1 KNOWLEDGE ECONOMY SOCIETY MANAGING ORGANIZATIONS: CONCEPTS AND THEIR APPLICATIONS Edited by A n d r z e j J a k i, B o g u s z M i k u ł a
2 KNOWLEDGE ECONOMY SOCIETY MANAGING ORGANIZATIONS: CONCEPTS AND THEIR APPLICATIONS
4 CRACOW UNIVERSITY OF ECONOMICS Faculty of Management FOUNDATION OF THE CRACOW UNIVERSITY OF ECONOMICS KNOWLEDGE ECONOMY SOCIETY MANAGING ORGANIZATIONS: CONCEPTS AND THEIR APPLICATIONS Edited by Andrzej Jaki, Bogusz Mikuła Cracow 2014
5 Reviewer Piotr Wachowiak All papers have been prepared in English by the Authors Wydanie publikacji zostało sfinansowane z dotacji na utrzymanie potencjału badawczego przyznanej Uniwersytetowi Ekonomicznemu w Krakowie The book was finansed with subsidies for maintaining the research capacity granted to the Cracow University of Economics Copyright by the Cracow University of Economics, Cracow 2014 ISBN (on-line pdf) ISBN (printed version) Publishing House Foundation of the Cracow University of Economics ul. Rakowicka 27, Kraków, Poland
6 Table of contents Introduction... 9 PART I SELECTED CONCEPTS AND METHODS OF CONTEMPORARY MANAGEMENT Chapter 1 Jolanta Walas-Trębacz Business Model and Value Chain of the Enterprise Chapter 2 Adam Stabryła Situation Analysis and Corporate Development Programming Chapter 3 Mariola Wiater The Impact of the Concept of New Public Management on the Development of Organizational Culture in the Civil Service Chapter 4 Joanna Sobula Modern Management Concepts in Work Organization Real Estate Managers Chapter 5 Bartosz Bednarz Sports Management: Case Study of a Polish Football Club KKS Lech Poznań, Years Chapter 6 Monika Sałata Modern Production Concepts Chapter 7 Jarosław Żerulik Project Assumptions, Development and Procedures in Quality Function Deployment Method... 69
7 6 Table of contents Chapter 8 Jarosław Nowak Impact of Business Intelligence Technology on Business Productivity Chapter 9 Jan Jekielek Enhancing Project and Enterprise Agility to Respond to Change Chapter 10 Beata Tarczydło Scents and Elements of Aroma Marketing in Building of an Appropriate Brand Image Chapter 11 Mirosław Woźniak The Specificity of Talent Management Process Chapter 12 Małgorzata Adamska-Chudzińska Determinants of Managerial Capability in Circumstances of Uncertainty and Risk Chapter 13 Beata Olszewska-Łabędź Employee Assistance Programmes, as a Part of a Modern Business Management Chapter 14 Jadwiga Ślawska Information Security Risk Management Chapter 15 Ryszard Pukała Insurance as a Tool for Limiting Corporate Operational Risk Chapter 16 Kanhiya Lal Chawla, Pankaj Kumar Gupta, Arunima Sirohi Managing Quality Risks in Indian Higher Technical Institutions via KM Interventions PART II DEVELOPMENT OF KNOWLEDGE AND COMPETENCES IN MANAGING ORGANIZATIONS Chapter 17 Paweł Łukasik Organizational Learning Factors
8 Table of contents 7 Chapter 18 Božidar Leković, Slobodan Marić Knowledge as a Source of Entrepreneurial Venture and Key Success Factor of Small Business Chapter 19 Grażyna Śmigielska Core Competences and Managerial Competences in Developing the Sustainable Competitive Advantage Chapter 20 Stefan Alimpić Intellectual Capital Aimed at Creating Value and Competitive Advantage of Enterprises Chapter 21 Michalina Szczepańska Usefulness of Different Intellectual Capital Models for Media Industry. Missing Elements in Terms of Media Characteristics Chapter 22 Małgorzata Dolińska Open Innovation Chapter 23 Marian Bursztyn Educational Significance of Emotional Intelligence in Development of Tourism Chapter 24 Nataliia Zavydivska, Olga Zavydivska Health Management as a Component of Modern Higher Education System Chapter 25 Anna Piwowarczyk Social Competences and Cross-Cultural Differences from a Perspective of Glottodidactics PART III DETERMINANTS OF FINANCIAL PROCESSESS ECONOMIC AND MANAGERIAL PERSPECTIVE Chapter 26 Tomasz Rojek Capital Flows in the Contemporary Economy Chapter 27 Andriy M. Lyubenko Conceptions of the Centralized and Decentralizing Organization of State Internal Financial Control
9 8 Table of contents Chapter 28 Tetyana Novikova, Snizhana Pashova Optimization of Management Processes of Crediting Innovation in Ukraine Chapter 29 Katarzyna Frodyma Sources of Financing in the Market of Renewable Energy in Poland Chapter 30 Tetiana Girchenko, Kateryna Kupriyenko Evaluation of Organization of Retail Lending Chapter 31 Marina Puchkova, Michail Romanovskii Project Finance in a Modern Volatile Economic Situation Chapter 32 Yuriy Nemish System of Enterprise Financial Liquidity Rating as an Instrument of Company Management in the Variable Economic Environment Chapter 33 Artur Hołda, Anna Staszel Is it Creative Accounting, Risk Management, Manipulation or a Fraud? Chapter 34 Agnieszka Giszterowicz Management and Tridimensionalism Chapter 35 Jurij Renkas The Human Capital Theory as a Basis for the Development of Financial Reporting Chapter 36 Anita Mrówka Labour Costs vs. Economic Performance of Companies Chapter 37 Anna Jonkisz-Zacny In Quest of the Most Selected Depreciation Method Authors
10 Introduction The end of the 20 th century was marked with a change in the structures and conditions of the economic world functioning, from industrial to post-industrial economy. The contemporary economy is defined as knowledge-based economy and can be considered to be the first stage of the development of post-industrial era. The scale of features characterizing it has now reached an unprecedented level. These are mainly qualities, such as: globalization of the business world, the network structure, turbulence, the acknowledge of knowledge as the key factor of production which determines the way of using the remaining assets of an organization, broad use of computer technique in business activities. The occurring significant diversity of the economic world and the network-turbulent environment of business entities functioning within its framework have made organization management particularly complex and difficult. The first group of difficulties results from the necessity to include in management some assets which so far have often been neglected, at least partially, such as, for example, knowledge, human capital, talents, or intellectual property. It enforces changes in employees ways of thinking and implementing the whole number of new management tools in practice. Secondly, the lack of possibility for highly probable forecasting future requires, among others, to improve business models, strengthen and develop new methods in the area of risk management. The development of IT technology requires further improvement of IT systems used in organizations, with special consideration given to the safety of information. Another group of difficulties arises from a high level of competitive struggle and imposes theoretical and tool strengthening of the concepts of innovation management, organization learning processes management and competence management, among others. On the other hand, a difficult situation on the financial markets and, arising from it, problems with financing activities of enterprises, the fall of demand on the world markets and the worsening financial situation of enterprises enforces the optimization of financial processes and the improvement of instruments applied in finance management. The economic situation of enterprises also necessitates the improvement of the fundamental areas of their activities and the systems of managing them, such as the production management systems. The mentioned conditionings became the starting point for the creation of this book showing the selected theoretical, methodological and practical aspects of managing organizations. The entirety of the publication is divided into three following parts, linked to each other: I. Selected Concepts and Methods of Contemporary Management. II. Development of Knowledge and Competences in Managing Organizations. III. Determinants of Financial Processes Economic and Managerial Perspectives. Part One of the work presents a broad context of the occurrence and evolution of different management concepts and methods. The need to develop and improve management solutions used in contemporary organizations is related both to the formation of new business models and a necessity to adapt management concepts and methods to unquestionable specificity of various organizations (e.g.
11 10 Introduction public entities, football clubs, universities and colleges), or their use with reference to various areas of management (e.g. production management, marketing management, human resources management). Volatility and unpredictability of the conditions in which contemporary organizations are functioning also bring the need for the development of concepts and methods of risk management, and thus, efficient adaptation to the turbulent social and economic environment. Part Two of the work focuses on exposing the significance of knowledge and competences in the process of managing organizations. It is a consequence of transformations occurring in recent years in the sphere of economic assets and their role in shaping economic processes. It is directly related to the growing significance of intellectual capital as the base for the functioning and development of organizations, and, in particular, the key determinant of the growth of its effectiveness and the capability of accomplishing their objectives. Its effect is the formation of the intellectual capital management concept and the knowledge-based management concept exposing the importance of knowledge, being both the component of an organization s economic assets and the product of its activity, as the object of management. In the last, third part of the work, attention is paid to the role of financial processes, both in shaping the effectiveness and efficiency of the functioning of economies and the management of the sphere of contemporary enterprises finance. Such an approach displays a need for the integration of macroeconomic and microeconomic perspective of perceiving and analyzing economic processes, and within them, financial processes because the financial system, including two subsystems: the public and the private one, constitutes an integrated legal and economic mechanism enabling the fulfillment of cash flows among all entities functioning on the market. This book was created as an effect of cooperation of the academic environment of Faculty of Management of the Cracow University of Economics and the employees and doctoral students of other University faculties, as well as representatives of various Polish and foreign academic centers. The work inscribes into the cycle of publications with the common title Knowledge Economy Society which are one of the effects of this many years cooperation 1. As scientific editors, we would like to thank all the Authors for accepting the invitation to co-create this publication and for their dedication and contribution to its creation. Andrzej Jaki, Bogusz Mikuła 1 See: Knowledge Economy Society. Challenges of the Contemporary World, Edited by R. Oczkowska, B. Mikuła, Faculty of Management of the Cracow University of Economics Foundation of the Cracow University of Economics, Cracow 2011; Knowledge Economy Society. Dilemmas of the Contemporary Management, Edited by A. Malina, R. Oczkowska, T. Rojek, Faculty of Management of the Cracow University of Economics Foundation of the Cracow University of Economics, Cracow 2012; Knowledge Economy Society. Transfer of Knowledge in the Contemporary Economy, Edited by P. Lula, B. Mikuła, A. Jaki, Faculty of Management of the Cracow University of Economics Foundation of the Cracow University of Economics, Cracow 2012; Knowledge Economy Society. Global and Regional Challenges of the 21 st Century Economy, Edited by P. Lula, B. Mikuła, A. Jaki, Faculty of Management of the Cracow University of Economics Foundation of the Cracow University of Economics, Cracow 2013; Knowledge Economy Society. Challenges of the Contemporary Management, Edited by A. Malina, R. Oczkowska, T. Rojek, Faculty of Management of the Cracow University of Economics Foundation of the Cracow University of Economics, Cracow 2013 and Knowledge Economy Society. Dilemmas of the Economic Resources Management, Edited by R. Oczkowska, G. Śmigielska, Faculty of Management of the Cracow University of Economics - Foundation of the Cracow University of Economics, Cracow 2014.
12 PART I SELECTED CONCEPTS AND METHODS OF CONTEMPORARY MANAGEMENT
14 Chapter 1 Business Model and Value Chain of the Enterprise Jolanta Walas-Trębacz 1. Introduction The dynamic growth of competition, in a large extend associated with the globalization of the economy, causes the necessity of creation the concept of running a business. In the strategic management increasing attention of many researchers and business strategists is focused on explaining the impact of business models on creating value, results, and enterprise competitive advantage in the market. As it turns out, based on numerous empirical researches one of the conditions for the enterprise success is properly developed business model. The substance of the business model are its three components: the competitive advantage, resources and skills, and the value chain, which allow to create and retain value in the enterprise. The design of the business models is a complex process which requires an interdisciplinary approach. The design process of business models should arise directly from the strategy of the enterprise. Changing the model may occur in the context of changes in the value chain at the interface of the relationship between suppliers, the enterprise and customers, but also in the context of innovative technologies, products, and creating new markets. 2. The concept and components of the business model The term business model has operated in the global economy and science management for over fifty years. The attempt to explain what the business model is, was made for the first time in 1957 by Professors R. Bellman and Ch.E. Clark in the elaboration entitled On the construction of a Multi-Stage, Multi-Person Business Game. Over the years, with the development of the market and the global economy, the term business model has become the subject of many debates and scientific considerations, resulting in the creation of many definitions (Bąk, Kulawczuk, Szczęśniak (eds.), 2011, p. 9). The business model is the method acquired by the enterprise to enlarge and use resources in order to present products and services offer to customers, in which the value exceeds the competitors offer and simultaneously provides the profitability to the enterprise (Afuah, Tucci, 2003, p. 20),
15 14 Jolanta Walas-Trębacz or some other term that says that it is a combination of strategic concept of the enterprise and technology of its practical realization understood as the construction of the value chain allowing for efficient exploitation and renewal of resources and skills, at the same time defining its purpose and answering questions: what organization will do? what are the basic sources and competencies? how the resources and competencies are configured in practice of everyday activities? (Obłój, 2002, pp ). The business model is a description of running a business by which the enterprise is profitable. It can also be defined as a specific and individual place of creating value for each enterprise. An essential element of the business model is to identify the role of the entity in the value chain in which it participates. The business model determines who, what, to whom, at what cost and at what price is provided, in other words, provides a description of creating value added in the enterprise 1. In the analytical context, it is a system model containing one central object, which is an analysed entity and interacting objects being suppliers, consumers, restriction sources. The business model is the configuration of the following elements: the proposition of the value for customer, resources/competencies, the position in the value chain and sources of revenue (Johnson, Christensen, Kagermann, 2008, p. 51; Gołębiowski, Dudzik, Lewandowska, Witek-Hajduk, 2008, p. 62) 2. According to H. Chesbrough and R.S. Rosenbloom the business model is determined by following decisions: establishment of the value for the customer, identification of the target segment or segments of the market, determination of the structure of the value chain, determination of the costs structure, sources of profit, and estimation of the level of the potential profitability of the given offer, determination of the enterprise position in the context of the network that creates the value for the end-users, formulation of the competitive strategy that ensures to obtain and maintain an advantage over competitors (Chesbrough, Rosenbloom, 2002, pp ). Table 1 contains an overview of the business model definitions due to various authors. 1 Contribution to the development of definitions of business models have various researchers and practitioners, inter alia, P. Drucker, J. Magretta, A. Slywotzky, D.J. Morrison, B. Andelman, R. Amit, C. Zott, L. Massa, D.J. Teece (Zott, Amit, Massa, 2011, p. 1024). 2 Regardless of whether there is creating the new business model, or follows the development of the existing one, elements are always: the type of competitive advantage (natural, relational, operating system, barriers to entry), resources and strategic skills, and the value chain. The advantage is the conceptual dimension of the business model and resources, skills, and the value chain comprise the practical extension of intellectual decisions (Obłój, 2002, p. 100).
16 Business Model and Value Chain of the Enterprise 15 Table 1. The interpretation of the term business model Author Definition of the business model A.J. Slovotzky, The business model is the enterprise s ability to obtain and maintain D.J. Morrison, profitability (remain in the profit zone ). B. Andelman (2000) R. Boulton, The business model is a unique combination of tangible and intangible B. Libert, assets that determine whether the organization is capable to create or S. Samek (2000) destroy values. M. Rappa (2001) The business model describes how the enterprise generates profits, determining the position of that enterprise in the case of the value chain. J.C. Linder, The business model is the idea of running a (profitable) business S. Cantrell (2001) in the changing environment, containing the proposition of the value for customers developed with key stakeholders, and including operations which serve creating and offering this value. K. Obłój (2002) The business model is a combination of strategic concept of the enterprise and technology of its practical realization understood as the construction of the value chain allowing for efficient exploitation and renewal of resources and skills. H.W. Chesbrough, R.S. Rosenbloom (2002) The business model is a heuristic logic linking the technical possibilities with the implementation of economic value. L. Morris (2003) The business model describes how the ways of creating and delivering value (for customer) can evolve along with changes in needs and preferences of customers. J. Rokita (2005) The business model reflects the ways of achieving appropriate economic results expressed by the relation of revenues, costs and profits in the entire organization. A. Osterwalder, M. Rossi, M. Dong (2010) D.J. Teece (2010) The business model describes the architecture of the enterprise and the system of relationships with external partners, created as a tool for forming values to final customers, serving to ensure the competitive conditions for sustainable growth of the enterprise (and increase its value for investors). The business model characterizes how the enterprise provides value to the customer and how transforms payments into profits. Source: own elaboration based on the quoted literature. A brief overview of business model definitions presented in Table 1 shows the diversity and the complexity of this issue at the same time. For this reason, the authors of the above-mentioned definitions also give different views of elements constituting the business model. The authors involved in discussing and explaining the issues refer to various theoretical concepts of economics and management, inter alia, the concept of value for customer, the concept of business strategy, the innovation theory, the resource theory of the enterprise, the concept of the value chain, the transaction costs theory, or the concept of strategic networks.
17 16 Jolanta Walas-Trębacz The most frequently discussed issues in defining the business model include: sources of revenues/profits (of earnings money), the value for customer, key resources, key processes, the architecture of the enterprise, relationships with partners (suppliers and customers), logic and the way of action, the position in the chain and the competitive strategy Classifications of the business models Over the past few years, has managed to notice some changes in building the business model resulting from the following facts: key role in new models play intangible assets (however, the success is achieved by the combination and interaction of various assets); new models create new varieties of risk and existing management and measurement systems do not match to the assets used to create value; success of the enterprise requires new processes and new tools (most of the enterprises do not have formalized processes and systems to manage the intangible assets and generated by them types of risk); transparency of information is crucial for creating value (Boulton, Libert, Samek, 2001, p. XVII; Kwiecień, 2007, p. 299). Among many types of business models can be distinguished those popularized by K. Obłój, which include: conductor s model, in which the enterprise rather than integrates, coordinates and controls all activities needed in the sector, decides to outsource those activities that are not crucial, and create a network of partners, acting in it as coordinator. In Poland has been implemented such the model in the fashion industry, which deputes performing certain specific phases of production outside (it is mainly associated with the reduction of manufacturing costs, leaving also other processes itself, i.e. distribution, designing clothes etc., then being sold under their own brand name, for example Redan S.A., LPP S.A.); operator s model, in which the enterprise concentrates on the one of chosen aspects of the value chain. This model takes into account the usage of skills of specialized enterprises rendering services in specified conditions with the selection of specialized equipment or having certain certificates. The assumption of this model is the subordination of the whole configuration to one enterprise s core business which the enterprise perform the best. A prime example of this model is the enterprise Impel S.A.; integrator s model, in which the enterprise expands its value chain of consecutive links in order to obtain control over the entire process of producing and appropriating value. This model functions among enterprises operating primarily in the sectors in which the key to success are: economies of scale, opportunity to diversify, repeatability of production, i.e. metallurgy, energy production, or mining industry (Obłój, 2002, pp ). 3 The basic features of business models are: innovation, revolutionary, appropriate long-distance character, flexibility, ease of destruction (in leaving), creating it in the base of the effect of learning, building relationships with the environment and also as a result of assessing the profitability of customers and profitability of the sector in which the enterprise operates (Koźmiński, 2004, p. 136).
18 Business Model and Value Chain of the Enterprise 17 The business models activities can be categorized according to specific criteria. The most complete list of business models presented A. Slywotzky, D.J. Morrison, and B. Adelman. These models were divided according to the following criteria: 1. Configuration of the value chain. 2. Strategic resources and skills of the enterprise. 3. Innovation. 4. The type of the competitive advantage (see Tab. 2). Table 2. Classification of the business models of enterprises The division criterion 1. Configuration of the value chain 2. Strategic resources and skills of the enterprise Types of models The source of obtaining profit and the basis of innovative model of activity is a specific configuration of processes (functions) realized by the enterprise. The organization analyses the value of individual components of the value chain, and then pays special attention on a particular element or expands the surveyed value chain. For this reason, the following business models can be distinguished: multielement profit model which is used by enterprises in food sector supporting many various distribution channels, inter alia, coffee producers, profit model from the liaisons, which is the basic business model of web sites and online shops or sector of financial counselling and insurance services, profit model from specialization in a particular field of activity, after-sales profit model, profit model from the position in the value chain. In enterprises disposing of strong assets in the struggle with competitors, in which key competencies are used, the essence of their functioning is to protect the ownership of strategic resources and their effective usage. According to this criterion, can be distinguished: profit model from existing customers base being a fundamental model of functioning in the sector of machinery and equipment vendors of small polygraph operating in Poland, profit model from brand which is used by manufacturers of youth clothing, for example Reserved, House, profit model from the gains multiplier which in recent times is used by mobile networks, profit model from the super-production.
19 18 Jolanta Walas-Trębacz 3. Innovation and speed of operation 4. The type of the competitive advantage These models are being used mainly where the product life cycle covers a relatively short period, and the enterprise draws its above-average profits primarily from the fact of being first. From this point of view can be distinguished: profit model depending on time, profit model from the specialized product, for example in markets of computer processors, automobiles, pharmaceuticals, profit model from new products (especially popular in regional clusters focused on the production of, for instance Christmas decorations, garden gnomes, chess etc.) The enterprise functioning in various sectors, which wants to be successful in the long time horizon should be based on specific sources of competitive advantage. Within this group can be distinguished: model based on natural advantage profit from the leadership at the local scale, models based on a favourable price-performance ratio profit model from transactions scale and profit from the experience curve, profit model from the low-cost activity, profit model from transactions scale, cyclical profit model, models based on the advantage of handling and offering solutions systems profit model from solutions for the customer, models based on creating barriers to entry profit model from standard de facto, profit model from the products pyramid. Source: own elaboration based on Slywotzky, Morrison, Andelman, 2000, p. 81, 88, 96. In addition to presented business models, can be distinguished those that pay attention to the way of creating value added. Among them may be mentioned models based on: differentiation of products (or specialization), low prices (or on massive scale), advantage in time (priority of entry gives a huge competitive advantage), having own norm (patent) binding in the market or using other barriers to entry, having particular products that enable full exploitation of the market or at deployments which have been made, complete integration with a customer, a particular structure of the enterprise which allows for significant savings or high efficiency activities (Muszyński, 2006, p. 12). 4. The role of the value chain in forming the business model The foundation of each being created business model is the value chain, whose an efficient structure requires to answer to the following questions: who exercises control over key activities for achieving success in the given sector? what are the basic possibilities and limitations in the development of the enterprise?
20 Business Model and Value Chain of the Enterprise 19 in what extent the position of the enterprise created by the given model is resistant to the attack of competition, in other words, what are the barriers to entry? The analysis of chain of activities constituting on the creation of the value offer for customer involves the following elements: value-creating entities, their number and nature of the activities, nature of relationships connecting the individual links (links: technology, capital, information, transaction), the position of particular entities in the chain (coordinating or passive), level of added value by each links measured by the difference of the cost of acquisition and resale price to the next link (Gołębiowski, Dudzik, Lewandowska, Witek-Hajduk, 2008, p. 70). With the business model closely corresponds profit model, therefore, can be indicated at least three such models using the value chain in order to create a competitive advantage: profit thanks to improvements with the customer (from customer solutions), profit from low operating costs model, profit from the position in the value chain (Ciesielski, Długosz (eds.), 2010, pp ). Taking into account two criteria: the length of the internal value chain and resource potential of the enterprise can be distinguished six business models. They were synthetically characterized in Table 3.