Editorial Board of “Holistic Marketing Management” (A refereed journal published four times annualy by the School of Management-Marketing of the Romanian-American University) Editor -in- Chief Theodor Valentin PURCĂREA Editorial Board
John L. STANTON
Léon F. WEGNEZ
William PERTTULA Levent ALTINAY Dana ZADRAZILOVA Riccardo BELTRAMO Sinisa ZARIC Gabriela SABĂU Hélène NIKOLOPOULOU Vasa LÁSZLÓ Peter STARCHON John MURRAY
Managing Director EuroHandels Institute Retail, Germany; President of EuCVoT; President of European Retail Academy; Member of the Astana Economic Scientists Club; Chairman of the Advisory Board of EuroShop; Chairman of the Board of the Orgainvent; Trustee of EHI Retail Institute at GLOBALG.A.P. Association of Management and International Association of Management, USA; Australian Graduate School of Entrepreneurship, the Faculty of Business and Enterprise, Swinburne University of Technology; Member of France’s National Academy of Scientific Research (CNRS) Professor of Food Marketing, Erivan K. Haub School of Business, Saint Joseph’s University Philadelphia, USA;; Editor, Journal of Food Products Marketing Secretary General, International Association of the Distributive Trade, AIDA Brussels;; Member of France’s Academy of Commercial Sciences, Doctor
Honoris Causa of the National School of Political Science and Public Administration (SNSPA), Bucharest Internet Marketing Professor, College of Business, San Francisco State University, USA Professor of Strategy and Entrepreneurship, Research Area Leader, Oxford School of Hospitality Management, Faculty of Business, Oxford Brookes University, UK Dean of Faculty of International Economic Relations, University of Economics, Prague, Czech Republic University of Turin, Italy University of Belgrade, Yugoslavia Memorial University, Grenfell Campus, Corner Brook, Canada University of Lille 3, France Szent Istvan University, Hungary Comenius University in Bratislava, Slovakia Faculty of Business, Dublin Institute of Technology, Ireland
Faculty of Economics,University of South Bohemia in Ceske Budejovice
President of Romanian Scientific Society of Management- SSMAR
Norbert HAYDAM Roxana CODITA Dumitru MIRON
Holistic Marketing Management
Deputy Head of Department of Business Economics, University of Economics and Management, Prague, Czech Republic Faculty of Business, Marketing Department, Cape Peninsula University of Technology, South Africa TUM School of Management, Technische Universität München Academy of Economic Studies in Bucharest 1
Valeriu IOAN-FRANC Iacob CĂTOIU Virgil BALAURE Gheorghe ORZAN
Luigi DUMITRESCU Marius D. POP Petre FILIP Ion VOICU SUCALA Virgil POPA Ana-Maria PREDA Ileana PONORAN Ovidiu FOLCUȚ Doinița CIOCÎRLAN Marius Dan DALOTĂ Mihai PAPUC Gheorghe ILIESCU Alexandru IONESCU Olga POTECEA Oana PREDA Nicoleta DUMITRU Monica Paula RAȚIU Costel NEGRICEA
National Institute for Economic Research, Romanian Academy; Romanian Marketing Association Academy of Economic Studies in Bucharest Academy of Economic Studies in Bucharest Academy of Economic Studies in Bucharest
Lucian Blaga University of Sibiu Babes-Bolyai University, Cluj-Napoca Dimitrie Cantemir University, Bucharest Technical University of Cluj-Napoca, Management and Economic Engineering Department; University of Glasgow, UK, College of Social Sciences, School of Social & Political Sciences; Managing Editor, Review of Management and Economic Engineering Valahia University of Târgovişte Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University Romanian-American University
Associate Editors Cristina NEAGOE Dan SMEDESCU Alexandra MIRONESCU Art Designer Director Alexandru BEJAN
Holistic Marketing Management
Theodor Valentin PURCĂREA
Riccardo BELTRAMO Sergio MARGARITA
Editorial: Waiting for the third spring, by considering all related interactions with customer that make up the customer experience and expanding our role in leading this customer experience.....................................................
The Scatol8® for Sustainability: an update on the remote sensing system of environmental, landscape and management variables...........................................................
Sebastian STEPIEN Alexandra MIRONESCU
Price risk management in hog production through the vertical coordination – theoretical and practical approach..............................................................................
Sms’s innovation and human resources management....
Relationship marketing communication case study: communication between managers and employees............
Strategy – main component of the strategic management process, in the context of organizations adhering to the knowledge based management.............................................
The quality system – major key in the touristic services......
Marian Florin BUSUIOC Elisabeta Andreea BUDACIA
The responsibility for the content of the scientific and the authenticity of the published materials and opinions expressed rests with the author.
Holistic Marketing Management
Editorial: Waiting for the third spring, by considering all related interactions with customer that make up the customer experience and expanding our role in leading this customer experience We all know, of course, that “time is the wisest counselor of all” (Pericles), and is “the school in which we learn, the fire in which we burn” (Delmore Schwartz). But according to Max Frisch, “time does not change us, it just unfolds us,” and in the opinion of Tenessee Wiliams time is “the longest distance between two places” (IMO, the case of our “Holistic Marketing Management” Journal between January 2011 and December 2012). “Time goes, you say? Ah, no! alas, time stays, we go” (Henry Austin Dobson). What can say more… the will to try it and the faith to believe that it’s possible… Because as Thomas Hardy said: “time changes everything except something within us which is always surprised by change.” From the very beginning we attracted the attention that making change (organizational, operational, commercial) happen is not an easy matter because it depends on how receptive the organizational environment is to this idea of change as a two-way process, considering the degree to which forces in the task and general environments change and evolve over time, and the organization develops the skills and knowledge necessary to deal with these environmental changes while competing and cooperating according to the tone of the organizational culture (organizational structure, employment relationship, characteristics of organizational members, organizational ethics), and re-imaging and re-innovating on the basis of the managerial actions impact, knowing that the best transformation is only through an improved understanding of how people interpret their environment and choose to act, bridging the gap between top management and the hole organization by building hope and conviction. Let us also remember the importance of the quality of team relations, as well as the quality of the network in initiating partnerships, along with establishing a fluid and flexible process for planning sequential stages, of a supportive organizational culture that goes beyond just the aggregation of the three components of the holistic marketing management and finds alternatives to the current bureaucratic and disempowering management practices so as to adequately managing the probability to capitalize on the opportunity to satisfy the customers and transforming them in team members. In our first Editorial we showed that according to Gary Hamel's Management Innovation eXchange (MIX, an open innovation project aimed at reinventing management for the 21st century), organizations must be adaptable, innovative, inspiring and socially accountable in order to thrive in the 21st century, being necessary to find alternatives to the current bureaucratic and disempowering management practices. We took into account our duty to properly understand, step by step: - the manager’s personal development in the context of the interaction between the managerial culture, the workplace culture and the surrounding culture, as bequeathed to us Professor ION SMEDESCU, the Founding-President and Rector of the Romanian-American University (19912008), who made a constant and coherent effort to transpose in the academic landscape powerful ideas specific to the „cultural architect” that is his beloved „Marketing”, advocating for „intelligent growth”, and often speaking of the necessity of the conscious sense of the ordinance, of the beauty, in order to perform a task the right way, in joyful communion; - the designed holistic marketing management framework as to adequately answer to the chalenge of establishing the right goals, and of making the right decisions and monitoring on the way of identifying new opportunities, of creating more promising new values offering, of using capabilities and infrastructure to deliver the new offerings more efficently (within the value chain, by proving the committment in value exploration, creation and delivery); - our status of both, participants and spectators of the experience marketing versus experience branding, while being involved in the „consumption” of the crisis which presupposes a rigurous analysis of instruments that bring the most; - the difference between being responsible (in a general sense; you can delegate it) for something and being held accountable (more measurable;; you can’t delegate it to anyone) if it goes wrong, and the actual need of the marketing organization to become the customer-engagement engine (a Holistic Marketing Management
customer engagement going beyond pure communication to include the product or service experience itself), while considering all related interactions with customers that make up the customer experience (challenged in turn by the multiplication of the customers renewed touch points used to to interact with companies) within the reality that the buying process has become collaborative, and must ensure critical touch points that drive engagement; - the economic recovery of the customer relationship affected by the current crisis requires the introduction of a functional culture of the relationship marketing, a culture based on a stated commitment of the company and a detailed implementation program of this „relational culture.” It is worth to remember that within this context we assumed the following definition: „Relationship marketing is the art of strategic building of relationships between key stakeholders brands in a organization, for the benefit of all relational landscape that stimulates the organization performance and profitability improvement, the quality and the depth of customer relationship”;; - in order to meet the challenges posed by new technologies and maximize the success of their organizations marketers must expand their role in leading the customer experience (considering that today's consumers are changing marketing, being well-informed, social media-savvy, more demanding - expecting current and perpetually shifting new channels, such as mobile and social, to deliver an exceptional customer experience), remove silos and integrate across channels, and embrace a greater partnership with IT - according to the results revealed by the third annual IBM State of Marketing Survey 2012.1 Of course, we do agree that: “Metrics are rarely perfect… The marketing environment continues to change rapidly and often feels like a moving target that’s impossible to hit.”2 But as participants at the seasonal symphony of a new Journal, we enjoy waiting for the third spring, knowing that each spring comes with its own meaningful palette belonging to the eyes that can see this palette offered by our “Holistic Marketing Management” Journal taking place in time and using up time as Peter Drucker said.
Theodor Valentin Purcărea Editor - in - Chief
IBM 2012 State of Marketing Survey, Marketers' Biggest Challenges and Opportunities Reveal the Rise of the Empowered Customer, http://www-01.ibm.com/software/marketing-solutions/campaigns/surveys/2012-marketerssurvey.html 2
David Court, Jonathan Gordon, and Jesko Perrey - Measuring marketing’s worth, Marketing and Sales Practice, May 2012
Holistic Marketing Management
THE SCATOL8® FOR SUSTAINABILITY: AN UPDATE ON THE REMOTE SENSING SYSTEM OF ENVIRONMENTAL, LANDSCAPE AND MANAGEMENT VARIABLES Professor Riccardo BELTRAMO, Ph.D. University of Torino, Department of Commodity Science Professor Sergio MARGARITA, Ph.D. University of Torino, Department of Management Abstract: This paper describes the evolution of Scatol8®, a remote sensing system conceived and developed within the Department of Commodity Science (DCS) of the University of Torino. The DCS developed, along the years, several projects related to Sustainable Management of economic organizations; the first part of the paper summarizes the key-elements of projects that enriched the knowledge base, providing hints that took to Scatol8®. Scatol8®’s vision has been described in a previous paper. Its basic elements form the second part of the paper. The third part is devoted to describe several activities that have been undertaken, which display the potential of the Scatol8® ‘s system along directions not foreseen at the beginning; the description is splitted into Research projects and Education initiatives. Key words: Sustainable Management, Remote sensing, Environmental and Landscape, Management System, Innovation, Simulation models, School Network JEL Classification: I25, L66, M11, M31, O13, O31, Q56
1. DOCS and sustainability The core activities of the DCS of the University of Torino are research and teaching in sustainable development. Around fifty projects, at national and international level have been designed, launched and produced, the period..... , by finding, from time to time, adequate funding. Since the '90s, the DCS is very active in applied research, to develop methodologies and tools for environment qualification of organizations and territories. Topics covered by multidiscipliar research groups range from enhancement of typical and traditional agricultural food production,
environmental management of manufacturing and services - with an emphasis on tourist facilities -, environmental sciences and technologies, conservation and recycling of natural resources, environmental management and control as well as on the study and application of environmental management systems. Within these issues, the following researches are worthy to be considered: - Project CRESTA - Environmental Management System for the Rifugio Regina Margherita. Launched on 1997, it ended on 2002 with ISO 14001 certification of the highest mountain hut in Europe. It was the first research with a systemic view condicted in mountain huts, to verify the applicability of environemntal management system to small tourist accomodation. After the identification of environmental significant aspects, to reach an environmental and economic optimum, a multidisciplinar team worked to adapt the european standard to the peculiar contest and to draw proper operative instructions. - Strategies of sustainabile tourism developed in Aosta Valley, Piedmont and Liguria. The experimental work in mountain huts took us to involve more than 30 hutsâ€™managers whose role was helpful to write guidelines, available in four languages, to lead courses and other initiatives on environmental education in mountain refuges, This multiannual engagement took to the WWF award of the Golden Panda, for the continuing action on sustainable tourism in the Alps, - Participation to K2 italian alpine expedition (Pakistan), on 2004, to design and implement the Environmental management system of the expedition. This on field research assured the complete control on the environmental aspects, sharing the operative instructions
with participants of different roles and nationalities. Result of this experience were guidelines that are being spread throughout the remote mountainous areas of the world. - Research on Environmental and Landscape Management System (ELMS). The four years research, which was implemented in the municipalities of Langa and the Barolo, took to a proposal for an evolution of the European Regulation EC n. 761/2001 (EMAS II), which sees its integration with the principles of the European Landscape Convention (ELC). This new method increases the benefits of EMAS and visibly the declination of the principles on a regional scale, promoting the value of the landscape, its conservation and enhancement, through the active involvement of population and economic actors. - Interreg Project (2007-2013) "VETTA, Enhancement experiences of Transboundary Tours and products of high and medium altitude', with the involvement of 52 mountain huts. These accommodations have environmental aspects related to the most popular organizations, including domestic reality and landscape aspects of excellence, which help to make them the attractors of a growing number of tourists. Sustainability is not just a matter of business, but it is associated with everyone’s daily life, with consumers’s choices and behavior. Internalize this principle and to adjust accordingly, their decision-making models is possible if you have data that express the pressure on resources and the environment. The Scatol8® was born for this! 2. Scatolo 8® in short
The Scatol8® is a remote sensing network of environmental, landscape and management variables, created at the DCS, entirely based on free and open technology (hardware and software) (Open Source), with a view of controlling costs, of openness and ease of access. The choice of the name Scatol8® conveys the idea of a friendlydevice, handmade, easy to understand and easy to use, so affordable.
As described in Fig. 1, Scatol8ÂŽ consists of a central unit and of peripheral (end) units, connected in a network. Numerous sensors, able to detect the monitored variables, are connected to peripheral units which transmit the data to a central unit, connected with a server. Sensors and peripheral units change in type and numbers depending on customersâ€™requirements. Collected data are transmitted to a personal computer, where they are stored, processed and displayed by an instrument digital panel, called the Crusc8. Thus, you can create a real-time monitoring of each measured variable, as well as evaluate their performance over time, thanks to the display of time series. In turn, the personal computer is able to upload data on a server on the Internet; the server collects and organizes them in a collective database. Data can be input for environmental management systems and/or for actuators (i.e. a wide range of devices, from leds to motors). The part list is the following: Main parts
END NODE Brief
Arduino uno Wirless sd shield
The Arduino Uno is a microcontroller board based on the ATmega328. It has 14 digital input/output pins and 6 analog Shield like alanguage socket for the bees modules and that inputs. that The acts program used is C++ contains an SD to store data in if the coordinator node is temporarily unavailable
XBee and XBee-PRO ZB ZigBee modules from digi provide costeffective wireless connectivity to devices in ZigBee mesh networks
The real time clock DS1307 is used to add a timestamp to every sample This shield replies the power supply, the ground and other signals from the ATmega many times. It is used to easily connect all the sensors and the RTC to the microcontroller
COORDINATOR NODE Main parts Brief Arduino MEGA
The Arduino Mega is a microcontroller board based on the ATmega2560. It differs for the one used in the end node basically because it offers more memory to run programs
It connect the microcontroller to the internet using the TCP protocol to send data to the server XBee and XBee-PRO ZB ZigBee modules from digi provide costeffective wireless connectivity to devices in ZigBee mesh networks
It interfaces the Xbee radio to the microcontroller
Until now, the set of variables the system is capable of monitoring is illustrated in the following table: variable Outdoor temperature Relative humidity Snowfall level Precipitation level Wind speed Wind direction Illumination level Air emission quality Water consumption Electric energy consumption Solid waste quantity Waste water quality Presence Landscape view
unit of measurement °C % m m m/s degree Lux Presence of LPG, butane, smoke, propane, methane, alcohol, hydrogen l/s W/h Kg pH, ORP number
Guidelines of Scatol8® Designed in the perspective of sustainability, Scatol8® is inspired in its creation and implementation to various criteria, such as: • Open Source. Hardware and software are fully based on open technologies and software (Open Source) in view of cost containment, openness and ease of access, even for training purposes; • Modularity. The system is constituted from time to time, according to the requirements and specifications of each application; • Environmental compatibility. All collection and processing devices are placed in recycled containers, coming mainly from food and electronics industry, transformed and adapted to their new function, or in containers made of wood (a renewable resource), or even cardboard. • Knowledge dissemination. The Scatol8® is not only a product, but also an initiative to spread knowledge, which aims to involve young people in the creation of technology (and not only in its use), which is accompanied by information tools on the relationship between observed variables and sustainability and proposes the reuse of components through the concrete realization of the active systems. The implementation of hardware and software is entrusted to Ing. Paolo Cantore who takes part in the definition of the technical specifications of the circuits, designed them and takes care of selecting sensors and microprocessors, conducting tests in DCS Lab to verify accuracy and reliability, within the economic constraints.
When the testing phase reaches satisfactory results, Scatol8® is packed in customized packaging. Finally, systems are installed and tested by Scatol8® ‘s Team in real conditions. Afterwards, the phase of writing technical documentation and reports begins. Communication plays a key role in the Scatol8®. it presents a number of problems because there are different subjects to which it is addressed (teachers, students, entrepreneurs of various productive sectors) and the means (website, social networks, brochures, research reports). A multilayer communication is carried out continuously, providing news updates to stimulate reflections and to keep the attention, to arouse curiosity in the potential of the system and to encourage involvement in the project proposals. Given the importance of these instances, in the organizational structure of the team Scatol8® has been inserted the “Communication” function, assigned to the Architect Camilla Botto Poala. As noted above, a great importance is given to the packaging that plays a role in communicating the values associated to Scatol8®. For this reason, she is also entrusted with the responsibility of the trials conducted on packaging recovery that must meet functional and communicational requirements that change depending on to the context. 3. Scatol8®‘s in Research projects Scatol8® makes it possible to simultaneously monitor different variables and multiply the number of these variables as necessary: the configuration of a network in a domestic unit is similar to the needs satisfied in mountain huts, that despite their structural peculiarities, exemplify application Scatol8® inside a building. Being able to store and view the captured data in real time and compare, thanks to the series, the environmental performance of a building (including not only the technological characteristics of the building and the materials used, but also plant components) together with the temperature and humidity characteristics of the interior, put the remote sensing system as a useful tool for understanding and monitoring of building in question. In addition to displaying the data collected continuously, also be carried out remotely, the system can convey a subsequent processing and analysis of the historical data collected in order to build maintenance actions or, where necessary, to improve the management of activities carried out in the domestic unit. 3.1. Scatol8® ‘s indoor applications Scatol8® ‘s in accomodations The sparks that took to Scatol8® has been the EU funded Interreg Project (20072013) "VETTA, Exploitation of Transboundary Tourist Experiences and products of medium and High altitude". Within the actions assigned to the DCS, there is a pilot project aimed to design and carry out three Wireless Sensor Networks (WSN) in as many mountain huts of Verbania province. In the summer of 2011 and 2012 Scatol8® systems were first tested and then installed permanently.
Scatol8® ‘s in manufacturing companies The DCS is engaged, with the University of Gastronomic Sciences and the Polytechnic of Torino in the project POLIEDRO - Pollenzo Index Environmental and Economics Design whose aim is the developing of a sustainability index for agroindustrial production in Piedmont. In particular, the DCS is committed to design the index, through the application and execution of Life Cycle Analysis on food products typical of our region. The need to overcome the reference data, often lacking or so generic to be meaningless, through an accurate measurement suggested to place a Scatol8® systems on the machines. Attention has been devoted to energy consumption of the main production stages. The monitoring system is used for the acquisition and management of environmental data and to provide a database from which to draw for the preparation of a quality index of food production based on aspects of environmental, social and economic sustainability. The project is in the final phase and the outcome will be a prototype of a dedicated system to start the production.
One of Scatol8®‘s installation was in Winery of Carema, in the province of Torino. The harvest of grapes and production of wine took place during the first weekend of last October. Scatol8® monitored the production process of wine-making, via a specially crafted network of remote sensing. Five peripheral units have detected the electrical consumption of the machines that make up the production line: roller conveyor, destemmer, crusher, pump and press, for the entire duration of their use. The purpose of monitoring is to measure and record the power consumption of each device, and on a technical level, this is done by means of clamp meters, prepared to work on a threephase voltage, such as the one in the Winery. The picture illustrates the positioning of the nodes and of the central unit. The timely detection and display of power consumption have multiple utilities: - to control the operating conditions of the equipment;
- to ease a prompt intervention with maintenance operations, should they occur abnormal absorption conditions; - to provide a reliable picture of energy requirements in order to assess costs and benefits of installation of production of electricity; - to prepare an initial energy analysis, useful to develop an energy management system, - to calculate the carbon footprint of a product, in order to raise consumer awareness on the contribution of consumer goods to greenhouse gas emissions. Winery of Carema can be considered a pilot-project from which other a pplications originated: a furniture firm and a home applications. 3.2. Scatol8®’s Outdoor applications The system, its features and architecture, allow outdoor applications, for the monitoring of environmental variables. In this framework, the DCS is working on ProGeo, in collaboration with the Faculty of Geology of the University of Torino. The project aims to develop a tourism offer focused on geological sites of relevant interest, such as quarries and mining sites. This convertion process is fostered by multimedia devices, able to make natural signs readable and, in general, to turn environmental data into stage effects, increasing visitors’ emotional involvement. Scatol8®’s task in this project concerns environmental quality data acquisition (air temperature, relative humidity, lighting) and communication with a wide range of sensors and actuators already installed in the sites. In addition, data will be used to feed an Integrated Management System (Environment, Safety and Social Responsibility) developed by the DCS. 3.3 Scatol8®’s in other initiatives Cooperation with Italian Association of Landscape Architects (AIAPP) As previously mentioned, DCS has invented ELMS and then gave rise to ELWSMS, which considers the possibilities opened up by the Internet. Though designed for local authorities, ELMS can be applied to all initiatives that seek to promote the environment and the landscape, sharing the principles of sustainability and enhancement of the landscape and by controlling the impacts resulting from its activities. Such a large-scale management system will be tested in the organization of an international event, the 2016 International Federation of Landscape Architects (IFLA) Congress, to be held in Turin. In this contest, data access through the Internet is particularly important and ELWSMS has the chance to be tested. The AIAPP is the entity that adheres to IFLA, and it is responsible for organizing the event at the national level. Through a Memorandum of Understanding, being formalized, the DCS is in charge of identifying ways to verify the applicability of the ELWSMS to events that, over three years, will accompany the international congress, where some 3000 landscape specialists are expected. The ELMS will be tested from the planning of events, to predict and monitor its multidimensional impacts along the life cycle. The ELC leads to emphasize the dimension of knowledge sharing, which is already present in EMAS, and to direct it towards the landscape, not just the physical, perceptible by the senses, but also to the cultural landscape.
The Scatol8® will be used to detect a number of variables that are at the basis of the assessment of the sustainability of events and to make available the environmental and landscape profile event. Other variables attaining the social and istitutional side of sustainability will be addedd to complete an on line Sustainability Report. Our commitment has been formalized in the application dossier, presented in Cape Town, September 4, 2012 which led Italy to win the race for hosting the Congress. 4. Scatol8® ‘s in Education activities Scatol8®’s in University Courses provided by DCS The teaching of the DCS has had for many years two courses: Commodity Science and Technology of Production Cycles. Commodity Science presented the methods for chemical and physical characterization of goods; the Technology of Production Cycles dealt with transformations from raw materials and all auxiliary services to production. Since 1983, the course of Social technology has been entered in the learning process, whose program included considerations on the environmental impacts from the production of goods and the study of technologies and methods for clean-up interventions. Since then, the course has changed its name (Technology of production cycles - address environmental, Environmental technology, Environmental management systems and certification, Integrated management systems) and programs included new feelings and new tools to reflect changes that have constitute the cultural heritage of graduates in Economics. In addition to a technical approach, the share of organizational and methodological aspects has been expanded, providing students with technical tools such as Life Cycle Assessment, and organizational tools, such as management systems ISO9001: 2001, ISO14001: 2004, ISO26000: 2010, ISO 50001:2011. Recently it has been realized a course in Industrial Ecology and Integrated Certification within which the "physical records" allow you to develop hypotheses of integration among firms located in Ecologically Equipped Productive Areas. Partnerships with companies for educational purposes have formed a significant part of the didactic and were appreciated by students who, in many cases, have developed their thesis within enterprises. Now Scatol8® is an integral part of didactics. The ebook “Scatol8®: A Path To Sustainability”, downloadable on http://scatol8.net, can be a useful support in different teaching methods and to different students. It is possibile to prepare taylor-made releases of the book, combining parts of it in relation to teachers and students’ needs. The issue of sustainability is linked to the availability of natural resources for future generations, a requirement influenced by the concepts of intra-and intergenerational fairness. Future generations are prepared to sustainability from the present. The message must be addressed right through the school, with motivated teachers and through engaging educational proposals, instilling in students concepts that form the foundation of sustainability, the environment, in order to form individuals who incorporate this value in their decision-making models. The interactive didactics made possible thanks to Scatol8® can do a lot to attract young people to concepts that may appear abstract or too complicated.
The funny side of teaching has been tested by DCS thanks to the participation at the 6th Edition of the "Researchers' Night" on September 2011. At our booth, set up in Turin, there have been various classes of primary school who participated with enthusiasm to the trail that Scatol8® has made it possible: the different games related to the monitoring of certain environmental variables have created a virtuous competition, which has stimulated the logical capacity, creativity and team spirit of the students, allowing you to reflect together on consumptions and on the concept of environmental sustainability. This year, the experience has been renewed, with new games. On September 2012, students had the chance to see the system in operational conditions, variables displayed on Crusc8 and clips on the experiences in the mountain huts. Interactive games have been organized. A new proposal for teaching-oriented capabilities of today's students, benefits from the potential offered by new technologies. New technologies very often allow the creation of gadgets that not only have a very short life cycle, are likely to be confined in the environment, very limited, the experimenters. But new technologies can also accompany a customized learning path. Therefore, at the basis of Scatol8® ‘s proposal there is the idea that new technologies are capable of imparting a tremendous impetus to training, if make it possible to understand important concepts in a fun way and if this process occurs in large numbers. From our experience with regard, in particular, to students of the Faculty of Economics, the values of Scatol8® led us to dialogue with other educational institutions to enrich and decline the initial concept, according to the wishes expressed by the new categories of users to which we refer.
Scatol8’s in Primary schools Primary schools “Sant'Anna” and “Santa Teresa” of Chieri are the first schools involved, since last year, in a positive competition on sustainability. After a meeting with the teachers, from the month of October 2012 will be organized educational activities with proper cultural association of science for children Ar:kid:lab, coordinated by the Architect Simona Gallina. Besides this initiative, whose costs are totally funded by pupils’ families, the Piedmont Region has started, in the school year 2011-2012, a project to promote energy savings in public buildings, with specific attention to the schools, was carried out a project for environmental education in primary schools in Piedmont. In the school year 20122013, two schools, respectively located in Torino and Vercelli join the initiative "Everybody in the race for Energy with the Scatol8®", which includes meetings with teachers to arrange the competition, installation and monitoring of two remote sensing networks, and a closing event. In autumn 2012, a network of remote sensing of environmental and management variables will be installed in two classes of each school. Around the monitored variables they will build a learning path based on the reading of the monitored data. From the operational involvement of students in the design and manufacture of containers of Scatol8® to be installed within the school walls, the game will run through analysis, comparisons, comments and use of good environmental practices. Pupils and teachers will work on data of waste production, energy consumption and temperature. The schools will be "virtually" connected thanks to their display on Crusc8. 5.Scatol8‘s improvement Technical Highschool “Ettore Majorana” On school year 2010-2011, DCS started a collaboration with the Technical Highschool Ettore Majorana - Grugliasco (TO) - to organize traineeships periods on technical issues (choice of sensors, electronic circuits production, ...). Some students were involved in the installation of Scatol8®’s in the huts participating to the project VETTA. The school is still actively working on the system. Polytechnic University of Turin - Faculty of Architecture In the academic year 2011-2012, the Scatol8® was presented to the students of Communication and Visual perception. It has been the theme for 8 working groups that have developed full proposals for games, videos, websites for an educational offer for the primary School. The results, some of which have appreciable effect and completeness, can be seen at the following link: http://scatol8.net/?p=639 In addition, the system has been presented in the course of Industrial Design (Prof. Claudio Germak) and is expected to carry out laboratory activities during the academic year 2012-2013. School network In our region, it has been set up a School Network for the Scatol8®’s dissemination in training activities. The following highschools joined the network: Institute “A.Monti” and “B. Vittone” of Chieri, Institute “N. Bobbio” of Carignano (TO), Institute “Plana” of Turin. The network is open to national and international schools. This initiative has been promoted by the Italian Association of Teachers of Natural Sciences -
ANISN. The strong environmental characterization of Scatol8® has made it possible to meet the ANISN, the Italian Association which links teachers of Natural Sciences, an Association strongly engaged in EU funded projects for the dissemination of scientific culture. On last May, Scatol8® was presented to the National Assembly and it was decided to explore ways to spreading the system and creating initiatives to teaching support. The first result was the formalization of a Memorandum of Understanding to create a Schools Network, which took place on July 31, 2012. Through the protocol, it has been planned a competition on Sustainability among the schools linked in the School network and decided to applicate to a national Call for proposals with a multi-year project. 6. Conclusion The following diagram was drawn at the time of the invention of Scatol8®.
It represents the initial structure has been followed in the development of the project. All the initiatives that, since then, have been dropped give an idea of the potential of Scatol8®’s system. Although they stand for a wide range of existence, we are still at the beginngin of our exploration of the pervasive concept of Sustainability. On the website http://scatol8.net we provide an upgrade of the project, on a concept map.
Bibliography: . R. BELTRAMO, “The SCATOL8™: an innovation for shifting from Environmental and Landscape Management System (ELMS) to the Eco-Land-Web-Scape Management System (ELWSMS)”, Romanian Distribution Committee Magazine, Volume 2, Issue 2, 2010, pp. 16-23, http://www.distribution-magazine.ro/magazine2/ . R. BELTRAMO, B. CUZZOLIN, R. PES, “Turismo, Ambiente e strutture ricettive, Sistema di gestione ambientale per il Rifugio Regina Margherita”, Pubblicato in proprio ai sensi del decreto legislativo luogotenenziale 31/8/1945 n. 660, Torino, 20 aprile 1999. . R. BELTRAMO, B. CUZZOLIN, “Manuale-tipo per la realizzazione di un Sistema di gestione ambientale dei Rifugi di montagna”, Editions l’Eubage, Aosta, Agosto 2001. . Beltramo R., Duglio S., Quarta M., “Sistema di Gestione AmbientalPaesaggistico - SGAP: Una metodologia per la gestione integrata dell’Ambiente e del Paesaggio”, Aracne Editrice, Roma, 2011 . R. BELTRAMO, S. CAFFA, S. DUGLIO, “Il Sistema QIT: uno strumento di Qualità Integrata Territoriale”, Valutazione Ambientale, n. 16, Edicom Edizioni, LuglioDicembre, 2009, pp. 75-84. . R. BELTRAMO, S. MARGARITA, "Smart technologies per Ia gestione ambientale e paeaggistica: lo SCATOL8® della sostenibilita", Atti del Congresso Nazionale AICA, Torino, 15-17 novembre 2011
PRICE RISK MANAGEMENT IN HOG PRODUCTION THROUGH THE VERTICAL COORDINATION – THEORETICAL AND PRACTICAL APPROACH Assistant Lecturer Alexandra MIRONESCU, PhD Candidate Romanian –American University 1B, Expoziției Avenue, Sector 1, Bucharest email@example.com
Assistant Professor Sebastian Stepien, Ph.D
Department of Macroeconomics and Food Economics Poznan University of Economics, Poland firstname.lastname@example.org
Abstract: Vertical coordination is a form of price risk management which mitigates the negative effects of hog cycle, associated with price and supply fluctuations on the pig market and is aims to stabilize farm incomes. It can take the form of contracts or full vertical integration, however the level of farmer’s commitment results from the estimated production risk and ability to fulfill agreement’s provisions. The aim of this paper is to identify the nature and effects of price risk management in hog production through the vertical integration. The authors argue that the properly coordinated production process can reduce the risk of price and production volatility and helps to stabilize farms’ income. It may also be beneficial to the environment and local community, strengthening the vitality of rural communities. It seems that this solution may become a dynamic trend in modern food system in developed countries. Key words: risk management, price fluctuations, vertical integration JEL classification: D23, Q12 Introduction Constant supply and price fluctuations in the pork market essentially rise the risk of production. It is associated with the natural conditions, however it may be mitigated through the use of more advanced technologies (e.g. frost and drought resistant varieties of plants). Though the risk of sales, which destabilizes the pork production, is more difficult to regulate. There are two important aspects to consider: variable price level and sales possibilities. The problem is that the farmer’s decision to start the production brings the results after a time, which is related to the breeding cycle, and the consequences of wrong decisions are difficult to withdraw and can only by mitigated3. Therefore the farmers
H. Szulce, Uwarunkowania i możliwości sterowania ryzykiem w produkcji rolnej, Wyd. AE w Poznaniu, Poznań 2001, s. 20-21.
should aim to reduce the impact of above mentioned factors on the duration of fluctuations and risk level. Traditional farms used to breed pig independently, which means that part of the services were delivered by themselves. Most of the resources (machinery, equipment, land, labor) was owned by the farms and they could decide about nutrition, animal health, reproduction and marketing programs. Meanwhile, there has been a rapid development of technology. Transfer of the new technologies was for the traditional farms quite difficult, which reduced the possibilities to improve the effectiveness. Producers had to try to somehow takeover the benefits by gathering information, getting an access to the technologies and to implement new methods of production. Coordinated systems of production became an alternative. In such production system farms form a kind of „coalition” for better breeding system, which reduces the costs, improves the meat quality, widens market access, helps to achieve the economies of scale, reduces and distributes the price and production risk and ensures wider access to new information and technologies. These elements help to achieve added value (which normally would be received by the wholesalers) and guarantee stable and long-time development. The aim of this paper is to identify the nature and effects of price risk management in hog production through the vertical integration. The authors argue that the properly coordinated production process can reduce the risk of price and production volatility and helps to stabilize farms’ income. It is a review paper with the elements of deductive reasoning and it is based on the Polish and English literature. The nature of vertical coordination Vertical coordination was developed in the second half of the twentieth century in the well-developed countries and it has its source in the deepening gap between the scattered, mostly small farms and the integrated food-industry and trading companies. It can be defined as a continuous transfer of product from the farmer to the consumer, or as a coordination of following stages of production in terms of quantity, quality and time4. The theory of transaction costs provides useful framework for the analysis of vertical coordination of the food supply chains, especially in the field of animal production. According to O.E. Williamson5, one can distinguish four types of transaction costs due to the phase of the transaction: preparation costs, negotiation costs, control costs and adaptation costs. These categories include the costs of searching for information (about prices and properties of goods, about potential buyers, sellers and their aims), costs of negotiations with buyers or sellers, costs of preparing contracts, costs of monitoring contract partners, as well contract enforcement and compensations costs and costs of the protection of property rights6. On the other hand, transaction costs can be interpreted as the opportunity cost in a situation, where a single entity (e.g. farmer) does not have adequate information about market conditions in which he works and for this purpose suffers losses (e.g. by obtaining lower sales prices of agricultural commodities). Assuming that proper assessment of the economic effectiveness of business entities should include the ability to reduce both production costs as well as transaction costs, the new institutional economy gives the opportunity to look at the issue of cooperation in agricultural sector from different 4
See S. Martinez, Vertical coordination of marketing systems: lesson from the poultry, egg and pork industries, Agricultural Economic Report, USDA, April 2002. 5 See O.E. Williamson, Ekonomiczne instytucje kapitalizmu, PWN, Warszawa 1998. 6 See M. Iwanek, J. Wilkin, Instytucje i instytucjonalizm w ekonomii, Wyd. Uniwersytetu Warszawskiego, Warszawa 1997.
perspective. In this context, the development of a coordinated production system can be seen as an attempt to optimize transaction costs. Key variables in this theory, which define the conditions under which transactions are carried out, are the ownership (property) characteristics and the level of market uncertainty7. In the comparative analysis of integration degree choice, one emphasizes the organization’s ability to adapt to the market and level of administrative control, which affects the autonomy of the subject. Transaction costs (e.g. associated with the supply uncertainty or non-productive assets) are a prerequisite for developing contracts between the parties, which results in the risk reduction and change in the specificity of owned property. One of the first papers, which used the theory of transaction costs to explain some phenomena on the meat sector is the one published by Ouden [Ouden 1996], in which the author sees the increasing consumer requirements for the meat quality as a premise of development of coordinated production systems. In particular, these requirements concern animal welfare, food safety, traceability of the production chain and care for the environment. It is assumed that from the transaction costs point of view, coordinated systems, which include contracts and vertical integration, are more efficient. Lawrence claims that the synchronized pork production, which ensure the quality and safety of food, provides incentives non-market coordination8. He argues that ordinary market transactions are not able to provide producers adequate information on the consumer requirements. Cooperation between farms and receivers (slaughterhouses, meat processing companies) can thus "save" transaction costs. Farmer benefits because he gets premiums for the proper quality (that is the one, which is required on the market) and the for processor the key issue is that he can obtain animals of the similar quality and in desired time and place. Vertical coordination is also important in reducing uncertainty about the quality of the goods in a critical situation, which in the meat industry are quite common (e.g. BSE, FMD, avian influenza). One stresses also the positive effects of integration, which involve reducing the number of agents and allows to take over part of their margin9. Summing up, the standard approach to the theory of transaction costs in the pork production stresses the importance of continuous changes in consumer expectations and the large uncertainties inherent in this type of activity as the main arguments in favor of extending the coordination in the processing of meat. Contracts can be seen as a factor, which reduces the production risk through centralized (at the slaughterhouse or processing plant level) decisions regarding the production factors and breeding standards. They reduce the problem of negative selection through a system of continuous monitoring of the supply chain ("from farm to fork").
B. Klein, R.G. Crawford, A.A. Alchian, Vertical integration, appropriable rents, and the competitive contracting process, “Journal of Law Economics” 1978/27, s. 297-326. 8 J.D. Lawrence, V.J. Rhodes, G.A. Grimes, M.L. Hayenga, Vertical coordination in the US pork industry: Status, motivations, and expectations, “Agribusiness” 1997/13, s. 21-31. 9 J.D. Lawrence, T.C. Schroeder, M.L. Hayenga, Evolving producer-packercustomer linkages in the beef and pork industries, “Review of Agriculture Economincs” 2001/23, s. 370-385.
Practical forms of vertical coordination There are two main forms of co-operation between the farmer and the processor, which have a character of vertical coordination: contract and full vertical integration. Two basic types of contracts are production and marketing contracts. Production contracts are signed before the production process and describe in details the responsibility of the farmer and the contractor with regard to production inputs, production methods and form of payment. In the case of contracts for the supply of the animals, the farmer provides equipment, buildings and work, while the contractor provides feed, livestock, medicines and veterinary services, as well as ensures the transport of animals. These contracts often define specific requirements for the production, including the use of the technology, compliance with certain requirements, etc. The contractor has the right to control the farmer and in the case of arrangements violations he can withdrawal. Payment for the delivered product is generally based on the costs incurred by the farmer (including cost of work and machines) and the amount of delivered product. Another way is to distribute sales profits between the farmer and the contractor10. In most cases, contractor is the animals owner during the entire duration of a contract. These kind of agreements are most adequate for young farmers starting their business, without an suitable amount of capital to purchase herd or farm with unused assets or for those who do not want to invest too much money in breeding pigs. Marketing contracts (called also forward sale contracts) define sales price and amount and conditions of delivery. Agreement details shall be specified before the end of production, i.e. before harvest or before the end of animal breeding. The mechanism of price setting generally reduces farmer’s risk by reducing the impact of price fluctuations on the price of the contract. In contrast to the production contracts, in marketing contracts the farmer owns the good throughout the time of production and has a major impact on production process. Another way is to divide contracts into: full risk contracts, contracts with limited risk and secure contracts11. Full risk contracts oblige a farmer to supply a certain number of pigs to the contractor without any warranty price12. They are characterized by the fact that 10
A specific form of the production contract is an agreement between a farm (which offers work, space and machinery), feed suppliers, herd suppliers and a consulting company (and others), which divides livestock sales income proportionally to the costs incurred. The most important issue in this type of contracts is the proper settlement of income share with regard to the actual expenditure incurred and risks. 11 P. Janusz, Kontrakt szansą czy zagrożeniem?, „Top Agrar Polska” – „Top Świnie” 2008/04, s. 8. 12 In many European countries (e.g. Germany, France, Denmark, Austria, Spain, Italy) pigs’ prices are however defined by the some organizations using special pricing system. These prices are respected by both parties - farmers and processors - hence there is no need to apply agreements with many rigorous requirements, including the pricing of delivery. In Poland in 2007, one attempted to introduce such a system. As a result of an agreement signed by the few organizations - the Polish Association of Pigs Breeders and Producers "POLSUS", the National Council of Agricultural Chambers, Chamber of Commerce Polish Meat, Butchers and Meat Processors Association and the Polish Institute of Agricultural and Food Economics – the Pricing Commission was established and its task was to analyze the pork price in the largest meat processing plants in Poland and in the European markets, and then to calculate the average price, which was suppose to be used as an initial base price for contracts (see. T. Blicharski, Działania dla stabilizacji rynku trzody, „Trzoda
in a situation of "pig bottom" farmer can earn higher prices for his products, while he may lose in the "pig peak". Contracts with limited risk cover at least part of the production costs (e.g. feed or piglets), but the farmer must meet certain production criteria defined by the buyer (feed consumption, daily weight gains, meat content, the number of falls, etc.). In the third type of contract, the buyer provides the farmer with live pigs or piglets, animal feed and other resources needed for production as well as veterinary services and farmer provides his work for previously defined income. So it is similar to a production contract described above. So-called contracts insuring against the risk of price fluctuations are example of contracts stabilizing agricultural production in the United States. These may take the form of two types of contracts: cost-plus and price window. Cost-plus are contracts in which the livestock producer receives a price equal to the cost of production, calculated on the basis of agreed feed costs and possibly other ingredients, plus a premium for the quality of the raw product13. This kind of pricing is good for the farmer in case of low livestock prices, while during high prices gains a purchaser. The price window contracts determine the range, in which market prices should probably be set. When this happens, the producer receives a agreed price. If the market price exceeds below or above the agreed level, gain or loss shall be shared equally between producers and purchasers14. This form of cooperation has another advantage - it allows to reduce costs by avoiding the so-called transaction costs associated with partner search. Guaranteed price level and lower transaction costs protect farms against cyclical changes and mitigate the fluctuation. This applies in particular farms from developing countries, where the market system does not work as well as in developed countries, and where farmers adapt slower to the market mechanism (e.g. due to the structural differences in agricultural sector in these two types of economies). As the result, part of the added value runs from the farmer to agents and the only way to keep it, is to create a coordinated production system. Full vertical integration is regarded as the most advanced form of coordination. It is a combination of the different stages of the production process in the same company. A characteristic feature of this form of cooperation is the possibility to control each phase of marketing chain. In this situation, farmer’s losses resulting from the poor bargaining position are minimized and the surplus, which in market economy leaks to the processors, can be taken over15. In the absence of capital required to develop own slaughterhouse and processing plant, membership in the cooperatives can be an alternative. Distribution of profit might be then a kind of compensation for lower livestock prices. This type of cooperation system is common in Denmark. Pig production in almost 90% is slaughtered, Chlewna” 2007/4, s. 22-26). In January 2011, the Commission's price quotations have been suspended due to irregular information and some members delays in analyzing the prices. 13 This type of contract is used for example by Animex with regard to regular partners. The agreement defines so-called guaranteed amount, taking into account the cost of feed and piglets purchase. If the farmer has to pay more, then Animex pays the difference. The maximum feed consumption has been set as 2.8 kg per 1 kg of growth. 14 D. Zawadzka, Formy koordynacji pionowej w sektorze trzody w Stanach Zjednoczonych i w Danii, “Zagadnienia Ekonomiki Rolnej” 2006/1, s. 64-65. 15 Repurchase of Salus Meat Plant in Golince (Wielkopolska region) by the pig producers (over 750 people) affiliated in 27 producer groups can be an example of this kind of action. In 2011, they took over 75% of company’s stakes for the amount of 16 million zł. This was the first case in Poland, when pork producers bought the processing plant.
processed and sold by the cooperatives, which are owned and managed by the pig producers. This allows sector to respond quickly to changes16. This does not mean however that the pig market in Denmark if free from cyclical fluctuations, though the variability of supply is relatively low and the pig producers' income more stable. Summary and conclusions Presented information allows to draw the following conclusions: 1. Vertical coordination is a form of mitigating the negative effects of hog cycle, associated with price and supply fluctuations on the pig market and is aims to stabilize farm incomes. It can take the form of contracts or full vertical integration, however the level of farmer’s commitment results from the estimated production risk and ability to fulfill agreement’s provisions;; 2. Farmers participate in the coordinated system, if they see no other opportunity for development or if they recognize the potential benefits of cooperation. Contracts are the preferred option of the meat sales especially when they reduce the risk (supply and price) and increase the feasibility of specific agricultural investment. For the processors the cooperation is a way to improve the quality of the raw product when the system of meat classification is not efficient and also when they implement food safety strategy17; 3. The criteria taken into account while organizing the pig market is freedom and flexibility to choose alternative sources of distribution on the one hand and fear of losing the autonomy (in decision-making), on the other. Reluctance to enter into contracts may results from the fact that using contracts on a large scale can lead to a conversion of price risk into the risk associated with the contract. Under certain conditions, these agreements may lead to a situation in which larger processors use their market advantage and try to exclude smaller companies from the sector, which may result in excessive loss of competition and to high concentration. Then there is the possibility that the farmers’ situation might be less favorable 18. Finally, it is worth noting that the vertical coordination, which is developing for decades at the national level, for several years also moves at global level in the form of transnational corporations. This is a result of globalization, which gives an incentive to the concentration of agribusiness entities. Corporations, which lead competitive struggle – fighting for the economic gains – strive to consolidation and even to a global oligopoly. Increasing subordination of agribusiness to retail chains is a new phenomenon. Super-and hypermarkets take over a even bigger share of the food market, and decisions regarding the production and distribution shifted from farmers to these corporations. Farmers are the ones who lose in this situation. They are subjected to immense pressure to concentrate the production, increasing specialization to monoculture, they lose the flexibility to decide, or are forced to end the business (mainly the small farmers). One of the cures for this problem may be the development of local food production systems and 16
T. Stadejek, System produkcji trzody chlewnej w Danii, “Trzoda Chlewna” 2007/1, s. 2629. 17 Boger S., Quality and contractual choice: A transaction cost approach to the Polish pork market, “European Review of Agriculture Economics” 2001/28, s. 241-261. 18 Such a situation occurred in the case of Tyson Foods, in relation to which the Alabama State Court in 2004 stated the practice of undercutting the purchase of raw products.
promotion of traditional and regional food. This creates some opportunities for smaller farms displaced from the market by corporations. It may also be beneficial to the environment and local community, strengthening the vitality of rural communities. It seems that this solution may become a dynamic trend in modern food system in developed countries. Bibliography: . Blicharski T., Działania dla stabilizacji rynku trzody, „Trzoda Chlewna” 2007/4, s. 22-26. . Boger S., 2001. Quality and contractual choice: A transaction cost approach to the Polish pork market. European Review of Agriculture Economics 28, 241-261. . Iwanek M., Wilkin J., Instytucje i instytucjonalizm w ekonomii, Wyd. Uniwersytetu Warszawskiego, Warszawa 1997. . Janusz P., Kontrakt szansą czy zagrożeniem?, „Top Agrar Polska” – „Top Świnie” 2008/04, s. 8. . Klein B., Crawford R.G., Alchian A.A., Vertical integration, appropriable rents, and the competitive contracting process, “Journal of Law Economics” 1978/27, s. 297-326. . Lawrence J.D., Rhodes V.J., Grimes G.A., Hayenga M.L., Vertical coordination in the US pork industry: Status, motivations, and expectations, “Agribusiness” 1997/13, s. 21-31. . Lawrence J.D., Schroeder T.C., Hayenga M.L., Evolving producerpackercustomer linkages in the beef and pork industries, “Review of Agriculture Economincs” 2001/23, s. 370-385. . Martinez S., Vertical coordination of marketing systems: lesson from the poultry, egg and pork industries, Agricultural Economic Report, USDA, April 2002. . Stadejek T., System produkcji trzody chlewnej w Danii, “Trzoda Chlewna” 2007/1, s. 26-29. . Szulce H., Uwarunkowania i możliwości sterowania ryzykiem w produkcji rolnej, Wyd. AE w Poznaniu, Poznań 2001, s. 20-21. . Zawadzka D., Formy koordynacji pionowej w sektorze trzody w Stanach Zjednoczonych i w Danii, “Zagadnienia Ekonomiki Rolnej” 2006/1, s. 64-65. . Williamson O.E., Ekonomiczne instytucje kapitalizmu, PWN, Warszawa 1998.
SMS’s INNOVATION AND HUMAN RESOURCES MANAGEMENT Professor Marius Dan DALOTĂ, Ph.D. Romanian-American University 1B, Expoziţiei Avenue, Sector 1, Bucharest email@example.com
Abstract: This paper aims at analysing the relationship between innovation and human resource management (HRM), attempting to establish whether innovation determines the ﬁrm’s human resource management or, conversely, human resource management inﬂuences the innovation level of the company. Based on this review, some research hypotheses are formulated. Article’s findings results provide evidence that, in order to affect employee behaviour, the ﬁrms must develop a bundle of internally consistent HRM practices. Keywords: Innovation; Small to medium-sized enterprises; Human resource management; JEL Classification: M10
Innovation and human resources management play an increasingly important role in sustaining “leading edge” competitiveness for organisations in times of rapid change and increased competition. “Discontinuous change requires discontinuous thinking. If the new way of things is going to be different from the old, not just an improvement on it, then we need to look at everything in a new way”. The continuous hegemony of innovation and creativity arises from organisations recognizing that correctly harnessed creativity can offer companies a competitive advantage (Porter, 1980). The analysis of the strategies of the top companies of the future, the structural flexibility and innovative power were listed among the top drivers of future success. Today, ﬁrms are facing a competitive and continuously changing situation. In this context the performance, and even the survival, of ﬁrms depend more than ever on their ability to achieve a solid and competitive position and on their ﬂexibility, adaptability and responsiveness. Therefore, it is hardly surprising that there is growing interest in innovation as a strategy that allows the ﬁrm to improve its ﬂexibility, competitive position and performance. A company will create new products for a variety of reasons, but usually in an attempt to increase profits. The most profitable new products will be those that meet the customer needs more effectively than competitors' products, and are therefore preferred by more customers. Companies need to identify those needs, and then generate ideas and solutions to address them. Many articles on innovation and creativity begin with a general statement that companies must innovate or they will die. While this is generally true, any company that is inefficient in vetting and implementing new product ideas or a company that continually introduces the wrong products will consume its own resources and will also fail.
In the management ﬁeld, a host of variables has been identiﬁed as inﬂuencing organizational innovation: having a vision of what the organization wishes to be, searching for opportunities, experience and technological potential following market orientation, market evolution and segmentation and the promotion and management of creative resources. Human factors and, in particular, human resource management, are today considered key elements of successful innovation, since the human element is involved in the whole innovation process. Specialists state that there are no good technologies or good innovations without competent people who can adequately use them and get beneﬁt from them. At the same time, no competent people can be available if there is not, ﬁrst, a business project deﬁning the role that technology and innovation must play and creating the necessary and sufﬁcient conditions for channelling aptitudes, capacities and attitudes of the individuals towards the established direction. Considering that HRM determines and modiﬁes, to a large extent, these aptitudes, capacities and attitudes, it seems clear that it becomes a crucial element in the development of innovation activities. Human resource management has been, up to now, scarcely treated in studies on innovation in the ﬁrm. Although there have been some empirical studies in recent years, their conclusions are heterogeneous and most of them have focused on U.S. ﬁrms. 2.
Dimensions of SMS’s growth through innovation
Three main sources of growth can be determined: Technological improvement – It is well known that processes and technology improvements can contribute to meeting quality and process - performance objectives. b) An increase in the quantity of capital – Very often, technology is deeply linked to investment because it is embodied in new machinery and better equipment. c) An increase in the number of workers, their skills and educational levels. Industry growth depends on several internal and external factors, such as physical assets, technologies all along the chain value, human resources in general and qualification levels in particular and also organizational capabilities. In general, the firms are more likely to reap profits and social benefits when they are in high-growth industries. SMEs can increase their activities and businesses in some ways and grow in some dimensions. The following dimensions can be identified: a) Raise the level of integration of the technologies – The management of technologies and the exploitation of all their potential is strictly linked to the possibility of integrate their synergies. b) Intensify innovative technology processes – This direction of innovation is a decisive contribution for the modernization of businesses and the implementation of competitive strategies. c) Increase the number of markets where the company operates – Internationalization and globalization are direct consequences of this decision. d) Increase businesses’ portfolios – The company that today is involved in a given industry can tomorrow widen its investment to other industries; a)
Increase the number of operational uses of technologies – Many technologies can have applications in operations of a different nature. To position strongly for future growth in the global marketplace, an organization has to make some effort to increase its investments in R&D and to focus on the implementation of advanced production innovations and practices. The growth of an organization, the technologies that are being used along all its activities, and business strategies that have been formulated are strictly related. Even organizational culture deals with technologies and growth. Technological progress driven by a decision to enhance productivity and profitability often fosters growth. The competitive success of most enterprises is strongly related to decisions such as: producing products and services according to high quality standards; quantifying production in the correct manner; anticipating and responding to changing consumer needs; reducing production costs in order to enhance profitability. The growth effort has to include: New technologies for manufacturing with ecological safety. Designing and modelling of secure facilities. Adopting zero-waste procedures in manufacturing and processing. Upgrading of existing installations. Developing new organizational tools and methodologies. Reducing resource consumption in order to reach competitive production costs. The success of SMEs depends on: using advanced technologies in an integrated manner, being aware of changing clients’ needs, producing quality goods and services, enhancing profits by reducing costs, reaching new markets within a competitive perspective, wide-open mentality. Many SME’s are not able to envisage growth as a competitive need and this difficult mentality and/or reluctance should be understood. The identification of innovative improvements that could enhance organizations’ movements for growth is a decisive process to reach growth objectives. Innovation in production, distribution, and communication processes serve as a vital source of productivity growth and other competitive advantages. The success of most management innovation processes is also a function of competitive efforts. The managerial decision regarding obtaining growth results has to take into account what is needed to reach a rapid modification in the professional qualification levels of workers and managers. It is indispensable that a strict and dedicated cooperation exists among governmental entities, industries and educational sectors. When an entrepreneur does not have experience and technical knowledge in the financial domain he may have a distorted perception of the reality, because an increase in sales does not necessarily correspond to an increase in profitability and, therefore, does not open the possibility of self-financing. It is well known that some entrepreneurs prefer self-financing because it provides them with more control. It is required to create new higher education models in the domain of entrepreneurship. We agree that a new higher education models will require the commitment of governments, universities, and associations.
The relationship between innovation and HRM
There are no best HR practices, because in order to be effective, HR practices must be consistent with other aspects of the organisation, speciﬁcally its strategy. The most suitable HRM practices for ﬁrms trying to develop a competitive advantage based on innovation will be different to those practices suitable for ﬁrms seeking other kind of competitive advantage. Some studies have focused on some isolated HRM practices while others have focused on the HR system adopted by the ﬁrms. The underlying assumption of these studies is that the impact on organizational performance of sets or “bundles” of interrelated HR practices can be greater that the cumulative impact of all the individual practices comprising the bundle. Most of the above mentioned studies are based on the models proposed by well-known specialists (Miles and Snow and Schuler and Jackson). Their model proposes the development of a market-type HRM system for those ﬁrms deﬁned as prospectors, ﬁrms characterized by the search for new products and markets, which are, therefore, the innovators. They argue that it is very difﬁcult for the ﬁrm to provide the necessary abilities for a new market or product from inside the company and, more importantly, to provide them quickly. Therefore, these authors recommend searching outside for these abilities whenever the organization needs them, i.e. developing a markettype HRM system. Other specialists (Schuler and Jackson) establish a connection between HRM practices and three types of strategy: costs, quality and innovation, deﬁned from Porter’s (1980) classiﬁcation of competitive strategies. Their model starts by analysing the employees’ behaviour required by each kind of strategy;; subsequently they propose HRM practices for the development of these behaviours. In their view, when contemplating an innovation strategy, the ﬁrm needs creative employees who are ﬂexible and tolerant of uncertainty and ambiguity; people who are able to take risks and assume responsibilities, very skilful, able to work in a cooperative and interdependent way and with a long-term orientation. The HRM practices that those systems include are listed in Table I. We can say that, between specialists, there is agreement, ﬁrst, about the importance of linking HRM and innovation and, second, regarding the form of some HRM practices, particularly the use of external sources of recruitment, performance appraisals and incentives. There is no consensus regarding other HRM practices such as employment security, training, career paths or employee participation. Furthermore, empirical research conclusions are also heterogeneous. For this reason, can be formulated propositions about the relationship between innovation and HRM practices following both Miles and Snow (1984) and Schuler and Jackson (1987). The ﬁrst hypothesis refers to isolated HRM practices. 1. The strategy developed by a ﬁrm determines the HRM practices it carries out. Thus, innovative ﬁrms will carry out HRM practices consistent with this strategy. This hypothesis is broken down into two according to the theoretical model employed: a. Firms following an innovation strategy will be characterised by the use of external sources of recruitment, low employment security, narrow application of training, very little use of internal career paths, the use of
performance appraisal systems, incentive-based compensation and low employee participation. b. Firms following an innovation strategy will be characterised by the use of external sources of recruitment, high employment security, broad application of training, the use of internal career paths, the use of performance appraisal systems, incentive-based compensation and high employee participation. The second hypothesis is formulated from a conﬁgurational perspective: The strategy developed by a ﬁrm determines the HRM system it implements. Thus, innovative ﬁrms will implement an HRM system consistent with this strategy. Table 1 - HRM practices for innovation
Source: Daniel Jime´nez-Jime´nez and Raquel Sanz-Valle As in the previous case, alternative hypotheses are formulated according to the reference models, Miles and Snow (1984) or Schuler and Jackson (1987): a. Firms following an innovation strategy will adopt an HRM system characterised by the use of external sources of recruitment, low employment security, narrow application of training, very little use of
internal career paths, the use of performance appraisal systems, incentive-based compensation and low employee participation. b. Firms following an innovation strategy will adopt an HRM system characterised by the use of external sources of recruitment, high employment security, broad application of training, the use of internal career paths, the use of performance appraisal systems, incentive-based compensation and high employee participation. The assumption that strategy determines the ﬁrm’s HRM practices is implicit in these hypotheses, as most of the contingent literature suggests. 3. The HRM practices developed by a ﬁrm determine its strategy. Thus, ﬁrms that carry out HRM practices consistent with innovation will follow an innovation strategy. a. Firms characterised by the use of external sources of recruitment, low employment security, narrow application of training, very little use of internal career paths, the use of performance appraisal systems, incentive-based compensation and low employee participation will seek a more innovative strategy. b. Firms characterised by the use of external sources of recruitment, high employment security, broad application of training, the use of internal career paths, the use of performance appraisal systems, incentive-based compensation and high employee participation will seek a more innovative strategy. Regarding the conﬁgurational approach, the following hypotheses are formulated: 4. The HRM system developed by a ﬁrm determine its strategy. Thus, ﬁrms that implement an HRM system consistent with innovation will follow an innovation strategy. a. Firms adopting an HRM system characterised by the use of external sources of recruitment, low employment security, narrow application of training, very little use of internal career paths, the use of performance appraisal systems, incentive-based compensation and low employee participation will seek a more innovative strategy. b. Firms adopting an HRM system characterised by the use of external sources of recruitment, high employment security, broad application of training, the use of internal career paths, the use of performance appraisal systems, incentive-based compensation and high employee participation will seek a more innovative strategy. Some European studies based on the models mentioned above, on small and medium enterprises, revealed the relation between HRM and innovation. According to the literature, HRM is a key element for the success of innovation, not many empirical studies have provided support for it. Using a contingency approach, different strategies will require different employee skills, knowledge and behaviours to be implemented. Presumably, HRM policies can inﬂuence these employee characteristics. There is agreement between specialists about, ﬁrst, the relationship between innovation and HRM and, second, that in order to improve innovation, the adoption of HRM bundles is superior to any of the individual HRM practices of which they are composed. On the other hand, there are inconsistencies in the literature about the contents of these bundles. Some authors suggest that employment security, extensive training or
employee participation have a positive impact on innovation, while others think they have the reverse effect. 4.
Alternative hypotheses, following the two most widely-accepted theoretical models, have been proposed in this paper. The conclusions drawn from European studies about HRM impact on firms’ innovations using the above models are the following: There are empirical evidences that innovation explains the adoption of some HRM practices. The choice of an innovation strategy implies the use of an incentivebased compensation, the encouragement of employee participation, the use of appraisal systems and the use of broad internal career opportunities. The HRM practices condition the ﬁrm’s orientation towards innovation. The participation and the use of promotion plans signiﬁcantly explain the ﬁrm’s innovation orientation. The importance of aligning HRM practices and innovation is a clear implication for managers. Schuler and Jackson’s model and Miles and Snow’s explains the ﬁt between innovation and HRM. The ﬁrms that adopt an innovation strategy are more likely to use internal labour markets than external ones. The use of HRM practices aimed at building a stable group of employees in the company, which can adopt risks and experiment and which can participate in the adoption of the decisions that affect their jobs. This is more likely to create the conditions for the emergence of the new ideas that feed innovation. Bibliography . Daniel Jime´nez-Jime´nez and Raquel Sanz-Valle, “Innovation and human resource management fit: an empirical study”, International Journal of Manpower . Vol. 26 No. 4, 2005 pp. 364-381 . Laursen, K., “The importance of sectorial differences in the application of complementary HRM practices for innovation performance”, International Journal of the Economics of Business, Vol. 9 No. 1, 2002, pp. 139-56 . Jackson, S.E. and Schuler, R.S., “Understanding human resource management in the context of organizations and their environments”, Annual Review of Psychology, Vol. 46, pp.,1995, 237-64. . Miles, R.E. and Snow, C.C., “Designing strategic human resources systems”, Organizational Dynamics, Summer, 1984, pp. 36-52 . Porter, M.E., “The technological innovation dimension of competitive strategy”, in Rosenbloom, R.S. (Ed), Research in Technological Innovation, Management, and Policy, 1983, JAI Press, Greenwich, CT. . Carneiro Alberto, “What is required for growth?“, Business Strategy Series, Vol.8, No.1 2007, pp. 51-57. . Dalotă Marius Dan, “Successful Implementation of Knowledge Management in Small and Medium Enterprises”, Romanian Economic and Business Review Vol.6 No.1, 2011, pp. 7-18
RELATIONSHIP MARKETING COMMUNICATION CASE STUDY: COMMUNICATION BETWEEN MANAGERS AND EMPLOYEES Assistant Lecturer Cristina NEAGOE, PhD Romanian-American University 1B, Expoziţiei Avenue, Sector 1, Bucharest firstname.lastname@example.org
Abstract: The current situation, of unprecedented development of the internal marketing and of the communication within it, commits any researcher who is drawn to this field, to accuracy, clarity, coherence and astuteness while identifying the mode in which the internal communication plan can be elaborated in tight connection with the organization’s relational marketing objectives (hired personnel’s satisfaction). Communication remains the main interaction element in the internal marketing. However, the indicators with maximum impact on employees’ satisfaction must be discovered and tested. The present study takes into consideration a series of communication variables and submits them to ergonomic tests (descriptive and causal) in order to add value to the managerial planning of the communication strategy. Keywords: relational marketing, internal marketing, communication, employees’ satisfaction JEL Classification: M31 1. Introduction Successively, marketing gained new valences: it moved from orientation towards consumption, to that towards transactions, and further towards competition, and later towards clients. All these determined the almost natural evolution towards relational marketing. Much was written about the network of relations (Gummesson 1994, 1999, 2008) that needed to be build, but the importance of configuring the communication plan’s structure, adapted to these trends, appeared relatively recently in the scientific pursuit range. In direct relation with this range of significant issues we also come across the frequency with which the national and international specialty literature authors bring into discussion the matters of communication channels, techniques and tools capable of sustaining the modern organizations’ ambitious objectives. The current situation of unprecedented development of the internal marketing and of the communication within it, commits any researcher who is drawn to this field, to accuracy, clarity, coherence and astuteness in his investigation.
2. Literature review A thorough analysis of the current stage of knowledge entitles us to act in the direction of emphasizing our national authors’ contribution to enriching the reference conceptual spectrum. One of the latest approaches of the concept of relational marketing introduces new elements that accompany the strategic endeavor: “increase of the capacity to involve all market actors within an assembly of long-term connections; the participative involvement, along with the manufacturers, of the request bearer; the development of some long-term connections between the exchange relationship partners” (Pop N. Al. 2006, pp. 39-40). “In essence, relational marketing refers to the strategic management of the relations with all relevant categories of stakeholders” (Bălan C. 2007, p. 8). The attempt to increase the value perceived by the clients, implies the orientation of the organization’s efforts towards all members of the relations networks, which they themselves represent a value generating chain, and therefore an important aspect in the strategic planning of relational marketing. Traditionally, the external interested parties (consumers, intermediaries, financial groups, etc.) have been the target of marketing communication. The importance, at internal level, of all persons implicated in the changing process and in orientating the communication effort in this direction, lead to the appearance (in the 80’s) and development of the concept of internal marketing. More and more organization understood the role that employees hold in attaining the global strategic objective. By coherently planning the internal communication, the organization can stimulate its employees to adhere to their own values and beliefs, strategies and objective, thus making possible the mission to eliminate the difference between the consumers’ perception regarding the brand and what the organization really transmitted (Fill Ch. 2006, p. 325). Communication remains the main interaction element in the internal marketing. In the internal marketing, the communication means can be grouped in two categories: customized and un-customized or medial, as presented in table no.1. Table1. Typology of the internal communication Mode of addressing Customized Un-customized Fluency of endeavor (medial) Continuous customized Un-customized internal Continuous internal communication communication (medial) Example: Example: • trainings and schooling • employees’ newsletter • group projects • intranet • mentorship • video Sporadic
Sporadic customized internal communication Example: • workshops • discussions with the employees
Sporadic un-customized internal communication (medial) Example: • news-board • circular (letter)
Source: Bruhn, M., 2007, p. 233
The creation of partnerships represents a priority for the top management. The first stage is represented by the need to carry out a complex investigation of the communication flows found at internal level in the organization. Finalizing this action presents the persons responsible with elaborating an internal communication strategy, a comprehensive image containing the following indicators of interest: - Dimension of communication (inferior management, team, project team, superior management); - Level of communication (coordinators, teammates, project colleagues, top managers, top managers); - Direction of the communication flow (predominantly bidirectional, bidirectional, bidirectional, unidirectional); - Participants to the communication process (coordinators, employees, top managers); - Message content (role of employees, personal impact, information on the project, on everyone’s tasks, organizational objectives, launch of new products) The results associated to the investigation are contained in five columns, as observed in the table below, no. 2: Table2. Internal communication matrix
Direction the communication flow
Participants in the communication flow Coordinators
Employees Employees Team
Content of the message
Employees’ role, personal impact, etc. Necessary information, discussion on the team’s tasks, etc.
Employees Project team
Information on the project, etc.
Bidirectional Employees Top managers
Predominantly unidirectional Employees
Organizational objectives, development, launch of new products, etc.
Source: adaptation after Welch and Jackson (Fill Ch., 2009, p. 898)
Defining the research problem: identify the mode in which the internal communication plan can be elaborated in tight correlation with the organization’s relational marketing objectives. In these conditions, it is compulsory to find the optimum communication versions that can increase the employed personnel’s degree of satisfaction. The connection between the internal communication and employees’ satisfaction is the object of a complex analysis presented in a recent study. Its results form a valuable premise for the present study: - “Between cultivating satisfaction among the employees and internal communication there is a positive connection, but not a strong one. The role of internal communication is not crucial with reference to employees’ satisfaction, as it explains only 31% of the total” (Neagoe C., 2012, p. 178). The purpose of the quantitative research is defining and testing some internal communication indicators with reference to their impact on employees’ satisfaction. The quantitative research has the role of offering support for designing future complex, conclusive studies that offer clear and adequate premises. In order to ensure support while coherently developing the endeavor, the questioning took place with the help of interviewoperators – as they are prepared to offer the possibly necessary clarifications. The research sample is made up of a number of 250 employees, excluding the ones in a management position as it has been intended to present the personnel’s perception regarding the manner in which the degree of satisfaction can be increased at the work place. The studied collectivity has been selected randomly from different divisions, positions and metropolis field organizations and the collection period for the answers has been MarchJune 2012. Main obtained results: Descriptive analysis - The employees’ preferences regarding the communication tools are mostly orientated to those that allow face-to-face or phone contact (the phone being the most used means of communication at internal level – this statement has been registered for 65% of the questioned personnel); - The communication flow described as containing an increased efficiency by most of the questioned personnel (87%) is the bidirectional one; but only 41% of the questioned personnel consider that the internal communication plan is characterized by such a flow. Econometric analysis The analysis of the results in terms of regression coefficients leads to obtaining information that mostly reflects: - “The organization’s reputation” has a substantial impact on employees’ satisfaction and on the way they perceive the organization’s internal climate (value of coefficient – 0.186). This result can be explained by the fact that the organizations’ reputation leads to the perception of high performances on the part of the organization. - “The degree of information”. Since the regression incline is positive, it shows a direct action of the degree of information on the employees’ satisfaction. Results’ interpretation show that should the degree of personnel information increase with 1%, satisfaction modifies to positive by 0.112%.
4. Conclusions and managerial implications The main communication problems at internal level are related to the absence, in most part, of the bidirectional flow communication. The natural recommendation for managers is to surpass the stage of communication to the employees towards the stage of implicating them in the communication process by stimulating feedback or interactive type participation. The econometric studies complete the image resulted from interpreting the descriptive information in order to offer a real support at strategic level. By correlating the results of the econometric analyses, we can observe that for the organization’s intangible values (e.g. organization’s reputation) to be reflected in the hired personnel’ satisfaction, managers have to ensure continuous information at internal level, in a management – employees flow, with reference to financial results, future strategies, marketing, branding results, etc. Bibliography: . Ahmed P., Rafiq M., Internal marketing, Ed. Butterworth – Heinemann, 2002 . Batterley R., Leading through relationship marketing, Ed. The McGraw – Hill, 2004 . Bălan C., Managementul relaţiilor cu clienţii: valenţe strategice, operaţionale şi analitice, Marketing Online Journal, Vol.1, Nr. 3, 2007 . Bruhn M.- Orientarea spre clienţi, Ed. Economică, Bucharest, 2001 . Fill Ch. – Simply Marketing Communications, Ed. Prentice Hall, 2006 . Fill Ch. –Marketing Communications: interactivity, communities and content, V-th edition of Ed. Prentice Hall, 200 . Freeman 1984 in Involving stakeholders in developing corporate brands: communication dimension, Gregory A., Journal of Marketing Management, Vol. 23, Nr 1-2, pp. 60, 2007 . Helm S., Employees’ awareness of their impact on corporate reputation, Journal of Business Research, 2010 . Neagoe C., Comunicarea de marketing relațional. Teorie și practică., Editura Universitară, v 2012 . Pitt L., Foreman S., Internal Marketing Role in Organizations: A Transaction Cost Perspective, Journal of Business Research, Nr. 44, 1999 . Pop N. Al., O nouă paradigmă în marketingul contemporan;; marketingul relaţional, Management& Marketing Journal, Iss.3, pp.33-44, 2006 . Ruyter K., Wetzels M., The role of corporate image and extension similarity in service brand extensions, Journal of Economic Psychology, Volume 21, Issue 6, pp. 639-659, December 2000
STRATEGY – MAIN COMPONENT OF THE STRATEGIC MANAGEMENT PROCESS, IN THE CONTEXT OF ORGANIZATIONS ADHERING TO THE KNOWLEDGE BASED MANAGEMENT Assistant Lecturer Anca CRUCERU, PhD Romanian - American University, 1B, Expoziției Avenue, Sector 1, Bucharest email@example.com
Abstract: Strategy and strategic management are two concepts that must not be mixed up. The process of strategic management includes, among others, the foundation and drafting of a strategy. Furthermore, strategy also represents an efficient means to adapt and answer to the requests of the external environment. Therefore, the application of an efficient strategic management process allows the organization to adapt to the external environment changes, and furthermore to the knowledge based management and organization. Keywords: strategy, strategic management, change, knowledge based management JEL Classification: D80, M10, M20 Strategy and strategic management are two concepts that must not be mixed up; as strategic management illustrates “not only a process to form a strategy that overlays the organization’s management system, but also a form of management based on strategy” (Naneş, 2003, pp. 47). The concept of strategy has already been presented in a previous article (Cruceru, 2012, pp.51- 52), thus, hereinafter we shall define the concept of strategic management, precisely in order to support the statement from the above paragraph, according to which strategy represents a main component of the strategic management process. The concept of strategic management has been approached by many specialists (Igor Ansoff, Fred David, Richard Daft, Yvan Allaire, Bogdan Băcanu, Ovidiu Nicolescu, Eugen Burduş, Marcela Naneş, Ioan Ciobanu, Doiniţa Ciocîrlan, Marius – Dan Dalotă, Corneliu Russu, Amedeo Istocescu etc.) as follows: Fred David (Ciocîrlan, 2009, pp. 32) – considers strategic management as being the art and science that forms, makes operational and evaluates the decisions that offer the organization the possibility to fulfill its target objectives; Amedeo Istocescu – strategic management represents “a particular approach of organization administration, that targets ensuring a tight “connection” between global strategy and operational policies” (Istocescu, 2005);; Ovidiu Nicolescu, Ion Verboncu (Nicolescu, 1998, pp. 39; Nicolescu, Verboncu, 2007, pp. 144) – consider the approach of J. Pierce and R. Robinson as being the most comprehensive with reference to the complexity of the concept of strategic management; from their point of view, strategic management represents a set of
decisions that takes shape by drafting and applying (make operational) some plans meant to fulfill the organization’s objectives;; Doiniţa Ciocîrlan – “strategic management is the science and art of creating, developing, and maintaining profitable a functional economic type structuralorganizational entity in a continuously changing environment” (Ciocîrlan, 2009, pp. 9); Eugen Burduş (2005, pp. 635) – defines strategic management as that process through which the organization’s strategic objectives and strategic options necessary in order to fulfill the target objectives are determined, while taking into consideration the endogenous and exogenous variables (forces), with the purpose of carrying out managerial changes critical to this process and of adopting the decisions necessary for strategy implementation. It is my opinion that strategic management represents the processes of foundation, drafting, implementation and control-evaluation of a strategy that satisfy fulfilling the organization’s mission in a continuously changing environment. In order to understand the operating mechanism of the strategic management process, I will present its stages. In this context, it has to be said that many specialists (Peter King, J. Pierce and R. Robinson, L. W. Rue and Ph. G. Holland, O. Gelinier, W. F. Glueck, A. Sharplin, F. David, Ovidiu Nicolescu and Ion Verboncu, Amedeo Istocescu, Tiberiu Zorlenţan, Eugen Burduş, Doiniţa Ciocîrlan, Marius – Dan Dalotă, Constantin Bărbulescu etc.) from the management field have proposed different models regarding the content of the strategic management process. I have chosen as example the model proposed by Ovidiu Nicolescu and Ion Verboncu (Nicolescu, 1998, pp. 165 - 184; Nicolescu, Verboncu, 2007, pp. 178 - 195), as I consider that they have “captured” best the operating mechanism of the strategic management process, while using a language easy to understand both by a specialist and especially by a simple reader, offering the possibility to understand the importance of this concept within an organization. This model contains three main stages, and each one, at its turn, contains multiple phases: 1.
Founding the strategy: 1.1. Setting the strategy’s premises and their analysis -
The need to identify the organization’s stage of existence and its strategic characteristics; Accurately setting the organization’s endogenous and exogenous determinants and their influence; Ensuring the continuous need to formulate and implement some strategies and policies in a dynamic environment; The pluridimensionality of the global strategy; Taking into account the fact that strategy formulating and making operational have to be approached systematically; The flexible character of strategy; Elaborating strategies while taking into account the internationalization trend of the economic activities; International exchange of managerial know-how;
1.2. Determining means of strategy foundation 2.
Determining the existence of micro and macro-economic forecasts and using them in order to characterize the environment in which the organization runs its activity; Compile diagnostic studies that show the organization’s strong and weak points, but also its opportunities and threats; Carry out marketing studies that supply information regarding the market where the organization wants to fulfill its mission; Carry out ecologic studies.
Enunciating the strategy: 2.1. 2.2. 2.3. 2.4. 2.5. 2.6. 2.7.
State the organization’s mission;; Set the strategic objectives; Determine the strategic alternatives; Foundation the requirement of resources; State the starting and finishing dates; Determining the competitive advantage; Putting together all the above elements in view of outlining the global strategy; 2.8. Formulating strategies on fields of activity; 2.9. Elaborating global policies and the organization’s operational policy.
3. Making the strategy operational: 3.1. Adapting the organizational culture to the new changes enforced by strategy and setting the budget necessary to ensure the fulfillment of material, human and financial conditions in order to support the operationalization of strategy; 3.2. Total or partial redesigning of the organization’s management system;; 3.3. The actual implementation of the provided strategic modifications; 3.4. Measuring and evaluating the effects of strategy operationalization; 3.5. Formulating and implementing some corrective measures (if needed). At the same time, strategy is an efficient means for an organization to adapt and to answer to the external environment changes. Therefore, I consider that a new approach regarding the strategic management process should also be taken into consideration; an approach recommended by Doiniţa Ciocîrlan (Ciocîrlan, 2009, pp. 39 – 42). This methodological endeavor combines the specialists’ ideas regarding the content of the strategic management process with the convictions, also, of the specialists regarding the stages of the process of managerial change and change management, as follows: 1. 2. 3. 4.
The organization’s top management identifies the importance of the need to change and of using strategic management with the purpose of adapting to the changes that take place in the external environment; Adopt the decision to change at top management level; Establish the team that shall carry out the strategic analysis; Initiate the strategic analysis activity;
5. 6. 7. 8. 9. 10.
11. 12. 13. 14.
Gather the information necessary for the strategic analysis team; Analyze the gathered information and present a synthesis (use the analysisdiagnostic method that contains the organization’s internal and external diagnostic); Formulate a global strategy and partial strategies, indicating the scenario method as means to determine the strategic alternatives; Dissolve the strategic analysis team; The top management accepts the global strategy and the partial strategies; “Arrange” the organizational climate necessary for operationalizing the planned strategy and the organizational changes (transmitting the information, finding the forces that oppose the changes, reducing or excluding the resistance towards change both on the part of the organization as well as from its employees); Initiating the process of implementing both the strategy and the changes necessary for supporting the strategy; Deploying the strategy’s control – adjustment process; Establishing the new values and behaviors that support the newly accomplished changes; Evaluating the results obtained following strategy implementation.
In conclusion, the strategic management process is a dynamic, continuous, iterative and interactive process; which implies that any change occurring within its components shall determine changes at the level of the entire process. Therefore, in consonance with the previous idea and in the context of adhering to the knowledge based organization and management, the organizations must adjust their strategy and strategic management in view of fulfilling their mission in profitable conditions.
Bibliography: . Burduş, E., 2005. Tratat de management, Editura Economică, Bucharest, ISBN 973-709-117-5 . Ciocîrlan, D., 2009. Management strategic, Editura Universitară, Bucharest, ISBN 978-973-749-632-4 . Cruceru, A., 2012. The Role of Strategy in The New Organizational Context, [online], Available at: <http://issuu.com/bcadv/docs/revista_hmm_vol.2iss.3?mode=window&viewMode =doublePage>, [Accessed 14 January 2013] . Dalotă, M.D., 2008. Managementul strategic al firmei. Fundamente teoretice, studii de . caz, teste grilă, II-nd revised Edition, Editura ProUniversitaria, Bucharest, ISBN 978-973-129-321-9 . Istocescu, A., 2005. Strategia şi managementul strategic al organizaţiei. Concepte fundamentale. Aplicaţii manageriale, [online], Available at: <http://www.biblioteca-digitala.ase.ro/biblioteca/pagina2.asp?id=cap1>, [Accessed 20 November 2011]
. Naneş, M., 2003. Management strategic. Concepte, metodologie, studii de caz, Editura Sylvi, Bucharest, ISBN 973-628-020-9 . Nicolescu, O. (coordonator), 1998. Strategii manageriale de firmă, Editura Economică, . Bucharest, ISBN 973-9198-26-0 . Nicolescu, O., Verboncu I., 2007. Managementul organizaţiei, Editura Economică, Bucharest, ISBN 978-973-709-343-1 . Zorlenţan, T., Burduş, E., Căprărescu, Gh., 1998. Managementul organizaţiei, Editura Economică, Bucharest, ISBN 973-590-070-x
THE QUALITY SYSTEM – MAJOR KEY IN THE TOURISTIC SERVICES Lecturer Marian Florin BUSUIOC, PhD Romanian American University 1B, Ezpoziției Avenue, Sector 1, Bucharest
Lecturer Andreea BUDACIA, Ph.D
Romanian American University 1B, Ezpoziției Avenue, Sector 1, Bucharest
firstname.lastname@example.org Abstract: In present, the tourism has become a social and economic phenomenon, with an important influence on the future of the world society. Since tourism tends to become a more and more important branch of the economic activity, it is essential to think about the quality of the touristic offer which has to be considered and designed in connection with the requirements of the demand that grows simultaneously with social and political changes. The quality system is made of a set of procedures whose management in an enterprise, is closely connected with the economic efficiency. The novelty of the system consists in directing the quality control towards the conception – designing stage with the aim of shortcomings prevention and towards the last stage which is the consumer’s use. Key words: Tourism, the quality system, objectives of the quality insurance system, the touristic offer Jel Classification: L83, M31 According to the World Tourism Organization opinion, the touristic activity is a form of cultural – educational and recreation manifestations of the modern society. In present, the tourism has become a social and economic phenomenon, with an important influence on the future of the world society, that all further developments of different fields of activity will have to make into account the qualitative and quantitative evolution of tourism. Setting tourism in the frame of the global Romanian economy imposes a growth in the quality both of the whole touristic activity as such and of the activities which participate satisfying of the touristic consume. As an important means of growing Romanian’s prestige and material and spiritual values over the world, tourism may have best results in these domains only if its specific activity is carried out at high parameters. Out of the set of aspects which draw our attention in the process of quality raising in the Romanian tourism, the services prove to have an important contribution. The national and international experience shows that the more services are carried out at higher quality parameters (the contents, the fastness, the high level of meeting the clients’ requirements), the more the touristic offer is asked for. In most of the cases it was noticed that the concern of the personnel in the touristic services sector represents the main factor
in ensuring the reputation and success of the touristic product among both the native foreign tourists. Since tourism tends to become a more and more important branch of the economic activity, it is essential to think about the quality of the touristic offer which has to be considered and designed in connection with the requirements of the demand that grows simultaneously with social and political changes. The quality system is made of a set of procedures whose management in an enterprise, is closely connected with the economic efficiency. The main characteristic of the system is the simultaneous application of some methods of quality management during all the stages and cycles of production and in every work place. The novelty of the system consists in directing the quality control towards the conception – designing stage with the aim of shortcomings prevention and towards the last stage which is the consumer’s use. The system generates an informational start-ends flow between all the stages of the production cycle and between all the stages of the life cycle. The system of quality insurance is used as an efficient management instrument and it represents a granting element for the provider within the contractual relations. The main objectives of the quality insurance system are: the achievement and maintenance of the products and services quality for the permanent meeting of the level of the consumers requirements; the grant of the management board itself that the quality level shall be reached and the aimed quality will be maintained; the trust of the user that the quality level will be assured in conformity with the contract stipulations; the objective necessity of the quality insurance system is determined by; the rise of the quality weight within the competition of both products and services on the market; the expansion of the automation, informatization of the production processes; the raise of the expenditure for quality within the total production costs; the raise in the offer of goods and services which generated a rise in the consumers’ requirements;; the raise of the system’s importance in the efficient turning of the material and human resources into quality goods and services able to be sold and therefore accepted by the user; the decisive influence of the quality over the other economic indicators of the enterprise. For any service (tourism) enterprise which wants to implement a quality control, a very important role is played by the enterprise management if they want to become a top enterprise. The management has to decide: - if the application of the quality control is possible and if the improvements are desired; - how they can set objectives for the whole unit and for each person; - how can the quality policy be known in the tourist unity in which it is applied. The managing board has to pay as much attention as possible to the personnel instruction. The code or regulations of a good professional practice can become the fundamental instrument for a collective improvement in any category of services.
When a service has to meet the quality requirements, each of the employees has to know in every little detail his professional attributions, obligations and responsibilities, the information he should give and whoever can provide them, what is the amount of the financial value of this work. The managing board has to take the responsibility of organizing the work, the use of an efficient information system, the implementation of a quality control department having a great competence and experience. At the same time the management of a tourism unit has to feel the “necessity” to be aware of the loss due to the “poor quality” of the services performed and also the urgency of the shortcomings evaluation and errors in management awareness. The tourism units to star the analysis with the knowledge of the client, thinking of what he desires and how they may come to meet his requirements. The tourism units have to make a good impression on the client from the very beginning. The psychological aspect of one person’s behavior should not be missing (in the day by day life but mainly when going on holiday) which is a relevant aspect mentioned by the manager of a big hotel group in Hong-Kong: “I think that people want to be guided or directed (even if they do not admit that) and there has to be someone – why not us – to perform this role”. The prosperity of a hotel comes from quality, from the personnel’s behavior and from the hotel’s management. By means of the contract with the client the conditions for a good quality of the service can be settled. Irrespective of the diversity in the regional customs, by means of the censuses made among the tourists and travelers, some common requirements will be found in terms of silence, comfort, security, hygiene, entertainment and these should be the directions towards which the main efforts should be directed. Nowadays, in many countries, goods and services tend more and more to comply with a “special” psychological demand of the consumer. Thus the goods or services are added a “psychic component” and the consumer is glad to pay for this advantage. The personnel of each tourism unit have to be characterized by a remarkable faithfulness. The errors, negligence, lack of politeness can do much harm to a hotel, as the image of its firm is made as consequence of the appreciations expressed or spread by its clients. It is proved that a satisfied client can positively influence 8 other persons, meaning 8 future potential clients, whereas a dissatisfied client can negatively influence about 17 persons about the respective housing unit. Therefore, it is much more difficult to re-make a compromised image than to make a good image (advertisement) from the beginning of goods, products, units. The imagine is a synthesis of four components of cognitive, affective, personal and social nature: existence, intensity, clearness, specificity of the image. With a view to implementing quality control there works the so-called “committees for quality” which permanently analyses and apply measures for the service insurance and control in the hotels. The “services” is a process very much like that of industrial production, in other words, a repetition, a production flow in stages, phases of operations ending with a financial invoicing. A model or norm for the organization of the quality control in a service unit has to contain: the application decision, the working team, the improvement measures, the creation of quality interest ambient, the detection of shortcomings and errors, the correcting
actions, the recognition of successes and positive efforts, the continuing professional formation, the control of objectives accomplishment, the periodical analysis of the results. The first action to be made by the management when aware of what the needs are and what has to be done is to call the main responsible, inform them about the action, educate, form and instruct them, give them a plan of work and control the results and progress obtained. In order that the application should be efficient, as a rule, “a Management team” is created in order to issue a program or a plan to introduce or improve the quality. This team has the task to plan the quality control implementation which has to make clear within the fixed period of time (week, term etc.) the amount of tasks to be performed by each department, sector or section in the unit. In case of a hotel the following should be show: the technical process of the service, the advertising of the hotel’s services;; the reception of requests, reservations, information asked by the client (kindness, politeness, operativity, concision);; the client’s registration (simplification, speed); accompanying him to the room, carrying the luggage; presenting of the key (while accompanying him to the room); presenting the room service (radio, TV, telephone, restaurant services etc.); floor service (tidiness, noise, heating, air conditioned, bar etc.); restaurant - cooking, menu, prices. In many countries there is a hotel network with very similar services and that is because they did organize a quality control of the services, but we can also notice that these hotels are full, very much asked for, especially in terms of the binomial relation quality – price. They have a “Quality Handbook” in which the management has clear tasks for each employee, as to what and how he has to do, showing clear advice, instructions and specifications. In all the hotels in Tokyo, Osaka, Yokohama posters with moral sayings are to be found, as much as practical and hygiene advice for the living style. There are lines and fragments of poems. These posters with flowers and birds say, in English translation: “A hotel is a plum-tree full of tasty fruit: nightingales are the guests housed in its branches”. The great hotel owners in Japan made the agreement, in one of their reunions held in Tokyo, that among other promotion means they should order to a great national poet a ballad about the first rank services from the Kingdom of the Rising Sun. This is indeed an extraordinary idea which no hotel owner in Europe or America should have ever considered as advertising means. The improvement of a service quality is a “realitively easy” task, but the key to commercial success is represented by the maintenance of the good quality. For the quality of the services performed two conditions have to be observed: the personal training and discipline. The control of the faultless application by each tourism employee of those he was taught is permanently necessary by means of some exigent and sufficient control in terms of frequency and domain aiming at the rise in responsibility for the quality of the activity carried out in tourism. It is worthwhile to consider also the issuing of a code which is to state the obligations, the rights, the behavior norms etc. of all those working in this field. Besides the effect in the rise of responsibility, such a normative act should contribute to the rise in the prestige of tourism professional and improve the interest of those with real vocation for the respective jobs, to work in this field.
The success of the implementation of the quality system in tourism is to be found in the concern of the whole personnel from the porter to the manager. The achievement of the quality has to be the result of a collective effort of all those interested. The tourists today are very exigent in the balance of the relation price-servicesquality. Most frequently the objections of the tourists make no reference to the price itself but to its high rate as compared to the quality offered. The visitors are more and more sensitive to the quality of the touristic offer and they ask for physical security, comfort, hygiene, a better quality of the resources. The touristic offer should be prepared to face the disabled tourists too, therefore the touristic should be diversified from more and more points of view. In terms of human resources, the improvement of the working conditions in the touristic units is necessary, mainly in the little and medium ones, and a bonus system for the stimulation of the personnel is also needed. The tourist is more and more looking for new experiments when traveling. That is why the touristic offer has to meet his information need, his curiosity about certain details or customs. Thus, a clearer evaluation of the service quality is requested, taking into account the increasing economic importance of the services, representing even more than half of the national gross product in the industrialized countries. The research and control of the services quality request a multidisciplinary analysis. It asks for a synthesis between different factors and an increased participation of the consumers and users to the decision, a personalization of the economic relations and new relationship between the participating units to the same final service and also new relationship between the operators, within the service network, and the users. Bibliography: . E.A. Budacia (coordinator) – Managementul serviciilor, Ed. Universitară, Bucureşti, 2010 . E. Radu – Managementul firmei de comerţ şi turism, Editura si Atelierele Tipografice METROPOL, 1994 . E. Radu, G. Ţigu – Managementul operaţiunilor în întreprinderile de servicii, Editura ASE, Bucureşti, 2002 . E. Radu (coordinator) – Management operaţional, Editura ASE, Bucureşti, 2006 . V. Neagu, M.F. Busuioc – Managementul calităţii serviciilor turistice, Editura Pro Universitaria, Bucureşti, 2007
Published on Dec 30, 2012
Published on Dec 30, 2012
The School of Management-Marketing of the Romanian-American University prides itself that as ambitious newcomers in the educational field, w...