Marwick 2/2016 ENG

MARWICKMarch/April 2016first-hand content

A magazine for clients and friends of KPMG Czech Republic

Are international sports events worth hosting? • Ten myths about customer experience • Interpreting the Labour Code:

an employer’s distressing journey • The Czechs – 1990 to 2015

CARS IN 2025:DIGITALISED AND INTERCONNECTED

na vysokou

na pracák

Až vyrostu půjdu:

Mladé lidi z dětských domovů je třeba motivovat.

Přidejte se!

✓

Pomáháme mladým lidem z dětských domovů a z pěstounské péče se správným výběrem studia a se vstupem na trh práce.

www.nadaniadovednosti.cz

Kpmg 2016_203x267.indd 1 21. 1. 2016 13:37:28

© 2016 KPMG Česká republika, s.r.o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.

The automotive sector awakens

Jan LinhartPartner in charge of

the Automotive SectorKPMG Česká republika

[email protected]@JanLinhart_cz

car makers don’t have much of a choice as they are under assault from the big IT companies who can’t wait to ad-dress users behind the wheel.

In fact, from an IT point of view, the time that people spend driving cars has so far been lost. The digital world can neither reach its users nor offer them its services. Car makers are aware of this and also know that the automobile cannot remain a locked box forever. Hence, in this issue of Marwick, we devote significant space to the future of the automotive world, taking place in an era where digital developments in all areas are gaining speed and decisions are going to be made by a new generation of users expecting to live in a fully digitalised world.

These people do not necessarily have to lose interest in cars, as is sometimes suggested. Their priorities are in-deed bound to change and car ownership will no longer be as important as it is today. Mobility as and of itself, i.e., the ability to get to wherever one is going on time, will come to the forefront instead of cars. New business models will appear, and along with them fresh entrepre-neurial opportunities. Mobility is a service and can be of-fered in a number of ways. Hence, the one ‘right’ path to be taken does not exist. Just as the digital world seems to be betting on increased individualisation, the same will apply to transportation. This change will be helped by the onset of autonomous mobility, enabling a much wider spectre of people than ever before to travel by car.

All these travels will have one factor in common, how-ever. Mobility involves costs to be borne by customers, who will not readily accept new models unless they deem them economically advantageous. And this will not only concern travel expenses, but will more often also involve a monetary expression of forgone personal time – espe-cially when it comes to the younger generations.

For years, there has been talk about fundamental changes awaiting the automotive sector. So far, however, car mak-ers and associated industries have been living in their own world, remaining there either intentionally or due to inertia, watching changes occurring around them. Now it seems that precipitous digitalisation is finally catching up to the automotive sector and that the transformations will be all the more pronounced.

In upcoming years, modern technologies are expected to change just about all areas of human activities and even fields considered conservative are making their peace with this. The automotive sector, so far leading with the number of innovations but only for its own benefit, is now bending to digitalisation pressures, realising that it has to get involved in the shaping of the future. And the

editorial

3


MARWICK

briefingTen myths about customer experienceIs the customer always right? Can the financial impact of CX be calculated? Customer experience experts put an end to the biggest myths in their field.page 6

topicThe benefits of sporting eventsInternational sports events inject millions into public coffers. But they could deliver a whole lot more…page 8

March/April 2016

Marwick – A magazine for clients and friends of KPMG Czech Republic. Published six times a year by KPMG Czech Republic, Pobřežní 1a, Praha 8. MK ČR E 22213. For subscriptions of on-line versions, go to www.marwick.cz. Editor-in-chief: Michaela Raková, art director: Štěpán Prokop, photo editor: Barbora Mráčková, proof-reader: Martina Ohlídalová. © 2016 KPMG Česká republika, s. r. o., a Czech limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

topicAutomotive trendsLeaders’ opinions on the future of cars have made an about turn. Digitalisation and connectivity will take over the motoring world by 2025.page 16

studyThe Czechs – 1990 to 2015Better off, but feeling worse. Why? KPMG’s study on the changes in the lives of Czechs provides answers.page 20

coffee break„The gig is a holy thing.“Josef Špaček, Concert Master of the Czech Philhar-monic on business on the higher levels of classical music.page 28

4

contents


Jindřich VašinaPartner

KPMG Česká [email protected]

Czech firms demonstrate how to succeed away from home

The first visible trailblazer in the area of active direct in-vestments was semi-national ČEZ, which for many rea-sons lately had to reduce both its plans and its activities in this field. In the same sector, already private energy groups EPH and Energo Pro have followed suit.

Among corporations actively building a positive reputa-tion for the Czech Republic with their activities on for-eign markets we also have to count the PPF/Home Credit group, which has truly become a global firm in the area of consumer financing. Successful abroad are also the software firms Avast and AVG; Linet, one of the biggest European producers of hospital beds as well as numerous glass, design, nanotechnology and precision engineering firms. Taking a closer look, we discover that the list of domestic firms which have succeeded in making a mark abroad goes on and on. Truly a very pleasant revelation!

In and of itself, the fact that these companies are success-ful on foreign markets proves their quality management and stable foundations. The firms also perfectly exemplify that even in our globalised world one does not have to be part of a supra-national corporation to be successful. What remains important are courage, good ideas, endur-ance and consistency in the fulfilment of one’s vision. The successful companies serve as role models for others and light the way towards successes away from the domestic playing field.

Recently, Czech companies have been increasingly looking towards foreign markets, not only as possible new destinations to which to export their goods and services to but also as possible targets for their direct investments. Our latest Pulse of the Economy Survey confirms this trend, as 68 percent of Czech companies shared that they planned to invest into a new foreign or domestic market within the next three years.

During the transformation of the Czech economy the influx of direct foreign investments by far exceeded in-vestments by Czech companies. This imbalance was of course most significant in the ‘90s of the last century and escalated with the initiation and culmination of the Czech Republic’s accession to the EU. The reasons for this were manifold: a low level of available capital, the cheap but at the same time qualified Czech labour force and favourable exchange rates. Due to a combination of these factors, lo-cal manufacturers did not feel the need to transfer their production sites abroad, as it was easier to rely on the ex-ports of domestically produced goods.

As Czech firms are gradually coming of age and becoming emancipated they are also changing their view on direct foreign investments. The owners of Czech firms have be-gun to understand that in many cases it is more advan-tageous to invest directly in foreign markets than to try to only export one’s production to them. Recently, this trend has also been supported by an elaborate system of investment and tax incentives, not only within the EU but also on American and Asian markets. For many investors this fact remains a big surprise.

5

commentary


Myth number one – Being customer oriented means doing what your clients want Imagine that a couple thousand years ago, a carpenter would have requested a market research study among cus-tomers involved in the transportation of heavy loads. The marketers would have found out that the customers really would like unbreakable levers and lighter back frame con-structions. Unfortunately, the carpenter would have never found out that he was to invent the wheel. Costumer ori-entation does not mean doing exactly what the customers want but to be inspired by the customers’ needs, to be crea-tive and to find and provide added value for them.

Myth number two – The customer is always rightThis myth is indeed a hyperbole but nevertheless has an accurate core. Our attitude towards customers must re-main positive under most circumstances. After all, it this them who feed us and our families. We will accommodate them even if they are not always in the right. On the other hand, let’s be honest – customers do know how to be im-polite, calculating and irresponsible. They are only human. Just like us.

Myth number three – CX’s financial effect cannot be calculatedIndeed, one single point in a customer satisfaction survey cannot be translated into x amounts of gross income. Nev-ertheless, if values can be put on brands, and nowadays hardly anybody will doubt that, then the experiences cus-tomers have with a company have them, too. Even things that are difficult to measure can be highly important.Good CX creates value in several ways: it reduces customer churn, lowers unnecessary expenses and supports sales. A satisfied customer doesn’t want to change anything, doesn’t have many service requests, shops repeatedly and makes recommendations. The importance of CX is growing due to the sharing of experiences on social networks, where potential customers often turn to get advice.

Myth number four – CX concerns only the B2C segmentThe name customer experience does logically imply cus-tomers who are natural persons. But not only individual end customers have experiences with companies, people in general do. And this involves also those who represent or manage another company. Within the company segment, however, a number of dif-ferent customer experience types apply to one client (com-pany): the firm’s management, people that are in constant contact with our company (i.e. the buyers or the compa-ny’s representatives) and the people who are the end users of our products. For a company which knows how to deal with its customers effectively, this provides many opportu-nities to create good customer experiences.

Myth number five – Ask and you shall find out You can conduct a lot of customer surveys with tens of dif-ferent in-depth questions and you still may feel that you are not getting to the bottom of it. Why? Maybe because the right question has not been asked, or maybe because it was asked but of the wrong person or at the wrong time. Here’s a couple of tips: In your most quantitative survey, re-place ten scaled questions with one open question asking for the reasons for the customer’s dissatisfaction; otherwise you won’t ever find out about it. Reduce the sophistication of your satisfied customer surveys – or you’ll only end up making them mad and won’t find out anything relevant. Instead, take advantage of the loads of feedback you are get-ting from your customers on your customer help line, in stores, on the web and the like.

Myth number six – Let’s first take care of the basics and then do something extra“Right now we are dealing with a lot of basic problems that have to be taken care of ASAP, we’ll deal with fine-tuning our CX once that’s done.” I have heard this said many times in many different ways. And yes, it appears and sounds logical.

Ten myths about customer experienceTo some extent, customer experience (CX) management is like brushing your teeth: its biggest effect will show only after a certain time. Often, the first tangible result is just the good feeling that you are running a customer-friendly business. In the long term, however, your customers’ greater satisfaction is bound to bring more concrete commercial results. Going back to our analogy, CX management in its specialised form has a shorter history that dental hygiene but a longer list of variants and myths surrounding it.

6

briefing


But appearances are often deceitful. A successfully developing company deals with both matters at the same time. The basics will never be one hundred percent. It’s sufficient to keep prob-lems from getting out of control. Customers have the wonder-ful ability to forgive mistakes – but only if there’s not too many of them, if they don’t feel cheated and if you can always offer them something that they can look forward to.

Myth number seven – CX is a KPI that can’t be influencedMaybe you’ve heard it said in your company, too: “Improv-ing customer satisfaction is one of our KPIs. If it works out, we’ll meet the target and there’ll be bonuses. But our chance to influence that is basically zero.” The reasons for this belief are twofold: Survey results change for no appar-ent and the results are the responsibility of everybody – hence it’s nobody’s fault. If a company indeed has only one number, then that really is demotivating. Ideal would be to have metrics in place evaluating everybody individually within their competence, but this is not always possible. The results of individual well-tuned KPIs together create a good score in overall numbers (e.g. a company’s NPS – net promoter score). At the same time, however, the company’s management has to lead by example in applying the three musketeer principle – one for all, all for one.

Myth number eight – CX concerns luxury goods…… and big money!? In reality, CX does not equal buying your customers’ loyalty. Such a business model cannot function successfully over time. Customers appreciate added value that is meaningful, so all it takes is to deliver the right service at the right time. Easier said than done, right? But if you truly understand your customer and are able to deal with them individually, you may actually get it right. And it even does not have to cost too much money. If you see an old blind lady trying to cross the road, you won’t necessarily have to pay for her laser eye surgery. It will probably suffice to ask her if she would like your assistance in getting to the other side.

Myth number nine – CX means listening to your customer’s voiceYou customer’s voice can be heard from a customer satisfac-tion survey in the aftermath of a delivery, after the custom-er’s visit to the store, after a meeting with the sales repre-sentative and after other similar interactions. But that’s by far not all. Customers express their opinions through their behaviour: customer churn, frequency of store visits, re-sponses to marketing campaigns, etc. To monitor your CX also means monitoring how the company functions in re-gards to its customers (quality of the products, accessibility of communication and service channels, etc.). In all cases it above all else holds that the customer’s voice cannot be ignored.

Myth number ten – CX equals NPS (net promoter score)Finally, one more myth which often is held by the top man-agement of a company. Hence, once and for all: CX really does not equal NPS. NPS is only one of many ways to ask about customer experi-ence. It compares the number of those who would recom-mend a company to those who would not do so. Just by it-self, NPS is a well-known and also probably a useful tool, but the perspective it offers equals a glance through the prover-bial keyhole. A company’s CX strategy cannot just consist of making NPS one of its firm-wide KPIs. In and of itself, that’s of course not a bad idea, but it may cover up the re-ally important and interconnected questions like: How does CX work within our brand and our business strategy? What do we need to change and improve? How will we measure our success? Would you like to find out more about CX management? At www.marwick.cz/cx you can test how advanced your company’s customer experience management really is.

Jan KlimešAssociate Manager

Management ConsultingKPMG Česká republika

[email protected]

Michal PobudaDirector

Management ConsultingKPMG Česká republika

[email protected]

7

briefing


On the first of May of last year, you could have heard foreign tongues more often than is usually the case on the streets of Ostrava. From the terraces of the Karolina shopping centre, people in the national colours of Finland and Russia were snapping pictures of the panorama of the Vitkovice steel works. The run on the observation tower of Ostrava’s town hall was also unheard-of. Souvenirs available at the town hall’s front desk were highly sought after. Fully booked ho-tels, restaurants and pubs doing a brisk business. Last year’s Ice Hockey World Championships perfectly exem-plify that hosting a sports event can bring a whole slew of benefits to the Czech Republic.

Experience and locationCanada sent its best team in years to the Czech Republic. In terms of visitor numbers, 2015 was the most successful ice hockey world championship ever. Restaurants as well as trains between Prague and Ostrava had no room to spare. Thanks to the Czech Republic’s geographic location, neither Latvians, Germans, Danes nor many others had to travel far. This is just one of the reasons why the Czech Republic is an

ideal venue for many sports events. Apart from its location in the heart of Europe it is also Prague’s beauty that attracts sports fans, as they can combine their favourite sports hap-pening with tourism. Data shows that when it comes to host-ing sports events, Prague is among the most visited cities in the world. And, on the other hand, such sports occurrences also attract fans for whom the Czech Republic would nor-mally not be a first-choice destination or those who would never visit at all. If they leave happy and satisfied, they will share their experience on social networks, show photos to their friends and maybe even return for a euro-weekend. The Czech Republic is an ideal host of international sports events for other reasons as well. International sports associa-tions trust this destination, plenty of occasions have been suc-cessful in the past and we have a lot of experience. Transporta-tion connections to the surrounding countries and the internal transportation network are solid and dependable. And another thing, which we often like to forget – it’s very safe here.

Hundreds of millions into public coffersThe hosting of sports events has even broader effects, how-

Championships in the Czech Republic pay off They bring hundreds of millions of crowns into Czech public coffers. But it’s not just about money – to host an international sports event makes excellent sense for a number of other reasons, as shown by data from several successful tournaments and championships held in the Czech Republic in the past.

Text: Zdeněk Mihalco, Illustrations: Jakub Bachorík

topic

8


ever. And this does not just involve the income from ticket sales. The events stimulate the economies of a number of re-lated sectors. Take, for example, the above mentioned passages between Ostrava and Prague – income from the sale of train and pub-lic transportation tickets flow into public budgets. Such ben-efits can easily be traced and calculated. Just on transporta-tion alone the visitors of the ice hockey championship spent ca. CZK 370 million, while food and drink were estimated to have come to CZK 600 million, with foreign visitors consum-ing the biggest part of this amount. “According to our calculations, the overall contribution of the last ice hockey world championships to public budgets exceeded a billion Czech crowns. These are the so-called ir-replaceable benefits emanating from the spending of for-eigners in the Czech Republic. These revenues constitute the main economic advantages of hosting events on the territory of our country,” says Ondřej Špaček, who at KPMG devotes his time to the sports and tourism sector. According to him, it generally holds that the benefits emanating from well or-ganised sports events in the Czech Republic significantly out-weigh any organisational costs. Interestingly enough, it is not as if only big international sports events would be worth it for the Czech Republic. Smaller events like last year’s European Athletics Indoor Championships and the UEFA European Under-21 Champi-onships also have a positive effect. This is also due to the pos-sibility to promote smaller venues, which would otherwise not receive many foreign visitors, like Olomouc, where the U21 championship took place, or already mentioned Ostrava.

What remains hidden?A number of other benefits are not that easily identifiable at first glance. A study conducted by KPMG two years ago for instance showed that the promotion of sports leads to a de-crease in public health expenditures. Every CZK 100 invested into health prevention through the support of sports activities may bring the state up to CZK 253 of savings in healthcare. Another benefit is the inspiration provided by successful athletes who become role models for children and youth. The Czech Ice Hockey Federation provided children with 35000 admission tickets for last year’s championship games free of charge. It has been proven that sports have a crime preventive function. Quite logically, the organisation of sports events also has a positive effect on the development and maintenance of sports infrastructure. Thanks to international sports com-petitions many a dilapidated stadium has undergone much needed reconstruction. Eventually, such renovated infra-structure ends up being used by the local population for both performance and recreational sports.A separate chapter ought to be dedicated to all the free world-wide advertising the Czech Republic gets through, let’s say,

television broadcasts. Indeed, together more than a billion television viewers watched last year’s ice hockey champion-ships alone. It is estimated that the championship provided media space for the promotion of Prague as a tourist destina-tion worth CZK 120 to 300 million, whereas Prague’s finan-cial contribution to this event was multiple times smaller. Plenty of unutilised potential lies especially in the area of mar-keting and advertising. A more comprehensive strategy on how to communicate during sports events is necessary. “Part of this should be close cooperation with CzechTourism, the Czech centre for the support of tourism, in the organisation of all crucial sports events. A couple additional shots of Prague panoramas, that’s advertising that would cost a fortune dur-ing regular broadcasting times,” Ondřej Špaček sums up.Additional opportunities can be found in the organisation of accompanying activities, like seminars, conferences or even trainer conventions.

Opportunities abound for hockey and volleyballOf course, once can never tell in advance if an event will be an unqualified success. But it nevertheless appears that the Czech Republic as a venue is more suitable for some sports than others. According to the KPMG study, the Czech Repub-lic is a great place for events in football, ice hockey, volleyball, tennis and basketball, while golf and cycling also offer inter-esting potential.Nonetheless, a number of risks exist, but event scenarios can be set up in such a way as to either minimise their impact or altogether avoid them. Among these risks are vandalism, ter-rorism, local protests and of course also the risk of the entire event falling flat. KPMG’s data also show that one of the main risks in organ-ising big sports events is the fact that the Czech Republic doesn’t offer ideal climactic conditions for some sports – this involves mainly winter sports. For other sports, the necessary infrastructure is just not there while others lack a significant fan base. What’s more, the cooperation between the public, private and non-profit sectors, essential in the effort to se-cure international sports competitions for the Czech Repub-lic, at times seems to lack a coordinated approach. Which is a pity, as the abovementioned data also show that the Czech Republic could easily be hosting a greater number of events than it is now, especially when it comes to those for which it already has the required infrastructure.

topic

9


How do sports events help the Czech Republic?

Tens of thousands of foreign visitors, spending money on food, beer and souvenirs. The benefits of successful sports events can easily be demonstrated with data from two recent tournaments analysed by KPMG. We are talking about the 2015 Ice Hockey World Championships and the 2015 UEFA European Under-21 Championships.

2015 UEFA European Under-21 Championship Venues: Olomouc, Prague, Uherské Hradiště

Massive amounts of foreign fans won’t be making their way to the Czech Republic for events of this type, but such happenings have other positive effects, as they involve the participation of highly placed and solvent representatives from major league clubs, who come to the championships to scout for Europe’s new football talents. The young foot-ball players showing off their skills are also an inspiration for Czech youth – similar events have a proven positive effect on the numbers of aspiring athletes and often times result in a lower crime rate as well as improvements in public health. The fact that towns like Olomouc and Uher-ské Hradiště, which usually do not host big events, got their time in the limelight can also be counted among the benefits of the championship.

Benefits:

→ Number of visitors: 163 000; 17 900 from abroad. → Overall number of annual fulltime positions utilised due to the event: 546.

→ Visitors spent approximately CZK 77 million on food and drink and ca. CZK 62 million on accommodation.

→ For transportation services, visitors spent ca. CZK 62 million, involving mostly public transportation, taxis, trains and inter-city buses.

→ The Czech Republic also received CZK 10 million to be spent on the further development of youth football.

→ On entertainment and souvenirs, visitors spent approximately CZK 32 million.

→ Public budgets recorded an increase of ca. CZK 125 million thanks to the championship.

topic

10


2015 Ice Hockey World Championships Venues: Prague, Ostrava

In terms of spectators, this event beat all records in the history of world ice hockey championships. Prague and Ostrava also hosted an extraordinarily high number of sports journalists and television stations all over the world broadcast a record number of games, even to less hock-ey-crazy nations. For food and drink, visitors, especially those from abroad, spent approximately CZK 660 mil-lion, whereas beer certainly constituted a significant part of this (for example in the special fan-zones of every ice arena). We should also point out that the consumed beer was of Czech provenance – as the Krušovice brewery was an official partner of the championships.

Benefits:

→ Number of visitors: 741 690, 32 percent from abroad. → TV stations broadcast 6 000 hours to 160 countries world-wide, 971 journalists received accreditation.

→ Overall number of annual fulltime positions utilised due to the event: 4 173.

→ Visits to the fan-zones: 1,2 million. → CZK 660 million spent on food and drink, CZK 370 million on transportation.

→ Total overall consumption connected with the world championships amounted to CZK 3,3 billion, with the majority coming from foreign spectators.

→ The inflow into public coffers exceeded a billion Czech crowns.

topic

11


How do sports events bring in tourists?Watching the games during the ice hockey world cham-pionships, viewers also got to see the logo of the Capital City of Prague on the boards. This logo also appeared in the short breaks between periods. Overall, the logo was visible on three to seven percent of all screen shots. If we were to try to put a number on this visibility, we would easily find out that this advertisement ended up being many times cheaper for the capital city than if Prague had paid for it in the media. Many other options are available to link similar sports happenings with support for incoming tourism, but these are currently underused by Czech event organisers. Fol-lowing are several tips and international examples which may inspire them in their future undertakings.

Let’s show the beautiful country the championships are taking place inAlpine meadows, the lavender fields of the Provence and the dark roofs of French historical towns. The beauty of the landscapes shown during the many hours of live transmission from the Tour de France bicycle champion-ships remind viewers probably more of BBC nature shows rather than of one of the most significant sports events in the world. Yes, the Tour de France last a bit longer than other sports occasions and thus offers more space for ro-mantic sightseeing, but it may nevertheless serve as an inspiration to basically any type of sports event we are intending to put on the Czech Republic in the future.

How to go about it?Organisers should assure the visibility of the Czech Re-public and the given region through spots on TV and on the internet. In practice, this may mean the visualisation of logos or symbols of the championship’s locality or the broadcasting of shots from museum exhibitions, panora-mas of historical town centres or interesting nature spots.

topic

12


Let’s offer more than just ticketsFans who managed to get a hold of tickets to the Europe-an Football Championships in Poland and in Ukraine got a little something extra as well. In the mail came, along with the admission tickets, also other materials – a plan of the city, instructions on how to find their way to the venue, a short tourist guide. It makes sense that visitors who come a relatively long way want to see something more than just the game they have tickets for. They usu-ally have some time prior to the game, between individual matches and sometimes they will even add an extra day or two on to their trip.

How to go about it?Visitors can be offered guides with trip suggestions, dis-counts on car rentals, tickets to concerts, to the theatre or to spas. This will motivate them to stay longer and to spend more money. All of this should of course be offered in a sensitive, clear manner and could even be person-alised according to the data the sports fan had to enter when ordering the ticket (age, gender, country of origin).

Let’s make sure that viewers hear and see all they can about our country“Welcome to Ostrava; welcome to a world championship ice hockey game. Ten minutes remain to face-off and only now some of our fans have taken their seats. What kept them was a sightseeing tour of the local steel mill, one of the unique sites of this surprisingly interesting industrial town.“ These could be the words out of the mouth of the, let’s say, Finnish commentator during a future champion-ship. The 2011 Rugby World Championships in New Zea-land, for example, did show that it is possible to “train” journalists to speak about the hosting country in superla-tives. At that time, commentators tried to entice viewers from all over the world to come for a visit.

How to go about it?Foreign broadcasters and journalists must have ample information about the place from which there are ad-dressing their audiences – they need to know about its history and what makes it so extraordinary for visitors. This means that they themselves should be offered an interesting programme by the organisers of events. Only then will they be able to convey to their viewers (and read-ers) what truly extraordinary place the pertaining sports association has chosen as the venue for its event.

topic

13


Interpreting the Labour Code: an employer’s distressing journey

The mutual rights and obligations of employees and em-ployers have not been set to be in equilibrium. The em-ployee is considered the weaker party. In contrast to the employer, dealing with labour law issues is not some-thing routine for employees and therefore the authors of the Labour Code have offered employees a number of concessions. That, in and of itself, would be quite alright. The source of an employee’s livelihood should indeed be protected. It becomes complicated when the judges adju-dicating labour-law disputes also feel the need to display their social empathy and apply rules ipso facto favouring employees to situations where the law provides no reason for this. The protection of employees in legal decisions at times takes on absurd proportions. When the dust has set-tled, it is often no longer obvious which of the two sides to an employment contract is left holding the better hand.

So what if work performance is unsatisfactory?Unlike the employee, the employer can only terminate an employment relationship for strictly defined reasons. And even if the employee’s behaviour meets the reasons pro-vided by the employer as to content, the court may still decide that the employee’s dismissal was wrongful, maybe because the employer selected an inappropriate justifica-tion for termination. The court may agree with the em-ployer that the employee is unfit for the job and deserves the pink slip, but feels that the type of notice given was wrong. The employer ends up paying dearly for what was merely a formal mistake and the slovenly employee wins. If employees become physically unfit to perform their jobs, employers may be better off forgetting about attempting to give notice. Consulting the Labour Code, one might get the idea that to terminate the employment relationship, all an employer needs is the opinion of the company doc-tor testifying to the employee’s insufficient health. How-

ever, nothing is ever that easy, and in their case law, judges have designated a number of conditions that employers must fulfil. Should even just one of them be missing, a ter-mination due to health reasons is bound to be void, be it that the employee has been declared fully disabled.

Don’t rely on the postal serviceEven if the employer manages to compose the termina-tion in such a way as to pass the judges’ muster, the bat-tle has not yet been won. After all, the notice still has to be validly delivered. Should the employer not be able to hand over the walking papers directly into the hands of the employee, the employer has to mail them. For the de-livery to become effective even if the employee, expecting the dismissal, preventively refuses to take over the mail, the envelope containing the pink slip has to list a caution mentioning the consequences of refusing delivery accord-ing to the Labour Code. Judges insist on literal compliance with the prescribed process, regardless of the fact that no mail service provider in the Czech Republic is able to offer services complying with the stringent delivery demands. Some attorneys have acquiesced in this game, having en-velopes printed and copying paragraphs from the Labour Code onto them. However, labour-law experts are already whispering that even this practice won’t satisfy the courts, as the law explicitly states that employees have to be in-structed about the consequences of refusing to accept de-livery by the carrier of the termination, i.e. verbally and not in writing. Rather than printing envelopes it appears that attorneys will have to conduct training courses for mail carriers instead.

Put a P.I. on the caseShould the employer against all odds have mastered the postal ordeal and if the termination letter was indeed de-

During our lives, most of us will find ourselves at least on one side of a labour-law relationship. Hence, even somebody without a law education will be able to guess what lies within the rights of employers and what can be considered „one step too far“. And if employers are not sure how to handle certain situations, they reach for the Labour Code. Surely, this rather thin rule book should be able to help employers find appropriate solutions. But alas, this is where the employer’s big error begins. As it turns out, when it comes to labour law, it does not always hold that “as it is written, so it shall be”.

legal

14


livered, it would nevertheless be premature to celebrate. Did the delivery really go to the “last address of the em-ployee”? According to the highest court, this address does not necessarily have to be the address which the employee provided as the current residence and which is on file with the HR department. Instead, it may be any kind of last address where the employee may have been staying and about which the employer could have found out. So, if the employee is on holiday, the employer should be delivering directly to the address of the employee’s holiday stay. The employer cannot hope to get far with the argument that temporary addresses are usually not known by employ-ers. If the employee in question mentioned the temporary residence to an arbitrary superior, according to the court, the address can be considered known by the employer and a delivery to any other address is not valid, even if the mailed letter may make it into the hands of the em-ployee after they return from their holiday. Hence, prior to sending off termination notices, employers would be well advised to diligently investigate their employees’ therea-bouts as well as extensively question their colleagues.

Who would want to bother with good morals?In private law relationships, it holds that any kind of be-haviour contrary to good morals is considered invalid. It would be a mistake to depend on such a principle when it comes to labour law. The employer who wanted to dissolve an employment relationship by agreement found out the hard way. The employee did not sign the agreement but instead only took possession of a document proving her employment, received unemployment benefits and was not seen at the employer’s for three years. The court nev-ertheless allowed her claim and decided that the employ-ment relationship was still ongoing.

Law makers not about to lend a helping handThe Labour Code formulates several employer obligations in a manner as to make them unfulfillable, no matter how hard employers may try. As an example we offer the obli-gation to pay for the maintenance of an employee’s protec-tive work clothes. The law does not mention how to cor-rectly determine the amount of money the employer must contribute to the employees’ laundry. If the employer pays out too little, the employee’s benefits are unlawfully short-ened and the employer may be fined by the labour office. If too much is paid out, the employer may be evading taxes, as the laundry contribution is not subject to tax. Get your calculators out. There are those who warn that not includ-ing the amortisation of washing machines or changes in the price of energy equals inviting over inspections.

The worst is yet to comeThe amendment to the Labour Code currently under

preparation should tighten the rules for telecommuting or remote work. Employers will need to verify whether the places which employees use to do their work away from the office conform to all safety and health protec-tion requirements. How diligent will employers have to be? Will they need to make sure that all chairs at the em-ployee’s home are ergonomically sound and that the floors are not slippery?

Is there a way out?The hands that both sides have been dealt have obviously changed. Employees are no longer defenceless and haven’t been for a while. Some of them even have learned how to abuse their handicap to their advantage. For employers, the obligations which courts are able to find for them be-tween the lines of the law are often times unpredictable. Law makers also seem to feel that the backs of employers will handle another load. And yet, the assumption that an employer’s main motivation is to work employees to the bone is in most cases unjustified. Often times, an exceed-ingly formal and broad interpretation of an employer’s ob-ligations is the reason why an employer’s actions fail to stand up in court. Hard-bitten malefactors will excel at turning an employer’s every oversight into prolonged, te-dious court proceedings. And once employers lose, they are required to reimburse the employee for lost earn-ings. The colleagues will probably also not welcome the employee’s victory as the resources the employer loses in court will quite likely have to be recovered by shortening their incomes. For an employer not to curse the day when the troublemaker was offered employment, it would be unwise to underestimate prevention, as only a seasoned lawyer may lead employers on the way through the Ab-surdistan of Czech labour law.

Martin HrdlíkCounsel, KPMG Legal

[email protected]@MHrdlik

Barbora BezděkováJunior Lawyer, KPMG Legal

[email protected]

legal

15


A change in the key trends important for the automotive sector up to 2025 is also becoming apparent. Whereas in the last couple of years growth in the developing markets was all important, this trend has experienced a somewhat drastic downfall to fourth place. The car makers’ manag-ers still hold it in high regard, but overall the sector seems to have become aware that it will have to face other chal-lenges as well. The importance of digitalisation and connectivity for the sector has taken off immensely; more than half of the re-spondents consider this trend to be extremely significant. This is even more astounding considering that digitalisation and connectivity made it to the head of our scale of trends from last year’s tenth place. Other shifts also warrant atten-tion. Whereas in the past, engine downsizing, platform op-timisation and production rationalisation were considered the key front runners, they are now losing significance. Die-selgate and fears of stricter emission testing procedures for new cars have no doubt also had a big impact. Then again, car makers have also seen many significant advances in these areas in the past few years and hence may not see much room for improvement here and may prefer to con-centrate on other topics they consider worthwhile. Among these will certainly be alternative fuels – as hybrids advanced to the number two spot among key trends from last year’s losing spots, closely trailed by electric drive ve-hicles. The last time alternative fuels ranked this high in

An automotive world ruled by digitalisation and connectivity This year‘s KPMG Global Automotive Executive Survey finds the automotive world on the threshold of fundamental changes. Cars are more and more becoming digitalised affairs and this year it seems that the automotive sector has finally become fully aware of this.

Text: Jan Linhart, Illustrations: Tomski & Polanski. The study can be downloaded in its entirety at www.kpmg.cz.

importance was 2013; at that time, their prominence was buoyed up by soaring petrol prices. The importance of self-driving vehicles is also bound to increase.

Major innovationsThe automotive sector is definitely in for huge innovations; however, the question remains who will be at their helm. The respondents to our survey perceive BMW and Toyota to be the biggest innovators, closely followed by Honda, Ford and Tesla. Obviously, the firms’ marketing is working even among representatives from the same sector, as in electric vehicles both BMW and Toyota are viewed to be bigger frontrunners than Tesla, which is expressly dedicated to the development and production of EV’s. Toyota doesn’t even produce classic electric drive vehicles, but its experience with hybrid engines and its efforts promoting hydrogen as an alternative fuel have advanced this car maker highly in the opinion of fellow sector members. The same just about goes for BMW, which is highly successful with its BMWi sub-brand. Just the same, American Tesla is not perceived as the biggest innovator on the autonomous mobility field, even though it was just this firm that recently introduced its Autopilot function to the market, making automated highway travel a possibility. When it comes to innovation, it appears that the car makers have lost a little bit of faith in themselves. Even though 35 percent of managers from the sector ex-

briefing

16


pect the car makers to be the players who will bring about game-changing innovations, it is the car makers’ represent-atives who are not so optimistic. Instead, they perceive ICT companies to be the bigger innovators. In turn, ICT companies do of course see themselves as the harbingers of major innovations and their self-confidence is indeed justified. Whereas in the past, cars used to be the ex-clusive product of mechanical engineering, today they are increasingly a conglomeration sprung from the heads of electronics engineers and computer scientists. A mechani-cally complicated invention has become a highly complex digitally sophisticated item and this trend is only bound to intensify. Hence, car makers also know that for cars, the era of one unified development cycle has come to an end. Dif-ferent car components will develop at different speeds and in the IT area, car makers will have to significantly up their game to stay ahead.

A change in relationshipsFor the first time ever, in this year’s GAES we included the customer’s viewpoint alongside the managerial outlook, also because it is generally assumed that as a direct result of the sector’s digitalisation the car makers’ relationship with their customers will change as new business models come to the forefront. In this regard, car makers have done an about-face into the opposite direction, as last year they still maintained that their agenda included no changes. Today, however, 82 percent of their representatives antici-pate them. Thoughts have even been raised which suggest

that some car manufacturers could in all essence become OEMs for big IT firms. The automobile sector’s representa-tives do not view this variant as too likely, however. But, should a firm like Apple decide to enter the sector, it then could have lots to gain from its outsourcing experience here as well.Be that as it may, according to the survey, car makers will be able to maintain their good customer relationships, even though the responding managers’ convictions are no longer unshakeable in this respect. Especially since their customers believe this even less to be true. It appears that Silicon Valley’s tech giants, who will want to profit from all the time spent inside of cars, will continue to score points with customers. These companies will want to mine a maxi-mum of the data that modern cars and their users produce. Here, however – and this may come as a surprise – both customers and managers agree that these data should re-main in the possession of the customers, or, if somebody else should have them, then the car makers. The treatment of data is bound to be a difficult chapter as customers basi-cally only trust themselves to dispose of their data properly. Car manufacturers will have to work on making custom-ers trust them sufficiently to gladly hand over data just like managers imagine it could be.

The market’s importanceThe importance of owning one’s own car will diminish in upcoming years and customers will come to demand mo-bility in and of itself. Here, price will always be the main decisive factor. Interestingly, the willingness not to own one’s own automobile is higher on the less developed Asian markets, while American as well as European customers are much less eager to relinquish their own personal rattletrap. Americans even more so, as half of the respondents want to own cars, not just have mobility services at their disposal. Keeping in mind the proverbial American obsession with cars, this may not be too surprising. This does mean, however, that the importance of the indi-vidual markets and of the introduction of innovations to them will change. A fundamental role will played by China, always more than willing to absorb novelties. It is there-fore quite possible that any autonomous mobility will gain a foothold first on the quickly developing markets where customers do not long to own their own vehicles as much, while the mature markets will remain the car makers’ ‘dis-play windows’.

The Czech car industry

2015 was a record year for the Czech automotive sector, with 1 328 788 produced road vehicles. All car manufacturers at home in the Czech Republic, i.e. Škoda Auto, Hyundai Motor Manufacturing Czech and TPCA were more or less success-ful, whereas bus manufacturers had a great year, producing 4 517 road vehicles designed to carry multiple passengers. Tatra Trucks of Kopřivnice was able to expedite 850 trans-portation vehicles last year. The Czech automotive sector can also look back on a spectacular year for its own domes-tic brand, Škoda Auto, which for a second year in a row sold more than a million cars world-wide (1 055 500 to be exact), year-on-year up by 1,8 %.

briefing

17


� BMW i8BMW’s plug-in hybrid combines dramatic design, top driving performance and emission-free operation.

� Chevrolet VoltThis hybrid drives on electricity and uses its combustion engine only as an on-board generator.

� BMW 7The newest member of BMW’s 7 line parks without any help from its driver, who now can get out in front of the garage while the car find its own way home.

� McLaren P1The hybrid McLaren supercar travels 10 kilometres using only its batteries, with a maximum speed of 350 km/h.

� Chevrolet BoltIts long range and acceptable price make the Chevrolet Bolt a practical electrical vehicle for a wider market.

� Ferrari LaFerrariThe first Ferrari with hybrid propulsion uses its electro-motors only to enhance the performance of its twelve cylinders.

� Toyota MiraiOne of the first serially produced and commercially sold hydrogen fuel-cell vehicles.

Cars of the future today

32 %

of c

onsu

mer

s pr

efer

pe

rson

al c

ar o

wne

rshi

p to

mob

ility

ser

vice

s.

65

% o

f car

s pr

odu

ced

by T

ata

have

a d

iese

l en

gine

, the

hig

hest

pe

rcen

tage

am

ong

car

mak

ers.

1 – T

he m

ost

impo

rtan

t co

untr

y fo

r th

e in

tro

duct

ion

of

inno

vati

ons

is C

hina

.

Ove

r 9

0 %

of A

mer

ican

dr

iver

s ow

n th

eir

own

car,

com

pare

d to

10

% in

C

hina

.

35 %

of m

anag

ers

trus

t th

at c

ar m

aker

s w

ill

be a

t th

e fo

refr

ont

of

inno

vati

ons;

30

% s

ee IT

co

mpa

nies

in t

his

role

.

briefing

18


The following data stems from the 2016 KPMG Global Automotive Executive Survey. You may download the entire study at www.kpmg.cz.

� Tesla Model SThe front runner among electric vehicles with a truly extensive range has recently been equipped with autopilot functions.

� Toyota PriusEven 18 years after its first market introduction, this hybrid remains the leader of its peers.

� Porsche 918 HybridThe performance of the extremely fast Porsche makes it hard to believe that it can travel 19 kilometres on electricity alone.

� Nissan GT-RTop-of-the-line electronics guide the chassis so as to make a race car driver out of just about anybody.

� Volkswagen XL1The ultra-light plug-in hybrid made from carbon fibres uses one litre of petrol for every 100 kilometres.

� Volvo XC90Conservative Volvo prefers to place its bets on architecture with four-cylinder motors, with power delivered by direct-injected turbo and a supercharged plug-in hybrid engine.

800

man

ager

s an

d 2

100

cons

umer

s re

spon

ded

to t

his

year

’s G

AES

.

82 %

of m

anag

ers

expe

ct

trad

itio

nal b

usin

ess

mo

dels

to

chan

ge, u

p fr

om la

st y

ear’

s 12

%.

33 %

of m

anag

ers

and

27 %

of c

onsu

mer

s be

lieve

tha

t ca

r m

aker

s w

ill b

e ab

le t

o ho

ld

on t

o go

od

cust

omer

re

lati

ons.

A re

cord

17,

5 m

illio

n ca

rs

foun

d ne

w o

wne

rs in

the

U

S la

st y

ear.

Chi

nese

dri

vers

bo

ught

21

,1 m

illio

n pe

rson

al-u

se

vehi

cles

last

yea

r.

At t

he b

egin

ning

of h

is

pres

iden

cy, B

arac

k O

bam

a ca

lled

for

1 00

0 0

00

elec

tro-

mob

iles

and

plug

-in

hybr

ids

to h

it A

mer

ican

ro

ads

by 2

015.

400

00

0 –

that

’s h

ow

man

y el

ectr

o-m

obile

s an

d pl

ug-i

n hy

brid

s ar

e ac

tual

ly b

eing

dri

ven

in

the

USA

to

day.

1 hyd

roge

n fu

ellin

g st

atio

n ex

ists

in t

he

Cze

ch R

epub

lic.

18 h

ydro

gen

fuel

ling

stat

ions

are

ope

n fo

r bu

sine

ss in

Ger

man

y.

10 f a

st-c

harg

ing

stat

ions

for

elec

tro-

cars

in t

he C

zech

Re

publ

ic a

re o

pera

ted

by Č

EZ.

briefing

19


The Czechs 1990–2015

20


21


Better off, but feeling worse

Overall, 71 % of all Czech men and women are happy with their lives, but compared to the 90s, twice as many of them hold a pessimistic outlook of their society‘s future. Hence, only a quarter of all Czechs expect an improvement of the economic situation within the next five years. This contradiction is one of the results of the study titled “The Czechs 1990-2015”, recently conducted and published by KPMG in the Czech Republic. Apart from traditional statistical indicators it also compares unique sociological data on the attitudes and opinions prevalent in Czech society.Text: Štěpán Kačena, Photo: Barbora Mráčková

Of hopes fulfilled and fears revealedLast year, KPMG celebrated 25 years of its existence in the Czech Republic. We decided to take this anniversary as an opportunity to hold off on our traditional forward-looking topics and instead pause and look back at the development of Czech society. Instead of taking the tradi-tional macro perspective we looked at the Czech Republic through the eyes of an individual and, apart from the tra-ditional statistical indicators, tried to capture any chang-es in such non-exact variables as mood, esteem or trust. Among other data, the study thus also contains the first comprehensive comparison of Czech attitudes and opin-ions, collected by the STEM Institute since 1990. The onset of the ‘90s was a great time full of optimism. Foreign capi-tal was coming into the country, Prague as well as its com-pany offices were full of Anglo-Americans. We expected that we would catch up to the West within ten years. Re-turning Czech emigrants countered that it would take at least one generation. In the end, neither of us were right. I still remember the feeling of hope and that all was pos-sible which in those days permeated Czech society. A lot of those hopes were indeed fulfilled, even though all went at a somewhat slower pace than we expected. In compari-son to 1993, Czech real wages have grown almost two-fold; we live in bigger flats or even single family homes, have more cars and property and according to the survey, even the number of those who have trouble making ends meet has declined. We are better off, but feel worse. We can blame this on our fear of the future; a fear which has grown remarkably. What is more, in the last year this fear has been mightily fuelled in media campaigns by “apoca-lyptic” visionaries. The number of Czechs who paint the future of their society in dark colours has doubled within the last twenty-five years. At the same time, we are less troubled by our present – personally, we are still as satis-fied with our lives as before and rate relationships and trust among people to be at even better levels than in the past. Nevertheless, among the Czech population, the feel-ing of eminent threat appears to be growing, as we try to disassociate ourselves from the European Union, the euro, Ukraine, refugees. For me personally, the most terrifying finding of our survey are the two-thirds of Czechs who would welcome a strong arm. I steadfastly believe that even in 2040 a government like that will not be at the helm of this country.

Jan ŽůrekManaging Partner

KPMG Česká [email protected]@ZurekHonza

About this studyThe analysed data have primarily been provided by the Centre for Empirical Studies (STEM), which provides for the longest continuous monitoring of trends in the Czech Republic. For 1990–1993 and 2013–2015 data have been averaged as to avoid any distortions due to current events in those years. The study also makes use of CVVM/IVVM data with the kind permission of the Centre for the Study of Public Opinion of the Sociological Institute of the Czech Academy of Sciences with utilisation of the Czech Social Science Data Archive. The remaining data were obtained from the database of the Czech Statistical Office (ČSÚ), the Czech National Bank (ČNB), the Institute for Sexology, the Automotive Industry Association, the Czech Ministry for Labour and Social Affairs and others.How well do you know the Czechs? Take our short quiz to find out and download the whole study at www.25let.cz.

study

22


How do we feel?The number of Czechs who view society’s future in a pes-simistic light is double than what it was in the ‘90s of the last century. We not as troubled by our present – person-ally, we are still as satisfied with our lives as we used to be and even consider relationships and trust among people to be in better shape than before.Grumpy Czechs? Seventy-one percent of Czechs are just as satisfied with their lives as they were in the ‘90s. Eight percent are very satisfied and the number of very dissatis-fied people has remained at around four percent. Overall satisfaction tends to decline slightly with age. But we look to the future with an increasing sense of pessimism, much more than 25 years ago. Only 25 percent of Czechs expect the economic situation to improve within five years and 36 percent instead think that the economy will be worse off. The rest, i.e. 39 percent believe that in terms of the economy, things will remain the same. Twenty-five years ago, the percentage of pessimists was lower (26 percent) and optimists were twice as numerous as today (46 per-cent). People with a university education are somewhat more optimistic (38 percent expect positive, 21 percent negative developments). Looking back, it seems that pes-simism really got a hold of us around 2003. Subsequently, faith in the economy grew all the way up to the beginning of the financial crisis in 2008, but then things were look-ing bleak again and our negative expectations reached their peak in 2011, when only 14 percent of Czech citizens believed in brighter economic tomorrows. We used to be-lieve that society was developing in a positive direction, but now, 45 percent of all Czechs feel that we will never be at the same level as Western European countries, whereas in the past, this number was 15 percentage points lower,

Is our society developing in a positive direction?

What do you think will be the state of the economy in five years?

at 30%. A fifth of Czechs remains optimistic and think that we will catch up with the West within 10 years. This optimism is somewhat more prevalent among Czechs 40 years of age and younger. What’s more significant, however, is that only 29 percent of Czechs believe that society is headed in a good direc-tion. Right after the Czech Republic’s inception as an independent country, two thirds, i.e. 65 percent, of its inhabitants was convinced that the Czechs were on the right path. Apart from a general pessimism, however, when asked about the state of relationships and trust among people or our financial possibilities, the majority of respondents saw these in a positive light.

Definitely yes

17 %

3 %

Rather yes

49 %

26 %

Rather no

27 %

44 %

Definitely no

7%

27 %

1991 1993 1994 1997 1998 1999 2003 2004 2005 2007 2008 2010 2011 2012 2014 2015

100 %

80 %

60 %

40 %

20 %

0 %

36 %

39 %

25 %

Worse than today

Same as today

Better than today

1993

13/14

1993

2013/2014

1993

2013/2014

1993

2013/2014

study

23


How much do we make and borrow, and what are we spending it on?In comparison with 1993, real wages have almost doubled. Spending has shifted from food and goods towards services and housing. We borrow especially to take care of our hous-ing situation – and we are about five times more in debt than we were 25 years ago. We are able to buy much more for our money that in the past. The average real gross salary has grown by 63 percent since 1990. In the first few years after the Velvet Resolution real wages initially declined as a result of the liberalisation of prices and a relatively high level of inflation. If compared with the period around the beginning of the independent Czech Republic in 1993, by 2004, average real gross wages had grown 94 percent. The average wage of course does not represent the income of the typical Czech; the median gross wage last year was CZK 22 531. Since 2006, however, the relative difference between the average and the median wage is no longer increasing. This signifies that the scissors between lower and higher income groups are no longer opening.The number of ‘millionaires’ has grown, as currently, 62 per-cent of households own property worth more than one mil-lion Czech crowns. Taking into account inflation, in 1995, only 46 percent of Czechs held assets worth one million crowns in today’s money. Financial assets make up only about a third of this wealth, whereas the remaining two-thirds are held in form of real estate or other assets. For many Czechs, their income is not sufficient to cover their consumption and housing expenses. Compared to 1993, household debt has risen almost five-fold (in real values adjusted for inflation). Since 2003 the popularity of

consumer loans has significantly grown, while in the past few years more than 70 percent of all borrowed funds have been directed towards housing and not, e.g., towards pur-chases of electronics and items of daily use. One reason for the Czech’s increased willingness to become indebted is of course the increase affordability of mortgages, whereas in the ‘90s, a mortgage loan with a 15 percent interest rate was considered a luxury. We have not become less responsible in handling our mon-ey. In fact, we are somewhat more successful in savings, be it because we want or have to. Compared to 1993, the number of those who in the last three months were able to save some of their income has grown by five percentage points to 44 percent of the population. Seniors are saving significantly more. A higher number of us is employed in the service sector; fewer work in industry and agriculture. Taking a closer look, we find out that the increase in service sector employees has not only been due to a larger number of restaurants and hotels, but that we now also have more technical, financial and IT experts as well as workers in health and social service areas. In contrast, agriculture and construction have experienced the relatively largest decline in their work force numbers in the last 15 years (beginning in 2009 in the case of construction as a result of the eco-nomic crisis).

Household loans in billions of crowns

Changes in consumer spending between 1990 and 2014

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1500

1200

900

600

300

0

Groceries and food outside of the home

Consumer goods

Services

Rent and other expenses100 %

89 %

-29 %

-35 %

1 314

572

Overall amounts of loans

Loan amounts in 1993 prices

study

24


What do we value most?Family still stands on the first rung of our imaginary ladder of values. Friends and acquaintances are gaining on signi-ficance, while religion and politics only take on marginal roles, with less than a quarter or Czechs considering them important in their lives. Not surprisingly, family remains the most important aspect in the lives of Czechs. Over time, the importance of our social surroundings (friends, acquaintances) and the signi-ficance of leisure time has grown. Even though we often read that today, all emphasis lies on performance, for many Czechs work and employment are slightly less important than 25 years ago. Politics and religion are considered im-portant by less than 25 percent of the population. Family may be very important to us, but since the revolu-tion, the time people take to start families has grown by six years on average. The number of marriages has dec-lined by almost half and divorce as a solution to marital problems has become increasingly acceptable. In 1990, wo-men had their first child at the average age of 22.5; today, the average woman has her first baby at 28. The final years of socialism were an anomaly in this respect, however, as, e.g., in the 20s of the twentieth century the average age of first-time childbearing mothers was 25 and the overall average age of mothers was similar to that of today, i.e. 30 years: at that time, however, due to a greater number of children. Twenty-five years ago, approximately 19 children were born to ten women, around 1999, this number decli-ned to 11 and today, it has returned to 15 children per ten Czech women. At the beginning of the ‘90s, 90 percent of men and 98 per-cent of women entered marriage at least once in their lives; today, we are much more cautious, as only 53% of men and

Life priorities

1990

1990

2015

2013

Perceived prestige of selected professions in 1990 and 2013 on a scale of 0 to 100

Source: IVVM (1990) and CVVM (2013), population 18+

Physician

University professor

Minister

Scientist

Elementary school teacher

Nurse

Manager, business expert

Designer, project engineer

private farmer

programmer

journalist

shop owner

professional athlete

priest, cleric

police officer

accountant

professional soldier

secretary

janitor

Family

Work

Friends and acquaintances

Leisure

Politics

Religion

61% of women enter matrimony. In the 90s, divorce was widely tolerated and remains very much accepted today, as 25 years ago, 77 percent of Czechs considered divorce a good solution to a marital crisis, in 2015, this number was 82 percent.

77

76

75

71

65

65

64

58

55

54

48

48

47

45

45

42

29

29

25

91

74

37

76

71

74

50

62

63

59

43

54

47

38

55

52

49

39

34

96,88 %

96,31 %

91,31 %

86,28 %

83,03 %

92,01 %

71,1 %

86,47 %

33,87 %

23,49 %

20,8 %

17,57 %

study

25


Water is by no means a givenIt is said that cooking without salt is an art. Without water, this art form would have to be taken to an even higher level, but so would any other activity as well as the entire human existence. It is therefore no surprise that companies as well as governments all over the world are actively trying to figure out how to maintain the sustainability of water sources. It may be true that water remains in a sort of cycle and sooner or later it returns to us, but more often as not it then is of questionable quality with huge sums of money necessary to convert it back to a usable state. Text: Ivana Ježková, CSR Supervisor, KPMG Česká republika

been dependent on sources of quality spring water, as it has a greater effect on the taste of the beverage than many people would guess. Significant from a CSR viewpoint is that the production of beer uses enormous amounts of water. Proof of this is for instance provided by Heineken, the brewing company with the largest global presence and the world’s second-largest producer of beer. The beer of this company is produced in 70 countries and its pro-duction uses a total of 834 million hectolitres of water to produce almost 200 million hectolitres of beer. In the Czech Republic, the breweries belonging to this corporate group annually use 8 million hectolitres of water, which, in view of its production is one of the lowest results in the brewery group. So, how did the Czech brewers producing under the Heineken name do it? The Business for Society publication Companies & Water describes some of the measures: “The first step for the Starobrno, Krušovice and Velké Březno breweries was to map out the use of all energy – heat, electricity and water. Consumption was first measured at the brewery level and later at the departmental level: in the brew house, cellar and fermenting cellar within the production department, and of bottle washers, crate washers and other equipment within the packing department. Expert employees made

Should the world population continue to grow at its cur-rent pace, then around 2025, our planet will be home to eight billion people. Already today, however, the number of people who do not have permanent access to water should be alarming – according to the UN, we are talking about 760 million of us. While here in Central Europe we should consider ourselves lucky in this respect, we do have rath-er extensive experience in what it looks like when water is either missing, or if, in the other extreme, there is too much of it. Just the past year was extremely dry and the lack of water has had a significant impact on a number of sectors, ranging from agriculture to ski lift operators. But only a couple years ago, wide stretches of the Czech Repub-lic were devastated by wide-spread flooding.

Water as a key part of CSRLarge corporations also cannot look away when it comes to water. Be it because they cannot do without it or simply because water management touches on all three basic spheres of CSR and has economic, social and environmental aspects. “Globally, the need to cut water consumption, use water more efficiently and reduce its chemical pollution is becoming apparent. Water is set to be a growing concern in the Czech Republic. Changing precipitation patterns, in particular, will require us to change our approach and pay closer attention to water,“ writes the Business for Society platform, associating some of the largest companies on the Czech market, in its publication Companies & Water. Hardly a firm could exist without water, but special attention has to be paid to companies who utilise water in their business directly. A typical example is the food indus-try which could not function without sufficient supplies of drinking water. Among the food producers, the bever-age industry stands out and many of its members have al-ready claimed their part of the responsibility for sustainable water management.

Without water, no beerWater makes up 95 percent of what can be considered the national beverage of Czechs – beer. Breweries have always

CSR

26


a thorough check of the entire water distribution system and proposed locations for water loss meters.”For companies of any size, the above account may provide an outline of how to manage or, to be more exact, limit the volume of water they use. First off, it needs to be assessed which of the companies activities are responsible for the largest portion of the company’s overall consumption of water. Monitoring is essential, but so are innovations, as new technologies make it possible to use water repeatedly in many parts of the production process. “In the past year, the measured consumption of water at Heineken ČR de-creased from 3,7 hectolitres per hectolitre of beer to 3,5 hl/hl, indicating a 5 percent decrease in the use of water to produce beer. At the Starobrno brewery we even manage to use only 2,5 hl of water producing one hectolitre of beer, which comes close to technical limits. With its water con-sumption, Starobrno is in fourth place measured against the whole group, which, considering its size, is quite an ex-traordinary feat”, says Jiří Hauptmann, Head of Corporate Relations and Public Affairs at Heineken Czech Republic.

Water is “just” a part of the wholeAttempting to manage water in an economic and sustain-able manner, it is not sufficient to only focus on how water is treated in various businesses. Instead, one must also take a look on the ecosystem beyond the walls of a firm. The op-

KPMG’s viewKPMG’s study Expect the Unexpected, published in 2012, defines ten global forces which impact international eco-nomic development and in the next two decades will have a direct impact on the sustainability of businesses. Among these trends are deforestation, food safety and security, the scarcity of material resources and population growth, and also insuffient water supplies, the dangers of which we like to point out with this article. We present Heineken as an example of a company that also has become aware of its business activities’ dependence on water and its own vul-nerability in this respect and which, as part of its CSR stra-tegy, is trying minimise the risks it faces due to the scarcity of water. A part of our series on CSR, Marwick will show you concrete examples of firms that have included social responsibility in their long-term strategy and are taking concrete steps towards truly sustainable business. KPMG is proud to be active in this field as well – take a look at our strategy at http://www.cestakudrzitelnosti.cz/en.

Karel RůžičkaPartner in charge of CSR

KPMG Česká [email protected]

timisation of internal water treatment processes represents only one of the elements of a responsible approach towards water. Just as important is the involvement and the inclu-sion of a company’s employees and of the local communi-ties. ”We have begun to actively support regional projects and want to become a trusted partner of local organisations both on the communal and regional level. On Engage Day, an internationally observed corporate volunteering day, our employees regularly get involved in regional activities and help protect and maintain water sources which are also linked with our breweries. Namely this involves cooperation with the Protected Landscape Areas CHKO Křivoklátsko and CHKO Moravský kras. Almost 100 company employees have become involved in these projects”, describes Hauptmann.Heineken has also teamed up with the Czech Union for Na-ture Conservation to help with the monitoring of wetlands. These distinct ecosystems used to be subject to massive drainage efforts in the past in the mistaken belief that they cannot be of any use otherwise. In reality, wetlands repre-sent very significant water reservoirs and are irreplaceable biotopes and unique ecosystems. Within the Our Wetlands project it has been possible to map more than 300 of such locations and to a large part include them in an environ-mental protection programme. Last year, Heineken received the Environmental Project of the Year award as part of the 2015 Top Responsible Company competition.

CSR

27


“The first ‘no’ is the hardest. When you’re starting out, you take everything.”28


Only from the outside do classical music and finance look like two entirely different worlds. In certain points, they interconnect. Violin virtuoso Josef Špaček (28), concert master of the Czech Philharmonic, talks very openly about the touching points with the editors of Marwick.Text: Jana Divišová, Photo: Barbora Mráčková

29


None of the finance or marketing inspired questions which we asked in the pleasant café in Prague’s Old Town, where Josef Špaček lives, ended up being swept under the table. To our meeting came an obliging, elegant young man whose manner did not even slightly let on that he was in between the demanding rehearsals of an ambi-tious programme and that he, at the end of the interview, would have to rush back to the Rudolfinum for further rehearsals with the Czech Philharmonic, his employer.

We caught you in the middle of rehearsals for Ludwig van Beethoven’s violin concerto. On several occasions you told the media that this composer is one of your role models. Now, throughout his life, Beethoven was never very lucky when it came to money. He started to make a living at the age of 11, as the member of a thea-tre orchestra; at 13, he was a organist, at 17 he also had to administer his widowed and alcoholic father’s in-come and took care of two younger brothers. How was it for you at 11 and 17?I also started earning some money already as a small boy, when I played at family events and one the aunts would give me a couple of crowns. I was always very frugal, so I put all the money I earned - and it started coming to-gether nicely - into a box. Only as an adult did I realise that that might not have been the most ideal way of sav-ing. You don’t get much interest. I really didn’t buy myself anything big until age 18, I think, when I one day went out and got myself a really great mountain bike. This was real-ly exciting; the feeling that I myself had made the money the bike had cost was great. As my career advanced, my income naturally increased, but it didn’t really grow expo-nentially. I didn’t play my first gig for CZK 1000 until I was almost of age. Musician come into contact with money somewhat earlier than is usual for their peers (a math-ematician will hardly be making money at the age of 11, right?), on the other hand, they reach a plateau rather quickly and unless you are Beyoncé or Britney Spears, your income won’t be going up by much anymore.

With a demanding programme and the need to prac-tice wouldn’t it then be better to let a manager take care of your career and any contract negotiations?Definitely. Taking part in the prestigious Queen Elisabeth Competition in Brussels [in 2012, Josef Špaček became the first Czech violinist laureate of this competition in the his-tory of Czech classical music - ed.], I was very lucky to meet a great guy and a true professional whom I trust a hundred percent. We have a mutually balanced relationship, which over time has grown into a beautiful friendship, but at its beginning, there were risks for both sides. I was an un-known young talent, with no guarantee for success. Now my manager negotiates the big concerts and their condi-tions and I thus have enough time to devote to my job and practice. Sometimes I will also take a gig that a friend from the music business may set up for me; after all these years, we of course all know each other.

Just as an aside, violin virtuosos use the term “gig”?You bet. To all performers, the gig is holy. Today, I am an employee of the Czech Philharmonic, a really amazing em-ployer; I am very proud to have gotten the concert master job a couple years ago. On the side, I am trying to build my solo career, which is basically like going to two jobs at once, very physically demanding and hard to organise. The last year was extreme, but this year, I am getting better at plan-ning. We’ll see how long that’ll last.

How does an artist of your calibre know what offers to take and which to decline?At first it’s really difficult, but you have to learn gradually. When you are starting out, you take just about anything you can get. The first “no” is the hardest, but necessary to get your career onto the track you want it to be on. I am now in a position where I can have my pick. To guard a cer-tain balance in your life is important from an artistic point of view but I also do it to remain able to handle the time and physical demands of my programme.

coffee break

30


Let’s go back to Beethoven and other classical music geniuses. Could you have been used as a “money ma-chine,” a child prodigy, whose parents drag them from concert to concert at a tender age? Theoretically I guess so. But I can’t even imagine that my wonderful parents would have been capable of using me like that. They supported me and my two brothers and two sisters to the utmost in our interests, but when it came to us kids, any kind of profit pursuit was never a possibility.

You graduated from two prestigious schools overseas, in Philadelphia and in New York. To what extent did spending so much time abroad help you get your bear-ings in the word of finance? And how much money did you have in your pocket when you landed at Philadel-phia International Airport?That’s an interesting question. I don’t remember the precise amount but it must have been around USD 2000 for per-sonal needs, with the school providing me with free room and board. But when I got to the accommodations they had gotten for me, I found out that the apartment did not have any furniture. Until I managed to get at least a bed, I slept in a sleeping bag on the floor – definitely an interest-ing life lesson. I survived without any harm; I was 17 and so excited to be able to study music at such excellent schools. By the way, they have a really interesting programme there for students, which lets them earn extra money after the first year of studies by working in the library or by playing at weddings, funerals, receptions, etc. For us students, that was a great thing, to get maybe USD 200 for the evening and a great steak dinner on top of that. I also remember that I tried to pick up extra cash by sewing sheet music together by hand.

Never mind the danger to your hands?It wasn’t as dangerous as it sounds. Of course I have to pro-tect my hands, but I don’t really want to succumb to any exaggerated fears. I live a normal life; I use knives.

Allow me to ask you a question about investments. Do you think a significant investment into a concert hall in the Czech Republic would be a good idea?That would be the best idea ever! At the same time, I do want to say that this should already have happened and next to traditional venues like the Rudolfinum, which are becoming less and less suitable, Prague should have a mod-ern building for the needs of classical music. We would be showing it off, just like other European capitals, which didn’t miss the boat. I could imagine it on the Letna plain, for example, with a view of Prague Castle.

Josef Špaček, Jr., discovered his first violin as a three-year old in his parents’ wardrobe. His father, Josef Špaček, Sen., is himself a gifted violoncellist and has also been active in the Czech Philharmonic for many years. Currently, Josef Špaček plays on an instrument from the workshop of the French luthier Jean-Baptist Vuillaume, which he purchased with the help of a New York musical instrument dealer.

the violin up close

coffee break

31


The best of culture when you’re travelingWill you spend this spring on the road? maybe then you will also get the chance to visit our Polish neighbours, as Wroclaw is one of this year’s European Cultural Capitals. A great many events are taking place only a little more than 300 kilometres from us.

Text: Anna Batistová

To Wroclaw, for culture’s sake Wroclaw until the end of 2016

Wroclaw, the capital of Lower Silesia, has become one of 2016’s European Cultural Capitals. The entire year will be under the sign of hundreds of cultural programs. In the spring, Wroclaw’s visitors can

look forward to the Wroclaw – Capital of Literature programme, which will take place from 22 to 24 April. Shortly after this, on 27 April, an event just as interesting, Wroclaw – Jazz and Guitar Capital, will start. For more information, go to www.wroclaw2016.pl.

Kaufmann singing Puccini’s arias

Prague, Essen, Munich, Brussels and other venues

In Prague on 16 March 2016

Jonas Kaufmann, Germany’s best tenor, last year released his album Nessun dor-ma, which promptly was nominated for a Grammy. On 16 March, Kaufmann will sing Puccini’s most beloved arias from his new album (from Manon Lescaut, Tosca, Madame Butterfly, Turandot and others) at Prague’s Municipal House. Jochen Rieder will conduct the Staatskapelle Weimar. In Milan, La Scala’s audience credited this concert with an unheard-of 40-minute standing ovation. The Prague concert will be followed by appearances in Essen, Munich and Brussels.

World Poetry Day, Spanish-style San Sebastian 20 March 2016

San Sebastian in Spain’s mountainous Basque Country has also been declared a European Cul-tural Capital of 2016. Hence it this year offers various events dedicated to the many faces of culture, among them a poetry march. The literary parade, led by San Sebastian’s own Esther Ferrer, has been timed to celebrate World Poetry Day, which falls on 21 March. Esther Ferrer is conside-red one of the most significant Spanish artists of her generation. In 1999 she represented Spain at the Biennale in Venice, Italy.

Matisse, Poussin and the Impressionist

Turin, Italy April 2016

Should you find yourselves in Turin in the North of Italy this April, you will have the chance to see two extraordina-ry exhibits. In the Palazzo Chiablese, the exhibit Matisse and His Time will offer a cross-section of the works of one of the most significant personalities of twentieth century modern art, ranging from his early studies to his major works. The Piazza Castello will host the From Poussin to the Impressionists exhibit, presenting French fine art of the 17th to the 19th century, on loan from the Hermitage Museum in St. Petersburg (showing works by Vouet, Lor-rain, Poussin, Watteau, Fragonard, David, Ingres, Dela-croix, Courbet, Daumier, Corot and others).

european cultural highlights

32


Pitínský, Radok and Martinů Brno from 29 April 2016

On 29 April, the Mahen Theatre in Brno will premiere the play Alfréd Radok’s Opening of the Wells. One of the most successful Czech theatre directors of our times, Jan Antonín Pitínský, will direct and thus meet one of the most significant theatre directors of the Czech past, Alfréd Radok. Jan Antonín Pitínský’s production will combine the story of Radok’s life with the music and the motifs of Bohuslav Martinů´s famous cantata. The play not only tells about important events from Radok’s life but also tries to convey the human longing for one’s home and the fact that all the oceans of the world cannot stand in for one drop from the well of one’s childhood.

Murakami’s third novel out in Czech

Czech Republic April 2016

In April, Odeon publishers will rele-ase the Czech translation of Haruki Murakami’s third novel, A Wild Sheep Chase. The novel’s protagonist, co-owner of a small ad agency, lives a quiet life in To-kio. As life goes on, he has learned not to expect too much. After his agency in a le-aflet prints an innocuous landscape with sheep, the main character finds himself on a sort of pilgrimage into the “heart of darkness” of current-day Japan…

Spotlight Czech Republic Czech premiere 7 April 2016

In April, Czech cinema audiences will get to see the award-winning film Spotlight, the true story of journalists from The Boston Globe who uncovered a huge pae-dophile scandal within the American Ca-tholic Church and subsequently received the Pulitzer Prize for their work. The film was directed by Tom Mc-Carthy, creator of films like The Visitor and The Station Agent, among others. Spotlight’s main characters are played by Mark Ruffalo, Michael Keaton, Rachel McAdams, Liev Schreiber and John Slattery.

Fashion Week Prague from 16 to 23 March 2016

If fashion is your thing, then you won’t want to miss Prague Fashion Week, the biggest fashion event in the Czech Republic and part of the world-wide network of fashion weeks organised by Mercedes-Benz, similar to its counterparts in New York, Berlin or Sydney. The Prague fashion event is moving to another location this year and will be hosted by one of the film studios at Strahov. So far, Zuzana Kubíčková, Jakub Polanka, Chatty, LaFormela and Petra Ptáčková have confirmed their participation.

One World 2016 Prague and more than 30 other Czech

and Moravian cities March 2016

The human rights documentary film festival, this year already celebrating its 18th anniversary, will start 7 March 2015 in Prague and will then move into Bohemia and Moravia. This year’s overriding topic is “Looking for Home.” We can see the fa-tes of hundreds of thousands of refugees unfold in the media on a daily basis. With them, many ques-tions connected with the concept of “home” arise. How does it feel to say goodbye to your family and to look for a way to safety? And how hard is it to find a promising future in new surroundings?

european cultural highlights

33


business lunch

34

A cider bar in the land of breweriesAt the beginning he only dreamed of owning a bar. In 2014, when this dream was close to coming true, Václav Synáček had already tasted so many good Czech-made ciders to feel confident enough to stock the whole bar with only ciders. A year and a half have gone by since then and his Incider Bar still remains the one and only cider bar in the Czech Republic.

Text: Eva Samšuková, Photo: Jindřich Kodíček

What type of reactions did you get when you told pe-ople that you wanted to open a cider bar, in the Czech Republic, a country of beer lovers?Sometimes we get people in here that don’t even know that they’ve entered a specialised bar. And they either get it, are happy and discover what ciders are all about, or they leave, never to return. Most of our regular patrons know this beverage well and want to discover all that there is to try.

You serve both domestic and foreign ciders in your bar. Can you compare their quality and their popularity with your customers? We usually have about 40 different types available. The majority of them are from the Czech Republic and a lot people come here specifically for them. This holds to for almost all the tourists, a large group of Czechs and also cider producers themselves who want to try what the competition has to offer. On the other hand, we do have

far do not have the permit to import anything myself so I have to rely on what other people import into this country.

When you opened your bar, you had no competition in the Czech Republic. What does it feel like to do busi-ness in such an environment?First of all, it’s not a competition-free environment because I am still competing with regular bars. On the other hand, I wouldn’t be able to run a normal bar where I would not be able to tell you how it differs from the bar across the street. So, this definitely helps me promote my business. But I have yet to compare myself to other cider-only bars.

How is it in your opinion possible that cider has no tradition in a country where everybody loves apples? Because we are a beer nation. But this doesn’t mean it’ll stay this way forever. When you take a look at America, ci-der had a great tradition there all the way up to the Prohi-bition, then it fell all the way to zero. In the last five years, however, the States are going through a huge cider boom – it seems that almost every week, a cider bar opens up in some city.

You try very strongly to differentiate yourself from in-dustrially produced ciders. Are you feeling any pressure from the big producers to change your attitude? The scene is so small that for the four industrial cider producers this seems like some kind of statistical mistake they don’t have to really bother with. I did have a sales rep of one of them here; we had a nice chat, and for the first time she drank something that was really good and really made from apples. And both sides quickly realised that co-operation would really not be possible. I am not planning any kind of offensive, but I would be happy if people were to realise that there is real cider, and then there is suga-red water, which unfortunately in the Czech Republic is allowed to carry the same name.

clients who consider only a French or English cider to be the one and only true cider. Spanish sidre or the German Apfelweins have a rather small following, even though they are my own personal favourites.

The great percentage of Czech producers among your suppliers also reflects your own personal interest?I always wanted to offer every good cider produced in the Czech Republic and so far, this is working out. One can’t really do this with wine for example; that is, to cover the entire Czech market with one bar. But I think that in a year or two, I won’t manage to have everything that’s good here either. With the foreign ciders, my hands are bound as I so

InCider Bar in numbers

So far, it has presented 60 types of ciders and hosted 13 000 guests.

Guest have drunk 22 883 individual orders of cider, which transla-

tes into ca. 9 200 litres, made from ca. 18 tonnes of apples.

Address: Krymská 440/26, Prague 10


„We are a beer nation. This doesn‘t mean it´ll stay this way forever.“


www.marwick.czRegularly in your inbox.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.


Marwick 2/2016 ENG

Documents

Transcript of Marwick 2/2016 ENG