MBA International Trip to Croatia: Part 1 — A Struggling Economy Tied to a Communist Past

Last week, myself and 60 of my Auburn MBA cohort colleagues traveled to Croatia for our international business trip. We spent the first part of the week in the capital city of Zagreb visiting several different companies and then finished out the week in the beautiful port city of Dubrovnik.

I have split this into series of posts in order to more effectively cover all that I experienced and learned. This is the first post in the series, but you can find Part 2 here and Part 3 here.

Prior Research into Croatia’s Struggles

Before we even left for our trip, my group of 4 was tasked with researching the biggest financial issues Croatia faced. In our research, we discovered that Croatia has been regarded as one of the worst economies in the world.

This discovery, along with never really knowing much about Croatia, caused myself and many of my classmates to question why our professor had chosen Croatia for our international trip destination.

My impressions after visiting for a week hold true to a lot of the things that our research found, but there is still a few bright spots and areas of possible hope for the future that I will cover in Part 2 of this series. I decided to start with the bad stuff first, but the rest of my posts will do a better job of reflecting all of the great things I learned about Croatia throughout the trip.

Croatia’s Communist Past Under Tito and Yugoslavia

Prior to its independence in 1991, Croatia was a member of Yugoslavia and most of the history discussed by our guides and other people we talked to focused on the leadership of Yugoslavia President Josip Broz, more commonly known as Tito.

It was apparent from the very beginning that one of our guides, who came from one of the villages outside of Zagreb, had a more favorable view of Tito and Croatia’s past. She often mentioned that while Croatia enjoyed a few things like free speech now, many people were much better off under Tito’s rule.

Tito was a powerful ruler and benevolent dictator that did lots of good for Croatia while standing up to Stalin and other attempts at encroachment on Croatia.

It is this communist past and reliance on equal earnings for everyone that I think keeps Croatia as one of the worst economies in the world. Even after joining the European Union, Croatia has still failed to meet requirement that would allow them to ditch the Kuna and adopt the Euro.

The poor performance of the Kuna has led to very low wages for Croatia workers, especially those with higher degrees in engineering, science, and other highly sought after degrees in other countries.

A few people mentioned that a lot of Croats leave Croatia to make more money working worse jobs so that they may return to buy a home. One of our waiters even mentioned that he had an engineering degree, but chose to work as a waiter because he was able to make more money that way.

It is things like this that have caused Croatia to have a major issue with emigration. Since it’s independence and even more so now that Croatia is a member of the EU, Croats are leaving to pursue their careers while immigration is at a much lower rate.

More Traditional Companies are Set in their Ways

While we were fortunate enough to get to visit more of the progressive companies in Croatia, and I write about those more in Part 2, a few of the traditional companies that we visited or talked to, showed that they are still set in the past.

In the middle of the week, we went to visit the Kraš candy company. Kraš has had unique success by adopting an employee ownership business model after the transition from communism to the free Republic of Croatia. This way of business has allowed Kraš to succeed through the transition, but also posses more issues as the economy continues to grow.

Kraš is one of the leading chocolate and candy distributors for Croatia and surrounding areas of Southeast Europe. However, because they are limited in their adoption of automation, I don’t see Kraš being able to expand their market in order to truly succeed in the future.

The employee ownership program allowed Kraš to survive and thrive in the transition of Croatia, but now it is hard to bring in improvements through automation at the cost of laying off workers when the workers are the ones with direct investment into the company. Right now Kraš tries to implement automation naturally as workers retire or leave the company, but through our questions, it was apparent to many of us that this was not a great outlook for the future of the company.

Kraš wasn’t the only company that we spoke to that is reluctant to adopt new innovations. In Dubrovnik, my half of the cohort had to listen to a presentation from Atlantska Plovidba, a small ship company who barely survived the recent economic recession in Croatia and the rest of the world.

Instead of learning from their mistakes and trying to improve their ships after surviving the recession, Atlantska seems to be okay with just barely surviving going forward. While we lobbed a few “softball” questions after the short presentation, the man we spoke too couldn’t talk about their lead time and reiterated that the company was not choosing to adopt new innovations in the shipping industry including more environmental fuel methods like solar power and sails as well as automation of voyages.

The presentation from Atlantska was one of the worst we saw last week, which we later learned reflects the lack of importance placed on public speaking, critical thinking, and other common skills that are emphasized in modern education.

Public Higher Education in Croatia is Outdated and Failing

From the very first session we had, which was a panel discussion with people from various industries in Croatia, it was clear that higher education was lacking. While it is free to attend public higher education in Croatia, the University of Zagreb is ranked as one of the worst public universities in the world with over 600 different institutions above them.

The public universities use outdated methods of teaching and testing, which has led to a workforce that lacks skills. This is probably part of the reason that people like the waiter I talked about earlier have trouble finding well paying jobs with engineering degrees and other degrees that would require high salaries in most other parts of the world.

Private universities are starting to adopt new ways of teaching, however. While the private universities are less accessible than the public universities, hopefully their move towards more progressive education methods will shift towards public universities. This will have to be the case if Croatia wants to continue to develop as a young independent country and economy.

In Conclusion…

This post highlighted some of the big issues that I think are holding Croatia’s economy back and I think most of them are tied to the communist past. People throughout the trip stated that this was just a way of traditional thinking prevailing over new ideas and a reluctancy to change, but in my blunt opinion, it appears that a majority of Croats are just lazily wishing things were as easy as they were under Tito.

Croatia will have to follow the lead of the companies and progressive thinkers that we got to speak to during our visit if the county is going to thrive as an independent nation going forward. This post focuses on the bad parts of Croatia, but overall the visit and country were wonderful and I highlight most of this in the next two posts in this series.