General economic environmentAfter the rough and full of market turmoil years, as we expected 2016 and 2017 were way better. The economy was improving and recovering noticeably. As we predicted, there were a strong demand for our product during these years.
Despite some fluctuations in gross domestic product, cost of living and costs of employees, we can state that the economy was quite favorable for our company and our products in 2016, but we were experiencing some problems, because of sharp grow in economy and prices, in 2017.If we look back at 2016 and all of the four periods of that year, we would see that the gross domestic product grew by 2 % almost in every quarter. The main reason for that was strong demand and growth abroad of different companies. Those companies attracted a lot of investments and additionally, the domestic companies were successfully growing in domestic market, because the prices of certain materials were relatively cheap. Moreover, the high unemployment remained a big problem during these quarters in 2016. Because of this reason, many companies in the market, including and ours, were not able to provide any increase in wages for our employees.
Also, because of unemployment, the working time per employee was reduced. At the beginning of 2017, our company realized that this year will be very hard to survive. At that time, we realized that prices for our production is starting to increase very sharply. The economy of the market was showing very similar growth indices in GDP, cost of living, wages and salaries. During this year, these economic factors played a big role in our unsuccessful performance in the market.As soon as we realized that the domestic market could significantly affect our company in 2017, we were looking for different opportunities how to avoid this situation.
By the end of 2016, more accurately in quarter 4 of 2016, we decided to enter the other market which showed promising growth signs. It turned out that this decision was right. This market was market was growing significantly every period of 2017.
The average growth of demand in this market reached around 40% per period. We believe that this move helped us to protect our company from bigger losses in 2017. Raw materials pricesThe raw materials prices played a big role in our performance of 2016 and 2017. Starting with 2016, the prices of raw materials for our products were experiencing just a small increase. Therefore, we were able to produce our products relatively cheap, but our competitors were able to do the same thing as well.
As soon as, our suppliers felt that there is a huge demand for their raw materials, the prices started to grow very fast for our main product COPY 1. If we look at the prices of raw material for our new product COPY 2 that we introduced in the second period of 2017, we would see that they were quite favorable for us. We even were able to buy the raw materials for this product cheaper at the end of year than we did in the second period of 2016. COPY 1 marketsThe main market for our product COPY 1 was very unstable.
At the beginning of 2016 the expectations for this market where very high. The facts shows that the market was growing therefore we expected the better performance of our company in this year. Nevertheless, in period 3 of 2016 we realized that this market slowed down and after that the stagnation came into place. This stagnation lasted till the second period of 2017, and only in the end of 2017 we were able to realize some better performances of our company in terms of economic situation.
The other market that we entered in the second period of 2017, was quite stable and the demand for our product was increasing significantly. Only in the last period of 2017, the economy slowed down what lead to decrease in the demand for our product.COPY 2 marketsThe move to launch this product for our company was a good choice, since our predictions for demand of this product in both markets, proved to be right. Starting with second period of 2017, as soon as we launched this product, both of the market were growing significantly. The growth percentage reached 50% and more per period in each of the markets.
Our expectations for this product in upcoming years look promising. Since the market did not show any bad signs and it grows significantly, we expect that the launch of this product was a good decision and the further development will become even more successful in the upcoming years. Overall assessment by managementThe Copy Motors can look back at two periods, one of them is successful business performance in 2016 and the other one is more difficult performance in 2017.
Despite different issues, such as increased competition, increased prices, different uncertainties in the economy and national environment, the overall picture was pretty positive in terms of our company’s development. The results of operations and financial position were only met in 2016, because we believe that 2017 were not that satisfying in terms of these results. Overall management expectations were only met in 2016, but the most recent year was realized as a big disappointment by our management. 1. Financial and non-financial performance indicatorsThe following section provides information on the key performance indicators. Both types of indicators are used as the basis for managing the Copy Motors Company.
This part will be presented by comparing the forecast made before each year with the actual outcomes of 2016 and 2017.Net incomeFor the past two years, the company continued to invest in technologies and ecology in order to ensure environmentally friendly production. Nevertheless, the company met its expectations in terms of earnings. Despite increasing competition in the markets, the company was able to achieve the 8.8 million euros in profit before tax in 2016. This success was reached by phenomenal performance made by management in terms of improved financial planning.
After this excellent performance made by management in 2016, the company was expecting the further growth and improvement in financial results. Although, the competition was increasing and our market share was not that big as our competitors, we expected to be successful company in 2017 as well. Nevertheless, the results in the end of the year showed, that our expectations where demolished in terms of financial success. In the end of 2017, we had to announce the loss of 86 million euros. This result was not in line with management`s expectations, therefore we expect to offset this loss in the upcoming years.Workforce at year-endDuring the 2016, the company was increasing the number of workforce slightly.
This number was increasing together with the increasing production. At the end of 2016 we registered the total workforce in our company of 1,344 people. The slight increase in this number was due to the need for additional staff in marketing, research & development and production departments. By hiring a qualified staff, we expected to increase our sales, technologically and ecologically develop our products and to improve our manufacturing. In the end of 2016, we expected the slight decrease in our workforce. This prediction was made due to increasing absenteeism and comparably lower production. As we expected, in the end of 2017, the workforce number that was registered is 1,172.
This number was in line with management`s expectations. Customer satisfactionAt the beginning of 2016, our management registered the customer satisfaction index which was 88. One of the main goals, for our management was to improve this indices during the year. By the end of 2016 we were able to register the customer satisfaction index of 92.
By investing huge amounts in company`s and our products` development, the management expected the bigger grow in this index than it was reached. During the year our company tried to offer our customers the best ratio in terms of quality and price, but the competition in the market affected us a lot. The huge competition, made our customers look at the other products what lead to choices of other products instead of ours.Despite quite unsuccessful improvement in our customer satisfaction index, the company decided to develop the production further by analyzing the competitors more detailed. As we mentioned earlier, the 2017 was not the best year for the company, because of lower revenues, our company had to lower the expenses for development.
Because of this reason we were not able to improve our customer satisfaction level during the last year and in the end of year we registered the same customer satisfaction level of 92 as it was in the end of 2016.Technological developmentAs it is stated in our company`s mission, we want to provide technological and ecological products. For that reason we made a big investments in both of the areas. At the beginning of 2016 we registered the technology index of 101.4. The main aim of our company in terms of technology index, was to keep it above 100.
This mission was accomplished successfully. Because of different investments in technology development, we were able to register the index of 105.7 by the end of 2016.
The same goal was raised for 2017, and it was successfully achieved. Because of constant investment in technology we reached the index of 109.5 for COPY 1 by the end of 2017. This index helped us a lot in our market competition, because we were able to offer similarly technologically developed products. In addition, the other product which is COPY 2, could not reach the same level as our COPY 1 reached in technological development. The index of technology for COPY 2 registered in the end of 2017 was 84.
9. As soon as we launched this product, we did not expect to increase this index for our product, because of hard situation for our company in 2017. We lowered the investments in technology development during that year, therefore we expected just small increase in this index during each quarter. We believe that we will be able to increase this index for our COPY 2 product in the near future.
Ecology developmentAs it was cleared in description about the technological development, our company pays a lot of attention not on for technological development, but also for the products that are ecological. For that reason, together with the investments in technological development, our management was making investments in ecology constantly. By the beginning of 2016, the ecology index for our company was 101.7 and in order to keep it above 100, our company invested a lot of money.
By the end of 2016, we were able to announce that the ecology index of our products reached 104.3 for COPY 1. Since, at the very beginning of 2016 we got rid of all the production lines that are not environmentally friendly, we expected that the ecology index of our products will be even more improved. It did not turned out as we planned, the ecology index of our products was not affected by our environmentally friendly production lines.
Nevertheless, we are satisfied that we were able to keep this index above 100 and offer ecological products for our customers. The other product of our company COPY 2, could not reach the same ecology development as it was reached with the main product. It happened because of the reasons that were explained earlier.
The small investments in ecology development for COPY 2, let our management register the rate of only 63.7 in the end of 2017.Because of positive results in 2016, our management expected the further increase in ecology index for COPY 1. The expectations were met, because in the end of 2017 we were able to register the index of 106.
8. This index was slightly higher compared with 2016, but despite really small investments, we are happy that we were able to increase this index and achieve our goals.