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EDITORIAL Editorial Board

BOARD

Ion Ababii, Chişinău Nicolae Albu, Brasov Levent Altinay, Oxford UK Kathleen Andrews, Colorado Springs Dan Barbilian, Bucharest Riccardo Beltramo, Turin Richard Beresford, Oxford Uk Dumitru Borţun, Bucharest Leonardo Borsacchi, Turin Mihail Cernavca, Chişinău Ioana Chiţu, Brasov Doiniţa Ciocîrlan, Bucharest Tudorel Ciurea, Craiova Alexandru Vlad Ciurea, Bucharest Maria Negreponti-Delivanis, Thessaloniki Jean-Sébastien Desjonqueres, Colmar Aurel Dobre, Călăraşi Mariana Drăguşin, Bucharest Ovidiu Folcuţ, Bucharest Luigi Frati, Roma, Italy Victor Greu, Bucharest Bernd Hallier, Köln

Sang-Lin Han, Seoul Aurel Iancu, Bucharest Mitsuhiko Iyoda, Osaka Mohamed Latib, Gwynedd Dong II Lee, Seoul Min-Sang Lee, Gyeonggi-Do Claude Magnan, Paris Radu Titus Marinescu, Bucharest James K. McCollum, Huntsville Nicolae Mihăiescu, Bucharest Dumitru Miron, Bucharest Dan Mischianu, Bucharest John Murray, Dublin Hélène Nikolopoulou, Lille Gheorghe Orzan, Bucharest Rodica Pamfilie, Bucharest Iulian Patriche, Bucharest Carmen Păunescu, Bucharest Mircea Penescu, Bucharest Virgil Popa, Targoviste Ana-Maria Preda, Bucharest Cristinel Radu, Călăraşi Florinel Radu, Fribourg Constantin Roşca, Craiova

Scientific Council

Young Editorial Board members

Vlad Barbu, Bucharest Gabriel Brătucu, Brasov Ion Bulborea, Bucharest Mircea Buruian, Targu Mures Iacob Cătoiu, Bucharest Jean Constantinescu, Bucharest Beniamin Cotigaru, Bucharest Radu Diaconescu, Iasi Valeriu Dulgheru, Chişinău Constantin Floricel, Bucharest Valeriu Ioan-Franc, Bucharest Gheorghe Ionescu, Timisoara Christophe Magnan, Montréal Pompiliu Manea, Cluj Andrei Moldovan, Bucharest Dafin Fior Muresan, Cluj Neculae Năbârjoiu, Bucharest Constantin Oprean, Sibiu

Adalbert Lucian Banyai, Bucharest Dumitru Patriche, Bucharest George Bobîrnac, Bucharest Stefano Duglio, Turin Florian Popa, Bucharest Marinela Hostiuc, Bucharest Dumitru Tudorache, BucharestDarius Ilincaş, London Adrian Lală, Bucharest Ion Smedescu, Bucharest Victor Părăuşanu, Bucharest Irina Purcărea, Bucharest Dan Smedescu, Bucharest Constantin C. Stanciu, New York George Cosmin Tănase, Bucharest Oana Patricia Zaharia, Bucharest

Reviewers

Alexandru Ionescu, Romanian-American University Adriana Bîrcă, “George Bariţiu” University Brasov Nelu Florea, “Alexandru Ioan Cuza” University Iasi Alexandru Ilie, Romanian American University Ana Ispas, Transilvania University Brasov Irena Jindrichowska, University of Economics and Management in Prague Costel Iliuţă Negricea, Romanian-American University Adina Negruşa, “Babes-Boyay” University Cluj-Napoca Anca Purcărea, Academy of Economic Studies in Bucharest Monica Paula Raţiu, Romanian-American University Gabriela L. Sabau, Memorial University, Sir Wilfred Grenfell College Andreea Săseanu, Academy of Economic Studies in Bucharest


Analisa Romani,Turin James Rowell, Buckingham John Saee, Virginia Beach VA Cătălin Sfrija, Bucharest Adrian Socol, Strasbourg Eliot Sorel, Washington D.C. Mihaela-Luminița Staicu, Bucharest John L. Stanton, Jr., Philadelphia Peter Starchon, Bratislava Felicia Stăncioiu, Bucharest Marcin Waldemar Staniewski, Warsaw Vasile Stănescu, Bucharest Filimon Stremţan, Alba-Iulia David Stucki, Fribourg Kamil Pícha, Ceske Budejovice Laurenţiu Tăchiciu, Bucharest Emil Toescu, Birmingham Eva Waginger, Wien Léon F. Wegnez, Brussels Răzvan Zaharia, Bucharest Gheorghe Zaman, Bucharest Dana Zadrazilova, Prague Sinisa Zaric, Belgrade

Editor-in-Chief

Theodor Valentin Purcărea

Executive Editor Victor Lorin Purcărea

Assistant Editors Dodu Gheorghe Petrescu Cătălina Poiană Raluca Gheorghe

Publishing Editors Petruţ Radu Ovidiu Călin

Art Designer Director: Alexandru Andrei Bejan Editorial Office P.O. Box 35-59, 35 Bucharest, România E-mail: office@crd-aida.ro, crd.rcdaida@yahoo.com Website: www.distribution-magazine.ro/, www.distribution-magazine.eu/ Copyright © 2010 Romanian Distribution Committee, Bucharest, Romania Printed at “Carol Davila” University Press, 8 Eroilor Sanitari Blvd., 050474 Bucharest, Romania Tel/Fax: +40 21 318 07 59


Editorial

How rich together are we today? What does being rich mean to us? How rich together are we today? What kind of cheap or expensive pleasures have we? What kind of concerns have we? We are a little before the second „SANABUNA” Conference (which will be held in June this year). The first „SANABUNA” Conference took place on April 9, 2009, being held at the University of Medicine and Pharmacy „Carol Davila”, Bucharest, which approached the imperative of reflection and responsible action on the issue „health-food-welfare”, seeking to identify the new and necessary direction of attitudes which would allow the establishment of a partnership between the public and the private sector, a partnership meant to offer proper solutions for influencing the change in behavior in order to improve the economic - social health and responsibility. It is well known that the event’s interdisciplinary character allowed covering certain new aspects, starting from the harmonization of the preocupations related to building a truly better life, in the context of the pressure of the awareness concerning the connections between health, food and the different aspects of businesses and the imperative of identifying the right answers in the confrontation with the wellfare reform, reconfiguring consistent ways with fundamental values, education being in the center of the adapta-

tion, and solidarity could not be neglected. It is also well known that the conclusion was that the speech and action on the issue „food-health-wellfare” must and can be modified in order to preserve our life, opening up our mind and hightening the spirits to cross the „ocean of mistrust” whose huge waves crash against the shores of economic- social constructions, going beyond the fragments of understanding, interacting, getting involved, communicating and learning how to realize the proper change of our behaviour as producers, distributors and individual and organizational consumers of the product that became part of our culture. As we all know, it takes time to change behaviors, change being not linear and the deliberation being limited by a multitude of competing factors within the challenging framework of making justifiable choices. Thinking about this issue from the perspective of the emerging community behavior (blogs, social networks, social bookmarks, wisdom of crowds with stop-and-go patterns in evolution) as the new wave of audience, it raises the question of the right delivering message, gradually building the „moment of truth” of the „customer” interface.

We observe that yes we do change, we change consuming (knowledge, news, words, food etc.), and changing the subject of life conversation, speaking about another crisis, another recession, another global food crisis, about the confidence crisis, about preparing to face the hunger… of justifiable choices.

What does being rich mean to us? How rich together are we today? Theodor Valentin Purcărea


A Comparison of Process and Ingredient Claims on US and EU Foods Dr. John L. Stanton Dr. Neal H. Hooker Professor and Chair, Department Professor and CJ McNutt Chair, of Food Marketing Department of Food Marketing jstanton @ sju.edu nhooker @ sju.edu

Abstract Significant research has been conducted to identify the extent to which consumers use label information. Much of this relates to nutrition labeling, yet increasingly foods are being marketed with ever more ingredient and process claims such as all natural or organic. Key studies consider the determinants of label use, debates over mandatory labeling, the label formats preferred by consumers, and the effect of nutrition label use on purchase patterns and dietary behavior. However, much less research has been attempted that tracks the claims actually made on food labels. This paper addresses this gap by comparing claims across the US and EU. The objective of this paper is to compare and identify All Natural, Organic and Vegetarian package claims that are actually made on 32,289 food labels in 2009 and to compare the results between the US and the EU.

Ekaterina Salnikova, MS. Mediterranean Agronomic Institute of Chania bonita_chica @ mail.ru

Keywords: All natural claims, organic claims, Vegetarian claims, packaging, labels JEL classification: L66

Introduction While a considerable amount of money is spent globally on advertising, greater consumer brand exposure is obtained from food labels. Each consumer walking though any food store is exposed to the huge variety of labels throughout the store. In many cases branded food companies create a “billboard effect” by carefully planning the packing and shelf layout to maximize this exposure. While significant attention is given to measuring the effectiveness of advertising little attention has been given to the promotional value of on product packaging. This paper provides an initial step in this process as it identifies which ingredient and process claims are made on foods and whether these claims vary between the US and EU. This study focuses on s All Natural, Organic and Vegetarian claims. Significant research has been conducted to identify the extent to which consumers use label information. Much of this relates to nutrition labeling, yet increasingly foods are being marketed with ever more ingredient and process claims such as all natural or organic. Key studies consider the determinants of label use, debates over mandatory labeling, the label formats preferred by consumers, and the effect of nutrition label use on purchase patterns and dietary behavior. (Drichoutis, 2006) Consumers gather information about the foods they purchase from a wide variety of sources. Family knowledge, education, the media and advertising all convey messages about different food characteristics. This information may also be found on the food product label. From a diet and health standpoint, the information on those labels about the nutritional content and health benefits of food is particularly important. Two types of such information appearing on food products are “nutrition labels” and “health claims” (see Van Camp et al., 2010 for a recent review of such claims on foods in the UK). Claims which relate to the person who eats the product are considered health claims and include foods which may support reduced serum cholesterol. (Stanton, 1987) In addition, claims may focus on the source and characteristics of key ingredient(s) or the manner in which they are grown or processed. Key among such “ingredient” or “process” claims


are All Natural, Organic and Vegetarian. Differences in definitions and institutional arrangements governing the use of such claims exist between the US and EU. All Natural, Organic and Vegetarian claims are credence claims (Caswell and Mojduszka, 1996). Although they do not refer to specific nutrients they do suggest that something may be “absent” from the food due to ingredient or process characteristics which cannot be easily verified by the consumer without the use of a claim. Label information creates brand awareness as well as actionable information. Various types of claims on foods have the potential to contribute to the achievement of public health objectives as well as personal health and life style objectives. Labeling provides consumers with information about the nutritional properties of a food and health claims (statements connecting a food, food component or nutrient to a state of desired health) provide information to consumers about the nutritional and health advantages of particular foods or nutrients. Ingredient and process claims may address ethical, ease of use or sustainabilty benefits and thus fit with life style choices. Much research in this area from a wide range of countries suggest that many consumers use label information when making food choices, especially when buying a product for the first time. People who read labels tend to use them to compare the nutritional profile of products - to find out how much fat and calories the food contains, for example. Nutrition labels have also been shown to encourage more healthful diets among people who read labels. However, the benefits of label information may be broader and can affect the entire population if nutrition labeling regulations encourage food companies to develop more foods with lower quantities of less healthy nutrients. While several studies have tracked the use of nutrition and health claims the authors are not aware of studies which do so for ingredient or process claims for foods launched in the US and EU. This paper therefore reviews the global regulatory environment for such claims by focusing on “All Natural,” “Organic” and “Vegetarian” foods. The paper provides a clear overview, and compiles and categorizes existing international regulations and national regulations for the US and European Union. The objective of this paper is to compare the use of claims actually made on food packaging and to compare the results between the US and the EU.

Methodology Data was collected from official web-sites of USDA- FSIS), the FDA), the European Commission (more precisely of the Directorate General for Health and Consumers), EFSA and from the official web-site of the Codex Alimentarius. This data was used to characterize the various possible claims. Additional information collected for this study came from Mintel’s Global New Product 2009 Database (www.gnpd.com). GNPD collects and records innovations in the food and beverage industry with up to 62 data elements for each product. Examples include: product name, product category, ingredients, price (in US$ & Euros), patent numbers, company address, and several package pictures. There were 25,433 product labels analyzed in the EU database from Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Poland, Portugal, Spain, Sweden and the UK. There were 6,856 product labels from the US. There were 64 different claims identified (and a category entitled “no claim”) from the US and EU databases. This research focused on only 3 of the claims that available: All Natural, Organic and Vegetar-

Literature review

Most of the existing studies attempted to explore the determinants of the use (by firms and consumers) of nutritional labels in general. A small number of these made a distinction between ingredient lists and nutrition panels (Bender and Derby, 1992), or explored the use of specific nutrient information (Drichoutis, Lazaridis, and Nayga, 2005; Nayga, 1996). Nutrition labeling as a policy tool is appropriate and particularly valuable because consumers have no other way to evaluate the nutritional value of their food. Nutrition information provided through a food label may reduce consumer’s uncertainty (Zarkin and Anderson, 1992) or transform credence attributes of food into search attributes (Caswell and Mojduszka, 1996). At an international level, nutrition labelling and health claims are contained in the Codex Alimentarius, a set of international standards, guidelines and related texts for food products developed by the Codex Alimentarius Commission a Joint FAO/WHO Food Standards Programme. The aim of the Codex Alimentarius is to protect consumer health and encourage fair practice in international food trade. Although the implementation of the Codex Alimentarius is voluntary, the World Trade Organization has recognized it as a reference in international trade and trade disputes. National regulations mandate different label formats. Some countries follow Codex Alimentarius recommendations for which energy, fat, protein and carbohydrate are listed on a label and where a claim is made. Codex guidelines now recommend that national governments should decide whether trans fatty acids should be labelled; thus an increasing set of countries are now choosing this option. Countries also have developed different methods of quantifying the nutrients on the label (Hawkes, 2010). However, Codex is less clear and uniform on the use of ingredient or process claims. Indeed, much debate has encircled the use of standards defining acceptable production processes with key examples being dolphin-friendly tuna, genetically modified grains and oilseeds or animal welfare measures. The US Food and Drug Administration (FDA) Food Labeling website addresses the labeling requirements for foods under the Federal Food Drug and Cosmetic Act and its amendments. Food labeling is required for most prepared foods, such as breads, cereals, canned and frozen foods, snacks, desserts, drinks, etc. Nutrition labeling for raw produce (fruits and vegetables) and fish is voluntary. The Food Safety and Inspection Service (FSIS) of the US Department of Agriculture (USDA) develops and provides labeling guidance, policies and inspection methods and administers programs to protect consumers from misbranded and economically adulterated meat, poultry, and egg products which ensure that all labels are truthful and not misleading. In the European Union (EU) the Directorate General for Health and Consumers ensures that food and consumer goods sold in the EU are safe, that the EU’s internal market works for the benefit of consumers and that Europe helps protect and improve its citizens’ health. It works with other EU institutions, national governments and agencies, consumer organizations, health interest groups, business groups, scientists, researchers and experts. The European Food Safety Authority (EFSA) is the keystone of EU risk assessments regarding food and feed safety. In close collaboration with national authorities and in open consultation with its stakeholders, EFSA provides independent scientific advice and clear communication on existing and emerging risks. These various agencies provide labeling directives and regulations, monitor the appropriate use of such claims, and thereby help to promote a more effective and efficient marketing process for foods with significant credence attributes (such as nutrition, ethical and humane treatment of workers and animals, and environmental sustainability).


ian. These are particularly important today as sales of products with these claims are increasing annually. Growth in retail sales has equaled 20 percent or more annually since 1990 for organic products for example (see Batte et al., 2007). Organic products are available in nearly 20,000 natural foods stores in the US, and are sold in 73 percent of all conventional grocery stores. (Dimitri, 2002)

Analysis The data was analyzed using a z-statistic to determine whether there are significant differences between the US and EU data (see Table 1). When one examines the “AllNatural Product” claim there is a significant difference between the US and EU, as can be seen in Table 1. The proportion of products claiming to be “All-Natural” are 1.7% in EU and 13.7% in US, with a z value of 43.5 that demonstrates a statistically significant difference beyond 0.001. This claim is used when a product clearly states that it is allnatural. Also used with the following on-pack terms - Ayurvedic, 100% natural, or free from artificial ingredients. Products that claim to be made with certain natural ingredients, are not necessarily all natural and in this case do not use this claim. Presumably, the main reason for this disparitylies in differences in legislation between the EU and US. To be precise in the lack of it in the US. Neither FDA nor USDA has precise or consistent rules for “natural.” Further, the food-and-beverage industry, represented by the Grocery Manufacturers Association, has no consensus. The Food, Drug, and Cosmetic Act prohibits labeling that is false or misleading, but does not give any specifics. (IFT, 2008). Because there is no legal definition for natural foods, food manufacturers in the US don’t have restrictions to put this claim on the products. They can include ingredients that may not be considered natural by some consumers. Therefore, firms can easily sell their products using the attractive “All-Natural” claim. In the EU there formal definitions for natural claims, definitions by process and by product which include tight restrictions of the criteria for use of terms such as Fresh, Pure, Natural, etc. in food labeling (controlled by EFSA). The guidance, in general, restricts the use of natural to foods that have “ingredients produced by nature, not the work of man or interfered with by man”. Hence, food manufactures don’t have as much freedom in using the claim “All-Natural” as they have in the US. Although often confused with natural, the organic claim is also significantly different in the EU and US. “Organic” claims appear on 9.6% of products in the EU and 8.5% in the US with a z value of 6.97. The larger quantity of organic claims in the EU may be related to a longer history of national, regional and third party process and ingredient standards for these claims. US sales of organic food and beverages have grown from $1 billion in 1990 to $24.8 billion in 2009. Sales in 2009 represented 5.1 percent growth over 2008 sales. Experiencing the highest growth in sales during 2009 were organic fruits and vegetables, up 11.4 percent over 2008 sales. Food and beverage sales represented approximately 3.7 percent of overall food and beverage sales in 2009. Leading were organic fruits and vegetables, now representing 11.4 percent of all U.S. fruit and vegetable sales. Organic non-

food sales grew 9.1 percent in 2009, to reach $1.8 billion. Total U.S. organic sales, including food and non-food products, were $26.6 billion in 2009, up 5.3 percent from 2008. Mass market retailers (mainstream supermarkets, club/warehouse stores, and mass merchandisers) in 2009 sold 54 percent of organic food. Natural retailers were next, selling 38 percent of total organic food sales. In 2008, mass market retailers represented 45 percent of sales, while natural food channels represented 43 percent of sales. Other sales occur via export, the Internet, farmers’ markets/ Community Supported Agriculture, mail order, and boutique and specialty stores. (Organic Trade Association, 2010) Meanwhile, according to Organic Monitor estimates, global organic sales reached $50.9 billion in 2008, double the $25 billion recorded in 2003. (The World of Organic Agriculture, 2010) The EU organic market has experienced similar growth over the last ten years. Finally, the claim “Vegetarian” has similar differences. It appeared in 10.20% of observed products in the EU and in 2.15% in the US with difference 21.2 with a z value of 21.17. This difference may be explained by difference in proportions of vegetarian population in the EU and the US. The “Vegetarianism in America” study, published by Vegetarian Times (vegetariantimes.com) in 2008, shows that 3.2 percent of U.S. adults, or 7.3 million people, follow a vegetarian-based diet. In Western Europe the number of vegetarians varies between 2% and 4% of the population. (Mintel, 2006), with the United Kingdom as the exception. The UK is shown as having the highest per capita vegetarians in Western Europe at 6% of the population. The growth rate of the meat-free foods market exceeded the five-year average in both 2007 and 2008. In 2008, the market is estimated to reach £739 million. Meat substitutes account for £170 million of this. Active new product development and the promotion of the products to a broader consumer base are the main reasons for this impressive growth.(Mintel ,2008) The large number of vegetarians in the UK is accounted for to some extent by real and perceived health scares relating to mad cow disease and foot and mouth disease. Taken together, the growing use of ingredient and process claims in both the US and EU may be related to the fact that while only 55% of those aged 55-64 state that they are “somewhat interested” or “very interested” in all-natural products, 75% of those aged 25-34 and 74% of 18-24s state that they have interest. This is one of several findings that indicate that demand for all-natural, organic and vegetarian products is high among young adults and will remain relatively strong in the years to come, as these young people mature, start families and gain greater influence. More than six in 10 respondents (62%) who use at least some natural/organic products agree that “It’s worth paying more for natural products for some types of items, but not for others” and 59% agree that “It’s worth paying more for organic for some products but not for others.” These findings indicate that many are tolerant of price premiums with these items, and thus worth promoting the attribute on the product package. (Mintel, 2010) Indeed, Li and Hooker (2009) using a similar data set found evidence of a significant 5 cent premium per ounce for a “preservative free” claim in spoonable yogurts. The authors found no statistically significant impact for “E. coli free” messages on meat and poultry products but find a significant price premium (approximately 20 cents per ounce) for “antibiotic free” claims in this category.


Table 1: Prevalence of Ingredient and Process Claims All Natural claim %

Organic claim %

Vegetarian claim %

US

13.7%

8.5%

2.15%

EU

1.7%

9.6%

10.2%

z-value

43.5

6.59

21.17

Summary Given the growth of ingredient and process claims on foods in the in both the US and EU, the importance of understanding the use of these claims within marketing mixes is of increasing importance. The emerging relevance of front of package labeling as a marketing tool makes understanding the differences pertinent. This paper marks the first systematic comparison of US and EU trends for three key ingredient and process claims. It appears that the extent to which a companies in the various countries use the All Natural, Organic and Vegetarian claims is influenced by both legislation and eating habits with each region. While the EU organic market has previously been considered to be more mature, it appears that the US market may be approaching this level, perhaps characterizing a “global” organic market, as opposed to regional natural and vegetarian markets. It would be interesting to further compare the use of these ingredient and process claims by individual global and regional brands to determine if the decision to employ a particular product differentiation strategy is made at a national, regional or global level. Further, the price premium assigned to such claims should be assessed at an individual product level and compared to national level consumer behavior measures to identify potential growth opportunities for new products. Footnote

ftp.fao.org/codex/Publications/understanding/Understanding_EN.pdf www.fda.gov/food/labelingnutrition/default.htm www.fsis.usda.gov/Regulations_&_Policies/Labeling_Guidance/index.asp ec.europa.eu/food/index_en.htm www.efsa.europa.eu/en/aboutefsa.htm http://www.food.gov.uk/multimedia/pdfs/markcritguidance.pdf

References

Batte, Marvin T., Neal H. Hooker, Tim Haab, and Jeremy Beaverson. 2007. Putting Their Money Where Their Mouth Is: Customer Willingness to Pay for Multi-Ingredient, Processed Organic Food Products. Food Policy. 32(2): pp. 145-159 Bender, M. M. and Derby, B. M. (1992). “Prevalence of reading nutrition and ingredient information on food labels among adult Americans: 1982-1988”. Journal of Nutrition Education, Vol. 24, pp. 292-297. Caswell J.A., and Mojduszka E.M. (1996). “Using informational labeling to influence the market for quality in food products”. American Journal of Agricultural Economics, Vol.78, No.5, pp.1248-1253. Dimitri C, and Greene, (2002). Recent Growth Patterns in the U.S. Organic Foods Market. U.S. Department of Agriculture, Economic Research Service, Market and Trade Economics Division and Resource Economics Division. Agriculture Information Bulletin Number 777. Drichoutis, A. C., Lazaridis, P. and Nayga, R. M., Jr. (2005). “Nutrition knowledge and consumer use of nutritional food labels”. European Review of Agricultural Economics, Vol. 32, No. 1, pp. 93-118. Drichoutis A.C., Lazaridis P., Nayga R.M., Jr. (2006). “Consumers’ Use of Nutritional Labels: A Review of Research Studies and Issues”. Academy of Marketing Science Review, Vol. 2006, No.9 Hawkes C. (2010). Nutrition labels and health claims: the global regulatory environment. The World Health Organization. IFT ( 2008), Is there a definition for natural foods. Institute of Food Technologists, http://www.am-fe.ift.org/cms/?pid=1000744) Li, Ji and Neal H. Hooker. 2009b. Documenting Food Safety Claims and their Influence on Product Prices. Agricultural and Resource Economics Review. 38(3): pp. 311-323 Mintel (2006) Mintel report, Mintel.com, 2006. Mintel (2008) , Meat-free Foods - UK - Mintel.com December 2008 Mintel (2010) , Consumer Attitudes Toward Natural and Organic Food and Beverage - US -Mintel.com March 2010 Nayga, R. M., Jr. (1996). “Determinants of consumers’ use of nutritional information on food packages”. Journal of Agricultural and Applied Economics, Vol. 28, No. 2, pp. 303-312. Organic Trade Association’s 2010 Organic Industry Survey The World of Organic Agriculture: Statistics & Emerging Trends 2010 Stanton “Health Claims in Food Advertising: Is There a Bandwagon Effect?,” Journal of Advertising Research, Vol. 27, No. 2 (April/May 1987) Co-authored. Van Camp, Debra, Neal H. Hooker and Diogo M. Souza-Monteiro. 2010. Adoption of Voluntary Front of Package Nutrition Schemes in UK Food Innovations. British Food Journal. 112(6): pp. 580-591 Zarkin, G.A. and Anderson, D.W. (1992). “Consumer and producer responses to nutrition label changes’’. American Journal of Agricultural Economics, Vol. 74 No. 5, pp. 1202-7.


Supply Chain Sustainability a Retailer Perspective By James Rowell james.rowell @ buckingham.ac.uk

Abstract

Since the publication of ‘The Greening of Wal-Mart’s Supply Chain’ (Plambeck, 2007) the subject of sustainability has gained a clear focus in organisations’ supply chain activities. (The Sustainable Business, EFMD, 2010) In fact the 2007 paper reported on Walmart’s ambitions as outlined by CEO Lee Scott, in 2005. That plan was titled “Sustainability 360”. Based on

information published by Walmart since 2007, this article discusses the organisational context of these initiatives and focuses on the supply chain and logistics practices that support their intentions. In the final discussion it draws the conclusion that logistics service providers (LSPs) can learn from practices operated by large retailers such as Walmart.

Key words: supply chain, Walmart, sustainability, logistics service providers JEL classification: L81

Organisation Profile Walmart was created by Sam Walton in 1962, initially with one store in Arkansas, USA. Sam had managed other stores before this, enabling him to set out his guiding principle, “If we work together, we’ll lower the cost of living for everyone…and have a better life” (Wal-Mart 2010Annual Report). Since then the organisation has grown to be the largest retailer in the world with an annual turnover of US $405 bn (2010) with sales from 8,650 stores across 15 countries and some 2 million staff. In the US it operates a variety of 4,300 outlets including Walmart supercenters, discount stores, Neighborhood Markets and Sam’s Club warehouses. It sells food/grocery, clothes and household goods, electrical/electronic goods. Given Walton’s original premise for guiding Walmart, “Sustainability 360” can be considered a natural development of its business model in an environment conscious 21st Century. The initiative has three goals: • • •

To be supplied by 100 percent renewable energy To create zero waste To sell products that sustain our resources and the environment

The extrapolation of the programme includes: Operations, Customers, Suppliers, Associates (staff) and social projects in the community (http://walmartstores.com/pressroom/factsheets/ sustainability fact sheet {1}. pdf).


Sustainable Supply Chains

In another context Walmart is working with manufacturers to produce more sustainable products. Whilst the company’s framework for sustainability is broad An example of this type is the development of in application this article concentrates on four aspects of concentrated liquid laundry detergents. According supply chain logistics - Supplier Relations, Transportation, Facilities/Infrastructure, and Supply Chain practices. to Walmart, in 2008, the estimated environmental savings could be high, through achieving reductions: - 400 million gallons of water, 95 million pounds of plastic resin and 125 million pounds One of the prime areas that retailers such as of cardboard, over a three year period. A particuWalmart focus their attention is the provenance larly interesting factor is that Walmart sells 25% of food products. A particular focus is on fresh of detergents in the US, so the accumulating produce such as fruit and vegetables, meat, fish benefit if other retailers follow suit is enormous. and seafood. Walmart has made a two-pronged attack on these product ranges. Further to that it In addition Walmart works with suppliers to reworks with suppliers of manufactured goods to de- duce the packaging content of existing products. velop and re-develop more sustainable products. Whilst the targets for packaging reduction vary, dependent upon the starting position in different countries, they are significant. The compaAs for fish and seafood they have focussed on ny is aiming to reduce the amount by 5% in the working with suppliers, and importantly, with US, whilst in the UK a target of 25% reduction accreditation bodies such as the Marine Stew- was set in 2007. Overall, just in the US, financial ardship Council (MSC). Their concern is to con- savings of some $3.4bn are expected by 2013.

Supplier Relations

firm that these products are being fished for, or farmed in a sustainable manner, and therefore - not destroy habitats, or over-fish. So far, in their North American stores (up to January 2009) they have achieved accreditation by the MSC and other councils of up to 49% of these products.

Although a good deal of attention is placed on local produce, Walmart also sells a much wider range of goods which are sourced from across the world. Its’ “Global Procurement” activities are also managed within its’ “Sustainability 360” programme by working with manufacturers. Another approach relating to fruit and vegeta- They demand that their factories can demonbles, launched in 2008 and being implemented strate they meet specific environmental metin the US and other countries, is by offering lo- rics whilst operating to high quality standards. cal produce in their stores. Walmart quote examples such as potatoes and sweet corn, but Indeed, Walmart announced in February 2010 these initiatives cover a wider range of produce. that it and its supplying companies would The emphasis is to offer high quality products at be audited independently by Pricewaterlow prices; and one of the key aspects of main- houseCoopers, to ensure that product qualtaining lower prices is the reduced cost of trans- ity and methodology of metric measurements portation (because of less miles travelled). These does accurately drive sustainable processes. initiatives vary dependent upon ‘local realities’ : in the UK, ASDA (Walmart subsidiary) is working with 5000 different suppliers; in China there is a whole programme (Direct Farm Program) to encourage sustainable harvested produce.


Transportation Achievements in meeting the challenges with regard to transportation and ‘Sustainable 360’ come in two forms. Firstly changes in the overall supply channel, and improvements in transportation usage.

In tandem with its attention on buying local produce come the added advantage of reducing ‘food miles’; that is the overall distance that the product travels before it arrives at the actual retail outlet. In terms of benefit to Walmart this reduces the lead-time of the product - from field to store, and reduces the overall cost of transportation. Whilst this is relatively straightforward for produce such as fresh fruit and vegetables, there is a greater challenge with meat products which are often shipped between farmer, abattoir, butcher, packager (often in different parts of the country/ or countries), all before being sent on to the retailer’s distribution centre.

• o o o

Vehicle management Better routing of deliveries/journeys Better loading of trucks Reducing empty ‘backhauling’

• Investment in vehicles o 2008 - 1,100 aerodynamic trucks introduced to the fleet o 2009 - Pilot use of alternative fuel, and hybrid fuel trucks tested. Are these improvements delivering value for Walmart? According to their reports a 38% increase in efficiency was achieved in this area of their operations. (http://walmartstores.com/ pressroom/factsheets/ sustainability fact sheet {1}.pdf).

In its logistics operation it has 7200 tractor units and nearly 8000 truck drivers. The company has achieved direct improvements in transportation in two forms:

Facilities/Infrastructure The emphasis on reducing the costs and environmental impact in their facilities will have a major input to achieving their “Sustainability 360” aims. In the introduction of the programme Walmart has focussed much attention on its facilities - stores and distribution centres. With 4,300 stores and 147 distribution centres in the US alone, some bigger than 24,000 m2 , with a typical sized store being around 18,000 m2, this is a significant element of their business portfolio and supply chain infrastructure. In the attempt to achieve 100% renewable energy a strong focus has been placed on generating energy from renewable sources, especially solar energy. Many stores and distribution centres, both new and refurbished, are having solar panels installed. Other forms of ‘generating’ power include geo-thermal heating and cooling with the ‘technology’ buried in 15km strings of cabling under the store’s car park. Capturing and directing the heat generated by refrigeration units is another method of heating the stores.

But it is not only about the energy input; the management of power, heat and light is also important. In an Environmental Demonstration Store constructed in Canada and opened in early 2009 Walmart is testing a range of methods/techniques in a largescale pilot site. Added to the use of solar energy and geothermal methods, is wind and water power. Addressing the aspect of energy management, the store also demonstrates the use of in-store lighting management. This comprises of the use of ‘daylight harvesting’ equipment using skylights with light refraction to spread daylight across the interior of the store. When additional lighting is needed this is managed using light sensors which monitor the environment and supplement the natural daylight when needed; when the daylight is strong the system adapts by dimming the in-store lighting. In addition, energy usage is reduced further as the lighting equipment is made up from LED lights, rather than the traditional fluorescent systems in earlier stores. In its press release on the opening of this demonstration Supercenter the overall energy saving is estimated to be 60% more energy efficient than an equivalent traditional Walmart supercenter. Another key resource in the facilities is water; Walmart is working to implement water saving and water re-cycling systems in countries in which water usage is acute. Simple improvements such as


low-flow sinks and toilets are being installed, along with onsite water treatment equipment which is being installed in Brazil, Mexico in addition to the new Canada demonstration store.

Supply Chain Practices

Whilst improvements are being made in products, transportation and infrastructure, there are other aspects of supply chain operations that are also important for retailers. In this section a number of initiatives and practices are discussed. In the Canadian Demonstration Supercenter the set-up allows for some 85% store waste to be diverted away from landfill sites; this is a significant improvement, compared to the current average of 65% in Walmart’s UK ASDA stores. In Brazil a particular initiative has been successful by working in partnership with a local consortium to have an organised collection and recycling service direct from the stores. The dumping of materials such as cardboard, plastics etc has been reduced by many hundreds of tons per annum. The increase in offering locally produced produce has in itself removed some of the high cost of trunking goods over long distances, and the increased attention on journey planning, and truck loading has increased efficiency in these aspects of logistics operations. Not only does a retailer manage its operations with it business partners, but also with its customers. One very public aspect of environmental concern in retailing is “the plastic bag”. Many retailers have employed various methods to reduce the number of single-use plastic bags in recent years, including charging for them, not providing them, or selling a more durable re-usable bag. Of course the shopping bag, in many instances is a strong marketing tool for retailer in many ways - to project, advertise, and re-enforce the company’s branding. But millions of plastic bags have then to be processed after use. Walmart is addressing this issue taking into account ‘local realities’, as these two particular examples show. In the US the check-out operator encourages the customer to place at least five items into one bag; in Japan there is a programme to encourage the customer to re-use the bags. In environmental terms, the figures from the stores in California alone have shown a reduction of 290,000 metric tonnes of greenhouse gases from a 33% reduction in bag usage.

Sustainability Report, 2009; The Future Laboratory Report for Oracle, 2008) are also pursuing approaches to achieving a sustainable supply chain. However, the actions discussed here highlight the broad thinking that is necessary when looking to develop sustainable operations. Working with suppliers, of products or services, creates opportunities and overcomes wasteful activity. Understanding the role of the customer/consumer highlights how service providers can achieve success. Even though Walmart is a very large organisation, with wide-ranging resources and capabilities, there is still potential for other organisations, both large and small, to gain from the ideas, practices and experiences generated through “Sustainability 360” and similar programmes. The examples here do not only apply to manufacturers and retailers, but also logistics service providers. These organisations are key service providers in supply chains, and therefore are well-placed to drive positive developments in sustainability. Whether large or small, national or international, they too can benefit from understanding the pressures facing and practices required by their own customers. With this knowledge they can support their customer’s own initiatives. In this way they can become industry leaders through offering competitive advantage to their customers by providing effective, competitive and sustainable services themselves.

Discussion This article focuses on the supply chain and logistics practices of Walmart to support its “Sustainability 360” programme. In the context of supply chain management representative examples of Walmart’s activities are used here. It is important to recognise that Walmart’s programme itself covers other areas of the business operations e.g. working with and managing staff, and programmes carried out as community service. Whilst acknowledging that many other retailers are following similar routes this article has used Walmart’s examples of sustainable practice. Further, some major manufacturers such as - Danone, Heinz, Kimberly-Clark, Procter and Gamble (Danone

Bibliography / References Plambeck E L, (2007) ‘The Greening of Wal-Mart’s Supply Chain’ Supply Chain Review July/August p18-25 “Wal-Mart 2010 Annual ReportPDF“ Wal-Mart. 2010. Retrieved on October 22, 2010. http://walmartstores.com/pressroom/news/ (Walmart Opens First Environmental Demonstration Store) Retrieved on October 30, 2010. http://walmartstores.com/pressroom/factsheets/ Retrieved on October 24, 2010. http://walmartstores.com/pressroom/factsheets/ walmart US fact sheet [1].pdf Retrieved on October 24, 2010. http://walmartstores.com/pressroom/factsheets/ corporate fact sheet [1].pdf Retrieved on October 24, 2010. http://walmartstores.com/pressroom/factsheets/ logistics fact sheet [1].pdf Retrieved on October 28, 2010. http://walmartstores.com/pressroom/factsheets/ sustainability fact sheet {1}.pdf Retrieved on October 22, 2010. http://walmartstores.com/pressroom/factsheets/ solar power fact sheet [1}.pdf Retrieved on November 4, 2010. http://walmartstores.com/pressroom/factsheets/ reusable plastic bags fact sheet [1].pdf Retrieved on November 4, 2010. Danone Sustainability Report (2009), Danone, France The Future Laboratory Report for Oracle (2008), The Future Laboratory, London The Sustainable Business (2010), European Foundation for Management Development (EFMD) Brussels


Funding Innovation Development and Restructuring: A Study of a Czech Engineering Manufacturer Dr Irena Jindrichovska, University of Economics and Management in Prague

Abstract

Successful and mature corporations can alter their financial structure and optimize their debt asset ratio according to their needs. This is not, however, so easy for companies in the start-up phase, when entrepreneurs have to rely almost ultimately on equity funding. This paper concentrates on the early stage of corporation’s development and on its sources of funding from venture capital. As an illustration it presents a history of funding and further development of medium sized Czech company.

Corresponding author:

Keywords: innovations, venture capital, capital structure

Dr Irena Jindrichovska Department of Business Economics University of Economics and Management Narožní 9a Praha 5 150 09 Czech Republic

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JEL classification: M13, M21

Contact details: Tel: 00420 774 550 810 e-mail: irena.jindrichovska@vsem.cz www: http://jindrichovska.webovka.eu/index.html Introduction

Capital structure is one of the core topics of corporate finance since 1950s. The investigation of the determinants of corporate capital structure is and has been one of the most active fields in finance for decades. The Modigliani-Miller theorem from 1958

forms the basis for modern thinking on corporation’s capital structure. In the following period, from the number of published papers concerning capital structure, it is apparent that capital structure is an important, difficult and complex subject. Every company would like to have a capital structure which is best fitted to their current situation that minimizes the cost of capital. Since the introduction of limited liability in British company law in 1855 companies have a

choice of changing capital structure relatively easily. However, this is not the same during the whole lifetime of the company. Capital structure changes during the lifecycle of a company mainly because the financial needs of the company change and so does the free cash flow generated in each phase of corporate development. Generation of free cash flow influences the self-funding potential. This is a tricky issue in every stage of corporate development because it influences finan-

cial flexibility and corporate debt capacity. These issued has been discussed in two major financial theories pecking order theory (Myers and Majluf, 1984 and Myers, 1984) and trade-off theory (DeAngelo and Masulis, 1980) This article concentrates on funding in the initial stage of corporation’s life. Successful and mature corporations can change their financial structure and optimize their debt asset ratio according to their needs. This is not, however, so easy for companies


in the start-up phase, when entrepreneurs have to rely almost ultimately on equity funding. The case study included in this paper looks into the case of Czech medium-sized company that was helped by the EBRD. In the initial stage of existence, when the company starts as a new venture, companies are financed by equity sources. For acquiring the assets the company can use various sources, however, the choices are limited in the introductory phase. In the initial stage the company has to rely on founders’ sources. The reasons for difficulties are (1) the high degree of risk involved in a new venture, (2) the problem of information asymmetry, (3) the nature of productive assets that the

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company needs to realize its venture, which is often nontraditional and highly innovative, and therefore difficult to asses by traditional methods used by lending institutions. During the next stages of lifetime the company can obtain financial means from different resources. It also depends on self-financing capacity, which is becoming very popular in innovative companies. Recently we have observed this motion in novelty sectors like communication, mobile phones and alternative technologies. It can be concluded, that in general as the company matures lending institutions are wiling to provide finance more readily. This is especially true at maturity phase, when the company

Pros and cons of venture capital funding Starting a new business is risky and most of the new companies fail. It is difficult to identify which firms will be successful in the competing world. Lending institutions are naturally adverse to risk and most suppliers of capital hesitate to undertake high risk investments. Moreover, this attitude is enforced by rules and regulations restricting their conduct. Another reason for funding difficulties is information asymmetry that lies behind all transactions of the new company. It arises when one party to a transaction has knowledge that the other party cannot have. The entrepreneur knows more about his or her company prospects, than the financial institution does. When company deals with highly specialised technologies or companies in new areas or new markets financial institutions do not have the expertise to distinguish between competitive and non-competitive projects and competent and incompetent entrepreneurs. Productive assets are another cause for difficulties. Lenders understand operations of traditional firms wanting to change their equipment or purchase a new product line – tangible assets machinery equipment buildings and physical inventory. Lenders understand “traditional” risk and are willing to make loans to them. However, if a new company wants to acquire a new often intangible asset – patents or trade secrets it is difficult to secure financing form traditional lending sources.

already proved its merits and it has shown its potential. In this phase, the company increases sales, number of employees and productive assets in general. The company also generates free cash flow that can be used for dividend payouts and/ or for development of furtherer innovations. Towards end of maturity phase the company perceives decline of sales and decrease of growth potential and needs to strive for another innovation and lay basis for new product to attract new clients and increase sales. It can also attempt to restructure its existing organisational structure and merge with new company in the sector or diversify to another field. Capital structure of company will be responding

to changes in activities and in generation of free cash flow. The structure of this paper is as follows: The first part is an introduction, the second part discusses problems of allocation of sufficient capital when forming a new firm and pros and cons of venture capital funding. The third part gives a brief overview of recent development of venture capital funding in the US in comparison with European experience. The fourth part presents a case study on one medium sized Czech company established in the early 1990s and its innovation potential developed with help of European funding. The fifth part concludes.

Firstly the entrepreneur has to provide his or her own financing then venture capitalists provide equity financing. Venture capital is important because new entrepreneurs in emerging stage have only limited access to traditional sources of financing. The most important sources of venture capital are private and public venture funds. Other sources include financial insurance firms, public pension funds, endowments and foundations. The industry of venture capital is specializing in different sectors. The first venture capital fund was created as a venture capital limited partnership formation in 1946. ADR, American Research and Development was created to raise funds from wealthy individuals and college endowments and invest them in entrepreneurial start-ups in technology-based manufacturing. The industry significantly developed in 1960s in the USA but much less in Europe. Many of today’s most dynamic and successful corporations received venture capital at the initial stages of their lives: eg. Amazon, Intel, Microsoft, Apple, Cisco, e-Bay or SunMicrosystem. Dynamic firms in traditional services, like Federal Express, Staples, or Starbucks, also received a sizeable share of venture finance (Bottazzi and DaRin, 2002, p 233). Today, the venture capital industry consists of several thousands professionals at about one thousand venture capital firms. The biggest concentration of forms is in California and Massachusetts. Modern venture capital firms tend to specialize in a specific line of business like medical services or new technology investments.

The venture capital cycle consists of several stages. The stages and roles of venture capital financing

Seed finance: Small investment, in the order of a few hundred thousand euros at most, which allows an entrepreneur to verify whether his project is feasible and economically attractive. At this stage the venture capitalist helps explore the viability of a project. Start-up finance: Investment aimed at making a firm operational by attracting the necessary employees and executives, developing a prototype and/or implementing marketing tests. At this stage the venture capitalist may become involved in the organization of the company. His contribution to shaping corporate strategy is felt most heavily at this stage. Expansion finance: Investment aimed at reaching the scale of industrial production, upgrading the production facilities and attracting further employees. At this stage the venture capitalist may help find additional financing and help the company contact clients and suppliers. As the company grows and needs revenue, he may also help recruit marketing and other non-technical executives. Later stage finance: Investment aimed at helping the firm grow fast enough to become a market leader and unleash its earning potential and to make it ready for a trade sale or for listing on a stock exchange. At this stage the venture capitalist may help set the stage for either a trade sale or an Initial Public Offering.

Adopted from Bottazzi, Laura and Da Rin, Marco (2002, p. 239)


When the new company is well established venture funds will exit through a private or public sale of their equity. The duration of the cycle is typically five to seven years. Risky capital funds do not stay in the companies they help with establishment. Usually they stay with the company until is a successful going concern and can be launched on the public market or sold to strategic private investors. However, venture capitalists with their knowledge of the market can also play an important role in the process of going public. Their experience often helps companies to choose the most favourable time for

their Initial Public Offering (IPO) and therefore their experience can lower under-pricing effect. Venture-backed companies which went public in the US in the 1970s and 1980s also often out-perform non venturebacked companies over five years. (Brav and Gompers, 1997) In the subsequent growth phase the accent is given to innovation and acquisition of new equipment or and new finances are needed for production. The role of venture funding is also significant and in venture capital terminology this is typically understood as the “later stage finance”. The company is already con-

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sidered established in its field and has much broader spectrum of financing possibilities. . Impact of the recent financial crisis on venture capital industry and features of European venture capital industry It has been observed that after the general economic crisis which started on the American mortgage markets in 2007 and effectively spread-out over the whole word the behav-

ioural pattern of venture capital funds has modified. It remains to be judged later whether this change of behaviour is permanent or temporary. Firstly, the money invested in venture funds have decreased in total as can be observed on Chart 1. The industry spectrum has also modified. Venture funds are prepared to stay in a company for longer time, but the choice is more selective. The perceived risk has increased also the sectors in which venture fund invests change slightly. Furthermore there are big investmentd funded by mature companies in the sector.

Chart 1. Corporate Venture Capital Group Investment Analysis 1995 - 2010 Development of venture financing 1995 - 2010 9 000 8 000 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0

120 000 100 000 80 000 60 000 40 000 20 000

Total VC in M$

2008

2006

2004

2002

2000

1998

1996

0

No of deals

Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Reuters http://www.nvca.org/ [consulted on 15.3.2011] In the last quarter of 2010 the investment activity decreased by 31 percent in terms of dollars and by 19 per cent in number of deals. The decrease in dollars invested was largely due to the absence of big investment deals in the Clean Technology sector, which drove last higher investment levels in the last period. Generally, investment in all industry sectors slowed down.

”While overall funding in traditionally strong sectors like Life Sciences and popular Clean Technology were down, Biotechnology continued to bring in significant funding while software took the lead as the top generator of VC funds” T. Lefteroff, global managing partner of the VC practice at PwC. http://www.nvca.org/ consulted on 19.3.2011. See also Table 1 for illustration.


For full year 2010, 157 venture capital funds raised $12.3 billion, which was the fourth consecutive year of declines and the slowest annual period for venture capital fundraising since 2003. The industry outlook for the immediate future implies that a limited number of venture firms will be able to successfully raise new funds in 2011.

”The continued downsizing of the venture industry has positive implications for investors and entrepreneurs. An agile venture capital model likely translates into more capital efficient and fewer duplicative deals in the IT arena as well as less capital intensive deals in the life science and clean technology arenas.” Mark Heesen president of the NVCA. http://www.nvca.org/ [consulted on 19.3.2011]

Table 1. The overview if innovative sectors in the American venture funds. Industry Biotechnology Business Products and Services Computers and Peripherals Consumer Products and Services Electronics/Instrumentation Financial Services Healthcare Services Industrial/Energy IT Services Media and Entertainment Medical Devices and Equipment Networking and Equipment Other Retailing/Distribution Semiconductors Software Telecommunications

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

2010 Total 3 685 517 300 448 006 500 516 613 500 528 993 800 375 237 100 527 928 900 272 922 700 3 358 014 200 1 668 420 200 1 422 479 100 2 315 860 500 665 840 100 26 122 000 177 278 200 951 716 800 3 963 806 900 918 622 300

Grand Total

$

21 823 380 100

Source: http://www.nvca.org/ [accessed on 25.3.2010]

Still, venture investors continued to invest more into first-time deals versus existing companies. This suggests a confidence in today’s entrepreneurs and innovators. It seems that the most innovative and efficient companies will continue to be funded by the venture community.

“It is important to reiterate that when it comes to venture capital returns, history has shown that often „less is more”. As the year progresses and the exit market continues to improve, we expect better performance from established funds as well as from recently raised funds which have the opportunity to invest in great companies at a time when valuations are more reasonable and the economy as a whole points upward.” Continuation Mark Heesen president of the NVCA. http://www.nvca.org/ consulted on 19.3.2011


Compared to the US market, venture capital industry in Europe is rather slow-moving and immature and European stock exchanges are perceived as rater hostile towards young firms. This has been found as a major obstacle to innovation. In general on one side, entrepreneurial firms are viewed as major contributors to economic growth and to the creation of new jobs and venture capital as an important tool for job creation, technological innovation, export growth, and regional development (European Investment Bank, 2001). There is a feeling that Europe’s growth problems may be caused not as much by rigidities in labor markets, as by weaknesses in capital markets, in the access to risk capital in particular. This raises important policy issues. It is crucial to understand whether any industrial policy and regulation can actually contribute to the growth of a dynamic venture capital industry in Europe. European official documents, and also industry reports like the White Paper of the European Venture Capital Association (EVCA, 1998), focus on the supply of funds and on the creation of favorable structural conditions for entrepreneurs. But it is not clear which policy would be most appropriate to support venture capital in Europe. In the paper of Bottazzi and DaRin (2002) the authors develop a systematic analysis of venture capital in Europe. To get around the shortage of data on European venture capital, the authors have exploited a new market Euro.nm. This was established in 1997 as an alliance of Europe’s ’new’ stock markets for innovative companies in high-growth industries – an analogy to the US Nasdaq. Euro.nm represented the ’new’ markets of Amsterdam, Brussels, Frankfurt, Paris, and later also Milan. Unfortunately this market disentangled as an alliance in December 2000, but its five members have continued to operate independently. Over its short life span, Euro. nm has allowed nearly 600 companies to list on public markets and raise over 40 billion euros of equity capital. Up until the early 1990s, venture capital remained essentially an American phenomenon. Its success in supporting dynamic companies which create jobs

and wealth brought many governments to look for ways to support a national venture capital industry. At the same time, the high returns enjoyed by US venture capital firms induced venture funds to become active also in other countries. Venture capital is by now a sizeable industry also in Europe and Asia. In Europe the innovative startups were usually financed by banks and government funds. Banks are less flexible in their policies. Furthermore the regulation in Europe is more restrictive and more limiting, which is probably given by inherent bureaucracy in all EU systems.

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.Case study: using Eur o p e a n funding in a Czech company An interesting case of European funding of growth and restructuring can be illustrated by a Czech company Korado, a.s, which specializes in design and production of heating radiators. The firm was established in 1990 as a small Czech company. Over the last twenty years it has come from virtually nothing to being one of the largest European producers of heating radiators. At the very beginning, Korado took over the tradition of manufacturing steel radiators in the plant of the company Koventa, which was acquired in the Czech small-scale privatisation in the early 1990s. During the subsequent years Korado expanded significantly and modernised its production. This allowed the company to build a new plant in Česká Třebová in the region of Eastern Bohemia. It must be stressed, that company Korado has become one of the main European leaders in the field without connection to any foreign strategic manufacturer and using only its own know-how, the Nowadays, it presents and jointly sets the new trends in the entire field of heating. At present Korado dominates the Czech market and it competes very successfully on foreign markets in Europe and other continents in countries such as Japan and China. Among the major achievements the company accomplished belongs one of the most modern

production plants in Europe. The funding and a brief history Korado was founded as the company Korado, s. r. o. in 1990, with initial equity of CZK 100,000. The founders were the current major shareholders. The small enterprise Koventa was privatized in 1991 by of auction for the price of CZK 130 million (approx. 7.5 million USD). After privatization the plant was modernised and production began. In 1993 the company reached its maximum production capacity and by that time the company repaid loans provided by the bank for the purchase of the original plant. In 1994 there was the first significant increase in equity of the company to the value of CZK 5 million. A decision was taken to build a new heating radiator production plant on a green field. Detailed business plan for construction of the new Korado plant was processed and detailed business plan was prepared. In 1996 the company was transformed into a joint-stock company and equity was increased to CZK 880 million. The company initiated the construction of the new Korado plant with a value of almost CZK 3 billion. In 1907 there was a capital entry of the European Bank for Reconstruction and Development (EBRD) in the company by means of a CZK 1.03 billion investment. This has increased equity to CZK 1.580 billion. In the same year the company gained the ISO 9001 certificate and production in the newly built plant in Česká Třebová started. In 1998 Korado acquired of 98.2 % ownership interest in production plant in Bulgaria and its complete consolidation. In the years 1998-1999 Restructuring project “Korado 2000” was performed and at the end of 1999 Česká spořitelna, a. s., transferred the loans provided to Korado to Konsolidační banka Praha, s. p. ú. Comprehensive restructuring of loan portfolio by Konsolidačni banka was performed in 2000. This resulted in a significant reduction in interest burden and financial stabilisation of the company. This resulted in reduction in equity of the company by the overall unpaid accumulated losses of past years in the amount of CZK 1.027 million. Subsequently, after agreement with the shareholders, increase of company equity on the part

of Konsolidacni banka by CZK 287.7 million to a value of CZK 840.7 million. Continuous annual growth in the number of radiators produced in 2001, first time ever for an interim drop in revenue caused by a global drop in sales, lowering of sales prices and the negative development of the exchange rate for the CZK in comparison to foreign currencies. At the same time, the process of looking for a strategic investor commenced for the support of the position of Korado on international markets. Year 2002 marked a turnaround in company economic management, when Korado, a.s. once again achieved a positive economic result after losses in the four preceding years. The level of this positive result was 31 million CZK. Significant restructuring of the largest subsidiary companies - Korado Polska, Korado Austria and Korado Deutschland - commenced, with the aim of increasing the capital return of investments made. The positive influence of organisational changes accomplished in the 2nd half of 2002 lowered of the company’s credit burden by 20%. Interim production growth of the main product has risen by 9,5%. The final economic result of the company was at the level of 111 million CZK. In 2004 the company produced and sold a record-breaking amount of panel heaters. This contributed to consolidation of a market position among the European producers of radiators. In 2006 for the first time ever the company we produced and sold more than 2 million steel panel radiators. The year-to-year increase in sales of steel panel radiators was more than 20%. Investment in new production technologies in the total amount of CZK 700 million was completed in 2007. This was the second biggest investment in the history of the company Korado, and in the same year the company Korado, a.s. achieved the biggest turnover in its history: 2.734 billion CZK which is about 105 million EUR. Subsequently, the new production line was launched of and increased the capacity of steel panel radiators by 40% to 2,8 million pieces. The graph below shows the development of company sales since its establishment in 1991.


Chart 2. Korado’s revenues in millions of CZK

Source: http://www.Korado.cz/cs/spolecnost/Korado_v_cislech.shtml [accessed on 19.11.2010]

Certificates of quality and high quality achievements

High quality of production remains an imperative of today’s successful company. Korado made every effort to gain necessary certifications to prove and establish a high quality products. Certificates are now necessary and quality and durability come as standard. To maintain a high position on competitive market the company needs to prove the quality if its products and technology procedures. For the majority of experts, business partners and end customers throughout Europe, the production brand Korado is today a guarantee of high quality, durability, top-of-the-range technical parameters at acceptable prices. But gaining this reputation required long-term intensive efforts on the part of many of the company’s technical and marketing employees. This culminated in the construction of the most modern European production plant for radiators and the awarding of a certificate which confirms the compliance of the production system with the international standard of the demanding norm ISO 9001:2000. The high quality of the of Korado products is further proved by acquiring the national quality marks RAL, BSI for the most demanding European countries. Quality marks for other important markets, such as the Russian mark GOST, are also available. These quality certificates ascertain that the high demands on the quality of used materials, construction and production technologies of the radiators RADIK and KORALUX and their regular testing are followed. The quality management system ISO 9001:2000 combined with the national quality standards confirms the highest degree of quality of the products and of all activities of Korado company on the European and world’s markets. On 1st June 2010 Korado company issued the EC conformity declaration ( PDF, 40 kB) for the radiators RADIK, KORALUX and KORATHERM. The conformity is declared together with the CE mark placed on the products and in the technical documentation.

Complying with environmental requirements

There is a great emphasis on care for the environment already in the design phase for the new production plant. Korado has built one of the most environmentally friendly plant and has thus become one to the resource-saving manufacturers in the field of engineering, not just in the Czech Republic but in the wider European context. This is evidenced, for example, by energy-saving heat recovery system which is operating during the production process or by the comprehensively designed project of waste management, handling of chemicals and prevention of accidents. Attention has been given to a detailed examination of waste water. This particular programme will be developed further. The fact that Korado cooperates with the renowned Danish group Marius Pedersen, which has carried out detailed checks and audits in the area of environment of the firm’s activity since the year 2000 is one example which shows that Korado considers the issue of environmental protection very responsibly.

Corporate social responsibility of a medium sized company R&D and employees

Remaining at the very peak in terms of quality of production and the technical parameters of products requires continuous technical and design development in addition to modern production technology. For this reason Korado employs leading Czech and foreign technical experts who enable the company to regularly expand the production range, to improve the existing products and improve other technical and utility and aesthetic properties. In view of the scope of its activity, Korado also works with many Czech and foreign freelance workers and professional associations. Regular contact with expert and non-professional customers provides the company with feedback and essential field experience which Korado directly applies in its further technical development and in the actual production. The company pays attention to the requirements of its clients and ia accommodating as possible towards them. Proof of this is the scope of its production range, with more than 10,000 different products. Korado, a. s., is a young and dynamic company which places heavy demands on the quality management and control of production, sales activity, technical development, production work, communication, information technology and marketing activities. Korado is historically the youngest company in the elite group of Europe’s main manufacturers of heating radiators, which qualifies its status as a modern, dynamic company. This is also the reason why the company places such high demands on its employees.


Chart 3. Korado’s number of employees

Source: Korado in figures [accessed on 19.11.2010 The reward for the more than 600 employees which Korado employs directly in the Czech Republic and in seven foreign subsidiaries is a high-quality working environment and above-average financial remuneration, including a targeted system of bonuses where every employee can actively influence the level of his compensation. Other advantages, which come from the strong base of a prosperous company of a Europe-wide standard, is a well designed training and education system, intense application of modern information technology and social certainty for employees. In order to maintain a high level of development Korado is constantly on the lookout for capable employees of many professions from amongst the ranks of graduates and experienced specialists. Nowadays the Czech company Korado belongs to world leading manufacturers of steel radiators. The quality of Korado’s radiators has been verified by more than 25 million customers around the world. To satisfy special customers’ demands the company uses the advantage of gained experience. The company is a reliable employer in its region. It employs between 600 and 650 qualified employees. As overall duality company cares about high duality emoloyees and their appropriate training. Taking into consideration that Korado is a medium sized company the program for employees is in line with usual CSR standards enabling further development of the firm and employees.

5. Conclusion

Venture capital is considered to be the most appropriate form of financing for new firms in general and for innovative firms in high-tech sectors in particular. Since the establishment of the first private foundation ADR - American Research and Development Corporation in 1946 the venture capital industry has developed a great potential. This continues to develop in current century after initial slowdown caused by American crisis 2007. Venture capital is effective in helping the new firms to overcome credit constraints, and thus to be established and develop their potential. It can be concluded that even though the conditions of venture capital financing may be limiting and constraining for some companies, it is a good possibility for pursuing innovations and reaching the scale of industrial production for innovative companies. Venture capital can also help new ventures upgrading the production facilities and attracting further employees and key executives and getting established on new promising markets. In the case study of the Czech company Korado we have learned how a small sized company with the use of appropriate financial resources can overcome both major problems of initial set-up and subsequent as market slowdowns. Obviously, without quality and entrepreneurial spirit of company management this would be impossible. The European Bank of Reconstruction and Development helped Korado to establish a major business on the market and to develop top of the range product. Further development on the financial front and acquisitions or creation of international subsidiary companies has lead to greater span of production whilst maintaining a high quality core product. In the future development one may see some outsourcing and international diversification of this company production. So far, however, the company concentrates its production mainly in the region of Ceska Trebova in Eastern Bohemia and helps to maintain employment in the region. The company is a good patriot and it is a good and socially responsible corporation contributing to its region and a good regional employer. Moreover, looking ah on the international front it has become a standard setter in its area of expertise. The study of Korado shows the case where innovation and good organisational skills helped to create internationally recognized trademark. Taking in consideration the skills of the Czech employees and the company’s ability to find its own route, one can say, that Korado is a good example of a successful Czech company. There are many avenues how this research could be extended. One of them is the topic of innovations and innovations funding. Another field worth exploring is the capital structure of companies and its changes during the lifecycle. Supporting topic is an industrial innovation per se: how are they motivated financed and protected against dishonest competition.

Footnote More information on venture capital activity can be found on http://www.nvca.org/ and on http://www.evca.eu/ [accessed on 9.11.2010] More information on ADR can be found on http://en.wikipedia.org/wiki/American_Research_and_Development_Corporation, [accessed on 9.11.2010] See for example http://www.missouribusiness.net/ [accessed on 9.11.2010] More on venture capital funding cycle can be found on http://www.missouribusiness.net/sbtdc/docs/seed_capital_funding.asp [accessed on 9.11.2010] Details on Euro.nm are on http://www.banque-france.fr/fondation/fr/telechar/chatelain.pdf [accessed on 6.4.2011] The major source of information about the company is at http://www.Korado.com/ [accessed on 19.11.2010] More details on Korados‘ quality are on: http://www.korado.com/en/products/radiators-radik/general-information/certification-radik.shtml More detail on Mirius Pedersem is on: http://www.mariuspedersen.cz/index.php?firm=1&node=50&frommenu=1

References:

Bender, Ruth and Keith Ward (2005) Corporate Financial Strategy, Butterworth-Heinemann, 2nd ed. Brav, Alon, and Paul Gompers (1997), ’Myth or Reality? The Long-run Underperformance of Initial Public Offering: Evidence from Venture and Nonventure-backed Companies,’ Journal of Finance, 52 (4) 1791-1820. Bottazzi, Laura and Marco Da Rin, (2002) Venture Capital in Europe and the Financing of Innovative Companies, Economic Policy, v.34, 229-69, April 2002. EVCA - European Private Equity and Venture Capital Association on http://www.evca.eu/ DeAngelo H. and R. Masulis (1980), Optimal Capital Structure under Corporate and Personal Taxation, Journal of Financial Economics, 8, 3-29 Demirag, Istemi Ed.(2005) Corporate Social Responsibility, Accountability and Governance, Greenleaf Publishing, Sheffield Griseri, Paul and Nina Seppala (2010) Business Ethics and Corporate Social Responsibility, Cengage Learing, Andover. Modigliani, Franco and Merton Miller, (1958) The Cost of Capital, Corporation Finance and the Theory of Investment, The American Economic Review, Vol. 48, No. 3., pp. 261-297. Myers, S. C. (1984),The Capital Structure Puzzle, Journal of Finance ,39,575-592 Myers, S. C. and Majluf, N. (1984), Corporate Financing and Investment Decisions when Firms have Information that Investors do not have, Journal of Financial Economics, 13, 187-221 National venture capital association on http://www.nvca.org/ Parrino, Robert and David Kidwell (2009) Fundamentals of Corporate Finance, Wiley and Sons, Inc. Hoboken. Solomon, Jill (2007) Corporate Governance and Accountability, John Wiley, 2nd ed.


www.Holisticmarketingmanagement.ro


Professor Ă Nicolae SuTA, a School Creator, a Man of vocation and Highly Dedication "MaeStrii trebuie apreciATi cum Si când se cuvine!”


Dumitru Miron, Ph.D. Vice-Rector Bucharest Academy of Economic Studies dumitru.miron@rei.ase.ro

Abstract

The natural spiritual condition and worthy of gratitude of the disciple towards the Master is encouraging and uplifting, also expressing the continuing close relation between the disciple and the model represented by the Master. Professor Nicolae Suta is an undisputed Master of the Romanian University School of International Economic Relations, being actually the creator of the postwar Romanian School of International Economics and especially international trade. He is a man of vocation and highly dedication, who assumed challenges, cultivating stringency and not stepping aside from the principles of professional ethics, a demanding, fair, polite and punctual person. He brought forward a valuable and unique School management style based on scientific excellence, teaching and methodological rigor and strategic dimension. A true shaper of characters, Professor Nicolae Suta created at the Faculty of International Economic Relations, Academy of Economic Studies in Bucharest, an authentic family that passes on the values he believed in and strongly believes in. Professor Nicolae Suta is an expression of an exemplary career, properly recognized by the scientific and professional communities.

Key words

S

: Master, disciple, gratitude, School creator, vocation, dedication

unt oameni care şi-au asumat de la începutul carierei rigoarea, corectitudinea, profesionalismul şi căldura sufletească a relaţiilor interumane autentice. Atunci când aceste cariere au fost cele academice, cu valenţele şi servitutile nobilei meserii de dascăl, a apărut categoria de tineri fericiţi că s-au intersectat în devenirea lor personală cu asemenea personalităţi. Şcoala universitară românească de relaţii economice internaţionale a consacrat câţiva astfel de oameni de vocaţie şi cu mare grad de dedicare, cărora numeroase generaţii de absolvenţi trebuie să le poarte multă recunoştinţă pentru ceea ce le-au transmis de la pupitrul “magic” al dascălului, i-au învăţat la cercurile ştiinţifice studenţesti, şi i-au îndrumat la lucrarile de diplomă şi la tezele de doctorat. Oamenii adevăraţi sunt cei care îsi asumă provocările, cred cu convingere atunci când alţii se îndoiesc, cultivă rigurozitatea când starea de fapt din jur este adaptarea la rigorile vremurilor şi nu abdică de la principiile deontologiei profesionale atunci când majoritatea celor din jur se pliază mai mult sau mai puţin mercantil. În peisajul complex al mediului universitar a fost întotdeauna esenţial să se înţeleagă la timp si cât mai complet ce înseamnă corectitudinea şi punctualitatea. Pentru multe generaţii de foşti studenţi ai Academiei de Studii Economice, ai Institutului Diplomatic Român dar şi ai altor universităţi, care au reuşit să exercite gravitaţia adecvată, un astfel de universitar autentic este domnul profesor Nicolae Sută. Orice tânăr îşi caută modelul la care să se raporteze. Pentru mine şi promoţia din care am făcut parte, acest moment al autenticei deveniri profesionale, s-a produs în anul universitar 1979-1980, când am intrat în amfiteatru la primul curs de comerţ internaţional si politici comerciale. Circulau în comunitatea studenţească numeroase „povestioare” despre profesionalismul, rigurozitatea, dedicarea profesională şi exigenţa, pe fond de corectitudine, a profesorului Sută. Realitatea percepută direct de mine a depăşit toate aceste elemente de ethos universitar. Dupa un an de cursuri la care titularul de curs intra la ora fixată în orar şi noi uitam să mai ieşim în pauză, în care am înţeles şi am început să reflectez la cariera didactică, am realizat la examen ce importanţă au toate aceste valori ale culturii organizaţionale de un tip special. La momentul opţiunii personale pentru cariera didactică, în 1981, am ales catedra de Relatii economice internaţionale pe care o conducea, cu dedicare, profesionalism şi cu o inegalabilă ştiinţă a managementului, domnul profesor Nicolae Suta. În şir cu mulţi alţi colegi care fuseseră discipolii maestrului, şi eu mi-am început cariera universitară sub bagheta domnului profesor având privilegiul de a acumula, cu ocazia fiecarui curs sau examen, elemente definitorii pentru vocaţia de universitar. Am înţeles, lângă Domnul Profesor, că o carieră universitară de succes are nevoie, alături de mult efort şi dedicare, de un referenţial uman de la care sa înveţi tainele nobilei, dar dificilei meserii de dascal. De la Domnul Profesor, noi cei tineri din colectivul catedrei, am învăţat să preţuim valoarea lucrului bine făcut, să cumpănim atent la ceea

ce primul impuls ne poate îndemna să facem, să fim corecţi, să ne respectăm studenţii şi colegii, să conducem colective, să fim oameni şi să nu cedăm la „cântecul falselor sirene”. Profesorul Nicolae Suta ne-a învăţat ce mult contează verticalitatea atunci când cei din jur se mlădiază în raport cu vremurile, ce valoare are corectitudinea mai ales atunci când falsitatea este percepută ca o virtute, ce înseamna ca toţi cei din preajma ta să te aprecieze firesc doar pentru ceea ce eşti cu adevărat şi nu pentru ceea ce te străduieşti să pari. Am lucrat cu Domnul Profesor şi în calitatea domniei sale de conducător de doctorat şi am avut norocul să mă orienteze pe calea extrem de dificilă a cercetarii stiintifice. Primele mele articole şi comunicări ştiinţifice le-am redactat şi prezentat în coautorat cu dumnealui, învăţând meticulozitatea devenită proverbială cu referire la modul în care îşi structura elaboratele ştiinţifice şi la densitatea ideilor şi respectul cu care acestea erau întâmpinate în comunitatea stiintifica. Studentii care au avut în planurile lor de învatamânt disciplinele de Economie mondială, Comerţ internaţional şi politici comerciale şi, respectiv, Comertul exterior al României s-au convins rapid de intensitatea maximă a emoţiile examenelor, dar şi de satisfacţia reuşitei. Incontestabila calitate a unui modelator de caractere constă în rabdarea cu care îi învata pe cei mai tineri să încerce să fie ei înşisi, să caute excelenţa şi să dorească să o gasească, să îşi propună să obţina mereu mai mult şi să nu facă niciodată compromisuri costisitoare caracterial şi societal. Pentru oricine dorea să participe la o activitate comună cu domnul Profesor un adevărat exerciţiu de rigoare era să încerce să ajungă la diversele activităţi universitare înaintea sau în acelaşi timp cu domnia sa, şi nimeni nu uită eşecul în acest demers, nu din cauza nepunctualitaţii proprii, ci din cauza punctualităţii inegalabile a maestrului. Liderii sunt personalităţi care deplasează organizaţiile din locul în care se află spre locul unde ar trebui să se afle. Ca şef al catedrei de Relatii economice internaţionale, domnul profesor Nicolae Suta ne-a arătat cum astfel de precepte învăţate din cărţi se transpun în viaţa reală chiar lânga noi. Ca un adevărat modelator de caractere, domnia sa a polarizat permanent colectivele pe care le-a condus, obţinând respectul pentru ceea ce era şi făcea, care îi urmau pentru că făcea lucrurile să se întâmple aşa cum trebuie, doreau să se autodepăşească şi vedeau la mentor această trăsătură de caracter. Profesorul Nicolae Sută a creat la Facultatea de Relaţii Economice Internaţionale o autentică familie, care îi duce mai departe valorile în care domnia sa a crezut şi crede cu convingere. Cei care sunt acum purtătorii mesajului predat cândva de Maestru constată cu emotie că generaţii întregi de absolvenţi ai facultăţii, indiferent ce au ajuns în viaţă, întreabă, atunci când revin la Academia de Studii Economice, de profesorul Nicolae Sută, iar atunci când curgerea inexorabilă, dar firească, a vremii face ca fiicele şi fiii lor să devină studenţi la ASE, aceştia vin, de acasă, cu „lecţia învăţată” despre valorile şcolii de relaţii economice internaţionale. Este o autentică datorie de onoare pentru fiecare membru al familiei noastre universitare, care a primit lecţii


Dumitru Miron, Ph.D.Vice-Rector Bucharest Academy of Economic Studies celălalt capăt al fluxurilor şi acelea obţinute cu mare dificultate. Teza sa de doctorat poate fi citită în orice etapă şi se remarcă prin acurateţea informaţională, corectitudinea analizei şi caracterul paradigmatic al concluziilor. Din anul 1971, profesorul Nicolae Sută îndrumă doctorat în economie, specializarea relaţii economice internaţionale, sub coordonarea sa finalizând programe de doctorat peste 100 de cercetatori printre aceştia numărându-mă şi eu. Rigurozitatea ştiinţifică, excelenţa analitică şi îndrazneala abordărilor au fost permanent calităţi pe care domnia sa le-a promovat în tot ce a făcut insuflându-le celor cu care a colaborat în tot acest interval de timp. Se poate afirma fără tăgadă că, profesorul Nicolae Sută a fost creatorul şcolii româneşti postbelice de economie internaţională si, în special, a celei de comerţ internaţional. Dedicat carierei universitare în întreaga sa completitate, profesorul Nicolae Suta a lucrat în Ministerul Educaţiei Naţionale atunci când se puneau bazele unui nou sistem de învăţământ universitar românesc şi a condus, în perioadele 1976-1985 si 1991-1999, catedra de Relaţii economice internaţionale din cadrul Academiei de Studii Economice din Bucureşti, consacrând un inconfundabil şi valoros stil de management al şcolii bazat pe excelenţa ştiintifică, rigurozitate metodico-didactică si dimensiune strategică. Profesorul Nicolae Sută a publicat, ca unic autor sau în colaborare, 23 de cărţiare au abordat domeniul de ştiinţă economie internaţională si europeană, 40 de caiete de seminar pe problematica politicilor comerciale, comerţului exterior, organismelor comerciale internaţionale şi peste 100 de articole şi studii legate îndeosebi de relaţiile comerciale internaţionale, economia mondială şi comerţul exterior al României. Miile de pagini de tratate, cărţi, cursuri universitare, caiete de seminar se deosebesc, prin rigoare ştiinţifică, corectitudine analitică şi acurateţe stilistică, de celelalte lucrări din aceeaşi arie tematică, transmit mesaje către cercetători, alimentează permanent nevoia de lectură bine direcţionată, dar şi de reflecţie, se poziţionează inconfundabil în dialogul de idei şi invită specialiştii la dialog profesional şi stiintific. O astfel de carieră exemplară a fost recunoscută, cum se cuvine, de către comunităţile profesionale şi ştiinţifice. Contribuţiile profesionale, ştiinţifice, precum şi calităţile umane ale profesorului Nicolae Sută au fost apreciate în Dicţionarul Specialiştilor, elaborat de către Editura Tehnică, Bucureşti, în 1999 şi în lucrarea Protagonişti ai vieţii economice, apărută la Editura Economică, Bucureşti, în 2002, precum şi prin obtinerea, în anul 2000, a Diplomei „Opera Omnia” a Academiei de Studii Economice „pentru întreaga activitate în domeniul cercetării economice” si a „Diplomei de excelenţă” a Asociatiei Generale a Economistilor din România pentru „întreaga cariera de cercetare si învăţământ”, în 2003. Dupa cum aprecia însuşi profesorul Nicolae Sută cu ocazia aniversării vârstei de 80 de ani, „pentru mine, activitatea didactică şi munca cu studenţii au fost o adevarata pasiune, fapt ce a facut să ne respectam reciproc şi să ne întâlnim întotdeauna cu mare placere, deşi am fost unul dintre cei mai exigenţi profesori din ASE, dar mereu corect şi politicos cu studenţii şi cu toţi colegii de catedră”.

de viaţă academică de la Profesor, să-i ducă mai departe valorile pe care le-a promovat întreaga sa viaţă şi să se străduiască să se ridice cât mai aproape de nivelul la care a ţintit domnia sa. Recunoştinţa pe care o putem arăta maestrului constă în ducerea mai departe a valorilor în care domnia sa a crezut o viaţă şi a-l preţui aşa cum merită. Bogaţia fiecăruia dintre noi se compune şi din sfaturile înţelepte pe care le primim în viaţă. Cei care au lucrat cu domnul Profesor au fost privilegiaţi, ca urmare a standardelor înalte care le-au jalonat devenirea profesională şi ştiinţifică şi a moştenirii de natura excelenţei pe care o capitalizează organizaţia din care fac parte. Profesorul Nicolae Sută s-a născut la data de 5 decembrie 1927, în comuna Albeni, judetul Gorj, într-o familie care a fost săracă material, dar foarte bogată spiritual, şi a parcurs toate etapele sistemului naţional de învăţământ fiind permanent primul în formaţiile de studii din care a făcut parte. Însuşi modul în care domnia sa a reuşit să urmeze cursurile şcolii primare, ale ciclurilor gimnazial, liceal şi universitar este o colectie de pilde exemplare prin densitatea în transformări, lecţiile transmise şi tăria de caracter de care a trebuit să dea dovadă pentru a nu abdica de la dorinţa fermă de a dovedi că, atunci când flacăra reuşitei te animă, nimic nu te poate împiedica. Dupa absolvirea, în 1950, a Facultăţii de Economie Generală din cadrul Academiei de Înalte Studii Comerciale şi Industriale (denumita ISEP după reforma învăţământului din 1948), a fost repartizat ca asistent universitar la catedra de Economie mondială a universităţii, fiind promovat lector universitar în anul 1952, devenind titularul cursului de Economie mondială. Domnul profesor Nicolae Sută este un exemplu şi pentru actualitatea cuvintelor romancierului Jean Bart care spunea că „în viaţă trebuie să-ţi asumi şi să valorifici povestea propriei vieti” făcând parte dintr-o generaţie care a reinternalizat valorile perene ale învăţământului economic românesc. În perioada 1952-1967, ca urmare a reconfigurărilor organizaţionale ale universităţii şi a redefinirii curriculei academice, domnul profesor Nicolae Suta a fost fondatorul cursurilor de Comerţ internaţional, Economia comerţului internaţional şi Comerţul exterior al României. Pentru tot ce a obţinut în viaţă, domnia sa a trebuit sa muncească mult mai mult decât alţi colegi de generaţie. În anul 1968 a obţinut prin concurs gradul didactic de conferenţiar universitar la catedra de Comerţ exterior (denumita ulterior Relaţii economice internaţionale), iar în anul 1973 a fost promovat la gradul didactic de profesor universitar. Tot timpul s-a dedicat statutului de creator de şcoală chiar dacă, la diverse momente, resursele infrastructurale şi umane au fost puţine, piedicile multe, provocările complexe şi mediul nu tocmai favorabil. Domnia sa şi-a început si desfăşurat cariera universitară într-o perioadă de permanente şi radicale schimbări societale, dar a ramas fidel lucrurilor durabile, transcendente peste capriciile vremurilor. Titlul ştiinţific de doctor în economie a fost obţinut în anul 1970, cu teza intitulată „Modificari în comerţul internaţional în perioada postbelică”, o analiza de mare profunzime şi corectitudine a fluxurilor comerciale internaţionale cu bunuri la scară internaţională. O astfel de cercetare a fost extrem de dificilă într-o perioadă în care accesul la informaţie era un vis frumos, când realităţile trebuiau cosmetizate şi când lumea se împărţea în partea „sănătoasă” şi partea „putredă” a economiei internaţionale. Pentru a reuşi în demersul de a fi cercetător onest, adică de a prezenta fluxurile comerciale internaţionale corect şi nu distorsionat, cercetătorul Nicolae Sută a trebuit să reinventeze metoda compunerii întregului din părţi mici, dintre care pentru multe nu existau decât elementele de la

Opera de căpătâi a profesorului univ.dr. Nicolae Suta, în doua volume, a apărut în 12 ediţii, ultima dată la Editura Economică, în anul 2003.


Prof. univ.dr. Nicolae Sută(în mijloc) împreună cu Prof.univ.dr. Sterian Dumitrescu, Prof.univ.dr. Gheorghe Dolgu şi Prof.univ.dr. Virgil Gheorghiţă.

În juriul sesiunii cercurilor ştiinţifice studentesti, alaturi de Prof.univ.dr. Gabriela Dragan şi Conf.univ.dr. Mirela Diaconescu

La ASE, în 1995, în mijlocul participantilor la o lansare de carte;


COMMUNICATIONS AND IT ON THE LONG WAY OF THE INFORMATION SOCIETY TOWARDS KNOWLEDGE BASED SOCIETY Prof. Eng. Ph.D. Victor GREU

Abstract

The paper is an approach of the complex problems involved in the process of evolution of the information society towards the knowledge based society, from the point of view of the communications and information technology contribution. The main issue the author considered is the determinant role of the concept of “knowlidge” in the way the communications and information technology could and must influence the stable and balanced evolution of the society when facing major challenges as the decline of Earth resources and the social incertitudes. On this matter, the major features of the huge potential of the communications and information technology products and services are presented, along with some lessons the nature could offer to the “refined and updated knowledge” concept.

Keywords: knowledge based society, information society, refined and updated knowledge, information age, communications and information technology, next generation networks. JEL classification: D83, L86


1. How to understand today when thinking at tomorrow? Perhaps this is one of the most difficult and complex question the human kind have to answer, but one could say “This is not a new problem!” – and it is true. The real problem is that we hardly get to watch (we should deeply understand!) “today” and the big challenge is that “The future is no more what it once was” – as said Yogi Berra [5]. In other words, the future is more and more difficult to imagine and to control, as our steps to it are changing with dynamic shapes and paces, in the information age. What all these questions have to do with the communications and information technology (CIT), information society (IS) and further with knowledge based society (KBS)? Of course, they have a lot to do, because the strategical policies and the tactical decisions, made by the companies and governments today for a better tomorrow, in fact could no more be imagined without all that CIT means in all society fields and levels, with an increasing and complex influnce. More than these, it is essential to understand that a better tomorrow is impossible to conceive and to reach without using and improving the potential, the means and benefits of CIT as provider of the IS services. This understanding is very clear expressed at an European Union high level [3 ] as: The EU and the knowledge-based society The Internet is changing the world we live in. It is a change no less significant than the Industrial Revolution of the 18th and 19th centuries. Over the last two decades, information technologies and the Internet have been transforming the way companies do business, the way students learn, the way scientists carry out research and the way in which governments provide services to their citizens. Now returning to the “question” – theme, it is clear why it is important to evaluate and fully understand the dimension and the complexity of the processes CIT generates in the IS, as it is the only way to manage the CIT potential to build a better future KBS and to face all challenges such a huge and fast evolution could bring for the humankind sooner or later (the “future” is not the “same”, its entropy is higher and higher). Thinking with responsibility at the future means to deeply analyze the benefits and the vulnerabilities of the world actual progress (the recent crisis is an exemple), in order to increase chances to rise a world where not only to have an improved general good well, but more important is to avoid the risks of the decline generated by the fading of Earth resources, social incertitudes and other challenges. All these fundamental issues justify the opinion that the actual IS has a “long way” to the KBS, even “knowing” that (and sometimes just because) CIT is a huge and dynamic factor of the society evolution, but not the only one!.

2. We have to learn to "know" what "know" edge" must be The debate on KBS started in the 60-s and according to some political and scientific statements, we are already living in knowledgebased societies [2], considering that KBS is a “modern society”. Of course it is a long discussion about where we exactly are (each and every country) and that is why, very long is the way of IS towards KBS. This does not mean that the question could be neglected, on the contrary, this is one of the main challenges to face when analyze the “present” and “design” the future. Now is the time to observe how complex and complicate is the impact of CIT evolution in IS and KBT. Better society requires best knowledge management practices and use of latest tools and technologies [1], but this issue does not mean that KBS could be reduced to what we already have in progress in the last decades: the knowledge based economy (KBE). In a more general and traditional approach, the “knowledge” concept is based on measuring the world according to scientific methods and is focused on human rationality. On the other hand, the creation of knowledge is more and more based on philosophical approaches, aiming the smooth dominance and transformation of nature. Like usually in complex problems, we can guess that the solution is somewhere at the middle, in our case integrating both sides (progress - nature). The evolution supported by CIT could generate in IS an optimal and balanced progress towards KBS, if we get to “know” all “knowledge” necessary for that. In order to do that, we have to learn all the time and use the time with an appropriate (wisdom) “pace”, inspite of the “too fast” pace that CIT is showing when providing the technological support and services for IS. As the actual “knowlidge” (including, for example, the software) increase in complexity, is more and more difficult (and time consuming!) to analyze all its implications on long term and especially to select the optimal solutions (which become new “knowlidge”) for development, irrespective the fields (scientific, technical, economic, social etc.) So, we must manage the CIT development and services using policies, strategies, tactical decisions, algorithms and eventually soft programs that are based on very well refined and updated “knowledge”, which must reflect both the rational creation of the humankind and the lessons learned from the nature (where all the bio-processes are in a harmony). In this matter, a simpler form is expressed by the EU policy on KBS [3]: The evolution towards an information and knowledge society influences the life of every citizen in the Community, inter alia, by enabling them to gain new ways of accessing and acquiring knowledge. Digital content plays an important role in this evolution. Content production has given rise to rapid job creation in recent years and continues to do so. Most of these jobs are created in small emerging companies. The public sector collects, produces, reproduces and disseminates a wide range of information in many areas of activity, such as social, economic, geographical, weather, tourist, business, patent and educational information.


3. Refining and updating knowledge with and for CIT, towards KBS - Trends and challenges

Learn from our progress and nature

CIT products and services bring in IS not only concrete progress elements, as their explosive evolution could offer lessons that would be appropriate to use in the main process of IS towards KBS, just because this process includes a lot of efficient “subroutines” that could match and lend the same kind of efficiency to a higher level of the organization (i.e. KBS), with adequate “filtering”. One of the major “lessons” CIT showed is the logical “multiplication of truth”, using hard and soft structures as “bricks” (but with a huge potential of intrinsic changes!), which further could be processed in a diversity of architectures and logics. Maybe this first lesson would appear more impressive if we observe that it was the way the transistor led us to actual “tablet”, i-phone and other, on a “short” way (versus the Industrial Revolution!) where the PC and even the general concept of “computer” is on fading against a diversity of “devices” which include computing among other features. It is important to notice that, in all this evolution the software has an increasing contribution, as its added value creating potential is huge and based on the “unlimited” resource of human brain. Inspite of this, we have further to learn from nature (including our native brain), beyond genetic algorithms, neural networks, artificial intelligence and so on. AnotherlessonfromCITprocessesisthewaytimeandfrequency(ingeneraltheelectromagneticspectrum)havebeenexploited,asapparently“immaterial”values. Here is sufficiently to mention that the old expression “time is money” turned into “time sharing” or TDMA (time division multiple access) bringing very much money (for example in GSM etc). About frequency it is relevant to see that, as national values, the frequency licences cost millions of EURO-s, but their technical applications in CIT products and services bring billions of EURO-s. Nowadays the “knowlidge” from these 2 lessons could be much important and complex than the above relatively “known” truths, just because CIT evolution based on these 2 lessons provided premises to leverage the level of understanding, approach new theory and achieve new state of the art technologies. Examples could range from the wide concept of “context aware” technologies and services (with clear applications in NGN – next generation networks, sensors networks and cognitive systems), to the approach of “collective intelligence” and “network centric” oriented development (in a diversity of applications fields, including the “social networks”). All these are aiming to exploit the “intelligence” and the “power” which are distributed in the “network”, either technical (as CIT use) or social (as we will see in the next future) networks. Last but maybe the most important, it is now easy to observe the similitude of these CIT trends (as a new “knowlidge” that is driving the steps to KBS) with the “lessons” learned from the “research” mother nature made for millions of years and resulted in the living world. Starting from the “multiplication logic” present in the cell-based structures and the electromagnetic model of the nervous system, the new CIT approaches tend to lend models and achieve features similar with the brain – senses system (as the faculty through which the external world is apprehended) and other. Soon we will have devices/services that will help us to be aware (i.e. to have signals, data etc.) about processes we are interested in: for example when bus/train will come as we are walking in the nearby, or the existence of other things or events etc. Designing “collective intelligence” and “network centric” strategies we have to learn from the “intelligence” collected in every part of the human body, which is able to react to changes (including catastrophic ones), as they could take over altered (or destroyed parts or functions). For example, this is a way “error tolerant” systems and services will have to follow. But it is important to remember every day that the human body is only a part of the life on Earth and we have to invest in research, in order to discover useful “knowlidge” from minus 11000 m (in the oceans) to plus 8000m (to the mountains) and more … in the Universe.

Watch the shades of the progress We have to consider the fact that the future challenges of a such explosive evolution (as CIT and IS have) are inherent, important and some times subliminal – anyway very difficult to forecast and evaluate. Again it is essential to learn from the “wisdom” which the nature eventually sedimented in the humankind, as a culmination of its evolution. It is obvious that the evolution achieved such a high level so any improvement is small, well refined and very slow (assumming the general environment unchanged!). The lesson learned is obvious in economical/financial and especially in health studies (and many other fields): first and most important is to keep what we have and after that try to increase! This way, the great challenge of the CIT progress towards KBS is to watch the steps and keep the pace enabling and using the proper “knowledge” everywhere in the IS. Among the other “shades” of this long way for CIT, we already have in front: • the energy resources decline and “green CIT”; • monitoring the security of critical infrastructures/resources (including CIT “assets”); • the role of CIT as media for the dilemma: democracy-security; • asymmetric environment (economic, politic and social) challenges for CIT development. REFERENCES [1] Abdulaziz S. Almazyad and Farooqui N.K., Towards Knowledge Based Society, Proceedings of the World Congress on Engineering and Computer Science 2009 Vol II, WCECS 2009, October 20-22, 2009, San Francisco, USA [2] Bettina-Johanna Krings, The sociological perspective on the knowledge-based society: assumptions, facts and visions, Forschungszentrum Karlsruhe, Institut für Technikfolgenabschätzung und Systemanalyse (ITAS), 2006, Germany. [3] *** DIRECTIVE 2003/98/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 17 November 2003 on the re-use of public sector information. [4] *** 31996Y1212(01) Council Resolution of 21 November 1996 on new policy- priorities regarding the information society. [5] R. Scoble, S. Israel, Naked conversations, John Wiley and Sons, 2006, New Jersey.

And more to come!


An overview of Retail Branding and Positioning as Marketing Management concepts. The advantages of establishing a strong brand image for retailers

by George Cosmin Tトハase

Abstract

Even though retailing has long had the opportunity to be marketing oriented because retailers are in closer contact with customers than manufacturers, mass retailing has been slow to take advantage of this aspect. Higher priority has been placed on buying decisions, operational concerns and short term objectives than on strategic marketing concepts. A lack of a well defined differentiation from competitors has been a frequently criticized consequence in many retail sectors. However, this has changed. Mainly as a result of changing industry conditions and increasing management capability in retail companies, a change of attitude towards strategic marketing can be observed. Within the context of strategic marketing, the relevance of establishing a clear cut and differentiated profile is clearly recognized by retailers, and retail brands are systematically being established and managed.

Keywords: brand architecture, differentiation, positioning, retail branding JEL classification: L81


Retailers as Brands While in the past, the term brand has been applied mainly to manufacturer brands (such as Coca-Cola, Nokia or Gillette), the brand concept can be applied to all kind of products and services, including retailers. Some authors define a brand as a name or formal sign. According to the American Marketing Association, a brand is a “name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers”. However, separating the brand name from the product or service alters the nature of the brand. If one were to take the IKEA logo and link it to a grocery supermarket, it may keep part of its brand strength, but the character of the brand would change with the underlying product. Other definitions therefore encompass the brand name (or brand logo, brand sign) and the branded product to define a brand: “A brand is therefore a product, but one that adds other dimensions that differentiate it in some way from other products designed to satisfy the same need”. Retail branding is a strategy based on the brand concept and which transfers it to a retail company. A retailer’s “products” are his stores that can be marketed in a similar way to a branded good. A retail brand is then a group of the retailer’s outlets which carry a unique name, symbol, logo or combination thereof. While all retailers constitute brands to some extent, some retail brands are strong, while many are not. Recognition and appreciation by consumers are the essential elements of a strong retail brand. Retail branding can be understood as a comprehensive and integrated marketing management concept, focusing on building long term customer loyalty and customer preference. The term retail brand has to be distinguished from the term store brand. While retail brand refers to stores, the term store brand refers to the product level and is used synonymously with private label. Often, the retail brand is also used to label the store brands, though

this is not a universal characteristic. Retail brands are characterized by enormous complexity, which results from the service attributes of retailers as well as from the multiplicity of brand attributes and consumer retailer interactions. While manufacturers frequently offer only a few products under one brand and the industrial production process is completed through quality control, customer experience with the retail brand is often shaped by several hundred outlets, with different locations and store designs, thousands of products, and dozens of employees in each store, who are also influenced by their moods and emotions. A uniform, consistent, and standardized performance and brand message is therefore difficult to convey. Establishing a strong brand can be the key to long term performance by providing the retailer with considerable advantages:

-

An existing retail brand strengthens brand awareness and differentiation from the competition, because it can serve as an anchor for associations with the brand. From the consumer perspective, strong retail brands simplify the purchasing process because there is already some knowledge about the retailer and buyers do not have to search for additional information about as sortments, prices, service etc. Strong retail brands also reduce perceived purchasing risk. Strong brands exert halo effects. A positive general attitude towards the brand in total positively influences the perception of all specific brand at tributes. Considering the impact of these evaluations on the general attitude, a virtuous cycle can develop. Strong brands not only represent functional benefits, they can also serve as symbolic devices. They represent different values, traits, and characteristics. Shopping at

a certain retailer might, therefore, allow consumers to project a certain self image to themselves and others.

-

If a retail company operates in different market segments, differentiated marketing with different retail brands facilitates approaching each market segment with a targeted approach. Cannibalisation is easier to avoid and each retail brand can develop its own image – without contradictory image transfers. Conversely, a strong brand can be used as a platform for expansion. This already occurs when retailers open new outlets, which, from the very start, are loaded with a certain image. Franchising concepts, in which the retail brand is transferred to independent shop owners, clearly illustrate this advantage. A strong retail brand can also facilitate diversification into new product ranges. This type of brand extension occurs when retailers use their image in one merchandise category to expand into additional categories. Brand architecture refers to the internal structuring of the retailer’s brands and revolves around how many and what kinds of offers are provided under a certain brand. Within the brand hierarchy, a retailer’s brands can be divided into different levels. Retailers have brand names at the level of the retail company as a whole (“corporate brand”), the retail stores, the merchandise (e.g. the store brands), and specific retail services (i.e. banking services or loyalty programmes). Besides the individual branding decision at each level, the interconnection between the levels has to be considered. As in industrial multiproduct companies, retailers with more than one store have to decide whether the stores should carry the same or different brands. Three general branding strategies can be distinguished at the level of the retail brand:

-

an umbrella brand strategy, where all the stores of the company carry the same brand, in most cases differentiated by a sub-brand; a family brand strategy, in which groups of stores of the retail company (usually different retail formats) carry different brands, i.e. the brands are strictly separated;

a mixed strategy, which applies an umbrella brand for some store formats and separates others by using different brand names. The main decision in this context is brand image transfer vs. brand image separation. Using an umbrella brand strategy, the common brand name leads to a substantial image transfer. Consumers transfer the associations they carry for Tesco Superstores at least partly to Tesco Express stores. All stores are part of one large brand and have to convey the same message to the consumer, if the brand image is to remain strong. A family brand strategy, on the other hand, is usually the result of market segmentation and an unambiguous brand focus with different brand attributes for each store format. Carrefour hypermarkets, for example, target a different market segment than Carrefour’s discount chain Dia. An image transfer would, therefore, probably not benefit either of the stores. Strategic brand management starts with a clear understanding of what the brand is to represent and how it should be positioned relative to competitors. Positioning is the deliberate and proactive process of defining and influencing consumer perceptions of a marketable object, with a strong focus on the competitive position. A product is thus positioned in the minds of the consumers. Positioning usually applies certain fixed dimensions along which the retail brand defines its position relative to its competitors. Market segmentation is often considered necessary for successful brand positioning. Market segmentation refers to the process of dividing a total market by certain attributes into (more homogeneous) partial markets. Segmentation criteria can be demographic, socioeconomic, lifestyle, geographic location and many others. Segmentation therefore includes the selection of one or several market segments and targeting the marketing towards the purchasing behaviour, motives, or expectations of these groups. However, segmentation is often considered difficult for retailers with given catchment areas and the need for high customer traffic in their stores which require appealing to broad customer groups. Successful positioning can be based on any retail activities and a unique profile along the various dimensions yields a clear position that is


the prerequisite of a strong brand. At the same time, the advertising spending of retailers has increased strongly over the last few decades and – as an indicator of the increasing relevance of retail branding – in many countries, retail stores are among the most heavily advertised “products” in terms of media spending. Retail brand positioning is based on a set of fixed dimensions along which a retailer is perceived to be located. However, the retail brand is broader than the actual positioning. The total brand knowledge which a consumer associates with a brand is relevant to the brand strength. The associative network model views memory as consisting of a network of nodes, representing stored information, and connecting links. Any type of information connected to the brand is stored in the memory network, including verbal, visual, abstract, and acoustic information. Retail brand image can be defined as perceptions about a retailer as reflected by the brand associations stored in consumer memory. The strength of the brand can be evaluated by analyzing the various relevant associations. Their uniqueness, favourability, strength, and the certainty with which consumers link the information with the brand, are the dimensions to consider. The retail brand image is complex and it is connected to an array of other images, both at a higher level as well as in the form of sub-images. The retail store format image (i.e. category “killer image”), shopping centre image, location image, price image, merchandise image and other components of the store or its context are all connected to the retail brand image and are part of the memory network of the consumer.

Principles of Successful Retail

Branding

All retail marketing instruments affect the retail brand, as illustrated by the notion of the comprehensive retail brand image, which is made up of a universe of interconnected associations. To develop a strong and successful brand, three basic principles are mentioned in literature: • differentiation from competitors • long term marketing continuity • coherence of different marketing components. Achieving differentiation (in consumers’ minds) is a central characteristic of a brand. Higher levels of differentiation from the competitor are expected to lead to higher profitability. Only brands that are well distinguished from their competitors can build up long term customer loyalty and avoid store switching by the consumers. Establishing a clear brand image is a long term process. Brands are established through consumer learning processes. Consumers store associations in their memory. Brand associations become stronger over time and must be reinforced by repeated exposure to the same brand messages, because they might otherwise fade away. The past investment in the brand building is at least partly lost if the brand marketing is changed. Thus, continuity is important. Also, risk reduction is one of a brand’s main functions. Consumers trust a brand, because it entails a standardized and uniform offer under a certain brand name. Some of the world’s most successful brands demonstrate that retaining the same brand message and communication (with slight variations) for years and even decades is one of the key prerequisites of successful branding. The retail marketing mix includes all marketing instruments that a retailer can deploy. The term mix indicates that the instruments are not used in isolation,

but that they jointly influence the consumer. In order to be successful, all marketing measures must be coordinated to ensure a close fit with one another and that all measures convey the same brand message. Because inconsistency makes a brand image fragile and consumers strive for internal harmony or congruity in their knowledge and information (“theory of cognitive dissonance”), creating coherence between all the different facets of the retail brand is crucial for success. Considering the complexity of the retail environment, ensuring a fit among the marketing instruments and all brand contact points is challenging. IKEA, Sephora, The Body Shop, Boots, Zara and others are examples of successful brands that succeed in projecting a uniform image with their store atmosphere, merchandise, pricing, communication and service.

Conclusion and Outlook Some of the most successful retailers in the world have developed into strong brands without having consciously managed their brands. While this is true, it is important to note that many successful retailers have developed strong brands by – even if unconsciously, adopting the above mentioned principles of branding. From the very beginning, Aldi, IKEA, Tesco, WalMart, Lidl and others have had a clear and distinct profile. They pursued their own marketing approach over several decades and, supported by a strong corporate culture, have been very coherent in all their activities. Differentiation, continuity and coherence in these cases were often ensured by the founder(s), who, over the years, developed a clear understanding of what their company should stand for – and followed that through rigorously. Brand management gains additional relevance through the internationalisation of retailers (e.g. should retailers use the same name in all countries?), with the ongoing wave of mergers & acquisitions in retailing (e.g. should an acquired retailer keep his retail brand or be adapted to the acquirer’s brand?) and with multi-channel retailing. Especially in the case of store retailers expanding their business to the Internet, the strategic decision on using the same retail brand across channels or separating the Internet shop from the store outlets, is crucial and far-reaching. In recent years, competition and changing consumer behaviour have increased the relevance of retail branding tremendously. Such branding aims at enhancing differentiation and customer loyalty. Retail brand management includes all components of the retail marketing mix and develops a strategic understanding of the intended positioning of the retail company. Developing a retail branding strategy helps to ensure the coherence of all marketing messages and market appearances of the company. Successful companies change over time, but considering the prerequisites of successful branding, the brand core should remain stable.

References 1. 2. 3. 4. 5. 6. 7. 8.

AILAWADI, K.; KELLER, K. (2004): “Understanding Retail Branding: Conceptual Insights and Research Priorities”, in: Journal of Retailing, Vol.80 KELLER, K. (1993): “Conceptualizing, Measuring, and Managing Customer Based Brand Equity”, in: Journal of Marketing, vol.57, no.1 KELLER, K. (2003): “Strategic Brand Management”, 2nd international ed., Prentice Hall KRISHNAN, H. (1996): “Characteristics of Memory Associations: A Consumer Based Brand Equity Perspective”, in: International Journal of Research in Marketing, Vol.13 MORSCHETT, D. (2002): “Retail Branding und Integriertes Handelsmarketing”, Wiesbaden MORSCHETT, D. (2006): “Retail Branding – Strategischer Rahmen für das Handelsmarketing”, in: ZENTES, J. (Ed.): Handbuch Handel, Wiesbaden. MULHERN, F. (1997): “Retail Marketing: From Distribution to Integration”, in: International Journal of Research in Marketing, Vol. 14 ZENTES, J.; MORSCHETT, D.; SCHRAMM-KLEIN, H. (2007) - “Strategic Retail Management” (GWV-Vieweg)


An outlook on the competitive framework of Romanian SMEs challenged by the economic crisis Irina Purcarea Academy of Economic Studies Bucharest, Romania irina.purcarea @ gmail.com

Abstract SMEs account for over 99% of all European business, proving to be engines of economic growth and employment. Due to the European integration, the competition has increased both on the international and national markets and the quality of the products and services offered to customers are considered to be major factors of competitiveness for SMEs. The SMEs sector in Romania proved to be the most dynamic sector but it was also one of the first sectors to be affected by the global financial crisis, in spite of the defining features of SMEs such as dynamism, flexibility, innovative spirit, client’ orientation or capacity to adapt that were not enough to resist the powerful impact of the crisis. The main challenges most SMEs in Romania have to cope with as a result of the economic-financial crisis are sudden rises in the prices of raw materials, energy and food, liquidity and credit related problems, a marked decline in the demand for products and services, considerable variations in the exchange rate, and inflation. The article approaches the competitive framework of SMEs in Romania amid the economic-financial crisis, by looking first of all at the current situation of the SMEs sector since Romania joined the European Union, followed by an analysis on the way in which SMEs in Romania have been affected by the crisis.

Key words: SMEs, competitive framework, economic crisis JEL classification: L25, L26, M13


The Romanian SMEs sector - a general perspective

by 2% compared to the first half of 2008. Another important finding is that the average number of employees in SMEs decreased by 3, 11% compared to the first half of 2009 while the investments made by SMEs decreased on average by 6, 45%.

Once Romania joined the European Union various benefits as well as challenges were brought forward, such as access to structural funds which Romania will be benefiting from until 2013, meant to reduce economic and social disparities between regions and creation of economic and social cohesion. The White Charter of SMEs in Romania is meant to offer a thorough analysis of the past and present situation of the Romanian Small and Medium Sized Enterprises sector. According to the 2008 SME’s White Charter, Romania’s integration into the European Union was considered as a major opportunity by 46.67% of SME, only 9.18% considering it as a major threat. The positive impact of Romania’s integration in the European Union on the SMEs activities consists of: • Improving access on markets (indicated by 43.47% of SMEs); • The existence of better and/or cheaper potential suppliers (indicated by 38.54% of SMEs); • A better legislation (indicated by 35.35% of SMEs); • The access to structural funds (indicated by 32.64% of SMEs). Starting with the last quarter of 2008, the macroeconomic context in which Romanian SMEs carried out their activity was a difficult one, marked by negative and unpredictable evolutions whose impact has increased especially during 2009. SME’s 2009 White Charter from Romania shows that over 58% of SMEs consider that the Romanian business environment is not conducive for business development. In what concerns future evolution, at that time, Romanian entrepreneurs were not confident of the possibility to experience an economic recovery, about 58% estimating that the Romanian economic environment will hamper development of companies. According to the 2010 Evaluation of the Romanian SMEs sector, the number of SMEs that obtained profit in 2009 decreased

Fig.1: Structure of the Romanian SMEs sector according to the size of the SMEs registered in 2009 Source: Annual Report on the Romanian SMEs sector, 2010

During 2008 and 2009, in the context of the SMEs sector’s sustained demographic growth, microenterprises have increased their share in the overall structure of the enterprises registered (fig.1). This aspect might be explained by the low level of internal capital as well as by the fact that the majority of Romanian investors tend to take the first step in business by setting up microenterprises which, during their life cycle, are unlikely to move to higher size categories. At the same time, we must not overlook the legislative factors and public policies along with fiscal measures taken which encouraged an increase in the number of new legal entities rather than consolidating the ones already registered. On the other hand, the prevalence of microenterprises describes a characteristic of the Romanian SMEs long-term development, which shows stagnation in the development of micro firms. This, in turn, could raise competitiveness issues in what concerns Romanian SMEs competition on the EU internal market, another important aspect that should not be overlooked.

On the long term, the share of employees in the SMEs in the services sector of activity increases considerably in comparison with the other sectors (fig.2). At the same time, it is worth mentioning that the share of average number of employees in Constructions increases on a continuous basis from 9,4 % in 2001 to 14,9% in 2008 and, in 2009, it diminishes to 13,5%.

The Romanian SMEs and the economic crisis This first UEAPME SME finance survey, based on national SME finance surveys, was conducted in 2009 by national craft and SME associations in Europe either by independent market research institutions or public finance providers. The survey allowed the display of some important trends as well as confirming some of the difficulties SMEs were experiencing in what concerns obtaining access to finance in the current financial and economic crisis. The findings of the survey revealed that between 20% and 32% of SMEs reported increased difficulties concerning access to finance, and out of those SMEs that have tried to get access to finance, 12% to 24% reported that they did not have access at all. According to a recent study (2009), 74% of bankers from Central and Eastern Europe considered that the impact of the financial crisis represents the biggest threat for the banking activity on the SMEs segment and 50% stated that the main factor that endangers the bank’s exposure

Fig.2: Distribution of the number of employees in Romanian SMEs according to the sector of activity, 2009 Source: Annual Report on the Romanian SMEs sector, 2010

on the SMEs segment is the actual macroeconomic environment. The Association of Chartered Certified Accountants (ACCA) calls for some key SME measures that need to be in place in order to speed up economic recovery, such as: • Government recognition of SMEs varied needs, adopting the ‘think small first’ approach when designing fiscal, economic, regulatory and legal environments; • Facilitating the use of equity finance, in order to build new, knowledge-intensive industries, ensuring future competitiveness of the SME sector; • Ensuring a more competitive public procurement market, more open to small business; • Tax transparency, a long-term approach to tax policy, simplicity and stability and tax policy that is fully evaluated prior to implementation


A study on the impact of the crisis on Romanian SMEs analyzed, among other important issues, the way in which the crisis affected certain aspects related to the activity carried out by the enterprises questioned, such as sales revenues, possibility to enter new markets or consumers’ loyalty. The results of this analysis (Table 1) points out that the crisis the business environment is faced with has affected Romanian SMEs to the highest extent in what concerns sales revenues (59.2%) and the cash flow (56.6%). One way to describe the impact of the economic-financial crisis on the SMEs sector in Romania is to refer to the main concern for SMEs at the moment, regarding the increasing difficulty in gaining access to credits. This is due to banks’ low interest in small customers, the high costs of credits as well as the increasingly stringent requirements applied to the analysis of projects and applicants’ trustworthiness. The impact of the financial crisis is especially visible in the case of SMEs in sectors such as commerce, construction and real estate. In this context, looking at the situation on the market which was completely different as compared to the previous year, the SMEs were obliged to take certain urgent measures in order to adjust administrative expenses. Such measures have resulted in diminishing investments, postponing or even abandoning certain investment projects, renegotiating contracts with suppliers, restructuring/ reducing activity, consequently personnel and wage reductions. In these times of crisis, encouraging entrepreneurship could represent the key to sustainable economic recovery. In this direction, on February 2, 2011 the Romanian Government adopted a decision to support young entrepreneurs, by stimulating the setting up and development of microenterprises. The project, prepared by the Government since 2010,

The influence of the economic crisis on the activities carried out by Romanian SMEs Table 1 The influence of the economic crisis on the activities carried out by Romanian SMEs Increased

Access to finance

Remained at the same level

Decreased

I don’t % know

4,4%

23,2%

41,7%

30,7

%

Possibility to invest in 0,9%

11,4%

32,5%

55,3

%

capital programs Company cash-flow

3,1%

12,3%

56,6%

28,1

%

Sales revenues

12,7%

9,6%

59,2%

18,4

%

Possibility to enter new 10,5%

18%

40,8%

30,7

%

the 14%

21,9%

25,9%

38,2

%

business 18%

16,2%

38,2%

27,6

%

The company’s market 11,4% value

19,7%

32,5%

36,4

%

Consumers’ loyalty

39,5%

24,1%

28,9

%

markets Ability

to

apply

strategy New opportunities

7,5%

Source: The impact of the crisis on the SMEs in Romania, 2009

has the objective to support the business environment and creation of new jobs. The decision relates to a state grant amounting to maximum 50% of what the project proposed is worth, but not more than 10,000 Euros, as well as the guaranteeing of loans the young entrepreneurs will raise.

References

[1] Irina PURCAREA (2009), The process of innovation in Romanian small and medium enterprises (book chapter), Management in the New Economy. Classic and modernity, Druck und Verlag Europaische Akademie der Naturwissenschaften Hannover, Editors: Marcin W. Staniewski and Piotr Szczepankowski, Die wissenschaftliche Rezension: Prof. Dr.Dr.h.c. multiplex Helmut Hahn, Prof.Dr. Marie Lemonnier, pg. 201-218, ISBN: 978-3-00030170-4 [2] Irina Purcarea (2010), Directions for enhancing innovation within Romanian SMEs, Proceedings of the 11th European Conference on Knowledge Management (ECKM 2010, Famalicao, Portugal) Volume two, Academic Publishing Limited, pg.1188-1195, ISBN 978-1-906638-70-2; listed in the Thomson Reuters ISI Index to Social Sciences & Humanities Proceedings (ISSHP), listed in the Thomson Reuters ISI Index to Social Sciences & Humanities Proceedings (ISSHP/ISI Proceedings), indexed by the Institution of Engineering and Technology in the UK, listed in the EBSCO database of Conference Proceedings [3] Hodorogel,R. (2009), The economic crisis and its effects on SMEs, [Online], http://store.ectap.ro/articole/389.pdf accessed at 21.04.2011 [4] Borcoși,C. (2010) Romanian SMEs after integration in European Union, [Online], http://www.utgjiu.ro/revista/ec/pdf/2010-01/15_CORINA_ANA_BORCOSI.pdf acessed at 21.04.2011 [5] Evaluarea situatiei de ansamblu a IMM-urilor din Romania in semestrul I 2010, [Online], http://www.cnipmmr.ro/statistica/evaluarea-semestriala-11.pdf accessed at 21.04.2011 [6] Annual Report regarding the Romanian SMEs sector, 2010, [Online] http://www.postprivatizare.ro/romana/wp-content/uploads/2011/02/Raport_FPP_RO-13022011_web.pdf [7] Studiu: IMM-urile din Romania sunt printre cele mai optimiste din regiune in legatura cu efectele crizei, http://economie.hotnews.ro/stiri-finante_banci-6320258-studiu-imm-urile-din-romania-sunt-printre-cele-mai-optimiste-din-regiune-legatura-efectele-crizei.htm [8] Impactul crizei asupra IMM-urilor din Romania, [Online], http://www.immromania.ro/retrieve.php?e=inf_noutati&m=972 accessed at 21.04.2011 [9] http://www.cnipmmr.ro/engl/publications/publications.htm [10] ACCA (2009), Policy Paper - SMEs : A cure for the financial crisis?, [Online], http://www.accaglobal.com/pubs/about/public_affairs/unit/parliamentary_briefings/financia_crisis.pdf [11] Hodorogel,R.( 2011), The global economic crisis challenges for SMEs in Romania, [Online], http://store.ectap.ro/articole/584.pdf accessed at 22.04.2011 [12] European SMEs finance survey/ Results 2009, [Online], http://www.ueapme.com/IMG/pdf/090728_SME-finance_survey.pdf


Editor in Chief, Professor Virgil Popa Ph.D. (Member of ECR- Europe Academic Partnership; Member of Supply Chain Management Professionals, USA; Member of the Board of ECR Romania; Member of the Board of Romanian Distribution Committee) invited us to teamworking within the „Supply Chain Management Journal�

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Living inside a PR world-between ethics and "spinning" By Larisa-Alexandra Grigore

Abstract While PR critics state that “public relation ethics is an oxymoron”, the purpose of this paper is to provide a comparison between good/bad, ethical/unethical public relation practice especially in managing conflict of interest, and to underline the importance of responsibility and reputation in managing crisis. Many PR people argue the concept of “spinning”, so the paper emphasizes its devastating effects both on public relation practitioner and company’s ethics, credibility, image and reputation. The only conclusion to draw from the contradiction between altruism and self-interest and between the interest of the public and the one of the company is recognizing the ethical judgment that helps make a balanced decision in ethical dilemmas.

Key words:

Responsibility, public confidence, reputation, integrity, propaganda, manipulation JEL classification: M14


3

. Spinning and PR “No matter I’m dizzy, the world keep spinning in circles.” (Anonymous)

1

. Responsibility and PR “Responsibility is the price of greatness” (Winston Churchill)

When talking about PR you cannot only resume to the definition given by James Grunig and Todd Hunt in 1984, the one saying that PR is nothing more than “the practice of managing communication between an organization and its publics”. There is one single word missing, the one that underlines the meaning of public relations better than any other: RESPONSIBILITY!...Professional, social, media, moral, corporate, individual (and so on) responsibility means nothing more than ethics. In a 2005 poll, sponsored by Public Relations Society of America (PRSA), one of the questions in the survey was: “Do PR practitioners sometimes take advantage of the media to present misleading information that is favorable to their clients?” Eighty five percent of the respondents agreed. Whether there is no truth, some truth or a lot of truth to the ethical indictments of public relations, PR practitioners must carefully consider their relationships to ethical principles.

2

. Ethics and PR “Relativity applies to physics, not ethics.” (Albert Einstein)

Ethics is more doing what you should do than doing what you must do. Some people say that practicing ethics needs courage. I would say that not practicing it needs a lot of courage because of the risk involved and the price paid. As John Luther said: “Good character is more to be praised than outstanding talent. Most talents are, to some extent, a gift. Good character, by contrast, is not given to us. We have to build it piece by piece-by thought choice, courage and determination.” Questions of ethics in public relations inevitably arise as practitioners are expected to endure a delicate balance of simultaneously servicing both client and the collective good. PR professionals must constantly and responsibly manage conflicting interest between the needs of the client and the needs of the public. Loss of public confidence and a damaged reputation are the most likely results of a poor managed conflict of interest. Because public confidence is important to all companies’ success, good market communications are all about making the company relevant to the target groups of people, having a message people believe in, keeping promises and creating dialogue and trust. For although the cost may be well hidden, losing public confidence is an expensive business.

But what happens when spinning rises, leaving PR behind? “Spinning” is nothing else that a form of propaganda, achieved through providing an interpretation of an event or campaign to persuade public opinion in favor or against a certain organization or public figure. While traditional PR may also rely on creative presentation of the facts, “spin” often, though not always, implies disingenuous, deceptive and/or highly manipulative tactics.² Orson Well’s broadcasted a radio rendition of the “War of the worlds” story on October 30, 1938- Halloween Night. A lot of people claimed that of the estimated six to twelve million people who heard the broadcast, nearly one million people panicked. The idea that the broadcast caused even hundreds of thousands of people to call the police, hide in cellars, or otherwise prepare for a “Martian invasion” is more of a “put-on” than the broadcast itself. Public relation firms provide much more than press agency. Harold Burson, chairman of Burson-Marsteller states: “In the beginning, top management used to say to us, ‘Here’s the message, deliver it’. Then it became, “What should we say?, Now, in smart organizations, it’s What should we do?” This is a good approach especially when we talk about crisis. As Steven Fink said, crisis are forewarning situations that run the risk of escalating in intensity, falling under close media or government scrutiny, interfering with normal operations, jeopardizing organizational image, and damaging a company’s bottom line. For example in a recent survey sixty-five percent of the respondents thought declining to comment almost always means the company is guilty of wrong doing. Responses to crises affect perceptions of the organization’s credibility, character and competence.

4

. Ethical dilemmas and PR“Other than the helplessness to choose between life options, dilemmas are often a situation when no option to choose is left before” (Anonymous)

Rephrasing the title of David Callahan’s book “The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead” I would raise the next question: Why more PR professionals are spinning to get ahead? The same David Callahan gives us the answer: “When you pun people under pressure and give them a choice of preserving either their integrity or their financial security, many will go for the money”. Ethical dilemmas often result from dealing with variables. The ability to consistently make decisions rooted in difficult ethical dilemmas is a characteristic that is an everyday reality of the PR practitioner. Rather than limiting discussion to negative, lump statements PR practitioners can now better understand the variables that affect their moral and ethics. In an ideal case everyone should follow Fitzpatrick and Gauthier’s professional responsibility model that frees public relations representatives from assuming social and communitarian responsibilities in their activities. In the end, isn’t all about what Milton Friedman said “The social responsibility of business is to increase its profits”, it is about competence, professionalism, specialist’ individual responsibility and conduct in managing PR, all these are activities that define and outline public relation activities in an ethical manner.

References 1. Grunig, James and Hunt, Todd: Managing Public Relations (Orlando, FL: Harcourt Brace Javanowich, 1984), 6e. “Public relations is what you do with what you know and what other think about what you say”. 2.

Safire, William “The Spinner Spun”, New York Times, December 22, 1996

3.

Cutlip Scott M., Certer Allen H and Broom Glen M.- Effective Public Relations, Eighth Edition

4.

Norwegian Business Daily Dagens Narringsliv, August 21st, 2006

5.

Callahan, David: The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead, Harcourt, 2004

6.

Fitzpatrick, K. & Gauthier, C. (2001). Toward a professional responsibility theory of public relations ethics. Journal of Mass Media Ethics, 16(2&3): 193-212.


Virtual currency trading: friend or foe? By

Adelina-Georgiana Barbalau

Abstract This research paper investigates how virtual currency trading can affect the real world economy, with the final purpose of establishing whether it is beneficial for the economy or it is harmful. Departing from the presentation of some theoretical concepts and facts, the paper analyzes the impacts that virtual currency trading has upon the real world from an economic, legal and social point of view. The conclusions drawn upon the analysis include some brief observations regarding quality as a possible cause of the uncontrollable emergence of this practice and the future direction of humankind with regard to the evolution of technology and virtual worlds.

Keywords: virtual economy, real money trading, virtual currency trading, gold farming. JEL classification: E42, E44

I. Introduction

Call it Information Age, Computer Age or Technology Era; it’s just the world we live in today. Personal computer, laptops or any other kind of technological devices meant to help us have become our best and most reliable friends. It’s no wonder then that the video game industry was an estimated $60.4 billion business in 2009 and is expected to reach $70.1 billion by 2015. Around this multibillion dollar industry the virtual economy has emerged. In the virtual economy real money is traded for virtual goods, services and currencies in the context of internet games, usually Massive Multi Player Online Role-Playing Games (MMORPGs) such as World of Warcraft.

This whole new type of economy has an obscure border between the real and the virtual, but whether this border begins to shade more and more it is a question that has caused a lot of controversy. The virtual economy is already worth billions of dollars annually, with virtual currency trading alone supposedly reaching the staggering amount of $8 billion dollars in 2009. In fact, several small countries around the world have smaller GDPs than the total worth of the virtual economy. Given the scale of this practice, the effects upon the real economy are not at all negligible so the goal of this research paper is to assess the impact that the virtual economy in general and virtual currency trading in particular, have upon the real world from an economic, legal, and social point of view. It aims at determining whether trading in virtual currencies has a positive or a negative im-


pact upon the real world, with the final purpose of answering the research question: Virtual currency trading: is it a friend or a foe?

II. Background

In the context of the virtual economy, the trading of virtual world currency, items, and services for real money is known as real money trading (RMT). RMT can be traced back to at least 1987 and the first cash payments between players for items or for improving characters within text and basic graphics-based multi-user dungeons (Hunter, 2006). It can be divided into two elements: primary RMT that takes place in-game or beside game as incorporated into the game’s structure, and secondary RMT that takes place partly out-game and is not approved by the game companies (Lehtiniemi, 2007). “Gold farming” is a more recent sub-component of the longer-standing activity of real money trading and it describes the illicit practice of trading virtual currencies, items, and services for real world money, being thus synonymous to the secondary RMT. “Gold farming” is the quintessential illicit activity related to MMORPG (Keegan, 2010). As any other illicit activity, it has proved to be very profitable so that many companies have set up virtual sweatshops where many young people called gold farmers play online games 12 hours a day for the sole purpose of earning virtual in-game resources, which the companies later sell for real money all over the world. The practice of gold farming employs hundreds of thousands of people worldwide of which approximately 80% to 85% are estimated to be based in China. As in almost all fields China has also become the world factory of virtual goods. As previously mentioned, in the context of real money trading in general, and “gold farming” in particular, there can be traded currencies, goods (equipments, weapons, clothing) and services (help given in surmounting certain obstacles, killing bosses, leveling or acquiring certain titles). Out of these, the most popular form of trade is virtual currency trading: the exchange between virtual currencies and real world currencies. The reason for this is that in such games, as in real life money means power. There had actually been reported the emergence of gangs and mafia in some MMORPGs, where powerful players threaten beginners to give money for their protection, and even steal or rob. There are countless website platforms especially designed for virtual currency exchange, where real currencies can be converted into virtual currencies at certain exchange rates which are established based on the supply and demand. The situation is very similar as in case of foreign currency exchange, only that in this case the currencies to be exchanged do not belong to different countries, but to different worlds: the real and the virtual. This research will be focused only upon virtual currency trading in the context of secondary RMT or “gold farming”, namely the illicit exchange of real money for virtual money. In China alone trading in virtual currencies has reached unimaginable heights and it

is supposed to have totaled nearly $2 billion in 2008, according to the China Internet Network Information Center; however, a much larger underground economy is supposed to exist. In June 2009 the Chinese government has banned virtual currency trading. The rule according to which virtual no conversion between virtual and real currencies could be made was issued by the Ministry of Commerce and Ministry of Culture, for fear that virtual currencies could affect the real financial system. As opposed to the situation in China, the South Korean Supreme Court ruled in January 2010 that virtual currencies can be legally exchanged for real world currencies, and the transactions will be taxable. Therefore, there is no doubt that virtual currency trading does have both a positive and a negative impact upon the real world in general and its financial system in particular, but which outweighs the other is rather difficult to say. I will further try to analyze the positive and negative implications of virtual currency trading from the economic, legal and social point of view.

III. Economic impact

By far the most important problem raised by virtual currency trading is the fact that as virtual currencies gain more and more purchasing power, control over the effective money supply can shift from the central bank to the game developers. (Castronova, 2009) This poses great problems to a country’s ability to control its money supply, which in its turn can lead to real world inflation. According to Kroszner (2009), virtual currency trading could also have an impact on currency demand and the so-called velocity of money, because it complicates the central bank’s task of anticipating what the currency demand will be. Moreover, real currencies can actually depreciate against virtual ones. In China, the so-called QQ coin - a form of virtual currency produced by the Chinese Internet giant Tencent - has sometimes risen sharply in value against China’s official currency, the renminbi, causing much alarm among the officials at the nation’s Central Bank. It appeared also the concern that virtual worlds can challenge the government control of society. In China people were actually buying real food, clothes, cosmetics and other goods with virtual currencies, thus beginning to replace the national currency with the virtual ones. On the other hand, real world cash inflows into a country’s economy positively influence its balance of payments and can have a beneficial effect upon the national economy, as long as they are controlled. An important positive impact that gold farming and virtual currency trading have upon the real world is that it offers employment to an imprecise but definitely large number of people. According to Heeks (2008) this practice employs approximately 400.000 people, of whom perhaps 85% are based in China, in a market worth in excess of US$1 billion. But the true figures could

be much more; Ryan (2009) for example cites one million people working on a global trade worth more than US$10 billion. This activity has been for more than a decade an ingenious, yet controversial, method for poorer nations to earn money from the technological and informational evolution. Not only that, but this has also been an opportunity for many unskilled men to build digital capabilities that will surely be of some use to them in the future in some other information technology related jobs. A Chinese gold farmer engaged in virtual currency trading can earn the same income and sometimes even more than might be paid for working in a factory for 12 hours a day. However beneficial this may sound, it is still a sweatshop practice, universally known as being unethical and controversial. China’s move to prohibit virtual currency trading will definitely hurt the country’s economy at least in the short term and put many gold farmers and other virtual employees out of work. All things considered, it must be clearly noted that virtual currency trading in the context of secondary RMT represents a black market, thus having the same negative impacts upon a country’s economy as any other black market. This newly emergent uncontrollable black market that operates in parallel with a country’s economy subtracts from the national budget a considerable amount of money in the form of unpaid taxes. A way to deal with this problem would be to regulate virtual currency trading by making it an integral part of the official economy and by making the transactions taxable, as in the case of South Korea. This move would represent a step in eliminating the black market of virtual currencies and it would definitely influence positively the country’s economy since it represents a considerable source of revenue for the government. The financial and economic benefits would be significant especially in case of China where the practice is based. However, China chose to outlaw virtual currency trading instead of taking advantage of what seemed to be an opportunity of increasing the national budget and boost the economy. The reasons behind this are multiple and rather complex but it may all come down to the fact that the drawbacks of this move outweigh the benefits.

IV. Legal impact

From a legal point of view, in the absence of real ownership no real trade can possibly occur. In virtual worlds no real ownership exists because the game developers can change at any time the virtual world, ban players, delete items, diminish their utility or simply put an end to the world. Moreover, most game companies make it a clear point to say players do not own any virtual property no matter what amount of effort or money is invested and anything generated in a virtual game, including virtual currencies is still the game’s property. Richard Bartle (2004) argued that these aspects


negate the whole idea of ownership in virtual worlds so virtual currency trading cannot even be considered a real trade in the first place. But things are not as simple as that because such trades do occur and have reached considerable proportions, fact that has draw attention upon the tax non-compliance issue they raise. Taxation in respect to virtual currency trading and secondary RMT is in fact a very delicate, complex and long debated subject which has been first brought into question by American writer Julian Dibbell who in 2004, went to the IRS and reported a rough $36.000 yearly income from the sale of imaginary goods. He had been engaged for a full year in virtual currency trading, in the name of research, and he reportedly earned from it an amount which only qualified him in the lower-middle class of the virtual businessmen but in the same time it was more than he ever earned as a professional writer. The IRS considered very plausible the idea of taxing virtual commerce, but they just did not know how to proceed. South Korea is the first country regulating virtual currency trading as a response to the increasing awareness of the tax non-compliance issue that virtual economies raise. Even though virtual currency trading may seem to be an unquestionable taxable event because converting virtual currencies into real world money would clearly constitute taxable gross income, things are not as simple as they appear to be. It is very difficult if not even impossible to keep track of transactions, so this would not only be very burdensome to enforce and control but it could also facilitate money laundering. For example, a person involved in an illegal activity, could create an account in one of these games and ask his fellow criminals to send on that account the equivalent in virtual currencies of the “black” money they make in that real world illegal activity. The criminal could then legitimately cash out the virtual currencies by selling it for real world currencies and could even establish decoy virtual businesses as support. However, bigger and more complex controversy may arise if virtual currency exchange is considered a taxable event. Departing from the premise that income from virtual worlds is taxable, it has also been raised the question whether in-game transactions and assets should be taxable even before they are converted into real world money. Since almost all virtual assets can be assigned a value in virtual currency, which in its turn can be assigned a value in real world currency, it has been argued that a virtual tax on items bought and sold solely within the virtual world should also be applied, as in case of barter. This would make it impossible for any player to avoid taxation since all items have fair market values and it would most probably cause MMORPGs to perish since playing just for fun would be impossible and the whole concept of game would be lost. Virtual taxation has been a long debated topic within the Joint Economic Committee of the U.S. Congress which has ultimately recognized the complexity of the issue, by stating that clearly, virtual economies represent an area where technology has outpaced the law. Regulating virtual currency trading is still very difficult and a rather farfetched idea to be put into practice which leads me to think that maybe South Korea has taken a hasty decision without fully grasping all its implications and possible consequences.

V. Social impact

With regard to the practice of virtual currency trading, while some gamers happily buy gold as a way to enhance their virtual experience, other gamers are strongly against it since this could enable online theft and fraud and they also think that the game world should be a level playing field, free of the corruption and interests of the real world. On the other hand it seems only natural to match one player’s need for virtual money with other player’s need for real money. It reunites two categories of people, those that have no time to earn money in game because they are involved in real world money generating activities and those that have the time to engage in virtual money generating activities but have no real world money. It can be simply seen as division of labor, which makes the trade necessary or it can only be the inevitable reproduction of global capitalism into the virtual worlds. According to Bernstein (1983) the production for virtual worlds has already followed the standard capitalist chronology: from subsistence production for personal use, to informal barter between players, to “monetization” (exchange for real money), to small-scale commodity production. Not only that,

but during the first years of the 21st century, real money trading adopted the final features that are typical of late-phase capitalism (Porter, 1980): wage labor, off shoring and automation. Wage labor refers to the fact that the activity takes place in a formal, organized arrangement in which entrepreneurs employ workers that do not own the means of production (PC, software and account) to farm gold on their behalf and later sell the virtual commodities for real world profit. Off shoring means that the practice migrated to low-wage locations in East Asia – and China in particular – due to the obvious reason that labor cost represents by far the largest cost component of gold farming. And finally, automation refers to the cutting of time and financial costs by use of bots that can imitate the actions of real players and can be used for gathering of some in-game items and currency (Kushner, 2007). At least in theory, the virtual economy seems to be capitalist but whether this makes it normal, moral or at least acceptable is rather subjective. Concerning the game companies, their response to real money trading has also been ambivalent and there are two types of game developers: the ones that strongly oppose real money trading and prohibit it through their games EULA (End User License Agreement) and the ones that incorporated virtual commerce into their game’s structure, realizing that not only the efforts to ban this practice are useless, time and money consuming but the practice is actually profitable. There is no doubt it is a profitable practice but whether it is a good, sound business practice, it is rather difficult to say in my opinion because I do not know if it is really ethical to sell “nothing”, regardless whether people are willing to buy it or not. All things considered, the most worrying aspect related to the virtual economy as a whole is that people nowadays fail to tell the difference between the real and the virtual. They engage in a trade already worth several billions of dollars in which they are giving up real, earned money for basically nothing: pixels on a screen. Regardless of people’s financial possibilities or welfare state, they are still buying things that do not actually exist and this fact that cannot be considered normal.

VI. C o n c l u s i o n s

The control and power seem to be shifting more and more towards computers and virtual worlds and I just cannot help but wonder: Is humankind going to be led by computers? I know I am not the first one raising this question and this is precisely what worries me the most. Even though it is a fact that we are becoming increasingly dependent on computers, the natural response to this question would be to say no because it is precisely humankind the one that creates and programs the computers. But we might be creating something that is on the verge of going out of control, something we just cannot keep pace with, nor fully understand. An overwhelming piece of proof is precisely the thing that humankind is not yet prepared to handle and regulate the virtual economy and all the issues that come along with the evolution of virtual worlds. However, I think it may all come down to quality management because the main problem in this case is the fact that these games severely lack the quality of preventing a “side effect” their developers or producers do not approve, namely secondary RMT. The game developers did not actually consider all the consequences, possible impacts or opportunities their products created, and this is how an uncontrollable black market and sweatshop industry have emerged. Although this subject has only been tackled with and there remains further research to be undertaken, my conclusion and the response to the stated research question is that virtual currency trading is a foe. Not only that it seems to me some kind of evolution towards science fiction, but the negative aspects related to it outweigh the positive aspects and it can seriously affect the real world financial system. It raises too much problems and unforeseen implications so that it cannot be fully understood nor controlled at the present time.

VII. References

• Bartle, Richard A. (2004). Pitfalls of Virtual Property, The Themis Group, published in April 2004, last accessed at 3 February 2010. http://www.themis-group.com/uploads/Pitfalls%20of%20Virtual%20Property.pdf • Bernstein, H. (1983). Third world economies: Diversity and integration. Milton Keynes: Open University, found in Heeks, R. 2010. Understanding “Gold Farming” and Real-Money Trading as the Intersection of Real and Virtual Economies, Journal of Virtual Worlds Research. • Castronova, E., Williams, D., Shen, C., Ratan, R., Xiong, L, Yuang, Y. & Keegan, B. (2009). As real as real? Macroeconomic behavior in a large-scale virtual world. New Media & Society, volume 11, number 5, published at 30 July 2009, last accessed at 3 February 2011. http://dmitriwilliams.com/EconVW.pdf • Heeks, R. (2008). Current Analysis and Future Research Agenda on “Gold Farming”: Real-World Production in Developing Countries for the Virtual Economies of Online Games. IDPM Development Informatics Working Paper no.32. University of Manchester, UK, last accessed at 3 February 2010. http://www.sed.manchester.ac.uk/idpm/research/publications/wp/di/index.htm • Heeks, R. (2010). Understanding “Gold Farming” and Real-Money Trading as the Intersection of Real and Virtual Economies, Journal of Virtual Worlds Research, Volume 2, Number 4 Virtual Economies, Virtual Goods and Services Delivery in Virtual Worlds, Virtual Worlds Institutes, Inc. Austin, Texas, USA, published in February 2010, last accessed at 3 February 2010. http://jvwresearch.org/page/volume_2_ number_4_virtual_economies_virtual_goods_and_service_delivery_in_virtual_worlds • Hunter, D. (2006). The early history of real money trades. TerraNova, published at 13 January 2006, last accessed at 3 February, 2011. http://terranova.blogs.com/terra_nova/2006/01/the_early_histo.html • Keegan, B., Ahmad, M. A., Williams, D., Srivastava, J., Contractor, N. (2010) Dark Gold: Statistical Properties of Clandestine Networks in Massively-Muliplayer Online Games, IEEE Social Computing Conference (SocialCom-10) Minneapolis, MN, USA, August 20-22, 2010. • Kroszner, R., Indiviglio, D., Castronova, E. (2009). Is virtual currency a real problem? The Atlantic, published at 1 July 2009, last accessed at 3 February 2011. http://www.theatlantic.com/business/archive/2009/07/is-virtual-currency-a-real-problem/20485/ • Kushner, D. (2007). Playing dirty. IEEE Spectrum. 44(12). Dec, 32-37 • Lehtiniemi, T. (2007). How big is the RMT market anyway? Virtual Economic Research Network, published at 2 March 2007, last accessed at 3 February 2010. http://virtual-economy.org/blog/how_big_is_the_rmt_market_anyw • Porter, M.E. (1980). Competitive Strategy, New York: The Free Press, found in Heeks, R. (2010), Understanding “Gold Farming” and Real-Money Trading as the Intersection of Real and Virtual Economies, Journal of Virtual Worlds Research. • Ryan, N. (2009). Gold trading exposed: the sellers. EuroGamer, published at 25 March 2009, last accessed at 3 February 2011.


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Photographing the relationship between corporate culture and implementation of quality practices By Andreea-Dora Mag mag.andreea@gmail.com

Abstract

This research paper investigates how different types of corporate culture have an influence upon the successful implementation of quality improvement methods, in particular Total Quality Management and Six Sigma practices. Starting from the definitions comprised by the specialized literature and Quinn’s Competing Values Framework, we have illustrated the direct relationship that exists between organizational culture and quality practices and possible reasons for it. The conclusions drawn include some brief observations regarding the directions in which the topic of this paper can be extended in order to obtain more precise results with practical applicability as well as some limits of the premises assumed.

Keywords

Total Quality Management, Six Sigma, Corporate Culture JEL classification: M14

1. Background

The literature of every field of activity contains terms which specialists have tried to explain and use in further researches. However, actual results arise from establishing connections between such terms and try to find practical implementations. The topic of this research paper is related to quality, and in particular to Total Quality Management and Six Sigma and how their practices are influenced by corporate culture. The paper will summarize the most frequent definitions of the terms used and an attempt to illustrate the link between the types of corporate culture and the successful implementation of Total Quality Management and Six Sigma practices towards building organizational excellence. To support the theoretic approach, a practical example consisting of an illustration upon a multinational company will be presented.

2. Foreground

Quality, apparently a common word, is actually rather confusing. If you select a sample of managers and ask them to define quality, several answers may occur such as: perfection, consistency, eliminating waste, speed of delivery, compliances with policies and procedures, providing a good, usable product, doing it right the first time, delighting or pleasing the customers or total customer service and satisfac-

tion. As it seems, the larger is the number of respondents, the greater is the variety of answers. That is why, there are several perspectives from which quality can be viewed in order to completely understand its role and importance: judgmental, product-based, user-based, value-based and manufacturing-based (Evans & Lindsay, 2008). If we combine all these perspectives and extend this concept in the management field, the term of quality management is obtained. The latter is considered to have the following three dimensions: quality control, quality assurance and quality improvement. The third, quality improvement can be achieved by using several instruments. From these we can mention ISO standards, Kaizen (continuous improvement, Six Sigma, PDAC (Plan-Do-Act-Check), lean manufacturing, Business Process Reengineering and Total Quality Management. TQM as it is often abbreviated means that the organization’s culture is defined and supports the constant attainment of customer satisfaction through an integrated system of tools, techniques and training. This involves the continuous improvement of organizational processes, resulting in high quality products and services (Sashkin & Kiser, 1993). Seven of the most important tools and techniques are: top management support, customer relationship, supplier relationship, workforce management, quality information, product/service design and process management (Zu, Robbins et al, 2008). (Appendix a) Six Sigma is a new approach to quality management (Kumar, No-

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wicki et al, 2008) and can be defined as “an organized and systematic method for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in customer defined defect rates” (Linderman, Schroeder et al, 2003). Zu et al (2008) has identified three distinct essential practices in order to implement Six Sigma principles and methods. These are: Six Sigma role structure, Six Sigma structured improvement procedure and Six Sigma focus on metrics. (Appendix b) Another concept would be corporate culture which Schein (1985) defined as “a pattern of basic assumptions – invented, discovered or developed by a given group as it learns to cope with its problems of external adoption and internal integration – that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems”. Quinn (1988) has developed the Competing Values Framework which explores the deep structures of organizational culture relating to compliance, motives, leadership, decision making, effectiveness and organizational forms in the organization.

Competing Values Framework (Quinn) The vertical axe shows the extent to which an organization focuses on change and stability, whereas the horizontal axe reflects the interest for the internal organization and external environment. However, this model illustrates an ideal situation because organizations usually exhibit a combination of different culture types. Researchers have widely agreed that organizational culture is an essential ingredient for a successful implementation of TQM and Six Sigma practices. Thus, having as a starting point the definitions presented above and Quinn’s CVF model, we will further analyze the relationship between corporate culture and quality management. The group culture comprises values such as belonging, trust and participation, orientating its strategies toward developing human relationships. It is characterized by teamwork and consensus, and the leaders tend to be supportive, encourage empowerment and show concern for employees’ ideas. With emphasis on commitment and cooperation, the group culture is related to seven of the ten practices. This is due to the fact that the implementation of all these practices requires an organizational environment that encourages open communication and employee involvement to facilitate changes and provide resources necessary for continuous improvement (Beer, 2003). In such supportive environments, employTable 1 Flexibility & Spontaneity Group culture Developmental culture

Internal focus Integration

Participation Teamwork Facilitator-type leader People, commitment

Creativity Flexibility Entrepreneurship-type leader Innovation, new resources

Centralization Order Administer-type leader Regulation, control

Efficiency Task focus Achievement-type leader Goal orientation, competition

Hierarchical culture Control & Stability

Rational culture

&

External focus Competitiveness

&

4. References • • • •

Beer, M. (2003). Why total quality management programs do not persist: the role of management quality and implications for leading a TQM transformation. Decision Sciences, 34, pp. 623-642. Dean, H.W., Bowen, D.E. (1994). Management theory and total quality: improving research and practice through theory development. Academy of Management Review, 19 (3), pp. 392-418. Evans, J.R., Lindsay, W.M. (2008). The Management and control of quality. (7th edition). Mason: Thomson South-Western. Kumar, U.D., Nowicki, D., Ramirez-Marquez, J.E., Verma, D. (2008). On the optimal selection of process alternatives in a Six Sigma implementation. International Journal Production Economics, 111, pp. 456-467. • Linderman, K., Schroeder, R.G., Zaheer, S., Choo, A.S. (2003). Six Sigma: a goal-theoretic perspective. Journal of Operations Management, 21, pp. 193-203. • Quinn, R.E. (1988). Beyond rational management: Mastering the paradoxes and competing demands of high performance. San Francisco: Jossey-Bass Publishers. • Sashkin, M., Kiser, K.J. (1993). Putting total quality management at work: what TQM means, How to Use It & How to Sustain it Over the Long Run. San Francisco: Berrett-Koehler Publishers Inc. • Schein, E.H. (1985). Organizational culture and leadership: a dynamic view. San Francisco: Jossey-Bass Publishers. • Schroeder, R.G., Linderman, K., Liedtke, C., Choo, A.S. (2008). Six Sigma: definition and underlying theory. Journal of Operations Management, 26 (4), pp. 536-554. • Zu, X., Fredendall, L.D., Douglas, T.J. (2008). The evolving theory of quality management: the role of Six Sigma. Journal of Operations Management, 26 (5), pp. 630-650. • Zu, X., Robbins, T.L., Fredendall, L.D. (2008). Mapping the critical links between organizational culture and TQM/Six Sigma practices. International Journal Production Economics, 123, pp. 86-106. 5. Appendices Quality practices Description a. TQM Top management support Top management accepts responsibility for quality and is evaluated based on quality performance. Top management participates in quality improvement efforts and makes strategies and goals for quality improvement. Customer Relationship Customer needs and expectations are assessed. Customers are involved in quality improvement projects. Customer satisfaction is measured. There is a close contact with key customers. Supplier relationship A small number of suppliers are used. Suppliers are involved in product development and quality improvement projects. Suppliers are evaluated based on quality. The organization provides suppliers training and technical assistance. Workforce management Employees are involved in quality decisions. Employees are evaluated based on their quality performance and their contributions to quality are recognized and rewarded. Managers encourage team work. There is training on Quality Management for both managers and employees. Quality information Quality data are available to managers and employees. There is an effort to collect timely quality data which are used for improvement. Product/service design There is thorough review before production. Design teams involve people from different functions. Process management There is an emphasis on mistake-proof process design. There is consistent use of statistical process control and preventive maintenance. Managers and employees make efforts to meet schedules. b. Six Sigma Six Sigma role structure The organization uses a group of improvement specialists who are developed through Six Sigma training and certification programs. The improvement specialists are classified with different ranks based on their expertise. The specialists are assigned with specific leadership roles and responsibilities in improvement teams. Six Sigma structured improvement procedure There is an emphasis on following a standardized procedure in planning and conducting improvement projects. Teams apply the appropriate Quality Management tools and techniques as prescribed in each step of the structured procedure. Six Sigma focus on metrics Quantitative metrics are used to measure process performance and product quality performance and to set improvement goals. Business-level performance measures and customer expectations are integrated with process-level performance measures.

ees are encouraged to participate in continuous improvement teams and are rewarded for their contribution to better quality. The developmental culture can be seen in strategies such as innovation, resource acquisition and the development of a new market. In organizations which display such a culture, the belief in external adaptation and development of flexibility and diversity leads to understanding customer needs and market requirements. This type of culture is related to the implementation of Six Sigma role structure due to the individuality value promoted. Depending on each task, different roles and responsibilities are assigned to the Six Sigma specialists based on their expertise (Linderman, Schroeder et al, 2003). The tolerance for flexibility can be illustrated by the tendency to shift power among teams in function of the problem addressed. Hence, it is easier to organize Six Sigma teams based on tasks (Schroeder, Linderman et al, 2008). The rational culture emphasizes competitiveness and goal orientation. Leaders are tough and demanding and tend to develop clear objectives and aggressive strategies in order to drive practices and behavior to productivity and profitability. This type of culture has an influence upon nine of the ten practices due to the fact that, on the one hand, the emphasis on productivity and achievement, with clearly defined objectives is compatible with Six Sigma practices, and on the other hand, efficiency and profit orientation are conducive to TQM practices that focus on achieving superior quality and competitiveness (Dean & Bowen, 1994). The hierarchical culture is characterized by uniformity, internal efficiency and a close adherence to rules and regulations. It is an environment in which pursues stability, error detection and management. This type of culture does not have any kind of influence upon the successful implementation of TQM/Six Sigma practices due to its internal focus and emphasis on control and stability.

3. Frame

The current analysis had as a premise the fact that the corporate culture of an organization must support the implementation of TQM/Six Sigma practices. Starting from this point, the four ideal types of organizational culture identified by Quinn have been reviewed and connected to the seven Total Quality Management practices and respectively, three Six Sigma practices (Appendices a, b). There have been noticed that three of them (group, rational and developmental culture) influence to a certain extent the successful implementation of these practices. However, several aspects have to be taken into consideration. Firstly, it may happen that attempting to implement these quality practices will alter the existing organizational culture. In this case, the research question is reversed and the subject of analysis becomes totally different. Secondly, reality can differ from theory. This perspective proves the fact that organizations do not have a pure type of corporate culture, but a mix of the four. This is why, any research which establishes a strict boundary between the four categories of cultures is purely theoretical and hence, its results cannot be implemented as such. Thirdly, in order to obtain precise results with practical applicability, a study of larger proportions should be conducted, using both quantitative and qualitative data from a representative sample of organizations. In my opinion, precise proportions in which the four different types of corporate culture can be combined in order to guarantee success do not exist. However, I believe that a successful implementation of such practices requires the involvement and the commitment of all the people from the organization, accompanied by leadership from the factors of decision. If I were to take an example, I would say that from the experience I have gained working in a FMCG company, the corporate culture should be a combination between group, developmental and rational cultures. A strong emphasis on people, flexibility, innovation and efficiency should not be absent when transforming an idea into reality. This parent company of the one in question is Japanese and I believe this aspect has to be taken into consideration when assessing the type of corporate culture. Moreover, the input nationals in each country, in this case Romania, bring blends within the culture factor.


Facebook Effect By Ana Maria Stoica

arc_en_ciel0108@yahoo.com

Abstract

This research paper is intended to understand the effects that Facebook, the social networking site has upon us, whether it influences our lives in a good or in a bad way. In order to understand the Facebook Effect we are trying to see how it impacts our lives at economic level,social level, political level, terminology level , psychological level and cultural level . Starting from the question : “What does Facebook want?” we found several answers consisting in pros and cons of this phenomenon , which should help us decide our position regarding Facebook importance in our lives and finally to decide whether or not we want/ need it.

Keywords: Facebook, social network, effect JEL classification: L82, L86

I. What is Facebook ?

In an era in which the technology took control of every single pieces of our universe, an era in which we use computers for everything, an era in which leisure time means spending time in front of your computer and playing games or developing your social life on a certain network, the only solution left to those skeptical regarding technology is to try to adapt to all these changes and to try to include them in our lives because there is no other away around. It is quite difficult if not impossible to try to stay away from all what technology means, try not to be affected by all these rapid-changing trends and to take the necessary time to decide which is helpful for you or by contrary which is harmful. In this category of technology-related items we can include the new revolution of the Internet: Facebook . Facebook is a social network service or “social utility” (as Mark Zuckerberg ,the founder, likes to call it) launched in February 2004, where users may create a personal profile, add other users as friends and exchange messages, including automatic notifications when they update their profile, they may join common interest user groups, organized by workplace, school, or college, or other characteristics. (Zuckerberg, 2007) Even from its first day of entering the market it was a huge success and all its evolution led to numbers hardly to imagine that beat his older competitors’ results . ‘How did he do that?’, ‘What does it have so special?’ and ‘What does Facebook want?’ ‘Do we need it? ’ , those are the questions that arise in my mind when I think about the usefulness and the purpose of it . “What does Facebook Want ?” and by this I’m not referring wheather it wants vanilla or chocolate ,by this I’m referring to the impact that Facebook has upon us, how Facebook succeeded to change in a certain measure our lives and the measure in which it still continues to influence our habits and ways of interacting with others.

II. What does Facebook Want?

1.To attract more users and revenues (economic impact) “The Facebook” ,how it was initially called , has been a great success since its first 24 hours of existence ,when over 1200 Harvard students had signed up , and after one month, over half of the undergraduate population had a profile. This was only the beginning of the Facebook phenomena. Since then Facebook wrote pages of history: in January 2009 Facebook became the most visited social networking site with 1,191,373,339 monthly visits (according to compete.com), on March 13, 2010 more people visited Facebook then Google, since July 2010 and the most important issue is that Facebook has more than 500 million active users (Zuckerberg,2010). Thanks to its dedica`ted “fans”, Facebook increased its revenues from $52 million in 2006 to $1,100 milion in 2010 in a period in which most companies encountered big difficulties due to the financial crises. (Rosseti, F. , 2010 )We shouldn’t forget neither the founder of the Facebook : Mark Elliot Zuckerberg which is tied in 35th place on the list of 400 richest people in the United States of America after seeing his wealth grow 245 percent to $6.9 billion.(Unchime, 2010) 2. To enter in our lives (social impact) Facebook team defined their mission as : “Giving people the power to share and make the world more open and connected”, meaning that using this social utility people can be closer to their friends by sharing photos, impressions ,messages. In a certain measure they succeeded this and as a proof we have all the stories told on Facebook Stories which are sent by people that their lives have been influenced by the use of Facebook. One of the greatest story is that of a woman who had her Facebook photo stolen and used as advertising in the Czech Repub-


t

lic. (Murano, 2009). The woman posted on her Facebook account a picture with her family (husband , her daughter and her son) , but when she did that she had never imagined that one of her friends would use the image without any authorization to advertise a food store in Prague, the Czech Republic. Mario Bertuccio , the owner of the company, declared that he took the picture from a site and that he never thought that the picture belonged to a real family. Another interesting story that can be found on Facebook Stories is that of a groom who updated his Facebook status at the altar during his wedding . Before kissing the bride, Dana Hanna, a Software Developer took his cellphone and updated his relationship status on Facebook and Twitter. He also handed one over to his new wife to do the same. (Murano,2009). 3.To debate upon politics (political impact) The fact that there is no boundary that Facebook cannot cross is sustained by the way in which this social networking site succeeds to appear everywhere, even on the political stage of America, as a way of attracting people debating on several issues related to politics. Before 2008 , the presidential election, ABC News and Facebook launched an online political initiative that combines the latest news form the campaign trail with a variety of discussion and interactive forums. “The goal is to extend the debate from being a one-hour session that happens on television to a dialogue that can take place before, after and now during the debate between voters,” sustains Dan Rose, Facebook’s vice president of business development. The partnership between these two : ABC News and Facebook is intended to attract users that would like to debate upon campaign issues , upon opinions of fellow users on key topics, upon different promises that candidates are doing during their campaigns , etc and in this way to facilitate and make it easier to understand what happens on the political stage. ABC News comes with the editorial content and Facebook with the appropriate technology and these 2 elements should make the perfect “furniture” for a place where people can find “a very special and different environment for political discourse and debate among people who know each other and follow one another”. (Ofiicial website of ABCnews ,2007) 4.To change our vocabulary (terminological impact) Another area where Facebook lets felt his presence is the terminology area. By 2005 , people using Facebook were already familiar with the meaning of the verb ‘facebooking’ that intended to describe the process of browsing others’ profiles or updating one’s own. The word “Facebook” has been added to the 2008 edition of the Collins English Dictionary as both a noun and a verb and in this way Facebook became the new Word of the Year .(DeLeo, 2007)So from now on we can for example say : ‘I can Facebook you now’ and it would be correct from grammatical point of view. But the Facebook impact doesn’t stop here and in December 2009 , New Oxford American Dictionary declared ‘unfriend ’ the Word of the Year and was defined as the action to remove someone as a ‘friend’ on a social networking site such as Facebook as in: ‘I decided to unfriend my roommate on Facebook after we had a fight.’ Christine Lindberg , Senior Lexicographer for Oxford U.S dictionary states that : “In the online social networking context, its meaning is understood , so its adoption as a modern verb form makes this an interesting choice for Word of the Year ”. Also at the decision of making ‘unfriend’ the Word of the Year contributed the fact that the word “has real lex-appeal”.

5.To read and watch the Facebook effect (cultural impact)

Facebook ’s success and the story behind it drew the attention of Ben Mezrich(an American New York Times Best Selling author from Princeton) who decided to write a book called ‘The Accidental Billionaires The Founding of Facebook : A Tale of Sex , Money, Genius and Betrayal’. Even though the book pretends to be a “nonfictionish” one , we cannot be 100% sure about this aspect, and our uncertainties will be sustained by the whole wild guessing process used by the author in order to understand how things happened. In order to gather realistic information concerning the process of creation of Facebook, behind his individual research , Mezrich asked information from Eduardo Saverin (cofounder of Facebook ) who is the main character of the book . First was Facebook , second was the book intended to present the

invention of Facebook and the next step is easily to be predicted: a movie. A movie called “ The Social Network “, directed by David Fincher based on writings of Ben Mezrich (author of the book ) and Aaron Sorkin,( author of the screenplay) (Official Site of Internet Movie Database, 2010). To this we add a distribution comprising : Jesse Eisenberg, Andrew Garfield and Justin Timberlake and a story about the site that keeps us hostile in front of our computers. All these are the ingredients the movie that won this year 4 Golden Globes out of 6 nominations and as far as the Oscar Awards are concerned we know that “The Social Network” is nominated at 8 categories. The Facebook phenomenon gained us first through the social networking site, second through the book and third through the movie , and I don’t say last because I don’t even know where else we will find Facebook in the future .

6. To make us Facebook dependent (psychological impact)

For an increasing number of people , the social networking site ,Facebook, became a real problem in the moment when they “moved” their entire life in virtual environment. Psychotherapists sustain that Facebook can create a dependence that can destroy the real life of the individual. Hilary Betts, a therapist from Great Britain defines the Facebook dependence as a “a form of media dependence and a form of compulsive online behavior ”. At the beginning of 2010 , American Psychiatry Association (A.P.A) announced 3 new forms of dependence which are to be introduced in the 5th edition of Diagnostic and Statistical Manual of Mental Disorders, through which we find also the Internet dependence , especially for Facebook , which has now more than 500 million members in the world. This type of social networking site allows a continuous form of communication , while the e-mail , for example is limited. The nature of the Facebook gives the user the impression that if he doesn’t access his Facebook account , he will loose important things and this gives him a sensation of frustration.

III.Do we need/want Facebook?

We have been branded ‘Facebook generation’ and I think this says a lot about us, about the way we choose to express ourselves , to interact with others and to live our lives. Facebook, same as technology, entered in every single piece of our universe and now it does whatever he want until another fancier trend will appear and we will become addicted to it. They wanted to give people the power to share and make the world more open and connected and they succeed to make us become dependent on this connection, dependent on knowing all the time what others are doing and dependent on posting the intimate details of our lives on full view to a global audience of tens of millions of people. We saw how Facebook makes us change our life style, how important can become for some of us, how much damage can bring to others and how can create dependency. We have to take into account all this minuses and pluses and after that we should decide whether or not we want Facebook in our life. We know that they want us ,but “Do we want them?” “What does Facebook want? ” is strictly connected with “Do we want Facebook?” because Facebook exists only because we make it possible.

References 1. Company’s blog , [Online] available at http://blog.facebook.com/blog.php?post=409753352130 [accessed on 06.11.2010] 2. Kazeniac, Andy. (2009). Social Networks: Facebook Takes Over Top Spot , Twitter Climbs , [Online] available at http://blog.compete.com/2009/02/09/facebookmyspace-twitter-social-network/ [accessed at 06.11.2010] 3. Locke, Laura. (2007). The Future of Facebook, [Online] available at http://www.time.com/time/business/article/0,8599,1644040,00.html [accessed at 04.11.2010] 4.Phillips, Sarah . (2007) . A Brief History of Facebook, [Online] available at http://www.guardian.co.uk/technology/2007/jul/25/media.newmedia [accessed at 01.11.2010] 5. Stanglin, Douglas.(2009). ‘Unfriend’ is new Oxford dictionary’s Word of the Year , [Online] available at http://content.usatoday.com/communities/ondeadline/ post/2009/11/unfriend-is-new-oxford-dictionarys-word-of-the-year-/1 [accessed at 08.11.2010] 6. Toma, Laura. (2009) . Pericolul din spatele Facebook , [Online] available at http://www.romanialibera.ro/exclusiv-rl/dosar/pericolul-din-spatele-facebook-195456. html [accessed at 20.11.2010] 7. Helt,Miguel. (2010) . Move over yahoo, google, hotmail; Facebook Message is here , [Online] available at http://www.theeastafrican.co.ke/business/-/2560/1057408/-/cdcl6lz/-/ [accessed at 15.11.2010] 8. Mcgirt, Ellen. (2007) . Facebook’s Mark Zuckerberg: Hacker. Dropout. CEO. , [Online] available at http://www.fastcompany.com/magazine/115/open_featureshacker-dropout-ceo.html [accessed at 05.11.2010] 9. Murano, Gracie. (2009) . 10 Unbelievable Facebook Stories , [Online] available at http://www.oddee.com/item_96910.aspx [accessed at 15.11.2010] 10. Nicole, Kristen. (2007). I Can So “Facebook” You Now (and be grammatically correct ) , [Online] available at http://mashable.com/2007/12/21/facebook-noun-verbcollins-english-dictionary/ [accessed at 15.11.2010] 11. Maslin, Jane. (2009) . Harvard Pals Grow Rich : Chronicling Facebook Without Face Time , [Online] available at http://www.nytimes.com/2009/07/20/ books/20maslin.html?_r=1 [accessed at 07.02.2011] 12. Ben Mezerich ‘s website, [Online] available at http://benmezrich.com/ [accessed at 05.02.2011] 13.Official Webiste of the Annual Golden Globe Awards, [Online] available at http://www.goldenglobes.org/nominations/ [accessed at 05.02.2011] 14. The Internet Movie Database Ofiicial Website , [Online] available at http://www.imdb.com/title/tt1285016/m [accessed at 05.02.2011] 15. Leskovit, Ali R.. (2010) . Ambition and Obsession Drive Fincher’s Flawless ‘Social Network ’ , [Online ] available at http://www.thecrimson.com/article/2010/9/30/ zuckerberg-facebook-social-movie/ [accessed at 05.02.2011] 16. Rosseti, F. .(2010) . Facebook Inc : Company Profiel , Information, History and Resources about Facebook.com [Online] available at http://www.thefreeresource. com/facebook-company-profile-information-history-and-resources-about-facebook-com [accessed at 07.11.2010] 17.Unchime, Success Kanyo . (2010) . Facebook Owner , Mark Zuckerberg , US 35th Richest Person ,[Online] available at http://www.allvoices.com/contributednews/6834396-facebook-owner-mark-zuckerberg-us-35th-richest-person [accessed at 07.11.2010] 18. Official website of ABCnews, [Online] available at http://abcnews.go.com/Technology/Politics/story?id=3899006&page=1 [accessed at 11.11.2010] 19. DeLeo , Jennifer. (2007) . Facebook to be Added to 2008 Collins English Dictionary , [Online] available at http://www.appscout.com/2007/12/facebook_to_be_added_to_2008_c.php [accessed at 11.11.2010]


CLOUD COMPUTING – OUT OF THE CLOUD ABSTRACT

by Ruxandra Dana Grebles

As with WEB 2.0 everything seems to be moving and changing with a fast pace and companies have to keep up by bringing new technology within their departments in order create a strong competitive advantage. That is why cloud computing is at the moment all the rage, “it’s become the phrase du jour” as Mr. Ben Ping , senior analyst at Gartner explains, echoing many of his peer. Being at an early stage of development there are speculations whether it is a good or a bad investment, but cloud computing is one of the key emerging trends for technologies today. New platforms, new providers and new opportunities abound. The strategic importance of information technology is diminishing as it becomes standardized and less expensive and the cloud computing paradigm shift is similar to the displacement of electricity generators by electricity grids early in the 20th century.

Key words: cloud, computing, cloud computing, web 2.0., IT, technology, cut costs, security, new, consulting, SaaS, green IT JEL classification: L86

INTRODUCTION

Cloud computing is a technology that uses the internet and central remote servers to maintain data and applications. Cloud computing allows consumers and businesses to use applications without installation and access their personal files at any computer with internet access. This technology allows for much more efficient computing by centralizing storage, memory, processing and bandwidth. As a metaphor for the Internet, “the cloud” is a familiar cliché, but when combined with “computing”, the meaning gets bigger and fuzzier. Some analysts and vendors define cloud computing narrowly as an updated version of utility computing: basically virtual servers available over the Internet. Others go very broad, arguing anything you consume outside the firewall is “in the cloud” including conventional outsourcing. This concept comes into focus only when you think about what IT always need: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. Cloud computing encompasses any subscription- based or pay-peruse service that, in real time over the Internet, extends IT’s capabilities. Cloud computing is broken down into three segments: “applications,” “platforms,” and “infrastructure.” Each segment serves a different purpose and offers different products for businesses and individuals around the world. In June 2009, a study conducted by VersionOne found that 41% of senior IT professionals actually don’t know what cloud computing is and two-thirds of senior finance professionals are confused by the concept, highlighting the young nature of the technology. A simple example of cloud computing is Yahoo email or Gmail. You don’t need software or a server to use them. All a consumer would need is just an internet connection and one can start sending emails. The server and email management software is all on the cloud (internet) and is totally managed by the cloud service provider like Yahoo, Google etc.

The consumer gets to use the software alone and enjoy the benefits. The analogy is: “If you only need milk, would you buy a cow ?” All the users or consumers need is to get the benefits of using the software or hardware of the computer like sending emails etc. Just to get this benefit (milk) why should a consumer buy a (cow) software /hardware? In the digital age, this new concept of cloud computing has the potential to revolutionize the way in which employees around the world interact and work with each other. But even if the economic advantages that cloud computing brings in a company are huge, these ultra-advanced servers face great barriers in Europe. Is this new technology another way to control and have access to inside information of companies in today’s globalized economic environment or a tool that will change everything we know about how to conduct a successful business?

ADVANTAGES OF CLOUD COMPUTING

Cloud computing has been the transition that most software platforms and services have made in the last few years which is driven by the cost savings, ease of upgrades, and the ability to scale. The cloud solutions come at hand because one can eliminate costs related to buying servers, software licenses, hosting, maintenance, highly specialized technical staff, all sorts of upgrades, annual subscriptions, etc. In Sept 2009, an Aberdeen Group study found that disciplined companies achieved on average an 18% reduction in their IT budget from cloud computing and a 16% reduction in data center power costs. According to New York Times the most costly investments in IT equipment and staff will be eliminated creating an ideal network with real time, not interrupted conversations between employees all over the world without the need of translators. A company only needs the final service and the cloud immediately offers


s

them this service. Every company or person has access to a computer and Internet services so everybody can benefit in an instance of cloud solutions. For example, Gmail allows you to have a memory storage of 25 GB emails, while an in house solution that will offer inferior performances would cost 3 or 4 times more per year. Let’s take for example an emerging small company that tries to develop in a highly competitive market where the multinational firms have all the control. The secret is this technology that allows these kinds of businesses to match the technical resources of the big players on the market, because the most advanced technologies in the world are without doubt available at the local level. The costs of using these services are insignificant. Whether we are talking about companies with 3 or 300 employees the ease of using these cloud services are immediate and the price will be directly proportional with the degree of usage.

Cloud Computing is divided in two categories:

1. SAAS – Software as a service This category allows users to access different applications without installing them on their own PC. (Example: Google Aps, Photoshop). The main advantage of his service is that the processed files can be saved online and accessed from anywhere which is crucial for the paperwork of companies that can access any files they need from all over the world. 2. HAAS – Hardware as a service As the name suggests it this is a service designed for hardware performances. With this we can buy processing power via Internet. The project developed by Amazon called EC2 – Elastic Compute Cloud is a relevant example here. This offers the opportunity to buy storage space or computing power which can also be accessed from anywhere using the Internet. Another advantage for this service is the fact that we can upgrade or downgrade the virtual system with a simple click. DISADVANTAGES OF CLOUD COMPUTING If you are going to move all of your information to data centers situated outside your company, then security should be of utmost importance. • Lost control comes with handing over your data and information • Depending on third-party to ensure the security and confidentiality of data and information • If your cloud host disappears, where does your information go? With Amazon moving into the cloud computing environment, everyone has access to what could be a major change in business intelligence. Amazon’s Elastic Compute Cloud is a dedicated, high performance, analytic database cluster that is open to businesses, on a pay-per-use scale, for a monthly fee. This sounds like an excellent business deal, if you are prepared to hand over your personal data and information. Moreover because documents, images and other information are no longer stored on the computer but online adds the risk for these to be accessed by other persons. Even if producers assure us that our data is perfectly safe there is no assurance for this. If we were to go further with the theft/copying/corruption of sensitive data we

could also think of “online mercenaries” paid by other companies or by secret services in order to spy or gather information about competitors. There are a few safety measures that we can take to feel more secure about our data like establishing a powerful alphanumeric password or using a program like TrueCrypt for encrypting data. The performance of the Cloud Computing model can also be affected by overloading the servers or limiting the bandwidth. Recently Amazon servers and even the gigantic infrastructure of Google have given signs of stress when providing web services for their business clients.

C O N C L U S I O N S

So the advantages are huge but there are also several downfalls that have to be considered when implementing such a technology in your company. Whether is the speed of data transfer or safety of information with a thorough investigation of the company’s situation one can take the best decision. As with all new technologies there are pros and cons regarding this subject but I truly believe that cloud computing is the future in international markets and in global businesses. The cost savings and continuous improvement in quality of cloud computing services make them very attractive resources, but consider the full cost of the software including disaster recovery costs and make sure that you are making the best decision for your business. If you are not comfortable with the solutions that are available or the companies that are providing it, then it would be worthwhile to keep those functions inhouse until your comfort level increases. There are enough tasks to keep you busy as a business owner without worrying about your core business applications failing. Choose wisely!

REFERENCES Eric Knorr, Galen Gruman, InfoWorld Media Group, september 2009, What cloud computing really means [special report]. Available at: <http://www.infoworld.com/d/cloud-computing/what-cloud-computing-really-means-031> [Accessed 20 October 2010] Aberdeen Group, 2009, Business Adoption of Cloud Computing. Available at: <http://www.aberdeen.com/Aberdeen-Library/6220/RA-cloud-computing-sustainability.aspx> [Accesed 21 October 2010]; Version One – Document Management & Imaging, June 2009, Cloud Confusion Amongst IT Professionals. Available at: < http://www.versionone.co.uk/news/cloud-of-confusion-amongst-it-professionals.php> [Accessed 21 October 2010] Florea, G., 2010, Dragos Manac: Piata romaneasca de cloud computing e la inceput, Hotnews [online]. Available at <http://economie.hotnews.ro/stiri-companii-6868996-dragos-manac-piata-romaneasca-cloud-computing-inceput.htm> [Accessed 20 October 2010] Pop, A.L., 2008, In trend: Cloud Computing, go4it!.ro [online]. Available at <http://www.go4it.ro/curiozitati/in-trend-cloud-computing-3122528/> [Accessed 19 October 2010]


Quality Assessment and Management In Educational Systems Japan vs. Romania

By Madalina-Nicoleta Cazan

Abstract:

The present paper tries to encompass some of the differences of the two educational systems, the Japanese one and our own Romanian system, but pointing our common ground as well, in regards to quality assessment, problems and quality management. The focus is on how international bodies perceive the quality of our educational systems and what conclusions regarding some of our problems can be drawn from their findings. And, even though the comparison may be sometimes unfair, it can very well pin point some of the options we have in the course of our educational system reforms and some solutions we can consider in the future. Focusing attention on individuality and creativity, on motivation rather than simple organizational technicalities might prove to be more efficient in both short and long run , given that studies have shown that relatively low improvement in labor force skills have a great impact on the future economic growth of a country.

Keywords : Quality assessment, Quality management, educational system, Japan, Romania JEL classification: I21, I23


Introduction Learning is a continuous process throughout our live and we are becoming more and more concerned with the quality of our education. Neither of the subjects, quality assessment and quality management is unheard of in the educational systems all across the world. But every country deals with them in their own way. Now, my question is, what do 2 very different educational systems such as the Romanian one and the Japanese one have in common with regards to quality assessment and management? Can we learn a lesson from them and the so obvious differences between the 2 educational systems? But when talking about quality in education I strongly believe there are 2 perspectives: the quality of knowledge received, thus the ability of the educational system to transmit the necessary knowledge and aid students in obtaining the necessary competences, and the perceived quality, quality from the point of view of the ones at the receiving end of the educational process. In this paper we turn our attention to the quality of the educational system as perceived by the ones involved in providing it as well as those that have as a task to manage it. Japanese vs. Romanian educational systems The 2 educational systems are very different in the way they are organized as well as from the point of view of the principles that guide their functioning. While the Romanian system is organized in such way that the compulsory education ends when the pupil is around 16 years old (until 10th grade, but with discussions to reduce it to 9 grades), in Japan people start at the same age of 3 the kindergarten cycle, but having a compulsory education which ends when the pupil is about 15 years old. There are other significant differences in organizing the classes and the school activities as a whole: Romanian students start classes at 8:00 in the morning and they end it depending on the class and the educational institution at 2 or 3 o’clock in the afternoon, as opposed to Japanese students that start at 8:30 in the morning and leave at around 3:50 in the afternoon, but spend about 2 hours of this time cleaning the classrooms, the hallways or having lunch. This points us to certain principles that the Japanese educational system teaches its students that are not so inherent in our own system. By teaching students to clean classrooms and hallways they learn different chores and the importance of a safe and clean environment, and by providing them with a free hour for lunch, they emphasize the need for a healthy diet and the need of respecting meal times. Even though the Japanese educational systems does not focus only on competences as the Romanian one, but has as purpose nurturing the soul, what Japanese people call “kokoro”, a strive to provide equality can be seen in both educational systems. All these differences, combined with the fact that for non-compulsory education in Japan(meaning high school and university) students tend to choose private educational institutions rather than public ones because they are seen as offering more of an individualized program and higher quality level, point out that the way the two systems work is entirely different, especially from quality point of view , as Romanian students tend to consider public schooling as an option for both high school and university since it is still considered to be the most efficient. The PISA 2000+ project Now that we have an overview about what makes our educational system so very different from the Japanese one, let’s go back to our main subject, that is quality, and talk about quality assessment and what these 2 systems have in common. International organizations often tackle with the subject by organizing surveys in order to assess and compare countries based on the educational system output, the knowledge they need to transmit to the students. One of these types of projects is the PISA project, the Program for International Student Assessment administered by OECD (Organization for Economic Co-operation and Development). The program started in year 2000 and takes place once every 3 years when a two-hours test assessing knowledge in mathematics, science and reading are given to students, along with 30-minutes questionnaires. The target is 15-year olds, as in the majority of the systems they are in their last year of middle school and compulsory education as well. The first round of the project took place in 2000 and had as participants 43 countries. Since then the number of countries that participate every 3 years in the survey has risen to 57 in 2006 and 63 in 2009. At least 150 schools are selected from each country. Because results from the latest survey will only be available in December this year, we’ll work with data from the previous years in order to present certain conclusions. As seen in Table 1, the differences in scores between Japan and Romania are highly significant in the 2006 survey, Japan managing an average score of 531 in science, 498 in reading and 523 in mathematics, while the OECD average was 500 in science, 492 in reading and 498 in mathematics. Romania on the other hand seems to be below the OECD averages in every aspect, having scores such as 418 in science, 396 in reading and 415 in mathematics. Given the results, we can conclude that the study findings point out to a below-average performance in terms of knowledge quality in the Romanian educational system. Another finding of the program indicates the heterogeneity of the educational system that has to educate a large number of different students by using the same means. In Romania the between-school variation for science is of 48.3 % , while in Japan the score is of 48.5 %, concluding that there is still a long way from achieving equality and homogeneity in both educational systems. We can therefore see problems that belong to both educational systems, but also particular findings regarding quality in our own educational system, which seems to need improvement.


Table 1 PISA 2006 results for 15-year olds performance in science, reading and mathematics

Quality management and the future

As far as managing quality in the educational systems is concerned, I highly appreciate the Japanese approach, which I will try to explain and which I would like to see adopted and adapted in the Romanian system as well. The Japanese system has made as many reforms as needed to ensure quality in the public educational system, given that the private one is not under their jurisdiction entirely. And, seeing a real problem in the quality students and their family perceive, the increasingly diversified student body of each school and the need to fulfill different needs that comes with this diversification, they decided to adopt in 2001 a new public school system starting from 2004, inspired by the small-school movement in the U.S. This movement focuses on transforming each school by paying attention to needs and to the full potential of the school. By approving to test this hypothesis in actual schools throughout Japan following 2004, and then create an appropriate model to ensure that a new qualitative and innovative educational system is set in motion, one that allows individuality and creativity and that motivates the student throughout the learning process, the Japanese reforms in terms of policy in quality management seem to be headed in a new direction.

Conclusion

Both educational systems have in common not only projects to assess quality, but also problems that are present and will take greater proportions in the future in lack of appropriate measures. Both systems are different and there are yet many more reforms we need to do to bring our educational system to the standards of the quality we like to pride ourselves in having, but how we are going to get there is yet uncertain. What we can do, in my opinion, is look around us, to similar systems or apparently very different ones, that share our problems and see how they cope and deal with such situations. We need to observe how they manage to improve or keep the quality of their educational systems, how they prevent or counter-attack problems that we seem to have in common, and not just copy solutions, as we have up until now, but try to determine which idea is worth adapting in our own educational system, based on our principles and our way of organization. I believe in the need to keep reforming, but beyond salary cuts and organizational aspects, keeping in mind that we need a system that works on principles, on quality, that is not change resistant, but easily adaptable, that focuses not only on competences, but on values such as individuality and creativity and many others more that seem to be forgotten in present times.

References: Okamoto, Kaoru,2001, Education of the Rising Sun 21- An introduction to Education in Japan- , NFSE, Tokyo Kurosaki, Isao, 2002, ‘Transformations in Japanese Education Policy for Quality Management ‘, Zeitschrift für Erziehungswissenschaft, vol. 5, no. 4, pages 584-597, viewed 15 October 2010 < http://www.springerlink.com/content/q2u8515l785r3228/> Sui-Chu Ho, Esther, 2010, ‘Assessing the Quality and Equality of Hong Kong basic education results from PISA 2000+ to PISA 2006’, Frontiers of Education in China, vol. 5, no. 2, pages 238-257, viewed 15 October 2010 , < http://www. springerlink.com/content/387143666214hj32/> http://www.oecd.org/department/0,3355,en_2649_35845621_1_1_1_1_1,00.html accessed on 15 October 2010


“What if I hadn’t chosen Business Administration?”

By Ruxandra Ionescu E-mail: rux_021@yahoo.com


ABSTRACT:

This paper is meant to provide the necessary information for a proper alimentation of daydreaming for the ones that had an alternative aspiration and failed to reach it. I dared to present the most fortunate cases of becoming a doctor, a lawyer, a fashion designer or choosing an acting or engineering career. The purpose of this article is to prove the fact that an Economics Bachelor Degree doesn’t automatically come with a Billion dollar fortune and also, choosing a career in Medicine, doesn’t necessarily mean that you will end up impoverished. Essential should be the passion for your work and finances will grow on you naturally. Fewer people in today’s world have the courage to follow the career they most desire and this is a downturn for our economy because it drastically decreases its general yield.

KEY WORDS: Business Administration, Career, Bill Gates, Carlos Slim, Fortune JEL classification: L82

1. Introduction

It is said that the highest aim of the 21st century business is to fully know your customer. We are taught that at almost every discipline, in the Business Administration course. Another living proof of redundancy is SWOT analysis, but this doesn’t have any relevance to our subject. My question, as a student, is: Does the company, in this case the Business School, know, in a thorough way, its customer? How much can a Business School penetrate the minds of students without discovering disturbing facts? Such as: What is the percent of students for whom Business was the first choice? How many of its students go to Business School because their sole purpose was to work in a bank, or as an accountant? I believe the company would be pretty disappointed. Just like a wise wealthy old man that realizes that his beautiful young wife didn’t marry him just because she

admired his vast amount of knowledge. Apparently money is one of the main reasons most of the Business School’s students study here. They got a grip of how society works and how money represents the blood that flows through its vessels and decided that they will make up their mind later in life when choosing their career. A Business School is basically the college that hosts the largest amount of undecided students. But what about the ones that had a calling and followed it in studying engineering, medicine, music and so on? This research paper is meant to answer the question “What if I hadn’t chosen Business Administration?”. It will do that by displaying the most famous and successful cases of alternative careers that lead to generating profits of Billions of dollars. Engineers, doctors, musicians that followed a dream and turned it into gold by becoming the wealthiest people in the world.

through Cascade Investments. Harvard decided to give him an honorary degree in 2007 when he held a speech at the commencement ceremony. When it comes to investing, Bill Gates may be a harsh judge but the billionaire has recently shown a soft side. ” Selling charity raffle tickets is hard; coaxing tycoons to pledge half their fortunes to philanthropy is near impossible. Apparently no one told Gates. This year the Microsoft mogul, futurist and America’s richest person strong-armed (with help from henchman Warren Buffett) 40 of the world’s wealthiest to sign his “Giving Pledge,” promising to donate the majority of their wealth to charity during their lifetimes. No longer the planet’s richest person, but that’s because he’s given nearly $30 billion philanthropically. World’s most influential charity tackles AIDS, tuberculosis, polio and funds famine-resistant crops to fight hunger. “(Forbes Magazine, 2010)

2. The engineer 3. The Sportsman The unwritten rivalry between Engineers and Economists probably has its time origins close to invention of the wheel. People that study in these particular fields are usually antagonistic creatures that mostly agree to disagree. There was one man that managed to combine them, the God of all the Economists…is an engineer. His fortune is estimated in 2010 at $53.5 Billion. The wealthiest person in the world, according to Forbes magazine has a degree in engineering. Carlos Slim is a Mexican with Lebanese origins. He earned his money by owning stocks and being in the Board of Directors in Altria (former Philip Morris), Alcatel, Telmex and America Movil. He also acquired a large amount of stock in Apple Computers( about 3%) just before its share price skyrocketed when introducing the iMac line. He recently announced his intention to buy Honda Formula One team. Speak about impulse buying. “His biggest loser was his stake in the New York Times, down 21%. His best-performing foreign holding was department-store chain Saks, up 64%, according to Bloomberg.Of course, it helps to have Slim’s overwhelming power and market share in Mexico, which is hard to replicate in many other countries.Yet his investing gains in 2010 may hold a lesson for the U.S. rich: that they really need to increase their investment exposure to markets abroad.”(Forbes Magazine, 2010) In second place, the man that every single one of Hefner’s bunnies secretly wants to marry, Henry Gates III, simply known as Bill Gates. The most accessible Billionaire constantly exposes himself to the public because he represents the image of Microsoft. With an estimated fortune, in 2010, of $53.0 Billion, Bill Gates proudly represents the American Dream, dropping out of Harvard and starting its own business, the classical entrepreneur should have been an engineer. At the moment he owns only 8 percent of its usedto-be small business, and still remains the largest individual shareholder. He is a chairman at Microsoft and a CEO for Cascade Investments which owns stocks in well-known companies such as Coca-Cola(20%-stake), Four Seasons Hotels and Resorts - 42.5 percent and Televisa. It is said that more than half of his fortune is held in assets

Targeting the male audience with this matter, sports are the last Mohican when it comes to showing off their muscles. There were times when testosterone wasn’t trapped by so many laws and regulations. Men could have started and ended a fight without being questioned by public authorities. Fencing in the 16th century, open weapon confrontations in the 19th century’s Wild West, the only public display of stamina and strength of the 21st century are sports. Fotbal, basketball, soccer, boxing are the most popular sports of our times. What about golf? It may not be a surprise but the richest sportsmen in the world, holding the front-page of any tabloid in the US is Tiger Woods. With an estimated net fortune of $500million, the golf player is the first sportsman predicted to become a Billionaire. Hopefully his divorce reported at $110 million won’t be that much of a drawback. Woods still keeps one top ranking with his spot as the world’s highest-paid athlete. Woods made $1.3 million in prize money this year which ranks 81st among all players around the world. Yet his income from appearances, golf course design and sponsors like EA Sports, Gillette, Nike and Upper Deck should hit $80 million in 2010. (Badenhausen, 2011). Woods launched his design business in 2006 and the Dubai course was his first project. The real estate development was to include 100 villas, 75 mansions, 22 palaces, a 360,000-squarefoot hotel, a golf academy and luxury shops. The project was a potential grand slam for Woods as his fee was expected to be $20 million plus a percentage of real estate sales. Now it looks finished. (Badenhausen, 2011 ) People don’t know if they should blame his failure on the scandals or on the recession. Either way, financing has become tight, and construction had to be halted. The moment is etched clearly in the mind. Argentina versus England in the World Cup, Sapporo, Japan, June 7, 2002. An unremarkable first half was winding down when Michael Owen was fouled in the penalty area. Instantly, you knew this was no normal penalty. At stake


was not merely England’s fortunes in the tournament--they desperately needed a win--but the career of their captain, their creative force and unarguably their biggest star; possibly, at that moment, the game’s biggest star. Other men might have quailed at the task. Not David Beckham. Up he stepped, placed the ball on the spot, did his customary shuffle and knocked the ball past Pablo Cavallero. Then he turned to his left and had his moment of catharsis: Clenched fists, primal scream. All around, in the press box, grown men--self included--whose job demanded neutrality and objectivity, did the same; Japanese, Koreans, even the ever-correct English. Amid all the emotion, one thought was clear: This could only happen with Beckham. (Jayaditya, 2010) The richest football player with an estimated fortune of 250 million, after signing a contract with Los Angeles Galaxy, is David Beckham. Having a former Spice Girl as his wife and 3 Louis Vuitton kids, he represents a brand and cheats the classical way of earning profits as a

6. The lawyer

4. The Doctor

sportsman by occasionally posing for Calvin Klein and Armani lingerie.

The trend when it comes to rich doctors is usually represented by plastic surgeons, but doctor 90210 has to “remodel” a big bunch of young ladies to top Thomas Frist. Forbes estimates his fortune at a value of $3.6bilion placing him on the 85th position in its famous top 400. Considering the fast pace of development of the BRIC countries was it just a charitable gesture to invest $120 million to start construction on a hospital in Cixi, China, 100 miles south of Shanghai with the Chinese government as a minority partner?

5. The Fashion Designer The famous 71 year old fashion designer which isn’t even close to retirement. That is because he is to busy making business all around the world. Recently lent Armani moniker to perfume, baby clothing, home decor, $10,000 Prive Borgo watches and hotels in construction in the Middle East. Giorgio Armani plans to open 20 new AX Armani Exchange stores in China by 2011. Also on the agenda: stores in Japan and Central and South America. His estimated fortune, $4.1 Billion.

Joe Jamail has an estimated fortune of $1.5Billion and is the wealthiest practicing attorney. One of the wealthiest lawyers in America, he is frequently referred to as the King of Torts. In 1985, Jamail represented Pennzoil in a lawsuit against Texaco. Pennzoil won the case and his contingency fee was $335 million. Jamail has given large donations to The University of Texas at Austin. The football field at Darrell K. RoyalTexas Memorial Stadium is named Joe Jamail Field in his honor, and so is the Joseph D. Jamail, Jr. Pavilion at The University of Texas School of Law.

7. The actor/producer Since these two fields often overlap in generating profits of millions of dollars, holding the cup in this league is Mr. Mel Gibson, scoring an estimated fortune of over $850million, expected to become a Billionaire by 2011. One of his profitable moves was producing and directing the blockbuster “The Passion of the Christ”. When he is not producing Billion dollar movies he fights with alcoholism and accusations of homophobia, misogyny and anti-Semitism.

8. Conclusions

To sum up, any work field has its winners and wealth isn’t always the biggest prize. A BA degree won’t guarantee you that your business will flourish unless you invest some passion in it. Bill Gates is just an example of the many men that developed their brilliant ideas into successful companies. Basically, your Economics degree provides you the necessary background in order to survive in this large Casino which also goes by the name of Global Economy. It’s up to you to find your calling and follow your dream in order to succeed!

Born into a Russian immigrant family that eventually moved to the Bronx, young Ralph Lauren worked during the day in department stores. He dropped out of Business School to design ties for Beau Brummel. In 1967 he started Polo Ralph Lauren with a $50,000 loan. Afterwards, he built its reputation dressing people who fancy a classic cut. Recently, he bought back licensing rights from Reebok to design luxury footwear also, he became exclusive apparel sponsor for the U.S. Open through 2008. Owns a ranch in Colorado, and an island retreat in Jamaica. (Daniel Pan, 2006)

References Forbes, 2010, World’s Most Powerful People, http://www.forbes.com/profile/carlos-slim-helu, February 4th 2011 Forbes, 2010, World’s Most Powerful People, http://www.forbes.com/profile/bill-gates , February 4th 2011 Pan, 2006, Top5 Richest Fashion Designer, http://panang.blogspot.com/2006/10/five-top-fashion-designer.html , February 4th 2011 Badenhausen, 2011, Tiger Woods No Longer No 1, http://blogs.forbes.com/kurtbadenhausen/2010/10/31/tiger-woods-no-longer-no-1/ , February 4th 2011 Jayaditya, 2010, Being Beckham, http://www.forbes.com/2010/09/20/forbes-india-david-beckham-legacy.html, February 4th 2011


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