RISK MANAGEMENT AND ASSESSMENT OF THE MANUFACTURING AND MARKETING RISK-FACTORS WITHIN INDUSTRIAL COMPANIES

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1 HENRI COANDA AIR FORCE ACADEMY ROMANIA INTERNATIONAL CONFERENCE of SCIENTIFIC PAPER AFASES 2015 Brasov, May 2015 GENERAL M.R. STEFANIK ARMED FORCES ACADEMY SLOVAK REPUBLIC RISK MANAGEMENT AND ASSESSMENT OF THE MANUFACTURING AND MARKETING RISK-FACTORS WITHIN INDUSTRIAL COMPANIES Ramona Pakocs*, Nouraş Barbu Lupulscu* *Dpartmnt of Manufacturing Enginring Transylvania Univrsity of Brasov, Romania Abstract: This papr is conscratd to a study rfrring to th manufacturing and markting risk factors, spcific to intllctual proprty; an analysis has bn conductd upon cas studis, within som companis manufacturing spar parts for cars, tractors, trucks tc., in Romania. By mans of this papr, an alarm signal is givn, rfrring to th countrfit or industrial piracy actions, as wll as to thir consquncs, whn th countrfit amplifis and xtnds masswid. As a rsult of th study conductd upon th rcovry of th intllctual-proprty rights, upon th spar parts, at a national lvl [5,8], th losss of th damagd companis bcom obvious, in trms of conomic fficincy; just as th stipulations th law bcom rlvant, in th cas of th situations undr analysis, within companis manufacturing spar parts for cars, tractors, trucks tc. Kywords: intangibl, assssmnt, mark, risk, countrfit/fak, crim. 1. INTRODUCTION Th conomic fficincy of any industrial company may b diminishd by whatsovr countrfit or piracy action. Th industrial companis mak grat fforts, in ordr to rduc th countrfiting of thir products. Hnc th final cost of th product manufacturd by th ownr of rights is highr than th cost of a licnsd product. Th licns dos not includ, among othrs, th markt tracking costs [5,8]. By this articl, w intnd to clarify th following aspcts: how th countrfit influncs th conomic fficincy of th industrial company; what says th law, in th cas th countrfit is masswid; and th on who should dal with th protction is nglignt; which is th social impact, as a rsult of this countrfit. [5] 2. ANALYSIS OF THE RISK FACTORS WITHIN A COMPANY 2.1. Risk Managmnt. Risk managmnt is th main componnt of any company s stratgic managmnt, nsuring an fficint administration of th possibilitis and of th advrs ffcts gnratd by th various typs of risks [5,8]. A highly prforming risk-managmnt supposs comprhnding th factors that may

2 affct th smooth functioning of th organization [5,8]. Th organizations hav adaptd a formal risk-managmnt procss, for ach typ of risk, undr diffrnt circumstancs [1,2,4,6] Study of th risk factors within a company. W introducd th risks spcific to intllctual proprty in a schm (shown in tabl 1) whrin w systmatizd th gnral risks that may b run by an organization, as wll as th main intrnal and xtrnal factors that dtrmin thm. Tabl 1. Intrnal and xtrnal risk factors. FACTORS INTERNAL EXTERNAL INTELLECT UAL PROPERTY FINANCIAL STRATEGIC OPERATION AL HAZARD -failur to suprvis th markt; - contracts; -unfair comptition; - undrstimation / ovrstimation; - copyright; -brand; - patnts; - industrial dsign tc. - liquiditis; - cash-flow. -rsarchdvlopmnt; - financial control; - IT systm; - rcruitmnt; - logistics. - wag-arnrs; - proprtis; - products; - srvics. - failur to suprvis th markt ; - contracts; - unfair comptition; - undrstimation / ovrstimation ; - copyright; - brand; - patnts; - industrial dsign tc. - intrst rats; - xchang rats; - crdits. - comptition; - markt; - dmand. - rgulations; - cultur; - managmnt. - contracts; - supplirs; - nvironmnt. Thr is a multitud of vnts, which may ngativly influnc th activity of an ntrpris/organization, and which can b split into two catgoris, namly: [5,8] 1. Extrnal factors with ngativ influnc: a. Economic factors: -comptition; -markt; -macroconomic/ microconomic conditions. b. Natural factors: -arthquaks, draught, natural disastrs tc.; c. Political factors: -chang of govrnmnt, aftr th lctions; -implmntation of nw lgislativ rgulations. d. Social factors: -incras/dcras in th living standard; -dmographic changs.. Tchnological factors: -accss to information; -rduction of th infrastructur costs; -volution of tchnology. 2. Intrnal factors with ngativ influnc: a. Infrastructur: -quipmnt noncompliant with th production dmands; -incurrd rpair costs, which hav not bn takn into account. b. Staff: -vr mor frqunt labour accidnts; -human rrors; -fraudulnt bhaviour. c. Procsss: -qualitativ rrors; -non-complianc with th dadlins affrnt to th manufactur of th products; -dlays in srvic. d. Tchnology: -problms with th data intgrity; -updat of th working tchnologis tc. I showd ths intrnal and xtrnal factors with ngativ influnc in figur 1, as follows: 1. EXTERNAL FACTORS WITH NEGATIVE INFLUENCE 2.d 1. d 1. a 2.a INTERNAL FACTORS WITH NEGATIVE INFLUENCE 2.c 2.b 1.c 1. b Figur 1. Intrnal / Extrnal factors with ngativ influnc.

3 HENRI COANDA AIR FORCE ACADEMY ROMANIA INTERNATIONAL CONFERENCE of SCIENTIFIC PAPER AFASES 2015 Brasov, May 2015 GENERAL M.R. STEFANIK ARMED FORCES ACADEMY SLOVAK REPUBLIC 2.3. Analysis of th manufacturing and markting risks, spcific to intllctual proprty. As a rsult of an analysis conductd within an industrial company, a sris of production risks and markting risks, spcific to intllctual proprty rsultd, such as: A. Manufacturing risks spcific to intllctual proprty: [5,8] -Risk rlatd to th inxistnc of a highlyprforming quality managmnt; -Risk rlatd to th managmnt s unrsponsivnss towards th infringmnt of P.I. rights, for on s own products; -Risk of infficint promotion on th markt of th P.I. (brand) for nw products; -Risk of unjustifid xpnditur on th promotion of old, outdatd products; -Risk of tradmark production infringing th P.I. rights ; -Risk of unfair comptition in production; -Risk rlatd to th disclosur of knowhow, production information, manufacturing scrts; -Risk rlatd to failur to promot th managrial skills; -Risk rlatd to failur to promot th mploys skills; -Tchnological risk rlatd to th lack of protction for invntions/patnts; -Tchnological risk rlatd to th lack of protction for utility modls; -Tchnological risk rlatd to th lack of protction for industrial drawings modls; -Tchnological risk rlatd to th lack of protction for intgratd circuit topographis; -Risk of product non-standardization tc. B. Markting risks spcific to intllctual proprty: [5,8] -Risk rlatd to th unfair protction of th businss nam; -Risk rlatd to th abusiv protction of a product by patnt; -Risk rlatd to th abusiv protction of a tradmark vs. businss nam; -Risk rlatd to th abusiv protction of a businss nam vs. tradmark; -Risk rlatd to th abusiv protction (confusion + association) of an industrial dsign/ modl vs. tradmark; -Risk rlatd to th abusiv protction (confusion + association) of a tradmark vs. industrial dsign/modl; -Risk rlatd to th abusiv protction of a utility modl; -Risk rlatd to th abusiv protction of an intgratd-circuit topography; -Risk rlatd to th abusiv protction (confusion + association) of a fild vs. businss nam; - Risk rlatd to th abusiv protction (confusion + association) of a fild vs. tradmark; -Risk rlatd to th lack of protction of th clint list and information; -Risk rlatd to th absnc of markt information; -Risk rlatd to th absnc of markting stratgis; th distribution ntwork; contracts; -Risk of clinching non-protctiv contracts in PI; -Risk rlatd to th loss of rputation and crdibility; -Risk rlatd to th lack of advrtising / promotion; th databas; -Risk to commrcializ goods infringing PI rights [11] and othrs; -Risk of unfair comptition in trad crim [14];

4 th tradmark of factory, commrc and srvics; th origin indications; th plant and animal spcis tc. Rgardlss of th typs of risks, th tratmnt throf with nglignc, by th organization s managmnt, may lad to normous losss, vn bankruptcy. In th following, w will analyz a cas study rfrring to th rcovry of th intllctual-proprty rights upon th spar parts, at a national lvl, in th cas of two companis, manufacturing spar parts for cars, tractors, trucks tc., in Romania. In ordr to kp th data confidntiality, w namd th formr company SIGMA and th lattr, OMEGA. 3. ANALYSIS OF THE CASE STUDY UPON THE MANUFACTURING AND MARKETING RISK FACTORS, WITHIN THE INDUSTRIAL COMPANIES S.C. SIGMA S.A. AND S.C. OMEGA S.A. At a national lvl, starting with th `90- is, basd on H.G din , th industrial plants wr abolishd; ad many joint stock companis wr stablishd, in ordr to tak ovr thir assts and liabilitis. [5,8] Th satllit ntrpriss, st up in th 70-is, with a viw to producing spar parts for th intrnal markt as a rsult of th suffocation of th ntrpriss, to covr th xtrnal markt changd ovrnight into joint stock companis, dtaching thmslvs from th parnt undrtaking. [5,8] Bsids, many influntial popl st up companis, which turnd subsquntly into basic pillars of th industry manufacturing spar parts for cars, tractors, trucks tc. Currntly, in our country, thr ar approximatly 100 units manufacturing spar parts for cars, tractors, trucks tc. In lin with th imposd intrnational lgislation, rfrring to nvironmnt and quality, th Romanian Auto Rgistrar (RAR), homologatd and crtifid all manufacturrs of spar parts, throughout our countr, according to th lgislation in forc. [8,10,12,13]. Aftr an analysis on th cas study rfrring to th patrimonial valuation of th first company manufacturing spar parts for cars, tractors and trucks, calld S.C. SIGMA S.A., a drop in th valu of th company and product brands was noticd, which could not b calculatd, as this assssmnt of th tradmarks, within th valuation of th intangibl assts, would not hav bn profitabl, in conomic trms. Th xplanation would b th low volum of th sals and th conomic infficincy. In this cas, th tangibl patrimonial assts wr valuatd, with som connctions to th intangibl assts, by calculating th good-will. In figur 2, w will prsnt th graph of th total sals for th company S.C. SIGMA S.A. in th priod , and in figur 3, th graph affrnt to th volution of th total spar-part sal, for th sam company: a r / y S D U s v a lu n u v R Evolution Figur 2. Graph of th sals volution at S.C. SIGMA S.A.[5] Th analysis of th graph affrnt to th volution of th total sals at S.C. SIGMA S.A., shows a light drop in sals, during th yars 3, 4; thn an incras, in th yars 5,6,7; aftrwards a dramatic drop, in th yars 8,9,10 which affctd th ntir company consquncs suffrd aftr th pntration on th markt, of th industrial countrfit, or piracy phnomnon. According to [3], "thr is countrfit, if an lmnt of th original work has bn rproducd, vn if thr is no risk of confusion. Th ssntial critrion of th countrfit rsids in th xmption from

5 HENRI COANDA AIR FORCE ACADEMY ROMANIA INTERNATIONAL CONFERENCE of SCIENTIFIC PAPER AFASES 2015 Brasov, May 2015 GENERAL M.R. STEFANIK ARMED FORCES ACADEMY SLOVAK REPUBLIC prsonal crativ ffort, rprsntd by th loan." Rvnu valus USD/yar Evolution Figur 3. Graph affrnt to th volution of th total spar-part sal for S.C. SIGMA S.A.[5] According to [7], "By rproduction, thr is undrstood, a prptration whrby th author convys or imitats somthing". Th socially dangrous consqunc of this crim is a concrt rsult, namly countrfit products..." Art.13/Law no stipulats: [9] th us or th xploitation of a work ngndrs th author s distinct and xclusiv rights to authoriz: a) th rproduction, ithr intgral or partial, of th work; Art (1) By rproduction, in th sns of this law, thr is undrstood th achivmnt of on or svral copis of th work, in any matrial form At th nd of 1990, th lattr company manufacturing spar parts for cars, trucks and tractors, calld S.C. OMEGA S.A., rqusts a study rfrring to th rcovry of th intllctual-proprty right upon th spar parts, at a national lvl [5,8], which study was subsquntly dmandd also by S.C. SIGMA S.A. [5,8] As a rsult of th two studis conductd at S.C. SIGMA S.A and S.C. OMEGA S.A., th following rsultd: as a consqunc of th grat dmand of spar parts, at a national lvl, 12 ntrpriss manufacturing spar-parts for trucks, cars and tractors wr stablishd, th dsign for th pics bing transmittd; yt no documnt of non-xclusiv licns assignmnt was vr signd. Th manufactur was achivd at th lvl of th plant, aftr clar ordrs, according to th critrion part/ no. itms; sinc th abolishmnt of th plant, so far, ths companis hav clinchd no contract of non-xclusiv cssion; all production of spar parts for cars, tractors and trucks, at a national lvl, was countrfitd, xcpting th pics manufacturd and sold by th right holdrs S.C. SGMA S.A. and S.C. OMEGA S.A. [5,8] a fw companis in th country wr intrstd to bcom lgal; a non-xclusiv cssion contract was ngotiatd, by law nr. 8/1996 as rgards th copyright and rlatd rights, which stands for th first contract clinchd by th right ownrs S.C. SIGMA S.A. and S.C. OMEGA. S.A. It was concludd and signd by th futur bnficiary, th company S.C. X S.A. (calld according to th confidntiality procdur); this contract bing stoppd by AGA. no knowldg xists of som summons to court for th rcovry of th rights, as th xprtis was not continud.

6 4. CONCLUSIONS & ACKNOWLEDGMENT 1. Unlss th pirat companis xistd, with a high production lvl, both S.C. SIGMA S.R.L. and S.C. OMEGA S.R.L. would hav bn th first companis manufacturing spar parts, at a national lvl. 2. If S.C. SIGMA S.R.L. and S.C. OMEGA S.R.L. rcovrd thir copyright, th grat valu of thir tradmarks would b provn. 3. Laws wr issud (Law no. 202/2000 as rgards th intllctual-proprty in customs) which disadvantags th right holdr (ownr). 4.Th fficincy of ths ntrpriss normously droppd; th markr losing by intllctual thft; th right holdr having not sud against th countrfit. This work was partially supportd by th stratgic grant POSDRU/159/1.5/S/ (2014) of th Ministry of National Education, Romania, co-financd by th Europan Social Fund Invsting in Popl, within th Sctoral Oprational Programm Human Rsourcs Dvlopmnt REFERENCES 1. Băbuţ, G., Moraru, R., Environmntal risk charactrisation principls, Procdings of th 6th Confrnc on Environmnt and Minral Procssing, part. I, pag , VŠB- TU Ostrava, Czch Rpublic, (2002). 2. Br, T., Ziolkowski, F., Environmntal risk assssmnt: An Australian prspctiv, Suprvising Scintific Rport 102, Australia, (1995). 3. Eminscu, I., Unfair comptition.roman Law and compard., Publishr " LUMINA LEX", Bucharst (1993 ). 4. En, C.N., Comparisons on intrnational approachs to risk managmnt., Economia Journal, Managmnt sris, (yar VIII, no. 2/2005, pp ). 5. Fântână, R.S., Rsarch on intgratd quality-risk managmnt of tchnicalconomic intllctual proprty, PhD Thsis, "Transilvania" Univrsity. Brasov Faculty of Tchnological Enginring (2008). 6. Hillson, D., Projct Risk Managmnt: Futur Dvlopmnts, (2004). Availabl: ( 7. Lazăr V., Offncs against intllctual proprty rights, Publishr ALL BECK, LEGAL, Collction " LEGAL STUDIES ", Bucharst (1999 ). 8. Scara G., Fântână R. S., Gnral Managmnt, Publishr Pro Univrsiataria, Bucharst (2010). 8. Rsolution no. 394 of 8 Jun 1995 on th obligations of conomic agnts - individuals or lgal th markting of durabl consumr (Official Gaztt no. 122 of 19 Jun 1995). 9. Law no. 8 of 14 March 1996 on Copyright and Rlatd Rights ( Official Gaztt No. 60 of 26 March 1996). 10. Dcision no. 786 of 10 Sptmbr 1996 amnding and supplmnting Govrnmnt Dcision no. 394/1995 concrning th obligations payabl by companis-natural or lgal prsons, in th markting of products from consumr us of long (d. OF No 222 of 17 Sptmbr 1996). 11. Law no. 84 of 15 April 1998 on tradmarks and gographical indications (Official Gaztt no. 161 of 23 April 1998). 12. Ordr No of 25 March 1999 for complting th rgulations on th crtification and/or approval of quipmnt, spar parts and matrials usd in road vhicls and allow conomic agnts which provids srvics rpairs or carris rconstruction of road vhicls approvd by ordr of th Ministr of transport no. 536/1997, (m. OF. No. 224 of 20 May 1999). 13. Ordinanc no. 82 of 24 August 2000 concrning th authorization of conomic agnts that provid rpair srvics, rgulation and / or carris on rconstruction of vhicls (Of. No. 413 of 30 August 2000). 14. Law no. 298 of 7 Jun 2001 amnding th Law no. 11/1991 on Unfair Comptition ( Official Gaztt. Part I no. 313 of 12 Jun 2001).