Electronic Library of Scientific Literature
Volume 45 / No. 10 / 1997
Nowadays, as in the past, relatively few research papers have been dedicated
to the area of the scientific status of marketing as a functional economic
discipline. As early as two hundred years ago the philosopher Ludovici
meditated on the prestige of economic and social sciences and concluded
that the prestige of economic and social sciences is lower than that of
natural sciences. Ludovici claimed that it is debasing for serious scientists
to be concerned with economics.
The argument on whether marketing is a science at all was opened fully in the sixties of this century. Opponents or sceptics point out at the difficulties with definitions and measurement of virtually important factors concerning mainly human behaviour. They stress also the singularity of problem situations, which rules out almost totally any generalization. As an extreme, they consider marketing as a craft or an art, depending to a great extent on the marketer's personality.
Marketing in Europe is regarded as a special function and section of the theory of enterprise economics whereas in Anglo-Saxon countries it is considered to be economic discipline sui generis. The potential object of research includes social life as a whole with all types of enterprises, and human being in the centre - that means that the theory of enterprise economics and marketing appear to be (just as applied sociology and psychology) in a certain sense a relation against other disciplines. The problem of whether division into individual disciplines, or admissibility of interdisciplinary subjects (such as marketing) are meaningful has been often discussed since the 1960s. The complexity of the subject marketing brings about the necessity of „borrowing" from other sciences, and this cannot be avoided. That is the reason why a great part of the methods of research in marketing consists currently of methods used in sociology.
Every science deals with the concentrate independent of common language - e. g. it deals with terms and statements. Considering the criteria imposed on the use of scientific terms, mainly exactness (e.g. whether the events and facts can be unequivocally assigned to a certain term), consistency (if a certain term can be used singularly) and validity (whether the term indeed expresses what was meant by it), one can even today state (at least in part) some weak spots of marketing.
Particularly at the beginning the term marketing, moreover taken from a foreign language a fashionable word, which appeared to many critics as being hollow, and even to many interested it sounded rather uncertain. The interpretation of marketing as a „concept of management" did not ease the seeking of indicators that could help to understand marketing. The neglect of terminology was the symptom of a mainly empirical and inductive approach.
A special problem in marketing in particular - and in economy sciences in general - is presented by examination of hypotheses. Marketing processes and phenomena are an extraordinary complex, influenced by many factors and determined by human behaviour, e.g. changing and unstable. Plurality of aims and behaviour patterns often enable to formulate only stochastic statements.
At the beginning of the sixties, the conviction prevailed that one can fully understand the laws of the market and consecutively thus a perfect marketing theory can be created as a closed and generally valid system, useful not only for science but applicable above all in decision making practices in enterprises. As time went by, this enthusiasm gradually disappeared.
Marketing is a real applied science, it is the „theory of politics", which pronounces neither generally valid valuations nor definitive conclusions. Marketing as a science oriented at practice aims - aside from its illustration task - to provide within the framework of creative task also recommendations for action/behaviour, and thus undoubtedly mediate certain evaluating statements. From the point of view of the whole society, the marketing discipline has led to the improvement of competition, to greater market transparency and to faster adaptation. Better reviews of producers and consumers influence improved satiation of hardly measurable needs. The decrease of prices, stimulation of competition, technical progress, luxury goods now available to lower classes too, are further important impacts ascribable to marketing.
From the point of view of the enterprise economy, marketing provides
the following positive effects:
growing market transparency decreases the risk of wrong decisions and widens opportunities for action;
effective flexibility means that the enterprise adapts itself to the chosen market (promising from the long-term point of view) and reacts in time to challenges in the market;
bids„tailor-made" to meet selected object groups make the enterprise particularly attractive, in the ideal case unique and bring about permanently satisfied customers;
sensitivity and candidates improve relations between enterprise and public rational, strategic and coordinated steps aimed at the market ensure reaching profit goals and long-term enterprise life.
Discussions on the question of what is the position of marketing within
the economics of the enterprise must be conducted in line with the basic
decision, whether to consider enterprise economics as pure basic science
or as applied technology. Supporters of the second approach often argue
with the undisputed link between science and technology. Here we have an
often unidentified problem of which particular basic scientific information
relates to the application route. It seems that the science theory alone
is unsuitable for deciding from a certain metatheory position the dispute
between the theoretic route and applied orientation of marketing.
We analyze in the paper certain tendencies that exist towards the institutional classification of marketing into theoretical, and manager oriented lines, at the same time both these lines reject this classification for tactical reasons. While analyzing the relation between applied science and scientific theory of marketing, doubts were cast on the problem of whether scientific theory has the task to provide normative statements at all. From the special applied science point of view, one cannot demand that the scientific theory of marketing should provide normative criteria and recommendations. Marketing researchers can provide only model solutions of certain ideal situations.
Ladislav UNČOVSKÝ - Ivan BREZINA
This paper is the output of research within the framework of PHARE ACE
project P-95-2035-R as the so called Country Report for the Slovak Republic,
auditing the degree of concentration in relevant country.
Concentration of the Slovak industry was developed in the framework of the Czecho-Slovak industry; its degree of concentration, even compared with other post-communist economies, was extremely high. The process of deconcentration took place mainly in the era of the Czech and Slovak Federal Republic particularly in the years 1990 - 1992.
The measurement of concentration and its influence can be accomplished by various indicators. Best available of these, yet not most effective, are number of enterprises, and their average size expressed by numbers of manual workers, number of employees etc. For the period preceding the year 1993 these data are the only ones related to the concentration of industry in the Slovak Republic, that can be used to monitor the deconcentration process.
The situation in concentration of industry in the year 1989 and in the year 1991 and the classification of enterprises into size groups is presented in tables 1 and 2.
Process of deconcentration of the Slovak industry over the period 1989 - 1995 expressed by the number of enterprises, their classification into size groups and by the average enterprise size is demonstrated in table 3. Similar development survey for the main industry branches followed continuously throughout the whole period is presented in tables 4 - 7.
Table 8 indicates the number of enterprises with less than 25, and over 25 employees, as well as their average size by number of employees.
Specific indicators for the analysis of the concentration are shown in the following tables. They deal with the shares of 3 and 4 biggest enterprises, or one biggest enterprise in the market (CR3, CR4, CR1). Table 11 presents the calculated Herfindahl-Hirschmann index for two digit industry branches. In the Annex values of this index for three digit branches are presented.
All in all, each of indicator types demonstrates gradual deconcentration of industry branches, which is manifested by the increase of the number of enterprises and the decrease of their average size on the one side, and by the slow decrease of the share of big enterprises in the market on the other side. The evidence of this presents table 12; it shows, that the share of enterprises with more than 1000 employees still holds about 50% of the market. In the year 1994 159 enterprises with more than 1000 employees constituted 10,94% of the total number of enterprises, but produced 52,8% of goods, in 1995 152 enterprises with over 1000 employees constituted 8,82% of the total number of enterprises, but produced 49,46 % of the production of goods.
As for individual branches, the highest level of concentration exists in branches 23 (NACE classification) e. g. manufacture of coke, refined petroleum products and nuclear fuel, 25 (manufacture of rubber and plastic products), 27 (manufacture of basic metals), 30 (manufacture of business machines & personal computers), 32 (manufacture of radio, TV and communications equipment and appliances), 34 (manufacture of motor vehicles, trailers and semi-trailers).
While analyzing concentration and deconcentration process in the Slovak industry one can say that the basic tendency is represented by the deconcentration of the strongly concentrated branches. Original concentration, however, was achieved almost entirely by administrative decisions, while substantially lesser part played the increase of equity capital and share in the market, never fusion actuated by enterprises themselves. To this „old" concentration has been recently added „new" concentration activated by impulses specific for market economy. Branch 34 (manufacture of motor vehicles, trailers and semi-trailers) is such a case.
Second problem sphere related to concentration in open economies is connected with the problem of foreign trade. As indicator of „import penetration" (IP) the proportion of import to sources (domestic sales and import) was accepted. If there is a branch with high share of imports (high IP indicator), market share of domestic producers which forms the basis of concentration indicator, does not express real concentration in the market. For evaluation of export the ratio of „export performance" (EP) was chosen, which is the proportion of sales for exports to total sales.
Big problems were linked with data procurement on exports, and above all on imports in NACE branch classification. Data for 1993 use statistic sources . Data for 1994 were obtained in similar way of calculation and are presented in table 13. For the period of 1994 and 1995 Slovak Statistical Office followed the data on exports and imports in NACE 2 classification. In spite of shortcomings mainly at imports, these data formed the basis for table 14. Data for 1994 in both tables are based on different methods of calculation.
At an application of data from publication , where production is expressed in commodities and consumption in branches NACE 2 at the same level of aggregation one could assume that commodities appertaining to certain industry branch would be produced in the same branch. It came out, however, that large part of commodity production is produced by other industries as well. This production can be labelled as „secondary production". It is listed in table 15, where the names and codes of commodity groups correspond to the NACE 2 branches. Table 15 presents also global production and production implemented inside relevant branch. The rate of primary production is the share of production implemented in the relevant branch. Complementary rate of secondary production expresses the share of production implemented outside its own industry.
Third problem sphere concerns relation of structure, which is expressed by concentration, and efficiency, usually expressed by profit rate. Within the framework of industrial economy is this problem very intensely treated. Within the scenario of the current project, and by means of econometric equations, the correlation between profit (variable PROF), or economic result equal to the difference of income and costs, concentration rate CR4, ratio of investments to sales IS, import penetration IP, and export performance EP were studied. These data are cross-sectional, where individual observations refer to the data for individual NACE 2 branches. Data for the years 1994 and 1995 were studied. The values of variables in the years mentioned were denoted as PROF, IP etc., PROF5, IP5 etc. respectively. The first two simulation experiments comprising the whole set of surveyed data provided results, that were not too satisfactory. The rate of model interpretation is very low in both cases, the significance of individual variables and of the equations as a whole is unsatisfactory. Thus the two following experiments were based only on data of the industries with profit (with positive economic result).
In case of equation for the year 1994 this adjustment lead to considerable improvement of results both in case of model interpretation rate and significance of individual variables. This improvement of results, however, cannot be stated for data from the year 1995. Further two equations were assessed only on the basis of data from the 8 most concentrated branches. The results remained unsatisfactory. The same result was gained from the last two experiments, where the variable for profit was modified. The conclusion must therefore be that the correlation between structure and profitability in this case was not confirmed in general.
Eleonóra FENDEKOVÁ - Michal FENDEK
In compliance with the transformation of the Slovak economy into a market
economy type, a number of urgent and important tasks related to the new
principles of operation of the market economy mechanism had to be solved.
The existence of the market structure of imperfect competition is linked
as a rule with the direct and hidden effects affecting negatively the implementation
of economic competition. The observance of conditions for economic competition
is monitored institutionally in the EU countries and other developed countries
of the world and one ascribes great importance to this item of economic
The protection of economic competition in the Slovak Republic and related tasks are insured by the Anti-Monopoly Office of the Slovak Republic. This Office during its relatively short existence has fixed its attention first on the preparation and then to the guarantees of adherence to Law No 188/94 „On the Protection of Economic Competition".
While solving the whole series of tasks related to the evaluation of the status of competition background in the branches of Slovak economy, the Department of Analyses of the Anti-Monopoly Office of the Slovak Republic started in 1996 the solution of how to propose and experimentally test methods applicable for quantitative analysis of the status of competition background within the branches of the economy of the Slovak Republic.
The paper presents possibilities of exploitation of model approaches, mathematical and economics methods and computer techniques for the evaluation of competition background in the branches of the Slovak national economy. Basic terms of methods to measure the concentration in individual branches are presented. The indicators of economical effectiveness of individual enterprises are characterized. Selected quantification methods of the degree of concentration, e.g. indicators of absolute and relative concentration implemented in presented case study, are explained. The values of indicators for extreme cases of the degree of concentration in the industry branch are quoted.
Measurement of Concentration in the Branch - Problems of Methodology
Development and the degree of concentration in an industry branch is
an essential factor that defines the level of competition background; its
exact demarcation is based on the system of quantitative characteristics
included in analytical materials of State institutions that inspect adherence
to the rules of economic competition in the majority of developed economies.
This phenomenon of economic analyses will be fundamentally significant for Slovakia in the near future because of the expected formal and institutional integration of Slovakia into the European economic zone and the marked opening of the Slovak economy. One can therefore expect that protection of economic competition will become a high priority factor for the guarantee of harmonic operation of economics.
Anti-Monopoly Office of the Slovak Republic as similar institutions in EU countries, plans to utilise methodical analysis of the status of competition background, and while using exact methods applied in developed industrial countries, aims to quantify the degree of concentration in individual branches of the national economy. Based on this analysis the Office will prepare for Government bodies qualified information for the following two decision levels:
for a long term point of view, information for generation of an economic policy concept;
for a short term point of view, information for actual corrections of this policy.
In the long-term horizon, the standard task of the Anti-Monopoly Office
of the Slovak Republic will be to monitor systematically the status
and development of the competition background within the whole of Slovak
economics and to prepare for decision-makers scientifically based and
recommendations quantified by exact methods for the preparation
of an economic policy concept dealing with the development of the economy
for the protection of a competitive environment in the branches of the
Slovak national economy.
A number of methods more or less suitable for the evaluation of the degree and effects of concentration in conditions of imperfect competition can be found in special literature. The essence of most of the methods is quantification of indicators, which describe in a certain way the position of an individual producer within the framework of a production branch in the relevant market for a certain commodity, and eventually characterize the state of competition background in the monitored branch.
Ultimately one can split these methods into two groups:
methods that measure the degree of concentration in the branch in the relevant market for a monitored commodity, and
methods that measure the degree of economic strength of an individual producer.
With some simplification one can say that all methodological tools for measuring concentration in fact quantify the share of relevant characteristics (for instance turnover share) of a certain subject of a particular hierarchical structure (for instance an enterprise within the framework of an industrial branch) in the total value of these characteristics summed up for all analysed subjects.
Data Base of the Model
By means of the case study, we illustrate possibilities for the exploitation
of quantitative methods the evaluation of the state of competition background
in the branch of furniture manufacture in the Slovak Republic, based on
the 1995 data. In spite of the fact that available data base provided data
for the year 1995 only and therefore did not allow to execute dynamic analyses
of the degree of concentration development in the relevant branch throughout
a certain time period, the results are by no means uninteresting. During
this relatively short period, e.g. during the year 1995, two allowed concentrations
were implemented in the branch of furniture production, thus allowing research
into the reaction of individual concentration indicators on this development
trend in the branch.
The manner of respecting the import of monitored commodities into the relevant Slovak market presented some problems. This import into the Slovak Republic during the year 1995 represented more than 20% of the market. It is obvious that such a share is significant for the position of individual producers in the relevant Slovak market. We therefore included furniture imports into the analysis as an aggregated item within a tentative enterprise. Based on the analysis of the situation and development of concentration in the branch of furniture production from the point of view of export sales of the branch, one can state interesting conclusions on the social effects of the concentration of production subjects within the branch.
Data base of tangible data from the 26 most important furniture producers in Slovakia, and aggregated unspecified data from a further 71 producers are available. The latter aggregated data were in this analysis denoted as „other producers" with the attribute of the independent producing subject under the serial number 27.
Information on the imports of this commodity class into the relevant Slovak market is available in the same structure as data for Slovak producers with the attribute of an independent producing subject under the serial number 28. Just the consideration of imports in the analyses mediates a more realistic view of the structure of producers' market shares in the relevant Slovak market.
Development of Concentration from the Domestic Market Sales Point of View
Data base of the file „sales to domestic market" and the situation
of the competition background in the furniture production branch before
concentration is described in Table 1. The following characteristics needed
for analysis of the situation of the competition background following each
concentration phase are quantified and presented in Table 2:
volume of supplies to the domestic market;
share in the market of the producer in branch production Kr;
degree of concentration CR3, CR6, CR10;
Herfindahl index H;
Herfindahl index at hypothetically uniform distribution of production of „other pro- ducers" H*;
degree of dispersion DR5, DR6, DR10;
variation coefficient V2.
Graphic interpretation of the situation of concentration in the branch
from the point of view of sales to domestic market for individual production
subjects including items „other producers" and „import" after
the second phase of concentration is presented on Figure 1.
Let us now interpret the meaning of individual indicators of the status of competition background in the branch of furniture production in the Slovak Republic.
The degree of market share concentration by the three biggest producers in the branch CR3 did not reach 23%, the market share concentration of the six biggest producers CR6 did not reach 29% and the market share concentration of the ten biggest producers CR10 did not reach 37% neither before the two permitted concentrations nor after them.
Similar favourable values reflected the standard indicator of the degree of concentration in the branch, the so called Herfindahl index. At the starting point, e.g. before concentration of two or three subjects, the value of Herfindahl index defined as the sum of the squares of market shares of all producers in the branch was H = 1 180.92. Thus the degree of concentration did not reach the standard risk boundary for the conditions of economic competition H0= 1 800 points. Let us remark that the value of Herfindahl index did not exceed the boundary 1 800 points after two phases of concentration either; it then reached the values of 1 280.7 or 1 456.23 points respectively.
Development of Concentration from the Export Sales Point of View
Data base of the file „sales for exports" and the situation of
the competition background in the furniture production branch from the
export sales point of view is described in Table 1. To analyse the situation
of the competition background following each concentration phase one used
the same analogical characteristics as those used in the analysis of the
state of competition background for sales to the domestic market, with
the exception of the Herfindahl index H* calculated for the hypothetically
uniform distribution of production of „other producers". There is
no need to analyse particularly the data base of the volume of sales for
exports for the whole file of the Slovak furniture producers, e.g. also
for those 71 producers not specified in detail, as the „other producers"
did not take part in furniture exports from Slovakia in the monitored year.
The values of individual characteristics are presented in Table 3.
Graphic interpretation of the situation of concentration in the branch from the point of view of export sales for individual production subjects including item „other producers" after the second phase of concentration is presented on Figure 2.
One can characterise the meaning of individual indicators of the situation of competition background in the furniture production branch in the Slovak Republic in the case of export sales in the following way. The values of all indicators used are, in the analysis of the situation of competition background in the production branch of furniture, assigned for exports less favourable not only after the implementation of the two listed permitted concentrations, but at the starting point of the branch as well. The degree of market share concentration by the three biggest producers in the branch CR3 increased from the value of 54% to 58%, the market share concentration of the six biggest producers CR6 exceeded after concentrations the value of 70.9%, and the market share concentration of ten biggest producers CR10 increased from the value of 77.6% to 84.06%.
Similar non-ideal values were yielded by the standard indicator of the degree of concentration in the branch, the so called Herfindahl index. At the starting point, e.g. before the concentration of the two, or three subjects respectively, the value of the Herfindahl index in the furniture production branch was H = 1 445.07, meaning that the degree of concentration did not reach the standard risk boundary for the conditions of economy competition, H0= 1 800 points. The value of the Herfindahl index however, after the implementation of each of the concentration phases, exceeded the 1 800 point boundary and reached the values of 2 158.9 and 3 087.26 point respectively. The important question is what aspect we choose while evaluating these results. It is necessary to stress that the standard method for this type of analysis, e.g. for the evaluation of export sales, has another interpretation meaning. The indicators in fact express the measure of economic strength of individual economic subjects from the point of view of their exporting possibilities , and here the strengthening of the export potential of producers can, in the end, be appreciated as a socially desirable trend.
Based on the presented analyses, one can positively evaluate the development
of concentration in the furniture production branch in the Slovak Republic
in the year 1995. Good conditions for the protection of economic competition
in the furniture production branch were guaranteed in the relevant Slovak
market on one side, and on the other one can consider the implemented concentration
as bringing socially positive effects strengthening the export ability
Basic indices presented here, as well as further tools published in special literature, enable to review very competently the degree of concentration in the branch. General conventions are existing, for instance the American or German, that define boundary values for these indices. When exceeding the values of these indices, one can expect the eventual constraint of economic competition.
An area of equal importance in utilizing this methodology lies not only in the analysis of the actual situation of the concentration in the branch mentioned, but also in the evaluation of the long-range impacts of appraised concentration of the producing subjects in the branch. This, or another analogical methodology, could then serve as an effective supporting criterion for making decisions whether to permit concentration.
One should realize, however, that high conclusiveness, high analytical level, complexity and information value of papers on the situation and development of the competition background in individual branches of the Slovak Republic cannot be a short-term process, but that this problem demands long-term systematic and conceptual work provided by a solid level of organisational, material and personal resources.
In concluding, we can say that the results of the quantitative analysis presented in the paper confirm that the concentration in the furniture production branch in Slovakia in 1995 complied with standard criteria applied in quantitative analyses of the competition background status both in the Slovak Republic and abroad
The economic theory explores two alternative economic systems: market
economy and command (planned) economy. K. Engliš calls these pure abstract
types the individualistic (capitalistic and co-operative) and the solidaristic
(socialism). He regards crossbreeding of both systems as a historic rule.
According to him a real system is always a combination of individualism
F. A. Hayek uses for compared economic systems the denotations, individualism and collectivism. He calls to the attention that the term „liberal" (primarily follower of the „laissez-faire" idea) expresses nowadays nearly the contrary. He accentuates out market economy preferences, but he does not understand by the market functioning absolutely. In his opinion the government has to create conditions for enforcement of competition, to substitute it in those situations where it cannot be efficient and to ensure the basic securities of life that are the important precondition for freedom.
Liberalism of the 20th century is of a very heterogeneous and changing nature and the-refore it is difficult to distinguish precisely particular streams and schools with various attributes. They are mutually penetrating, changing names and content. For instance, neoconservatism is gradually merging with the traditional conservatism from which it originally arose.
The comparison of economic systems should be always done on the same level of abstraction, i.e. either on a most general level, or as a comparison of real economic systems. The goal of economic policy cannot be the implementation of the economic model in its purest possible form. The main problem is to determine a rational rate first of all in the field of taxation and redistribution of income, in the extent and structure of social expenditures, and in the position of the public sector in the economy.
Market and government regulation have their positive and negative consequences in economic practice. For instance, Mexico and Turkey but also the USA and Japan have the lowest tax burden and redistribution of income within OECD countries. On the other hand, Denmark has the highest tax burden among OECD countries, high social expenditures, but simultaneously higher economic growth, labour productivity, lower budget deficit, and lower government debt than many other countries with lower rates of income redistribution. A particular tool and measure of economic policy is not good or bad by itself, but it finds in every economic model its own concrete contents and also its specific consequences.
Since about 1990´s various approaches to the economic policy have been converging in various aspects. Nowadays, the succession of a new government with a different political orientation does not necessarily mean sweeping changes in economic policy; however a certain correction of economic policy is enforced and greater continuity is preserved, as compared to the past. However, the extent of redistribution of GDP during the last 30 years has been increasing in all EU (or OECD) countries.
A modern economy can perform efficiently neither without market mechanisms, nor without regulation by government. However, it is difficult to find and change the relation between market and government regulation along with changes of economic, social, political, and other conditions, both, internal and external.
The paper is dedicated to that part of the private sector, which shows
features of effective ownership, hence the sector of small and medium enterprises
(SME) and the sector of foreign enterprises. SMEs are supposed to be a
source of employment, value added and innovation. They are flexible and
adapt themselves quickly to market changes. Socially, SMEs are closely
linked to the middle class and contribute to the political stability. There
is the general feeling that foreign enterprises will speed up the process
of structural for a variety of reasons, including the lack of domestic
capital, managerial abilities and modern technologies in former centrally
planned economies. One expects generally that foreign enterprises will
contribute to the increase of work productivity and to the economy growth.
Foreign enterprises integrate domestic economy into world markets, improve
R&D level and product quality.
At the start of transformation the number of foreign enterprises was negligible and the small business sector did not exist at all. Since 1989 SME sector has expanded considerably to such an extent, that its share on employment rate and on production is comparable to those in the EU countries. Due to the rather imperfect statistics in small enterprises one cannot discuss the quality and internal structure of SME sector in detail. Performance of small enterprises has not yet been analyzed either. As for the foreign enterprise sector, one can state that the number of foreign enterprises in the Czech economy increases year after year, their share in economy, however, does not reach proportions common in the EU countries. The activities of foreign enterprises are also evaluated only on the basis of individual cases, and systematic statistical analysis of their functioning is only sporadic in spite of the capability of our statistics to identify enterprises with foreign direct investment (FDI) participation.
The aim of statistical analysis presented in the paper was to appraise the role, structure and performance of the SME sector and the sector of FDI in our economy and in the manufacturing industry, based on the combination of several unique sets of statistical data from the Czech Statistical Office. Small enterprises are compared with the big ones and FDIs are compared with the level of domestic enterprises. Main variables used in the paper are : number of workers, number of employees, sales, production, value added, labour productivity, investments, incomes and export. Data presented in the paper constitute careful adjustment of the data from the Czech Statistical Office, they can, nevertheless, differ from the officially published data.
Our analysis of the statistical data confirmed that both SMEs and foreign enterprises make important contributions to the restructuring and growth of the economy and its stability. Different, and mainly positive economic indicators, that are found in SMEs and foreign enterprises, signal their considerable contribution to economy restructuring. SMEs helped to retain low unemployment rate during transformation process and to mitigate the GDP shock. At the same time they radically contributed towards economy restructuring by the transfer of economic activities to the underdimensioned sectors, above all into service sector.
In the year 1995 small enterprises (e. g. those with less than 50 employed persons) provided jobs for 48% of the total labour force. In some sectors the share of small enterprises on employment rate was even higher - in trade and repair small enterprises employed 72 % of the total labour force, in the sector of hotels and restaurants even 75%. By analysis one discovered, that small enterprises are considerably represented in the manufacturing industry too; not only in traditional labour intensive branches such as metalworking, printing and woodworking industries, but also industry branches characterized by progressive technologies, as for instance radio, TV & telecommunications industry or production of optical & medical instruments. Compared to the EU, small enterprises there employ on average 50% of the total labour force. Judging by the number of enterprises per 1000 inhabitants, the data for Czech Republic are very high. This is obviously caused by the excessive number of very small firms with zero employee number. Such firms are founded by persons, who the same time are full time employed in another, usually state owned enterprise, and simultaneously carry out another activity within „their own" firm. Another cause of the excessive number of very small firms can be, that one or two persons (partners) found several firms for various purposes and thus control several firms at the same time.
The implemented analysis indicates, that small enterprises produce on average more value added, and are more productive in more labour intensive branches. These results are, however, only temporary. When comparing foreign enterprises with domestic ones, unequivocal results were obtained. Foreign management, which usually comes together with foreign investments, is oriented at enterprise strategy and long term development which, with local management, has not been usual case yet. Foreign enterprises usually have no problem of financing their business and strategic plans, whereas domestic firms are often indebted by old liabilities that originated in privatization process. These facts were confirmed by an analysis. Foreign enterprises invest on average four times as much as domestic enterprises, are more productive and their export performance is higher. While domestic producers in the manufacturing industry export on average a quarter of their output, foreign enterprises export more than 40% of the output. Employees in foreign enterprises have on average higher salaries than in-foreign enterprises by about 20 %. Foreign firms are apparently able to attract more skilled workers and managers. The share of foreign enterprises on employment rate in Czech economy is but 10% only, their importance, however, continues to grow. Between 1993 and 1996 the number of foreign enterprises increased in construction six times, in retail four times, in real estate three times, it doubled in manufacturing and transport.
Concluding the analysis, the author deals with conditions for enterprise operation in the Czech economy. One pays attention to policies supporting small enterprises, or supporting the inflow of FDIs. Despite of some efficiency of fiscal and financial tools supporting small enterprises or FDIs, the author means, that one cannot prove, whether the discrimination which is a result of preferential treatment of some segments of economy is not causing more damage (lost opportunities, indispensable redistribution of means etc.) than eventual benefit from supporting tools can bring. For the decision making of all investors, irrespective of whether big or small, domestic or foreign, macroeconomic stability is absolute and fundamental priority. Small and weak enterprises suffer by economy fluctuations and by the inflation more, than strong and big enterprises. Expectations linked with stability and economy growth are important for strategic decision making of foreign investors.