Business PlanFor exporting pistons and

segments to Hungary by the monopolist in their production in

Bulgaria :

"Drouzhba" Co.Razgrad

Company's ProfileCompany's ProfileProduct portfolioProduct portfolioPPrerequisitererequisites leading to successs leading to successCompetitors on the world marketCompetitors on the world marketReasons for selection of the particular marketReasons for selection of the particular market

FactorsFactors influencing market entry influencing market entryAApproaches for the introduction of the marketpproaches for the introduction of the marketCCost estimatesost estimatesRisk factorsRisk factorsSWOT analysisSWOT analysis

Company's ProfileCompany's Profile "Drouzhba" Co. - established in 1964 as a state owned company – member of "Drouzhba" Co. - established in 1964 as a state owned company – member of BALKANCAR Holding, producer of fork lift trucks. BALKANCAR Holding, producer of fork lift trucks.

2001: The company got International Quality Standard ISO 90012001: The company got International Quality Standard ISO 9001

2003: The company successfully started using ultra modern machinery line for 2003: The company successfully started using ultra modern machinery line for machining of pistons, purchased by the leading Japanese company TAKISAWA machining of pistons, purchased by the leading Japanese company TAKISAWA Co Co

2009: The company got the international quality certificate applicable for the 2009: The company got the international quality certificate applicable for the suppliers of the automotive industry - ISO TS 16949.suppliers of the automotive industry - ISO TS 16949.

““Drouzhba” Co. offers highest quality products for the following variety of engines: Drouzhba” Co. offers highest quality products for the following variety of engines: FIAT, PEUGEOT, RENAULT, MERCEDES, FORD, PERKINS, VAZ, MOSKVICH, FIAT, PEUGEOT, RENAULT, MERCEDES, FORD, PERKINS, VAZ, MOSKVICH, TAVRIA, ZIL, GAZ, IFA, LIAZ-MADARA, SKODA, YAMZ, IKARUS, MAN, KamAZ, TAVRIA, ZIL, GAZ, IFA, LIAZ-MADARA, SKODA, YAMZ, IKARUS, MAN, KamAZ, DACHIA, URSUS, WARTBURG, TRABANT, SIMSON, etc.DACHIA, URSUS, WARTBURG, TRABANT, SIMSON, etc.

Over the past years the proportion of sales of domestic and foreign market is 50 Over the past years the proportion of sales of domestic and foreign market is 50 to 50. The basic foreign markets are: Romania, Russia, Lithuania, Ukraine, and to 50. The basic foreign markets are: Romania, Russia, Lithuania, Ukraine, and little less presence in Turkey, Egypt, India, Algeria.little less presence in Turkey, Egypt, India, Algeria.

Product portfolioProduct portfolio

PistonsPistons

Piston ringsPiston rings

Piston PinsPiston Pins

PistonsPistonsAbility to achieve diameter ranging Ability to achieve diameter ranging from 40 to 150 mm. from 40 to 150 mm.

SSeveral casting methods:everal casting methods:-mould casting-mould casting-die casting-die casting-semi-liquid forging -semi-liquid forging

Piston CoatingPiston Coating Tin coating, in silver white color and Tin coating, in silver white color and

thickness of 3÷5 µm thickness of 3÷5 µm Phosphate coating in dark grey color Phosphate coating in dark grey color

and thickness of 1÷4 µm.and thickness of 1÷4 µm.Hard anodizing with thickness of Hard anodizing with thickness of

40÷80 µm.40÷80 µm.Graphite coating, with thickness of Graphite coating, with thickness of

12÷15 µm.12÷15 µm.

Piston RingsPiston Rings

Ability to achieve Ability to achieve diameters, ranging from diameters, ranging from 60 to 150 mm. 60 to 150 mm. Production, performed Production, performed under license and know-under license and know-how by “GOETZE” – how by “GOETZE” – GermanyGermanyCastingCasting: full set of : full set of equipment of "Goetze".  equipment of "Goetze".  Material:Material: raw materials,  raw materials, which have a guaranteed which have a guaranteed origin. origin. Surface coatingSurface coating: solid : solid chrome and phosphate. chrome and phosphate.

Piston PinsPiston Pins

Ability to achieve diameters, Ability to achieve diameters, ranging from 10 to 60 mm. ranging from 10 to 60 mm. Made from cemented steel. Made from cemented steel. Final polishing is achieved by Final polishing is achieved by precise unfocused rotation and precise unfocused rotation and active control machines, made active control machines, made by “Cincinnati-Milacron” USA. by “Cincinnati-Milacron” USA. Piston pins production is in Piston pins production is in accordance to the quality accordance to the quality standard DIN 73 126 standard DIN 73 126 QQualitative indexes: roughness ualitative indexes: roughness Ra 0.08mm and cylindricity up Ra 0.08mm and cylindricity up to 0.0015mm to 0.0015mm

PPrerequisitererequisites leading to successs leading to success1. 1. Introduced modern technologies in production :Introduced modern technologies in production : - - Installed Installed ultra ultra modern Japanese technology for mechanical modern Japanese technology for mechanical

treatment TAKISAWA treatment TAKISAWA - - Utilization of a new kind of mill with replaceable carbide head Utilization of a new kind of mill with replaceable carbide head - U- Utilization of manufacturing piston kit VW 1.9 SDI commissioned by MSI tilization of manufacturing piston kit VW 1.9 SDI commissioned by MSI

(KolbenSchmidt) - Germany (KolbenSchmidt) - Germany - - Received certification audit, category "B" from VW Received certification audit, category "B" from VW - - ISO 9001 Certification  ISO 9001 Certification 

2.2.Financial condition of companyFinancial condition of company::

- - Positive net working capitalPositive net working capital- - Sales growthSales growth- - Increase in accounting and book profit after taxationIncrease in accounting and book profit after taxation- - Double increase in the profitability Double increase in the profitability

3.3.Marketing Marketing activity activity of the companyof the company - - Established distribution channels Established distribution channels  - - Making a successful marketing communication, advertising,Making a successful marketing communication, advertising, sales sales

promotion . promotion .

Sales (in thousand EUR)Sales (in thousand EUR)

2002 2003 2004 2005 2006

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Competitors on the world marketCompetitors on the world market Major competitors Major competitors onon the international market: the international market:

- Kolbenschmidt- Kolbenschmidt- Federal Mogul- Federal Mogul- Mahle- Mahle

●● Other manufacturers of pistons and segments: Other manufacturers of pistons and segments:

- NURALNURAL – – GermanyGermany- Sealed PowerSealed Power - - USA USA- Art MetalArt Metal - - USA USA- AEAE – – United KingdomUnited Kingdom- AuridaAurida - Latvia - Latvia - United MotorsUnited Motors - - USAUSA- otherother ( (India, Turkey, ChinaIndia, Turkey, China))

Reasons for selection of the particular Reasons for selection of the particular

marketmarket Hungary is a producer of Ikarus buses Hungary is a producer of Ikarus buses

Membership of the two countries in the EU Membership of the two countries in the EU

Past partnerships with wholesalers in HungaryPast partnerships with wholesalers in Hungary

Lack of local Lack of local production ofproduction of piston kits for installation or  piston kits for installation or repairs repairs

LocationLocation

FactorsFactors influencing market entry  influencing market entry

Technological factors - the upgrading of Technological factors - the upgrading of technical andtechnological facilities of the company - a technical andtechnological facilities of the company - a key factor forkey factor for a producer like “Drouzhba” Co. for a producer like “Drouzhba” Co. for its successful development.its successful development. New technologies are New technologies are created for automation and mechanization of production created for automation and mechanization of production and reduce costs for materials, energy and labor.and reduce costs for materials, energy and labor.

This inevitably leads to lower production costs and This inevitably leads to lower production costs and thereforereduce costs and increase competitiveness. thereforereduce costs and increase competitiveness.

PPolitical factorsolitical factors      - Public relations with partners of the company      - Public relations with partners of the company      - Adoption of Bulgaria in EU      - Adoption of Bulgaria in EU      - Increasing Bulgaria      - Increasing Bulgaria’s investment rating’s investment rating

AApproaches for the introduction of pproaches for the introduction of the market the market

Export -  Export -  IIrregularrregular ExportExport - a passive form  - a passive form of entry, exportsurpluses, saleof entry, exportsurpluses, saless toto local wholesalers.  local wholesalers.

Contract manufacturingContract manufacturing - - contract between the company  contract between the company and amanufacturing company. The contract represents a and amanufacturing company. The contract represents a specific order with all requirements of the customer. Correct specific order with all requirements of the customer. Correct and professional execution of the contracts provide the and professional execution of the contracts provide the company's loyal customerswhile building and company's loyal customerswhile building and consolidate the image and prosperity of the company . consolidate the image and prosperity of the company .

CCost estimates ost estimates

1.1. costs of production - mass production will lead to a costs of production - mass production will lead to a prominenteffect of scale and thus cost of production will prominenteffect of scale and thus cost of production will decreasedecrease

2.2. costcostss of sales of sales 3.3. costs of costs of promotionpromotion4.4. shipping costsshipping costs5.5. costs for staff salariescosts for staff salaries6.6. costs for business trips costs for business trips 7.7. costs for services from third parties - distributors, costs for services from third parties - distributors,

consultants, marketing specialistsconsultants, marketing specialists8.8. insurance of productioninsurance of production9.9. depreciation depreciation

Risk factorsRisk factors

Financial - a change in exchange rates, interest rates Financial - a change in exchange rates, interest rates of of commercial commercial and and bank loans, betting against receivables bank loans, betting against receivables and credit periods granted and credit periods granted to customersto customers. .

Growth of prices in international markets the Growth of prices in international markets the company suppliescompany supplies 80%80% of of the the  rawraw  materials for production  materials for production

Price of fuel - for the last year has seen a rise in the cost Price of fuel - for the last year has seen a rise in the cost ofelectricity production by over 24% and gas by 5% ofelectricity production by over 24% and gas by 5%

SWОT analysis SWОT analysis SSTRENGHTSTRENGHTS► ► High quality of production.High quality of production.► ► Traditions and over 40 - years experience in manufacturing pistons and componentsthereofTraditions and over 40 - years experience in manufacturing pistons and componentsthereof ►  ► Highly qualified staff Highly qualified staff ► ► sole producer of most of thesole producer of most of the productsproducts► ► Flexible and rapid development activity.Flexible and rapid development activity.►►capable of producing a complete piston sets.capable of producing a complete piston sets.► ► High tech equipment supplied by leading companies.High tech equipment supplied by leading companies.► ► OOffers quality,based on 40 years of experience at competitive prices.ffers quality,based on 40 years of experience at competitive prices.

WWEAKNESSESEAKNESSES► ► WWeak presence of international markets in Central and Western Europeeak presence of international markets in Central and Western Europe► ► Incomplete capacity utilization.Incomplete capacity utilization.► ► Lack of quality certificationof suppliers of products for the automotive industry ISO / TS16949, which is Lack of quality certificationof suppliers of products for the automotive industry ISO / TS16949, which is

still in its infancy.still in its infancy.► ► depending on the price ofbasic raw materials - aluminum.depending on the price ofbasic raw materials - aluminum.► ► Lack Lack of of a clear marketing strategy to foreign customers.a clear marketing strategy to foreign customers.

OOPPORTUNITIESPPORTUNITIES► ► Future cooperation to supply products to major European automotive company.Future cooperation to supply products to major European automotive company.► ► joint venture with a large automotive company and / or possible offer shareholding of the leading joint venture with a large automotive company and / or possible offer shareholding of the leading

company in the automotive industry.company in the automotive industry.

THREATSTHREATS► ► Loss of markets - both domestic and foreign.Loss of markets - both domestic and foreign.► ► Reduction of sales due to increased costs of production due to the rise. Reduction of sales due to increased costs of production due to the rise.

We are the heart and We are the heart and the power of your enginethe power of your engine