state-owned and two private
TV channels as well as five regional and six local channels. The
law restricts advertising on state television to nine minutes per
hour for the first two national channels. Advertising on
privately-owned (regional and local) television stations can not
exceed 25 percent of total program length.
The advertising sector experienced 12 % growth because of the
extensive advertising campaigns of the mobile telecommunications
firms. The most advertised products are telecommunications,
vehicles, financial institutions, beverages and newspapers.
Croatian regulations prohibit television advertisement of
tobacco, alcohol, and spirits.
Magazines, particularly specialized magazines, are growing in
circulation. The six national daily newspapers account for 62 %
of advertising expenditures for print periodicals. The balance of
the revenue is shared among the sixteen high circulation
periodicals and over 45 other specialized magazines.
More than 6,000 billboards populate Croatia. Prices range from
$150 per month to $250 per month depending on frequency and
category. It is recommended that 150-200 billboards be used for a
nationwide launch campaign.
Key TV stations include state-owned Hrvatska Radiotelevizija, and privately-owned
RTL and Nova TV.
Key Internet service providers/portals include Hrvatski
Telekom, Iskon, VipNet, Globalnet, and Index. Foreign advertising firms with
offices in Croatia include BBDO, DDB, McCann-Erickson, Ogilvy & Mather, Lowe Digitel,
and Grey. Among the key PR agencies are Premisa, Madison, and Dialog.
There are a substantial number of domestic advertising agencies,
but most are very small. Also 90 % of international agencies are
in partnership with domestic agencies. (i.e. McCann is 50 % local
and 50 % international). Typically, domestic agencies are too
small to have enough clients for the biggest discounts on media
buying.
TV stations:
HTV – Marketing
Prisavlje 3
10 000 Zagreb, Croatia
Tel:(385)(1)634-3785; (385)(1)634-2322
Fax:(385)(1)634-3791
E-mail: dijana.majer@hrt.hr
Web site: www.hrt.hr
RTL
Krapinska 45
10000 Zagreb, Croatia
Tel: (385)(1)365-4280
Fax: (385)(1)365-4282
Web site: www.rtl.hr
NOVA TV
Remetinecka cesta 123
10000 Zagreb, Croatia
Tel: (385)(1)600-8350
Fax: (385)(1)600-8355
Web site: www.novatv.hr
Newspapers and Business Journals:
Vecernji List
Slavonska avenija 4
10000 Zagreb, Croatia
Tel: (385)(1)630-0600
Fax: (385)(1)630-0675
E-mail: vecernji@vecernji.net
Web site: www.vecernji-list.hr
Jutarnji list
Koranska 2
10000 Zagreb, Croatia
Tel: (385)(1) 610-3100; 610-3101
Fax: (385)(1) 610-3148; 610-3115
E-mail: jutarnji_list@eph.hr
Vjesnik
Slavonska avenija 4
10000 Zagreb, Croatia
Tel: (385)(1) 616-6666; 364-1111
Fax: (385)(1) 616 1650; 616 1602
E-mail: vjesnik@vjesnik.hr
Web site: www.vjesnik.com or www.vjesnik.hr
Poslovni Dnevnik
Savska 66/10
10000 Zagreb, Croatia
Tel: (385)(1)632-6000
Fax: (385)(1)632-6060
Web site: www.poslovni.hr
Slobodna Dalmacija
Hrvatske mornarice 4
21000 Split, Croatia
Tel: (385)(21)352-888
Fax: (385)(21)383-102
E-mail: glavniurednik@slobodnadalmacija.hr
Web site: www.slobodnadalmacija.com or www.slobodnadalmacija.hr
Novi List
Zvonimirova 20a
p.p.130
51000 Rijeka, Croatia
Tel: (385)(51)650-011
Fax: (385)(51) 672-114; 672-118
E-mail: nl-redakcija@novi-list.tel.hr
Web site: www.novilist.hr
Banka
MZB d.o.o.
Savska 28
10000 Zagreb, Croatia
Tel: (385)(1) 488-2600
Fax: (385)(1) 484-3083
E-mail: marina.ralasic@bankamagazine.hr
Web site: www.bankamagazine.hr
Privredni Vjesnik
Kaciceva 9
10000 Zagreb, Croatia
Tel: (385)(1) 4846-665
Fax: (385)(1) 4846-656
E-mail: redakcija@privredni-vjesnik.hr
Web site: www.privredni-vjesnik.hr
Business.hr
Ul. grada Vukovara 269D
10000 Zagreb, Croatia
Tel: (385)(1) 555-1600
Fax: (385)(1) 555-1678
E-mail: redakcija@business.hr
Web site: www.business.hr
Lider
Savska cesta 41
10000 Zagreb, Croatia
Tel: (385)(1) 633-3500
Fax: (385)(1) 633-3599
E-mail: vladimira.pavlovic@liderpress.hr
Web site: www.liderpress.hr
Nacional
Vlaska 40
10000 Zagreb, Croatia
Tel: (385)(1) 481-4111
Fax: (385)(1) 481-4393
E-mail: nacional@nacional.hr
Web site: www.nacional.hr
Globus
Koranska 2
10000 Zagreb, Croatia
Tel: (385)(1) 610-3200
Fax: (385)(1) 610-3204
E-mail: globus@eph.hr
Web site: www.globus.com.hr
Pricing
Liberalization of the market has put pressure on domestic producers to bring pricing down and more in line with costs. The level of prices in Croatia is generally high, even compared to prices of similar products/services in Western European countries and the United States thus making imported products price competitive. As Croatian currency Kuna is tied to Euro and U.S. exporters typically set their prices in US Dollars, Croatian importers/distributors often prefer to deal with European suppliers, to avoid dealing with problems that araise from strong USD/Euro exchange rate fluctuation. Value Added Tax (VAT) in Croatia is 22%, flat rate.
Price supports and subsidies have been stripped away and, as
mentioned above, price competition has intensified. Although
prices are generally determined by the market, certain
necessities are still subject to government control. For example,
price changes for milk and bread must be notified two weeks in
advance to the Ministry of Economy. Price alterations on
approximately 30 products must be reported to the Ministry of
Economy within three days of modifications. The government
retains the right to disapprove price changes although in
practice this has been rare during the last few years. The
government has the ability to influence pricing policy at
companies under its direct or indirect control.
Sales Service/Customer Support
Croatian distributors and end-users often complain that U.S. companies tend to provide much weaker sales service/customer support that their European competitors. There is a feeling of “being at the end of their list of priorities”, “not taking this market seriously”, or even “having take-money-and-run approach”. Another problem often reported by local representatives is that U.S. principals have little patience with the complex Croatian business environment and are setting unrealistic expectations. U.S. exporters able and willing to address these two issues will have significantly increased chances to succeed in the Croatian market.
Protecting Your Intellectual Property
Protection of Property Rights: In March 2004, the Croatian
Parliament ratified a
comprehensive bilateral Memorandum of Understanding on the
Protection of
Intellectual Property Rights, signed by the US and Croatia in May
1998.
Because of this progress, Croatia remained on the Special 301
Watch List,
rather than being named to the Priority Watch List.
The following local organizations may also be useful:
State Intellectual Property Office
Mr. Zeljko Topic, Managing Director
Ulica grada Vukovara 78, 10000 Zagreb, Croatia
Phone: 385/1/6106-101; Fax: 385/1/6112-017
E-mail: ipo.croatia@patent.tel.hr
Due Diligence
Detailed due diligence using utmost caution and assistance from experienced and well-connected local professionals is strongly recommended to investors in Croatia, but can be also very important to exporters when making decisions regarding a potential client or representative. One of the standard programs of the U.S. Commercial Service is the International Company Profile (ICP), designed to assist U.S. companies to enter international business relationships with greater confidence by providing background information on a prospective business partner.
Local Professional Services
Croatia offers a wide variety of high-quality professional services. See Web Resources section below for links to some key professional services providers and associations.
Web Resources
One-Stop-Shop for dealing with state administration: www.hitro.hr
Croatian Bar Association: www.odvj-komora.hr
Legal 500 Recommended Law Firms: http://www.legal500.com/lfe/frames/cr_fr.htm
Public Notaries: www.hjk.hr
Authorized Court Translators: www.sudski-tumac.com
Scientific and Technical Translators: http://www.drustvoprevoditelja.htnet.hr/
PricewaterhouseCoopers: (tax consultants/accountants): www.pwc.com/hr
KPMG (tax consultants/accountants): www.kpmg.hr
Ernst & Young (tax consultants/accountants): www.ey.com/hr
Deloitte & Touche (tax consultants/accountants): www.deloitte.com
Croatiabiz (business directory): www.croatiabiz.com
Zavod za poslovna istrazivanja (business directory): www.zapi.hr
Kompass (business directory): www.kompass.com.hr
American Chamber of Commerce in Croatia: www.amcham.hr
Croatian Chamber of Economy: www.hgk.hr
The Croatian Homepage (portal): http://www.hr/
Embassy of the United States of America: http://www.usembassy.hr/
U.S. Commercial Service Zagreb: www.buyusa.gov/croatia
Ministry of Economy, Labour and Entrepreneurship: www.mingorp.hr
Central Bureau of Statistics: www.dzs.hr
Croatia National Bank: www.hnb.hr