Electronic Library of Scientific Literature
Electronic Library of Scientific Literature
Volume 45 / No. 11 / 1997
Štefan SLÁVIK
Change management is a subdiscipline of management created as an integrated
set of knowledge at the beginning of the 90s, though management in fact
is actually change management from the 60s. Although the first publications
dealing with changes within enterprises and the business environment appeared
in the 50s, the definite conceptions and opinions on the topic have matured
only in present times.
Change management is coming into the centre of managerial work. Business
managers have to be able to cope with changes which emerge suddenly without
previous warning symptoms and are difficult to foresee. The changes are
profound, frequent and irregular, gaining the character of discontinuity.
The main and primary source of change is an external environment which
is unstable, turbulent and chaotic. A part of the impulse for change emerges
inside the enterprise as well.
Traditional and classic methods of management can cope with standard changes
which do not influence the enterprise in principle. In the 90s, indeed,
business management already deals with change management, which means to
foresee and identify the change, to overcome resistance and antipathy towards
the change, to accept and adapt to the change.
As the pioneer in change management theory we may consider the American
psychologist Kurt Lewin, who developed the model of the force field in
which change is characterized as a state of imbalance between motive powers
(pressures in favour of the change) and contradicting powers (pressures
against the change). On the contrary, change not can occur if the powers
maintain balance.
The conception of the mentioned model may be further developed and updated.
The external factors which are the sources of external unstability and
turbulency may be divided into the following areas:
political and economic environment,
social environment,
technological environment,
business environment.
Some external factors and internal factors overlap (e. g. technology).
Even in this sphere it is possible to pick out several areas as sources
of change. The topical task of Slovak enterprises is to understand the
necessity of the changes and to carry them out. The changes should be implemented
in the following parts of the internal environment within the enterprise:
staff (personnel),
organizational structure,
technology finance,
marketing.
Change management is characterized by the following particularities:
Change is always new, there is no prototype for the change.
Change is personal.
Change is divisible to a set of elementary changes.
People have learned to live through changes without changing themselves.
Change management is also the management of feelings.
Confidence between initiators and executors is a necessary prerequisite
for a successful process of change.
Change of one part shifts the balance of the other part.
Process of change consists of several phases.
Errors and mistakes in any phase may influence the total result in a negative
way.
The main problem of change implementation is to overcome antipathy towards
the change. The preparation and implementation of the change activate a defense
mechanism which ignores or belittles the inevitability of the change. The
resistance or antipathy towards the change occur when the employees do
not support the effort for the change. Among the causes of antipathy may
be the fear of harming one's own interests, misunderstanding, the sensation
of uncomfortability, incredulity, different valuations of the change urgency,
inertia of the company culture, etc. In the background of all causes of
antipathy is usually an indirect calculation that the costs of the change
exceed its contributions.
The resistance to the change may be overcome by means of good communications,
suitable stimulation, the involvement of employees who are the subject
of the change in the process of change propositions and implementation,
and by finding the operative moment when the employees are ready for the
change. Managers do not often understand well that the causes of antipathy
may follow from different points of view. The top management considers
the change to be an opportunity to improve the position of the enterprise,
to undertake an attractive challenge and to advance in the career. On the
contrary, for many subordinates, including managers on the middle level,
the change is neither desired nor welcome because it affects stable running
operations, is disturbing and destructive.
A scheduled approach to change management has prevailed in the theory and
practise of change management during the last 50 years. This was based
on the pioneer work of Kurt Lewin. According to this approach change is
supposed to be the process of moving from one exactly-defined point to
the other by means of sequences of foreseeable and in advance planned steps.
Considering the study of various models of the change process and observations
from economic practice, I would like to suggest the following steps of
a successful change management process:
To foresee and identify the changes.
To provoke the sensation of the change urgency.
To create focuses of the positive deviation.
To formulate the target state.
To communicate the target state
To overcome the obstacles.
To plan and implement short-term targets.
To maintain tension and enthusiasm by means of deepening and consolidating
the partial changes.
To fix the new approaches and attitudes.
A more flexible approach to change management is called spontaneous,
though desig-nations such as a continual improving or learning in organizations
begin to appear. According to this approach the impulse to the change moves
on the managing vertical from bottom to top rather than from top to bottom.
This approach perceives change as a never ending, continuous process of
adaptation to changing conditions. The process of change is supposed to
be a process of learning and it is not limited only to changes in organizational
structure and working procedures.
Though the spontaneous approach to change management does not dispose of
a set of direct methods, the process of change is influenced, from this
point of view, by the following factors:
organizational structure,
company culture,
learning capacity of the enterprise,
behaviour of the managers.
The scheduled approach is more adequate for the stable or predictable
environment. It suggest a favourable internal environment within the enterprise
or will create it by using appropriate tools. The spontaneous approach
is supposed to be used in enterprises operating in uncertain and unforeseeable
conditions which are very difficult to influence. Change is a continuous
process of adaptation which managers are not able to identify and manage
fully and effectively.
The growth of the dynamics and complexity of the business environment complicates
the formulation and implementation of business strategies. The essence
and nature of the strategy in unforeseeable conditions is not a combination
of products, services and markets, but the dynamics of a business behaviour
and its ability to adapt. Thus strategy is shifting to the formation of
an internal environment which activates flexible and independent thought.
Ladislav UNČOVSKÝ
In 1997 the Nobel prize for economics was granted to economists Robert
C. Merton and Myron S. Scholes. Fischer Black, deceased in 1995, took part
in their achievement. Their work opened new ways for economic evaluation
in many fields and supported the creation of new financial products.
In 1990 a group of American economists got this award (H. Markowitz, M.
Miller and W. Sharpe) for development of financial market, especially portfolio,
theory. This theory is nowadays classical. The theory of some new phenomena
on financial markets was developed by the winners of the 1997 prize.
The most important change of recent years on world financial markets is
the appearance of derivatives. They are products whose value is derived
from the values of underlying assets. Forwards is an advanced amount of
currency or commodity settled by a con-tract between a buyer and a seller.
It is a once-only deal between the two parties, where the seller undertakes
to provide the buyer with a fixed amount or commodity on a fixed future
date and at a fixed price. The oldest type of derivatives is an option,
the contract giving the right to buy or sell a financial instrument or
commodity at a specified price on a specified date or within a period.
Options exercisable on a specified date are European options those, exercisable
within a given period are American. If the option gives the right to buy,
it is a call option; when the right is to sell, it is a put option. The
most important quality of options is that they can be either exercised
or disregarded. There is no obligation to exercise.
Not only a security, but a commodity as well may serve as an underlying
asset.
Other types of derivatives are connected with fixed and binding obligation.
The best known instrument for purchase and sale of financial instruments
and commodities at a date in the future are known as futures. They are
fixed and binding contracts for a standard amount to be sold at a fixed
future price. They are objects of trade on futures markets. In the US,
currency futures have been traded since 1970.
More sophisticated derivatives are swaps. They are transactions whereby
a security is sold to a buyer in exchange for the purchase from him of
a security of the same value. The aim is to obtain an asset preferred by
the partner or to eliminate unfavourable price development. In foreign
exchange, a swap is the purchase or sale of a currency in the spot market
against the purchase or sale of the same amount of the same currency on
the forward market.
New types of derivatives are derivatives on interest rate and share indices.
Derivatives are used for hedging and for speculation.
Special exchanges for futures trading originated in the US for trade with
agricultural commodities. Exchanges for financial derivatives originated
in the 1970s. In Germany such an exchange was created in 1988.
The rise and development of futures markets brought large changes in world
financial markets. Large volumes and a high dynamic of trades were in some
cases connected with a certain destabilisation.
On emerging financial markets trade with derivatives is only at its beginning.
So in Slovakia certain attempts with derivatives were undertaken. Their
trade on organised markets is in its beginning. The first experiment with
a specialised futures exchange in post-communist countries was the foundation
of the Bratislava Options Exchange.
The development of futures markets made the problem of derivative evaluation
and pricing more complicated. A sophisticated theory of pricing derivatives
is the result of last year's Nobel prize winners' investigations. The best
known paper is The Pricing of Options and Corporate Liabilities
from 1973, where the Black-Scholes model of European call options pricing
was published. For users with adequate software this model is simple. More
complicated is the theory used for its formulation. The theory of random
processes was applied, starting with the premise that changes in prices
of stocks are a kind of Brownian motion.
Further development of the mentioned model enabled its adaptation for other
types of securities. These results are connected with the paper of Robert
Merton's The Theory of Rational Option Pricing, published in 1973.
The 1997 Nobel prize winners contributed to other developments in this
field. Their results are a contribution to the further application of quantitative
methods in finance. The incorporation of these method is important without
making finance a part of mathematics.
Jaroslav FIDRMUC
To characterize more closely the actual situation in the Slovak enterprise
sphere and especially its export orientation, 20 enterprises were chosen
and case studies of these were prepared.
A common feature of these enterprises is their importance, in fact they
are vital for the economics of the country as a whole; not all these enterprises
are good, some are weak and there are even those where dissolution of the
enterprise is in question, as well as the possibility and desirability
of their revitalization. These selected companies are either the biggest
enterprises - real flagships of the Slovak economy, or medium sized enterprises
important by their position in the branch and in the Slovak economics as
a whole. Both of these define and lead the way for other enterprises. A
special position here is occupied by enterprises either fully owned by
foreign capital, or with a decisive capital investment. These enterprises
can afford losses even for several years, and at the same time vast investment
activities, because they have at their disposal sufficient capital and
possibilities of sales. In spite of their relatively small number, these
twenty selected enterprises define to a great extent the operation of the
whole economics of the country and prospects for its development. Following
the development and problem solutions of these selected enterprises, one
can make conclusions for the whole enterprising sphere of the Slovak Republic.
In terms of various features one can classify these selected enterprises
into three main groups.
The first consists of enterprises that are already adapted to the market
economy and achieve sufficient profits. In spite of their dependence on
credits - domestic or foreign, thanks to their solvency they have no problem
obtaining credits. These enterprises may be temporarily loss-making, but
with sufficient, mostly foreign, financial resources. In the list of observed
members of this group are VSŽ Košice, Slovnaft Bratislava, Slovakofarma
Hlohovec and all enterprises owned fully or at least as majority shareholders
by foreign investors - Henkel Bratislava, Hirocem Rohožník, Kablo Bratislava
and Volks-wagen Bratislava.
The second group is formed by enterprises which still have problems of
adaptation to the market economy, have big transformation problems, sales
and financial problems, but are nevertheless able to develop themselves
without the necessary help of government. In the list of observed enterprises
to this (biggest) group of eleven enterprises belong the following: Chemolak
Smolenice, Chirana-Prema Stará Turá, Ozeta Trenčín, Palma Tumys Bratislava,
Plastika Nitra, Protetika Bratislava, TOS Trenčín and all four foreign
trading companies - Chirana Export Piešťany, Incheba Bratislava, Kerametal
Bratislava and Omnia Bratislava.
The third group consists of those enterprises considered for dissolution
rather than revitalization, even though they would need just this help
of the government because of their heavy over-indebtedness. There are two
enterprises in this group: Hydronika Bratislava and Gumon Bratislava.
With the exception of Kablo Bratislava and Volkswagen Bratislava, which
in spite of multimillion turnover are companies with limited partnership
(Ltd.), all other enterprises are joint stock companies. All selected enterprises
observed in this list originated from privatisation of former state owned
enterprises. The degree of their adaptation to market conditions varies
considerably even within each of the three groups.
After almost seven years of economic transformation, the problem of these
enterprises is far from being the problem of adaptation to market economy
conditions alone. Often one witnesses rather changes in the assertion of
these enterprises within the framework of the market economy and above
all in foreign trade. For instance Chirana-Prema Stará Turá is a company
with excellent management and success in foreign trade. Lately, however,
this success is fading and because of decreasing sales and thus stagnation
and even decrease of production, the enterprise had to switch over to a
part-time operation on a four-day working week. On the other side Hydronika
Bratislava, after having been included into the capital aggregate Dividend
Group (mainly Investment Fund Dividend), relatively consolidated itself
even without official revitalization; the price of its shares increased
several times and there is no discussion of dissolution any more.
The synthesis of case studies prepared for selected enterprises of the
Slovak Republic points strongly at the deterioration of the enterprising
environment in Slovakia. Enterprises try to face this by more or less successful
activities of their own and internal financial means; they are afraid however
of further deterioration of the entrepreneuring environment, and that even
in the strongest enterprises such as Slovnaft. As for the prepared revitalization,
even the weak enterprises fear very much that this revitalization will
only lengthen the existence of certain chosen strategic companies and postpone
their extremely necessary restructuring, whereas in other companies this
will instantly aggravate recovering accounts payable to them.
At the same time, radical positive changes to improve the entrepreneuring
environment are needed: decrease of taxes, limitation of outside intervention
into the economics of the enterprise, improvement of conditions for international
co-operation within the framework of economy globalization. From the experience
gained at individual enterprises, fears of further deterioration of the
entrepreneuring environment prevail and marked pessimism dominates even
in relatively best companies and most large-minded members of their top
management.
Ľubomír MICHNÍK - Gabriela BAĽÁKOVÁ
From the Slovak entrepreneuring subjects' point of view, the market
of developing countries represents up to now the least explored and exploited
market area. These countries, however, are by no means untouched areas
on the economic map of the world; before 1989 former Czechoslovakia located
up to 80% of its exports in developing countries and countries of planned
economies (CPE). Conversion to market economy and minimising or total elimination
of conventional forms of economic help used in the past, above all deliveries
based on intergovernmental loans, resulted in massive abandonment of markets
in developing countries, and after the breakdown of Comecon the same happened
to markets in the former Eastern countries; these markets were then immediately
taken over by countries of EU and OECD.
Developing countries compared to the markets in developed countries are
markedly marginalized and underrated. At the same time by their huge market
unsaturated by investments these countries offer optimum combination for
the sale of our production. To find an adequate way and means to penetrate
or return to these markets poses a precondition of success.
From a commercial point of view the co-operation with developing countries
is a mar-kedly specific one and demands above all deep knowledge of business
methods and manners, basic safety criterions in trade, knowledge of the
territory and good references and information on the traded goods. None
of the above-mentioned factors can be underestimated in trade with developing
countries. The trade with developing countries, on the other side, enables
to export even those commodities that for final consumption in developed
countries would be virtually unmarketable. This does not refer solely to
the goods designed by quality and technology for markets in developing
countries, it concerns also products of VSŽ Košice (re-exports for instance
through Belgium or through Austria), hops to Brazil, glass and various
other products.
Trade with developing countries brings about business and political risks;
all developed countries trade with these countries nevertheless (often
trading our products). Investment unit deliveries demand an especially
sensitive approach. These deliveries are usually implemented as credit
sales, credit being often granted by another country. The insurance of
exports and export credits against economic and political risks goes without
saying. Consumer goods are delivered essentially against cash or letter
of credit (covered appropriately). Higher margin is the award for risks
taken (only reasonable risks, of course). Exporters should aim at selling
their goods without intermediaries, directly to final customers.
Another point in trading with developing countries is the problem of communication
with the relevant territory. This can be a problem not only due to the
geographical distance, formal and social differences, but often also due
to the absence of an embassy, and above all trade representative in the
territory. There are only five Slovak embassies in forty-five Sub-Saharan
Africa countries, and only four embassies on the South American subcontinent.
The role of the embassy's trade department is especially important when
armaments are the traded commodity.
Knowledge about developing countries is in Slovakia still inadequate. This
is true not so much in the case of general political and universal information,
it concerns above all information on production and export possibilities
of our firms.
Inadequate also is the participation of Slovak enterprises at fairs and
exhibitions abroad. By means of proper co-ordination of the activities
of our embassies' trade departments abroad and our firms in the Slovak
Republic it is possible within a relatively short time to multiply sales
of our products even without extremely high cost, thanks to purposeful
information and exhibition activities.
The coverage of developing countries by treaties and trade agreements is
inadequate too. To create some sort of agreement framework in the form
of at least a Trade Agreement, Agreement to Prevent Double Taxation or
Agreement on the Support and Preservation of Investments is at the same
time one of the basic presumptions for the increase of the volume of trade
exchange and for the development of higher forms of economic co-operation.
Foreign trade volume of the Slovak Republic with the developing countries
of Africa, Southeast Asia and Latin America reached in 1996 24 628.8 million
Sk (about 4.12% of the total Slovak foreign trade turnover), of which Slovak
exports amounted to 7 122.3 million Sk (e.g. 2.64% of total Slovak exports)
and Slovak imports were 17 506.5 million Sk (e.g. 5.36% of total Slovak
imports in 1996).
Most important importers from the Slovak Republic in the year 1996 were
India, China, Indonesia and Thailand. The value of exports into each of
these territories exceeded the sum of 0.5 billion Sk. Argentina, Malaysia,
Brazil, South Korea, Republic of South Africa, Bangladesh and Ecuador are
next on the list with their purchases of over 100 million Sk each.
In the year 1996 biggest imports to the Slovak Republic exceeding 1 billion
Sk came from South Korea (5 864.4 million Sk), China (2 481.6 million Sk),
Taiwan (2 226.8 million Sk) and Malaysia (1 105.6 million Sk). Imports
exceeding 100 million Sk were implemented from the following 12 countries
ranged in the order of import magnitude: India, Hong Kong, Republic of
South Africa, Brazil, Indonesia, Ivory Coast, Thailand, Columbia, Ecuador,
Peru, Argentina and Vietnam.
Passive balance of trade payments with the above listed countries in the
year 1996 reached 10 384.2 million Sk, in 1995 it was 4 018.5 million Sk;
that means 2.5 times as much in 1996 compared to 1995.
Active balance of trade exceeding the amount of 100 million Sk was reached
by Slovakia only with five countries: India, Argentine, Thailand, Bangladesh
and Indonesia.
Analysis of the possibilities of Slovak firms to penetrate markets in developing countries
One must differentiate in reviewing the possibilities of Slovak firms to penetrate countries of Southeast Asia, Sub-Saharan Africa and Latin America. There are various factors influencing the degree and level of co-operation with individual territorial regions: besides geographical distance one must take into consideration foreign policy relations, tradition of contacts, degree of maturity, total level of economy, political and economic stability of individual countries and geographical regions.
Southeast Asia region
Newly industrialized countries of Southeast Asia represent the fourth
most dynamically developing megamarket of the world. This fact is acknowledged
by eminent interest of foreign investors, mainly Japan, USA and EU countries
to establish themselves on this market.
In spite of the permanently existing positive relations with almost all
countries of Southeast Asia, due to the political and economic changes
in Central and Eastern European countries (CEEC) including Slovakia at
the beginning of the nineties, the intensity in mutual contacts has weakened.
Slovakia, aiming at the improvement of its economic and political position
in Europe and in the wider international context, is unable (at least temporarily)
to take part in deliveries of help to the poorest countries, to prove itself
independently in tender participation and financing based on intergovernmental
credit agreements (in times of the former Czechoslovakia this form of co-operation,
above all with CPE countries represented marked share). Monocultural character
of economy, poverty, inadequate contractual base, unfit commercial-and-technical
conditions (non-convertible currencies, default in payments, barter trading
...) represent but a part of the factors determining the decrease of the
level of economic relations.
One must state, however, that Slovakia does not fully utilize even its
existing potential possibilities.
The highly passive trade balance of the Slovak Republic with China, unsaturated
market (mainly Central and Western China) as well as the activities of
six Slovak trade agencies should provide a sufficient motivation when looking
for possibilities for the penetration of Slovak subjects into that territory
with various commodities. Particularly significant is the need to extend
the number of joint ventures (to the projects of diesel engine production
and thermal power plant that already exist, joint brewery companies will
be added).
An important export territory in Western Asia is India. Trade balance with
this country remains positive ever since the independent Slovak Republic
was formed. A decisive item in Slovak exports is constituted by armaments,
the share of which reaches about 60% of total exports.
The centre of gravity of Slovak foreign trade relations with developing
countries lies in the countries of Southeast Asia. The reason for this
is very rational; this however cannot prevent more intensive co-operation
with the other two geographical regions.
Latin America
The countries of Latin America seem as yet awaiting to be „discovered"
by Slovak entrepreneurs. Geographical distance certainly plays its part;
primary is, however, the absence of longer traditions in trading with these
territories, and thus lesser knowledge of relevant markets. At the same
time developed countries such as EU countries, USA and Canada or Japan
(recognizing relative stability of political regimes and ever stronger
economic base) are showing eminent interest in South America. South American
countries are aware of their growing importance in the world, both politically
and economically. Exploitation of rich raw material resources has changed
the predominantly agricultural character of their economies and mining
and processing of raw materials together with the development of related
industries step to the foreground.
The volume of Slovak exports to the developing American countries reached
in 1996 not fully 1.5 billion Sk. Slovak Republic so far utilizes the absorption
capacities of Latin America markets on a very small scale. Inadequate personal
coverage of this region by our entrepreneuring subjects is certainly one
of the decisive causes of this situation.
Selected countries of sub-Saharan Africa
The co-operation with South African countries has partly a different
character. There are several reasons for this:
massive economic difference between individual states, diverse economic
potential,
permanent political instability (state of war, military regimes, tribal
and religious unfriendliness),
different traditions of mutual economic relations (support for socialist-oriented
regimes during the past political system), etc.
The whole foreign trade between the Slovak Republic and African developing
countries reached in 1996 the volume of 3 272 million Sk (0.55% of the
total foreign trade of the Slovak Republic), of which exports 1 512 million
Sk (0.56%), imports 1 760 million Sk (0.54% of all imports) and the negative
balance reached the value of - 248 million Sk.
The Republic of South Africa, Nigeria, Zaire, Ghana, Kenya and Tanzania
were most important customers.
Imports from countries of sub-Saharan Africa reached in 1996 a volume of
1.4 billion Sk; most important suppliers to Slovakia listed in the order
of volume delivered were the Republic of South Africa, Ivory Coast, Nigeria,
Ghana, Ethiopia and Zimbabwe.
Assertion of pro-export policy of Slovakia aimed at developing countries - concretization of action
When seeking starting points for more massive penetration of Slovak
subjects into markets of Southeast Asia, sub-Saharan Africa and Latin America
one must analyze two basic approaches:
direct sales increase
penetration with investment projects, participation at tenders
Direct sales increase
The increase of direct exports volume demands first of all a change
of philosophy of production and sales. Markets of developed countries,
but also some of the transitional economies, demand highly sophisticated
goods, where quality is accentuated; the price must therefore correspond
to the product accomplishment and has to be strongly competitive. Regarding
the relatively low purchasing power of the population in developing countries,
markets in these countries prefer price level in the first place; quality
is not decisive as long as price is sufficiently attractive. This factor
enabled for instance the newly industrialized countries of Southeast Asia
to win within a relatively short time a decisive position in consumer goods
market of Africa. Similar situation exists in the engineering product commodities,
where users in developing countries prefer robust, technically and technologically
simple, manually controlled machines, where demands on operation abilities
and high craftsmanship from personnel are not so high.
Exports of investment units and participation in public tenders
Rich raw material resources, cheap manpower, benevolent environmental
legislation and goodwill of governments in many developing countries in
specifying foreign trade conditions often in newly formed special economic
zones, present a sufficient argument for various forms of engagement of
foreign investors in the relevant country is economy. Investment projects
and tenders declared in the poorest countries mainly by World Bank, UN
and regional development banks (IBRD, IFC, MIGA, IDA, UNDP, UNIDO, FAO,
ILO, WHO, UNICEF, ADB etc.) are oriented predominantly on the development
of infrastructure, transport, construction, electrification, energy delivery
and supply, development of agriculture, health servi-ces, education, environment
and tourism. The engagement of foreign investors in projects within three
to five years will be possible mainly in the sphere of hydropower plant
construction, thermal power plant construction, construction of infrastructure
(construction of bridges, highways, undersea pipelines), big joint ventures
in the construction industry, cement factories, geological research and
raw material mining.
Early tender identification and information of relevant entrepreneuring
subjects are the elementary condition for registering in public tender.
Our embassies serve up to now as a basic source of information on tenders.
This is a certain disadvantage, as our embassies or trade representations
get information of this kind only after they are published in mass media,
e.g. at a time when there is a lack of time for the elaboration of the
project and for the pre-selection lobbying. This problem can be solved
by preventive orientation of our representations in organs and institutions
relevant in cases of tender declarations for the territory.
Second source of information on investment activities just being prepared
are the publications Development Business, issued by the World Bank, and
publications issued by regional development banks (Asian, African, Transamerican
Development Bank, etc.). Development Business presents a survey of the
projects financed by the World Bank from identification up to implementation.
Timely identification of the projects is one of the essential preconditions.
A further problem area is the financing of production during investment
unit delivery. Here we expect an important, if not decisive, role of the
Exim Bank. An irreplaceable role in the exports of investment units into
developing countries is played by the insurance of export loans, international
inspection institutions etc.
Ľubomíra STRÁŽOVSKÁ - Marián VITKOVIČ
The article represents first part from presentation of autors'
joint analysis dedicated for problems of mergers and acquisitions generally
and applicability of their standard analysis by dealing with restructuring
of banking (credit institutions' sectors) in common sense and in the case
of transition economies, too. This first contribution presents shortly
main theoretical and analytical approaches and presumptions used in standard
discussions on mergers and takeovers today's - broad variety of modern
property rights' theories, positive theory of agency an on transaction
costs' based concepts as whole. Besides several sectors' and branches'
specifies, one overview of most frequent explanations of mergers' and takeovers'
incentives is presented here, followed by standard classification of M&A
according to traditional industrial structures' analysis. Some basic features
of most intensive M&A waves in past century to present days are described
here, too.
Second Section deals with comparison of different financial systems: Anglo-American
(external or capital market - based) system and so called continental European
(internal or bank - based) system are discussed. Each of these simplified
ideal type represents specific features of the organisation of transaction,
the nature of firm and markets, incentives for M&A activities reflecting
specific shareholders' and stakeholders' relations in both systems and
centralized or decentralized incentives for restructuring and role of government
by them. This part of our analysis is based on the best traditions of contemporary
neoinstitutionalism. After description of most important similarities and
differences, some important items are given for identifying of restructuring'
specifies and difficulties in banking (credit institutions' sector) in
general. The majority of studies elaborated for problems of M&A in
banking have not found evidence of M&A resulting in significant improvements.
By them, in discussions on transition countries' banking consolidation,
the existence of increasing returns to scale in banking (and in sector
of financial intermediaries as whole) is widely assumed. In this sense,
the initial prerequisites for evaluation of possibilities to improve of
banking's structure and its role in transition economies are formulated
at the end of article.
Conceptual analysis of problems of banking's restructuring in transition
economies, especially then in Slovakia, will be an object of our analysis
in subsequent article in Ekonomický časopis - Journal of Economics.
Jozef LOPUŠNÝ
At present the need for a solution of the problem of integrating the
development of production activities with the needs of environmental protection
and sustainability is one that must be solved by the economy. This has
been confirmed by the basic principles of the so-called „Entrepreneurial
Chart for Sustainable Development" through its action programme „Agenda
21".
The Strategy of State Environmental Policy" and „National Environmental
Action Programme" were worked out following the conference proceedings
and form a wide area for carrying out the ideas of sustainable development.
We need not leave out a business sphere that influences the environment
in a decisive way. It influences the origin of negative externalities that
give evidence of market failure in economic practice. The solution to the
problem of negative externalities is possible by combining the use of direct
and economic tools. These are complemented by new methods and institutions,
and represented by environmental corporate management systems and the environmental
audit. One of the basic principles of the „Entrepreneurial Chart"
is the recognition of environmental management as a common business priority.
The implementation of the environmental management system - EMS requires
many gradual steps. The first step is the definition of an environmental
policy and its organizational assurance.
Environmental policy comes out of „The State Environmental Policy of the
Slovak Republic". It reacts to global, regional, national and local
environmental problems. Several factors influence the forming of strategy
in the framework of environmental corporate policy. The basic factors are
identification and evaluation of the activity influences of corporations
on the environment. The present state of environmental protection, financial
possibilities, and know-how are represented by external conditions influencing
the environmental corporate policy. They are determined by the situation
on the market, by the attitude of competitors, product image, customer
demands, and by the results of international conferences on the environment.
This is followed by a business environmental analysis with an evaluation
of environmental influences which determines environmental aims and programmes.
Environmental analysis consists of evaluation of the influences of past,
present and proposed activities. A register is then composed, using results
from complex professional judgements of planned activities. These follow
from law of the National Council of the Slovak Republic No 127/1994 on
the judgement of influences on the environment.
In environmental analysis one considers air and water pollution, soil contamination,
waste production, usage of fuel, energy, water and soil, and the influences
on ecosystems.
On the basis of results of the environmental analysis, corporate top management
will determine priorities, short- and long-term goals in harmony with corporate
environmental policy. These goals ensure first of all the observation of
national legislation in the conditions of corporations. Environmental programme
is a tool for reaching environmental goals. It implies activities for fulfilling
these aims, responsibility for carrying out these activities, their financing
and implementation.
The last stage of EMS consists of a flow-chart and marking out the process
of realization and final assessment. The basic requirement of EMS is the
integration of environmental goals into the existing structure of corporate
goals. It assumes an extension of the organizational structure of the corporation
on the top management level by the management representative for EMS. This
representative has certain authority and duties. It is necessary to extend
the environmental activities within the level of corporate sections.
Environmental measures cause financial costs to the corporation, mainly
expenses of formation of EMS and the costs for environmental verification.
The assessment of the EMS is carried out on the basis of internal and external
environmental audits. In the broadest sense of the word, an audit is defined
as the verification of the correctness of something. In case of the EMS
audit, it is verified if the system was properly implemented in the corporation;
furthermore the level of ensuring the strategic, routine and improved corporate
activities is assessed. The audit can evaluate systematically, periodically
and objectively the corporate activities and managerial systems in relation
to the environment.
The assessment of the EMS is carried out on the basis of internal and external
environmental audits. The process of verification by an independent organization
can result in certification. The certificate confirms that the certified
business meets the demands of the norm ISO 14001. Profits from EMS are
in the saving of energy, raw materials, and materials. The saving is secured
by more effective evaluation and the use of a programme of cleaner technologies
with minimum waste. Operational costs of the corporation (such as energy,
fees for environmental loading) will be decreased. Also the risk of environmental
accidents in the corporation will be decreased. Negative influences of
a polluted environment on the health of its employees and on the corporation
surroundings will substantially decrease. There will be improvement in
the outlook of the corporation in obtaining concessions, licenses, investment
possibilities and reduction of insurance costs.
The image of the corporation will significantly improve as well, and thus
its position on the domestic or international market will be strengthened.
Finally, the communication of a corporation with state administration,
local governments and the public will also improve.
Daniela ZEMANOVIČOVÁ
Recent inquiry into the conditions of competition is dedicated mainly
to entry barriers. Competition in market economy represents a pivot mechanism
that ensures allocation and production effectiveness. Therefore analysis
of barriers that limit competition pressure is interesting not only from
the theoretical point of view, but from the standpoint of economic policy
as well. The problem of barriers to competition is significant also from
the point of view of the policy for the protection of economic competition.
In markets where entry and exit are free, less effective activities and
subjects are replaced by more effective ones. Barriers, on the other side,
lead to limiting competition pressure and effectiveness deterioration.
The aim of the paper is to analyze the problem of entry and exit market
barriers, as well as barriers obstructing the source mobility. It is oriented
to the development of views on these problems, specification of competition
barriers and their classification. Many papers have been dedicated to this
sphere already; therefore, because of the limited scope of this paper,
a comprehensive review is not presented here.
Research into the problem of competition barriers started after World War
II. First, the barriers obstructing market entry were monitored. J. Bain
dealt with conditions of entry that may be advantageous for the already
established firms compared to their potential competitors. These advantages
are linked with the possibility to raise prices against the competing level
without making the entry of competing firms attractive. He starts rather
from barrier evaluation than from the identification of the causes of their
formation. Other authors define more precisely or modified the understanding
of entry barriers. For instance G. J. Stigler defines entry barriers as
costs that firms entering the market must pay, which, however, the already
established firms can spare. Von Weiszac-ker completes this definition
by the condition that entry barriers must decrease the welfare of society.
Thus the entry should create social benefit. Other authors (for instance
W. J. Baumol, J. C. Panzar, R. D. Willig) start to orientate themselves
at exit barriers as well. They define competitive markets (markets where
conditions for competition are favou-rable) as those fulfilling two conditions:
entry to the market is free, no entry barriers exist
exit from the market is free and not linked to any extraordinary costs.
They stress the importance of buried costs that lose their value at
the change of activities and can create barriers for the entry of a potential
competitor.
R. E. Caves and M. E. Porter stress the significance of mobility barriers
that prevent the movement of resources between branches.
The paper suggests also conclusions of various empirical researches implemented
abroad. Analysis of empirical data on entry of new firms into the market
and exit from the market suggests correlation between the rates of entry
and exit to and from the market. Individual branches differ by the rates
of entry and exit, and these differences are preserved throughout a longer
time period. Considerable scatter between rates of entry and exit in individual
branches has been observed. Firms already existing enter new activities
to a greater extent compared to newly-formed firms. Small new firms experience
high rate of exits and failures. The probability of survival is higher
in established firms that widen their activities. In average 40% of all
firms, and 60% of new firms cease to exist within five years. The size
of entering firms is smaller than the average size of the firms active
in the branch.
Competition barrier monitoring enables preparation of theoretical platform
for the research of mechanisms suitable for the reduction of competition
barriers. While reviewing competition barriers it is necessary to take
into account the dynamic development of economic conditions and their economic
impacts.
Competition barriers constitute a heterogeneous group. In the opinion of
the author of this paper one can classify these barriers into three groups:
a) structural barriers linked with economic conditions of
a given sector (high investments, unique technology, importance of cost
saving due to economy of scale, vertical integration, necessary threshold
of R&D support costs etc.),
b) strategic barriers linked with the behaviour of the firms
already established, that can react by raising structural barriers or by
discouraging potential competitors from entering the market (predatory
activities, buy-out of production resources). Established firms may implement
various strategies to raise the costs of entry, thus creating asymmetry
between established and entering firms; the latter therefore may give up
their intention to enter the market. If successful, these strategies can
create even long-term barriers to entry.
c) regulation barriers resulting from some measures by government
authorities and municipalities (for instance regulation measures, protectionism,
administrative restriction of entry into the market, exclusive rights,
certificates, licenses and other concessions for entrepreneuring), which
can limit or postpone the time of entry into the market. There are government
or community measures that prevent or obstruct competition activities and,
finally, lead to the decrease of welfare.
Such classification starts from a certain simplification and summarization
of theoretical views presented, as well as from the differentiation of
tools one can use to eliminate such barriers. In the context of economies
in transition the author stresses just the group of regulation barriers
where one needs different mechanisms for dealing with them. In literature
the group of regulation barriers is usually not treated independently.
Just the sphere of regulation barriers deserves special attention not only
from the theory point of view, but when seeking effective tools to get
rid of these barriers. Classic tools of competition policy can intervene
or respect structural and strategic barriers. Effective mechanisms for
the elimination of regulation interference into the economy, which deform
conditions for competition, have not been created so far. In transitional
economies it is necessary to consider regulation barriers to economic competition
as vital and seek mechanisms for the elimination of these barriers.