Subject area:                    Corporate Level Strategy, Growth Strategy, International Business Strategy

Region:                               Europe

Industry:                            Food, Candy, Confectionery

Company:                          Pallas S.A.

Decision Maker:             Stylianos Lavdas, CEO of Pallas S.A.

Dilemma: Stylianos Lavdas leaned back in his office chair, contemplating the future of Pallas S.A. Since its founding in 1953, Pallas has become one of the most well-known and respected companies in the confectionary industry in Greece. Stylianos Lavdas, the CEO, loosened his tie after another long day at work, it was late and time to go home. Though this is the case Stylianos believed sleep would not come to him tonight, as his company was facing a business problem similar to many other business leaders in Greece. While the country was in the midst of a severe recession, Stylianos had to make key decisions regarding how the company could remain profitable after the 2009 Greek debt crisis and the broader global financial crisis. After months of deliberation, Lavdas concluded where Pallas produced their confectionary items would have a major impact on the company’s success. Earlier that day, the team Lavdas had assigned to research possibilities had reported their results, concluding that Pallas’ production facilities should do one of the following: stay in Greece, move to Cyprus, or move to Bulgaria. 

Economic environment of Greece affecting Pallas S.A.

Because of the economic crisis that occurred in Greece it caused hundreds of businesses to close down and created an unstable financial environment. This economic crisis has created a lot of uncertainty for the company, and the situation has only gotten worse. A company operating with profits is a rare thing and what is even more uncommon is a company expanding on those profits from year to year. Unfortunately, though, the government has raised taxes on businesses and even more so on profitable ones, because it is one of the very few ways it can save some time to pay for the pensions and the salaries of the public sector, as well as healthcare, and any other expenses a government may have. Moreover, capital controls have been issued in the country for the past year and a half. Capital controls are controls on bank transfers within and outside of Greece, so banks are not allowing Pallas S.A. to pay its suppliers whenever necessary, even though the company has the liquidity to do so. There are other factors that need to be taken into account, such as the fact that, even though the company is making profits, all of the export divisions are underperforming, and are operating with losses this year. Pallas S.A. has had a significant presence in exports; it has been active for more than 30 years and exports to more than 40 countries in Europe, the United States, the Arab States, and Asia. Measuring output in units, approximately 60% of its production is exported and the remaining 40% is distributed in Greece, so having profitable exports is very important for the survival of the company.