Business Development

Transcription

1 1. Business Development Business System Economics and Management CO-CHAIRS: Dr. Dušan Baran Dr. Jogaila Mačerinskas Dr. Iveta Šimberova SECRETARIES: Laura Aidukien Migl Černikovait 6

2 COMMODITIES MARKET DEVELOPMENT Dušan Baran European Polytechnic Institute Ltd. Czech Republic Abstract. Commodities, whether food, energy, metals and chairs they are sitting on are real, tangible things that are part of our everyday lives. All have different characteristics, different supply and production criteria, demand and other uses. The main commodities traded on major world exchanges with business volumes significantly exceeding the volume of stock exchanges. In addition to these exchanges, large producers and consumers also traded increasingly small investors. This article shows the dynamic of commodities prices and identifies factors influencing this change. There are a lot of investment opportunities in commodities market both for conservative investors and investors accepting a high level of risk. Keywords: Commodities, business, investors, development, markets, precious metals, agriculture, inflation. Introduction Over the last 130 years, humanity has been witness to several growth commodity trends, each lasting an average of eighteen years, and about the same time, then declined. In the penultimate commodity boom in the years experienced a surge in commodity prices. Many of the commodity prices reached their historic highs. But with every boom comes bust and this boom was no exception. After some 20 years of bear market reached the end of the nineties, global commodity prices have bottomed. After the Internet bubble burst in 2000, a dramatic increase in demand for raw materials from emerging markets and insufficient supply, but also to the monetary policy of central banks, commodity prices began to rise significantly again. Given that the markets were growing and becoming much more attractive asset for many funds, but also retail investors. By this time, the commodity markets from the perspective of small investors, the black sheep of the family investment - small banks serving niche markets, consumers and producers to provide price risk management. The growth of interest in commodity markets by retail investors contributed electrification markets. The revolution in computer technology has changed a method and system of trading, compared to previous periods of electronic trading platforms for all market participants yielded the same access to business data, flexibility, the market is, more liquid, efficient, investors will get the best price, margins are lower, the market disappeared many dealers who retail investor beggaring. The aim of this article is to analyze recent trends of commodity market. To reach this aim, prices of commodities (precious metals and agriculture products) are analyzed. Factors influencing commodities prices are identified. Analysis of recent trends and factors of commodities market allows predicting price development and identifying investment opportunities. In this article these methods are applied: analyses, syntheses, comparison, deduction, induction and graphic methods. 1. Prediction of Development Market Commodities Future development in commodity markets depends on many factors. One of the most important factors are: monetary policy of central banks supply and demand 7

3 Most commodities are traded globally in dollars. Important role in commodity prices and U. S. plays a central bank. Fed with massive incentives that the government keeps the economy in operation since the beginning of the economic crisis, record increases in commodity prices. Quantitative release in 2010 caused a weakening dollar and lower interest rates. These Steps lead investors to invest in assets such as commodities. Monitoring the dollar cost is an important aspect of support for trade commodity market as commodities and the dollar generally move in the opposite direction. The most frequently used tools to track the dollar's value is called the dollar index. When the dollar against major currencies strengthened, commodity markets tend to fall and the reverse is also true when value of the dollar falls, commodity markets tend to rise. As can be seen on the graph, the value Dollar comparing CRB index of commodity. This situation is the strong signal for growth in prices commodities. Graph 1 shows the comparison the dollar index with CRB commodity index. Graph 1 Comparison the dollar index with CRB commodity index Source: [9] 2. Precious Metals One of the prerequisites for future developments in commodity markets, precious metals will FED policy and central banks. When comes the third wave of quantitative easing, whereof the chairman, Ben Bernanke is not exponent, can not wait for the rising of commodities in those days regarded as a safe haven. Gold One such store of value is gold. Investment demand for the metal is the huge. Current events from a macroeconomic point of view are ideal for gold. Riots in Arab countries fear the spread of inflation in the U. S., Europe and Asia, weak dollar, Fed monetary policy, a large and growing deficit in the fundamentals are good growth of gold, further supported by investor psychology. Correction may come, but which investor can use it as an opportunity to buy. Development of the gold price for 2011 will therefore be growth. Principal trend can be realized through gold ETFs. The recommendation is SPDR Gold Shares - GLD and the ishares Gold Trust - IAU. Graph 2 shows the 8

4 comparison the dollar index with gold. Graph 2 Comparison the dollar index with gold Source: [11] Graph 3 shows the development of the gold price with moving averages. Graph 3 Development of the gold price with moving averages Source: [12] Graph long-term development of the gold price moving averages (20-day, 50-day, 100 days) shows a clear trend. We see that gold since 2008 has experienced price increases, which is the accompanied by corrections. Now, again hits up, which is confirmed by moving averages. I believe that growth could continue in the coming months. 9

5 Silver Another of precious metals, are considered a safe haven in times of uncertainty, is the silver. Unlike gold, silver has, more industrial uses, the demand for it is of nineteen minor part driven by investors and speculators. Never the less, as shown by the graph price of silver tends to move in correlation with the gold. Silver is a good investment when inflation. Graph 4 shows the development of the gold price and silver price. Graph 4 Comparison of the gold and silver price development Source: [12, 13] Graph 5 Growth in silver consumption in new application areas Source: [13] Graph 5 shows the growth in silver consumption in new application areas. In the long term, consumption of silver could rise due to their unique properties, such as excellent electrical conductivity and antibacterial characteristics. There are so the new use of silver as solar energy, water purification, medicine, etc. This is due, these properties can cause that its consumption should in coming years increase substantially. 10

6 3. Agriculture There are several important reports that market participants are watching. Perhaps the most importantis the report published by the U. S. Department of Agriculture (USDA - United States Department of Agriculture), bringing reports of American and world production, cultivation farmers' intentions for the coming harvesting season, and an overview of consumption and stock agricultural crops. During the development of the USDA issued any further reports determining the approximate volume of harvest. 3.1 Corn The United States is the world's largest producer and exporter of corn. Although exported only 30% of its domestic production, this 30 % represents 80 % of the total volume of world trade in maize. According to the U. S. Department of Agriculture, issued USDA report, the ratio of stocks in 2011 would fall to lowest level since record-season Closing stocks in the United States should move at 675 million bushels. The previous estimate of 745 million counted. USDA therefore expected to rise. Table 1 show the USD a corn report. Table 1 USDA corn report Source: [14] Chart of the development of maize prices moving average (20-day, 50-day, 100 days) indicate an upward trend. Technical analysis suggests that the upward trend could continue, however, may be accompanied by severe corrections. These corrections can be strong good opportunity to buy. 11

7 Graph 6 shows the development of the corn price. Graph 7 shows the U S ethanol production. Graph 6 Development of the corn price Source: [14] 3.2 Ethanol Graph 7 US ethanol productions Source: [15] Support the growth of corn prices and high oil prices on world markets. With rising oil prices and growing demand for biofuels all this is also exacerbated by the policies laid down volumes of biofuels, the United States is one of the countries, where most ethanol is produced from corn. 12

8 Conclusions Prices of commodities in the last decade soared to their historical highs and there are still a lot of assumptions that this growth will continue. One of the main reasons why it is the influence of developing countries as demand for agricultural raw materials, metals, oil, energy, construction materials, as well as the increasing population in these countries, their reaching and changing eating and consumer habits, long-term reduction of cultivated land, all brings with it increased demand for commodities. Another factor is the policy of central banks, whose actions led to an increase in asset prices. In addition, the central bank holds interest rates at such levels that returns are negative after inflation. In such conditions, investors are leaving traditional investment instruments and deposit their money into assets such as commodities. About the where and how to invest, the investor must decide for himself with regard to their knowledge and preferences. Investment ideas and practices are vastly different depending on which side of the investor and lean as a theory take as their own. Because conditions in the markets in recent times often change, trading commodities and commodity indices is need active investment management. But attention to proactively manage the increasingly seems like a necessity in any market, whether stock or commodity. If an investor wants to succeed, he must adapt to the market. References 1. BARAN, D. Kapitálový trh a podnikové financie, Vydavatelstvo STU Bratislava 2003, 169 s. 2. ESNÍDAL, T.; PODHAJSKÝ, P. Obchodování na komoditních trzích. 2. rozš. vyd. Praha : Grada, s. 3. ROGERS, J. Žhavé komodity. 1. vyd. Praha : Grada, s. 4. Jílek, J. Akciové trhy a investování. 1. vyd. Praha : Grada, s. 5. WILLIAMS, L. Kompletní průvodce obchodováním komodit. Praha : Centrum finančního vzdělávání, s. 6. Financnik.cz. Více o čtení gafů. [online] [cit ]. Dostupné z WWW: < 7. U.S. Commodity Futures Trading Commission. Market Reports. [online] [cit ]. Dostupné z WWW: < 8. Commodity Correlations. [online] [cit ]. Dostupné z WWW: < =119&eec ce954078c =5a548b23da5e0357abe09528ce1c01a5>. 9. U.S. Business Cycles. [online] [cit ]. Dostupné z WWW: < 10. Investice.ihned.cz. Komoditní ETF fondy. [online] [cit ]. Dostupné z WWW: < 11. SPDR Gold Shares [online] [cit ]. Dostupné z WWW: < 12. IShares Gold Trust [online] [cit ]. Dostupné z WWW: < 13. THE SILVER BOOK [online] [cit ]. Dostupné z WWW: < 14. United States Department of Agriculture [online] [cit ]. Dostupné z WWW: < 15. Produkce etanolu v USA [online] [cit ]. Dostupné z WWW: < 13

9 ECONOMIC EVALUATION OF PROJECTS CO FINANCED FROM THE EUROPEAN FUNDS Dagmar Čámská University of Economics, Prague, Abstract. This article is focused on investment projects which are co financed from the European funds. The European funds are important source of money to the Czech economy. The aim of the paper is shown economic evaluation of supported projects. Economic evaluation of these projects will be compared with theoretical approaches of business economics. There are several types of supported programmes. Two will be chosen and compared. Although it seems that economic evaluation follows all theoretical recommendation mistakes can always occur. Classical techniques, wrong estimations and bureaucracy followed by corruption are meant as main failures. Keywords: investment projects, Czech financial support programmes, European funds, economic evaluation, failures of evaluation. Introduction This paper describes economic evaluation of projects co financed from the European funds in the Czech Republic. First the financial support programmes are introduced as an important source of money. Then two financial supported programmes are chosen and their application requirements are shown. The methods of evaluation are discussed. Everything is compared with theoretical approaches and recommendations of business economics in the field of investment projects and investment decision making. If it is possible results are documented with the help of surveys. The last part deals with potential failures of application evaluation. 1. Investment This article is focused on microeconomic or business approach of investment. According to Scholleova 1 in a narrower sense investment is an asset which is not directly consumed but used to creating additional asset, the company then sells on the market. It is hardly imaginable that any company is able to survive for a long time without investment. Each investment is connected at the beginning with one-off (short-term) cash outlay 2. There are various sources of finance. Long-term sources are usually used for financing investment. As I have already written 3 finance sources can be divided into three categories traditional internal sources, ownership capital and non-ownership capital. In the Czech Republic the companies most use bank loans and leasing as non-ownership capital. With entering the European Union in 2004 another way to capital was opened. An access to structural funds has been widened. Companies have the possibility to obtain non-returnable subsidies. 2. Financial support programmes We will pay attention to programmes co financed from European Union funds which are very important sources because for running period of , the Czech Republic has billion available 4. There is a huge variety of beneficiaries because projects may be presented by 1 Scholleova, H. Investiční controlling: jak hodnotit investiční záměry a řídit podnikové investice. Grada, 2009, p.13 2 Scholleova, H. Ekonomické a finanční řízení pro neekonomy, Grada, 2008, p Čámská, D., Kula, D. Financial support programmes and their prediction models. Scientific proceedings, 2011, year 19, issue 2, p European Union funds. [accessed ] < 14

10 municipalities, regions, ministries, entrepreneurs, owners of transport infrastructure, non-profit organizations, schools, research centres and others. There are four major groups of programmes for the period of which are financed thanks to European money: Thematic Operational Programs Regional Operational Programs Operational Programs Prague European Territorial Cooperation These groups contain together 26 different programmes although this article uses data referring to the state of financial drawing of 19 Czech operational programmes (Objective 1 and 2). The state of financial drawing of other 7 programmes is not included because these programmes are part of the Objective 3 of the economic and social cohesion policy implemented in the Czech Republic. By 3 August applications have been submitted in the amount of billion CZK 5. Less than half of projects have been accepted. Figure 1 shows us the latest state of implementation from July % of sources have been already allocated and 33.6% of sources have been paid to beneficiaries. Figure 1 Latest state of implementation of the cohesion policy, Source: own elaboration based on data 6 It is obvious that more than half of money is already divided among its beneficiaries but money is still available there. It is time to answer a question how many projects have been supported. Supported projects are distinguished into three groups cancelled projects during their implementation, already finished projects and ongoing group. Table 1 show how the projects are divided into specific groups according to different operational programmes. It is necessary to say that numbers are current because the latest update came from 4 August European Union funds. [accessed ] < 6 European Union funds. [accessed ] < available > 15

11 Table 1Current number of beneficiaries of European Regional Development Fund, Source: own elaboration based on data 7 Number of projects Opperational programmes All Canc elled Finali zed Ongo ing Integrated Operational Program OP Czech Republic-Poland OP Transport OP Human Resources and Employment OP Enterprise and Innovation OP Prague Adaptability OP Prague Competitiveness OP Fishing OP Technical Assistance OP Research and Development for Innovations OP Education for Competitiveness OP Environment ROP NUTS II South-East ROP NUTS II South-West ROP NUTS II Moravia-Silesia ROP NUTS II North-East ROP NUTS II North-West ROP NUTS II Central Bohemia ROP NUTS II Central Moravia All programmes Getting of support is obviously not automatic because there are many requirements which each project should fulfil. Conditions differ according to different support programmes but some characteristics are common for all programmes. 3. Common requirements At the beginning the core idea of the project is the most important. First of all each project should contain the general beneficial effect. We mean beneficial in a wide sense because also private companies can ask for money. Secondly the idea of projects has to be consistent with the objectives of the concrete operational program. Third is time because each program has its deadlines when it accepts applications. Parts of application There are required parts that each application should include logical framework, feasibility study, cost-benefit analysis and project budget. If we look at the names and content of these parts they are similar to parts of business plan. Small exception is cost-benefit analysis which is usually not part of typical business plans which are created by profit organisations. The business plan can be characterized 8 as a proposal that sets out a new business venture, direction, product, or course of action. Lamb 9 follows that if you write a business plan it is in order to gain support for your idea. Here we see a visible connection with application forms. According to European Union funds. [accessed ] < available> 8 Lamb, S.E. How to Write It: Business Plans and Reports. Business & Economic Review; Oct-Dec2006, Vol. 53 Issue 1, p Lamb, S.E., p

12 Lamb 10 the major plan sections are the general business description, a mission statement, goals, management team, market analysis, the marketing plan, the financial analysis and appendices or supporting documents. We can compare theoretical major plan sections with two handbooks. We have chosen two examples the handbook of Operational Program Prague Competitiveness and the handbook of ROP NUTS II North-East. It does not matter that one is called feasibility study and the second study of the economic evaluation of the project. General structure of feasibility study of Operational Program Prague Competitiveness 11 includes parts as general information about potential beneficent, description of project, market analysis and estimate of demand, management team and human resource management, technical and technological aspects, impact on the environment, ensure of current assets and investment, project budget, financial plan, evaluation of the effectiveness and sustainability of the project, project schedule, risk management and final project evaluation. On the other hand the document of ROP NUTS II North East 12 should contain general business description, market analysis and estimate of demand, technical and technological solution of project, needs and ensure of current assets and investment, financial plan, cost-benefit analysis, risk management and detailed final project evaluation. Both these documents follow theoretical approaches of business economics. Financial plan and evaluation of project From business economics point of view the most important parts are financial plan and evaluation of project. Handbooks of financial support programmes specify in detail the components of the financial plan. We do not realize any difference if we study the handbook of Operational Program Prague Competitiveness or the handbook of ROP NUTS II North-East. There are always components as plan of costs and revenues, plan of state property and resources of its coverage and cash flow plan because costs do not have to be expenses in same year as well as revenues are not always incomes at the same period of time. Each investment project should be evaluated in an economic way if it is enough profitable and it has sense to implement it. Literature describes many methods or criterions for evaluating. Basically the criterions of capital projects are divided into two groups static and dynamic criterions. The main differences between static and dynamic criterions are written in the article of authors Scholleova, Fotr and Svecova 13. Static criterions consider mainly cash flows. They consider time in constraint mode and in principle they do not work with risk. On the other hand dynamic criterions take into account all three factors which mean cash flows, service life and undergone risk as well. Czech companies usually prefer static criterions although they do not consider risk because evaluating is simply. Anglo-American literature does not take into account static criterions such as Anthes 14. He points out, despite the difficulty of developing good estimates, especially of benefits, four basic methods for comparing project costs and returns remain in vogue: payback period, ROI, net present value (NPV) and internal rate of return (IRR). Many more have been created, but these four have endured for decades. Unfortunately Czech research works show that companies prefer statistic criterions. Table 2 contains results from survey of Faculty of Business Administration. The sample consisted 252 Czech companies. 10 Ibid. 11 Operační program Praha Konkurenceschopnost Metodická příručka: Studie proveditelnosti pro oblast podpory OPPK available [accessed ] < 12 ROP NUTS II North-East Příloha č.5 PPŽP Studie ekonomického hodnocení projektu [accessed ] < 13 Scholleova, H., Fotr, J., Svecova, L. Investment decison making criterions in practice. Economics & Management; 2010, p Anthes, G. What is your project worth? Computerworld; 3/10/2008, Vol. 42 Issue 11, p

13 Table 2 Criterion used in evaluating investment projects 15 Type of criterion Criterion N umber R ake-off static Indices of profitability and payback % static Payback period % dynamic Discounted Payback Period % dynamic Internal Rate of Return % dynamic Net Present Value % dynamic Profitability Index % dynamic Benefit-Cost Ratio 8 3 % Others 9 4 % It is not surprising fact that results vary according to the size of the enterprise or size of the capital project. It is obvious that small companies will use less sophisticated methods. Anthes 16 indicates an example of the Schwan Food Co. which uses NPV, IRR and payback period to evaluate IT projects costing more than $1 million. The survey of Faculty of Business Administration shows representative results. Figure 2 confirms that large companies and more important projects are evaluated using dynamic criterions. Figure 2 Using methods depending up to the size of the enterprise, absolute frequencies 17 We have discussed capital projects in general. We see that the evaluating in the Czech Republic is not ideal and it does not follow all theoretical approaches and recommendations. We should answer a remaining question how projects co financed from European funds in the Czech Republic are evaluated. Feasibility studies emphasize dynamic criterions and they completely omit statistic criterions. Economic evaluation is required part of each application. In the case of 15 Kislingerova, E. and others. New Theory of Economy and Management in Organizations and Their Adaptation Processes. Survey of Faculty of Business Administration, University of Economics, Prague, Anthes, G. What is your project worth? Computerworld; 3/10/2008, Vol. 42 Issue 11, p Kislingerova, E. op.cit. 18

14 Operational Program Prague Competitiveness 18 it has to contain present value, net present value, internal rate of return, profitability ratio and payback period. Application of ROP NUTS II North East 19 contains the same minus profitability ratio which has the same explanatory power as net present value. Applicants do not have to count all criterions because they are counted automatically when they fill numbers of financial plan. It is important to note that all potential projects, that should be co financed from European funds in the Czech Republic, undergo economic evaluation. In this case the Czech government do not follow the practices of Czech business environment. 4. Failures It seems that best approaches for investment decision making have been chosen and they are used by financial support programmes in the Czech Republic. But as we know failures can always occur which has a consequence that the chosen projects are not the best. Finally chosen projects do not have to be the best in main aspects such as profitability, risk or social contribution. As a source of failure can be traced following factors classical techniques for evaluation, wrong estimations and bureaucracy followed by corruption. Classical techniques As classical techniques we mean dynamic criterions for evaluation. The right evaluation is crucial. It is necessary to take into account risks in direct investments project evaluation because we do not live in a world without risks anymore. Difficulties of classical methods are discussed for example in the article by professors Dragota 20. They point out that the main problem is the probability distribution for NPV is not normal. The article 21 sees solution in modern techniques which can eliminate some of inconveniences. Sensitivity analysis, decision tree, scenario technique, Monte Carlo technique and real options are suggested as modern techniques. Handbooks of financial support techniques react exemplary. As we have already mention risk management and risk analysis should be part of each application but it goes further because also sensitivity analysis is required. In this case sensitivity analysis takes into account the level of change of net present value if some variables are changed. Other techniques as scenarios or Monte Carlo are not used because they are not so easy applicable and they required input knowledge of applicants. Wrong estimations Wrong estimations can happen. It is possible to trace two main reasons of wrong estimations. First the applicant does not have all pieces of available information. Secondly the wrong estimation is done as an intentional error by an applicant. First reason can also happen during usual business. The company underestimates risks, overestimates revenues or omits some important factor. It is obvious that the projects should avoid wrong estimations and therefore government authorities require detailed application containing feasibility study. The applicant has to fulfil many pieces of information how we have already mentioned in the part 3.1. It is time for exploring all important things which can change results of the project. Bigger problem is an intentional error by an applicant. We have already emphasized this in the article Investment projects importance of pre audit and post audit 22. If an entrepreneur 18 Operační program Praha Konkurenceschopnost Metodická příručka: Studie proveditelnosti pro oblast podpory OPPK [accessed ] < 19 ROP NUTS II North-East Příloha č.5 PPŽP Studie ekonomického hodnocení projektu [accessed ] < 20 Dragotă, V., Dragotă, M.I. Models and indicators for risk valuation of direct investment. Economic Computation & Economic Cybernetics Studies & Research; 2009, Vol. 43 Issue 3, p Ibid. 22 Kula, D., Čámská, D. Investments projects importance of pre-audit and post-audit. Scientific proceedings, 2011, 19, issue 2, p

15 appraises a private project, he usually place emphasis on real inputs and data. On the other hand, if an entrepreneur appraises a subsidized project, the main aim is to fulfil predefined criterions. It means that he can cheat in order to obtain subsidies. For example, he can underestimate risks or overestimate cash-flow of the project. Although investors should be honest, they can behave very pragmatically at the moment paradoxically. Sometimes it happens that investors do not want cheat but are not able to reliably predict input data because of very positive expectations caused by possible subsidy obtaining. Consequently, it depends on a project evaluator, whether is able to find discrepancy or not Bureaucracy followed by corruption Government contracts and financial support are connected with bureaucracy and corruption in many countries. Unfortunately the Czech Republic is no exceptions. The document Transparency of the regulatory system 23 says that bureaucracy and unnecessary red tape remain a source of complaints by both domestic and foreign investors although the Czech Republic ratified OECD anti-bribery convention in January According to Transparency International's Corruption Perception Index for , the Czech Republic ranks in the 53 rd place out of 178 countries. As DATAMONITOR 25 mentions the Czech Republic's percentile ranking on the control of corruption is 77.0 in Among the transitioning countries of the former Soviet bloc, the Czech Republic is rated as one of the better countries in the terms of perception of corruption. But corruption remains and it is general problem which cannot be solved only on the level of financial support programmes. Conclusions The paper described economic evaluation of projects co financed from the European funds in the Czech Republic. Two supported programmes were chosen Operational Program Prague Competitiveness and ROP NUTS II North-East. Application requirements were discussed and compared between programmes. Although it seems that application requirements include all important components of classical business plan and economic evaluation follows all theoretical recommendation of investment decision making failures can always occur. Classical techniques, wrong estimation and corruption are pointed out as sources of failures. The article is one of the outputs from the research project Analysis and evaluation of investment projects financed from European funds registered with the Internal Grant Agency of University of Economics, Prague under the number F3/32/2011. References 1. Anthes, G. What is your project worth? Computerworld; 3/10/2008, 42(11), p Čámská, D., Kula, D. Financial Support Programmes and their Prediction Models. Scientific proceedings, 2011, 19(2), p Dragotă, V., Dragotă, M.I. Models and Indicators for Risk Valuation of Direct Investment. Economic Computation & Economic Cybernetics Studies & Research; 2009, 43(3), p Kislingerova, E. and others. New Theory of Economy and Management in Organizations and Their Adaptation Processes. Survey of Faculty of Business Administration, University of Economics, Prague, Macro-accessibility in Czech Republic: Transparency of the regulatory system. Czech Republic Economic Studies; 2007, p Press release: Index vnímání korupce 2010: Česko je letos na 53. místě a patří k zemím, kde se situace zhoržila. < > 25 Datamonitor: Czech Republic. Czech Republic Country Profile; 2010, p

16 5. Kula, D., Čámská, D. Investments Projects Importance of Pre-audit and Post-audit. SCIENTIFIC PROCEEDINGS, 2011, 9(2), p Lamb, S.E. How to Write It: Business Plans and Reports. Business and Economic Review; Oct- Dec 2006, 53(1), p Scholleova, H. Ekonomické a finanční řízení pro neekonomy, Grada, 2008, p Scholleova, H. Investiční controlling: jak hodnotit investiční záměry a řídit podnikové investice. Grada, 2009, p Scholleova, H., Fotr, J., Svecova, L. Investment Decison Making Criterions in Practice. Economics and Management; 2010, p Datamonitor: Czech Republic. Czech Republic Country Profile; 2010, p Macro-accessibility in Czech Republic: 2Transparency of the regulatory system. Czech Republic Economic Studies; 2007, p Operační program Praha Konkurenceschopnost Metodická příručka: Studie proveditelnosti pro oblast podpory 3.3 OPPK available on Press release: Index vnímání korupce 2010: Česko je letos na 53. místě a patří k zemím, kde se situace zhoržila [accessed ] < 14. ROP NUTS II North-East Příloha č.5 PPŽP Studie ekonomického hodnocení projektu [accessed ] < 15. European Union funds. [accessed ] < 21

17 ON THE MOTIVATIONAL ACCENT IN THE MANAGEMENT ACTIVITIES IN CONDITION OF ICT COMPANIES 1 Tatiana Corejova, Lubomir Bombala University of Zilina,Slovak Republic. [email protected], [email protected] Abstract. The paper deals with the results of inner motivational aspects of highly qualified employees of information and communication (ICT) companies. It is based on qualitative research and the data had collected from different ICT transnational companies during the 2010 year that was conducted at the University of Zilina, Slovak republic. The main goal of empirical research was to investigate motivation accent in the managerial activities in the ICT companies. The purpose was to show that implementation of the motivation accent in managerial activities can help to improve employee motivation and to increase their performance, loyalty to the organization in the ICT sector. The special attention in frame of investigation in ICT companies was devoted on the employee s self-assessment of his/her inner motivation. We took in consideration such aspects like employee intrinsic motivation, management areas and attributes of the manager. So, the contribution follows four areas that have key importance for employees in ICT company and that are related with inner motivation of employees e.g. inner motivation to quality of work, to ongoing increasing of the level of professional knowledge and skills, to provide new motives and increase the effectiveness of performed processes and to cooperate with manager and other departments of the company. The investigation was based on the combination of research methodologies and three main methods: scientific observation, questionnaires and comparison with the previous research in the similar environment (the number and rate of highly educated or highly qualified employees in the company). Keywords: motivation, motivation accent, human potential, management, information and communication company, highly-qualified employee Introduction The fast technology changes in the information and communication technology require the education and motivation of employees with balanced using of the long-valid principles and the newest information. The changes of the motivation of highly-qualified employees with specific combination of competences and skills 2, contents and forms of motivation or stimulation are characterized by conversion from classic to integrated forms. Manager of ICT company has to have skills to create universal communication and motivation frame. The companies prefer to pay for studies provided by different personal agencies about salaries, benefits in certain sector in certain place. They are not willing to offer much better conditions except the moment they see big advantage from hiring of particular person. The highly qualified employees of information and communication (ICT) companies (human resource) are the main capital in ICT companies. They have a lot of possibilities also in the crisis time to change the employer and they are carrier of tacit knowledge. But they have also good salaries in comparison with another sectors, employees or industries and so we have to give attention on the motivation aspects of these employees. That is 1 This contribution was undertaken as part of the research projects: APVV Regional dimensions of knowledge economy, VEGA 1/0149/10 Diffusion processes of new mobile services (m-commerce) and their value chain and APVV KRENAR. It benefited from grants from the Ministry of Education of Slovak Republic and the Slovak Research and Development Agency for which the authors express their gratitude. 2 Blašková, M., Grazulis, V Motivation of Human Potential: Theory and Practice. Publishing Centre of Mykolas Romeris University, 2009, ISBN

18 why we decided to focus our case study on those areas that can make difference in the stimulation (salary or other material form of salary). University of Zilina has participated in several projects that investigate the problems of motivation and focused on examination the knowledge economy aspects and whole knowledge process from creation up to dissemination of knowledge. 1. Theoretical background The theoretical background of motivation is discussed in many books and publications. It is not easy to introduce shortly all theoretical concepts. They are based on the investigation and results of different sciences psychology, sociology, economics, management etc. In the context of motivation of employees the purpose of motivation is connected with the terms: performance and efficiency of employees. Robins and Coulter 3 regard the performance and efficiency as the same term, but the author (Blašková 2006, p. 102) differentiates between these terms and argues by benefits of efficiency growing following by employee performance. The content of the employee activities and the intensity of these activities depend on subjective conditions that are noted as the motivation of people activity. The psychology differentiates two groups of motivation to the work, two types of motivation 4 : motives that are connected with the work e.g. intrinsic motivation (inner motivation) motives that are connected with another areas, e.g. extrinsic motivation 5 Both motives determine the success of company, its performance, profitability, stability etc. The scale of motives in relation to intrinsic and extrinsic motivation depends on the position and tasks of employees. By the highly educated employees demonstrate the willingness to increase the total level of their work when their motivation by managers is better 6. The approach to the investigation of motivation of highly educated employees with specific knowledge and skills presented in Blaskova, Grazulis, (2009) was used for empirical research of motivation in condition of ICT companies Empirical study The empirical research was focused also on areas/attributes of manager that are necessary for proper motivation of his/her employees on following 8 areas of the management of human potential in the organization: 8 Strategic management and development of highly-qualified employees Planning of highly-qualified employees Obtaining and choosing of the new highly-qualified employee Orientation and positioning of highly-qualified employees Evaluation of complex working performance of highly-qualified employees Motivation of highly-qualified employees Creative management of highly-qualified employees Education and development of the knowledge and skills of highly-qualified employees 3 Bedrnová, E. Nový, I. a kol Psychologie a sociologie řízení. 2. vyd. Praha: Management Press, 586 s. ISBN Bedrnová, E. Nový, I. a kol Psychologie a sociologie řízení. 2. vyd. Praha: Management Press, 586 s. ISBN Nakonečný, M Motivace pracovního jednání a její řizení, Management Press, Praha 6 Blašková, M. et al., Riadenie a rozvoj vysokokvalifikovaného ľudského potenciálu, TU, Zvolen, ISBN Blašková, M., Grazulis, V Motivation of Human Potential: Theory and Practice. Publishing Centre of Mykolas Romeris University, 2009, ISBN Blašková, M., Grazulis, V Motivation of Human Potential: Theory and Practice. Publishing Centre of Mykolas Romeris University, 2009, ISBN

19 The mentioned areas of management of human potential in the company are offering 2 levels how organizations can benefit from the employee motivation. The first level that we can call primary is related to the direct motivation of employees that are in scope of the process of the motivation. We can see it as a consistence between targets and ambitions of new employees with targets and ambitions of the organization. The second level that we can call secondary is related to the level of motivation of managers and people that participated on the process of employee motivation after successful motivation of the new employee 9. This can result in better willingness to perform this process with other employees in the future. In the following text of contribution the motivation tools and self motivation problems from the point of view highly-qualified employees are discussed. 2.1 Basic data research Case study was based on the empirical research in the several translational companies in ICT sector. The questionnaire included 21 questions and followed up the research made by Blašková (2006) 10. It has been distributed 124 questionnaires and as received back 55 questionnaires what represents 44 % of the distributed amount. The research has the attributes of qualitative research, the number of respondents is relatively small, our methods are stochastic and we use subjective ways of interpretation of the results. We used the supporting methods comparison, analysis of secondary data and analysis of internal documents of companies that are orientated on human resources management. The distribution of 55 respondents was following: 38 male respondents and 17 female respondents. The distribution from the point of view of age, gender, achieved education and length of work experience are shown in Table 1-3. Age of the respondents Number of respondents % of respondents up to 24 years years years years 3 5 more than 55 years 4 7 Table 1 Age structure of the respondents 9 Plamínek, J Tajemství motivace, Grada Publishing, Prah 10 Blašková, M. et al., Riadenie a rozvoj vysokokvalifikovaného ľudského potenciálu, TU, Zvolen, ISBN

20 Table 2 Structure of respondents by level education Level of education Number of % of respondents respondents basic education 0 0 special secondary 3 5 general secondary (e.g. grammar school) 2 4 higher education (e.g. DiS) 3 5 bachelor s degree Master s degree (e.g. Mgr., MsC., Ing., Mag.) university postgraduate 2 4 Table 3 Structure of respondents by work experiences Length of work experience Number of % of respondents respondents up to 2 years years years years more than 21 years 6 11 Results In this part of contribution we discussed the selected question and aspects of motivation related to motivational tools, their perception by employees, self motivation and inner motivation aspects. We have suggested some ways how to implement motivation accent in the process of creative management of the employees. We would like to emphasize those instruments that are the most frequently used. Such instruments are: bilateral and non-blocked communication and freedom of ideas. The very seldom used instruments are: unusually high and beneficial productivity and creative as almost participative style of management. We can see from the results in the table 4 that many of the instruments are not widely used in the ICT sector. On the question, that was related to the area of education and development of the knowledge and skills of employees in ICT organizations, 75 % of employees confirmed that their manager pay certain level of attention to education. The aspect that we should consider is the gender difference. Female respondents have replied (36% of them) that their manager pays no and rather no attention to education and development of the knowledge and skills. This can be understood in different ways. In general ICT organizations offer some way of internal CBT courses to develop the knowledge and skills. They may really expect more involvement and interest of their manager in the training or they see the opportunities provided by company as insufficient. Without making any final judgment we can declare that management approach in this area can really vary from position to position and from department to department and female employees see this area as the area where they expect improvement in their manager approach. 25

21 Table 4 Tools used by manager for formation of working behavior and attitudes % of answers from total number of respondents Tools for formation of working Together Gender Age behaviour and attitudes Male Female Up to 34 More than 35 strong engagement in problem solving pursuit for appropriate reaction in every situation with high level of self-control creative as almost participative style of management bilateral and non-blocked communication commonly accepted and agreed norms of mutual interaction freedom of ideas situational roles taking over at the solving of different tasks unusually high and beneficial productivity mutual knowledge enhancement enlarging of skills and competencies Table 5 Manager attention to education and development Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 Answer "yes" Answer "mostly yes" Answer "partially" Answer "rather no" Answer "no" Table 6 shows the answers on the question that was focused on the more detailed areas by which the managers have possibility to influence the employee education. We have chosen some of the areas where manager can direct the education. Managers direct the education to areas that are connected with the particular position and to areas which are required by organization. There is very small possibility that employee will participate on the training that is chosen randomly from the list of available classes. The third areas where the education can be oriented are courses necessary for fulfilment of employee carrier aspirations. 25 % of respondents stated such possibility is present at their manager. This is important motivational aspect in the organization. Very interesting are the results according to age of respondents. They have showed that employees with higher age than 35 have almost no possibility to participate on such courses (in our research 0 %). This can be explained by several reasons. They do not request such courses and prefer to stay longer at the current position. This can be connected also with their private life and family background. They are not willing to change position so often. And also managers expect from them to stay longer at the current position. 40 % of the employees have got such opportunity to attend courses necessary for their carrier aspiration. This is quite high percentage but can be caused by two reasons. Majority of employees are relatively young. As we can see at the beginning of the article (67%) employees that participated on our research were younger than 35. Managers know about their need to develop and offer them such training to retain them for the company especially in the cases where they see the higher performance than standard. 26

22 Table 6 Orientation of employee education Orientation of employee education randomly chosen courses from arbitrary area courses necessary for particular position or working arrangement courses necessary for fulfillment of your carrier aspirations courses required by the organization and organizational unit % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than The success of the motivation program from the employee point of view depends on the characteristics of motivation system of company and on the possibilities to change or to influence the system by manager in relation with the individual needs and motives of employees 11. We have asked on these characteristics and we have used the term influenced by your manager because especially managers have the possibility to influence their employees. We can declare as we can see from results that employee opinions in this area are very critical. The most critical and skeptical in this area are employees older than 35 years. This area would require wider research to find out what employees see as the cause of this problem. If it is management structure, size of the company or their manager. Table 7 Respect of individual needs in motivation system Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 "yes" "rather yes" "partially" "rather no" "no" The type of communication between employee and manager is the important for the effectiveness of motivation as well as on the performance management in the company. 12 The level of communication has direct impact on communication interchange and because of this has very big influence on quality of work of employees and as a consequence also on the level of their motivation. The results (Table 8) show that communication is on the good level (answers yes and mostly yes) in the case of 68 % of respondents. If we take in consideration the fact that remaining 32 % of respondents have troubles in this area we see this as the right place where the improvement is needed. 11 Thorne, K., Pellant, A., The essential guide to managing talent: How top companies recruit, train & retain the best employees, Kogan Page, London and Philadelphia 12 Strenitzerová, M., Poniščiaková, O., Diagnostika a manažment procesov v riadení ľudských zdrojov, EDIS, Žilina 27

23 Table 8 Openness, effectiveness and regularity of communication with manager Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 "yes" "mostly yes" "sometimes" "mostly no" "no" Source: own research During the empirical research we have tried also to measure the perception of different motivational instruments by employees. We have obtained question from one respondent if the question is set properly regarding phrase uses or should use. The explanation is that we want to know what instrument is the best independently from the fact of manager uses it or it is just the wish of the employee. The four instruments with the best perception by employees are: creation of good relationships, providing of necessary information, providing space for independent action and possibility to participate in educational activities. There are the same instruments considered as the best by male respondents. Female respondents consider as the best instruments: possibility to participate in educational activities, providing of necessary information, enabling of carrier growth, acknowledgement of personal bonus and rewards, creation of good relationships. We can see that female respondents consider carrier growth and acknowledgement of personal bonus and rewards as very effective motivational instrument. This difference can be explained by comparatively smaller amount of female employees and positions that they have in the ICT companies. Employees with age to 34 years consider as most effective instruments: creation of good relationships, enabling of carrier growth and possibility to participate in educational activities. Employees older than 35 years consider as the most effective: providing of necessary information, creation of good relationships, providing space for independent action. Table 9 Perception of effectiveness of motivational tools Motivational tools % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 acknowledgement of personal bonus and rewards 6 5,7 6,6 6,2 5,1 providing of necessary information 6.5 6,4 6,8 6,5 6,3 enouncement of praise ,9 6 3,9 creation of good relationships 6.6 6,6 6,6 6,8 6,2 manifestation of the interest in your opinions and 5.5 5,6 5,5 6 4,6 ideas providing space for independent action 6.4 6,5 6,1 6,5 6,1 enabling of carrier growth 6.2 5,7 6,7 6,7 5,2 correctness of direct supervisor and management 5.5 5,5 5,6 5,6 5,3 possibility to participate in educational activities 6.4 6,1 6,9 6,6 5,8 usage of threats and sanctions 2.3 2,3 2,1 2,5 1,6 The important part of motivational aspects investigation in ICT companies is the employee s self-assessment of his/her inner motivation. We think that in the environment of ICT company is relatively difficult to make this assessment. The first problem is the small objectivity of similar research if it is performed by line manager. The only possible way how to find out answers on these questions is the monitoring of employee s work and outputs of his/her work. This approach is more objective but requires manager s effort on regular basis. We have focused our research on following 28

24 4 areas that have key importance for employees in ICT Company and that are related with inner motivation of employees: - To quality of work - To ongoing increasing of the level of professional knowledge and skills - To provide new motives and increase the effectiveness of performed processes - To cooperate with manager and other departments of the company - As we can see from results in table 10 employees in the ICT companies have high level of motivation to quality work. We cannot see any major differences from the point of view of age and gender of respondents. Table 10 Inner motivation of employees to quality of work Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 very high sufficiently high average rather low low Table 11 Inner motivation of employees to ongoing increasing of the level of your professional knowledge and skills Answer % of answers from total number of respondents Toget Gender Age her Male Fema Up to More than le very high sufficiently high average rather low low The results introduced in Table 11 employees in the ICT companies have high level of motivation to ongoing increasing of the level of your professional knowledge and skills. We cannot see any major differences from the point of view of age of respondents but there is little bit higher motivation at the employees younger than 34 years. There is visible difference from the point of view of gender. 87% of male respondents have sufficiently high or very high inner motivation but only 50% of male respondents have such level of inner motivation to ongoing increasing of the level of professional knowledge and skills. 29

25 Table 12 Inner motivation of employees to provide new motives and increase the effectiveness of performed processes Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 very high sufficiently high average rather low low The level of motivation to provide new motives and increase the effectiveness of performed processes is the lowest from the 4 areas we are measuring (Table 12). 46 % of respondents have very high or sufficiently high level of motivation in this area. The higher level of this motivation is present at male respondents compared to female respondents and at the employees older than 35 years compared to younger employees. The motivation to cooperate with manager and other departments of the organization is relatively good (Table 13). There are only 7% of the respondents that declared lower level of the motivation in this area. From the point of view of gender and age the stronger groups in this area are male respondents and respondents up to 34 years. But differences are relatively small when we consider the amount of respondents that participated on this research. Table 13 Inner motivation of employees to cooperate with your manager and other departments of the organization Answer % of answers from total number of respondents Together Gender Age Male Female Up to 34 More than 35 very high sufficiently high average rather low low Conclusions The article has introduced to part of survey results about characteristics and challenges of motivational aspects from the point of view highly qualified employees at the ICT markets and highlighted the importance for any ICT organisation or company to consider motivational aspects in the managerial work. The case study confirms and broadens the theoretical findings on importance of motivational aspects, on the inner motivation that is very important in the case of highly educated employees. There is no universal recipe for the successful motivation of these employees in ICT companies. Most of the aspects are related to manager s personality and his/her managerial skills. They create natural environment in which employees can optimally use their knowledge and skills for the welfare of the organization. The aspects that had the lowest presence in our research are: usage of effective instruments for motivation, thorough knowledge and control of manager s emotions and organizational knowledge, knowledge from the area of management and development of human potential. Another problem is the insufficient level of emotional intelligence and lack of knowledge from the area of the management of human resources or potential. References 1. Batten, J., Hansen, M. V., Mistr motivace: tajemství inspirujícího vedení, Pragma, Praha 2. Bedrnová, E. Nový, I. a kol Psychologie a sociologie řízení. 2. vyd. Praha: Management Press, 586 s. 30

26 3. Blašková, M., Grazulis, V Motivation of Human Potential: Theory and Practice. Publishing Centre of Mykolas Romeris University, Blašková, M. et al., Riadenie a rozvoj vysokokvalifikovaného ľudského potenciálu, TU, Zvolen. 5. Nakonečný, M Motivace pracovního jednání a její řizení, Management Press, Praha 6. Plamínek, J Tajemství motivace, Grada Publishing, Praha. 7. Plamínek, J., Vedení lidí, týmů a firem, Grada, 2008, Praha. 8. Robins S. P. Coulter M Management. Praha: Grada Publishing, p Strenitzerová, M., Poniščiaková, O., Diagnostika a manažment procesov v riadení ľudských zdrojov, EDIS, Žilina. 10. Thorne, K., Pellant, A., The essential guide to managing talent: How top companies recruit, train & retain the best employees, Kogan Page, London and Philadelphia. 31

27 ATVYKSTAMASIS TURIZMAS LIETUVOJE: ANALIZö IR VYSTIMOSI TENDENCIJOS Aldona Damulien Mykolo Romerio universitetas, Ateities g. 20, LT Vilnius el. paštas Santrauka. Straipsnyje analizuojamas Lietuvos atvykstamasis turizmas ir jo vystimosi tendencijos. Nagrin jama turizmo sampratos kilm ir apbr žimų įvairov, atskleidžiami esminiai turizmą charakterizuojantys bruožai. Analizuojamas Lietuvos atvykstamojo turizmo vystimasis metais ir jį įtakojantys veiksniai. Atskleidžiamos globalios problemos su kuriomis susiduria turizmo sektorius Raktiniai žodžiai: turizmo rinka, atvykstamasis turizmas, užsienio lankytojai, turistai, turizmo eksporto pajamos. Įvadas Turizmas viena perspektyviausių ir stambiausių ekonomikos sektorių pasaulyje m. turizmo ind lis į pasaulio bendrąjį vidaus produktą (BVP) siek apie 5%. Tarptautinio turizmo eksporto pajamos sudar 919 mlrd. JAV dolerių (693 mlrd. eurų) (beveik 3 mlrd. JAV dolerių per dieną), o tai daugiau kaip 30 % pasaulio paslaugų eksporto arba 6 % bendro prekių ir paslaugų eksporto 1. Pagal prekybos apimti tarptautinis turizmas užima ketvirtą vietą po kuro, cheminių medžiagų ir automobilių pramon s produkcijos eksporto. Turizmo sektoriuje sukurta daugiau nei 235 mln. darbo vietų (8 % visos darbo j gos) m. pasaulio valstyb s sulauk iki 940 mln. keliautojų m. JT PTO prognozuoja atvykstančių turistų skaičiaus augimą nuo 4 % iki 5 % 2. Turizmas tai atviros šalies įvaizdis, paslaugų sferos pl tojimas, geresnis šalies infrastruktūros naudojimas, darbo efektyvumo didinimas, naujų darbo vietų sukūrimas, geresnis veiklos pasiskirstymas regionuose, aktyvesn užsienio valiutos apyvarta, šalies pajamų did jimas, mažų ir vidutinių įmonių pl tra, ryšių su kitais ekonomikos sektoriais stipr jimas. Tod l Lietuvai, siekiančiai pagerinti mok jimų balansą, užtikrinti pakankamus ir stabilius tvirtos valiutos gavimo šaltinius, kurti naujas darbo vietas, skatinti šalies infrastruktūros ir atskirų regionų ekonomikos augimą, pritraukti potencialius užsienio investuotojus, spartus turizmo vystymas gali tapti būtina ir esmine šių tikslų pasiekimo sąlyga. Tyrimo tikslas: išnagrin ti Lietuvos atvykstamąjį turizmą ir jo vystimosi tendencijas. Tyrimo objektas: atvykstamasis turizmas. Siekiant užsibr žto tikslo, numatoma: 1. Atskleisti ir įvertinti turizmo sampratos įvairovę; 2. Išnagrin ti Lietuvos atvykstamojo turizmo kitimą metais ir pagrindinius įtakojusius veiksnius; 3. Įvardinti globalias problemas su kuriomis susiduria ir turizmo sektorius. Tyrimo metodai: straipsnis parengtas sistemin s, bendrosios, login s, lyginamosios analiz s ir apibendrinimo metodais. 1 UNWTO. Tourism Highlights Edition. For more information: Facts & Figures section at For the latest trends in international tourism: UNWTO World Tourism Barometer. For an overview of tourism in 2010: UNWTO Tourism Highlights. Šaltinis: 32

28 1. Turizmo definicija Etimologiškai, žodis turizmas yra kilęs iš lotinų kalbos žodžio tornare ir graikų tornos (tekinis arba apskritimas), reiškiančių jud jimą aplink centrinį tašką arba ašį 3. Ši reikšm pasikeit anglams prid jus priesagą - izm nusakančią veiksmą ar procesą, tipišką elgesį ar kokybę, ir priesagą -ist reiškiančia asmenį, atlikusį tokį veiksmą. Žodis kelion kartu su priesagomis - izmas ir -ist rodo jud jimo aplink ratą veiksmą. Apskritimas tai atspirties taškas, kuris galiausiai grįžta atgal į savo pradžią. Tod l, pavyzdžiui, kelionę ratu sudaro keliavimas pirmyn ir atgal, t.y. aktas kai paliekamas pradžios taškas ir grįžtama į jį atgal. Tokia kelion gali būti vadinama turizmu. Ilgainiui buvo bandoma tiksliai apibr žti turizmo sąvoką, tačiau iki šiol n ra prieita prie vieningo universalaus turizmo apibr žimo. Tod l mokslin je literatūroje galima sutikti skirtingų požiūrių į turizmo sampratą. Štai keletas jų. Turizmas tai:,,... visuma reiškinių ir santykių, kylančių iš kelionių bei laikino buvimo toje teritorijoje, tol kol tai netampa nuolatine gyvenamąja vieta ir n ra susijusi su apmokama veikla (Šveicarijos profesoriai Hunziker ir Krapf) 4 ;... visumą tarpusavio santykių ir paslaugų, susijusių su laikinu ir savanorišku keliautojo gyvenamosios vietos pakeitimu nekomerciniais ir neprofesiniais tikslais (Bernecher) 5 ;... laikinas žmonių išvykimas ir jud jimas toli nuo jų nuolatin s gyvenamosios bei darbo vietos ir visa veikla, vykdoma šios išvykos metu (Wanhill) 6 ;... veikla, apimanti turistų elgseną, išteklių naudojimą ir sąveiką su kitais žmon mis, ekonomiką bei aplinka, taip pat fizinį turistų jud jimą į kitas teritorijas, kurios n ra įprastos jų gyvenimo vietos (Witt, Brooke ir Buckley) 7 ;... žmonių veikla, apimanti jų elgseną, išteklių naudojimą ir sąveiką su kitais žmon mis, ekonomiką bei aplinką, taip pat fizinį turistų jud jimą į kitas teritorijas, kurios n ra įprastos jų nuolatinio gyvenimo vietos (Bull) 8. Skirtingai turizmas apibr žiamas ir tarptautinių organizacijų dokumentuose:,,...laikinas, trumpalaikis žmonių jud jimas iš savo pastovios gyvenamosios vietos į kitas vietoves bei užsi mimai šių apsilankymų metu; tai apima visą jud jimą, taip pat vienadienius apsilankymus bei ekskursijas (Didžiosios Britanijos Turizmo Institutas, 1976 m.) 9 ;... viena iš aktyvaus poilsio būdų, kelion s siekiant pažinti vienus ar kitus rajonus, naujas šalis, dažnai derinant jas su sporto elementais (Pasaulio Turizmo Organizacijos (PTO), 1981 m.) 10 ;... visos kelionių, ekskursijų rūšys, kai asmuo palieka savo nuolatinę darbo ir gyvenimo vietą ilgiau nei vienai parai ir trumpiau nei 12 m nesių, ir kai išvykos tikslas n ra samdoma, apmokama veikla (PTO, 1991 m.) 11. Nežiūrint sąvokų skirtumų, galima išskirti pagrindinius aspektus naudojamus turizmui apibr žti 12 : 3 Theobald, William F. Global tourism (2nd ed.). Butterworth HeinemannOksford [Anglija]: Butterworth-Heinemann, 1998,p.8. 4 Holloway J.C. The Business of Tourism. Harlow: Financial times: Prentice Hall, 2006, p. 4. Jayapalan N. An Introduction to Tourism. New Delhi: Atlantic Publishers and Distributors, 2001, p Bernecher, P. Fundaments of tourism. Geneva, 1964, p Wanhill, S. Tourism Statistics to Proceedings of Current Issues in Services Research Conference. Poole, Dorset Institute, 1988, p Witt, S.F., Brooke, M.Z. ir Buckley, P.J. The Management of International Tourism. London: Unwin Hyman Ltd, 1991, p Bull. A. The economics of travel and Tourism. Australia: Pitman Publishing. 1994, p Holloway J.C. The Business of Tourism. Harlow: Financial times: Prentice Hall, 2006, p Dvilevičien D. Kelionių paslaugų industrija ir komercija. Vilnius, 1997, p. 54. Ekonomika sovrem nogo turizma. Moskva-Sankt Peterburg: Torgobyj dom G rda, 1998, p Holloway J.C. The Business of Tourism. Harlow: Financial times: Prentice Hall, 2006, p. 5. European Community: Past and Future of the Tourism.// UK travel Weekly. 1996, Nr.1, p

29 išvykimą iš nuolatin s aplinkos; laikinumą (laikotarpį iki vienerių metų) 13 ; veiklą kelion s metu; kelion s tikslą 14. Connell, Stephen, Cooper ir kt.(2006) nurodo, kad, norint paaiškinti terminą,,įprastin aplinka, kartais įtraukiama atstumo aplinkyb,. Šie pagrindiniai momentai labiausiai charakterizuoja turizmą ir leidžia išskirti iš kitų ekonomikos sektorių. Atkreiptinas d mesys į tai, kad visuose aukščiau pateiktuose turizmo apibr žimuose pasigendama atstumo dimensijos. Tod l Holloway (2006) pagrįstai iškelia retorinį klausimą,,ar galima turistu vadinti žmogų, kuris tam, kad apsipirktų, iš savo gyvenamosios vietos važiuoja 12 mylių? 15. Turizmo sąvokoje svarbu nubr žti ne tik laiko, bet ir atstumo ribas, kas ir buvo bandyta padaryti JAV, Kanadoje ir Jungtin je Karalyst je, nustatant atitinkamai 50, 25 bei 20 mylių atstumus, kuriuos nuvažiavus, jau galima vadintis turistu. Atstumo reikšmę akcentavo taip pat Mill bei Morrison (1998) pabr ždami, kad, nors turizmas visuomet reiškia kelionę, tačiau kelion ne visada gali reikšti turizmą 16. Tačiau atstumo klausimas ir toliau išlieka diskusijų objektu, o turizmui apibr žti dažniausiai naudojama 1991 metais PTO pasiūlyta sąvoka. 2. Atvykstamasis turizmas Lietuvoje m. Masinis turizmas reliatyviai naujas fenomenas. Nors turizmo atskaitos tašku galima vadinti Anglijoje 1841 m. Thomas Cook suorganizuotą kelionę traukiniu, tačiau istorikai linkę teigti, jog turizmas masiniu reiškiniu tapo tik po Antrojo Pasaulinio karo. Lietuvoje rinkos santykiais organizuojamo masinio turizmo pradžia sietina su Nepriklausomyb s atkūrimu šalyje. Atkūrus Lietuvos nepriklausomybę, pirmaisiais metais analizuojamame sektoriuje mažai kas pasikeit, kadangi Lietuvos Respublikos užsienio valstyb s vis dar nepripažino, o jos sienas kontroliavo TSRS tarnybos. Tik po 1991 m. rugpjūčio pučo ir TSRS žlugimo Lietuva po daugelio centralizuoto valdymo metų prad jo naują rinkos ekonomikos atkūrimo ir raidos etapą. Turizmo sektorių, kaip ir visą privatų šalies ūkį, teko kurti beveik tuščioje vietoje. Prasid jo sparti turizmo įmonių privatizacija, kuriai juridinį pagrindą suteik 1991 m. vasario m n. 28 d. Valstybinio turto pirminio privatizavimo įstatymas 17. Juo remiantis suskaidytos monopolin s turizmo valdymo struktūros, prad tos kurti naujos privačios turizmo įmon s. Pirmieji Nepriklausomyb s metai pasižym jo ryškiu atvykstančių turistų skaičiaus maž jimu (1 pav.). Maž jo tiek organizuotų grupių, tiek pavienių turistų skaičius, trump jo jų praleistas laikas Lietuvoje. Didžiausias turistų skaičiaus sumaž jimas stebimas 1995 m., kuomet buvo įvestos vizos NVS šalių piliečiams. Turizmo rinkoje buvo smarkiau jaučiami ankstesnieji ryšiai: tebevyravo turistai iš Rytų (buvusių TSRS) šalių. 12 Connell J., Stephen J. P. Tourism: A Modern Synthesis, Second Edition. London: Thomson Learning, 2006, p. 12.Cooper Chris et al. Tourism: Principles and Practice. Fourth Edition. Harlow: Financial times: Prentice Hall, 2008, p Connell J., Stephen J. P. Tourism: A Modern Synthesis, Second Edition. London: Thomson Learning, 2006, p. 12.Cooper Chris et al. Tourism: Principles and Practice. Fourth Edition. Harlow: Financial times: Prentice Hall, 2008, p Connell J., Stephen J. P. Tourism: A Modern Synthesis, Second Edition. London: Thomson Learning, 2006, p. 12.Cooper Chris et al. Tourism: Principles and Practice. Fourth Edition. Harlow: Financial times: Prentice Hall, 2008, p Holloway J.C. The Business of Tourism. Harlow: Financial times: Prentice Hall, 2006, p Mill R. C., Morrison A. M. The Tourism System. Iowa: Kendall/Hunt, 1998, p Lietuvos Respublikos valstybinio turto pirminio privatizavimo įstatymas Nr. I-1115 //Valstyb s žinios, 1991, Nr.:

30 Nuo 1996 m. turizmo rinka prad jo sparčiai atsigauti (1 pav. ir 1 lentel ) m. Lietuvą aplank jau beveik 4,5 milijono užsieniečių, iš jų 1,45 milijono turistų (lankytojų su nakvyne). Pagrindinis lankytojų srautas buvo iš kaimyninių šalių: Rusijos (1,5 mln.), Latvijos (1,2 mln.), Baltarusijos (762 tūkst.), Estijos (319 tūkst. ) ir Lenkijos (179 tūkst.). 1 pav. Užsienio lankytojų skaičiaus kitimo tendencija m. Šaltinis: Lietuvos valstybinis turizmo departamentas, 2002, p. 3 Daugiausia užsienio lankytojų (68,89 %) atvyko kelių transportų, 24,44 % - traukiniais, 3,22 % - naudojosi oro transportu ir tik 1,51 % svečių pasirinko jūrų transportą. Užsieniečių išlaidos Lietuvoje tais metais siek 2,4 milijardus litų, o tai sudaro 14 % viso Lietuvos prekių ir kitų paslaugų eksporto arba 5,6 % BVP. 18 Bet metų Rusijos kriz l m atvykstančių užsienio svečių srauto sumaž jimą m. Tiesa, jis buvo ženkliai mažesnis lyginant su 1995 m., nes tiek Rusijos, tiek NVS šalių rinka jau nebetur jo lemiamo poveikio Lietuvos atvykstamajam turizmui. Pagal atvykusių lankytojų skaičių Rusija užleido vietą Latvijai, daug jo svečių iš Vokietijos, Skandinavijos 19. Tačiau Vakarų turistų poreikių netenkinanti šalies turizmo infrastruktūra stabd spartesnę atvykstamojo turizmo pl trą. D l ženkliai prarandamos Rytų rinkos ir silpnai pl tojamos Vakarų rinkos atvykstančių užsieniečių srautai maž jo ir m. (1 lentel ). Tai vert valstybines institucijas ir ypač privačias firmas daugiau orientuotis į Vakarų rinkas organizuojant ne tik išvykstamąjį, bet ir atvykstamąjį turizmą. Būtent po 2000 metų imtasi pertvarkyti visus Lietuvos turizmo sektoriaus elementus. Did jant verslo turizmo lyginamajam svoriui ir brangesnio turizmo ekonominio produkto paklausai, sparčiai pl tojama viešbučių statyba, didesnį užmojį įgijo kaimo turizmas, imta daugiau rūpintis atvykstančiųjų aptarnavimo kokybe 20. Po įstojimo į Europos Sąjungą, turizmas kartu su kitomis ūkio šakomis išgyveno spartų augimą, kurį lyd jo kasmet did jantis užsienio lankytojų srautas. Nors statistin s apskaitos pasikeitimas m. neleidžia pratęsti atvykstančiųjų keliautojų skaičiaus kitimo analiz s, tačiau, remiantis turimais atvykusių iš trečiųjų šalių piliečių duomenimis, galima konstatuoti apie lankytojų srauto tolesnį did jimą (1 lentel ). Ypač akcentuotini 2006 m., kuomet sulaukta net 11,4 % svečių daugia nei 2005 m. Daug jo svečių ir ateinančius dvejus metus. Nežiūrint kasmet did jančio užsienio lankytojų skaičiaus, 2008 m. buvo pasiektas tik 1999 m. lygis. 18 Trumpa Lietuvos turizmo statistikos apžvalga Lietuvos turizmo statistikos apžvalga, Labanauskait D. (2002). Tarptautinio turizmo įtaka ekonominiam augimui. Ekonomika ir vadyba Kaunas: Technologija, p

31 1 lentel Užsienio lankytojų skaičiaus dinamika Lietuvoje metais 21 Eil.Nr. Metai Užsienio lankytojų skaičius, tūkst. pokytis žmonių tūkst. žmonių procentais grandininis grandininis kitimo tempas bazinis kitimo tempas , ,86 105, ,80 122, ,8 166,8 103,89 127, ,1-361,7 91,88 117, ,2 103,1 102,54 119, ,4 195,8 95,33 114, ,2 364,2 90,89 103, ,1 *** *** ,4 *** *** ,3 *** *** ,4 *** *** 120, ,7 244,3 105,80 127, ,3 457,4 89,74 114, ,0 71,7 101,79 116, / ,0 *** *** 116,47 Šaltinis: sudaryta remiantis atitinkamų metų Statistikos departamento leidiniais Lietuvos statistikos metraštis, Turizmas Lietuvoje ir internetiniu šaltiniu Po įstojimo į Europos Sąjungą, turizmas kartu su kitomis ūkio šakomis išgyveno spartų augimą, kurį lyd jo kasmet did jantis užsienio lankytojų srautas. Nors statistin s apskaitos pasikeitimas m. neleidžia pratęsti atvykstančiųjų keliautojų skaičiaus kitimo analiz s, tačiau, remiantis turimais atvykusių iš trečiųjų šalių piliečių duomenimis, galima konstatuoti apie lankytojų srauto tolesnį did jimą (1 lentel ). Ypač akcentuotini 2006 m., kuomet sulaukta net 11,4 % svečių daugia nei 2005 m. Daug jo svečių ir ateinančius dvejus metus. Nežiūrint kasmet did jančio užsienio lankytojų skaičiaus, 2008 m. buvo pasiektas tik 1999 m. lygis. Tačiau 2007 m. prasid jusi JAV finansų kriz, v liau peraugusi į pasaulinę ekonominę krizę, dar kartą smog turizmo sektoriui: 2009 metais bendras užsienio svečių skaičius lyginant su 2008 m. sumaž jo 10,26%, o nakvojančių (turistų) net 16,8 %. Kriz s padariniai buvo juntami ir 2010 m., kuomet Lietuvą aplank tik 4 073,0 turistų arba vos 1,8 % daugiau nei 2009 m. Lankytojų srauto sumaž jimui įtakos tur jo taip pat Lietuvos prisijungimas prie Šengeno erdv s ( ; oro uostuose nuo ), ženkliai sumažinęs svečių iš Rusijos srautą 22. Jei 2007 ir 2008 metais Rusija buvo pirmaujanti šalis pagal iš jos atvykusių turistų skaičių, tai 2009 m. šis skaičius sumaž jo net 16,7 proc. arba 1 proc. punktu. Neigiamą vaidmenį suvaidino ir FlyLAL Lithuanian Airlines bankrotas 2009 m. D l šios aviakompanijos nutrauktų skrydžių sumaž jo turistų srautas iš Jungtin s Karalyst s 23 proc., Italijos 40 proc. ir ypač Airijos beveik 50 proc. Tai ypač neigiamai paveik turizmo sektorių, nes šių šalių piliečių vidutin s kelion s išlaidos gerokai viršija bendrą visų šalių vidurkį (Italijos 14 proc., Jungtin s Karalyst s 34 proc., o Airijos net 43 proc.). Tiesa, Lietuvos turizmo rinkos 21 Lietuvos Respublikos Statistikos departamentas prad jo teikti susistemintą informaciją apie turizmą nuo 1996 metų m. pateikiami Vidaus reikalų ministerijos Valstyb s sienos apsaugos tarnybos duomenys; m. duomenys apie atvykusius tik iš trečiųjų šalių, o nuo 2007 m. - asmenų srautų pasienio kontrol s punktuose statistinio tyrimo ir Vidaus reikalų ministerijos Valstyb s sienos apsaugos tarnybos duomenys. 22 Milašien A. Zaliapūgien B. Šengeno zonos įtaka turizmo srautams Lietuvoje. Tarptautin s mokslin s metodin s konferencijos Inovacijos turizmo versle ir moksle straipsnių rinkinys. Klaip da: S. Jokužio spaustuv leidykla, 2008, p

32 smukimą d l skrydžių stokos dalinai amortizavo Lietuvos vardo tūkstantmečiui pamin ti skirti renginiai bei Vilnius Europos kultūros sostin kultūriniai renginiai 23. Nagrin jamu laikotarpiu Lietuva daugiausiai turistų pritrauk laisvalaikio, verslo ir profesiniais bei draugų ir giminių lankymo tikslais. Nors 2009 m. lankytojų srautas maž jo visose šiose srityse, tačiau verslo ir profesiniais tikslais apsilankančių turistų svarba bendrame sraute išaugo nuo 28,5 proc metais iki 36,2 proc metais 24. Galima teigti, kad ekonomiką ištikusi finansų kriz mažiausiai paveik būtent šiuo tikslu keliaujančius svečius iš užsienio. Verslo turistai šalyje palieka 4 5 kartus daugiau pajamų nei atvykę kitais tikslais, be to užmezgami naudingi ryšiai prekybos pl tojimui, skatinamos investicijos. Šie turistai generuoja pajamas ir laisvalaikio paslaugas siūlančioms įmon ms, dalis jų grįžta į Lietuvą tiesiog poilsiauti. Tod l šis lankytojų segmentas šaliai ypač svarbus. Verslo turizmas Nacionalin je turizmo pl tros programoje yra viena iš prioritetinių turizmo šakų, tačiau kol kas Lietuvoje gyvuoja vienintel verslo turizmo įmon L2S (Lithuania to Success). Kelion s tikslas yra pagrindinis faktorius, nuo kurio priklaus kelion s trukm metais vidutin metin užsieniečio kelion s Lietuvoje trukm 4,5 nakvyn s. Vidutiniškai didžiausias nakvynių skaičius teko tiems, kurie lank si Lietuvoje sveikatingumo tikslais vienam svečiui teko net 14,13 nakvyn s. Antroje vietoje draugų ir giminių lankymas su 6,53 nakvyn mis 25. Žinant, kad tarp turistų buvimo šalyje trukm s ir iš turizmo gaunamų pajamų egzistuoja tiesioginis ryšys (ilg jant buvimo trukmei, did ja gaunamos pajamos), galima teigti, kad užsienio turistų kelion s laiko trump jimas neigiamai atsiliepia iš atvykstamojo turizmo gaunamoms pajamoms. Maž jant pas gimines ir draugus apsistojusių užsienio turistų skaičiui, did jo kolektyvin se apgyvendinimo įmon se nakvojančiųjų skaičius ir nakvynei skirtų turistų išlaidų dalis, o tuo pačiu kolektyvinio apgyvendinimo įmonių gaunamos pajamos m. apie 51 proc. visų į Lietuvą atvykusių užsienio turistų pasinaudodavo viešbučių tipo apgyvendinimo paslaugomis m. Lietuvos apgyvendinimo įmonių (be kaimo turizmo) paslaugomis naudojosi 840 tūkst. užsieniečių. Bendrosios Lietuvos ūkio pajamos iš turizmo 2010 metais sudar 4,16 mlrd. litų arba 4,4 % šalies BVP dydžio. Kelionių paslaugų eksporto (atvykstamojo turizmo ) pajamos siek 2,69 mlrd. Lt ir sudar 25 % šalies paslaugų eksporto arba 4 % prekių ir paslaugų eksporto. Apibendrinant galima teigti, kad Lietuvos atvykstamasis turizmas vyst si netolygiai d l vidaus ir išor s veiksnių poveikio. Tolesn turizmo pl tra priklausys nuo busimų mikro ir makro aplinkos pokyčių. 3. Turizmo iššūkiai ir jų įtaka turizmo pl trai Pasaulio globalizacijos ir integracijos procesai ir iš to išplaukiančios pasekm s neaplenkia ir turizmo industrijos. XXI a. ji vis dažniau susiduria ir susidurs su problemomis, kurios įtakoja ne vien tik verslininkų sprendimus tam tikros nacionalin s valstyb s ribose, bet ir keičia šių šalių vyriausybių darbotvarkes 26. Tai: Žem s klimato pokyčiai. Pasaulyje stebima audrų, potvynių, žem s dreb jimų, ugnikalnių išsiveržimų ir kitų negandų did jimo tendencija. Daugelis ekspertų mano, kad, jeigu artimiausiu metu nebus imamasi toli siekiančių priemonių, pasaulio žem s klimato pokyčiai ir jų įtaka orui ir gamtai sukels rimtą pavojų. Turizmas yra viena iš ekonomikos sektorių, kurį ypač veikia klimato pokyčiai ir stichin s nelaim s. Mokslininkams pateikiant vis daugiau įrodymų apie art jantį globalinį atšilimą bei ozono sluoksnio maž jimą, gali iš esm s pasikeisti turistų traukos centrai. 23 Turizmo būkl s apžvalga. Vilnius: Valstybinis turizmo departamentas prie Ūkio ministerijos, URL: 24 Statistikos departamento leidiniai,,turizmas Lietuvoje 2007, 2008, 2009 metais. 25 Statistikos departamento leidiniai Turizmas Lietuvoje 2009, Henderson, Joan C. Tourism crises: causes, consequences and management. Amsterdam : Elsevier : Butterworth- Heinemann,

33 Terorizmas ir smurtas. Rugs jo 11 įvykiai JAV, įvykiai Rusijoje (Maskvoje ir Beslane), Breivikio žudyn s Norvegijoje ir kt. pakeit ne vien galingiausių pasaulio valstybių krašto apsaugos doktrinas, bet ir turizmo verslą. Teroristų veiksmai s ja baimę. Tod l vis daugiau turistų renkasi šalis su mažesne teroro atvejų rizika. Be to, vis daugiau žmonių renkasi kelionę autobusu, mašina ar net dviračiu, vietoj skrydžio l ktuvu. Globalin s ligos. Daug jant tarptautinių kelionių šalyse su skirtingu klimatu ir skirtingais higienos reikalavimais, did ja rizika užsikr sti įvairiomis ligomis. Daugelyje vadinamųjų besivystančių dažnai turistų lankomų šalių, 50% bendro mirtingumo atvejų sukelia infekcin s ligos. Kuo didesnis žmonių mobilumas (pavyzdžiui, turistinių kelionių metu), tuo greičiau gali išplisti virusas visame pasaulyje. SARS, AIDS, naujos kartos gripo virusas H1N1 ir kitos epidemijos skatina ne vien naujos sveikatos apsaugos paradigmos klostimąsi, bet realiai veikia ir visą turizmo industriją. Šie globalūs iššūkiai įtakoja daugelio valstybių, jų tarpe ir Lietuvos turizmo sektorių: regionuose, kuriuose kyla terorizmo ar globalinių ligų gr sm, ženkliai sumaž ja turistų srautai ir net gali sustoti turizmo infrastruktūros pl tra. Ir priešingai, did ja turistų pasiūla saugesn se, turizmui palankesn se, patrauklesn se valstyb se. Tokiu būdu gali pasikeisti turistų traukos centrai 27. Turistų traukos centrai gali persistumti ir d l klimato pokyčių. Lietuva turi visas prielaidas tapti vienu iš tokių turistų traukos centru. Pasinaudodama savo lyginamuoju pranašumu ji turi didinti turizmo sektoriaus konkurencingumą. Siekiant dinamiško ir tvaraus augimo, būtina pl toti turizmo naujoves, stiprinti paslaugų teikimo kokybę visose sektoriaus grandyse, bandyti įveikti paklausos sezoniškumą, įvairinti turizmo paslaugų pasiūlą, pasiūlyti darnų ir aukštos kokyb s turizmo produktą. Akcentuotina turizmo sinergijos su menu ir amatais svarba, kuri gali ne tik paįvairinti turizmo pasiūlą, bet ir pad ti išsaugoti kultūros paveldą, pl toti vietos ekonomiką. Tai gali apimti visą spektrą kultūros paveldo (įskaitant kultūros maršrutus), šiuolaikin s kultūros, saugomų gamtos objektų, sveikatingumo ir rekreacijos (įskaitant SPA turizmą), švietimo, kulinarinį, istorinį, sporto ar religinį turizmą. Siekdama išsaugoti savo konkurencinį lygį, turizmo pramon turi prisitaikyti prie demografinių pokyčių pasaulio gyventojų sen jimo proceso pasiūlydama šios segmento poreikius atitinkančius turizmo produktus. Į turizmo paslaugų teikimo sistemą taip pat turi būti integruotas riboto judumo gyventojų segmentas, turintis specifinius poreikius. Pagrindinis šalies turizmo potencialas keturios prioritetin s turizmo rūšys: kultūrinis, aktyvaus poilsio, dalykinis bei sveikatos turizmas, iš kurių labiausiai pamin tinos dvi pastarosios. Išvados Turizmas yra viena perspektyviausių ir stambiausių ekonomikos sektorių pasaulyje. Tačiau tai, kad iki šiol n ra vieningo universalaus turizmo apibr žimo, rodo šio reiškinio sud tingumą. Darbe atlikta analiz parod, jog atvykstamasis turizmas pl tojosi Lietuvoje labai netolygiai. Per dvidešimties metų laikotarpį akcentuotini trys nuosmukiai, kuomet ženkliai sumaž davo į šalį atvykstančių turistų skaičius: m., m. ir m. Netolygią turizmo raidą daugiausiai l m : m. ekonomikos recesija šalyje; 1998m. Rusijos ekonomin kriz ; m. pasaulin ekonomin kriz. Prognozuojat tolesnę turizmo pl trą Lietuvoje, būtina atsižvelgti į globalias problemas su kuriomis vis dažniau susiduria ir susidurs pasaulio turizmo industrija: klimato pokyčius, terorizmą ir smurtą, globalines ligas, kurios realiai gali pakeisti turistų traukos centrus. Panaudojus ir maksimaliai sustiprinus esamas turizmo sektoriaus potencialo stipriąsias puses gana išvystytą turizmo infrastruktūrą ir įvairialypius turizmo išteklius, sudarančius prielaidas kurti ir realizuoti subalansuoto turizmo produktus ir pagal galimybes užtikrinant adekvatų finansavimą, 27 Organizacija meždunarodnogo turizma. Pod red.akcijej A.A Skamnickogo. Moskva: Gardariki,

34 Lietuva gali sukurti ir pasiūlyti originalius produktus ir tapti vienu iš patrauklių turistų traukos centrų. Šaltiniai 1. Bernecher, P. Fundaments of tourism. Geneva, Bull. A. The economics of travel and Tourism. Australia: Pitman Publishing Connell J., Stephen J. P. Tourism: A Modern Synthesis, Second Edition. London: Thomson Learning, Cooper Chris et al. Tourism: Principles and Practice. Fourth Edition. Harlow: Financial times: Prentice Hall, Dvilevičien D. Kelionių paslaugų industrija ir komercija. Vilnius, Dwyer, Larry; Forsyth, Peter and Dwyer, Wayne. Tourism economics and policy. Bristol; Buffalo (N.Y.); Toronto: Channel View Publications, For the latest trends in international tourism: UNWTO World Tourism Barometer. For an overview of tourism in UNWTO Tourism Highlights Henderson, Joan C. Tourism crises: causes, consequences and management. Amsterdam: Elsevier: Butterworth-Heinemann, Holloway J.C. The Business of Tourism. Harlow: Financial times: Prentice Hall, Labanauskait D. Tarptautinio turizmo įtaka ekonominiam augimui.// Ekonomika ir vadyba Kaunas: Technologija. 11. Lietuvos Respublikos turizmo įstatymas m. kovo 19 d. Nr. VIII str. 1 dalis. Valstyb s žinios, 1998, Nr Lietuvos valstybinis turizmo departamentas, 2002, p Milašien A. Zaliapūgien B. Šengeno zonos įtaka turizmo srautams Lietuvoje. Tarptautin s mokslin s metodin s konferencijos Inovacijos turizmo versle ir moksle straipsnių rinkinys. Klaip da: S. Jokužio spaustuv leidykla, Mill R. C., Morrison A. M. The Tourism System. Iowa: Kendall/Hunt, Organizacija meždunarodnogo turizma. Pod red.akcijej A.A Skamnickogo. Moskva: Gardariki, Wanhill, S. Tourism Statistics to Proceedings of Current Issues in Services Research Conference. Poole, Dorset Institute, Witt, S.F., Brooke, M.Z. ir Buckley, P.J. The Management of International Tourism. London: Unwin Hyman Ltd, Theobald, William F. Global tourism (2nd ed.). Oksford [Anglija]: Butterworth-Heinemann, Trumpa Lietuvos turizmo statistikos apžvalga Turizm i rekreacija na puti ustoičivogo razvitija. Moskva: Sovetskij sport, Turizmas Lietuvoje 2007, 2008, 2009, 2010 metais. Vilnius. Statistikos departamentas. 22. Turizmo būkl s apžvalga. Vilnius: Valstybinis turizmo departamentas, URL: UNWTO. Tourism Highlights Edition. For more information: Facts & Figures section at m. Lietuvos turizmo trumpa ekonomin analiz. 39

35 INBOUND TOURISM IN LITHUANIA: ANALYSIS AND TRENDS OF DEVELOPMENT SUMMARY Aldona Damulien Tourism one of the most promising and fastest growing economic sectors, which is facing the challenges and opportunities of the global competitive market. The subject of the thesis the analysis and trends of development of inbound tourism in Lithuania is relevant because of the current changes that took place in recent decades regarding Lithuania s integration into the EU and the Schengen area, as well as the global economic recession that has reflected in the performance of tourism sector. The objective is to reveal the peculiarities of Lithuania s inbound tourism functioning and its development, to find out the prospects of the development conception. For this reason the subject that has been chosen is the development and prospects of the inbound tourism of Lithuania. The aforesaid objective leads to the following tasks: to get acquainted with the concept of tourism, its economic implications; to review the development of the inbound tourism of Lithuania since the independence, and assess the implications of accession to the EU; to carry out the statistical analysis of sector s current state; to evaluate the situation and prospects of Lithuania s inbound tourism based on tourism recourses, four priority types of tourism. The problem of the tourism development and its prospects is being conceptualized in this research. Following research methods have been used: systematic and logical analysis and synthesis of scientific literature, statistical analysis. Social and economic development in Lithuania opened the possibility to integrate into the international tourism market. During the pos-soviet transformation a significant moment was joining the Shengen area that has given the freedom of movement. The largest loss of the reorganization the loss of East market share for political reasons. Based on survey results, the main tourism potential of the country - the four priority types of tourism: cultural, active recreation, business and health tourism with the biggest consideration for the last two. While formatting internationally competitive tourism product, it is proposed to draw bigger attention to the development of country s image, purposeful marketing strategy, the use of tourism recourses for the development of infrastructure. Keywords: tourism market; inbound tourism; foreign visitors; tourist; tourism revenues. 40

36 ASSESSMENT OF EFFICIENCY OF THE SUPPORT MECHANISM FOR ELECTRICITY GENERATION FROM RENEWABLE ENERGY SOURCES IN LATVIA Arta Denina, Janis Zvanitajs Riga Technical University, Faculty of Engineering and Management Meza str. 1/7, Riga, LV-1048, Latvia Abstract. The paper analyzes and assesses the efficiency of promotion of electricity generation from renewable energy sources (RES) in Latvia by looking at the economic incentives available for entrepreneurs. The main support measure is the obligatory purchase mechanism (OPM) and the feed-in tariffs for electricity that is generated from RES (RES-E). The methodology for assessing the efficiency of the economic incentives for RES-E producers is set out. The paper concludes that there is a room to improve the efficiency of economic incentives for RES-E generation in Latvia. Keywords: Renewable energy sources, electricity, cost of electricity generation, support mechanism, efficiency. Introduction There is not much scientific work done in the field of economic analysis that would focus exclusively on efficiency assessment of the support incentives for RES-E generation in Latvia. In fact, there has been now thorough assessment carried out on the efficiency of introduction and expansion of RES-E generation in Latvia. This article represents added value in the respective field by presenting some analysis and findings of a detailed scientific work carried out by the authors. The term efficiency refers evaluation of how adequate the input is compared to the output achieved. The two most relevant and recent pieces of the scientific research in Latvia have been done in 2009 and 2010, although they do not directly address the topic of this paper. The research paper Use of renewable energy sources to ensure sustainable development of Latvia provides a general analysis of the benefits RES can bring to the economy (Gaidis et al., 2010). The research carried out by a group of researchers from Riga Technical University in 2009 Possibilities for enhanced uses of RES, analyzes scenarios for possible use RES in energy production (Riga Technical University, 2009). For each investment decision the crucial issue is the pay-back time of the investment. In order to promote use of RES for electricity generation and to ensure acceptable level of return on investment for potential investors, governments often set a regulatory framework where RES-E generation is supported. The design of this support can and does vary significantly. There are many instruments (i.e. feed-in tariffs, investment support, tax discounts, etc.) that can be introduced to foster RES-E generation business. However, it is important to ensure that the designed support framework is effective and efficient. This can be very challenging, since, on one hand, it should guarantee stability and predictability for investments, and, on the other, balance economic motivation for the potential investor with the overall cost to the society. In Latvia as in many other countries RES-E generation is not competing in a market place. Instead, prices for RES-E are set by the regulatory framework. The major support mechanisms for enhancing RES-E generation business are the obligatory purchase mechanism (OPM) of RES-E produced and a favourable electricity price (feed-in tariff) which is allocated to the RES-E producers in Latvia. In addition, the government has set RES-E targets to promote RES-E generation. Latvenergo AS, the largest electricity utility in Latvia, has a legal obligation to buy all RES-E produced in Latvia. The tariffs for electricity from different RES sources are set by several 41

37 legislative acts. Since these measures are complementing each other, in the paper the term support mechanism is used and it covers both. The aim of this article is to assess efficiency of the support mechanism for RES-E producers in Latvia. In order to achieve the aim, there are the following tasks: to establish the methodology for assessing efficiency of the support mechanism for the RES-E generators in Latvia, to evaluate the development of the RES-E generation in the total electricity supply structure in Latvia; to establish a cost reference for different types of the RES-E generation; to calculate the prices that generators producing RES-E from various sources of RES are entitled to within the framework of the support mechanism in Latvia; to assess the overall cost paid to the RES-E generators in Latvia; to provide an international comparison for the cost of support mechanisms in different EU member states. The main sources used to elaborate this paper include research reports from the international organizations such as International Energy Agency, the European Commission, the European Statistics Office EUROSTAT, as well as from the Latvian authorities such as Ministry of Economy, Commission of regulation of the public services, Central Statistical Bureau of Latvia. Unpublished data from Latvenergo AS as well as the legislative acts that set out methodology for calculation of feed-in tariffs for selling RES-E produced in Latvia are also used. The authors have used qualitative and quantitative methods to better explain some aspects of the article, such as analysis and synthesis; logical and abstractive construction; data grouping and comparing; correlation regression analysis; etc. The paper has the following structure: In the beginning of the paper the methodology to assess efficiency of the support mechanism for RES-E producers in Latvia is set out. Then, the RES support mechanism in Latvia is addressed. This is followed by presentation of the change in the electricity supply structure in Latvia with particular focus on the development of RES-E generation. The calculation of the feed-in tariffs for different sources of RES-E shown in an international perspective follows next. Then the cost reference for RES-E generation is set. The costs are compared with the feed-in tariffs. The paper concludes that the RES-E generators in Latvia are well remunerated; however, there is a need for further research in order to pursue with further assessments of the efficiency of the support mechanism in Latvia. 1. Methodology Several indicators can be used to assess efficiency of a support mechanism. In this paper the authors provide the comparison of the RES-E tariffs in Latvia and the cost of RES-E generation from an international perspective. The cost of generating electricity and the expected price for selling the RES-E are the major factors that potential investors in RES-E projects consider. From the economic efficiency point of view, the optimum situation is reached when the tariff or price paid for a unit of RES-E is the closest to the cost level of production costs of a RES-E unit. If the tariff is set too low, there will be no investment projects in RES-E generation. In contrary, if the tariff is set too high, a situation for windfall profits is created bringing the overall efficiency of the support mechanism down. Setting the right tariff for RES-E is a challenge. It depends very much on the technological and market maturity of a RES-E technology (International Energy Agency, 2008). The most recent publication of the International Energy Agency (2010) on levelized costs of electricity generation is used as a reference for the cost estimates for RES-E generation. An example of the comparison of the RES-E generation cost and the tariffs is provided. Here the tariffs are calculated using freely chosen installed capacity ranges for the RES-E power plants. 42

38 2. The support mechanism for RES-E generators in Latvia The OPM of the RES-E for special tariffs, the major principle of the current support mechanism for enhancing RES-E generation in Latvia is in place since However, since then it has evolved significantly. The state owned public limited company Latvenergo AS is responsible for purchasing all produced RES-E electricity in Latvia. The tariff to be paid for a unit of RES-E is calculated from the formulas set by the legislation. The tariffs are different for output of each RES- E technology. Therefore, also the generators` revenues from RES-E selling vary. Until 2002 there were no set limitations as for the amount of RES-E to be purchased in the framework of the OPM. The price for RES-E was set on the basis of the average electricity tariff (AET) in Latvia. For small hydro installations it meant double AET, for wind 1,5 times AET. After 2002 Latvenergo AS has been obliged to buy only the amount of RES-E that was produced from the new RES-E generation capacities (not exceeding the annual quota set by the government each year). For example, in 2005 the only quota available was for biomass (20 MW) and biogas (3 MW) power plants. In fact, the largest capacity quota in general was set for biomass and biogas power plants. However, only hydro sector and wind experienced real growth in terms of numbers of companies generating electricity and capacities installed. Despite the important quota for biomass and biogas no plants were built in this time; these plants first entered into the operation only after The quota principle was in place until It was then replaced by the RES-E generation/consumption quota (targets). Since 2007 a target for RES-E as a share in the total electricity consumption has been set for each year. The RES-E targets have been set with an increasing tendency: 44,62% in 2007 and 54,57% in 2010 and the years after. 3. Development of RES-E generation in Latvia RES-E generation capacity. There has been significant investment made into RES-E generation. In 2010 there were in total 1622 MW of RES-E capacity installed. The 3 large hydropower plants account for 95% of this amount. 5% or 72 MW are distributed among the small independent RES-E generators as follows: 26 MW of small hydro, 30 MW of wind, 5 MW of biomass and 11 MW of biogas (Central Statistical Bureau of Latvia, 2011). The total electricity supply in terms of output in 2009 has increased by slightly more than one fifth compared to that of 2000 and reached 7220 GWh. There has been significant growth in electricity generation from the decentralized RES and CHP power plants (this growth has taken place thanks to the support mechanism). Electricity supply from the CHP installations has risen from 150 GWh in 2000 to 580 GWh in 2009 while the decentralized RES-E installations generated 120 GWh in 2009 (forth fold compared to 2000) (Ministry of Economy, 2011). Figure 1 compares the electricity supply structures in Latvia in 2000 and Thanks to the increased RES-E generation, electricity imports have decreased. In the electricity output from the decentralized power plants small hydro and wind generation accounted for 50% and 40%, respectively. 43

39 ,2 47,0 19,6 20,4 30,2 22,9 8,1 0,5 2,5 1,6 Large hydro Large CHP Import Other RES Other CHP Figure 1 Electricity supply structure in Latvia in 2000 and 2009, % (authors` construction based on the working document on energy statistics from the Ministry of Economy of Latvia) Figure 2 shows the structure of the domestic electricity generation in Latvia in 2009 by source of fuel. Almost 65% of the total electricity generation came from RES, mainly large hydro. Contributions from other RES, i.e. small hydro, wind, biogas and biomass are significantly smaller. Fossil fuels; 2010 GWh; 36% Biogas; 45 GWh; 1% Wind; 50 GWh; 1% Large hydro; 3391 GWh; 61% Biomass; 4 GWh; 0% Small hydro; 66 GWh; 1% Figure 2 Structure of the domestic electricity generation in Latvia in 2009, GWh and % (authors` construction based on the working document on energy statistics from the Ministry of Economy of Latvia) Domestic RES-E generation. As shown in the previous figure the domestic RES-E generation in Latvia is dominated by hydropower business (97% in the total RES-E generation activity). 3% are almost equally shared by wind and biogas generation (biomass is the least used RES source with only 0,1% share) (Fig. 3). 44

40 1,3% 97,2% 0,1% 1,4% Hydro Wind Biogas Biomass Figure 3 Structure of the domestic RES-E generation in Latvia by source in 2009 (authors` construction based on the working document on energy statistics from the Ministry of Economy of Latvia) Figure 4 shows the structure of the RES-E generation business in Latvia in In there were 182 companies that operated within the framework of the support mechanism and received the feed-in tariff for the produced RES-E output. 77% or 139 companies were producing electricity from small hydro; 14% or 26 companies operated in wind business. 6% of the total number of companies generated RES-E from biogas. Only 3% or 6 companies were power stations, burning biomass. 6; 3% 11; 6% 26; 14% 139; 77% Small hydro Wind Biomass Biogas Figure 4 RES-E generation businesses in 2010 in Latvia by RES source (authors` construction based on unpublished information from Latvenergo AS) Since 1997 there has been a gradual increase in number of companies producing RES-E under the support mechanism. The total number of such producers has increased from 15 in 1997 to 182 in Figure 6 illustrates statistical significance in growth of numbers of the RES-E generators benefiting from the support mechanism in Latvia from 1997 until Statistically important increases can be observed for RES-E generators in total and also for the RES-E generators grouped by source of RES. The corresponding coefficients of determination are displayed in the figure. 45

41 Total R 2 = 0,8151 Small hydro R 2 = 0,7426 Wind R 2 = 0,818 Biogas R 2 = 0,7787 Biomass R 2 = 0, Biomass Biogas Wind Small hydro Total Linear (Total ) Linear (Wind) Figure 5 Trends in rise in number of RES-E producers benefiting from the support mechanism in Latvia, (authors` construction based on unpublished information from Latvenergo AS) 4. Assessment of the efficiency of the support mechanism in Latvia RES-E tariffs under the support mechanism. There has been frequent change in the respective legislation that sets out formulas for calculation of the tariffs for RES-E. The relative legislation includes the following Ministerial Decrees: Ministerial Decree Nr. 503 (adopted in July 2007); Ministerial Decree Nr. 198 (adopted in February 2009); Ministerial Decree Nr. 486 (adopted in May 2009); and Ministerial Decree Nr. 262 (adopted in March 2010). Therefore, RES-E generators receive different tariffs. Figure 6 compares RES-E tariffs according to each piece of legislation in force from 2007 until The current Ministerial Decree Nr. 262 contains the same formula for calculation of the tariffs as set out in the Ministerial Decree Nr. 486 (amendments to the Ministerial Decree Nr. 198). Tariffs are thus the same. In Figure only reference to the Ministerial Decree Nr. 486 is made. The most generous support level has been under the Ministerial Decree Nr The authors have deliberately chosen the capacity interval of 0,6 0,8 MW for small hydro, biomass and biogas installations and 0,25 MW and 1 MW for wind power plants (in general, there is installed capacity differentiation in the methodologies for setting tariffs for RES-e purchase within OPM; also, a different tariff setting formula for RES-E purchase from wind installations with installed electric capacity smaller than 0,25 MW and for wind installations with installed capacity over 0,25 MW). In the same Figure name of renewable energy source 10 means the tariff paid to a RES-E generator for the first 10 years of operation of a RES-E power station; name of renewable energy source means the tariff paid to the RES-E producer 10 years after the first 10 years of operation of a RES-E installation. The maximum duration of support is 20 years. The tariff level is set in the Latvian national currency lats (LVL).The National Bank of Latvia has set the official exchange rate between euros and lats and it is 0, lats for 1 euro. 46

42 MD Nr. 503 MD Nr. 198 Amend. MD Nr ,00 200,00 150,00 100,00 50,00 0,00 Wind 10 (0,25 MW) Wind (0,25 MW) Wind 10 (1 MW) Wind (1 MW) Small hydro 10 (0,6-0,8 MW) Biomass 10 (0,6-0,8 MW) Small hydro (0,6-0,8 MW) Biomass (0,6-0,8 MW) Biogas 10 (0,6-0,8 MW) Biogas (0,6-0,8 MW) Biogas 10 (2-2,5 MW) Biogas (2-2,5 MW) Figure 6 Tariffs for RES-E by source, LVL (authors` construction based on the Ministerial Decrees Nr. 503, Nr. 198, and Nr. 486) As shown in this particular example, the Ministerial Decree Nr. 198 significantly increased RES-E tariff for wind, small hydro and biogas (with capacity 0,6 0,8 MW). On average this increase has been by 55%. Ministerial Decree Nr 486 (Amendments to the Ministerial Decree Nr. 198) lowered the tariff levels by almost 19%. Compared to average tariff levels for RES-E as set by the Ministerial Decree Nr. 503, amendments to the Ministerial Decree Nr. 198 nevertheless increased the tariff levels on average by 9,3%. Similar patterns can be observed for the RES-E generating technologies in a different range of installed capacity. 180,00 160,00 140,00 120,00 100,00 80,00 60,00 40,00 20,00 0,00 Austria Belgium Czech Republic AVE RES-E support tariff, EUR/MWh Denmark France Germany UK Hungary Italy Lithuania Luxembourg Portugal Spain Sweden The Netherlands Latvia Support for RES-E unit from each electricity unit consumed, EUR/MWh Figure 7 Average support tariff (bars) and the cost for RES-E from each electricity unit consumed (dots) in the European countries in 2009, EUR/MWh (authors` construction based on CEER Report on Renewable Energy Sources, p ; Energy in Latvia in Figures, 2011, p. 19; and unpublished information from Latvenergo AS) Since the introduction of the support mechanism there has been a significant rise in the cost. In 1997 the cost was around 0,4 million lats (0,57 million EUR), in 2010 the cost had increased ten times compared to the cost of 2001 when it was around 2 million lats (2,8 million EUR). Figure 8 places Latvia in the international perspective regarding the average tariffs paid for RES-E (EUR/MWh), on one hand, and the price paid for RES-E by each unit of electricity consumed (EUR/MWh). The data reflects the situation in The average RES-E tariff, close to ,00 20,00 15,00 10,00 5,00 0,00 47

43 EUR/MWh, is the highest in Latvia (bars in the figure), while the price for the RES-E support paid by the electricity consumer for each electricity unit consumed (dots in the figure) is comparatively low (3,46 EUR/MWh). Cost of generating RES-E. In general the RES-E technologies represent a clear tendency of decreasing the cost of electricity generation over time. For example, since early 1980s the RES-E generation cost from wind power plants has decreased by two thirds (International Energy Agency, 1998). Also the cost of electricity generation from solar PV has decreased steeply since 1980s. Although the gradual cost reduction is well known, there is hardly any comprehensive data available on the actual cost of RES-E generation. The International Energy Agency publishes regular estimates for projected electricity generation costs, including those of RES-E plants. Figure 8 shows its most recent evaluations regarding the cost of RES-E generation. These costs are forward looking and apply for the plants that are foreseen to start operation by Only minimum values have been reported for electricity generation from biomass and biogas plants. These values are used as a reference. 500,00 507,33 400,00 300,00 200,00 100,00 137,64 125,26 67,12 109,11 0,00 Small hydro Onshore wind Biogas* Biomass* Solar PV Figure 8. Average projected cost of electricity generation by source, EUR/MWh (authors` construction based on projected costs of generating electricity, International Energy Agency, 2010) Comparison of the tariffs for RES-E in Latvia and the cost of RES-E generation. Comparing the tariffs paid to the RES-E generators under the current legislation Ministerial Decree Nr. 262 (the specific example in Fig. 6) with the referenced cost estimates for RES-E generation, one can observe the following: RES-E generators operating a wind power plant with installed capacity exceeding 0,25 MW receive 76 to 127 EUR per MWh produced (from 100 to 167 EUR per MWh in case of a power plant with installed capacity of less than 0,25 MW). This is in the range of minimum (86 EUR/MWh) and maximum (165 EUR/MWh) in the reference generation cost data; small hydro operators receive 136 to 170 EUR per MWh produced. This is above the reference average electricity generation cost for hydropower and well above the reference minimum (65 EUR per MWh) but below the reference maximum (210 EUR/MWh); RES-E generators from biomass power plants are paid 124 to 164 EUR per MWh. This is above the minimum reference value of 109 EUR per MWh; RES-E generators from biogas power plants receive 161 to 201 EUR per MWh. This is two and more times than the minimum reference value of 67 EUR per MWh. Conclusions Thanks to the support mechanism for RES-E generation there has been gradual increase in RES-E generation business in Latvia. Assessing the efficiency of this support mechanism is a difficult task. The major problem is the data availability on the cost of RES-E generation. From the 48

44 analysis based on the specific example provided by this paper it can be concluded that the RES-E generators in Latvia are well remunerated. However, in order to pursue with a more detailed assessment of the efficiency of the support mechanism in Latvia a detailed methodology for comparison of the RES-E generation costs against the RES-E tariffs need to be established. References 1. Central Statistical Bureau of Latvia (2011). EN22. Electric capacity and produced electricity from renewable energy sources. [Accessed August ]. Internet Access: 2. Commission of regulation of the public services of Latvia (2010). Annual report Internet access: [Accessed July ]. 3. Council of European Energy Regulators (2011) CEER Report on Renewable Energy Support in Europe. [Accessed August ]. Internet Access: /C10-SDE-19-04a_RES_4-May-2011%20final.pdf. 4. European Parliament and Council (2009). Directive 2009/28/EC on the promotion of the use of energy from renewable sources and amending and subsequently repealing Directives 201/77/EC and 2003/30/EC. [Accessed July ]. Internet Access: 5. European Commission (2008). The support of electricity from renewable energy sources. Commission staff working document. [Accessed July ]. Internet Access: 6. Gaidis K. et al. (2010). Use of renewable energy sources to ensure sustainable development of Latvia. [Accessed December ]. Internet Access: 7. International Energy Agency (1998). Projected costs of generating electricity. OECD Publishing. 240 p. 8. International Energy Agency (2008). Deploying Renewable. Principles for effective policies. [Accessed July ]. Internet Access: 9. International Energy Agency (2010). Projected costs of generating electricity. OECD Publishing. 215 p. 10. Latvijas Republikas Ekonomikas ministrija (2011). Latvijas enerăētika skaitĝos. [Accessed August ]. Internet Access: (1).pdf. 11. Ministerial Decree Nr. 250 ( ) on total capacity amount for installation in 2005 and amount for each type of technology if electricity is produced from renewable energy sources. [Accessed August ]. Internet access: Ministerial Decree Nr. 28 ( ) on total capacity amount for installation in 2002 and amount for each type of technology if electricity is produced from renewable energy sources. [Accessed August ]. Internet access: Ministerial Decree Nr. 40 ( ) on total capacity amount for installation in 2004 and amount for each type of technology if electricity is produced from renewable energy sources. [Accessed August ]. Internet access: Ministerial Decree Nr. 545 ( ) on total capacity amount for installation in 2003 and amount for each type of technology if electricity is produced from renewable energy sources. [Accessed August ]. Internet access: Ministry of Economy of Latvia (2011). Energy in Latvia in Figures. [Accessed August ]. Internet Access: Riga Technical University (2009). Possibilities for enhanced use of renewable energy sources in Latvia. [Accessed December ]. Internet Access: 49

45 %20plans_KOPSAVILKUMS.pdf. 17. Unpublished materials from Latvenergo AS. 50

46 EFFECTS OF CHANGE IN VARIANCE ACTIVITIES WHEN COMPUTING CRITICALLY NODE USING THE PERT METHOD Karel Doubravský, Radek Doskočil Brno University of Technology, Czech Republic, Abstract. The paper generally deals with the effects of a change in variance activities when computing the criticality node of a PERT network diagram. The main aim of the paper is to analyze the effects of a change in variance activities for two different approaches used when computing the criticality node. In order to achieve the aim, a hypothesis is formed that the change in variance activity should affect the computation of the criticality probability of nodes. The analysis is applied to a sample PERT network diagram comprising 9 nodes and 14 activities. A time analysis is developed using the PERT method, and the criticality node is computed using both approaches. The computed results serve as input for further statistical processing. Keywords: PERT method, node criticality, mean value, variance, standard deviation, hypothesis testing. Introduction Project management is nowadays a widely discussed discipline. This fact is substantiated by numerous scientific articles, books and publications dealing with these problems 1,2,3. This discipline is also included in the courses of numerous faculties focusing on economy both in the Czech Republic and abroad. Experts are also associated in various professional organizations or associations 4,5. Project managers and other members of the project team use different tools, techniques or methods in project management. If we take a closer look at these tools, we will find out that in certain cases the manner of their application varies, depending on the approach of individual authors. One of the various approaches is node criticality computation in the PERT method (Program Evaluation and Review Technique) generally using two different approaches to the computation. Neither approach considers mutual size of variances of the individual activities. This fact might affect appropriateness of use of one or the other approach. The computation of node criticality is one part of a probability analysis. In the framework of this analysis criticality of activities is also computed (depending on the user needs) 6, together with computation of the probability of meeting the planned deadlines 7. The purpose of the present paper is to compare the two different approaches with regard to activity variations. For the purpose of the comparison the authors defined the assumption that the change of activity variance can affect the computation of node criticality. The defined issue is demonstrated on a sample case of a PERT network diagram consisting of 9 nodes and 14 activities 8. 1 Bergantiños, G., Vidal-Puga, J. (2009) A value for PERT problems, International Game Theory Review. 2 Garcia, P. J. et all. (2005) The Two-Sided Power Distribution for the Treatment of the Uncertainty in PERT, Statistical Methods and Applications. 3 Herreri'as-Velasco, J.M., Herreri'as-Pleguezuelo, R. & van Dorp, Johan René. (2011)Revisiting the PERT mean and variance, European Journal of Operational Research,. 4 Society for Project Management Czech Republic. (2011) [Online], [24 Aug. 2011], 5 International project management association. (2011) [Online], [20 Aug. 2011], 6 Premachandra, I. M. (2001) An approximation of the activity duration distribution in PERT, Computers & Operations Research. 7 Jablonský, J. (2002) Operační výzkum; kvantitativní modely pro ekonomické rozhodování, Professional Publishing, Praha. 8 Rais, K., Doskočil, R. (2006) Operační a systémová analýza I, BUT Brno, Business Faculty, Brno. 51

47 1. Materials and methods Three estimated times of activity duration were used in the network diagram used the optimistic, the most likely and the pessimistic one. Subsequently mean times of activity duration (1) were calculated using the formula 9 : aij + 4mij + bij tij =, (1) 6 where: i, j = node number, t ij = time of activity duration, a ij = optimistic estimate of activity duration, m ij = estimate of most likely activity duration, b ij = pessimistic estimate of activity duration. Variances (2) and standard deviations (3) of activity duration were also calculated. The following formulas were used for the calculations: σ 2 (bij aij =, 36 (2) bij aij =. 6 (3) ) 2 tij σ t ij For the purpose of the time analysis the basic time characteristics were further calculated on the basis of standard equations. Further information can also be found in literature 10,11. Using an incidence matrix the possible earliest times of nodes (4) were calculated using the following formulas: ETN j =max{eft ij }, kde EFT ij = EST ij +t ij, (4) where: i, j = node number, ETN j = Earliest Time of Node, EFT ij = Earliest Finish Time of Activity, EST ij = Earliest Start Time of Activity, t ij = activity duration. The permissible Latest Times of Nodes (5) were calculated using the following formulas: LTN i =min{lst ij }, kde LST ij =LFT ij t ij, (5) where: i, j = node number, LTN i = permissible Latest Time of Node, LFT ij = permissible Latest Start Time of Activity, LFT ij = permissible Latest Finish Time of Activity, t ij = activity duration. There are two generally used approaches to variance computation needed for a node criticality analysis. 9 Plevný, M., Žižka, M. Modelování a optimalizace v manažerském rozhodování, (2005) West Bohemian University in Plzen, Plzeň. 10 Černá, A. (2008) Metody operačního managementu, Oeconomica publishers, Praha. 11 Wisniewski, M. (1996) Metody manažerského rozhodování, Grada Publishing, spol. s r.o., Praha. 52

48 The first approach is based on the assumption that variances of Earliest Times of Nodes (6) correspond to the calculated variances of Earliest Finish Times of Activities and the one is selected that pertains to the maximum duration to the Earliest Finish Times of Activities coinciding with the respective node. σ 2 ETN i =σ 2 EFT ij pro max {EFT ij}, j=1,2,...,k i where: i, j = node number, σ 2 ETN i = variance of Earliest Time of Node, σ 2 EFT ij = variance of Earliest Finish Time of Activity, k = number of nodes., (6) Variances of permissible Latest Times of Nodes (7) in the first approach correspond to the calculated variances of the permissible Latest Start Times of Activities and the one is selected that pertains to the minimum duration of the permissible Latest Start Times of Activities coinciding with the respective node 13. σ 2 LTN j =σ 2 LST ij pro min j {LST ij}, i=1,2,..., k, (7) where: i, j = node number, σ 2 LTN j = variance of permissible Latest Time of Node, σ 2 LST ij = variance of permissible Latest Start Time of Activity, k = number of nodes. The second approach is based on the assumption that variances of Earliest Time of Nodes (8) correspond to the calculated variances of Earliest Finish Times of Activities and the one is selected which shows the maximum value of the ones coinciding with the respective node. σ 2 ETN i =max{σ 2 EFT ij }, j=1,2,...,k i, (8) where: i, j = node number, σ 2 ETN i = variance of Earliest Time of Node, σ 2 EFT ij = variance of Earliest Finish Time of Activity, k = number of nodes. Variances of permissible Latest Times of Nodes (9) correspond to the calculated variances of the permissible Latest Start Times of Activities and the one is selected which shows the maximum value of the ones coinciding with the respective node 12. σ 2 LTN j =max{σ 2 LST ij }, i=1,2,...,k j (9) where: i, j = node number, σ 2 LTN j = variance of permissible Latest Time of Node, σ 2 LST ij = variance of permissible Latest Start Time of Activity, k = number of nodes. 12 Operation Analysis. Materials for Lectures and Seminars. (2003), Faculty of Applied Science, West Bohemian University in Plzen, Plzeň. 53

49 When looking for the probability with which non-critical nodes become critical it is sufficient to specify the probability of the interference margin of the node to equal or be less than zero, i.e. probability (10): P( IM i 0)=P( LTN i ETN i 0) where: i, j = node number, P = probability, IM i = Interference margin, LTN i = permissible Latest Time of Node, ETN j = Earliest Time of Node. (10) The calculated value (parameter) of the standardized normal distribution (11) will be based on u= ( LTN i ETN i ) σ 2 LTN i +σ 2 ETN i where: i, j = node number, u = value of standardized normal distribution, LTN i = permissible Latest Time of Node, ETN j = Earliest Time of Node, σ 2 LTN j = variance of permissible Latest Time of Node, σ 2 ETN i = variance of Earliest Time of Node. (11) The sought probability will be the value of distribution function F(u), found for example in statistical tables or using appropriate software 13. To verify the hypothesis selected apparatus of mathematical statistics will be used, in particular instruments of hypothesis testing and t-test. Further information can be found in literature 14, Results The network diagram consisting of 9 nodes and 14 activities had three estimates of times of activity duration set: optimistic (a ij ), most likely (m ij ) and pessimistic (b ij ) (see table 1). Index i represents the initial activity node and index j the end activity node. Table 1 further includes calculated mean times of activity durations (t ii ), their variances (σ 2 t ij ) and standard deviations (σ t ij ). The calculated variances of activities (1;4) and (4;6) show that their values are different in size from all other activity variances Gros, I. (2003) Kvantitativní metody v manažerském rozhodování, Grada Publishing a.s., Praha. Mathews, P. (2005) Design of Experiments with Minitab, ASQ Quality Press, Milwaukee, Wisconsin. Wonnacott, T. H., Wonnacott, R. J. (1990) Introductory Statistics for Business and Economics, Wiley, Oxford. 54

50 Table 1 Calculation of Mean Activity Duration and Variance i j a ij m ij b ij t ij σ 2 t ij σ t ij Table 2 represents the incidence matrix of the network diagram. Its inside cells include calculated mean times of activity duration (see table 1). The last column includes Earliest Times of Nodes (ETN i ) calculated with formula (4) and the last row includes permissible Latest Times of Nodes (LTN j ) calculated with formula (5). Table 2 Incidence Matrix Earliest and Latest Times of Nodes i ETN i LTN i The next stage of the node criticality analysis is represented by the calculation of variances of time characteristics on the level of both nodes (Earliest and Latest Times of Nodes) and activities. Incidence matrix is again used for practical processing where only some of the time characteristics values and their variances are entered. Further information can be found in literature 16. The following part of the text includes results of both examined approaches to variance calculations Approach I Table 3 shows the network diagram incidence matrix. Its inside cells include calculated variances of activity durations (see table 1). The last column includes variances of Earliest Times of Nodes calculated with the first approach (6), i.e. the variances correspond to the calculated variances of activities and the one is selected that pertains to the maximum duration of Earliest Finish Times of Activities coinciding with the respective node. The last row includes variances of Latest Times of Nodes calculated with the first approach (7), i.e. the variances correspond to the calculated variances of activities and the one is selected that pertains to the minimum duration of the Latest Start Times of Activities coinciding with the respective node. 16 Gros, I. (2003) Kvantitativní metody v manažerském rozhodování, Grada Publishing a.s., Praha. 55

51 Table 3 Incidence Matrix Variances of Earliest and Latest Times of Nodes Approach I i σ 2 ETN i σ 2 LTN i Table 4 summarises the values of the above tables needed for the node criticality calculation. The first column shows node numbers, and the second interference margins. The third column shows values of the parameter of standardized normal distribution and the matching values of distribution function of standardized normal distribution (column four), corresponding to the node criticality probability. Table 4 Node Criticality Calculation Approach I i IM i u F(u) Approach II Table 5 shows the network diagram incidence matrix. Its inside cells include calculated variances of activity durations (see table 1). The last column includes variances of Earliest Times of Nodes calculated with the second approach (8), i.e. the variances correspond to the calculated variances of activities and the one is selected that pertains to the maximum variance of the possible variances of activities coinciding with the respective node. The last row includes variances of Latest Times of Nodes calculated with the second approach (9), i.e. the variances correspond to the calculated variances of activities and the one is selected that pertains to the maximum duration of the Latest Start Times of Activities coinciding with the respective node. Table 5 Incidence Matrix Variances of Earliest and Latest Times of Nodes Approach II i σ 2 ETN i σ 2 LTN i Table 6 summarises the values of the above tables needed for node criticality calculation. The first column shows node numbers, and the second interference margins. The third column shows values of the parameter of standardized normal distribution and the matching values of distribution function of standardized normal distribution (column four), corresponding to the node criticality probability. Table 6 Node Criticality Calculations Approach II I IM i u F(u)

52 3. Discussion Values from the last column (node criticality probability) of tables 4 and 6 were used for further calculations. The performed analyses show that the probable critical path is identical whichever of the two approaches is used. The only difference is shown by the values of F(u) of nodes 2, 3, 6 and 7. The question is whether this difference is statistically significant or not. To find this the statistical apparatus of hypothesis testing was used. The values of the calculated probabilities for both approaches were included in two data files. To compare the values in these data files there was the t-test for two basic files. The basic conditions of use of this test are data normality and independence. To verify data normality the Shapiro-Wilcoxon test was used. The requirement of independence of the values of both files appears to be the key requirement. Regarding the nature of the calculations where two probability values were specified for each node the requirement of independence might be violated. To verify the independence the Pearson correlation coefficient was calculated and the test of independence of two characters was performed. The calculated Pearson coefficient equalled This value indicated a strong linear correlation between the found probability values. This assumption was further verified by the independence test. The null hypothesis of this test can be formulated as follows: The probability values are independent. The alternative hypothesis is: The probability values correlate. For the selected significance level α = 0.05 the test criterion t = was calculated and the critical value t 0, 975 (7 ) = was specified. As the value of the test criterion was higher than the critical value ( > 2.365) the null hypothesis was denied and the alternative hypothesis was accepted. This means that the probability values correlated (were not independent). For this reason the calculated probability values were considered paired values. To find out whether the difference between the probability values was statistically significant or not the t-test for paired values was used. For that reason the difference was calculated on the basis of probability pairs for each node. The values formed a new data file. The basic characteristics were calculated for this data file: the selected mean x = and the standard deviation s = The basic assumptions for use of t-test for paired values include the assumption of data normality. The normality of data (obtained as the difference between probabilities) was verified by the Shapiro- Wilcoxon test. The p-value was calculated for the selected significance level α = 0.05 with the result p = As the p-value was higher than the selected significance level the null hypothesis was applied (the difference values were normally distributed). Thus the basic condition was fulfilled and the pair t-test calculation could be performed. The null hypothesis says that the differences between the calculated probabilities are close to zero (i.e. both approaches yield similar results). The alternative hypothesis says that the differences are significantly different from zero (i.e. both approaches yield different results). The calculated characteristics (selected mean and standard deviation) were used for the calculation of the test criterion t = For the selected significance level the critical value t 0, 975 (8 ) = was specified. As the absolute value of the test criterion was lower than the critical value (1.846 < 2.306) the null hypothesis was not denied (the probability differences are close to zero). This means in our case that the differences between the calculated probabilities were not statistically significant, and therefore the change of activity variances did not affect the calculation of the node criticality probability. For illustration table 7 shows the analysis of node 8. Two activities (5;8) and (6;8) lead to node 8 (see column 1 of the table). The other columns show the calculated numerical characteristics and intervals 3σ for both approaches. 57

53 Mean duration (µ) Variance (σ 2 ) Approach I µ-3σ µ+3σ Mean duration (µ) Variance (σ 2 ) Table 7 Analysis of Node 8 Approach II Node Activity (5;8) Activity (6;8) If the first approach is used the node characteristics will always correspond to the characteristics (mean duration, variance) of one of the activities. The upper threshold of interval 3σ i.e. (µ+3σ) of node 8 is identical with the upper threshold of interval 3σ of activity (5;8). As soon as activity (5;8), which is the longest of the activities leading to node 8, ends, the activities starting from node 8 can begin. If the second approach is used the mean time of the node will correspond to the maximum mean time of activities leading to node 8. The variance of node 8 will correspond to the maximum variance of activities leading to node 8. This approach incorporates a time margin for activities starting from node 8. The value of the margin in our case is ( ). This margin need not be obvious in the case when a situation occurs that the maximum value of the mean duration of activities and its maximum variance apply to the same activity. This situation would correspond to the first approach where no margin is applied. Conclusions The present paper deals with analysis of the effect of a change of activity variance in two different approaches to the node criticality calculation. These approaches were presented on a sample of the PERT network diagram consisting of 9 nodes and 14 activities. The results of both approaches were subsequently subject to a statistical examination showing that the two approaches yielded identical results. The initially formulated hypothesis thus was not confirmed, which can be interpreted as follows: Changes of variance of activities do not affect the node criticality. The probability values are statistically identical. This indicates that the user of the PERT method, when choosing the approach to the node criticality computation, need not consider the size of the initially calculated activity variances. References 1. Bergantiños, G., Vidal-Puga, J. (2009) A value for PERT problems, International Game Theory Review. 2. Černá, A. (2008) Metody operačního managementu, Oeconomica publishers, Praha. 3. Garcia, P. J. et all. (2005) The Two-Sided Power Distribution for the Treatment of the Uncertainty in PERT, Statistical Methods and Applications. 4. Gros, I. (2003) Kvantitativní metody v manažerském rozhodování, Grada Publishing a.s., Praha. 5. Herreri'as-Velasco, J.M., Herreri'as-Pleguezuelo, R. & van Dorp, Johan René. Revisiting the PERT mean and variance, European Journal of Operational Research, International project management association. (2011) [Online], [last viewed: 20 Aug. 2011], 7. Jablonský, J. (2002) Operační výzkum; kvantitativní modely pro ekonomické rozhodování, Professional Publishing, Praha. 8. Mathews, P. (2005) Design of Experiments with Minitab, ASQ Quality Press, Milwaukee, Wisconsin. µ-3σ µ+3σ 58

54 9. Operation Analysis. Materials for lectures and seminars. (2003), Faculty of Applied Science, West Bohemian University in Plzen, Plzeň. 10. Plevný, M., Žižka, M. Modelování a optimalizace v manažerském rozhodování, (2005) West Bohemian University in Plzen, Plzeň. 11. Premachandra, I. M. (2001) An approximation of the activity duration distribution in PERT, Computers & Operations Research. 12. Rais, K., Doskočil, R. (2006) Operační a systémová analýza I, BUT in Brno, Business Faculty, Brno. 13. Society for Project Management Czech Republic. (2011) [Online], [24 Aug. 2011], Wisniewski, M. (1996) Metody manažerského rozhodování, Grada Publishing, spol. s r.o., Praha. 15. Wonnacott, T. H., Wonnacott, R. J. (1990) Introductory Statistics for Business and Economics, Wiley, Oxford. 59

55 FACEBOOK AS SUPPLEMENTARY COMMUNICATION TOOL OF CZECH FOOTBALL AND HOCKEY CLUBS 1 Jiří Kotáb University of Economics, Prague Winston Churchill, Sq Prague 3, Czech Republic, [email protected] Abstract. The research paper investigates if there are effects of being active at Facebook for Czech football and ice hockey clubs. In Theoretical Background there are classical tools for promoting sports matches of football clubs. Then there are presented web 2.0 technologies used by Czech sports clubs and conclusions of previous researches. Next theoretical parts describe recent works of authors on Social Media Topic. And the last part of theory describes clubs perspective of official Facbook pages. In Methodology the procedure of regression analysis is presented there. In Research part there are number of Facebook fans set as independent variable and average home attendance in season 2010/2011 of clubs of Gambrinus Liga (football) and Tipsport Extraliga (ice hockey) as dependent variable. Research Results part presents regression line and formula which confirms the established hypothesis. Keywords: Sport, Football, Ice Hockey, Club, Facebook, Attendance, Regression analysis. Introduction The research paper considers effects of Facebook as communication tool of sports clubs with their fans. This article is the outcome of the research project Using Web 2.0 Technologies in Sports Promotion. According to previous researches web 2.0 tools can be used as supplementary communication tool for sports clubs to communicate with their fans. Sports matches are unique type of products which are directly connected with emotions so communication with web 2.0 tools offers itself. There has been already answered lot of questions which are presented thereinafter but now we have to solve more questions: what is real aim of communication strategy of football clubs? Is it generating new fans on the Facebook pages? No, football clubs usually have no direct revenues from having most fans on the Facebook pages. Generating unique visitors on official club web pages is more important because there is increasing of value of advertisement place for sponsors. Main aim of communication strategy of the club should be increasing of average home attendances. This effect directly influences more revenue streams. If the club has higher attendances, the club has higher match day incomes fee for the tickets, parking fee, fee for merchandising products. Club can charge more from operators of refreshment stalls if the club rent it and don t operate itself. And it increases position in bargaining with potential sponsors because it is always better to persuade sponsor if the club have full stands in comparison with the club with empty stands. There are investigated football and ice hockey clubs in the highest divisions in the Czech Republic in 2010/2011 season. There is assumed positive dependence between being active at Facebook and having high home attendances that is the main reason why linear regression analysis is used as main research method. 1 Theoretical Background and Hypotheses Sport and Media 1 This article is the outcome of the research project Využití Webu 2.0 v propagaci sportu registered at IGA VŠE under evidence number F3/2/

56 The main topic of famous sports marketers and sports economists (Bill Gerard, Wladimir Andreff, Andrew Zimbalist, Chris Gratton, Harry Arne Solberg, Novotný 2 and others) about connection sport and media is about selling sports media broadcasting rights to TV companies. There are several sport marketers who orient their work on promoting sports matches by clubs or franchises (in professional leagues) but if they go to internet communication they stop with Web sites. There are only few articles connected with sport and web 2.0 technologies (social networks / social media) but this number is rapidly increasing over the last years. Yu Kyoum Kim, Trail Galen and Yong Jae Ko 3 describes that there is very important to promote relationship quality with fans. And using media are one of the way how to do it. The importance of marketing in sport is evident and is mentioned in works by Rosner et al 4 or Supovitz 5, which is more oriented on sports events. Sport Marketing Sport marketing consists of all activities designed to meet the needs and wants of sport consumers through exchange processes. Sport marketing has developed two major thrusts: the marketing of sport products and services directly to consumers of sport, and the marketing of other consumer and industrial products or services through the use of sport promotions. Viewpoint of singularity of sport marketing of professional clubs can be seen in uniqueness of sport product (unpredictability, simultaneous production and consumption, strong personal and emotional identification), sport market (many sport organizations simultaneously compete and cooperate), sport finances (indirect revenues are frequently greater than direct operating revenues) or sport promotion (media and sponsors emphasize celebrities, widespread media exposure of sport). Promoting sports matches If we look at recent sport marketing publications of prestigious authors clubs can attract fans to sports matches by complex marketing plans which include many types of advertisement and communication tools and techniques. Publications Sport Marketing by Mullin 6 et al or Sports Marketing by Fullerton 7 there is presented studies of marketing initiatives for the NBA clubs by R. Dick, B. Turner 8 and Mawson 9. This list ordered by fans importance: Promotional giveaway items 1. Promote star players of league 2. Group sales with discounted pricing 3. Implementation of good public relations 4. Partial-season ticket plans 5. Radio advertising 2 Novotný, Jiří: Ekonomika Sportu Vybrané kapitoly II, Oeconomica Publisher, Prague 2010, ISBN: Yu Kyoum Kim; Trail, Galen; Yong Jae Ko: The Influence of Relationship Quality on Sport Consumption Behaviors: An Empirical Examination of the Relationship Quality Framework., Journal of Sport Management, 7/11/ Rosner, S.,R., Shropshire, K. L.: The Business of Sports, 2 nd Edition, Jones & Bartlett Learning, USA 2011, ISBN> Supovitz, F.: The Sport Event Management and Marketing Playbook, John Wiley and Sons Inc., Hoboken, New Jersey USA 2005, ISBN: Mullin, J., B., Hardy, S., Sutton, W., A.: Sport Marketing, Human Kinetics, 3 rd edition, Champaign 2007, ISBN: Fullerton, S. Sports Marketing, Mc Graw Hill, 2 nd edition, New York Dick, R., Turner, B. Are Fans and NBA Marketing Directors on the Same Page? A Comparison of Value of Marketing Techniques, Sport Marketing Quarterly 16, no. 3 (2007). 9 Mawson, L., Coan, E. Marketing Techniques Used by NBA Franchises to Promote Home Game Attendance, Sport Marketing Quarterly 3, no. 1,

57 6. Newspaper advertising 7. via Internet/Web site 8. Direct mail 9. Referrals and word-of-mouth 10. Outdoor advertising (e.g. billboards) 11. Grassroots marketing with community service programs 12. Meetings with sponsorship and corporate ticketing programs 13. Special pregame and postgame events 14. Select a target market with strategic and research plan 15. Employee incentives with theme nights 16. Booster and special membership clubs 17. In-arena messages and public address announcements 18. Civic groups and local leader initiatives 19. Telemarketing with upselling David King 10 investigated that clubs in US professional leagues use the web 2.0 technologies very often. The content of the presentation is similar to content on the official Web sites but there is important feedback from fans and club can get useful information. Leivadiotou et al 11 also confirms the importance of Electronic word-of-mouth (WOM) and presents Facebook as contemporary mean through which e-wom is applied. Electronic Media In Sport Marketing by Bernard Mullin 12 is possible to find chapter Electronic Media whose author is Tim Ashwell from the University of New Hampshire. In this chapter it is presented how to build winning Web site. Maybe more important conclusion of the paper is that organizations should investigate the relative cost and benefits of producing their own media products. And it is possible the conclusion take into consideration also for Web 2.0 technologies. There comes the question: Does investing into Web 2.0 technologies have any impact on attendance? Web 2.0 technologies in Czech sport Twitter has big potential in the Czech Republic because club can communicate with fan very fast but Twitter doesn t have big membership because it still doesn t support Czech language. YouTube is important web for sharing video. Clubs can promote their video campaigns via YouTube. The main and most important web 2.0 tool in the Czech Republic is the Facebook. According to previous research football clubs use this communication tool. There have been already answered questions concerning the Facebook communication of Czech professional football clubs by quantitative analysis: How much official fans clubs have on their official pages? How often clubs communicate with fans via this communication tool? One of conclusions was: Official Facebook pages generate about 10% of unique visitors of official Web sites of AC Sparta Praha and FC Viktoria Plzeň. In qualitative analysis topics and forms of clubs communication and levels of fans respond were evaluated. Most clubs operates official Facebook pages only posting links to their official Web sites (FC Viktoria Plzeň) but few clubs works with the Facebook very creatively (AC Sparta Praha) so fans can feel they can get something extra in comparison with Web sites. 10 King, D. Click This Button if You 'Like' Sports on Facebook. Information Today; Jul/Aug2010, Vol. 27 Issue 7, p 35-35, 1/2p. 11 Leivadiotou, E.; Markopoulos, D. Cyber Communities and Electronic Word-of-Mouth: The Use of Facebook in the Promotion of Hospitality Services, MIBES Transactions, 2010, v. 4, iss. 1, pp Mullin, J., B., Hardy, S., Sutton, W., A. Sport Marketing, Human Kinetics, 3 rd edition, Champaign

58 Web 2.0 technologies in Sport According to the research of L. van Daal Twitter is used by one of eight top athletes in the Netherlands mostly as complementary communication tool which can use athletes which are not so often in spotlights. Nowadays Web 2.0 technologies (Social media) seem to be very up to date topic because one of theme session of prestigious conferences EASM 2011 or NASSM Coppes 13 (2011) describes whole area of online personal branding in sport area via Social Media sites and states online reputation management has become increasingly important for a professional athlete in this fast paced world. Wallace 14 is preparing case study of Facebook communication of NFL teams. There are several evaluations of Social Media campaigns which are connected with sporting events for example with the FIFA World Cup 2010 Santomier 15. According to work of Blaszka teams in MLB, NBA, NFL, and NHL have their Twitter and Facebook accounts located somewhere on their team webpage. This suggests that sport organizations are at least trying to engage with their consumers. The communication between sport organization and consumer is no longer one-way rather, a two-way, interactive process to engage their fans. In the same work author presents results of research: In season 2010/ % of the Twitter users attended at least one game of their favorite team in US leagues. Sport managers should seek to drive more consumers to their Twitter page in hopes that it fosters fan identification, interest in the team, and future game attendance. According to McLaren 17 Tony Fernandes (new boss of QPR football club) is a huge advocate of using social media to aid transparency in his companies (great interview we did with him last year). This is something he has done with Air Asia and continued with great success with the Lotus F1 team. In work of Thomaselli 18 in college football organization The Bowl Championship Series is considered to have committed a major blunder when it used its pages on the online social networks Twitter and Facebook to simply present marketing information rather than to interact with football fans. Hypothesis and research question of the research Clubs perspective The main hypothesis in the research paper is: Football and hockey clubs which are active at Facebook (the most developed Social Media in the Czech Republic) have higher home average attendances. The hypothesis is founded on the premise that football and hockey clubs use official Facebook pages as supplementary communication tool with fans to attract them to the stands. Clubs actively try to enlarge the community at Facebook and see the equation more fans at Facebook pages equals more fans in the stands. 2 Methodology 13 Coppes, J.: Online Personal branding from professional Dutch Sports athletes via Social Media, NASSM Conference 2011, June 4, London, Ontario, USA. 14 Wallace, L., Wilson, J., Miloch, K. Sporting Facebook: A Case study with the National Football League, Texas Woman's University. 15 Santomier, J., 2008, New Media, Branding and Global Sports Sponsorship, International. 16 Blaszka, Matthew, "An Examination of Sport Consumers Twitter Usage" (2011). Kinesiology Theses. Paper McLaren, D.: QPR and Social Media, UK Sports Network Digital Tech & Sport. 25 August 2011, 18 Thomaselli, R.: If you're wondering what not to do when it comes to social media, learn from BCS. Advertising Age, 11/30/2009, Vol. 80 Issue 40, p3-22, 2p 63

59 Due to the research hypothesis there is assumption that there is link between Facebook fans of football club and average attendance of home matches. That is the reason why Linear Regression Analysis is used as main research method. Linear Regression Analysis According to Hindls et al 19 or Leeds et al 20 finding existence of one or more dependent variables on one independent variable is the main aim of regression analysis. Appropriate stochastic model is the result of regression analysis. General formula of linear regression analysis is possible to express: where: y dependent variable a coefficient of dependence x independent variable b random variable (1) The procedures of used research methods are: 1. Define dependent and independent variables of the research sample. 2. Count P values to displace the theory that variables are independent with 95% significance level. 3. Form the trend line of values and count its regression function and its values. 4. Count R squared values which are called as indexes of determination and explains rate of variability. 5. Interpret the results of the regression analysis. 3 Research Attendance and number of Facebook fans In the clubs perspective we try to confirm the hypothesis if the football or hockey club is active at Facebook (the most developed Social Media in the Czech Republic) then it has higher home average attendances. It is investigated for football clubs and ice hockey clubs in season 2010/2011 in the Gambrinus Liga (the highest Czech football league) and the Tipsport Extraliga (the highest Czech hockey league). Football and ice hockey are the most attended spectator oriented sports in the Czech Republic. Table 1 Attendance and Facebook Fans No Club name Number of fans on official FB pages Average home attendance 25th July 2011 season 2010/ FC Viktoria Plzeň AC Sparta Praha SK Slavia Praha FK Teplice FK Baumit Jablonec SK Sigma Olomouc FK Ústí nad Labem Hindls, R., Hronová, S., Seger, J., Fischer, J.: Statistika pro ekonomy, 7 th edtion, Professional Publishing, Prague Leeds, M., von Allmen, P.: The Economics of Sports, Pearson Education Inc., Boston

60 8 FC Slovan Liberec FK Příbram FC Slovácko FC Hradec Králové Bohemians FK Mladá Boleslav FC Baník Ostrava FC Zbrojovka Brno SK Dynamo České Budějovice HC Eaton Pardubice HC Kometa Brno HC Plzeň HC Sparta Praha HC Slavia Praha Bílí Tygři Liberec HC Vítkovice Steel HC MOUNTFIELD PSG Zlín HC BENZINA Litvínov HC Oceláři Třinec HC Energie Karlovy Vary BK Mladá Boleslav HC Vagnerplast Kladno Total Average Football Average Hockey Average Source: own research There are only official facebook pages taken into consideration. In some cases (FC Slovan Liberec, FK Ústí nad Labem, HC Benzina Litvínov) there is possible to see value 0 fans. It is because these clubs do not use Facebook pages as an official communication tool. 65

61 4 Research Results Figure 1 Facebook fans at official pages and average home attendance Source: own calculation P value: R 2 coefficient of determination: 0.64 The regression function for Facebook fans and average attendances of home matches is: y = 0.05x From this formula hypothesis that clubs which are active on the Facebook in the Czech Republic have slightly higher (coefficient is 0.05) attendances of home matches with high rate of R 2 coefficient of determination 0.64 can be confirmed. According to the P value is (is lower than 0.005) it is possible to confirm that this model is valid with 95% significance level. The coefficient 0.05 seems to be low number. But it means when club reach 20 new Facebook fans they get 1 fan into stands. For clubs with long tradition and wide market it is not so difficult to gain 20 new Facebook fans. 5 Discussion Previous researches discovered firstly there is big potential in using web 2.0 technologies in the Czech Republic for marketing purposes, secondly if and how much the football clubs in the Czech Republic use the web 2.0 technologies for communication with their fans, thirdly there were quantitative and qualitative analyses of official Facebook pages on the impact on internet awareness and generating visitors on official Web site. The aim of this paper was to see further if there is connection between number of fans at official Facebook pages and attendances at home matches of football and ice hockey clubs. The research confirmed that there exists direct impact of being social at the most extended web 2.0 technologies (the Facebook) in the Czech Republic and attendances at home matches on football and ice hockey stadiums. 66

62 Therefore it does it worth to invest in official Facebook pages. Of course Facebook pages are not panacea that will full stands of football stadiums and ice hockey arenas all the time but it can be supplementary communication tool which can help to promote every single match. In comparison with classical marketing communication tools administrating Facebook pages is not so costly and if club have big number of the fans at the Facebook then it is possible to contact mass of people without being charged. We must say that research results are limited only to the Czech Republic and are not valid to global football clubs such as Barcelona CF or Manchester United because our clubs have mostly fans mostly from our country and therefore there is possibility they will attend the match personally. On the other hand overseas fans of the global clubs can be attracted by the Facebook campaign to buy clubs merchandising products. The limitation also exists in quality of communication on the Facebook. The research has another limitation because there is not only clubs perspective to become a fan of the official Facebook pages of his/her favorite club. Becoming the fan represents one of possible expressions: I am fan of my club. I am proud on the club. I want to be part of the club. I want to be connected with my club. Or I want you to see that I am fan of my club. These possible motivations can be investigated in future research. Conclusions Although the research has its limitations the main hypothesis: Football and hockey clubs which are active at Facebook (the most developed Social Media in the Czech Republic) have higher home average attendances. was confirmed by the regression analysis and model is valid with 95% significance level. Having more fans at official Facebook pages in the Czech Republic has the positive effects on home attendances of two most popular professional sports (football and ice hockey). Football and ice hockey clubs should operate official Facebook pages. It is not costly and they can address masses of people very fast. Nowadays the Official Facebook pages should be part of communication of every club. However there are still few clubs which don t use it. The Facebook has huge potential also in their function. Most of clubs in the Czech Republic don t use full potential of these technologies but that is the question of next researches. Same as investigating fans perspective why to become fan of his/her favorite club on Facebook pages. References 1. Blaszka, Matthew, "An Examination of Sport Consumers Twitter Usage" (2011). Kinesiology Theses. Paper Coppes, J.: Online Personal branding from professional Dutch Sports athletes via Social Media, NASSM Conference 2011, June 4, London, Ontario, USA. 3. Yu Kyoum Kim; Trail, Galen; Yong Jae Ko: The Influence of Relationship Quality on Sport Consumption Behaviors: An Empirical Examination of the Relationship Quality Framework., Journal of Sport Management, 7/11/ Dick, R., Turner, B.: Are Fans and NBA Marketing Directors on the Same Page? A Comparison of Value of Marketing Techniques, Sport Marketing Quarterly 16, no. 3 (2007) 5. Fullerton, Sam: Sports Marketing, Mc Graw Hill, 2 nd edition, New York Hindls, R., Hronová, S., Seger, J., Fischer, J.: Statistika pro ekonomy, 7 th edtion, Professional Publishing, Prague King, D.: Click This Button if You 'Like' Sports on Facebook. Information Today; Jul/Aug2010, Vol. 27 Issue 7, p35-35, 1/2p 8. Leeds, M., von Allmen, P.: The Economics of Sports, Pearson Education Inc., Boston

63 9. Leivadiotou, E.; Markopoulos, D.: Cyber Communities and Electronic Word-of-Mouth: The Use of Facebook in the Promotion of Hospitality Services, MIBES Transactions, 2010, v. 4, iss. 1, pp Mawson, L., Coan, E.: Marketing Techniques Used by NBA Franchises to Promote Home Game Attendance, Sport Marketing Quarterly 3, no. 1, McLaren, D.: QPR and Social Media, UK Sports Network Digital Tech & Sport. 25 August 2011, Mullin, J., B., Hardy, S., Sutton, W., A.: Sport Marketing, Human Kinetics, 3 rd edition, Champaign Novotný, Jiří: Ekonomika Sportu Vybrané kapitoly II, Oeconomica Publisher, Prague Rosner, S.,R., Shropshire, K. L.: The Business of Sports, 2 nd Edition, Jones & Bartlett Learning, USA Santomier, J., 2008, New Media, Branding and Global Sports Sponsorship, International, Journal of Sports Marketing and Sponsorship, October edition, pp Supovitz, F.: The Sport Event Management and Marketing Playbook, John Wiley and Sons Inc., Hoboken, New Jersey USA Thomaselli, R.: If you're wondering what not to do when it comes to social media, learn from BCS. Advertising Age, 11/30/2009, Vol. 80 Issue 40, p 3-22, 2p. 18. Wallace, L., Wilson, J., Miloch, K. Sporting Facebook: A Case study with the National Football League, Texas Woman's University. 68

64 VERIFICATION OF INFORMATION SYSTEM WEAK POINTS IN THE SECURITY AREA Miloš Koch Brno University of Technology, Czech Republic. Abstract. The article describes the results of a research dedicated to the situation in selected areas of information systems, testing the hypotheses about the variances of results in relation to the company size using the good correspondence test with the relevance level of The investigation used data from the research portal ZEFIS. Questions regarding the security of information systems were answered by about 660 respondents from 283 companies. The sample in the survey was comprised of approx. 77 percent of respondents from the Czech Republic, 18 percent from the European Union countries, and the rest from other countries. The obtained results do not confirm the validity of working hypotheses that larger firms perceive data as more important and they have better data protection than small firms. Keywords: effectiveness, information systems, key factors, ICT, ICT security Introduction The article was written as a part of the project called The Development of Knowledge Needed for the Improvement of Information Support of Economic Business Management. This project is supported by the Internal Grant Agency at Brno University of Technology and registered under No. FP-S The results used in the article were taken from the author s research portal ZEFIS. Objective of which is to make it possible for companies from all over the world to assess the effectiveness of their information systems free of charge, to find the weak points thereof and compare the results with the reference database of the other companies. 1 The concept of effectiveness is understood here according to Drucker as a synergy of efficiency and meaningfulness. The survey covers the following areas: - User satisfaction with the information system - User satisfaction with the information support level - Quality of user training - What information systems are used - Employees awareness of corporate objectives in view of their respective roles - Existence of an information strategy in the company - Experience with outsourcing and ASP - Perception of trends in the area of information and communication technologies The inquiries studied in the research cover all six key areas of the Information Systems Successfulness Model by Delon & McLean (2003). 1. General Assumptions Many authors deal with the issue of information system effectiveness. It is important to distinguish between the words Software and Information System - S. Ozkan (2006) 2. Among world respected authors dealing with the general effectiveness model are DeLone and McLean. Their 1 research website on-line. Although primarily the research focused on ICT users in Czech and Slovak companies it extended to other countries, too, on the grounds of possible comparison and identification of variances, if any. 2 OZKAN, S., A Process Capability Approach to Information Systems Effectiveness Evaluation, The Electronic Journal of Information Systems Evaluation, Vol. 9, (2006) Iss. 1, pp

65 model was published back in 1992 and subsequently was updated in 2002 and It is this model that is used by many authors at present. Majid Ramezan (2009) has built up a model to assess IS effectiveness in the Iranian oil industry. In his work he primarily deals with the assessment of user satisfaction 4. Furthermore, L. Pitt, for example, in his article (1995) approaches the issue on the basis of the assumption that the IS is actually a service provider and to assess quality he makes use of the SERVQUAL model, or else a marketing tool for service quality measuring. The basic stone of this approach is the paradigm of contradiction between clients ideas and the service actually provided to them. In this model, the information system user plays the role of a client and the IS that of a service provider supplier 5. Many times the models are created for very specific conditions. An example may be the one described in the article by H. Sajady (2008), who tries to assess benefits of an information system on a stock exchange, or A. Mashour (2008), who set up a model for the assessment of effectiveness in the bank sector 67. G. Panigyrakis (2006) concentrates on marketing information system and its assessment in practice. 8 The articles mentioned above judge information systems from various points of view and for specific needs and requirements. The data processed are always focussed on a narrow segment compliant with the modelled issue. Further on, M. Maryška in his article (2007) deals with economic effectiveness of the information system comparing two different approaches to the issue Research Organisation Data used in this article are based on the respondents answers in the ZEFIS portal. Within the controlled survey taking place in 2011, questions relating to security were answered by randomly selected 662 respondents from 283 companies who use an information system in their work. Although the sample is not very big it is the maximum of data we managed to get in the period. The total number of respondents in the ZEFIS system is 2176 from 1176 companies. The questions regarding security were added to the campaign of the survey 2011, and therefore answers by all respondents kept in the database are not available. The structure of answers of new respondents to questions from other areas, investigated previously, does not vary from those of the remaining respondents, and hence we may suppose that the results obtained are in the least indicative to think about the situation of some areas of the information system security. 3 DELONE, W.H., and MCLEAN, E.R. Measuring E-Commerce Success: Applying the DeLone & McLean Information Systems Success Model. International Journal of Electronic Commerce (9:1), Fall, pp RAMEZAN, M., Measuring the effectiveness of a human resource information system in National Iranian Oil Company: An empirical assessment, Iranian Journal of Management Studies (IJMS),Vol 2. No.2. June 2009 pp: PITT, LEYLAND; WATSON, RICHARD; AND KAVAN, C. Service Quality: A Measure of Information Systems Effectiveness, MIS Quarterly, Vol. 19, No. 2 (Jun., 1995), pp SAJADY, H., DASTGIR, M., HASHEM, H.N., Evaluation of the effectiveness of accounting information systems, International Journal of Information Science & Technology,Vol. 6, No. 2 ( July / December, 2008). 7 MASHHOUR, A., ZAATREH, Z.. A Framework for Evaluating the Effectiveness of Information Systems at Jordan Banks: An Empirical Study, Journal of Internet Banking and Commerce, Vol. 13, No PANIGYRAKIS, GEORGE G, CHATZIPANAGIOTOU, KALLI-OPI C., The impact of design characteristics and support services on the effectiveness of marketing information systems: an empirical investigation, Review of business information systems second quarter, Volume 10, 2006, pp MARYŠKA, M., Měření ekonomické efektivnosti informačního systému, Systémová integrace, Vol. 2, 2007, pp

66 Diagram 1 Structure of respondents by countries The companies were divided to groups by the number of employees in line with the methodology of the Czech Statistical Office. In the table below respondents are divided by company size. In order to study results by company size respondents were put together to groups of similar sizes. Table 1 Numbers of respondents by company size put together Company size S1 S2 S3 S4 Number of employees >1000 Number of respondents S S S S4 >1000 Diagram 2 Numbers of respondents by company size put together 3. Assessment In this paragraph we will discuss some of the surveyed areas of the information system security. They were formulated these working hypotheses: H 1 : Larger firms perceive the data as more important than small firms H 2 : Larger firms have better data protection and security than small firms Given the scope of this article was not possible to describe the results of all examined areas of safety data, it is limited to a comparison of three factors: 71

67 - Internet access - The Possibility of Connecting of External Memory Devices - Data Backup responsibility 3.1 Access to the Internet Do you have internet access from your computer at work? a) No b) Restricted only to selected websites 450 c) Yes, unrestricted 400 Diagram 3 Internet access It was investigated whether respondents had access to the Internet at work and whether the access was completely free or limited to certain websites only. Generally, the access to the Internet is not necessary for a number of company professions and represents a safety risk. Diagram 4 Internet access by company size in percents Table 2 Accepting/rejecting the hypothesis about the correspondence of the internet access based on the company size Company size S1 S2 S3 S4 χ Rejection of the hypothesis significance level of 0.05 (5.99) yes no yes no We reject the hypothesis about the correspondence of structure of the answers regarding Internet access at work for small companies up to 50 employees and for mid-size companies having employees. In the smallest companies the restriction is only very small, as expected, while nearly all employees have unrestricted access to the Internet, which increases safety risks and may reduce work productivity if the Internet is used for entertainment and relax. On the other hand, in 72

68 mid-size companies the restriction is at the highest level most respondents have the Internet restricted to certain websites. This result was expected rather in the biggest companies from group S The Possibility of Connecting of External Memory Devices Can you connect any external memory device (USB disk or similar) into your computer at work? a) No b) Yes c) I don t know 0 a b c Diagram 5 The possibility of connecting external devices The possibility of connecting external devices is usually considered a relatively high safety risk because of potential virus infection and copying and abuse of company data. Diagram 6 The possibility of connecting external devices by company size Table 3 Accepting/rejecting the hypothesis about the correspondence of the external memory device connection based on company size Company size S1 S2 S3 S4 χ Rejection of the hypothesis significance level of 0.05 (5.99) no yes no no The hypothesis about the correspondence of structure of the answers regarding the possibility of connecting external devices may be rejected only for companies with employees but not for small companies. In these companies we see somewhat higher restrictions laid by the employer when permitting external devices and the reason may be a greater fear of data abuse in big companies that usually have one or more owners taking more care about the data than in the small companies where professional management in the area of ICT is usually missing. In total, the high number of companies permitting their employees external memory devices is very surprising. 3.3 Data Backup 73

69 Who is responsible for the backup of your data or files which you have on your computer at work? a) An automatic backup system b) A specialist of the Information System Department c) Myself, personally d) Someone else, not from the Information System Department, e.g. your colleague e) Nobody, there are no data stored in my computer f) Nobody, but there are files and data in my computer that I create and use Diagram 7 Who is responsible for backup Diagram 8 Who is responsible for backup by company size Table 4 Accepting/rejecting the hypothesis about the correspondence of backup responsibility based on company size Company size S1 S2 S3 S4 χ Rejection of the hypothesis significance level of 0.05 (11.07) yes no yes yes The hypothesis about the correspondence of structure of the answers with the total data backup condition we hereby reject for all groups except for companies with employees. It is interesting how relatively few companies use automatic backup or location of all data outside the employee s computer. Likewise, direct responsibility of an employee for data backup is very high in all groups of companies. On the other hand, though, it is encouraging to see that the worst possible alternatives d and e no user data backup or backup carried out by another employee than it should be occur in all groups of companies in a very limited number. 74

70 Conclusions Due to the article scope it was not possible to publish more areas included in the investigation the issue of ICT security in the ZEFIS system is covered by ten questions, and furthermore we studied the possibility of programme installation by the user, impact of loss or destruction of the user s computer, and others. The article gives a description of the results of a research of weak points in three selected areas of the information system security. In all the companies included in the survey unrestricted Internet access prevails and the worst situation is in small companies in line with our expectations, where ICT management is not very good and is usually performed by managers who are not experts in ICT. In the area of risks arising from the possibility of connecting external devices the situation in general is very bad in all companies regardless of the size. The best situation appears to be in small companies up to 200 employees but even here nearly eighty percent of employees can connect external devices to their computers, which may be a significant safety risk of data abuse by the employee. In terms of data backup as a key attribute of ICT security the situation varies according to the company size. The situation appears to be the best in big companies with employees. In all companies the percentage of backups carried out by the users is relatively high. The obtained results do not confirm the validity of working hypotheses H1, H2 that larger firms perceive data as more important and they have better data protection than small firms. It is not possible to generalize the results due to the size of the selection file but they are interesting and can serve as basis for further research and as a warning to managers about the insufficiency of their data and information system security. References 1. BASL, Josef, BLAŽÍČEK, Roman. Podnikové informační systémy : Podnik v informační společnosti 2. výrazně přepracované a rozšířené vydání vyd. Praha : Grada Publishing, a.s., s. 2. ČESKÝ STATISTICKÝ ÚŘAD. Využívání informačních a komunikačních technologií v podnikatelském sektoru za rok Kód: w Dostupné on line 3. DELONE, W.H., and MCLEAN, E.R. Measuring E-Commerce Success: Applying the DeLone & McLean Information Systems Success Model. International Journal of Electronic Commerce (9:1), Fall, pp MARYŠKA, M., Měření ekonomické efektivnosti informačního systému, Systémová integrace, Vol. 2, 2007, pp MASHHOUR, A., ZAATREH, Z. A Framework for Evaluating the Effectiveness of Information Systems at Jordan Banks: An Empirical Study, Journal of Internet Banking and Commerce, Vol. 13, No NOVOTNÁ, V. Ověření slabých mist informačních systémů. TRENDY EKONOMIKY A MANAGEMENTU (7). p OZKAN, S., A Process Capability Approach to Information Systems Effectiveness Evaluation, The Electronic Journal of Information Systems Evaluation, Vol. 9, (2006) Iss. 1, pp PITT, LEYLAND; WATSON, RICHARD; AND KAVAN, C. Service Quality: A Measure of Information Systems Effectiveness, MIS Quarterly, Vol. 19, No. 2 (Jun., 1995), pp PANIGYRAKIS, GEORGE G, CHATZIPANAGIOTOU, KALLI-OPI C., The impact of design characteristics and support services on the effectiveness of marketing information systems: an 75

71 empirical investigation, Review of business information systems second quarter, Volume 10, 2006, pp RAMEZAN, M., Measuring the effectiveness of a human resource information system in National Iranian Oil Company: An empirical assessment, Iranian Journal of Management Studies (IJMS), Vol 2. No.2. June 2009 pp: SAJADY, H., DASTGIR, M., HASHEM, H.N., Evaluation of the effectiveness of accounting information systems, International Journal of Information Science & Technology,Vol. 6, No. 2 (July / December, 2008). 12. SODOMKA, Petr. Informační systémy v podnikové praxi. 2. vyd. Brno: Computer Press, a.s., s. 13. ZEFIS research website. On line 76

72 THE USE OF THEORETICAL MODELLING OF THE ENVIRONMENTAL, SOCIAL AND CORPORATE GOVERNANCE (ESG) PERFORMANCE INDICATORS 1 Alena Kocmanová Brno University of Technology, Business and Management Faculty, Kolejní 4, Brno, Czech Republic, [email protected] Petr Němeček Tomas Bata University in Zlín, Faculty of Management and Economics, Mostní 5139, Zlín, Czech Republic, [email protected] Abstract. In her paper, the author analyzes the use of theoretical modeling of the environmental, social and corporate governance (ESG) performance indicators. Economic, environmental, social and governance factors form the core business strategy, as part of its daily operations, the challenge to succeed, defense against the threat, the incentive opportunities. Very important is their connection with the company performance assessment based on an evaluation (measurement) of a company complex performance, determined by these factors. Using advanced quantitative methods (optimization/stochastic/dynamic, etc.) in a measurement of complex company performance can be refined on qualitative aspects by capturing them with nondeterministic methods (uncertainty/data mining/imprecision/fuzzy logic, etc.). The aim of the papers is the proposal theoretic possibility utilization fuzzy logic for evaluation (measurement) of a complex company performance. This shows that classic models are very simplified, this due to the need of using rationale, mainly qualitative models together with fuzzy logic. Keywords: qualitative modeling, fuzzy logic, environmental, social, corporate governance, economic performance indicators. Introduction Performance management is a management style based on an evaluation of both financial and non-financial indicators, the so-called Key Performance Indicators. The set of such indicators has a coherent concept, and it is fully comprehensible for, and integrated into, the company-wide system of future-oriented management. A precondition for a successful implementation of performance management is a correctly defined performance indicator, straightforward communication of results, a suitable form of performance management implementation with respect to the company's specific needs and a conscious interlinking of the strategic, tactical and operating levels of company management through performance indicators. Good application of performance management hinges on the determination of performance indicators for the company's individual sections, which are monitored, measured and evaluated over time. Performance indicators are derived from decomposed objectives of individual processes (or functional areas) and critical success factors of the corporate strategy. By measuring and evaluating them, we can accomplish monitoring of successes and failures. When defining the overall system of performance measurement, we need to emphasize the purposefulness, i.e. the need to measure the right indicators, which means that we need to choose the right performance indicators that are most closely related to corporate performance. The second step is to measure the indicators properly, i.e. to select the proper measurement technique. The purpose of performance measurement is not a perfectly elaborated system of performance measurement of any undertaking. Performance measures should, rather, be considered a framework within which measurements take place. 1 This paper is supported by The Czech Science Foundation. Name of the Project: Construction of Methods for Multifactor Assessment of Company complex Performance in Selected Sectors. Reg. Nr. P403/11/

73 The environmental, social and economic factors and Corporate Governance are at the heart of the corporate and business strategies, they are part and parcel of daily operations, stimulate work for success and work as an indicator of threat and risk and push for seizing opportunity, and of course they should become part of the voluntary corporate reporting on the assessment of links between the environmental and economic assessment of performance, the social assessment of performance and the relation to Corporate Governance (Kocmanová, Němeček, 2009). Great importance is attributed to the defining of Key Performance Indicators (KPIs) in the economic, environmental, and social and governance areas for a specified CZ-NACE industry and subsequent measurement of sustainable development. The corporate sustainability reporting and sustainability performance of a company would thus be defined by the integrated achievement of economic, social, environmental and corporate governance performance measures. Sustainability performance is, however, often understood as performance in environmental and social terms, thus excluding economic performance (Schaltegger, Wagner, 2005). Decision-making is based on a qualified assessment (measurement) of a situation determined at the same time by multiple factors (indicators), primarily in their horizontal development. In pursuit of an outstanding informative force an emphasis is currently placed not only on the absolute data, but in the first place on the change data and analyses of changes of these changes. That is, dynamics of systems is the focus of attention. Appropriately applied vertical analyses then add further dimension to the conditions for decision making. In this conjunction other methods have to be discussed: logical and empirical methods, methods of qualitative and quantitative research such as in particular modelling of asocial statistics (Chvátalová, Kocmanová, Dočekalová, 2011). A systematic approach to problem solving is of great importance in relation to decisionmaking processes. The theory of systems, i.e. system analysis is another important approach based on gradual decomposition into subsystems and elements; it focuses on transformation of system inputs into outputs, i.e. behaviour and features of systems. Decision-making processes in the public as well as commercial sectors, economic management and political sphere have to be subject to multicriterial, multifactor and non-unifiably algorithm able managerial decision-making and control (Talašová, 2003). The construction of methods for rational while at the same sophisticated use of multifactor metric, creation of change methodology, a methodical handbook for a specific industry considering modifiability and broad spectral application, will be universally applicable in the commercial, institutional and public spheres, its outputs will be a means of international relevance. Modelling and optimization of vaguely described and prohibitively complex systems in a realistic environment must necessarily be based on vague and sparse knowledge. The very reason is that the interdisciplinary nature of problems under study must integrate different knowledge items and different types of uncertainties. Conventional methods of optimization and consequently decision making have very limited areas of applications if realistic tasks must be solved. Those traditional algorithms use conventional mathematics i.e. equation based models. Such models are information intensive. It means that the classical models are heavily simplified. This shows that classic models are very simplified, this due to the need of using rationale, mainly qualitative models together with fuzzy logic. Ecosystem modelling has a rich history firmly based in general systems theory (Jorgensen, 2000), and social theorists can trace the ancestry of their soft systems approaches to general systems theory, see e.g. classical works (Kauffman, 1993; Peterson, 1993). Among the social theories that have drawn heavily on general systems theory, and which explicitly consider the relationship between society and the environment, is the theory of ecological communication (Grant, 2002). From ESG performance data is necessary to determine KPIs to identify company overall performance. Great importance is attributed to the defining of KPIs in the economic, environmental, social and governance areas for a specified CZ-NACE activity (NACE is an acronym standing for Statistical Classification of Economic Activities, used by the EU since NACE provides a framework for statistical data relating to activities in many economic areas. Classification of 78

74 economic activities CZ-NACE replaced the Branch classification of economic activities (OKEC) and has been used since 2008 in the CR) with subsequent measurement of sustainable development. The Reporting and overall performance of a company in a specific CZ-NACE activity would thus be defined by the integrated achievement of economic, social, environmental and governance performance measures. Sustainability performance is, however, often understood as performance in environmental and social terms, thus excluding economic performance. 1. Methods modelling The process of creating models of real situations (in general, not just in economics) may be called real phenomena modelling. The more real situation aspects the model embraces, the more exactly it describes it. Such a model, however, may not be suitable for understanding context and achieving clearness, processing and further manipulation (obtaining results within a reasonable time span, formulation of conclusions; possible uncovering of strengths and weaknesses of facts or inappropriate use of ICT). Modelling may be categorized from different points of view. For example if the focus is on description, this may be of verbal, visual, quantitative, qualitative or analytic kinds. If the focus is on character, this encompasses deterministic and stochastic, static, dynamic and other approaches. When modelling employing advanced quantitative methods, optimization, stochastic, dynamic, further mathematic (e.g. disaster theories) and other methods, the level of examination may be increased by also considering significant aspects of qualitative character, mainly consisting in capturing facts no deterministically, e.g. by capturing phenomena under conditions of indeterminateness, by means of data extraction, by considering and reflecting upon uncertainty not just by measuring of empirical data, but also uncertainty of methods, technology, the facts that economic, environmental as well as social experiments are difficult to control, by taking into account degrees of phenomenal ambiguity, delimiting certain balance space etc. The resulting methods should be modifiable, enabling e.g. local specification taking into account abnormal or marginal conditions, with a potential of reasonable prediction, deducing historical development, single- and multi- criteria, capable of further simplification (e.g. comparative static approach) etc. (Gander, Hřebíček, 2004), (Hřebíček, Chvátalová, 2009). In this way new methods are created, but along with that even some older methods have been re-discovered and transferred from their academic environment into practical use. Mathematicians found inspiration in the nature and developed new theories such as fuzzy logic (determining how many elements belong in a specific set), artificial neuron networks (are sort of imperfect model of the human mind, termed black box, as it is impossible to thoroughly learn about an internal structure of a system), genetic algorithms (used where exact solutions of practical problems would be almost infinitely long if systematically examined) or chaos (describes behaviour of non-linear systems which though having a hidden order, still appear as systems controlled by chance effects). The construction of methods for rational while at the same sophisticated use of multifactor metric, creation of change methodology, a methodical handbook for a specific industry considering modifiability and broad spectral application, will be universally applicable in the commercial, institutional and public spheres, its outputs will be a means of international relevance. As regards statistical methods inputs into researches, creation of new fuzzy stochastic models is essential at present for the description and evaluation of sets of numerical and linguistic data of chance nature with dominating indeterminateness, creation of unconventional mathematic-statistical methods for fitting discrete distributions of probability aimed at categorical analysis including the testing of statistical hypotheses and multi-criteria decision-making and software implementation of developed methods and their application to real data and information sets (Karpíšek, 2008). 79

75 2. Methodology Qualitative Modelling Modelling and optimization of vaguely described and prohibitively complex systems in a realistic environment must necessarily be based on vague and sparse knowledge. The very reason is that the interdisciplinary nature of problems under study must integrate different knowledge items and different types of uncertainties. Conventional methods of optimization and consequently decision making have very limited areas of applications if realistic tasks must be solved. Those traditional algorithms use conventional mathematics i.e. equation based models. Such models are information intensive. Qualitative models seem to be particularly suitable for long-term predictions of behaviour of complex systems. The methodology of common sense reasoning will be used to formalize this fact and derive implications for different stages of transition. The inclusion of heterogeneous aspects, economic dynamics produces rather complicated models. The result will be a qualitative definition of a vector optimization problem. A qualitative model is the most advanced calculus, which can be used as a theoretical background to formalize common sense reasoning. In brief, there are instances where traditional formal models may not be the most appropriate tools for understanding and explaining political tasks. In their place, common sense reasoning may provide an alternative. As an explanation of a qualitative model, suppose there are only three qualitative values positive, zero or negative (1) a qualitative solution of a qualitative model is specified if all its n qualitative variables X1, X2, Xn (2) Are described in the qualitative triplets (X1, DX1, DDX1), (X2, DX2, DDX2), (Xn, DXn, DDXn), (3) where Xi is the i-th variable and DXi and DDXi are the first qualitative and second qualitative derivations with respect to the independent variable to t (which is usually time). If X1 is e.g. profitability then DX1 indicates profitability changes (growing, declining or constant) and DDX1 indicates what is happening to the rate of change in profitability. Precise quantitative functions are not known. What is known is that the profitability is rising, staying constant or falling at an unknown rate of change. Fig. 1 gives a qualitative description of an oscillation process. The corresponding triplets (3) are given there. A typical example of a qualitative knowledge item can be formalized by a certain simple relation between two variables X and Y. The complete set of relations has = 21 different shapes. Only six of them are given in Fig. 2. All relations are qualitative. It means that nothing is qualitatively known. For example the relation 22 indicates clearly that there is a linear relationship between Y and X. If X = 0 then Y is positive. However, nobody knows e.g. the slope. It is clear that the slope is positive. 80

76 (+ 0 -) e.g. Triplet (+ - +) = (X, DX, DDX) (+ + -) (+ + 0) (+ - -) (+ + 0) Concentration (+ - 0) (+ - +) (+ 0 +) (+ + +) Time Figure 1 A qualitative description of an oscillation process However, there are such qualitative relations which are known so vaguely that the second derivative is unknown (unpredictable) and therefore the following description is used to characterized them: if X is increasing then Y is increasing MZ+ (4) if X is decreasing then Y is decreasing if X is decreasing then Y is increasing MZ- (5) if X is increasing then Y is decreasing Y Y X X Y Y X X Y 2 5 Y 2 6 X Figure 2 Qualitative shape X In other words the first derivatives are related as follows DX = DY MZ+ (6) DX = -DY MZ- (7) 81

77 Qualitative screening To simplify the problem, let us suppose that there are two independent variables X1, X2 and two objective functions Q1, Q2. Both objective functions have to be maximized. The fact that both objective functions are maximized is formally described as: DQ1 = + ; DQ2 = + (8) Let us suppose that a qualitative model has the following set of three solutions / scenarios described by the corresponding triplets (3): X1 X2 Q1 Q (9) Therefore the first qualitative solution is totally wrong (see (8)). The reason is simple. The first derivative must be positive, see (8). However, the first scenario in (9) gives for both objective functions negative first derivatives: DQ1 = - DQ2 = - Moreover the second derivatives are negative as well, see (9) DDQ1 = - DDQ2 = - It means that both objective functions are decreasing more and more rapidly. Therefore the qualitative behaviour of independent variables X1 and X2, see the first scenario (9) X1 X (10) is totally unacceptable if we want to achieve maximization of both objective functions as it is required by (8). The second scenario in (9) maximizes the first objective function and decrease the second one. The third scenario maximizes the second objective function and decreasing the first one. In the set of scenarios (9) there is no such scenario which maximizes both objective functions at the same time. If there would be a set of scenarios which contains the following scenario: X1 X2 Q1 Q2 (11) then the scenario (11) is the best possible one (Dohnal, 2002; Brož, Z.; Kocmanová, A.; Luňáček, J.; Meluzín, T., 2008). Dohnal M., Vícha T.,2008; 82

78 3. The Concept and used Methods Reporting tools designed for the ESG performance together with Corporate Social Responsibility (CSR) and GRI-appear as essential at present. The overall company performance plays a key role in its corporate strategic policy and sustainability of success. The creation of reliable methods of company performance measurement where concurrent acting of multiple factors is in play can be considered a prerequisite for success not only in decision making, but also with regard to corporate governance, comparison possibilities, development of healthy competition environment etc. The overall company performance plays a key role in the general development of a company. The creation of a reliable method of company performance measurement where concurrent acting of multiple factors is in play can be considered a prerequisite for success not only in decision making, but also with regard to general corporate governance, comparison possibilities, development of healthy competition environment etc. Examine, analyze and categorize contemporary characteristics of the individual pillars: economic, environmental, social and corporate governance (or the attractive sustainability of success) in relation to the measure of progress or dynamics of development of the overall company performance, so that the basic data and preparation for the construction and defining of multifactor methods in a rational and useful manner identify the system of conditions as the support to subsequent creation of an applicable methodology. The following sets of variables are identifying ad as important by a group of experts - Integration of environmental performance; Integration of social performance; Integration of corporate governance. Integration of Environmental Performance Environmental Reporting. Defining of key performance indicators Environmental performance; 1) Carbon emissions, greenhouse gas emissions, disclosure/measurement and reporting; 2) Climate change; effect on Company/risk exposure/opportunities; 3) Ecosystem change; 4) Facilities citing environmental risks; 5) Hazardous waste disposal/cleanup; 6) License to operate in communities; 7) Pollution; 8) Renewable energy; 9) Resource depletion; 10) Toxic chemical use and disposal. Integration of Social Performance Social Reporting. Concept Corporate Social Responsibility; Safety and Health Protection at Work; Health and Safety Management System; Defining of key performance indicators Social performance: 1) Community relations; 2) Discrimination; 3) Diversity (employee/board diversity); 4) Facilities, citing social risks; 5) Genetically modified organisms; 6) Living wage disputes; 7) Predatory lending; 8) Political contributions; 9) Political risk of involvement in troubled markets, countries; 10) Shareowner advisory vote on executive compensation; 11) Slave labour. Integration of Corporate Governance. The development of Corporate Governance regulation in the Czech Republic (CR) uses a dualistic model: mechanism of written law enforcement, in CR mainly the Commercial Code, and self-regulation mechanism, characterized by self-imposed observing of the required rules. This mechanism is primarily implemented through the code of company governance and due diligence principles. The company is governed by a body of shareholders the general meeting reported to by the board of directors as an executive managing body and by the supervisory board as a surveillance authority. Determination of key performance indicators Corporate Governance performance: 1) Cumulative voting; 2) Dual-class share structure; 3) Executive compensation (pay for performance, pay equity);4) Majority voting; 5) Poison pills; 6) Say on pay; 7) Separation of chairman/ceo position; 8) Shareowner rights; 9) Staggered Boards; 10) Takeover defenses/market for control. 83

79 On the basis of these quantities will simulated program possible scenario development. The results do not represent the sole possibility of the development, but they can be regarded as the auxiliary tool for decision-making, as they bring additional and auxiliary information on the relations between input variables. The main advantage of this procedure is that there is no need for numerical values of parameters; it provides a comprehensive set of possible scenarios that could not be determined by quantitative modelling. The using of suitable ICT tools to facilitate the calculations and the visualizations of models of these indicators development and these differences. Qualitative modelling a new and topical manner - an opportunity to increase action readiness and preparedness of Czech undertakings to deal with demanding changes in the business environment while emphasizing the implementation of Sustainability Reporting into corporate practice as a way to further enhance undertakings' flexibility and adaptability in satisfying the customers' needs, producing high potential life-long value for the undertaking, increasing corporate performance, corporate competitiveness on the market at the time of globalization, internalization, standardization and informatization. Conclusions The primary and crucial basis of the conception is the fact on quality monitoring of real-life conditions, their good knowledge, gathering of empirical data, when mainly the values of the mentioned ESG factors come to the fore, for the individual phases of the economic, environmental, social and corporate governance performances, while not only their values, but also their roles and priorities, content and functions and mutual interaction will be monitored, and proposals and methodical procedures will be formulated based on them as benefits to help boost company performance. The dynamic development of corporate accountability and corporate sustainability reporting in the Czech Republic takes place in an era where investors want more than just a good product or an attractive sound of a brand. Moreover, the growing demand for and offer of the reporting corresponds with the rapid development of information society. We need to take into account market trends and issues affecting society, analysis of risks and opportunities. It is not insignificant that the question of language, i.e. understanding, appears problematic. A framework for describing this new world view has not been generally established. This actually involves creating and handling intangible values. By means of proven methods, ESG metrics for mass effect of multiple factors need to be developed, so that the decision on determining the ESG strategy is possibly the most suitable and its suitability provable. Therefore a demand for ESG data, research and analyses is developing. At the same time the factor of time and development has to be considered, in order to prevent that the relevant facts become out-of-date before they are formulated, and the factor of development and changes for the methods revealing the ESG strategic priority from the previous period (trend) in the continuity of quantified goals for the future. Relevant data to be used in global research in this field is very difficult to obtain (experiments are difficult to control or repeat), and the same is true of monitoring the impacts of comprehensive external effects. Significant are the levels of environmental, social and government strategies and company performance. Strategically important activities may improve the corporate governance, sustainable activities and social responsibility; they create the intangible value of the company. Responsible sustainable development of corporate resources is the basis for the target company strategies. The main executive message clearly explains why the responsible and sustainable development of corporate resources is the basis for comprehensive company strategies. It is being pointed to the following: urgent need of satisfactory domestic environment characterized by working infrastructure, sound public administration, levels of human resources, knowledge of world markets and market practices and it is recommended that the process of 84

80 opening of economies becomes slower, the role of national governments is enhanced and effectiveness of supranational supervision is improved. References 1. Brož, Z.; Kocmanová, A.; Luňáček, J.; Meluzín, T. (2008) Integrated analysis of chilling processes in food industry. In CHISA Summaries5. Praha: Process Engineering Publisher. p Dohnal, M., (2002). Qualitative models of complex systems as decision support system. In: 15th International Congress CHISA. Praha: Czech Society of Chemical Engineering. 3. Dohnal M., Vícha T. (2008) Qualitative identification of chaotic systems behaviours. Chaos, Solitons &Fractals, year 39, No 1, pp Grant, W.E., Peterson, T.R., Peterson, Markus J. (2002) Quantitative modeling of coupled natural/human systems: simulation of societal constraints on environmental action, Ecological Modelling 158. p Gander W., Hřebíček J.(2004) Solving Problems in Scientific Computing Using Maple and Matlab. 4th ed.springer Verlag, Berlin. 416 p. 6. Hřebíček J., Chvátalová, Z. (2009) Maple as an Instrument for Connection School and Practice. In Aplimat 2009, 8th international conference. Bratislava (SR): STU Bratislava (SR). s Chvátalová Z., Kocmanová A., Dočekalová, M. (2011) Corporate Sustainability Reporting and Measuring Corporate Performance. In Environmental Software Systems. Frameworks of eenvironment. In Proceedings of 9th International Symposium on Environmental Software Systems (ISESS 2011). Brno:Springer. p Jorgensen, S.E., Muller, F. (Eds.), Handbook of Ecosystem Theories and Management. Lewis Publishers, New York, Karpíšek Z. (2008) Zadeh-Type Fuzzy Probability with Triangular Norms. In: 15th Zittau Fuzzy Colloquium. Conference Proceedings. Zittau, pp Kauffman, S.A. The Origins of Order: Self-Organization and Selection in Evolution. Oxford University Press, New York, Kocmanová, A., Němeček, P. (2009) Economic, Environmental and Social Issuses and Corporate Governance in Relation to Measurement of Company Performance. In Liberec Economic Forum Liberec: Technická univerzita v Liberci, Fakulta ekonomiky, s Kocmanová, A., Hornungová, J., Klímková, M. (2010) Impact of Economic, Social and Environmental Performance on Sustainable Development in the Czech Republic. In The 15th Intenational Business Information Management Conference (IBIMA) Cairo Egypt. The American University in Cairo School of Business: IBIMA USA. p Peterson, M.J., Peterson, T.R., A rhetorical critique of nonmarket economic valuations for natural resources. Environ. Values 2, 1993, Pages Peterson, T.R., Peterson, M.J., Valuation analysis in environmental policy making: How economic models limit possibilities for environmental advocacy. In: Cantrill, J.G., Weinberg, G.M. An Introduction to General Systems Thinking. Wiley, New York, Talašová J. (2003) Fuzzy metody vícekriteriálního hodnocení a rozhodování. Olomouc: UP PF. 180 p. 16. Schalteger, S.,Wagner, M. Managing Sustainability Performance Measurement and Reporting in an Integrated Manner, Sustability Accounting as the Link between the Sustainability Balanced Scorcared and Sustainability Reporting. Dordrecht: Springer,

81 FREE ECONOMIC ZONES IN THE WORLD AND INITIATIVES OF GEORGIA Nana Akhalaia, Nino Liparteliani Gori University, Georgia Abstract. The article deals with the development of free economic zones during the last decades which became a significant occurrence of the world economic. It is enough to point out that in early 1990s more than a thousand such zones were registered but by /3 of the world commodity circulation was due to free economic zones. Our purpose was to study the world practice of organizing and functioning of special economic zones, which show that they are creating and they practically influence achieving various goals. The goal of creating free economic zones is deeply involving the country in distribution of international labor. Due to this the issue is actual, as it deals with increasing producing competitive production and in this way increasing transferring foreign currency. This is quite logical. If a country is unable to open economic widely for foreign enterprising capital then it is able to do it under the free economic zones. Free economic zones are also necessary for an interested country to provide the inner market with high quality production. Free economic zones foresee involving in international relations not only by means of enterprising but also in tourism, cultural-sanatorium spheres as well which finally increases foreign currency income. Free economic zones are appealed for implementation native and foreign scientifictechnical achievements in national economic. The goal for creating free economic zones for developing countries is to prepare qualified workers, engineers, economic and administrative personnel for own country and last opening free economic zones are discussed as the model of modernization of economic.. The object of the research is the positive world practice of creating free economic zones which shows the effectiveness of the method of recovering of economic. Our aim is to prove the necessity of existing free industrial zones in Georgia, such as Poti, Kutaisi, Kobuleti free industrial zone as the first free industrial zone in Georgia. Keywords: Free economic zone, attracting investments, free industrial zone of Poti, economic consequences of Russian aggression, new workplaces. Introduction Free economic zones are functioning successfully in many countries of the world. They are functioning as in developed industrial countries, such as: United States of America, Japan, Germany or England and also in developing countries. At first free economic zone was considered the special territory of the largest sea port or its neighboring region, which was separated from the country customs territory with the duty-free regime for import-export of foreign goods. The status of free ports had during the centuries: Livorno in 1547, Genoa in 1595, Venice in 1661, Marseille in 1669, Odessa in 1817, Vladivostok in 1862, Batumi in Nowadays status of free port has in Switzerland Bux, Geneva port, in Brazil - Manaus, in Romania Sulina etc. In such kind of ports goods are kept in storages for defined and undefined period of time, and then they are supplied to the domestic market of the mentioned country with customs tax or are exported abroad duty-free. Due to the monopolization of markets and protectionist politics of countries with free ports there were created free economic zones in place of such kind of ports. In developed capitalist countries free economic zones are created as a rule in crisis districts, where there is undeveloped infrastructure and high level of unemployment. With awarded status free zones for these regions emphasis is not made on attracting investments but they try to create conditions for development of integrated manufacturing in domestic market. In developing countries with less developed economic the main purpose of economic zone creation is attraction of foreign capital, advanced technologies and management experience, stimulation of export, 86

82 improvement of its structure, growth of employment, preparation of qualified staff, receiving additional monetary revenues. Before Russian aggression against Georgia and the world economic crisis it was approved government action plan which covered three years. Because of the planned changes in economic, fiscal and monetary politic it is possible to add lots of things to this plan. According to the plan country would maintain economic course and dynamic of the last year. 1 Yet before Russian aggression against Georgia and the world economic crisis President of Georgia signed the law about free industrial zones on July 3, This law establishes the rule of creation and liquidation of free industrial zones on the territory of Georgia; defines the management of free industrial zones and within the borders of zones rules of management and service-supervisor organs creation and activities, establishes additional conditions for industries of free industrial zones, tax privileges and other questions connecting to activities of these zones. Analytic office of the parliament of Georgia prepared a conclusion where there is mentioned that free industrial zones are one of the elements of new international distribution of work. In conditions of economic globalization free zones are efficient instrument for activate foreign-economic activities of the country. 1. Opportunities to develop the free economic zones in Georgia The question of opening free industrial zone in Poti caused great deference of opinions. There were a lot of questions: Since there acts quite liberal tax and custom code in Georgia, is there any necessity of additional privileges for investors? By what criterions should we select especially Poti as a special economic zone? Is there appropriate infrastructure in Poti which will give us opportunity to create such kind of zone quickly? What resources are connected to administrating of the zone and preventive measures implementation of potentially dangerous activities and creation of controlling institutions in it? The perspective of special economic zone in Georgia has been discussed on the background of that nowadays Georgia is more developed country, which means that our country has no privileges of cheap workforce and huge domestic market. The existing tariff regime in Georgia is one of the most liberal in Europe. In 2007 in 120 countries of the world there were acting more than 2000 different kinds of free economic zones, whose total annual turnover exceeded 60 billion USA dollars. 3 It seems the government of Georgia was relying on this data, when it was making decision about creation free industrial zone in Poti. Positive argument says that there will be a huge opportunity for developing business in free industrial zone. The positive side of the free industrial zone is that advanced technologies, know-how will more actively come into the country, because the nature of capital is objective, it flows where there is less tax. By the government prognosis the free economic zone is being created for three expectations: first - being given additional impulse to economic development of Georgia, second such kind of precedents exist there and many of them are successful and three - there should be created successful economic development centres and the first is Poti where such kind of zone was created. 4 In summer 2007 Ministry of Economic Development of Georgia claimed about leasing of Poti Sea port and creation a free industrial zone 1 Meskhia J. The post-war period and the perspectives of Georgia Economy. Magazine -Business and Law. Tb. 2008(8) g The Decree of the Government of Georgia - about creation, arrangement and functioning rules approval of a free industrial zone, 131. June 3, Tbilisi. 3 Sikharulidze D. Economic Effectiveness of Foreign Business in Georgia. Magazine Metsniereba (Science). Tb. 2008(9) p Chikvaidze D. Free Industrial Zones will be created in Georgia. Magazine Business and Management. Tbilisi. 2007(2) p

83 on the territory of the port. For creation of free industrial zone 1 billion USA dollar Arab investment came into Georgia through two state companies DUBAI WORLD and JAFZA. JAFZA was investor, manager of free industrial zone and consultant of the Georgia government. It promised to invest till a billion dollar in Georgia. On the first stage of project 300 million dollar will be used for a new container terminal and free industrial zone construction. The same amount of investment will be implemented on the second stage of project. At the same time a special logistic park and elite districts construction was planned in Tbilisi. A free economic zone of Jebel Ali JAFZA, which was established 25 years ago, is considered as one of the most successful free economic zone in the world and is situated in Dubai Emirate. In experts opinion this zone seriously pushed Dubai economic development and contributed its formation as important trade, financial, transport and tourist center. JAFZA is managing not only Dubai but also other countries analogical free zones and compete with different countries governments. They work in China, Malaysia, Morocco, India, Romania, Turkey, Great Britain and many other countries. On August 2007 Ministry of Economic Development of Georgia claimed interest expression competition on the project: Lease of Poti Sea Port and creation and management of free industrial zone (400ha) nearby territory of the port during 49 years. One of the largest port of Black Sea Basin and the largest port of dry cargos serving in Caucasus is situated on TRACECA corridor and represents the most important part of Caucasus transit, transport network. It connects by means of straight sea routes to the largest ports of Europe and Asia and has straight ferry communication with ports of Black Sea in Ukraine, Russia and Bulgaria. The port is inclusion in country s rail network and connects to every city of Georgia by means of roads, has a connection with airport of Poti and international airport of Batumi (80km). In 2006 the turnover of marine port consisted 7 million ton, which is 9.1% more than the data of previous years. In 2007 the turnover was increased with 12% in compare of previous year. The sum of unloading containers is equal of TEU (twenty ft. containers). The port services all kinds of load and functions during the whole year. In port function famous transportation lines and companies such as Maerski, CMA-CGM, MSC, ZIM Line. Besides this, several private companies implement exploitation of terminal on the base of lease agreement. As one of the best equipped and modernized port of Black Sea East Coast, the port of Poti has got ISO To take into account the increase of turnover between the countries of Europe and Asia, Poti port has the potential of increase the capacity and attracting-servicing about 25 million ton load annual. The offered territory (400 ha) for the creation of free zone is directly bordered the port from the North and follows the sea coast. The presumable duration of lease is 49 years. The investor should develop the main infrastructure of free industrial zone, build the necessary buildings, draw out the appropriate procedures and rules also manage the zone during the lease agreement period according to the Georgian law. In his/her duty also include to attract invests in the zone from the international companies for the goal of secure with increased load flow of the port. Firs of all 12 companies were interested in connection of the lease of Poti marine port and for creation the free industrial zone on the nearby territory of port. 5 8 companies from them continue the participation on the next stage, among them were: 1. DP and Lafza United Emirates 2. RAK Investment Authority - United Emirates 3. Hutchison Westports Great Britain 4. CMA CGM France 5. Hamburger Hafen-Und Logistic Aktiengese//schaft Germany 6. International Container Terminal Services Philippines 7. ZIM PORTS Israel 8. Momentum Engineering - United Emirates 5 Great interest Free Industrial Zone. Journal - Business news of Business. Tbilisi. 2007(8) p

84 On the base of competition the representatives of United Emirates were chosen. On March 2008 the free industrial zone of Poti was opened officially, but after the famous appearance of August even this investment project stopped temporarily. Poti port received huge financial losses. For a long time worked only 35 % of port. Due to reduce of load flow the port had 2 million USD losses. After the bombard technique and property of USD was out of order. Turkish- Georgian oil company Channel Energy received USD losses from the debris of cluster bomb were damaged its reservoirs. In Georgia in 2009 with government resolution was created free industrial zone of Kutaisi (FIZ), it is located at the former territory of Kutaisi motor plant. 6 Total area is 27ha. The initiator of creation is the territory owner Georgian International holding LTD, which at the same time is the administrator of FIZ. Created 100% private capital and its constituents are individuals the citizens of Georgia. The goal of company-administrator is to create industrial zone constructed on the principle of free entrepreneurship as local also foreign investors strengths. In free industrial zone of Kutaisi functions company FRESH GEORGIA LTD. The activity category is to output-realization of domestic gas and electro techniques. The investment implemented in 2009 consisted USD. For the creation of full industrial cycle the company has planed extra investments: in USD quantity, in USD quantity. As a result of implemented investment nowadays functions the constructive department of domestic gas and electro techniques. Produce realization implements in Georgia. The value of realized produce is GEL. The produce is ready for unloading for Azerbaijan and Ukraine. After the implement of total amount of investments ( USD) will be created the full industrial cycle, which secures the production of components details at place on the base of local and imported materials, annual million USD amount of manufacture. Kutaisi is the second city of Georgia by size and industrial importance. Its population is persons with last describe and consists almost 4% of Georgian population. The produce manufactured in it with Imereti region consisted 14-15% of Georgian gross domestic product and national income for In Kutaisi was manufacturing 16% of Georgian industrial produce. Also in 2011 was created free industrial zone in Tbilisi at the territory of airport. The creation of free industrial zone secured Jewish-Georgian Company Tera 1. The creation of Kobuleti free industrial zone looks attractively and interesting. The State will isolate 11.3ha at the territory of Kobuleti pine forest, where investors will be able to built 27 hotels in privilege conditions. According to draft law, the appropriate plot maximum 3.5ha will transmit to the investor in property with symbolic price 1 GEL. He / She should built average or high class hotel maximum 7 storey and 60 rooms. 1 million GEL is determined as minimal investment. About person live in Kobuleti. The city is 25km far from Batumi. Traditionally, this place was attractive for the tourists having average income then large investments. From 2011 with preliminary calculations after the project completely set in motion in Kobuleti will be created about extra hotel apartments and will be appeared 500 work places. In 2011 planed to create the free industrial zone in central section of Khelvachauri region. Soon in Khelvachauri region at the 15ha territory can be make free industrial zone, 8km on the way from Batumi. This territory gives the mean of creation 2500 work places. The period of leasing is 49 year. The price of leasing is 1 GEL at 1sqm, which corresponds to 0.55USD. Finally we can conclude that the pros of opening free industrial zone in Georgia is that advanced technologies, know- how will be incoming more actively in country as the nature of capital is objective flows there where is the less tax. What is concretely necessary for this? The main thing is that the investors be sure that Georgia is a good country for conducting business. The hard work is necessary not only with the future theoretical investors also with them who are in 6 Namicheishvili R. Basic Principles of Economic and Social Transformation in Kutaisi. Magazine Economic Profile. Kutaisi 2008(4) g

85 country now as they stay here and be satisfied. Foreign investors create large part of small business and appropriate the new work places. This is vitally important for the country. Conclusions and recommendations The perspective of special economic zone in Georgia should have been discussed on the background of that nowadays Georgia is more developed country, which means that our country has no privileges of cheap workforce and huge domestic market. There will be a huge opportunity for business development in Free Industrial Zone. The positive side of the free industrial zone establishment in Georgia is that advanced technologies, know-how will be more actively coming into the country, because the nature of capital is objective, flows there where is the less tax. The main thing is that the investors be sure that Georgia is a good country for conducting business. The hard work is necessary not only with the future theoretical investors also with them who are in country now as they stay here and be satisfied. Foreign investors create large part of small business and appropriate the new work places. This is vitally important for the country. References 1. The Decree of the Government of Georgia - about creation, arrangement and functioning rules approval of a free industrial zone. June 3, 2008 (131). Tbilisi. 2. Meskhia J. The post-war period and the perspectives of Georgia Economy. Magazine -Business and Law. Tbilisi. 2008(18) p Sikharulidze D. Economic Effectiveness of Foreign Business in Georgia. Magazine Metsniereba (Science). Tbilisi. 2008(9) p Namicheishvili R. Basic Principles of Economic and Social Transformation in Kutaisi. Magazine Economic Profile. Kutaisi 2008(4) p Great interest Free Industrial Zone. Journal - Business news of Business. Tbilisi. 2007(8) p Chikvaidze D. Free Industrial Zones will be created in Georgia. Magazine Business and Management. Tbilisi. 2007(2) p Internet recourses

86 STRATEGIC APPROACH TO SALES HUMAN RESOURCES MANAGEMENT OF UKRAINIAN COMMERCIAL BANK IN CONDITIONS OF CRISIS Dmytro Lukin, Tetyana Mazylo Prominvestbank, State Higher Educational Institution «Ukrainian Academy of Banking of the National Bank of Ukraine Abstract. Present world financial crisis tests the strength of banking sector of all countries, including Ukraine. The conditions of functioning of commercial banks changed greatly, so do the tasks that face them. All such challenges of modern period must be efficiently solved not only by the managers, but also by personnel of commercial banks. That is why, it is very important to receive the theoretical studies of questions of crisis human resources management for competent skilful decisions in the bank practice. The choice of correct personnel strategy and its realization underlies in going out of the bank s crisis. Key words: personnel, bank, crisis, human resources strategy, motivation. Introduction Banking sector in economics of majority of countries, including Ukraine, experience hard times today. Profitability of banking activity felt down, society becomes more negative to banks and bankers. In conditions of this, requests to personnel of commercial bank must change, so do requests to personnel management strategy. As we see it, in present-day conditions, there is no need in formal, but a real acceptance of strategic importance of human factor in banking establishment. As a result of it, strategic approach is needed for the personnel management in terms of anti-crisis measures of commercial bank. 1. Basic researches and publications In spite of the fact, themes, which are dedicated to personnel management, are quite popular today and are subject of researches of many authors (for example, monographs of М. Аrmstrong, S. Shekshnya, S. Bаzаrov, V. Pugachov, V. Travin, Е. Utkin, and others), problems of anti-crisis bank personnel management did not found enough interpretation in science literature. Even specialized publication, that reveals different aspects of personnel work in banking institutions, authors (for example, Т. Lobanova, A. Kostuc) specially do not examine the special questions of crisis personnel management. On the other hand, there are many interviews of practicing bank administrators on this theme in periodicals. That is why, it is very important, to receive the theoretical studies of questions of crises human resources management for competent skilful decisions in the bank practice. Unsolved parts of the problem As we see it, in present-day conditions, there is no need in formal, but a real acceptance of strategic importance of human factor in banking establishment. As a result of it, strategic approach is needed for the personnel management in terms of anti-crisis measures of commercial bank. Aim of the article identify basic trends of anti-crisis bank personnel management and means of it realization. Exposition of basic material In terms of financial crisis, traditional problems, that banks usually solve, are added with new, such as decrease of revenue of balances, reduction of deposits of population and enterprises, a certain imbalance of currency position, big temporal gap between loans and credits, certain increase of particle of problematic credits in bank portfolios etc. Stabilization of situation in concrete bank foundation depends not only on suspended decisions of shareholders and top-manager in financial 91

87 politic field, involvement of means, but on everyday efforts of all banks employees, their abilities and orientation on positive result. Unfortunately, nowadays most of Ukrainian bank managers give priority only for financial, material and informative resources. Human capital stands on nearly the last place in this list. We can assert, that in majority of banks in terms of crisis the approach to personnel as costs is (Tab. 1) 1, and this must be reduced to minimum. Table 1 Characteristic of difference in approaches to the concept of staff Staff-costs Forcing Minimization Small period of planning Results Quantity Inflexible Dependable Staff-resource Reasonability Optimization Protracted period of planning Means + results Quality Flexible Autonomous Global staff reduction in banks and big decrease in quantity of bank branches and subsidiaries means that staff-costs strategy is dominating in bank field. It is the world practice. For example, nearly by 83 thousands employees of large financial companies in the world were dismissed since last July due to financial crisis in the U.S. and Europe. The number of job losses is the same as the number of all personnel of big banks like Goldman Sachs or Morgan Stanley. Only U.S. bank Citigroup has announced a reduction of 52 thousand jobs worldwide in the next six months, after bank losses last year totalled $ 20 billion. At the same time, last year, Citigroup already reduced its staff by 23 thousand employees. The scale of reductions in separately taken structures varies from 90 persons (0.1% of total workforce of the company) in a London bank HBOS to 9160 (66 percent) in the American Bear Stearns. On average, financial firms laid off 3.3% of its employees, which many times lower than the last recession of , when the big banks and funds have been reduced 17% of workplaces 2. There are the same tendencies in Ukraine. Quantity of unbalanced structural subdivisions of commercial banks in Ukraine had cut down only from October 2008 till July 2009, nearly on 1500 units. For example, «UkrsibBank» has shut 100 departments; «Finances and Credit» - 80; «Nadrabank» - 77; «Ukrprombank» - 32; «Forum» - 20, «Rodovid Bank» - 19; «Kyiv» In the first half of 2010 financial agencies have closed nearly one thousand branches. Since the beginning of 2009 till July 1, 2010 banks had closed a total of nearly three thousand branches. Thus only one branch outside the country continues to operate - the Cyprussubsidiary of Ukraine's largest Privatbank (Dnepropetrovsk). In the period between October 2008 and October 2010 nearly on 60 thousand employees of Ukrainian commercial banks were left without job 4. In parallel with the closing of offices local banks are actively reducing staff. Since the beginning of 2009 about 20 thousand people ended working in the banking sector. Overall, from the beginning of the crisis, number of bank employees declined by 22,5%. According to the report, the number of employees of the Ukrainian banks in September 2010 amounted to thousand people. For illustration of reducing process see diagram 1. Despite global shortenings, banks didn t make it up to decrease costs greatly. Facts of National Bank of Ukraine states that administrative costs of credit institutions for the first quarter of 1 Управление персоналом организации: Учебник. Под ред. А.Я. Кибанова. Москва: ИНФРА-М, с РБК-Україна. 4 Васильева А. Банковские увольнения. 92

88 2009 grew from 3 billion hryvnas. - to 8,73 billion hryvnas, when in the first quarter of 2009 costs made up 5,92 billion hryvnas., and in the first half of 2010 eventually increased by 200 million USD compared to the same period of to 17.6 billion USD 5. These facts prove our thesis that in condition of crisis problems of bank field cannot be solved with cruel reduction of costs on staff. This is not a panacea. Besides reduction of personnel, we must mark another tendency manpower administration of banking institutions that is also a part of unprofitable personnel-strategy this is an intrusion of basic principles of taylorism into management. It concerns banks with foreign capital in first place, but it is becoming normal for many domestic banks. It is characteristic for taylorism : maximum splitting of productive operations and simplification of work functions; absolute (thoughtless to some extent) realization of operating standards; severe demarcation of administrative and executive functions, creative (leading, organizational) and non-creative (monotonous, executive) work. It is strange, but the fact remains, Ukrainian bank field that is actually intellectual, is now starting to fill with such mechanical treatment of human place in organization. Most creative functions are given to main office that is sometimes situated in foreign countries. Workers of all subsidiary fields are made to do work out schemes, instructions and standards. So, commercial bank is becoming more like single tool, where each «knot» (subsidiary, department, etc) and «screw» (employee) quickly and clearly execute their functions, without intruding into the work of other «knots» and «screws», and having no information about their positive experience or failures. As a result, monotony, featurelessness and depersonalization of work, that makes it impossible to become necessary to life and source of implementation of personality. This does not concern lower workers of bank organizations (cashier, tellers) only, but also managers of lower and middle structural unit of management. Figure 1 The number of personnel of the Ukrainian banking system (commercial banks only), thousands of people Moreover, majority of bank workers ran into great worsening of labour conditions. We can label such characteristics: spreading of service zones, increase of working hours, increase of workload. Quite a typical situation: worked that is usually done by employees, is made by three or five people left. increase of psychical load. In such a hard time nervous stress and waiting for «terrific» of nearly all clients of commercial banks (borrowers and investors) is taken by personnel of bank. 5 Гриньков Д. М. Широко закрытые //- БИЗНЕС 38(921) от , 93

89 With the intensification of work, system of compensation of working efforts has become much worse. In the majority of banks, emoluments of employees have been upholded or decreased, premiums are cancelled, bonus programs liquidated, social package shorten or abolished. So, taking in account inflation and workload, we can say, that nowadays working in bank sector of economy becomes low-profitable. All the stimulation systems in banks are based only on one motivating factor fear of dismissal. Specialists say, fear «works» 2 3 months only, and there appears indifference or annoyance, and as consequence, loss of loyalty of staff to organization. And this by-turn assists poor execution of functions, nervous breakdowns, emotional relief, relaxation on the bank clients, and breach of bank secret and so on. As a result, critical state of organization intensifies. So, in our point of view, it is important to accent the attention on the development of reasonable personnel strategy in terms of financial crisis. HR strategy must follow bank strategy. There are two ways to overcome the crisis - either the liquidation of the organization, or its development in another capacity. Elimination strategy is used in organizations in which all or main activities are in decline, both in terms of profit, well as because of the position on the market in comparison with competitors. There are two ways to implement this strategy. The first variant - a complete liquidation of the bank as an organization, the second - its resale. Only by defining the further destiny of the organization we should decide about optimizing workforce. If the bank is liquidated, its assets are selling by parts (buildings, equipment, etc.), it is advisable to keep employees that perform solely technical, accounting functions, which do not nor solve strategic problems, nor adhered to organization and willing to work for short time. Thus, personnel costs are reduced to a minimum. If there is a purpose to profitably sell the entire crisis bank as an organization apparently, it is advisable to keep personnel core of the bank as an essential element that is laid in the sales price. Perspective of the existence of the bank should be reported to the key staff to avoid their leaving and to use their personnel potential for more profitable sales of organization. Strategy of rescue and recovery of organization. This type of strategy is anti-crisis on the whole. The main objective here - is to save bank as an organization to bring it on a new level of development and gain stability for a long term. Leadership of crisis banking institution should state the main goals of crisis management and human resources strategy inform it up to staff. In our opinion, such purposes include: ensuring an optimal balance of storing processes and updating of personnel potential of the bank; removal of social tensions in primary collectives (branches and divisions); human resources development in accordance with innovative and anti-crisis needs of organization; identify existing and hidden interests and values that prevail in different groups of personnel of various levels of government bank; providing economic and information security of the bank and prevent escape of information and fraud by staff; compliance with labour laws; consideration of conjecture of labour market. For successful implementation of this strategy we need to add certain efforts to highlight socalled "problematic sites", effects that slow down the livelihoods of the banking institutions and to develop particular measures. Let s pay attention to the most important of those. 1. It is necessary to formulate the basic requirements to the personnel which are needed just in crisis terms of bank functioning. We must note that during the crisis banking activities are aimed at solving issues not only financial nature, but rather psychological: negotiating with borrowers, reducing nervousness of investors (especially elderly people) and other. We believe that problems cannot be solved with only similar professional and skill characteristics of workers. Other staff skills and competence are now needed more than in a stable 94

90 situation. Therefore purely professional (qualification) requirements for the personnel of a banking institution in crisis conditions, in our viewpoint should be added with following: psychological stability and ability to work under stress; internal self-discipline, loyalty to the banking organization, negotiating skills and ability to listen, ability to work in teams, mutual aid, flexibility of experts to changing conditions, focus on long-term goals dedication; reliability of the relationship between employees and departments, focus on long-term goals, initiative and intuition. 2. Carefully analyze the presence or absence of the necessary elements of personnel management system (like planning of staff, organization of recruitment and hiring, training and staff development, business valuation, availability and effectiveness of incentive mechanisms, etc.) and create balanced modern system of human resource management. 3. It should be noted, that the rapidly changing macroeconomic environment continually establishes new requirements to the bank personnel. The mismatch of personnel competence to the needs of the organization in production exacerbates crisis and leads to low productivity and excessive personnel costs. According to surveys conducted in late 2008 (at the beginning of the sectoral crisis) professional standards consistent of 15.2% of managers of Ukrainian banks only 6. Ligning competencies to the needs of the bank must stand on one of the highest positions of importance. 4. Develop a qualitative analysis of the official structure of the bank. Most crisis banks can be characterized by a lack of clear, rational distribution of functions among employees, duplication of work; deficit or surplus personnel. Thus, the main goal should not be reducing staff numbers but optimization based on the definition of specific goals and objectives of each officer in the exit from crisis strategy of the bank. 5. Analyze parameters of composite organizational culture. Manifestation of weak organizational culture during the crisis can be: lack of initiatives of employees; hard emotional atmosphere in the collective because of the threat of dismissal or a sense of hastening collapses of organization; large number of conflict situations, nervous breakdowns. It is important to determine the presence of the countercultures and try to neutralize them. Particular attention should be paid to identifying informal leaders who can make both positive and negative impact on bank staff during the crisis. 6. Check the loyalty and reliability of personnel and identify contingent of employees which are potential or real threats to the economic security of the bank. 7. Motivation of staff is of particular importance. On one hand, we agree that the salary of board members of most Ukrainian banks is excessive 7 and requires filling during the crisis. But we believe that it is completely wrong to refuse bonus programs related to ordinary employees of banking institutions. According to the definition, compensation package is material and immaterial reward received employee as compensation for the representation of organization of his time, health and results of work 8. More stressful nature of work of crisis bank requires adequate compensation of labour efforts. Therefore in our view, in the face of rising inflation in the first place attention should be paid to economic incentives for staff. In our opinion such improvements of the following areas of staff compensation are possible: After the program of optimizing the number of staff, salaries should be raised taking into account of the new workload and stressful working conditions of employees remaining in the bank. The stimulation of employees from front offices, departments of work with individuals and 6 Половинко А. Банки и кризис. Организатор. 2010(2). С Костюк, О.М. Корпоративне управління в банках в умовах фінансової кризи: визначення пріоритетних напрямів розвитку / Проблеми і перспективи розвитку банківської системи України : збірник тез доповідей ХІІ Всеукраїнської науково-практичної конференції (12-13 листопада 2009 р.): у 2 т. / Державний вищий навчальний заклад «Українська академія банківської справи Національного банку України». Суми: ДВНЗ «УАБС НБУ», 2009(1). С Мордовин С.K. Управление человеческими ресурсами: 17 модульная программа для менеджеров «Управление развитием организации» / Мордовин С.K // [Текст] : Модуль 16. / - М.: ИНФРА-М, с. 95

91 professionals that deal with reduction of arrears requires special attention, as these officials with the most intense and stressful character of labour during the crisis. Do not cancel bonuses, make them applicable tool to stimulate instead. The criteria for awarding bonuses should be performance or effectiveness of work. The introduction of spot bonuses that is one-time reward for specific achievements (for example, the successful negotiation about restructuring of external debt). A possible variant would also be an input of new methods of stimulating for certain categories of managers at a specific period (for example, on a period of revision of credit portfolio to make it better). Maximally leave the corporative benefits, which are aimed at creating a sense of caring on the part of organization (such as catering, flexible labour, health insurance, etc.). Thus, the social package should be created on a "cafeteria", that is to give employees a choice of benefits. 8. It is necessary to examine the activity of top management in building the strategy of formation and use of labour potential of bank carefully examine the level of competence of each senior and middle management, his ability to work in crisis conditions. 9. Carry out the work with the personnel reserve for the nomination and evaluation of skills of reservists for work in crisis conditions. We should note that due to financial crisis and the labour market, new trends have appeared to protect the rights of bank employees. Employers of banking sector should pay attention to proposals that are actively discussed (yet online) about a trade union of bank employees. A similar movement is a response to massive reduction of personnel in the field, reducing of the real wages of bank employees, and unprofessional methods of dismissal of certain staff members and uncertainty about the future of people working in banks and so on. Therefore, if employers will not listen to the advice of specialists in personnel management now, then later they will have to make concessions to teams that are already under pressure of trade unions. Conclusions Problems that banking institutions are facing during the financial crisis are very complex and unusual. They require coordinated actions from shareholders, managers and ordinary employees of the bank. First of all, it is very important to decline staff-costs approach in management. It is therefore essential to use own human resources like the most flexible resources, which would be able to adapt to the new conditions of operating. Secondly, HR strategy of crisis organization must follow the bank strategy. The choice of HR strategy must depend on the bank s afterlife. Correct HR strategy can considerably reduce costs and increase production efficiency. Thirdly, the management must concentrate its efforts on the creation of the effective system of motivation, drop of the stress of staff and develop personnel competences adjust in accordance with new needs of the bank. In our opinion, only an integrated approach, when it is along with financial and organizational changes, is gaining crisis personnel measures, it will allow banks to survive the crisis with minimal losses. References 1. Армстронг М. Практика управления человеческими ресурсами. 8-е изд. / Пер. с англ. Под ред. С.К. Мордовина. СПб.: Питер, с.: с ил. (серия «Классика МВА»). 2. Васильева А. Банковские увольнения: /03/31/90673_Bankovskie_uvolneniya.html. 96

92 3. Гриньков Д. М. Широко закрытые//бизнес 38(921) от Карпова О. Кризис и персонал. ( ). 5. Корпоративная стратегия компании в период кризиса. d_krizisa. 6. Костюк О.М. Корпоративне управління в банках в умовах фінансової кризи: визначення пріоритетних напрямів розвитку//проблеми і перспективи розвитку банківської системи України: збірник тез доповідей ХІІ Всеукраїнської науково-практичної конференції (12-13 листопада 2009 р.): у 2 т./державний вищий навчальний заклад «Українська академія банківської справи Національного банку України». Суми: ДВНЗ «УАБС НБУ» (1). 7. Костюк О.М. Корпоративне управління у банку. Суми: ДВНЗ «УАБС НБУ», с. 8. Лобанова Т.Н. Банки: организация и персонал/учебно-практическое пособие. М.: Издательство «Городец», с. 9. Мордовин С.K. Управление человеческими ресурсами: 17 модульная программа для менеджеров «Управление развитием организации» / Мордовин С.K //Модуль 16./М.: ИНФРА-М, с. 10. Осипова Е. Управление персоналом в рамках стратегического менеджмента Половинко А. Банки и кризис / А. Половинко // Организатор (2). С РБК-Україна. Інформаційна агенція: Сотрудник как средство от кризиса: Управление персоналом организации/учебник/под ред. А.Я. Кибанова. М.: ИНФРА-М, с. 15. Шекшня С.В. Управление персоналом современной организации./с. В. Шекшня/: Учебно-практическое пособие. Изд. 5-е, перераб. и доп. (Серии "Библиотека журнала 'Управление персоналом") М.: ЗАО "Бизнес-школа "Интел-Синтез", с. 16. Финансовые новости. В США уволены 83 тысячи банкиров access on: Банки продолжают увольнять сотрудников "кризисными" темпами. [interactive] access on: Сокращения в финсекторе удвоятся. [interactive] ukrrudprom.ua/digest/dnhgnggh html access on:

93 SIGNIFICATION OF MARKETING EFFECTIVENESS IN INDUSTRY 1 František Milichovský, Iveta Šimberová Brno University of Technology, Faculty of Business and Management, [email protected]; [email protected] Abstract. Nowadays, marketing and marketing performance are becoming one of the most important sections in all companies. The reason for this change is made by world globalization. Many companies have to improve own corporate marketing activities, especially in industrial marketing. Marketing thinking brings new view on market environment and creates specific marketing tools, which are possible to use in industry area. Companies have no comparison with own competitors in the individual industry fields, which is only possible using appropriately by chosen instruments. The goal of this paper is map current level of knowledge on the issue, based on a search of scientific articles and researches. Keywords: marketing effectiveness, industry, corporate performance, measurement. Introduction To be an effective in all actions, also in marketing activities, it is one of fundamental interests of each company. For business competitiveness and sustainability of its successful functioning of the market, it is important to have appropriate metrics for measuring effectiveness. The issue of measuring the effectiveness of marketing activities between the professional and scientific community devoted considerable interest. Every company should be able to demonstrate own efficiency and effectiveness by used metrics or other processes and standards. Businesses may be missing a direct comparison with competitors in the industry, which is only possible using appropriately chosen instruments, whether financial or non-financial. In conclusion, this paper has focused on review of chosen articles which deal with kind of metrics, especially marketing metrics. It is remarkable that some authors aren t considering the use of some metrics without possibility of their application in other areas of production. Therefore, it is important to do thorough research, in which there would be a definition of the metrics for measuring effectiveness of the company. 1. Methods and Resources of this paper This paper is based on secondary research, includes scientific articles and books. These sources are focused on marketing metrics, which are divided into two basic groups financial and non-financial metrics. Some companies use one other kind of metrics which measure marketing activities marketing metrics. Therefore it is necessary to determine the effectiveness of own marketing activities, it is appropriate to examine how the level of efficiency can be obtained. To achieve this, it was necessary to choose an approach to achieve the following objectives: 1. Review of relevant literature with a focus on metrics, 2. Disposal project data, 3. Conclusions based on survey. 1 This paper is supported by project FP-S-11-3/1417, with title Innovative approaches in management and marketing in a global environment of European due to Faculty of Business and Management at Brno University of Technology. 98

94 2. Marketing effectiveness Marketing effectiveness could be defined as ratio of return on marketing and marketing cost 2. For measurement of marketing effectiveness we should use different metrics, which are from corporate view divided into two groups: financial and non-financial. Marketing effectiveness should be depictured as return of spent finance into marketing activities in company. Marketing effectiveness according Kotler and d Keller 3 includes five attributes of marketing orientation: Customer philosophy, Marketing integrated organization, Strategic orientation, Operative strategy, Organizational imperatives. Marketing measurement is complex process which depends on multiply metrics than single number of organizational health. Therefore it reflects current state of the organization and should influence on company s future changes Marketing metrics In general, marketing metrics are tools which help evaluate past performance as way to improve future corporate strategy and implementation marketing programs 5. Marketing metrics usually build connection between financial outcomes and marketing strategy 6. Halachmi 7 described several reasons which are important for measurement: If you can t measure it, you can t understand it If you don t understand it, you can t check it If you can t check it, you can t improve it Therefore is necessary taking marketing metrics as most significant priority in each company? The reason for it should be dissatisfaction with classical metrics which are focused on accounting, corporate costs or IT trends. Marketing metrics as total group of metrics is difficult to split. It depends on the person which makes separation. One of way of dividing marketing metrics should be dividing into two basic groups, financial and non-financial 8. Individual compound of these two groups depends on focusing of authors. Financial metrics should include e.g.: Financial indicators like ROI, ROE, Marketing ROI or ROMI, Data envelopment analysis, or 2 Daukševičiūté, I., Valainis, A., Vilkaité, N. Conceptualization of Effectiveness of Marketing Tools. Intellectual Economics. 2011(5). 3 Milichovský, F. Marketingová efektivnost v kontextu strategického marketingu. 2010, International workshop for PhD students. pp Eechambadi, N. High performance marketing: Bringing method to the madness of marketing. 2005, Dearborn Trade Pub. 5 Solčanský, M.; Sychrová, L.; Milichovský, F. Marketing Effectiveness by Way of Metrics. 2011, In Economics and management, roč. 2011, č. 16, s Petersen, J. A., McAlister, L., Reibstein, D. J., Winer, R. S., Kumar, V., Atkinson, G. Choosing the right metrics to maximize profitability and shareholder value Journal of retailing. 85, pp Halachmi, A. Performance Measurement in only One Way of Managing Performance International Journal of Productivity and Performance Management, Vol. 54 Iss. 7, pp Solčanský, M.; Sychrová, L.; Milichovský, F. Marketing Effectiveness by Way of Metrics. 2011, Economics and management, roč. 2011, č. 16, s

95 BM index (reports on cost, revenues and margins). Non-financial metrics should include these metrics: Comparative study, Customer satisfaction and loyalty, or Customer lifetime value. From another view on marketing metrics is possible to divide them into six groups 9 : 1. Financial indicators, which includes e.g. turnover, profit, return indicators, 2. Market measuring with e.g. market share, advertising shares, 3. Measurement of customer behavior (e.g. loyalty, penetration, number of new customers), 4. Measurement of customers moving has e.g. customer satisfaction, brand recognition, 5. Measurement direct customers by level of distribution, returns of intermediary, 6. Measurement of innovation which could contains number of new products, share of new products on earnings. Nevertheless, Sampaia et al. 10 indicated ten most relevant metrics, mentioned by Brazilian managers. These metrics are: 1. brand/product knowledge, 2. commitment/purchase intent, 3. customer satisfaction, 4. market share, 5. number of complaints, 6. perceived quality, 7. profit/profitability, 8. Return on Investment (ROI), 9. sales volume, 10. service/product availability These ten metrics were divided into four groups with their importance level. As the most important group of metrics they found customer visions with connection with product vision which got the highest values. There is possible to find some metrics in both of financial and non-financial groups. Submission of chosen metric into one of mentioned groups depend on connection several metrics. For example some authors use customer lifetime value as financial metric Milichovský, F.; Solčanský, M.; Sychrová, L. Approaches to Measuring the Effectiveness of Marketing Activities. 2011, In Trends Economics and Management, Vol.. V, Iss. 8, pp ISSN: Sampaioa, C. H., Simõesb, C., Perina, M. G., Almeidac, A. Marketing metrics: Insights from Brazilian managers. 2011, In Industrial Marketing Management, Vol.40, Iss 1, pp Doyle, P. (2008) Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value. 2008, Chichester : John Wiley & Sons. ISBN:

96 Figure 1 Model of marketing metrics importance (Sampaioa et al. 2011) 4. Industrial marketing Industrial marketing seems like one kind of marketing activities which are usually used in common companies. If we look at it from view of our consumer to which are produced industrial products, it is true. Yadin 12 defines industrial marketing as whole process in industrial company as knowledge which is based on own customers (who buy and use offered products and services). Generally we could describe it as kind of marketing of industrial products and services to industrial buyers, users and manufacturers. A managing director s corporate task is to run the company, smoothly and profitably, and deliver the highest possible dividend to shareholders Therefore, industrial marketing need a lot of information from different corporate departments with appropriate communications between each of the directors, managers and other executives through whole company, who is responsible for decision making. This could be taken as some essence in industrial marketing. Industrial products 13 are this kind of production, which is manufactured, distributed and promoted only to industrial buyers, users and manufacturers (it is a business-to-business). This product group contains four main types of products: capital equipment; consumable supplies; manufactured goods; raw materials. 5. Measuring in industrial company Each company need to measure own activities in own production. Main problem should be in choice right metrics for measurement performance. A lot of managers in Czech companies use unsuitable metrics for measuring performance and effectiveness or they interpret gained results in wrong way. Some differences should be between industry companies and organization which produce services depend on manager s choice. For basic separating companies is perfect range of NACE (acronym from title Nomenclature générale des Activités économiques dans les Communautés Européennes ). This scale could perfect separate individual kind of industry into right groups. During 2011 was made research work focused on marketing activities in various companies in Czech Republic. This research was attended by 238 representatives of business. From this statistical sample are 110 companies classified as industry companies (from total count it is 46,22%). That companies use various metrics mentioned in Table 1. For other potential metrics answered respondents less than four percent, what means their occasional usage? 12 Yadin, D. The International Dictionary of Marketing. 2002, London : Kogan Page Limited. P Yadin, D., p

97 Table 1 Most usually used marketing metrics and marketing activities in Czech companies Absolutely Relatively in % Number of customers 101 9,34 Net profit 91 8,42 Variable and fixed costs 81 8,88 Customer satisfaction 80 7,40 Profit per customer 64 5,92 Market share 60 5,55 Marketing expanses 45 4,16 ROMI 15 1,39 ROI 29 2,68 Source: Own research It is engrossing that companies use mainly metrics mentioned in Table 1. It may be due the simplicity of use these metrics. However, it is necessary to do thorough survey. 6. Discussion Metrics listed above are the most used in Czech companies. Many of them are useable in different organizations; always depend on appropriate marketers, if they focus on financial or nonfinancial metrics. It is very interesting that among the most used metrics in Table 1 are two metrics from non-financial metrics customer satisfaction and number of customers. From the financial metrics is convenient to refer about financial indicator ROMI Return on Marketing Investment. This indicator is recommended by many marketers and specialist as suitable financial metrics. It could be expressed as percentage of net profit and costs activities. It seems similar like index ROI, but that is mistake. Marketing activities isn t kind of investments like general business investments 14. Young and Aitken 15 explain marketing ROI as process of creating positive value for business. This process should be bad for some companies when they must demonstrate actual cost effectiveness. But according Jalkala and Salminen 16 almost the most important is way of measuring customer satisfaction, with customer reference as considerable part of marketing activities for industrial suppliers. Helm and Salminen 17 pointed customer are key sources of competitive advantage, because good customer approach should create market access or critical information for industrial suppliers. Conclusions Implement an effective marketing practices is very important for every business. It is obvious that one of the principal problems is the inability of some metrics applications in diverse sectors (industry, services, public administration). Because is marketing effectiveness one of the most significant parts in corporate marketing field. It is remarkable that some marketing experts aren t 14 Solčanský, M., Šimberová, I. Measurement of Marketing Effectiveness. 2010, In Economics and Management, Vol. 15, pp. 1 6, ISSN Young, A., Aitken, L. Profitable Marketing Communications A Guide to Marketing Return on Investment. 2007, London : Kogan Page Limited. ISBN: Jalkala, A., Salminen, R. T. Practices and functions of customer reference marketing Leveraging customer references as marketing assets. 2010, In Industrial Marketing Management. Vol.39, pp Helm, S., Salminen, R. T. Basking in reflected glory: Using customer reference relationships to build reputation in industrial markets. 2010, In Industrial Marketing Management. Vol.39, pp

98 considering the use of some metrics without possibility of their application in other areas of production. Industry area is just a specific area for measurement effectiveness. Therefore is almost necessary create kind of board of corporate metrics where would be included both of financial and non-financial metrics. For example it should be indicator ROI, ROMI, net profit, customer satisfaction, scrap percentage or accident rate in dependence on individual branch. References 1. Ambler, T., Kokkinaki, F., Puntoni, S. Assessing Marketing Performance: Reason form Metrics Selection. In Journal of Marketing Management. 2004, 20, p Daukševičiūté, I., Valainis, A., Vilkaité, N. Conceptualization of Effectiveness of Marketing Tools. Intellectual Economics. 2011, 5(2). 3. Doyle, P. (2008) Value-Based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value. Chichester: John Wiley & Sons Eechambadi, N. High performance marketing: Bringing method to the madness of marketing. 2005, Dearborn Trade Pub. 5. Halachmi, A. Performance Measurement in only One Way of Managing Performance. In International Journal of Productivity and Performance Management. 2005, 54(7), p Helm, S., Salminen, R. T. Basking in Reflected Glory: Using Customer Reference Relationships to Build Reputation in Industrial Markets. In Industrial Marketing Management. 2010, 39, p Jalkala, A., Salminen, R. T. Practices and functions of customer reference marketing Leveraging customer references as marketing assets. In Industrial Marketing Management. 2010, 39, p Milichovsky, F. Marketingová efektivnost v kontextu strategického marketingu. In International Workshop for PhD students. 2010, p Milichovský, F.; Solčanský, M.; Sychrová, L. Approaches to Measuring the Effectiveness of Marketing Activities. Trends Economics and Management, 2011, 5(8), p Petersen, J. A.; McAlister, L.; Reibstein, D. J.; Winer, R. S.; Kumar, V.; Atkinson, G. Choosing the Right Metrics to Maximize Profitability and Shareholder Value. Journal of Retailing. 2009, 85, p Sampaioa, C. H., Simõesb, C., Perina, M. G., Almeidac, A. Marketing metrics: Insights from Brazilian managers. Industrial Marketing Management. 2011, 40(1), p Solčanský, M.; Sychrová, L.; Milichovský, F. Marketing Effectiveness by Way of Metrics. 2011, In Economics and management, roč. 2011, č. 16, s Solčanský, M., Šimberová, I. Measurement of Marketing Effectiveness. Economics and Management, 2010, 15, p Yadin, D. The International Dictionary of Marketing. 2002, London: Kogan Page Limited. 15. Young, A., Aitken, L. Profitable Marketing Communications A Guide to Marketing Return on Investment. London: Kogan Page Limited

99 MAIN ASPECTS OF RISKS ADMINISTRATION IN THE PROJECT ADJUSTMENT PROCESS Nino Paresashvili, Irine Maisuradze, Ivane Javakhishvili Tbilisi State University, Georgia. Abstract. The role of the risk while implementing a project in general and in particular situation is under review of the present article. In modern unstable situation management of risk is the matter of actual importance since it is the significant tool in the arsenal of modern global world. If we deliberate the example of Georgia we will see that creation of the risks management structure and its development is especially intricate task. For Georgian modern realities while the project implementation the risks management is going on rather at the expense of experiments and failures. Keywords: risks administration, project adjustment, optimal decision, the risk analysis and evaluation, efficiency of project regulation. Introduction Economic and social advance of the state significantly depends upon the peculiarities of the processes of the project current adjustment throughout various fields, the risks forecast while implementation of any project and elaboration of the activation system for their eradication. The manager responsible for risks should cover all preventive measures serving to minimize the undesirable outcome resulted from any unexpected features connected with the project..if we take into account the environment when the organizations coordinate their activities in permanently changing and unexpected conditions, provision of economic sustainable development of the state becomes especially actual, and this depends upon classification and analysis of the various hazards standing before different current ongoing projects in numerous fields of the state. Successful overcoming of the crisis covers financial stability of the organizations, inculcation of positions in the market and numerous positive tendencies. The agenda for combat crisis involves the most important issues including: the hazards analysis and selection of evaluation strategy; systems approach towards management of hazardous situation; definition of a response to the risk and criteria regulation; usage of methodology to calculate the risks marginal values; to take the optimal decision and etc. 1 The risk and Evaluation The risks adjustment and the analysis for searching the decision is rather important issue of modern business relations. In any process and the organizational structure is considered to be necessary to deliberate the hazardous situation as the phenomenon and to carry out corresponding activities for their prevention. At the same time we should recognize the complicated structural phenomenon that is based upon numerous factors. While implementation of any process the comprehension of the risk management is the important factor. In conditions of appropriate realization and consecutive regulation, the right policy of the risk-management will reveal not only undesirable events but may determine the profitable and successful perspectives of development. Each leader of the project is aware of the hazards being behind the project and moreover the all hazards may not be avoided. No matter which way is right one is not always able to get rid of development of the casual situation which may be out of control. The planned schedule involves the 1 Gabidzashvili B. Economic Ambiguity and Risks in Businessmen Activities. Monograph, Publisher Universal, 2010, p

100 list of activities to be fulfilled; however the plan doesn t take into account the serious potential hazards of the project. The risk implied in the project is a probability of all results and undesirable events. The risks connected with the project developments may be resulted in stoppage or destruction of the project. Some undesirable cases may be revealed until the project starts but others are not subjected to the forecast and can t be foreseen. All projects involve the hazards like exceeding the expenses, breach of terms, low capacities, disappointment of customers, dismantling of business and other. Therefore the hazards management and their definition are rather significant issues. The risks regulation is oriented towards the fact that it is necessary to elucidate many possible negative events, to minimize their impact, to make attempts to prevent them, however if they occur we should provide the appropriate means to cover unforeseen charges. Taking into account the methods of principles and implementation of the risk management it is necessary to pay ordinary attention to each stage. Following of the content statement the identification and definition of a potential risk is the necessary process. The processes involving risks may consider all events that while their original rising cause problems. So the risks identification may be undertaken from their initial source or from the problem itself. The manager should pay regular attention to the analysis of the source. The hazardous sources may be placed inside or outside of the system to be surveyed. The objects of risky sources may involve the partners, users, employees and natural situation. Exposure of possible risks connected with the project and their analysis are formally connected with the problematic areas of detection, evaluation and analysis before the project undertakes. This is rather practical process than reactive. In other words it is preventive process aiming to minimize any unexpected failure or undesirable results. It is definitely the project leader active readiness before the hazardous effects. The successful coordination of risks connected with the project gives opportunity to the project manager to better supervise future and increase possibilities to achieve objectives of the project in the framework of approved estimate according of technical requirements. 2 The main components of the risks regulation process are following: identification of reasons caused risks; the risks analysis and evaluation; definition of a response to risks; planning of expenses while emergencies; creation of reserves in case of emergencies. Identification of reasons of risks starts with definition of the description which may hinder the project working or prevent its implementation. The problematic areas are created by the works which earlier have not been done. In the activities connected with detection of problems should take part all members of the project leading team? It is better to start from the risks which are completely adjusted to the project as a whole and not to some specified section. The members of the project team should be given opportunity to deliberate in multi-lateral way and their focus must not be limited by the concrete section of the network. 3 Among the issues on the agenda are mostly significant the following: how much the specialists qualification is in conformity with the requirements rising from the project implementation; in comparison with the majority of the project the innovation quality of the present project high, average or low; according to your viewpoint which factor of the project is connected with the biggest risk expenses, time or functional fulfilment and why it is so. In the process of the problems analysis may be reviewed the risks connected with the specified threats (threat to losses, threat of infringement of personal information confidentiality, accidents and other incidents). Threats may come from various directions but mostly from depositors, clients, lawful authorities and official structures as well. If the source or the problem is known, the threat and the hazards may be studied how they may be caused. We may bring the example: exemption of the partner from the project that may create threat to finances and existence of the project as well; the confidential information may leak 2 Keshelashvili G., Paresashvli N. Project Management. 2009, p Keshelashvili G., Paresashvli N. Project Management. 2009, p

101 from even closed network; the risk may have system feature or sovereign depending of the sphere we are working in and the processes we coordinate. The selected method of identification depends on traditions, sphere of activities and their adjustment. The identification methods are made by general format or the source through definition of the problems and events. Creation and development of the risk-management structure in Georgia represent especially complicated task, since the project governing the responses to the questions on revealed risks should be made immediately followed by eradication actions. Or in better case the risks must be forecasted in prior according to analysis of tendencies and possible sources. For the last years in Georgia actually have not been established the fundamental researches in direction to the risk management. The scientific literature don t involve the historical traditions of ample scientific analysis, the managers are less aware of foreign experience and traditions. Thus, in Georgian modern reality coordination of projects and risks in most cases happen at the expense of experiments and mistakes. There are number of tasks before the projects managers, from which are important : to define needs for necessity of the risk management and analysis; to select the risk management methods and the sources; to implement formation of organizational structure of risk management and the analysis; identification of the risks, selection-experience of the best trends of their management and reduction; to define the risk value, margins and control ; analysis, monitoring and evaluation of the project regulation efficiency. Despite implemented researches over risk management and analysis there is no fundamental definition of the risk management analysis in the project. Thus, selection of the studies trends such as the risks coordination in the project management and definition of analysis for searching solution are defined by not only processes of Georgian projects coordination but also by foreign theories based on the best practical examples, analysis and systematization. In modern conditions the issue of the projects risks management is diverse and complex structure which is changeable in swiftly developing environment taking into account time and conditions. Exactly for this reason elaboration of the whole standard is a hard task, the number of problems include discussion features and require further elaboration. We considered justified that attempts of Georgian scientists in this sphere directed to studying and deliberation of the risk and the processes connected thereof, like the phenomenon or present world economics or of other spheres priority and significant target of research. Working out of risks search, definition, analysis and their adjustment system; elaboration of instruments and mechanisms through which the risks will be reduced, the efficiency of the system of risks regulation and probability of losses should be evaluated. In modern unstable conditions management of risks is actual task as much as it represents the important tool in arsenal of modern world arsenal. While implementation of each project should be stated which outside and inside threats exist in different entities and focus attention to the methods which will help managers to reduce or avoid threats. The risk management study is targeted to: statement of legal environment and political risks connected with financial, market, business, currency exchange rate, inflation, operation and human recourses. The article also covers gauging and evaluation methodology and estimation of the costs limits being under risk (V). The practical examples in various entities will reflect important issues and provide us with successful tools and methods used for the risk coordination. The research objective is represented by theoretical-practical analysis of the process of the project regulation and the statement of practical methods for implementation of successive activities and systematization of processes of risks study and management, classification of potential risks, peculiarities of avoidance from risks, recognition-approval of risks, control and interruption, minimization of losses and other methods as well. Therefore classification of risks, analysis and permanent control are preconditions for successful quality and growth of efficiency of processes. These raise the chance to achieve the aim and reduce the risks probability at all levels of the project. The methodological basis we should take: system approach to the risks regulation, theories for 106

102 taking decision for financial managers, principles of management responsibility and obligations coordination, the theory for selection of evaluation strategy, criteria for financial risks, methodology of calculation of risks value limits. In process of the projects coordination the focus should be directed to the inter-relationship between subsystems and basic elements because we should take into account possible risk of each sub-system involved in implementation of the project which stipulates the basic elements. Aiming to observe the market rules the companies should retain transparency in order for the market representatives could evaluate the risks existence. This scope the efficiency may not be achieved if is not formed the inner system of risks calculation and inner system of adjustment and description-fixing of documentation. Reduction of all kind of risks is an ultimate strategy of the project management. The right management and appropriate team of managers, this is the main factor for risks elimination. Let s take Georgian example, in 2010 was held millennium program by Georgian statistics national service in the framework evaluation project concerning the program efficiency. The project represented the innovation study on description of village infrastructure. All stages of activities were accompanied by the risks definition, analysis and reduction process. Description covered 3529 Georgian rural settlements excluding occupied territories. 4 Based on selected data the information product was created which was helpful and necessary either in Georgia for decision makers over rural infrastructure, wide community or international organizations. As a result of description of infrastructure was established the database in which are given up-to-date information about existing situation in Georgian villages. In particular, provision of natural gas, power energy, drinking water, sewage system, intensity of natural calamities, irrigation system and access to other important services. Moreover as a result of the implementation of population list it became possible to define existence of such rural units as: healthcare, education entities, banks, mixed entities, or specialized markets, the enterprises processing agricultural products, other objects which are necessary for the people welfare. Other than deficit of qualified personnel, separate isolation of respondent made us to focus the risks; sending respondents selection-makers for each field working; creation of different teams for working caused loosing of some information; the date of interview which is acceptable for respondent may turned to be not useful for interview since the other interview may be planned at the same time in another village. Correspondingly update the respondent selection scheme became necessary. In order to diminish risks was recommended planning to be implemented by one person who would be responsible for the quality of conducted interviews. So for the respondents selection-makers was necessary to have following features: the respondents selection maker should have been aware of the study essence, objectives and tasks for making respondents agree on interview. The selection-maker should be well aware of the certain region specification, placements of the rural area and accessible roads in order to define rationally the date and time of interviews in selection process. The selection makers are required to present high social capital. Owing to a.m. specification selection of respondents should be implemented by zonal supervisors. The zonal supervisor was selected according to regional specificity. Each supervisor was appointed for each region. The exception concerned big regions where were sent two supervisors and small regions which according of geographical distribution will be united by zonal supervisor. Selection of the respondents implemented by zonal supervisor had the following positive sides conditioning the risks reduction: the zonal supervisors was well aware of the region specificity, they had good relations with the local population and had certain contacts with the 4 National Statistics Office of Georgia, www. geostat.ge. Tbilisi,

103 community Sakrebulo (Board) representatives. Correspondingly, the process of the respondents election made by them was coordinated in more operative and high profile. Owing to the fact that the interviews distribution plans was compiled by zonal supervisor, aiming to avoid dissemination of information it was better to select respondents only by one unit to implement the respondents selection, consensus on interviews days and further planning. In order to reduce risks and neutralize possible negative attitude of respondents for each respondent were prepared letters which were handed them before starting of interviews. The letters clearly defined description objectives, tasks and importance of their participation while process of description of infrastructure. For provision of listing quality for recording of interviews were used dictating machines technical gadgets. Recording by dictating machines served the following aim the interviewed person had expectation to check perfectness of records quality. As a result all questions were guided by the instruction. As well the practice showed that the method of control and analysis of interviews quality represent more perfect mechanism. Though recording by dictating machine was accompanied by negative factors that arose new risk, in particular: possible negative attitude from respondents respondents estrange recording by dictating machine somehow restrain respondents, especially in rural area with non - Georgian speaking population. In order to reduce risks and to neutralize the possible negative attitude for each respondent were prepared letters where along with listing description was made focus to confidential issues, the letters and questionnaires for non-georgian speaking people were prepared in corresponding language. Regular consecutive comprehension of above risks and solution made positive effect on the process of listing and the survey aims were achieved in perfect way. In the framework of the project on evaluation of impact of millennium program by Georgian national statistics service is one more current innovation, inculcation of monitoring control of the field under survey and the process of analysis of which successful implementation is directly in proportion with provision of survey quality and reflects all risks of all stages of study, its positive sides and setbacks. Managers very often focus towards conception of governing risks, the strategy of administration risks, the analysis of financial risks when in the process of the project implementation usage of the forecast methods is very important as well, «naturally indefinite» forecast of situation and behavioural risks. While the process of project administration it is desirable to deliberate decline from average, square decline showings and deliberate variation ratio along with the calculation methodology of average level of hazards. The managers often give the risk zone grading but it would be more reasonable to review the risky zone with more specified classification represented by ultimate and inadmissible zones and to make more appropriate statements. Examples of Georgia evidence that even in massive projects implementation process managers pay attention to the negative events of the project and they reflect the measures to eradicate them. It would be desirable if managers deliberate in advance other successful or disadvantageous foreign and local projects in the process of the project implementation and based on thereof define the similar risk-factors system of reasons of advantages and disadvantages and elaborate this risk-factor in complex system consisting of advantages and disadvantages. While the managers have talks over marketing strategy would be more wishful for them to connect the marketing study role with the process risk-factors detection. From the point of looking for reasonable solution it would be more advisable to use probability evaluations while the project administration process, for example mathematical waiting that would result numerous probabilities based on multiplication sum. All these is very complicated process with its essence and certainly owing to calculation and takes into account number of mathematic processes in order to achieve the aim and it is necessary to take into account these methods and approaches. While the process administration it is necessary to review contingencies of unexpected cases, 108

104 the planning process and the matrix of response to risks. While regulation of financial recourses we often face the task of fighting uncertainty and ambiguity. This indefiniteness involves two types: it is impossible to clear up the current situation of the financial system with admissible specification; it is unknown or non-definable (or can t be stated with required specification) the financial indices of future period and its concomitant parameters. Non-precise multiplications in this case plays the role of uncertainty modelling instruments, which from their side base on human cognition ability and by features categories operation and logical statement possibility of formation with featuring forms. The great importance is conferred to the right calculation of the cost limits of hazards because inappropriate estimation may cause regulating press and additional sanctions from central or local structures and expenses of the cost remuneration of the bank guaranties; excessive estimation of the risk costs will cause surplus insurance costs and will increase the bankruptcy probability. If we talk about future importance of financial factors in this case is possible and helpful operation with non-specified figures and functions. The modelling total result takes the similar view and becomes possible to evaluate possible declines risk from preliminary defined norms. Based on non-specified sets of theory in order to define risks in financial management are used: the enterprise bankruptcy risk analysis; the project risk evaluation; formation of optimal portfolio of business and securities; fixing of actual prices of units; evaluation of investment attraction of shares and obligations; necessity to develop the internet technologies and justified analysis. The policy of administration of information risks is in direct connection with the company information management and the information security policy. The main benchmarks of information risk management should be : the definition of risks management scale; interrelation between information risks regulation and the company strategic planning processes; the aims of the project information risks management and the principles; which risks are admissible it should be established; responsibility for information risks management. When the hazards are revealed and evaluated the decision should be taken over adequate response. Among responses are distinguished the risks reduction, or retention, readdressing and participation. 5 In some cases they consciously choose retention version, because the risk sometimes is so large that it is simply impossible (insensible) their readdressing or reduction (for instance, force major - earthquake, floods etc). In other cases the risks are involved in the estimate reserve. They are destined for a case of their emergence. Risks retention in case we elaborate the emergency schedule and use it in case of hazardous situation. Sometimes we may not take into account the risks and simply agree the estimate increase for risky cases. The risks readdressing or redistribution is rather simple undertaking. Readdressing doesn t change risks; readdressing the risks for the other side is followed by payment of surplus cost, which has fixed prices. The contracts are the classical example of the risks readdressing from leaser to lessee. Lessee knows that its firm should make payment for any risks. So the factor of financial risk is added to the contract cost. Till the risks are readdressed leaser should foresee which side can make better control of factors causing hazards and their specification. Is lessee able to overcome risks? While working over risks it is necessary to define liability and make written justification. The simpler way of risks readdressing is represented by insurance. However in many cases it is unreal, since it is not easy and simple to define hazardous conditions for insurance agent, who is not aware of the project affairs. It becomes easier to insure the risks like natural calamities which have low probability of happening and rather serious results. For the last time the large attention is directed towards exposure and calculation process of risky situations, which on one side represents the risk motivation and on the other side the opportunity to reduce the project cost. Cooperation between leasers and lessees made farmers to think over improvement of technological processes and methodical, in order to encourage lessees by way of innovation offers while the project implementation. Though this method may imply 5 Gabidzashvili B. Economic Ambiguity and Risks in Businessmen Activities. Monograph, Publisher Universal, 2010, p.p

105 increasing of costs at initial stage and the risk that the process may be activated, however expenses for risks and profits may be divided between leaser and lessee. More attention is paid to risks before starting the project the more is possibility for making them minimized. When the forecasted risk becomes real the plan of preventive measures to protect the environment from unexpected events is used in order to reduce the negative effect. In case of unexpected developments the plan meets the questions: what, where and when and in which quality it will happen? Absence of such plan causes serious mistakes while administration. Delayed solutions or taking decisions after risks may be rather dangerous and expensive. In case of unexpected developments at earlier stage designation of alternative activities, planning encourages finding the way out of crisis and this will significantly improve the project successive opportunities. The plan should cover evaluation of costs and source of financing. All participants should approve it since usage of such plan means change of sequence of processes. Therefore the plan should be checked by the team members in order to minimize their unexpectedness. The risk-management process, despite the range of the project represents systems and logics approach to the risks coordination. The risks fundamental solutions should be in conformity and inter-related with the company activation strategic objectives and the priorities. Any project should cover the policy of risks regulation, the risks administration procedures should be a part of daily activities. The issue is the policy of improvement of information risks management which should be subjected to the policy of the sole system of the project risks. Both should meet requirements for risks regulation which should be agreed with co-workers. Conclusions The article Main Aspects of Risks Administration in the Project Adjustment Process focuses towards the risks role while the project implementation process generally and in particular case. In modern unstable conditions the risks management is actual since as much it represents the significant tool in the arsenal of modern global world. If we review the example of Georgia we will see that creation of the risks management structure and its development is especially intricate task. For Georgian modern realities while the project implementation the risks management is going rather at the expense of experiments and failures. We should sort out the situation when the issue of projects risk management is diverse and complicated structure, which in rapidly developing environment is volatile considering time and conditions, just therefore elaboration of its sole standard becomes difficult. The selected method of risks identification depends on traditions, the sphere of activities and alignment. The identification methods are created by general format or the source, through definition of problem and the phenomenon. While the single project implementation process should be stated which kind of inner and external threats exist in various entities and the focus should be emphasized to the methods, which may help managers to reduce such threats or avoid them. As more attention is delivered to the risks till starting the project there may be more opportunities to minimize them. When the risk forecast comes true then the preventive measures are necessary in order to reduce risks. We consider that the scientists research attempts in this sphere which direct to study and deliberate risks and the processes in this regard are completely justified as the phenomenon and the foremost and the most important item of study of contemporary world economic or other spheres; to elaborate the system of analysis and management of risks survey and definition; to elaborate tools and mechanisms whereby will be reduced risks and will be evaluated the efficiency of risks management system and probability of possible losses. References 1. Gabidzashvili B. Economic Ambiguity and Risks in Businessmen Activities. Monograph, Publisher Universal, 2010, p Clifford F., Graj, E., Larson W. Project Management. Irwin McGraw-Hill,

106 3. Hillson D. Practical Project Risk Management: The Atom Methodology. Management Concepts Keshelashvili G., Paresashvli N. Project Management Gardner, D. Risk: The Science and Politics of Fear. Random House, Inc., National Statistics Office of Georgia. Tbilisi www. geostat.ge. 111

107 DELEGATION VERSUS EMPOWERMENT IN MANAGING EMPLOYEES Monika Rolkova, Viera Farkasova The Faculty of Operation and Economics of Transport and Communication Zilina, Slovakia, Abstract. One of the competences, which determine the effectiveness of each manager, is his or her ability to effectively delegate tasks to the subordinates, which means transfer the responsibility for carrying out tasks and the necessary power as well. The effective delegation releases managers hands to performing other important tasks that can be performed only by themselves and develops staff, increase their responsibility for completing tasks and also motivates them. More people who are able to manage their own work and get the information necessary for performing the tasks by themselves are needed. Employee empowerment is a systematic transfer of decision-making competency from the top of the hierarchy to the self-governing structures. It removes barriers in the organization, overcomes bureaucracy, strengthens the feeling of involvement of the employees and improves long-term performance and synergy in the organization. Keywords: delegation, employee empowerment, responsibility, barriers, delegation rules Introduction The current senior management is often drowned in an operational agenda. Usually because of an inappropriate way they respond to emerging problems. One of the important competences, which in fact determine the effectiveness of each manager, is ability to effectively delegate tasks to the subordinates, thus transfer the responsibility for carrying out tasks together with the necessary power. Proper delegation releases the hands of managers to performing other important tasks that can be performed only by themselves and develop staff, increase their responsibility for completing tasks and also motivates them. Manager while delegating must ensure that employees have the necessary conditions and resources to enable them to perform specified tasks. Then during the process he should not intervene in the implementation of tasks with the exception of situations where an employee fails to fulfil his role, or he performs poorly. Many managers are unable to give up responsibility and want to know about every detail that happens in the work of their subordinates, they constantly control, guide, intervene in their activities, thereby the employees are losing responsibility for their performance, because they know that their manager is always close and prepared to do the task for them if there was any problem. Managers thus hamper their development, discourage them and don t have the best results because they devote a large portion of time for activities where should be someone else in charge, so there is no time for their own work. The delegation presupposes confidence - the employee knows what is his role, has the necessary resources, or knows where he can get them, has the trust of manager that he can handle the task, although he has always an open door, if he needs consultation during the task completing. The delegation of managers should not be taken as the transfer of tasks that they themselves do not want to do or blaming staff, if something goes wrong and vice versa, and collecting accolades for themselves, if team manages to get a good result. 112

108 1. Delegation procedure For proper delegation these rules should be followed: The role must be clearly specified. The employee must know what should be an output and how long should it takes. Managers should explain the broader context of subordinate role. Why is it necessary to do it, what makes sense for the overall outcome of the team or company and what complications can arise during its implementation. Determining the evaluation criteria. The employee should know how and on what basis will be assessed the success of the task. Handing the necessary powers. Employees are passed with the necessary powers to perform their tasks and are provided adequate resources (financial resources, advice, training, human resources, etc.). Verification of understanding and motivation. The manager should ensure that the employee understood the assignment and is motivated to accomplish the task. 2. What is appropriate to delegate Of course, you can delegate any task. For effective delegation manager tends to delegate only certain tasks and others keeps for himself, because they are a load of managerial function and their delegations would not be appropriate. When delegating it is necessary to assess the ability of employees and provide them with appropriate tasks, or slightly more difficult if the manager will consider that they have to cope with them and want to develop them. Manager should always delegate: gathering information - gather the necessary information for a manager can effectively carry out another employee to release him the space for his analysis and design some solutions needed. repetitive tasks - management time is too precious to re-write routine reports and comparison with the budget expenditure. After training it can handle any of the subordinates. detailed work - searching for errors in the documents, data verification, these all are activities which occupy a disproportionately high share of manager s time and should be done in minimum of his time. representation - a manager can not be everywhere and it is appropriate when he can effectively use his authorized staff to go on less important meetings or conference calls, and then summarize for him the main conclusions. development tasks - manager should train and prepare employees with the potential for future features and develop them by giving them grants challenging tasks that will be required of them in the future. 3. What is not suitable to delegate Some activities should remain in the hands of managers, because they are the main tasks of his role: long-term goals - long-term vision for forming the company and its objectives, a manager can use the advice of the staff, but the final version must be in his hands. monitoring and evaluation of employee performance, labor discipline - to assess the work of subordinate or conduct disciplinary interviews should always be done by a manager and not of someone else because of lack of time. confidential and politically sensitive tasks in some tasks are dealt with confidential information, such as salaries or new business plans of the company. This would be without a 113

109 serious reason not to get out of the hands of the manager as well as carrying out tasks from his boss that he wants to carry out by manager personally. 4. Barriers to delegation Managers often delegate tasks ineffectively, or not at all, because they don t know how to do it right, does not have time for effective delegation or are afraid of losing their positions. The reason of this can be their misconceptions as for example: You can not rely on employees. By delegation manager loses control over the tasks and results. The manager is the only one who has all the information and it is time consuming to give them all to the employees. Manager is able to the task faster. Delegation reduces managers power and authority. 5. Upward delegation Delegation means giving the roles to the workers in accordance with their capabilities, together with the powers necessary to complete the task. Often, however, there is the fact that employees return task to manager only partly completed, do not make the necessary decisions and rely on the boss decides for them; check the task and eventually he completes it. If the manager tolerates such behavior, employees start to rely on it, don t take any responsibility, don t grow professionally and a manager does the work for someone else. The only solution is to return them task back and get them to reflect on how to continue, what they suggest, and what solutions they already have tried. If they are asking manager for a decision, he should ask them what decision they would consider the most appropriate and if not made any major mistakes, let them continue and complete it by themselves. In the terms of delegation of tasks there is tendency in recent years to start to use the specific term employee empowerment. 6. Employee empowerment Today it is really not enough, if the employee only performs duties, companies need people who can take responsibility. More people who are able to manage their own work and get the information necessary for performing the tasks by themselves are needed. They know goals; share the values and vision of the company and the specific tasks they can set out by themselves. The more sophisticated processes are used in organization, the more people are prepared to administer high performance, the more need is to establish for them relative autonomy - self-governing team. To be able to accurately and quickly respond to what is happening in the market, the company needs to focus to reduce level of decision-making. In recent years, more people receive the assignment, in the best case they were able to meet it without mistakes and quickly. Now the confusing dynamic environment requires a quick response, it is not possible to be let information struggling through the whole hierarchy to the very top of the company, and thence in the form of assignments back down again to the people. The decision must occur close to the situation, to the problem. This leads to the other demands on people. Employee empowerment is a systematic transfer of decision-making powers of the hierarchy to the self-governing structure. It removes barriers and helplessness in the organization and overcomes bureaucracy. It improves long-term performance, synergy in the organization, strengthens the feeling of involvement and flexibility of employees. Empowering employees and encouraging them to engage in various business functions usually make them feel like they are valued by the company, it improves morale. When morale is high, workers are more productive, which translates to greater revenue and profit (Thibodeaux, 2011). Duran (2011) comes to the same conclusion that there is a positive correlation between employee 114

110 empowerment and productivity. Motivated, empowered employees are more inclined to see the organization succeed, and they will often deliver better customer service. Conditions that support empowerment are for example: clearly defined responsibility for results continuous access to actual results (permanent feedback) decision-making power in the key issues that affect performance clearly defined link between the results, rewards and recognition Why empowerment fails: reluctance to lose control over the process environment of mistrust and fear "You wanted it so you must cope with it by yourself" organizational barriers (bureaucracy, hierarchy, etc.) feeling of abuse of employees Apart from cases of initial resistance arising from distrust of change and worry concerning new demands, it is commonly found that the major resistance to employee empowerment comes neither from senior management nor from the employees themselves but from middle level supervisors who perceive their positions of authority threatened (Keighley, 1993). On the other side, if subordinates tend to go with every small problem to the manager and leave all decisions on him, it's usually because they are learned so or do not have the necessary powers, to complete the tasks. The manager should think about how he can pass operational agenda to his team effectively, develop the smartest people through empowerment and obtain for himself time for his strategic role. As Jack Hyles puts it: "Don't use your people to build a great work; use your work to built great people." This in principle epitomizes the concept of empowerment (Theyaqu, 2009). References 1. Doughty, H.A. Employee Empowerment: Democracy or Delusion? In: The Innovation Journal: The Public Sector Innovation Journal, vol.9 [online]. Retrieved from:< 2. Duran, D.A. What Does Employee Empowerment Mean&How Is It Productive? [online] Retrieved from: < > 3. Hroník, F. Empowerment aneb Proměny rozvoje lidských zdrojů. Business Brunch 4/ Hroník, F. Manažerská integrita. Brno: MotivPress, ISBN Thibodeaux,W.:What is Employee Participation&Empowerment. [online] Retrieved from:< 6. Theyaqu,D. Delegation versus Empowerment [online] Retrieved from: < 7. Urban, J. Řízení lidí v organizaci. Praha, ASPI Publishing s.r.o.,

111 THE CORE PRINCIPLES OF STUDIES PROGRAMS A MEANS TO MATCH THE INTERESTS OF PARTICIPANTS OF STUDIES PROCESS AND TO STIMULATE INTERACTION BETWEEN SCIENCE AND STUDIES Aleksandras Vytautas Rutkauskas Mykolas Romeris University, Lithuania, [email protected] Abstract. The object of this article is the process of studies, seeking the sources and factors of this process effectiveness in the stage of studies programs preparation and primarily highlighting the necessity of interests compatibility of process participants entrants, university, business and nation. Without mentioned detection of the interests of process participants and anticipation of its compatibility in the studies program as digest of purposes, means and possible results of projecting studies process the attributes of the studies process such as competitiveness based on economy of process, flexibility and adaptivity should be unclosed and possible general values of the studies process and drafts of values for every participant of process for the university the value of services provider, for the student values of the knowledge and practical skills formed by the programme, for the business surplus values, for the nation public values should be defined. Plus, already in the program of studies process should be estimated risks of discrepancy between the purposes projected in the program and process of the reality. The prevention of the mention risks or the education of students abilities to qualify the subsequences of possible risks is necessary requirement for studies process and its organizers. The hope is flattering that commanding requirement to follow the principles of interests compatibility, to do reasoned estimations of mentioned values and to publish its results openly will eliminate the base for unreasoned or even demagogical discussions about the advantages, disadvantages or necessity of the one or other program. Moreover, objective information would be useful for choice of entrants. They could to see the receivable benefit from program, possible risks and, finally, to have the guaranty that the liabilities established in the program will be fulfilled. In order to concretize the principles of studies programs preparation, as the object of the research a faculty of one Lithuanian university was selected, where the complex of studies according the programs of business, management and economics are performed. In order to prevent the paper of becoming a commercials of that faculty, it is named as FF. Keywords: study program, information systems, science, and specialization. Research type: conceptual paper. 1. General remarks about assessment of studies programs effectiveness today and improvement possibilities of this assessment The presentation of studies programs goals implementation possibilities with the help of programs methodical and material description, modules set and necessary literature digest just reminds about programs material provision, organizers understanding about good program structure and knowing about most new literature necessary for programs process 1. However this not creates sufficient assumptions to assess and implement attributes of the studies process such as program 1 Laipsnį suteikiančių pirmosios pakopos ir vientisųjų studijų programų bendrųjų reikalavimų aprašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. balandžio 9 d. įsakymu Nr. V-501. Magistrantūros studijų programų bendrųjų reikalavimų aprašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. birželio 3 d. įsakymu Nr. V-826. Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l vadybos ir verslo administravimo studijų krypties reglamento patvirtinimo m. liepos 31 d. Nr. ISAK-2294, Vilnius. 116

112 competitiveness, adequacy to interests of programs participants, program economy, flexibility and adaptivity and, finally, value created of program and risk of program 2. Study program is production of intellectual activity and has long evolution period (Hill et al, 2003; Murias et al, 2008; Staskeviciute ir Neverauskas, 2008; Katiliūt ir Kazlauskien, 2010; Stukalina, 2010). For this reason studies program instead original musical composition often reminds folk musical composition useful for conversation about music, amateurish training and, finally, for professional concerts. Truly, studies program having the same modules set and references could be found in the programs digest of both most progressive world university and ordinary college. On the other hand, in the face of studies and science management monopolization, if it would happen in any country, we should say that science and studies also studies programs is not just public resource or public good about which should care just government of particular country. In order to develop mentioned programs features first of all the interests of all interested parties future specialists, business, universities and nation should be deeply realized and to know how to estimate receivable value. Talking about competitiveness of studies programs as a single product of institution of studies services it would mean the ability of that program to attract more students going to get particular speciality in particular institution and in this way giving bigger financial benefit. However thinking about studies program brand as whole and expansion of this brand influence to the increase of general value created by studies program the interests of all interested parties participating in the program management process and those who using studies program services should be seen and estimated. First of all there are interests of the students interested in demand of their acquired knowledge and practical skills in the labor market. Second are interests of business as direct user of specialist knowledge and practical skills in order to get value-added. And finally, interests of the nation, which the main capital is intellectual and well-educated yang person. In order to implement program goals especially important attribute is economy of program. Economy of program should be a direct component of the competitiveness of program, but regarding to nowadays reality demand to look for saving possibilities in any activity, we should to assess whether knowledge and practical skills got from program, i.e. value for specialist, business and nation is got with the minimal inputs. It is not debatable that flexibility and adaptivity of the program are important features of programs competitiveness and economy. Doubtless that estimation and practice of value of the studies programs as creation giving intellectual product and service should become imperative. Probably it will become impulse to unclose the benefit which exploiting and projecting studies program should bring to every participant of the studies process (Wolansky, 2001; Doherty, 2008; Grundey, 2008; Benton, 2011; Rutschow ir Schneider, 2011; Verdina, 2011; Bana e Costa ir Oliveira, 2012) 2. About information systems as integrate component of studies programs and necessity to invoke adequate information systems In the last section mentioned consideration that description of the knowledge and practical skills got from program, set of the program modules and digest of the important literature, potential indicators of the methodical and material equipment should be complemented by generally known or created by program authors information system, which has expanded information about possible challenges for particular speciality from both practical skills allowing professionally deal with activities tasks, inadequacy and unknowing of decision methods viewpoints. These are most often meet strains of studies program risk and the readiness of the students to buffer the subsequences is 2 Lietuvos Respublikos mokslo ir studijų įstatymas m. balandžio 30 d. Nr. XI-242, Vilnius. Studijų kryptis sudarančių šakų sąrašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. vasario 19 d. įsakymu Nr. V

113 important attribute of studies program quality. Also it is a means for students who are going solo to increase benefit got from studies program. Naturally, that mentioned risks on knowledge and its conversion to the practical skills, as rule, can not to become direct object of the academicals and practical lectures or practical exercises because the credo of the studies is preparation for particular speciality. Preparation for the possible risk challenges is separate problem requiring several decision means and methods. Thus, also according to the shortening duration of studies, especially important is to create information system or to use already existing one in order to see particular speciality in the risk challenges context. Programs from both general value and separate value strains creation viewpoints very important place should to take in specialists preparation for possible risk challenges. Thus, programs organizers and administrators also users and assessors should to understand, that students ability to work self-dependently should be complemented by students ability to overtake him as programmed professional answering to risk challenges. Most effective this problem is tackling involving students into science-research activity and giving for them knowledge about riskiness of the future possibilities and possibilities to manage this riskiness. The force of the studies program conveys not just by abilities of students education to know the processes they interested in but also by unclosing new possibilities of that processes development and giving abilities for future professionals to use those possibilities. This is especially effective search way of the studies and science research synergy. The implementation of the last three paragraphs of this section is not possible without functioning of studies programs infrastructure information system, principles of which are discussed in the next section (Fig. 1). I N FO R M AT I O N Information about demand changes in labor market and international relationships development Information about knowledge and practical skills inadequacy to possible changes STUDY PROGRAM The digest of modules Means for practical skills education External and foreign relationships Scientific, information accumulation and usage skills Knowledge about possibilities, tools and methods to manage risk of studies programs Information about innovations and science results possible influence to activity, for which specialists are prepared S Y S T E M Figure 1 The scheme of the general possibilities of interactions between studies programs and its information system 3. FF objectives and possibilities to harmonize interests of students, social development and business and to enshrine interface between science and studies 3.1. The definitions used in this text (SUDIS, SETDIS, BUDIS, INNVIS, REGCDIS, REGDRIS) could be understood as linkups of paganism or other mystical powers of invisible environment. However it is just acronyms of definitions every day used in auditoriums and business or politics environment. The main part of these definitions is IS information system. 118

114 In many cases, information system is understood as an entirety of definitions, opinions and consistent patterns formatted in base system together with hypothesis of characteristics of base system and information needful for decisions, which are necessity for achieving purposes. In our case information system is a digest of knowledge entirety about base system, for example investment processes development requirements, goals and its achievement possibilities based on most important factors knowledge and intellect power of coming professionals and real activities estimated with possibilities requirements investments. It should be together with seeing how to train mentioned power and to estimate demand and possibilities. The object of this section is FF studies programs complex, which is pointed to create knowledge and skills entirety, which, from one side, lets to meet students interest to get package of knowledge and practical skills giving competitiveness advantages in labor market for a long time and to safe ability to refresh competitiveness knowledge and practical skills in the perspective, from the other side, lets to guarantee that business, which will become user of graduates knowledge and skills, would be ensure about creation of added value and graduates flexibility reacting into changes of environment and work processes. Teaching institution, which aims to achieve all goals perfectly, needs to attain students having proper preparation and intellect and who also aims their goals reasonably. Business, in turn, using the great asset of country intellectual potential should be responsible for efficient practice of it and future development guarantee. To see this and to promote is the obligation of every government. Great loss for country could be when young people, requesting largest investments, are wrong identified, when intellectual career education is prosecuted by teaching institutions having not enough competences, when supply of specialists is not adequate to real demand, when it is incapable to use created valuables young specialists Base provisions of formation of FF studies programs complex. The complex of FF studies programs is oriented into such prospective professionals career education, which would guarantee possibilities of perfection for him and also would enable him to use acquired knowledge and practical skills seeking social, economical and intellectual development of Lithuania during the integration into beneficial EU and global structures. The quality of studies is recognized as the main means for implementation of most important goal of studies complex Presumptions and resources of implementation of FF studies programs. High intellect level of bachelor and master entrants and labor markets practical demand of specialists trained in the faculty could be declare as main presumptions for successful implementation of studies programs complex 3. As the main improve for presented arguments is high average of studies of entrants and high level of placement of FF graduates. The main resources of FF, giving knowledge and skills, are high qualification of lectures, plenty of knowledge necessary for every specialization or profession, high international mobility of students during studies and, most important, very purposeful accumulating and also generating in faculty knowledge, which creates the corona of graduates knowledge. Accumulating and generating knowledge usually has double mission. First, it is oriented into high performance of graduates knowledge and skills. Second, it is oriented into promotion of business development possibilities in the sphere, for which faculty is preparing specialists. Strong synergetic effect is received in the case of success also storing and generating knowledge joins in knowledge base or information system formation (Barkhi ir Williams, 2010). Here (Fig. 1) we would like to represent the main moments of interaction between studies programs and its information system. Information system could include the possibilities of 3 Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l jungtinių studijų programų bendrųjų reikalavimų patvirtinimo, 2009 m. gruodžio 31 d. Nr. ISAK-2833, Vilnius. Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l laipsnį suteikiančių pirmosios pakopos ir vientisųjų studijų programų bendrųjų reikalavimų aprašo patvirtinimo m. balandžio 9 d. Nr. V-501, Vilnius. Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l nuolatin s ir ištęstin s studijų formų aprašo patvirtinimo m. geguž s 15 d. Nr. ISAK-1026, Vilnius. Lietuvos Respublikos Vyriausyb s nutarimas D l studijų sričių ir krypčių, pagal kurias vyksta studijos aukštosiose mokyklose, sąrašo ir kvalifikacinių laipsnių sąrašo patvirtinimo m. gruodžio 23 d. Nr. 1749, Vilnius. 119

115 methodical and material equipment or could be analyzed as the subsystem complementing mention possibilities. Further we will represent (Fig. 2) real information systems serve as studies programs information systems in order to educe the requirements for students entering to bachelor and master studies and also to define skills of those, who works after FF studies graduation The particularities of organization of FF studies programs complex implementation. From Fig. 1 we can see that decision about demand of necessary knowledge and practical skills is taken analyzing macro economical, social, integration and other macro goals in their interaction with solution of social problems, search and implementation of business development strategies, investments as most active and unique means in order to impact development of Lithuania and, maybe, its survival, also to ensure national, technological, intellectual, organizational maturity and its dynamics. Fig. 2 lets us to understand in which goals and interests hierarchy level necessary knowledge is accumulated and guaranteed for concrete studies program or specialization and also scientific researches, which, from one side, are necessary for modern and long-lasting knowledge formation for future professionals and, from the other side, for incentive of business development in spheres where FF graduates should and could be in the lead. In order to guarantee successful way to mentioned leadership for students, who chose bachelor or master studies at FF the singleness of intellect, readiness and motivation is needed The principles of individual program (specialization) selection. FF maintains limited number of programs on the same time two of bachelor and two of master studies. In order to ensure the flexibility of these programs large number of specializations, which are prepared on the base of information system and gives particular knowledge, is prepared. The selection of specializations in concrete period usually proceeds following special procedure (Fig. 3): according to forecast of specialities and professions dynamics made in EU, Lithuania and other countries with analogical or reachable social-economical development, the list of most expected and popular in Lithuania professions is formed; according to current knowledge systems and it s refreshable possibilities, proper specializations are selected; the competitiveness in labour market of specialists prepared of FF specializations is estimated; the levels of entrants readiness, intellect and motivation for specializations are forecasted; the decision about concrete specialization is made; The team, which should implement programs, specializations refreshing information systems and other required means is formed. 120

116 SUDIS Sustainable development information system SETDIS Social, economical and technological development information system BUDIS Business development information system INNVIS Investment information system REGCDIS Regional competitiveness development information system REGDRIS Regional development risk information system Figure 2 Hierarchical scheme of information systems interaction detailing ( and integrating feedback ( ) ) rising demand and preparing This procedure is prosecuting according to requirement maximally by specialization to supply the interests of all in this process participating sides, i.e. specialist to-be, business, university and government (Fig. 2). Government, which is responsible for saving and education of most important resource of country genetic fund School graduates, who intellectually and objectively are ready for studies at university and reasonably reaching for speciality, which has competitiveness in market and long lasting value, and readiness to react into all profession requirements changes Speciality, which lets to realize interests of professional to-be, business using his capabilities, university qualifying specialists and fostering their activities arsenal and government, which is responsible for country s future. Business, which is interested on specialist s capability to create added value, readiness to participate in business management and technological development and flexibility FF, which reaches to dispose studies programs able to competitive in the country and international level and adequate scientific researches results Figure 3 FF specialization as interests realization results of specialist, educating faculty, business using specialist s knowledge and skills and government 121

117 4. Programs management In order to develop the quality of studies, to look for economically optimal studies process development ways, enshrine relationships of today s market in science and studies sphere the important attention should be given for the studies programs creation and management from both fundamentally of management and timeliness viewpoints 4. It should be guaranteed that for the existence and development of the studies program influence would have interests and decisions of all interested parties. In the aggregated management structure of the program (see Fig. 4) the actions of the subjects of direct programs process and its perspective development programs council and leader are unclosed together with the interests and actions of programs organizers, users and assessors. Programs estimators - Vice-rector for studies (the quality of studies; value for programs owner) - MSM (public value) - Business (added value) Programs council Programs leader The organization and implementation of the program Programs organizers Departments of the university; Scientific laboratories; Social and foreign partners. Users of the programs services: 1.Preparing specialists. 2. Others Figure 4 Aggregated management structure showing necessary to implement decisions ( ( ). Double cursor shows plurality of requirements and information ) and notifications According to Fig. 4 the main duties and rights of the participants of studies programs in the programs management process could be formatted: 1. The main functions of the operative programs management and monitoring of the implementation quality and the strategic management belongs to the leader of program, which: - is responsible for the studies process adequacy to the declared programs goals and quality; - is balancing operatively the interests of programs users, assessors and organizers; - is responsible for programs succession and resumption. He is the main strategist of quality and marketing; - is responsible for programs council. 2. Programs council (scientific-methodical commission in the case of department programs and directorate of studies in the case of interdepartmental programs) is responsible for the coordination of interprogramical and interdepartmental interactions and accumulation of the information got during particular programs process supervision and its representation for the leader. 3. Programs users are responsible for their readiness and attempts to master knowledge and practical skills giving to them in particular way. If they unreservedly follow liabilities they have right to require part compensation for departed from declared services and to make restitution of subsequences during some time. 4 Studijų kokyb s vertinimo centro direktoriaus įsakymas D l vykdimų studijų programų vertinimo metodikos patvirtinimo, 2010 m. gruodžio 20 d. nr

118 4. Programs assessors assessing and informing programs council about programs adequacy to programs users (in the broad sense) and about created value for the owner (for the university), public value (for the nation) and added value (for the business). It should become as a base for assessment of programs generated value as whole. 5. Theoretical basics and estimation practice of the intellectual product or activities value estimation already is in the mature state period but this practice for the estimation of generating value of studies programs is not large. But it is doubtless that this method based on science and progressive experience should safe programs from incompetent fighters for the saving of interests of nation, business and university. 6. Programs organizers should be professionally and financially free choosing services in one or other program and to have the guaranty of activity s succession if the services meet the requirements of quality and contract conditions. Further we will discuss the selection one of the programs and the preparation for its implementation. A note. The author in the paper was not discussing on the key questions of the paper about the interests of participants of the program, about the value, created by the program for its participants, about the program risk and its prevention, because the authors of the formulated topics have not been met nor in Lithuanian, nor in the foreign literature. The presented list of literature was as an information system for the author on the peculiarities of study process in Lithuania and in EU. The author positively thinks that the questions discussed in the paper are worth exceptional attention. Concluding remarks Academic studies program is the plan of knowledge giving and practical skills formation. On the results of this plan are interested not just university as the owner of the intellectual capital program and student as recipient of programs direct result but also particular activities as users of programs prepared specialists, services helping in added value creation and nation as keeper of public value creation. Success of the studies program depends on both compatibility of interests of mentioned interested parties and created spreads of owner, user, added and public values. As the base of programs utility and acceptability should be integral, i.e. all mentioned values included value. The factors related between each other by program potential utility are not just program competitiveness, economy, adaptivity and flexibility but also important becoming program riskiness, which subsequences management is constructive ability of the future specialist. The participants of the studies program process university, student, business and nation have their commitments and rights: for the university to get nation support, for the business to get services of specialist understanding local business peculiarities, for the nation to see the creation of the value for users and investors and, finally, for the students to have rights for the compensation if the owner of the program not guaranteed promised quality and amount of the knowledge and skills. One of the success preconditions of the studies program is programmed management. References 1. Studijų kokyb s vertinimo centro direktoriaus įsakymas D l vykdimų studijų programų vertinimo metodikos patvirtinimo, 2010 m. gruodžio 20 d. nr Magistrantūros studijų programų bendrųjų reikalavimų aprašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. birželio 3 d. įsakymu Nr. V Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l jungtinių studijų programų bendrųjų reikalavimų patvirtinimo, 2009 m. gruodžio 31 d. Nr. ISAK-2833, Vilnius. 123

119 4. Studijų kryptis sudarančių šakų sąrašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. vasario 19 d. įsakymu Nr. V Laipsnį suteikiančių pirmosios pakopos ir vientisųjų studijų programų bendrųjų reikalavimų aprašas. Patvirtinta Lietuvos Respublikos švietimo ir mokslo ministro 2010 m. balandžio 9 d. įsakymu Nr. V Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l laipsnį suteikiančių pirmosios pakopos ir vientisųjų studijų programų bendrųjų reikalavimų aprašo patvirtinimo m. balandžio 9 d. Nr. V-501, Vilnius. 7. Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l vadybos ir verslo administravimo studijų krypties reglamento patvirtinimo m. liepos 31 d. Nr. ISAK-2294, Vilnius. 8. Lietuvos Respublikos švietimo ir mokslo ministro įsakymas D l nuolatin s ir ištęstin s studijų formų aprašo patvirtinimo m. geguž s 15 d. Nr. ISAK-1026, Vilnius. 9. Lietuvos Respublikos mokslo ir studijų įstatymas m. balandžio 30 d. Nr. XI-242, Vilnius. 10. Lietuvos Respublikos Vyriausyb s nutarimas D l studijų sričių ir krypčių, pagal kurias vyksta studijos aukštosiose mokyklose, sąrašo ir kvalifikacinių laipsnių sąrašo patvirtinimo m. gruodžio 23 d. Nr. 1749, Vilnius. 11. Rutschow, E. Z.; Schneider, E. Unlocking the Gate: What We Know About Improving Developmental Education [interaktyvus]. MDRC, June [žiūr ta ]. < 12. Bana e Costa, C. A.; Oliveira, M. D A Multicriteria Decision Analysis Model for Faculty Evaluation. Omega, 40: Verdina, G Risk Management as a Tool for Securing Internal Control in the Process of Study Programme Implementation at Higher Education Institutions. Economics & Management., 16: Katiliūt, E.; Kazlauskien I The Model of Studies Quality Dimensions from Student s Perception. Economics & Management., 15: Barkhi, R.; Williams, P The impact of electronic media on faculty evaluation. Assessment and Evaluation in Higher Education. 35(2): Benton, R. J Using Student Course Evaluations to Design Faculty Development Workshops. Academy of Educational Leadership Journal. 15(2): Doherty, D. G On quality in education. Quality Assurance In Education. 16(3): Grundey, D TQM in university studies: Quality assessment and quality assurance in a Lithuanian University. Transformations in Business & Economics., 7(2): Hill, Y., Lomas L., MacGregor, J Students perceptions of quality in higher education. Quality Assurance In Education. 11(1): Staskeviciute, I.; Neverauskas, B The Intelligent University's Conceptual Model. Inzinerine Ekonomika-Engineering Economics. 4: Stukalina, Y Using Quality Management Procedures in Education: Managing the Learner-Centered Educational Environment. Technological and Economic Development of Economy. 16(1): Wolansky, W. D A multiple approach to faculty evaluation. Education. 97: Murias, P.; Miguel, J. Cd.; Rodrı guez, D A Composite Indicator for University Quality Assesment: the Case of Spanish Higher Education System. Social Indicators Research. 89:

120 NAUJI STUDIJŲ PROGRAMŲ PRINCIPAI KAIP PRIEMONö SUDERINTI STUDIJŲ PROCESO DALYVIŲ INTERESUS IR PUOSELöTI MOKSLO IR STUDIJŲ SĄVEIKĄ Aleksandras Vytautas Rutkauskas SANTRAUKA Studijų programos tikslų įgyvendinimo galimybių pristatymas tik metodinio ir materialiojo programos aprašo, modulių sąrankos ir skaitytinos literatūros sąvado pagalba veikiau primena apie programos materialinį aprūpinimą, reng jų geros programos sandaros supratimą ir šviežiausios programos vykdymui priimtinos literatūros žinojimą, tačiau nesudaro pakankamų prielaidų įvertinti ir įgyvendinti tokių programos savybių kaip programos konkurencingumas, adekvatumas programos dalyvių interesams, programos ekonomiškumas, lankstumas ir adaptyvumas ir, pagaliau, programos kuriama vert bei programos rizika.šio straipsnio analiz s objektas yra studijų procesas, ieškant to proceso efektyvumo ištakų ir veiksnių, jau studijų programų parengimo etape ir akcentuojant proceso dalyvių studijuojančiųjų, universiteto, verslo ir valstyb s interesų suderinamumo būtinybę. Studijų programoje, kaip projektuojamo studijų proceso tikslų, priemonių, vyksmo ir tik tinų rezultatų sąvade, be jau pamin tų proceso dalyvių interesų atskleidimo ir jų suderinamumo numatymo tur tų atsiskleisti ir tokie studijų proceso atributai kaip konkurencingumas, paremtas proceso ekonomiškumu, lankstumu ir adaptyvumu, tur tų būti nubr žtos programuojamo studijų proceso galimos bendrosios vert s ir verčių kiekvienam iš proceso dalyvių: universitetui savininko vert s, studijuojančiam vartojamosios vert s, verslui prid tin s vert s, valstybei viešosios vert s apmatai. Ir dar, jau studijų proceso programoje tur tų būti įvertinti programoje projektuotų tikslų ir tikrov s vyksmo neatitikimo rizikos iššūkiai, kurių prevencija ar studijuojančių geb jimo sušvelninti galimų rizikų pasekmes išugdymas yra būtinas reikalavimas studijų procesui, taigi ir jo organizatoriams. Straipsnyje puosel jama viltis, kad įsakmus reikalavimas laikytis aptariamų interesų suderinamumo principų, atlikti pagrįstus pamin tų naudų vertinimus ir viešai juos skelbti atimtų pagrindą neargumentuotoms ar netgi demagogiškoms diskusijoms apie vienų ir kitų programų privalumus ir trūkumus ar jų reikalingumą. Dar daugiau, objektyvi informacija pasitarnautų būsimų studentų pasirinkimui, kai jie matytų tiek gautiną iš programos naudą, tiek galimas rizikas ir, pagaliau, tur dami garantiją, kad programose iškelti įsipareigojimai bus tikrai įvykdyti. Konkretizuojant studijų programų rengimo principus, nagrin jimo objektu pasirinktas Vilniaus Gedimino technikos universiteto Verslo vadybos fakulteto studijų kompleksas. Raktiniai žodžiai: studijų programa, informacin s sistemos, mokslas, specializacija. 125

121 SOCIAL NETWORKS FOR BUSINESS: CASE OF LATVIA Deniss Ščeulovs Riga Technical University, LV-1048 Riga, Meža str.1/7, Abstract. Today's information and telecommunications technology makes it possible to communicate data and other information exchange and regardless of location, distance and time space. The computer revolution that has profoundly changed production and communication is destined to change marketing just as profoundly 1. The most popular e-tool used for communication is social networking. Social networks have experienced an evolutionary process - in the beginning was like-minded grouping, news exchange by mean of . Later on developed social networks, that became a tool for e-business. Social networks can be effectively used in different e-business and e-marketing activities, such as sales, advertising, PR, human resources, customer segmentation etc. Keywords: internet, social networks, social networks development, e-environment, e- marketing. Introduction Objective of the paper is to describe and evaluate social networks phenomena, to describe the reason and justification of its occurrence from marketing theory point of view, to describe the place and importance of social portals in e-marketing and main problems that social network creators and users face. What contains knowledge about the social portals and what kind of opportunities this resource offers; who are the clients and how to increase their quantity? What are the business benefits of using this kind of portals in the market? The author analyzes the impact of social portals on various activities of enterprises - changes in marketing, sales, business planning under the influence of social portals, risks that are associated with social portal usage. Prospects for the development of relations between businesses and their customers in the context of social portals. Research methodology: the author employs well-established quantitative and qualitative methods of research: grouping, analysis, statistic method, etc. The theoretical and methodological background of the research is formed by, scientific researches and publications, publications from mass media and professional literature; statistical information from legal institutions as well as information collected by the author during the survey. Findings: research result shows that social networks may be classified based on various factors. Depending on company s aims and specifics different social networks can be used for maintaining different processes. Originality/value: in this paper the author presented their findings based on theoretical, scientific and field research. Author has conducted research on e-environment utilization among Latvian enterprises. Conclusions: electronic social networks are the major tool for entrepreneurs in the electronic environment. Wise usage of the opportunities that the entrepreneur can extract from operations in social networks, may significantly improve the competitiveness of the company - sales channel and market scope expansion, sales increase, new product development, testing and bringing to the market or improving the existing product portfolio, target audience analysis and segmentation, various marketing activities maintenance, e-commerce development, etc. At present time in Latvia, even considering that Internet in Latvian entrepreneurship is widely used during long time, active e-marketing employment and social networking in e-environment is at inception point. This observation is especially characteristic to Latvian micro and small enterprises. 1 Rapp, S. Collins, T.L The New Maximarketing: McGraw-Hill. 126

122 1. Theories of sociology Every day we are in different types of relationship with different people, thus creating a social network. How? In order to realize this fact, some questions should be answered. Perhaps you've found a job through a friend or friends? Perhaps you and your friends share common interests that unite you in a club or interest group? In the end of the day, you simply meet one another at home, work, outdoors, or perhaps you are a web portal and social network (facebook.com) user. The essence of the social networks is in possibility of contacting other people who, in turn, are connected with other people, and they, in turn, with other ones, etc. Thus, we can conclude that social network is a group of people and the relationships between them. The idea and premise of social portals can be searched in the theories of sociology. For example, French sociologist Pierre Bourdieu examines mental routine as bloodedly changing as individuals are too linked to each other through "their" social space and its applicable standards (Ozolzīle, 2009). Another sociologist, George Homans, in his theory of social exchange emphasizes three social groups: small, primary and secondary 2. Main features of the small groups: small, limited number of participants; common purpose and motivation of the group; group membership feeling (we and they); common norms and values that determine the interaction; differentiated social roles that are united by a common goal. Main features of the primary groups: frequent contacts; different types of contacts (verbal, optical, etc.); mostly direct contacts (face-to-face); frequent emotional contacts; small number of people. Main features of the secondary groups: rare contacts; predominantly indirect contact; predominantly verbal contact; primarily emotional contacts; large number of people. Analyzing the contemporary sociological theory, the authors want to highlight the concept of "globalization." E. Gidens treats it like this: Globalization is the process of strengthening the intensification of social relations and mutual dependence 3. Globalization means that we are increasingly becoming citizens of the "one world", that our actions are increasingly influencing others and vice versa. At the present day globalization affects all people in all parts of the world, both rich and poor. Globalization encompasses not only the economy but also politics, culture and social sphere. The main engine of modernization so far has been the information and telecommunication technology development. Globalization development has been provoked by many other factors. First, the end of the Cold War and the emergence of new international and regional forms of cooperation have contributed to the convergence of different nations and countries. Secondly, information technologies have provided a free flow of information around the world and created a new global worldview. Thirdly, the number of multinationals and their influence increased so that those creating the production and sales network transformed into intermarket elements. Globalization - opened and controversial process, whose consequences are difficult to predict and control (Fisks, 2009). Important role in globalization process has global community where people around the world views themselves as potential partners or even family members in a vast increasingly interconnected human family 4. Analyzing sociological theories, the authors concluded that the emergence of social portals is quite natural. Their appearance became possible owing to development of modern digital technology. It can be asserted, that the basis for the emergence of social web portals are modern 2 Ozolzīle, G. Socioloăija: Biznesa vadības koledža, p , 19; p ; p Fisks, P Mārketinga ăēnijs: JāĦa Rozes apgāds, p Kotler, Ph., Keller, K.L., Brady, M., Goodman, M., Hansen, T Marketing Management: Pearson Education Limited, p

123 sociological theories on one hand, and digital technology, namely the Internet, together with modern marketing, on another. 2. The study of social networks The study of the phenomenon of social networks for many decades, occupies the minds of sociology scientists, especially in Western sociology, which is rapidly developing. Network researchers are interested in explanation models and tools that go beyond the traditional quantitative methods. In addition, there is a rich set of mathematical methods that allow creating a fairly sophisticated model of social interaction that describe almost any social system. It is believed that the first time the term "social network" was applied in 1954 by John Barnes in «Class and Committees in a Norwegian Island Parish», published in «Human Relations» magazine 5. Using of social systems theory for marketing problems has long-standing tradition. In 1967, for instance, Fisk tried to structure all marketing activities by introducing the marketing system a set of marketing activities 6. Describing network Fuchs use definition the essentialism it is how the network works when it protects its foundations 7. Defining the concept of analysis of social networks, the author believes that it is the study of existing social relationships in a group of people. In contrast to classical methods of analysis that explore the individual characteristics of people, the main purpose of social network analysis is to study the interaction between people and to determine its occurrence conditions. Relationships are investigated in the context of relationships between individuals (or groups of individuals) and their actions are considered to be interrelated rather than isolated. It is important that "links" refer not only to communication between people, but also to of various resources and activities exchange. A central aspect of social network analysis is that the views, feelings and actions of people are created not because of their personal qualities, but because of relationship form they are participating in. The main concept of "network" idea hides in the fact that each person has a relationship with other people who are both linked with some other people etc., thus, a social network is associated with a group of people and the relationships between them. There are different social network analysis and evaluation methods both qualitative and quantitative. Qualitative research methods - unstructured or exploratory studies, which allow to collect and analyze detailed information about the object of investigation. Quantitative research methods whose main goal is collection of information for further processing and analysis, including statistical analysis. Collected information is also used for qualitative researches. These or other methods are chosen depending on the research objectives, as well as the number of participants of social networks. Information accessibility is also very significant fact. The authors believe that the most useful tools for social network research are qualitative research methods such as surveys and questionnaires, interviews, observation. Questionnaires should be used in case when the number of participants is sufficiently large and information which is planned to receive should be standardized and structured. Also it must be collected within a short period of time. The questionnaire usually includes questions about respondents' relationships with other people. Interview. Face to face or phone interviews are usually used in cases where all necessary information about the social network cannot be obtained through questionnaires. In-depth interviews are particularly useful in cases when more detailed explanations or clarifications are necessary, as well as in cases when the number of respondents is small. 5 Webopeadia [online] [citeded ] Available from Internet: 6 Ludicke. M. K. A Theory of Marketing: Gabler Edition Wissenschaft, p Fuchs, S Against essentialism A theory of culture and society. Harvard press University Press, p

124 Observation. This method is widely used for studies of small groups in order to analyze people that are involved in direct relationship process. As verbal responses are not necessary this method should be applied in cases when it is impossible to get verbal or written answers 8. Observation method also helps to understand the various psychological and behavioral characteristics and aspects of the social network. Analysis of the documentation. Relationship connections can also be studied by using a variety of published data - documents, files, diaries, etc. 9 Thanks to modern digital technology and the Internet, social networks are becoming an integral part of everyday people's life, whose number is growing daily. Social networks are functioning as a mediator in their relationship. While using one another social network, people have greater access to various resources (including information) that would not be available when searching for them on their own. Thus, the study of social networks can be useful for entrepreneurs in their various marketing and PR campaigns - to know which channels to use in order to transmit a message to potential and existing customers and clients. It is also important to know which social portals are used by the target audience. 3. Social web portal types There are a lot of methods and types of classification in traditional marketing, for example, classified forms of marketing, consumers and their behaviour, motivations of consumers, products and services, as well as many other factors, objects, etc. Classification takes place according to different criteria and parameters. Since the main participants in the social internet networks are people who are also customers or potential customers, the author will consider various ways of classifying consumers and will propose his social network classification. F. Kotler proposes to classify consumers by the following features: income level, age group, geographic, psychographic, behavioral principle 10. D. Blythe classifies consumers according to their: geographic characteristics; psychographic characteristics, socio-economic characteristics, demographic characteristics 11. Kotler, Jain and Meysinsi are classifying consumers based on their value to the company in terms of revenue 12 : 1. "Platinum" (top team) - 1% of the most active consumers; 2. "Gold (large consumers)" - 4% of active clients; 3. "Iron (average consumers)" - 15% of active consumers; 4. "Lead (small customers)" - the remaining 80% of active consumers. From the authors viewpoint this particular classification can be used for long-term e-business and e-commerce planning. These classifications, their principles or individual elements are applicable to the social network classification. The authors offer to classify social portals according to its destination: 1. Contact social Internet network (plaxo.com, partnerpedia.com, etc.); 2. Communicational channels (facebook.com, linkedin.com myspace.com, draugiem.lv, wordpress.com, youtube.com, facelink.ru etc.) 3. Sales channels (amazon.com, ebay.com, etc.) 4. Business tools (wawe.google.com, google.com, twitter.com, alibaba.com etc. 5. Etc. 8 Praude, V. Šalkovska, J Mārketinga komunikācijas: Vaidelote, p Kotlers. F Kotlers par mārketingu: kā radīt, iekarot tirgu un dominēt tajā: Lietišėās informācijas dienests, p Blaits, Dž Mārketings. Rokasgrāmata. R.: Zvaigzne ABC, p Котлер, Ф. Джайн, Д.К. Мэйсинси, С Маневры маркетинга. Современные подходы к прибыли, росту и обновлению: ЗАО «Олимп-Бизнес», p Twitter [online] [citeded ] Available from Internet: 129

125 The main objective of the social web portals is to provide mutual communication and exchange of information between people within business environment. The main functions of business social networks are: 1. Establishing new business contacts; 2. Business, managers, employees, individual entrepreneurs profile presence or creation; 3. Links to entrepreneurs blogs; 4. Job search; 5.Opportunity to receive the results of various types of examinations and investigations; 6. various business discussion groups creation and maintenance Businesses can use the following benefits participating and using social networks to enhance their competitiveness: 1. Establishing and getting a wide variety of business grouped contacts, for example, potential customers, suppliers and intermediaries. You can also use business contacts for the various types of consultations in both directions - both to receive and provide, for example, legal, financial, marketing, etc.; 2. Opportunity to assess and measure the efficiency of communication processes in real mode; 3. Possibility of evaluating and measuring the results of two-way communication; 4. Opportunity to assess and analyze costs - advertising, marketing event, promotion, etc. A striking example of a successful business online social network is with 175 million registered users on The main features of the portal: regulated number of characters in blogs characters. Real-time negotiation possibility. Ability to follow and monitor the expert, customer and potential customers statement about various events, for example, the opinion about services and products - including critical feedback. Social online networks also offer a number of tools that can be used in business activities: 1. Communication and cooperation platforms (BaseCamp, Google Wave); 2. Conducting various processes (sales, promotion, etc.), its control, registration, data sharing, virtual workgroup creation (Facebook, Linkedin, etc.); 3. Communication establishment (Skype, MSN etc.); 4. Shared user programs (Google Doc's, etc.); 5. Various micro-services for direct communication with customers, potential customers and partners; Organizations that use or are willing to use an electronic environment for entrepreneurship should have a high level of cultural communication and understanding of teamwork (collaboration). Entrepreneurs must have the skills and knowledge to work in an electronic environment. They should have a clear understanding of responsibility in dealing with social networks, as different processes are taking place and developing rapidly, and employers need to be able to manage these processes and be responsible for results. Benefits that an entrepreneur can get from using social networking as follows: 1. Optimization and evaluation of communication processes and their costs; 2. Collaboration model creation, which will lead to company's improvement; 3. Joint problem solving with clients; 4. Efficiency and productivity analysis within the framework of the team; 5. Working time's and corresponding payment's control, as well as function supervision. Social networking for business development: the channels of communication and promotion. As it was already mentioned people are being united by interests, values and attitudes. The same thing can be attributed to social online networks. Social Internet networks are a place where people can meet other people, answer questions, thus possibly help them, as well as ask questions and listen to other's opinions. Depending on the action and participants activity, authors proposes to divide them into three groups: 1. Members, who themselves create original content; 2. Participants who comment, evaluate, transmit, copy, vote etc. 13 Niedrītis J. Ē. Mārketings Trešais, pārstrādātais un papildinātais izdevums. R.: Turība,. p

126 3. Participants who only consume the content (information) posted by others. Social networks can be used to promote products and services, as well as to communicate with clients or potential clients. Social networks as communication channels: 1. Possibility to create groups of supporters and fans of the brand; 2. Possibility of communicating exact target audience and "its" environment; 3. Possibility to quickly obtain information about consumer current needs and interests; 4. Possibility of receiving feedback and react accordingly; Social networks as distribution channel: 1. Possibility of virtual "direct selling" - selling products or services in the "midst of socialization" of the target audience (eg, insurance, ticket, information and banking services, etc.); 2. Less time is being spent on the product or service sales provided that the consumer agreed to purchase; 3. Increased service delivery speed. Generalizing all above mentioned, author concluded that electronic social networks are a major tool for entrepreneurs in the electronic environment. Wise usage of its opportunities may significantly improve the competitiveness of the company - expand sales channels and scope of the market, increase sales, bring to market new products and test them or improve existing product portfolio, analyze and segment target audience, carry out various marketing activities, develop e- commerce, etc. 4. Social networks usage by both sides of e-market - Latvian enterprises In order to understand what kind of e-tools are used by Latvian e-market shares, authors of the paper have carried out the following research activities: one study describes buyers' or prospective buyers' activity, the other one - the internet selling activity. Due to the fact that it is impossible to cover all e-environment, in the study, authors have imposed certain limitations. In buyers case there was made a separate e-environment elements' analysis, namely, social network and its user analysis. Research: Social networks and those participants customers The author carried out a research on January 2011 with the aim to understand what activities in what social networks customers do. The target group comprised people in the age group from 20 to 43 years, both genders; total number of respondents was 147. A questionnaire was designed, with 8 questions including 2 open questions. According to the research results most popular social networks are local network draugiem.lv, it is used by 31.4% of respondents and facebook.com - is used by almost 31% of respondents, 14.3% uses local one.lv site (the site is used for more Russian-speaking audience). Business social networks used by almost 9% of respondents and are tweeting almost 13%. Social networks members are quite active, regular attendance in a single social network 31.1%, two and four - almost 16%, three - almost 18%. In addition, 71% of respondents visit web sites several times per day. Almost 30% of respondents consider themselves to be active social network users. 30% of respondents use social networks to communicate with friends, exchange of information, advising and recommending sometimes for peers, as well as for consuming this kind of information. Almost 18% of respondents regularly update personal information, almost 26% of respondents follow the events, news and announcements made by friends and other people and made in company profiles. Interesting is the fact that over 45% of respondents like to keep a track of various sales and opportunities with the aim to buy cheaper. For example, sites were possible to buy goods and services significantly cheaper (advertisement campaign) (cherry.lv, perkamkopa.lv, deal.lv, etc.). The survey confirmed a fact that social network members use e-procurement environment in a very active manner - more than 46% regularly shop online, more than 25% of respondents use a discount shopping website. Of those who regularly shop online, more than 21% rely on friends' views and recommendations; more than 12% are influenced by the promotional information in various social networks. 131

127 Conducted survey is an evidence of good social network user activity level. In addition, respondents are open to a variety of activities related to shopping. They are actively using opportunities to shop online. Author believes that companies must communicate and sell their goods and services more actively by using e-environment. Research: Latvian entrepreneurs and e-environment. The previous survey showed that Latvian e-environment users are opened to various e- marketing activities; they are willing and able to spend money in the Internet. In order to understand Latvian entrepreneur level of involvement in e-environment, as well as their operational activity in this distribution channel segment, authors carried out a survey. The author of the paper carried out a research on October 2010 December 2010 with the aim to define how they use most popular e-tools such a corporate homepages, blogs etc. The target group comprised people in the age group from 30 to 65 years (managers and employees of different companies); total number of respondents was 175 small and medium enterprises, acting in various Latvian economic structures emerging sectors. A questionnaire consisted of 10 questions. 99% of all respondents have homepages in Latvian, but only 43% of all respondent homepages translated into Russian and English or other language. Only 31% of all respondents have corporate blogs, and only 13% of them regularly update information in blogs. 90% of bloggers write those in Latvian. 80% of all respondents homepages name and s correspond to the name of the company. Only 5% of all respondents use homepage for human resources activities headhunting (for example, in other western countries and America this proportion is close to 20 %). 76% of all respondents have separate section with products and services offered description. Only 34% of all respondents have links to their profiles in popular social networks. Only 12% of respondents offer to buy and pay products and services via corporate homepage. On the positive side stands the fact that one third of the respondents maintain relationships with customers with corporate blog help, but communication takes place only in Latvian. Irregularity of such communication also reduces the company's awareness among other consumers. Conducted study shows that Latvian companies use the main e-tools not very actively and effectively, using mostly only a single language to communicate with consumers, which narrows the number of potential buyers. Author of the paper assumes that they are not completely aware of the market's globalization, as well as e-market's opportunities and benefits. The study also confirms the fact that the majority of respondents use a website as a company's business card, and not as a sales and interactive communication tools. Another survey which involved 314 Latvian companies, conducted by the Latvian Internet Association showed that vast majority of Latvian companies have profiles in social networks, the most popular of which is Twitter.com. Facebook.com took the second place, while third place went to Draugiem.lv. 26.4% of respondents indicated that are using Twitter.com for business purposes, 22.6% - Facebook.com and 20.8% - Draugiem.lv. Only 18.9% of companies have no profiles in any of the social networks. 3.8% of companies do not know why they are in social networks, 5.1% do so because it is trendy and everyone talks about it. According to survey performer opinion entrepreneurs do not pay sufficient attention to performance evaluation on these sites. Only 37.5% of respondents conduct analysis activities in the social networks and have idea of how effective it is 14. The author of the paper believes that Latvian entrepreneurs should change themselves ASAP, change their views on e-market e-business and e-commerce management, as it can lead to the situation where not only competitors, but also consumers will be more intellectually mature on the same business and thus the business will bring significant losses, as Chairman and Chief Executive of GE prof. Jack Welch said: "At a time when off-track change take place faster than in-house one, your end is not far away" Pētījums: Twitter Latvijā kĝūst populārāks par draugiem.lv [online] [citeded ] Available from Internet: / petijums_ twitter_latvija_klust_popularaks_par_draugiem 15 How Jack Welch runs ge: A Close-up Look at How America's #1 Manager Runs GE [online] [citeded ] Available from Internet: 132

128 Conclusions Summarizing all above mentioned, authors want to highlight the importance of social online networks. Social Internet networks have become an integral part of everyday life for most people around the world. Necessity of building social networks among humans has appeared before the Internet and electronic social networks, as evidenced by a variety of sociological research. Globalization is an important catalyst for social networking, which covers all spheres of activity - economics, politics, culture and social sphere 16. The next stage in social network development is associated with the development of telecommunication technologies, including Internet. It hosted a lot of people, in various social networks and portals depending on their interests around the world. The main feature of the electronic social online networks is relationship and two-way communication between the participants. For better understanding of social networks, as well as the possibility of their use in business it is necessary to investigate them, using different methods. Thanks to the capabilities and features of Internet, research can be conducted at different scales and at different levels depending on the needs and goals of entrepreneurs. For the best social web portal and network usage, the author proposes to classify them according to their destination. The main driver of change in business is a consumer, whose power and importance with each passing day becomes more influential. E-environment and Internet provides significant benefits for sustainable business development. Latvian e-market participants - both buyers and sellers are active in e- environment, and their level of activity is growing on a regular basis. Nevertheless, Latvian entrepreneurs are not always following and examining customers' activity and needs within the e- environment. For example, the Latvian entrepreneurs "activated" on twitter.com, despite the fact that buyers are not using it as active as other social networks. Not all companies are clearly aware of its goals, operating in e-environment. Author of the paper are suggesting to use more e-tools in business processes, because, it they are available easily and can be used in most fields of the everyday activities. Many of e-tools available via internet have low price or are free of charge. This aspect is especially important for small and medium business development. It is important to remember, that communication process within electronic environment is very fast and information, both positive and negative, spreads very quickly. That is why entrepreneurs should not only be computer literate and well oriented in cyberspace, and know how to work with various electronic media tools - the portals, including social, search engines, databases, etc. However, the field of research is very wide and this paper presents just an insight in the large scope of questions what should be analyzed in the future researches. References 1. Rapp S.; Collins. T.L The New Maximarketing. McGraw-Hill. 2. Ozolzīle, G Socioloăija: Biznesa vadības koledža. pp , 19 p., pp , p Fisks P Mārketinga ăēnijs: JāĦa Rozes apgāds, p Ph. Kotler, K.L. Keller, M. Brady, M. Goodman, T. Hansen Marketing Management. Pearson Education Limited, p Webopeadia [online] [citeded ] Available from Internet: 6. Ludicke, M. K Theory of Marketing: Gabler Edition Wissenschaft, p Twitter [online] [citeded ] Available from Internet: 133

129 7. Fuchs, S Against Essentialism A theory of Culture and Society. Harvard press University Press, p Praude, V. Šalkovska, J Mārketinga komunikācijas: Vaidelote, p Kotlers. F Kotlers par mārketingu: kā radīt, iekarot tirgu un dominēt tajā: Lietišėās informācijas dienests, p Blaits Dž Mārketings. Rokasgrāmata. R.: Zvaigzne ABC, p Котлер, Ф. Джайн, Д.К. Мэйсинси, С Маневры маркетинга. Современные подходы к прибыли, росту и обновлению: ЗАО «Олимп-Бизнес», p Twitter. [online] [citeded ] Available from Internet: Niedrītis J. Ē. Mārketings Trešais, pārstrādātais un papildinātais izdevums. R.: Turība, p Pētījums: Twitter Latvijā kĝūst populārāks par draugiem.lv [online] [citeded ] Available from Internet: / petijums_ twitter_latvija_klust_popularaks_par_draugiem 15. How Jack Welch runs ge: A Close-up Look at How America's #1 Manager Runs GE [online] [citeded ] Available from Internet: 134

130 STAKEHOLDER APPROACH IN MARKETING STRATEGY Petra Smakalova, Iveta Simberova Brno University of Technology, Czech Republic. Abstract. Stakeholder approach has still gained greater popularity, especially in the last 15 years. We can mark a boarder socio - economic trends, affecting the business environment, as the reason of this access creation. This approach appears to be useful in many ways and its intense interest brings new possibilities to use. One of the possibilities is to use stakeholders approach in business activity for creating marketing strategy, which lies in the formulation for choosing correct stakeholder and build relationship with them and creating competitive advantage. In order to deal company with stakeholder through business activity was successful the companies should choose appropriate marketing strategy. Keywords: stakeholders, stakeholders approach, marketing strategy, business activity, relationship marketing Introduction In the present time constant change, globalization, technological advances and rapidly changing market, it is still difficult to orientate in a highly competitive environment for company. Every company that wants to succeed on the market should have chosen such business activity that would promote the overall company strategy. There are countless factors that affect the competitive environment. Expect customers, who are key elements of business activities, there are other stakeholders who are getting to the fore with which company come into relationship and who more or less can affect the future development and performance of the company. Stakeholders approach recognizes importance of all groups or individual who are in a relationship with company. Appropriate business activity, the company can establish or strengthen their existing relationship with individuals group of stakeholders who generate business value and which vice versa the company generate the value. Essence of marketing strategy is to meet the satisfaction of all individual groups of stakeholders and as well harmonize their anchor towards the goals of the company. Investing in relationship with stakeholders and business activities can form a permanent increase in business performance. Research development question was set: Which groups of stakeholder the most affect the future development and performance of the companies through business activities? The paper presents knowledge and findings of literary review which is supported by primary research within project of Internal Grant Agency Faculty of Business and Management Brno University of Technology FP-S-11-3/1417. The topic of research was Innovation approaches in management and marketing in a global environment of European. Primary research was conducted by questionnaire survey in companies from different sectors (the most important sectors are outlined in Table 1 and different size in the Czech Republic in It was asked about 983 respondents, only 147 respondents answered. 135

131 Table 1 Companies according to NACE Session Count in % Manufacturing Industry 34,03 Wholesale and retail trade 21,01 Construction 8,40 Professional, scientific and technical activities 7,98 Information and Communication 7,56 Source: author s research, Stakeholders approach In the nineties of last century was an extremely important customer. There is a need to know are their needs, requirements and aspiration. Customer value is assigned the key concepts of the contemporary market economy. 1 But today s competitive environment emphasizes not only on customers, but also to other groups of stakeholders from the company environment with which the company comes to relationships, and who have affect on the overall success of the operation of the market. 2 Drucker (1955) argued that the purpose of the firm is to create and maintain satisfied customers on that later followed Frieman (1970) with his theory that purpose of the company is to maximalist shareholder return and in later years Ghosal (2005) argued strongly that shareholder do not have priority over other stakeholders who can be equally important for company 3. Although most research in marketing emphasizes especially the role of end users, companies are often aware that other groups of stakeholders are decisive element for their behavior and performance of the company. Previously, it was goal of marketing to create value for customer. The assumption was that if the companies satisfies customers, gain the market share and automatically achieves positive financial results. This means that business activities have led to an increase in market share. Unfortunately, a satisfied customer may not be profitable. Marketers 21 st century are aware of the need for a more comprehensive, coherent approach that goes beyond traditional application of marketing concept. 4 Therefore, today s marketing takes into account the other group of stakeholders who have an impact on company Choosing correct stakeholders Freeman (1984) states that it is management s task to create a list of the firm s stakeholders. It is incumbent upon the corporation to identify its stakeholders and to formally acknowledge those groups as stakeholders in the company. Without such acknowledgement, a dialog between the corporation and stakeholder can not take place 6. Edward Freeman (1984), defined a stakeholder as any group or individual who can affect or is affected by the achievement of the organization s objectives 7. Stakeholders can be individuals, groups, organization, institution, society and environment. Freemen explained who stakeholders are, but it unclear which of them is keys. 1 Jirásek, J. Management budoucnosti. Praha: Porfeccional Publishing, 2008, pp Šimberová, I. & Pollard, D. Stakeholder relationship focus in marketing concepts of companies. Brno: Brno University of Technology, pp Zinkin, J. Strategic marketing: balancing customer value with shareholder. Nottingham: Nottingham University Business School, pp Kottler, P. & Keller,K.L. Marketing Management, 12 th ed. Praha: Grada Publishing, a.s., 2007, p Doyle, P. Value- Based Marketing: marketing Strategies for Corporate Growth and Shareholder Value, 2nd ed. British: John Wiley & Sons, Ltd, 2008, p Jurgens,M., Berthon, P., Papania, L. & Shabbir, H.A. Stakeholder theorzy and practice in Europe and North America: The key to success lies in a marketing approach. London: European Academy of Business and Society, 2010, p Doyle,P.,p

132 Owing to the limited organizational resources, businesses are not able to include all the identified stakeholders issues in their plans, so have to establish an importance ranking in order to address the needs and expectations of the most relevant stakeholders in a strategic context 8. There are many frameworks that can be used in order to classify stakeholders. Several authors proposed a variety of stakeholder types. For example, Morgan and Hunter (1994) noted four basic type of organizational stakeholder: internal, buyers, supplier and lateral 9. Lerner and Fryxell (1994) highlighter five major stakeholders: customer, community, stockholders, government and employees 10. Donald and Preston (1995) categorized stakeholder into governments, investors, political groups, supplier, customer, trade associations, employees and communities 11. Clarkson (1995) addressed two major stakeholder groups: primary and secondary. Primary stakeholder groups comprise of employees, customers, investors, suppliers, government, and community with whom the corporation may have a formal, official, or contractual relationship. Secondary stakeholders are media and special interest group toward whom a firm does not have any contractual obligation 12. Mitchel, Agle & Wood (1997) develop a comprehensive identification typology based on normative assumptions defined by the stakeholder possessing at least one of the following attributes: (1) power to influence the organization (2) legitimacy of relationship with the organization and (3) urgency of a claim on the organization 13. Henriques and Sadorsky (1999) introduced four groups: regulatory, community, organizational, and media. Recently, Sirgy (2002) categorized stakeholders into three groups: internal, external and distal 14. Salience of different stakeholder group varies in the literature. Donaldson and Preston (1995) note that all stakeholder groups are equally important 15. A growing number of researchers argue the firms must identify the salient stakeholders and deal mostly with them (Galbreath, 2006, Greenley and Foxall, 1997) 16. Authors Anderson (1982), Freeman a Reed (1983) defined stakeholders as those most necessary for the firm s survival or the ones that have strong legitimacy claims over the firm and thus require its urgent attention (Agle et al., 1999) 17.Other authors are aware of the importance of the other stakeholders that do not provide financial resources to the firm (e.g. employees, competitors), they emphasize here the role that financial resources play in organizational survive (Deshpandé and Farley 1998) 18. Authors Hilman a Keim (2001) argue that it depends mainly on managers who decide which groups of stakeholder are primary for company. 19 Orientation to key stakeholders is positively related to performance like sales growth, market share a product success León- Soriano, R., Munoz-Torres, M.J. & Chalmeta- Rosalen, R. Methodology for sustainability strategy planning and management. Industrial management & Data Systems, 2009,p Geuchan, L, Hynchul, A. & Heeseok,L. Formulation strategies for stakeholder management: a case- based reasoning approach. Korea Advanced Institute of Science and Technology, 2005, p Geuchan, L, Hynchul, A. & Heeseok, L, p Geuchan, L, Hynchul, A. & Heeseok,L., p. p Mishra, S. & Suar,D. Do stakeholder strategy and salience influence corporate social responsibility in Indian companies? Social Responsibility Journal, 2010, p Kyj, M.J., Kyj, L., An institution- stakeholder framework for examining business relationship dynamics in a transforming Eastern Europe. Journal of World Business, 2009, p Geuchan, L, Hynchul, A. & Heeseok, L. 15 Xinming, H., Xioxiang, Z., Xiaoqing, L. & Piesse, J. Stakeholder orientation and organizational performance in an emerging market, Journal of General Management, 2011, p Grinstein, A. & Goldman, A. Beyond the final consumer: the effectiveness of a generalist stakeholder strategy. European Journal o Marketing, 2009, p Grinstein, A. & Goldman, A.,p Grinstein, A. & Goldman, A. Beyond the final consumer: the effectiveness of a generalist stakeholder strategy. European Journal o Marketing, 2009, p Hilman, A.J. & Keim, G.D. Shareholder value, stakeholder management and social issue: What s the Bottom line? Strategic management Journal, 2001, p Xinming, H., Xioxiang, Z., Xiaoqing, L. & Piesse, J. Stakeholder orientation and organiyational performance in an emerging market, Journal of General Management, 2011, p

133 Choosing the right stakeholders is important, because some stakeholders do not offer the potential to create value either because the cost of serving them exceed the benefits they generate, or because the company does not have the appropriate bundle of skill to serve them effectively Relationship marketing and marketing strategy in business activity There is a fundamental paradigm shift in the way marketing is being redefined 22. The increasing attention paid to customer retention and to the relationship between the firm and its stakeholder led to the affirmation of the more relationship - oriented marketing paradigm. Leaving the real of single transaction towards new dynamic type of relationships shape the way marketing is seen and expected to perform (Webster, 1992) 23. A key definition of marketing reconceptualization describe its purpose as to identify and establish, maintain and enhance, and hence necessary terminate relationship with customers and other parties so that the objectives regarding economic and other variable of all parties are met (Gronroos, 2007) 24. This task is responsible for relationship marketing which according to Kotler, aims to build long term relationships with each other important parties customers, suppliers, distributors and another business partners to retain and acquire business relations with them 25. Also Author Das (2008) argue that relationship marketing create one of the important components for creating marketing strategy, where relationship marketing is not limited to the consumer market, but understand complex relationships, which may be more effective than limited to relationship with customer. 26. Relationship marketing is defined as a process of building relationship with customers and other stakeholders that enhance business opportunities 27. Author Kanagal (2008) to add this idea and adds that relationship marketing is an element that is part of marketing strategies and that helps to understand needs and desire of stakeholders who are necessary for creating business challenge 28. These relational exchanges, it is argued, are becoming so important that they can constitute firm resources that can lead to competitive advantage (Hunt, 1997, 2000, Hunt & Morgan, 1995) 29. Managing relationship with customers and significant stakeholder form an important part of the formulation marketing strategies 30. Marketing theory posits that to enable marketing strategy implementation and achieve superior performance, managers should organize business activities in different ways depending on their marketing strategy (Slater & Olson, 2000, Walker & Ruekert, 1987) 31. The purpose of the strategy is determining the future direction of the company. There are many different approaches for formulating marketing strategies. In our article we consider the generic strategies. These strategies are formed according the relative power of stakeholders and 21 Doyle, P. Value- Based Marketing: marketing Strategies for Corporate Growth and Shareholder Value, 2nd ed. British: John Wiley & Sons, Ltd, Malhotra, N.K. & Agarwal, J. A stakeholder perspective on relationship marketing: Framework and proposition. Journal of relationship marketing, 2002, p Hoffmann, A.O.I. &Pennings, J.M.E. & Wies, S. Relationship marketing s role in managing the firm- investor dyad. Journal of Business Research, 2010, p Hoffmann, A.O.I. &Pennings, J.M.E. & Wies, S.,p Kottler, P. & Keller,K.L. Marketing Management, 12 th ed. Praha: Grada Publishing, a.s., 2007, p Das,K. Relationship marketing research ( ) an academic literature review and classification. Market Inteligence & Planning, 2008, p Šimberová, I. Synergy in marketing management- challenge for innovation of industrial company.. Brno: Brno University of Technology, 2010, p Kanagal, N. Role of relationship marketing in competitive marketing strategy. Journal of Management and Marketing Research, Arnett,D.B, German, S.D & Hunt, S.D. The Identity Salience Model of Relationship Marketing Success: The case of nonprofit Marketing, Journal of marketing, 2003, p Kanagal, N. 31 Vorthies, D.W. & Morgan, N.A. A configuration Theory assessment of marketing organization Fit with business strategy and its relationship with marketing performance, Journal of marketing,

134 their potential to cooperate or threaten corporate strategy. The result is a four way typology of generic strategies 32 : 1. Offensive strategies should be adopted if a stakeholder group has relatively high cooperative potential and relatively low competitive threat. 2. Defensive strategies should be adopted if a stakeholder group has a relatively high competitive threat and relatively low cooperative potential. 3. Swing strategies should be adopted if a stakeholder group has a relatively high cooperative potential and competitive threat. 4. Hold strategies should by adopt if a stakeholder groups has a relatively low competitive threat and cooperative potential. The company should use the Offensive stakeholders, keep the Hold stakeholders, defend the Defensive stakeholders and cooperate with the Swing stakeholders. 4. Research results As the literature review show, other groups of stakeholders are increasingly getting to the fore than just customers. Therefore it is necessary to companies create a comprehensive and coherent approach to all groups of stakeholders who have an impact on company. In order to deal company with stakeholder through business activity was successful the companies should choose appropriate marketing strategy. Aim of the paper is to map literary review about stakeholder approach for creating marketing strategy and find out, that groups of stakeholder the most affect the future development and performance of the companies through business activities. Research development question was set for acquiring knowledge whose task was to find out that group of stakeholder the most affect the future development and performance of the companies through business activities. This research question was a part of questionnaire research where respondents asked to evaluate relationship with individual stakeholders for different areas of business management. They were supposed to mark cross positive or negative answer depending on whether the individual groups of stakeholder affect or not to affect an area of business management. The results are discussed below: Table 2 is divide in ten boxes where in first of them are defined individual groups of stakeholder and in other boxes is defined different areas of business management. As we can see from the bottom line of table, business activity is one of the important areas of business management. The numbers in individual boxes is number of responders who answered positive. For example, there are 127 companies (from 147 respondents) are affected by customers, 95 companies (from 147 respondents) is affected by suppliers, 76 companies (from 147 respondents) are affected by employees in business activities of company. For clarity the problem we have created a bar graph 1, where we see the percentage effect of the most important stakeholder in business activities with company. Other stakeholder with less than 50% effect, are not take into account. 32 Miles, S. & Friedman, A. L. Stakeholders: Theory and Practice. Oxford University Press, 2006, pp

135 Stakehold ers Pla nni ng Organ izing Stimul ation Con trol Table 2 Assessment of relationship with each stakeholder Source: own research,2010 Per Manuf son Finan Busin Informati acturi al cial ess on ng ma mana activit managem proces nag geme ies ent ses eme nt nt Customers Suppliers Employees Management Shareholders Financial institution Local goverment authorities Chamber of Commerce innovation Centre Consultancy State authorities Citizens Universities Research centers Competitors Media Share of individual areas of business 13% 11% 10% 12% 9% 8% 13% 12% 11% 140

136 The most importat stakeholders 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Management 88% 86% Customers Shareholders 81% Competitors 76% Suppliers 65% Employees 52% Graph 1 The most important stakeholders Source: own research, 2010 There are 6 the most important groups of stakeholders who have a significant effect on the business activities of the companies: Management - 88% effect on the business activities of the companies, Customers 86% effect on the business activities of the companies, Shareholders 81% effect on the business activities of the companies, Competitors 76% effect on the business activities of the companies, Suppliers 65% effect on the business activities of the companies, Employees 52% effect on the business activities of the companies. Conclusion The research was involved 147 companies in the Czech Republic, different size and orientation. For the development of the research was defined research question: Which groups of stakeholder the most affect the future development and performance of the companies through business activities? As the literary solution, and the results of research question shows that more and more to the fore and other important groups of stakeholders than just consumers who affect the future development and business performance. Among these important groups according to the research include. Management, customers, owners, competitors, suppliers and employees. Therefore, the need for firm to create more a comprehensive and coherent approach to these particular groups of stakeholders who have an impact on business and sophisticated marketing strategies, trying to establish or strengthen their relationships with them. Firms should therefore apply a comprehensive approach to these interested parties and try to maintain a suitable marketing strategy and get on my tent. For current status of knowledge of the issue and given the complexity of data acquisitions, consider interviewing for selected form is sufficient. But we are aware that this type of questioning is not ideal for obtaining a deeper knowledge. We recommend any in follow- up research to select different type of questions and a different form of questioning based on the assessment scale. This form of inquiry will allow us to get more specific and relevant information on that will help us to pursue the issue further. Now, by solving the research we found out that groups of stakeholders are significant due to development enterprise. Based on the lessons learned would be good to use that knowledge and extend it to other research. The task would be to determine what values are selected group of stakeholder recognized most often and how much a link exists between knowledge and values of stakeholders and marketing strategy and how it affects. References 1. Arnett, D.B, German, S.D & Hunt, S.D. (2003).The Identity Salience Model of Relationship Marketing Success: The case of nonprofit Marketing. In: Journal of marketing, Vol. 67, No.2, pp Das, K. (2008) Relationship marketing research ( ) an academic literature review and classification. In: Market Intelligence & Planning, Vol. 27, No.3, pp

137 3. Doyle, P. (2008). Value- Based Marketing: marketing Strategies for Corporate Growth and Shareholder Value, 2nd ed. British: John Wiley & Sons, Ltd, p Geuchan, L, Hynchul, A. & Heeseok,L. (2005). Formulation strategies for stakeholder management: a case- based reasoning approach. Korea Advanced Institute of Science and Technology, Vol.28 No. 4 pp Grinstein, A. & Goldman, A. (2009). Beyond the final consumer: the effectiveness of a generalist stakeholder strategy. In: European Journal of Marketing, Vol. 45, No. 4, pp Hilman, A.J. & Keim, G.D. (2001). Shareholder value, stakeholder management and social issue: What s the Bottom line? In: Strategic management Journal, Vol. 22, No.2, pp Hoffmann, A.O.I. & Pennings, J.M.E. & Wies, S. (2010). Relationship marketing s role in managing the firm- investor dyad. In: Journal of Business Research, Vol. 64, No. 8, pp Jirásek, J. (2008). Management budoucnosti. Praha: Porfeccional Publishing, 2008, p Jurgens,M., Berthon, P., Papania, L. & Shabbir, H.A. (2010). Stakeholder theory and practice in Europe and North America: The key to success lies in a marketing approach. In Industrial marketing Management, Vol. 39, No. 5, pp Kanagal, N. (2008). Role of relationship marketing in competitive marketing strategy. In: Journal of Management and Marketing Research. 11. Kottler, P. & Keller,K.L. (2007) Marketing Management, 12 th ed. Praha: Grada Publishing, a.s., pp Kyj, M.J., Kyj, L. (2009). An institution- stakeholder framework for examining business relationship dynamics in a transforming Eastern Europe. In: Journal of World Business, Vol. 44, No. 3, pp Malhotra, N.K. & Agarwal, J. (2002). A stakeholdr perspective on relationship marketing: Framework and proposition. In: Journal of relationship marketing, No.1/2, pp Miles, S. & Friedman, A. L. Stakeholders: Theory and Practice. Oxford University Press, 2006, pp Mishra, S. & Suar,D. (2010). Do stakeholder strategy and salience influence corporate social responsibility in Indian companies? In: Social Responsibility Journal, Vol. 6, No. 2, pp León- Soriano, R., Munoz-Torres, M.J. & Chalmeta- Rosalen, R. (2009). Methodology for sustainability strategiy planning and management. In: Industrial management & Data Systéme, Iss. 110, No. 2, pp Šimberová, I. (2010). Synergy in marketing management - challenge for innovation of industrial company. Brno: Brno University of Technology, pp Šimberová, I. & Pollard, D. (2008) Stakeholder relationship focus in marketing concepts of companies. Brno: Brno University of Technology, pp Vorthies, D.W. & Morgan, N.A. (2003). A configuration Theory assessment of marketing organization Fit with business strategz and its relationship with marketing performance, In Journal of marketing, Vol. 67, No Xinming, H., Xioxiang, Z., Xiaoqing, L. & Piesse, J. (2011). Stakeholder orientation and organiyational performance in an emerging market. In Journal of General Management, Vol. 36, No. 3, pp Zinkin, J. (2006). Strategic marketing: balancing customer value with shareholder. Nottingham: Nottingham University Business School, p

138 THE LATVIAN LARGE-SCALE SHOPPING CENTERS DEVELOPMENT PERSPECTIVES Tatjana Staube, Ineta Geipele Riga Technical University, Latvia. Abstract. The article provides the analysis and the vision on the development of the largescale retail real estate in Latvia. The authors concentrate the attention on the large-scale shopping centers that are presented by over 360 thousand sq.m of gross leasable area and planned to be a little less than doubled up to The target is to analyze the target audience and business scope, therefore the authors decide on the standardization of the shopping centers as the objects of the research, the spatial planning concept for the retail real estate within the theoretical and practical scope. Key words: large-scale shopping mall, retail real property, retail density, spatial planning, the concept of territory Introduction The recent fluctuations in the world economies influenced the national economies. Latvia has experienced sharp annual inflation rate changes, significant people income decrease and significant population emigration flow, bank financing limitations. These issues were among the main reasons why retail turnover per capita considerably changed in capital city, and kept the same positions in rural area, a number of retailers left the market, but services and catering outlets observed expansion opportunities. The big shopping projects stand idle, but small traditional format real property items appear while developers wait for the positive movements in the market. The research object is the large-scale shopping centers. The authors applied a theoretical overview of the issues on the large-scale shopping centers standards and allocation clues to the practical samples. The methods include analyzing the official statistical data on the main economical indicators and retail real estate market indexes. The research results observation of the development perspectives of the large-scale shopping centers on the micro and macro levels. 1. The essence of the large-scale shopping malls 1.1. Standardization of the retail real property The shopping and entertainment centers considered to be big format real estate objects. According to International Council of Shopping Centers (ICSC) research, a European shopping center is a retail property that is planned, built and managed as a single entity, comprising units and communal areas, with a minimum gross leasable area (also GLA abbreviation is used further in text) of 5,000 square meters (sq.m further in text) 1. A framework was created after extracting common elements from center types throughout Europe. This new framework classifies shopping centers into 11 broad based international types of centers, which can be grouped into two broader categories traditional and specialized, as shown in table 1. 1 Lambert, J. One Step Closer to a Pan-European Shopping Center Standard. Illustrating the New Framework With Examples in The Research Review [interactive]. New York: International Council of Shopping Centers, 2006, 13(2): [accessed ], p

139 Table 1 International standard of European shopping center types 2 The extended understanding of the large-shopping center that accounts minimum one anchor tenant of a compact hypermarket format valued in 3,000sq.m of GLA and a focus catchment area considering minimum 30,000 inhabitants is a basis for the spatial or territory planning concept for such type of a real property 3. Here, one of the highly required positions is the client parking area accessibility on shopping center s territory The concept of territory The spatial or territorial concept may be applied towards a symbol of location of any real estate object, or a land lot, or a body of land plots. In a wider sense, a territory is the place of the existing or potential entrepreneurship, where the interests of three groups of the society meet: the population (represented by the state itself from the standpoint of macroeconomics); the entrepreneur or developer and/or investor, and the partners of the potential deal (collaboration partners, potential investors, tourists etc.). Territory plays a very important role in the spatial design planning, since a territory is an actual place, where the interaction of the external and internal aspects is really taking place. The utilization of a territory or economically justified action to deploy there a particular real estate object of a specific kind and type promotes and provides the direction of the long-term business development in the country. One of the most distinctive factors for the locations for largescale shopping malls is to ensure the flow of potential consumers through the existing freeways and public transportation stops. The right location for the minimum format of the large-scale retail property may be central and/or on the edge of catchment area. 2. The aspects of the Latvian large-scale shopping centers territory s vision 2.1. The macroeconomic problematic issues Analyzing the development perspectives, the investor would be willing to examine such data as the existing economic situation, which, in case of the state of Latvia, would mean the primary necessity to analyze the market of the capital city - Riga. Historically, Riga plays the main part in the Latvian economy. Within the recent years, the rates of the Latvian gross domestic product (GDP) and the Latvian retail turnover concentrated in Riga keep at the same level 55% and 60% correspondingly. The table 2 presents the data from the economy s recession period. Compared to the rest of the Latvian territory, the retail turnover per one resident of the capital was more than 3 times higher. Table 2 The role of Riga in the Latvian economy. 2 Lambert, J.,op.cit., p Staube, T., Geipele, I. Lielformāta tirdzniecības objektu izvietošanas teritoriju telpiskās plānošanas vīzija. Scientific Journal of Riga Technical University, Economics and business. 2009, p

140 Analysis of available statistical data breakdown in recession period 4 Year Indicator / Region Riga Region Rest Latvia Latvia, TOTAL Rest Latvia Rest Latvia Latvia, TOTAL GDP, current price, billion EUR n/a 5 n/a GDP breakdown, % n/a n/a Retail turnover 6, billion EUR Retail turnover breakdown, % Population, million people Retail turnover per capita, EUR 6,008 1,835 3,153 4,558 1,376 2,379 Inflation rate, % to previous year In the frame of high inflation rate influenced the considerable growth and further fluctuations of the Latvian GDP in recent decade, in 2009 it returned at early 1990-ies and/or 2004 years level at 2000comparative prices the periods of regaining the independence and entering the EU. The period of is the starting point for the straight development of the retail real property in Latvia. Although retail dominates in Riga, it survived approximately 2 billions EUR drop at current prices (or 37 per cent points at 2005 constant prices) in the recession period. The capital region dominance difference in retail turnover per capita of over 1,500 EUR gap is evident in comparison to the rates in out of Riga territories identifying the lapsided retail property development in Latvia. The official Latvian statistics justifies that the major annual emigrants flow from Latvia was fixed in the first years after resoration of the Republic s independency, but in 2009 regained at 2001 level 5,000 persons. Here, together with negative demopraghy saldo it influenced fixed reduction of population in a country. However, the investors possibly rely on the high local market potential due to the following factors: central geographical location of Latvia within the Eastern board of the European Union (EU), physical market saturation gap considering the average ratio in EU of 170 sq.m per 1,000 inhabitants 7, comparibly poor spectrum of the presented formats of the large-scale shopping centers in Latvia, high local market demand for the European shopping traditions adoptions. 4 Central Statistical Bureau of Latvia database and site information [interactive]. Riga: Central Statistical Bureau of Latvia, 2011 [accessed ].< 5 n/a not available information 6 Retail business, except cars, motorcycles, and gasoline; repair services of the individual usage items, household equipment and installations. 7 Baltic property market report, Lithuania, Latvia, Estonia. [interactive]. Riga: NEWSEC, 2008 [accessed ].< p

141 Population, GLA Year population, 10 thousand people GLA per 1000 inhabitants Figure 1 Large-scale shopping centers density and population trend in Latvia in the forecast period Authors calculations 2.2. The microeconomic aspects As far back as fifteen years ago, there were no large-scale shopping centers in Latvia, or on 0 sq.m per 1000 inhabitants. Due to the favorable economic circumstances and the low level of the real estate market development, many professional developers and investors of the Baltic Sea region demonstrated great activity in the development of the Latvian retail market: ICA/Ahold Ltd. (net of the RIMI stores) alliance from the Netherlands, Norway, and Sweden; Linstow Ltd. (the current Galactico owned shopping centers Mols, Alfa, Origo, etc.) from Norway, Vilniaus Prekyba Ltd. and Palink Ltd. (consequently, net of the Maxima and IKI stores) from Lithuania. Thanks to the experience obtained in their countries of origin, these companies, based on the results of the spatial planning, developed several shopping malls and stores in the first-priority locations, thus facilitating the creation of the high level turnover and the non-stop interest of potential leaseholders and investors. Here, exactly due to Riga brings out the major cash flow in Latvia, the large-scale shopping centers development started in the part of capital city with high concentration of economical activity and the most intensive flow of potential customers. Daugava River s right coast was that location. Together with Riga s real estate economy and real estate market development, the investors interest to build the large-scale shopping attracted the locations with following characteristics (visual illustration is in figure 2): Close to the historical cultural and business center of Riga with high pedestrians and transport flow; Residential areas of a) high employment rate, b) high population density, c) population explosion ( caused also by new dwelling projects realization); Next to transportation connection points (bus station, central railroad station); Attached to centrally located or roadways (Brivibas Street, Krasta Street, Barona Street); 146

142 Figure 2 Current large-scale shopping centers and new projects locations in Riga city matching the Riga Dome research data on a breakdown of a total population number 8. Red dots are new projects and green dots existing locations In the large-scale non-built territories on the edge of residential areas; in the old factories territories 9. The Daugava River from the consumers perception in Riga is a physical obstacle, which one needs to overcome to reach the over-the-river location of the shopping center. During the developmental expansion of Riga, two shopping regions are evident: Pardaugava (Daugava River left coast) and the right bank of the Daugava River, thus facilitating satisfaction of the demand and change of the purchasing traditions for the most part of the potential consumers. 3. Large-scale shopping centers real estate market options in Europe The large-scale shopping centers real estate market has reached the saturation phase. Riga s agglomeration expansion causes more qualitative than quantitative market changes. Table 3 The large-scale shopping centers market saturation in Riga and Latvia. Authors calculations Regions The total shopping malls GLA, sq.m per 1,000 inhabitants Year 2008 Year 2010 Year 2015 Latvia Comment: Eurostat forecast of entire Latvian population in 2015 is adapted 10 8 Authors complex research based on: Social-economical analytics in Riga districts [interactive]. Riga: Riga City Council, 2011 [accessed ].< Description of shopping center projects data Cube City, Riga Akropole; Linstow Portfolio; Official statistics of shopping centers Stockmann, Riga Plaza; Baltic property market report, Lithuania, Latvia, Estonia. [interactive]. Riga: NEWSEC, 2008 [accessed ].< p. 39; Golubevs, R. Budlevskis, M. Mazumtirdzniecības biznesa nianses. In The Varianti.lv [interactive]. Riga: Valranti.lv, 2008 [accessed ]. Kossovičs, M. Tirdzniecības centri gatavojas taupības režīmam. In The Latvijas Tirgotājs [interactive]. Riga: Latvijas Tirgotājs, 2008 [accessed ]. < 9 Staube, T., Geipele, I. Lielformāta tirdzniecības objektu izvietošanas teritoriju telpiskās plānošanas vīzija. Scientific Journal of Riga Technical University, Economics and business. 2009, 3(18): p Authors complex calculations based on: Description of shopping center projects data Cube City, Riga Akropole; Linstow Portfolio; Official statistics of shopping centers Stockmann, Riga Plaza; Baltic property market report, Lithuania, Latvia, Estonia. [interactive]. Riga: NEWSEC, 2008 [accessed

143 As an evidence to the market saturation is 2006 sales deal between the biggest developer, Linstow Ltd., and the investment fund ACTA (Norway) involving the owned by the Linstow Ltd. shopping malls Alfa, Mols and Dole, with total square area over 150 thousand square meters 11. Migration and natural decrease of population and ambitious projects sizes is precondition to the remarkable doubling of the market saturation. Retail property is concentrated in Riga, but it does not make sense to analyze Riga region separately from the rest of Latvia. Capital city s retail property saturation would overlap the 900 sq.m level per 1,000 inhabitants in Under the circumstance if Latvia economy is able to attract foreign consumer s interest and integrate into the European economy development at a fast pace as capable and active state, the next phase of largescale shopping centers development would be the expansion of the objects which territories format allow further development, and retail park projects realization (e.g., Linstow Retail Park project in Saliena). That would mean efficient market campaigns within spatial planning, attracting clients from the distant residential areas and strengthening the loyalty in the current catchment area. Following the results of the market analysis provided in 2007 by the worldwide real estate consultancy Company Jones Lang LaSalle (Figure 3), the density of the European shopping center market is approximately 170 sq.m per 1,000 inhabitants. This is the leading indicator among the professional developers of the shopping centers and investors when looking for territories for the new projects. Supplementing the results of the analysis provided by figure 2, the one may conclude that the market participants from the Baltic Sea region and the Western European are ready (below the median indicator at the Figure 3 are countries from the Czech Republic Sweden), and the barometer of this activity shows that there are almost more than 455 million people (under the provision that the population number is a constant) at the territory of the potential development 12. Under the provision that the median indicator at the territory of Europe while planning big format commercial objects, their number may reach 4,400 projects. For its part, Latvia would have, in addition, approximately, 80,000 sq.m of total commercial area. It has been partly implementing by the traditional small formats of the current year projects, however, this may return due to natural competition between the formats. 05].< p. 39; European Commission Statistics (EUROSTAT) database and site information [interactive]. Luxembourg: EUROSTAT, 2011 [accessed ]. < Baltic States and Belarus real estate market review. Accelerating success. Riga: Colliers International, 2011 [accessed ]. Baltic property market report, Lithuania, Latvia, Estonia [interactive]. Riga: NEWSEC, 2011 [accessed ].< 11 Linstow and Norwegian investment fund Acta business deal facts [interactive]. Riga: Zvērinātu advokātu birojs Raidla LejiĦš & Norcous, 2009 [accessed ].< 12 Authors complex calculations based on: European Commission Statistics (EUROSTAT) database and site information [interactive]. Luxembourg: EUROSTAT, 2011 [accessed ]. < Щербакова, E. На начало 2007 года постоянное население России насчитывало 142,2 миллиона человек. In Домоскоп Weekly, электронная версия бюллетеня Население и общество. Москва: Национальный исследовательский университет Высшая школа экономии [interactive]. 2007, [accessed ].< 148

144 Figure 3 Jones Lang LaSalle Company s market research data. Large-scale shopping centers density, Fall, The collaboration with the foreign investors caused the improvement of professional knowledge of the local market specialists. The research on the large-scale shopping centers s market density increase in Latvia results the surplus of the commercial leasable area in the mediumterm, but international market become optional for the Latvian specialists to develop new real estate objects professionally and attract interest for the international partners for opening business in the territory of Latvian state. Conclusions Summary of the results of the carried research the authors present within the following issues: 1. The successful realisation of the retail real property requires the focused and deep look on the territorial or spatial planning. The concept of territory s development and standards of the largescale shopping centers might be considered. 2. In the scale of Europe, Latvia is a small scale country. Even more the entire retail concentration is located in Riga. This brings a misbalance into the entire country or lapsided retail property development proved by one of the ratios retail turnover per capita and market saturation breakdown between Riga Region and rest Latvia. 3. The Latvian central location between the New EU members from Baltic Sea region and professionalism of the presented large-scale shopping centers developers and retail brands companies raise the potential of the local market in a long-term perspective and cultivate the other markets up to 80,000 sq.m GLA locally and over 4,400 projects in Europe. References 1. Baltic States and Belarus real estate market review. Accelerating success. Riga: Colliers International, 2011 [accessed ].< 2. Baltic property market report, Lithuania, Latvia, Estonia. [interactive]. Riga: NEWSEC, 2008 [accessed ].< 13 Baltic property market report, Lithuania, Latvia, Estonia. op.cit., p

145 3. Baltic property market report, Lithuania, Latvia, Estonia [interactive]. Riga: NEWSEC, 2011 [accessed ].< 4. Central Statistical Bureau of Latvia database and site information [interactive]. Riga: Central Statistical Bureau of Latvia, 2011 [accessed ].< 5. Description of shopping center project data Cube City [interactive]. Riga: Colliers International, 2010 [accessed ].< 6. Description of shopping center project data Riga Akropole [interactive]. Riga: Akropolis group, 2011 [accessed ].< 7. European Commission Statistics (EUROSTAT) database and site information [interactive]. Luxembourg: EUROSTAT, 2011 [accessed ]. < 8. Golubevs, R. Budlevskis, M. Mazumtirdzniecības biznesa nianses. In The Varianti.lv [interactive]. Riga: Valranti.lv, 2008 [accessed ]. < 9. Kossovičs, M. Tirdzniecības centri gatavojas taupības režīmam. In The Latvijas Tirgotājs [interactive]. Riga: Latvijas Tirgotājs, 2008 [accessed ]. < 10. Lambert, J. One Step Closer to a Pan-European Shopping Center Standard. Illustrating the New Framework With Examples in The Research Review [interactive]. New York: International Council of Shopping Centers, 2006, 13(2): [accessed ] 11. Linstow and Norwegian investment fund Acta business deal facts [interactive]. Riga: Zvērinātu advokātu birojs Raidla LejiĦš & Norcous, 2009 [accessed ].< Linstow Portfolio [interactive]. Riga: Linstow Center management, 2011 [accessed ].< Official statistics of department store Stockmann in Riga [interactive]. Riga: Stockmann Corporate Group, 2011 [accessed ].< Official statistics of shopping center Riga Plaza [interactive]. Riga: EMCM group, 2011 [accessed ].< Social-economical analytics in Riga districts [interactive]. Riga: Riga City Council, 2011 [accessed ].< Staube, T., Geipele, I. Lielformāta tirdzniecības objektu izvietošanas teritoriju telpiskās plānošanas vīzija. Scientific Journal of Riga Technical University, Economics and business. 2009, 3(18): Щербакова, E. На начало 2007 года постоянное население России насчитывало 142,2 миллиона человек. In Домоскоп Weekly, электронная версия бюллетеня Население и общество. Москва: Национальный исследовательский университет Высшая школа экономии [interactive]. 2007, [accessed ]. < 150

146 ASPECTS OF EVALUATION OF THE EFFECTIVENESS OF THE CZECH CONSTRUCTION INDUSTRY DUE TO THE LIFE CYCLE Lucie Sychrová Brno University of Technology, Czech Republic, Abstract. Objective/purpose: Aim of this paper is to map out the specifics of the Czech construction market and justify the relevance of the choice of this sector as a targeted area within the marketing-oriented research work. Article analyzes the construction industry especially from the perspective of construction production, construction contracts, business, construction, and associated development of sales in this field. The purpose is to provide a holistic view of development in the construction industry in recent years and determine whether it is appropriate to target the areas of marketing research. These specific features and aspects are discussed from the perspective of the life cycle of a product / service - construction activity. This contribution was prepared on the FP VUT Brno the number of solved FP-S-11-3/1417 project titled "Innovative approaches in management and marketing in Europe a global environment". Originality / value: Outline of the links between the specifics of the construction market and the various stages in the life cycle of construction companies provided products / services. Methodology / approach: induction, deduction, analysislimits / Implications of Research: Continued development in the construction industry, both in terms of new technologies, as well as from the perspective of the relevant macro indicators, narrowing the timeliness of this study for a shorter period of time. Further insight into the industry may vary according to the investigated problem. This study analyzes the construction industry from the perspective of the needs of marketing research. Keywords: Czech construction industry, effectiveness, building products, construction contracts, construction work, the annual comparison, the life cycle of service / product life-cycle Introduction Construction is an industry which plays an important role in stimulating the growth of the economy. Currently produces approximately 5% of gross value added and employ about 9% of people. Decisive role in the performance of the domestic construction industry, contracts for public sector-oriented transport infrastructure, and procurement of foreign investors focused on building the business and administration. The structure of business entities reached a similar character as in other EU countries. As the number of businesses are dominated by small and medium enterprises. Big companies often operate as part of foreign companies. It is the entry of foreign capital into the sector played an important role in shaping industry structure, but also in increasing the competitiveness of firms. This article offers a view on the Czech construction industry across the years of its development.contemplates the possibility of using a closer look through the different stages of the life cycle of a product / service (in building terminology: the life cycle of the contract). This contribution was prepared on the FP VUT Brno the number of solved FP-S-11-3/1417 project titled "Innovative approaches in management and marketing in Europe a global environment". 1. Czech construction market As follows from data published by the Czech Statistical Office 1, in 2007, total construction output increased by 6.7%. Approximate value of permitted constructions was CZK billion, 1 Industry, construction [interactive]. Prague: Czech Statistical Office, 2011 [accessed ] < 151

147 decreased by 0.9%. In 2008, total construction output increased by 0.6%. Approximate value of permitted constructions was CZK billion (up 9.3%). Construction output in 2009 at constant prices decreased by 1.0%, adjusted for working days decreased by 0.6%. Civil engineering recorded annual growth of construction output by 14.3% (contribution +4.0 pp) and building construction fell by 7.0% (-5.0 pp contribution). Construction output in 2010 at constant prices decreased by 7.8%, adjusted for working days fell by 8.0%. Production of building construction recorded a decrease of 8.4% (contribution -5.6 pp) and civil engineering fell by 6.7% (-2.2 pp contribution).construction output in the 2nd quarter of 2011 fell year on year by 5.7%. Production of building construction fell by 2.5% (contribution -1.6 pp) and civil engineering recorded a decline in construction output by 11.7% (contribution -4.1 pp). The number of construction contracts, construction enterprises with 50 or more employees in 2010 grew by 15.7%, many businesses in the country concluded st The number of construction contracts, construction enterprises with 50 or more employees in the 2nd quarter of 2011 grew by 21.1%, many businesses in the country concluded th The total value of these contracts decreased by 29.1% and reached CZK 41.2 billion, building construction 17.5 billion CZK (-5.2 pp contribution, a decrease of 14.7%) and civil engineering CZK 23,7 billion (contribution pp, drop by 36.9%). Decrease the volume of construction orders for civil engineering was influenced by a higher comparative base in the 2nd quarter of 2010, when the value of construction orders rose by 11.5%. At the end of the 2nd quarter of 2011 Construction enterprises with 50 or more employees concluded a total of 13,300 orders (up 12.1%), and these contracts represented a stock not yet carried out construction work worth CZK billion (down 3.8 %). The following table provides a comparative view of the anticipated construction and development of sales in comparison with selected countries. Table 1 Predicted the development of construction and sales Development Construction (prediction companies) Czech Republic Hungary Slovakia Poland ,6% 0,4% -1,4% 3,4% ,6% 5,3% 5,6% 1,5% Sales development (prediction companies) Czech Republic Hungary Slovakia Poland ,7% 0,9% 0,9% 3,5% ,4% 4,7% 4,4% 2,8% Last year ended with expected annual decline of 7.8%, which almost exactly match the assumption. Perhaps it will seem that it's not a bad result. If we compare this year rather than fall, but by 2008, the first year of crisis, we are already at a value of nearly 13%, and considering the boom even more unique solar photovoltaic (for the year 2010, implemented a CZK 50 billion!) then it is already more than 17%. Statistics of the year recorded in the individual months increase by 4-8%. At the end of the first quarter grew by 5.9%, but the fall of 2008 to almost 20% complete! Companies still expect a continuing decline in its revenues, compared to their predictions in January there was a slight deterioration. Again, the worst situation, they perceive the greatest representatives of the companies. Large construction companies expect their sales decline by 3.9%. 152

148 Small businesses expect a moderate decline in sales by 1.6%. 2 The situation from the perspective of the respondents engaged in building or engineering construction shows the continuing large differences between these two segments. Fewer orders confirms only 37% of building construction (32% in January), compared with a large construction, where 56% of respondents confirmed. Figure 1 Expected development of construction 2. The issue of life-cycle product / service Each product has its life cycle (Dunk, 2004). During this cycle, changing business objectives, depending on the stage of life cycle in which the product is not. A prerequisite to successful survival of the product on the market including evaluation objectives defined for each phase of product life cycle. The effectiveness of marketing activities is reflected in the final phase of volume sales of the product or service (Wong, Ellis, 2007). The most effective advertising is the one that will maximize sales, while investment in advertising will be minimal. Return on investment is one of the major problems of the effectiveness of advertising. Investments made in advertising with us does not have to always return. Each product goes through various stages of the life cycle. The life cycle of product development refers to the volume of sales and profits. Length of life cycle depends on the nature of the product and its market success. According to life cycle stages in which the product is not, shall be amended only targets manufacturers, but the volume of sales growth, profit and efficiency of various promotional tools (advertising, personal selling, sales promotion, publicity). As stated Che in his work (Che, 2009), advertising itself is most effective in the implementation phase of the product on the market, where consumers know the product. The aim of the advertising message is to inform customers about new product and thus increase sales and profits. In the growth phase, the volume of sales and profits have been depressed because of all instruments of promotion. Stage of maturity is again characterized by increasing advertising, sales volume had reached the point of maximum and begins to slowly decline. Most are applied to sales promotion, as well as in decline, the demand for the product greatly decreases. The product passes through various stages of the life cycle, such as a human being who has the youth, other requirements and goals than in old age. How to properly and effectively apply the advertising just 2 Czech Construction Qualitative Analysis [interactive]. Prague: Topinfo, 2010 [accessed ]< 153

149 depends on the stage, in which the product is located. Effective advertising (Pavlov, Bourne, 2011) is a tool to influence consumer preferences so you just bought "our" product. This is necessary to know the needs and wishes, and accordingly to effectively apply an effective advertising campaign. Figure 3 The features of each life cycle phase 3 3. Research problem and research methods Research question is to connect the building industry with the elements of life cycle stages of contract and outlined the most important metrics observed across phases. The research method consists in drawing the above-described information concerning the construction and life cycle of a product / service of the conclusions, which are aspects of the construction company Most critical. This was done by deduction and induction. 4. Research result Among the most important metrics that affect the performance of construction companies across phases include: The financial metrics: 1. Costs of construction contracts (costs associated with the development and application of construction contracts in practice across periods, should be seen in connection with the development of revenue and marketing costs) 2. Marketing expenses (cost of sales and marketing activities across periods) 3. Margin (profit contribution revenues in each phase) 4. Cash flow (to see which specific activities generate cash flow and at which stage) 5. The stock index (in the case of joint stock companies to monitor trends in share values) 6. Return on sales (ROS) 7. Return on investment (ROI) 8. The customer metrics: 3 Kotler, L., Philip, J. (1991) Marketing management-analysis, planning, implementation and control. Prentice-Hall, Englewood Cliffs,

150 9. Marketing cost per user (monitoring marketing expenses in connection with the number of customers) 10. The cost of procurement (in the case of firms receiving construction contracts through public procurement) 11. The profitability of individual construction contracts / customers 12. Customer value (the aim is to increase customer value) 13. The number of construction orders (in most cases it is the service - the provision of construction works) The choice of suitable metrics from the perspective of the life cycle: Stage 1 Introduction In the initial phase of the life cycle need to include monitoring the response time. On the basis of appropriate metrics can then track the effectiveness of the initial phase. It is necessary to constantly monitor the process of building contracts. Stage 2 Growth At this stage it is necessary to focus on the period from the start of the contract until the full scale and in particular monitor the yield and the need for corrections made in the process. Stage 3 Maturity In this phase, the construction company mainly focuses on competitive pressures and trying to establish their competitive advantage. They must react quickly enough to changes occurring in the market place. Stage 4 Decline The final phase is the evaluation phase of the contract monitoring spokojenosi the contract in terms of complaints, customer retention and attracting new customers based on positive references. 5. Discussion Developments in production and building construction contracts shows a clear trend. The development is highly variable. Construction is a sector whose performance affects a number of factors. The main factors in addition to the overall macroeconomic indicators, it is possible to include the fact whether or not a company dependent on government procurement. Large construction companies expect a decrease in sales for 2011 of 3.9%. Small businesses expect a moderate decline in sales, by 1.6%. The situation in the construction and civil engineering continued to show large differences between the two segments. Prediction performance for the sector in 2011, at least not deteriorated. Conversely outlook for 2012 worsened - the first time, the company predicts continuing decline in the Czech construction next year, the sector will recover slower than expected. The worst perceived status and views of representatives of large construction companies, engineering and construction segment. In the currently most efficient way of obtaining contracts, consider a large company tenders. Developments in 2010 and 2011 (Q2) shows a downward trend. Domestic construction output year on year in July 2011 fell by 11.1%, which further deepened the June decline. Production of building construction decreased compared to the same period last year by 6.4 percent and civil engineering output by nearly 20 percent. 4 The drop was recorded mainly for road construction. The annual decline in construction output is gaining momentum and is primarily due to lower investment in civil engineering. Given the expected 4 Everyone saves, construction dying [interactive]. Prague: Magazine Právo&Seznam.cz [accessed ]<:// 155

151 development of the state budget for next year can expect an early improvement. Construction industry still does not free from crisis and not the views of others does not inspire optimism. Decrease by more than 11 percent is due to the large reduction in production engineering, which resulted in restrictions on investment by the state. It builds a larger number of buildings, but a smaller value. Number of building permits has increased, but the value of orders fell by more than a quarter. State, firms and households save. The pre-crisis levels, the domestic construction industry could get the earliest in Fell slightly and apartments. They started to build them by 6.2 percent less. This is primarily due to the fact that the housing market is now stagnant, and above all new dwellings on the market surplus. For the above reasons, on-site execution of a deeper and more detailed analysis of development indicators (sales, procurement, production) from the perspective of the individual phases of product life cycle. The first phase (Introduction) requires the creation of a new product / service and then to market. This phase is very long. This time lag leads to a loss of market share, loss of earning potential and finally the loss of competitive advantage. This longer response time should therefore be as short as possible and to measure effectiveness across this stage of metrics used in particular focusing on the location of this inefficiency (market share, profitability, competitive advantage). In the second stage (Growth) is a company able to place the product on the market, but not perfect product / service. We are constantly exploring the perfection of order and to correct deficiencies found. It is therefore a time to refine the product. To measure the effectiveness of this stage is the need to focus on possible problem areas that at this stage of the construction company preventing the full power and start the order. The third phase (Maturity) is a phase of maturity, a phase which has already been incorporated into the contract due to changes in market and customers. To monitor the effectiveness of the need to focus on those metrics that are able to respond to the competitive position (competitive benchmarking metrics). In the final phase (Decline) in terms of monitoring the effectiveness of an important moment of maintaining existing customer satisfaction evaluation and learning from the process. It is also the stage where there is a service and claim management. The chosen metrics should therefore reflect these particular moments. At each stage it is necessary to capture the most important feature that is typical for this phase and the use of appropriate metrics to monitor. Construction has in the life cycle of the contract also specific elements. Focusing on both moments simultaneously, thus a typical feature of the life-cycle and investigated the specifics of the industry (construction), thus creating space for a basic evaluation of the effectiveness of marketing activities. Conclusions Czech construction shows a downward trend. Each phase of the selected analysis period ( ) show a highly variable trend, but compared to the base year 2008 is currently possible to speak of a significant downturn. It is useful to examine the effectiveness of marketing approach of companies across the life cycle stages and determine the possible torque inefficient behavior Czech construction companies. References 1. Adrian E. Coronado Mondragon, Chandra Lalwani, Christian E. Coronado Mondragon. Measures for auditing performance and integration in closed-loop supply chains. Supply Chain Management: An International Journal, Vol. 16 Iss: 1, 2011, p Alan S. Dunk. Product life cycle cost analysis: the impact of customer profiling, competitive advantage, and quality of IS information. Management Accounting Research, Volume 15, Issue 4, December 2004, p Andrey Pavlov, Mike Bourne, Explaining the effects of performance measurement on performance: An organizational routines perspective. International Journal of Operations & Production Management, Vol. 31 Iss: 1, 2011, pp

152 4. Amir Grinstein, The relationships between market orientation and alternative strategic orientations: A meta-analysis. European Journal of Marketing, Vol. 42 Iss: 1/2, 2008, pp Bengt Steen. Environmental costs and benefits in life cycle costing. Management of Environmental Quality: An International Journal, Vol. 16 Iss: 2, 2005, p Don O'Sullivan, Andrew V. Abela, Mark Hutchinson. Marketing performance measurement and firm performance: Evidence from the European high-technology sector. European Journal of Marketing, Vol. 43 Iss: 5/6, 2009, p Debra Zahay, Abbie Griffin. Marketing strategy selection, marketing metrics, and firm performance. Journal of Business & Industrial Marketing, Vol. 25 Iss: 2, 2010, p Farris Paul et al. Marketing metrics: 50+ Metrics every executive should master. USA: Wharton School Publishing, 2006, p Hiu-Kan Wong, Paul D. Ellis. Is market orientation affected by the product life cycle? Journal of World Business, Volume 42, Issue 2, June 2007, p Jim Andersén, Strategic resources and firm performance. Management Decision, Vol. 49 Iss: 1, 2011, pp Kathryn Hashimoto. Product life cycle theory: a quantitative application for casino courses in higher education. International Journal of Hospitality Management, Volume 22, Issue 2, June 2003, p Kotler, L., Philip, J. Marketing management-analysis, planning, implementation and control. Prentice-Hall: Englewood Cliffs, 1991, p Milichovský, F.; Solčanský, M.; Sychrová, L. Přístupy k měření efektivnosti marketingových činnost. Trendy ekonomiky a managementu, 2011, roč. V, č. 8, s ISSN: Raab, D. The Marketing performance measurement toolkit. Chicago: Racom Books, 2009, p Stefan Mann, Henry Wüstemann, Efficiency and utility: an evolutionary perspective. International Journal of Social Economics, Vol. 37 Iss: 9, 2010, pp Z.H. Che. Pricing strategy and reserved capacity plan based on product life cycle and production function on LCD TV manufacturer, Expert Systems with Applications, Volume 36, Issue 2, Part 1, March 2009, Pages Industry, construction [interactive]. Prague: Czech Statistical Office, 2011 [accessed ] < 18. Sales development in construction [interactive]. Prague: AliaWeb, 2011 [accessed ]< 19. Czech Construction Qualitative Analysis [interactive]. Prague: Topinfo, 2010 [accessed ]< 20. Everyone saves, construction dying [interactive]. Prague: Magazine Právo&Seznam.cz [accessed ]<:// 157

153 INFLUENCE OF STOCK-KEEPING-UNITS DISTRIBUTION WITHIN SUPPLY CHAIN ON THE PROFITABILITY OF THE SYSTEM AS A WHOLE Rimvydas Jasinavičius Mykolas Romeris University, Lithuania [email protected] Girius Jasinavičius UAB TOC sprendimai, Totorių 30-3, Vilnius, [email protected] ABSTRACT Profitability of sales never loses their relevance while formulating business objectives, managing its processes, and analyzing the results. The actual sales of goods and services delivered through the value added are the result of professionally managed operational processes of whole supply chain. Constantly striving for continuous improvement of the operational efficiency, it is important to identify the constraints that are the prime cause of the existing problems. These existing barriers directly influence and determine the profitability of the system and often create non-productive costs. This article examines how the different accumulation of inventory volumes in a coherent supply chain affects profitability system as a whole. It analyzes the cause of commonly existing problems in different global supply chains. Analysis mainly focuses on two distribution strategies through the supply chain: "push" strategy based on pre-term forecasts methods and "pull" strategy based on actual sales data and rapid replenishment of goods sold. It is analyzed and explained why pull strategy under methodology of Theory of Constraints is much more effective. This article includes a specific supply chain management methods based on Theory of Constraints that challenges traditional supply chain management. Analysis covers errors of forecasts and their influence on the supply chain results. Examines other essential factors of existing problems and suggests alternative methods such as buffer management, rapid respond and replenishment of goods sold and other. The results of alternative supply chain management according Theory of Constraints is supported by case study. Presented methods were implemented in the household chemicals wholesale and retail trading company Zolusca (Moldova, Chisinau). With in a short period of time the company achieved notable economic results: increase in sales volumes by 40%, significant increase in net profit, increase in inventory turnover by 2 times, freed cash flow from inventory, expansion of points of sales, others. Keywords: supply chain, supply chain management, distribution, stock-keeping-units, sales, Theory of Constraints; "pull" distribution strategy, push distribution strategy, forecasts, rapid replenishment. 158

154 CORPORATIVE MANAGEMENT IN GEORGIAN COMPANIES (EXAMPLE OF JSC TBILAVIAMSHENI ) Larisa Takalandze Sukhumi State University, Georgia, [email protected] ABSTRACT The issues of corporative management are relatively new ones for Georgian companies. At the outset of market reforms, most of them developed based on their own assets. Though, at the rapidly growing market, in the conditions of dynamically changing technologies and severe competition, the own assets are apparently insufficient. The companies inevitably face the issue of attraction of the external financial assets, and in quite significant quantities. This requires from the companies organization of its operation in accordance with the state-of-art management principles. As we have stated, the corporative management institute is quite weakly developed in our country. Currently, in Georgia, there are numerous problems related to corporative management; among them unawareness of the shareholders in their rights, negligence with respect of the established procedures, ineffective management bodies, non-public nature of information, legislation weaknesses etc. To deal with this problem, the International Finance Corporation IFC (WB Group member, operating for private sector and supporting formation of open and competitive markets in the developing countries) has performed wide-scale and effective work; it has already completed the corporative management project in Georgia, intending assistance to Georgian companies in the sphere of improvement of corporative management practices. Introduction of responsibility, accountability and transparence principles in the company s activities promoted the profitability and attraction of the investments. IFC provided assistance in improvement of legislative environment regulating corporative management, as well as adoption of voluntary corporative management code by the Georgian Banks Association. IFC has also conducted seminars and individual consultations on legal and financial aspects of corporative issues and implemented the pilot program for the selected companies and banks. In result, in numerous companies and banks improvement of the corporative management practice led to improvement of effectiveness. One of such entities is JSC Tbilaviamsheni (former Tbilisi Aviation Factory). Thus, the article provides consideration of the problems with respect of corporative management, as well as peculiarities of corporative management in Georgia, on the example of Georgian company TAM-Tbilaviamsheni, the company, which, currently, is the most successful in using of the corporative management principles. 159