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Sector Specific Sources of Competitiveness in the Western Balkans

Recommendation for a Regional Investment Strategy

image of Sector Specific Sources of Competitiveness in the Western Balkans

The Western Balkan region benefits from a cost-competitive labour force and geographic and cultural proximity to EU markets. However, cost competitiveness as a source of differentiation is not sustainable. Cost levels are increasing gradually in some sectors, reducing firms’ profitability. In order to sustain competitiveness, the Western Balkans needs to move up the value chain, from investing in automated technology to producing higher-quality goods and enhancing its human capital. This report examines the apparel manufacturing, automotive components and business process and technology outsourcing sectors, focusing on market competitiveness factors, industry key success factors and policy recommendations.

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Automotive Components

In recent years the global automotive industry has experienced sweeping changes. On the demand side, consumer requirements are evolving from better performance and reliability to a wider range of features at low prices. Styling and environmental awareness, in particular, have emerged as important drivers of consumer demand. On the supply side, rising material costs, falling car prices and ever stricter environmental regulations have increased pressure on carmakers to reduce costs in order to remain competitive. Focusing on cost reduction has led to important changes in the industry, in particular consolidation and increasing competition between major car brands. Stagnant worldwide sales, consolidation and product proliferation have contributed to excess capacity throughout the industry. In addition, increased competition has forced carmakers to shift their main focus from vehicle manufacturing to design, brand management and customer relationships. Carmakers are also shortening product lifecycles to compete for customer loyalty.

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