Strategic Management · AUS CRO SER USA Overall GCI rank 19 76 95 5 5.02 Tertiary education...

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Decision Support Systems in Strategic Management www.ef.uns.ac.rs/sm ISSN 1821-3448 UDC 005.21 2012, Vol. 17, No. 2

Contents Overcoming Future Crises: Quality of Education in Business Schools as a Predecessor of Competitiveness Darko Pantelić, Andreas Zehetner, Jeanne Enders, Domagoja Buljan Barbača 03-12 Coping with European Debt Crisis: China’s Fiscal Policy Effect and OrientationShi’an Hou , Bo Li, Jingyou Li, Hui Mao 13-21 The Case of Slovenian International Comparative Advantage in Logistics Services Marjan Sternad, Darja Topolšek, Matjaž Knez 22-30 The Second Wave of the Global Financial and Economic Crisis and a New Agribusiness Development Model: A Study Case of Vojvodina Sofija Adžić, Jelena Birovljev, Biljana Štavljanin 31-44 The Analysis of Concentration of Slovak Banking SectorIvan Brezina, Juraj Pekár, Zuzana Čičková 45-50 CRM Systems as an Important Component in Overcoming Business Crises Within Organisations Jelica Trninić, Jovica Đurković, Vuk Vuković 51-56 Marketing Management in Turbulent Times Aleksandar Grubor 57-62

STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 003-012 UDC 005.6:37

Received: March 5, 2012 Accepted: April 16, 2012

Overcoming Future Crises: Quality of Education in Business Schools as a Predecessor of Competitiveness

Darko Pantelić University of Novi Sad, Faculty of Economics Subotica, Serbia

Andreas Zehetner Upper Austria University of Applied Sciences, Austria

Jeanne Enders Portland State University, School of Business Administration, USA

Domagoja Buljan Barbača University of Split, Croatia

Abstract The 2008 crisis was not the first one, and certainly will be not the last one. Substantial differences regarding a country’s competitiveness influence the ability to overcome economic downturns. National competitivenessrepresents a complex phenomenon, out of which one major criterion is intellectual capital and education. Theauthors investigate the issue of quality of education, particularly in business schools, as a major predecessorof business success. This can be further aggregated towards the general ability of a national economy to func-tion in time of crises and, as much as possible, protect resources and its potentials. Senior year students from four business schools in Austria, Croatia, Serbia and USA were approached in an attempt to link their percep-tion of educational quality, international exposure and perception of competitiveness with their optim-ism/pessimism related to the ability to compete in global markets, as well as employment expectations and thegeneral availability of opportunities for young, educated people. The Global Competitiveness Report, by theWorld Economic Forum, was used as a benchmark in measuring respective countries’ position in the globalmarketplace. Weaker economies show less satisfaction with educational quality and feel less competent thantheir peers in more developed nations, entering into spiral of pessimism, followed by high brain-drain, thus further eroding intellectual capital and potential for development and business success. Policymakers andbusiness school management should put strategic emphasis in building quality of (business) education as asource of competitive advantage and ability to overcome any future economic downturn. Keywords Business schools, quality of education, crises, competitiveness, students’ perception, policymakers, businessschool management.

Introduction

The 2008 crisis was not the first one, and certainly will not be the last. In aftermaths of crises, vivid dis-cussions are led about recession winners, industries, and nations that overcome crises with less destruc-tion to key economic indicators. In Business Week Scott (2009), argues that “…developed countries still top the charts.” Foroohar & Schneiderman (2010) attempted to identify the stars of the recession, giving an overview of industries that were not severely impacted by recession. Their article could be summa-rized in a few brief facts describing the impact of the 2008 crisis on the US economy: export oriented businesses experienced less difficulty, commodities, agriculture and high-tech companies fared com-

4 Darko Pantelić et. al Overcoming Future Crises: Quality of Education in Business Schools as a Predecessor of Competitiveness

STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 003-012

paratively well, education sector is increasingly becoming, and more “export oriented” and overall ser-vices are becoming even more important. What would be the common nominators for these two stories? Being more competitive (in a global arena) and relying to intellectual capital makes companies/nations able to function in harsh environment.

1. National competitiveness: sources and indicators

Competitiveness is a multifaceted concept, which can be defined at the level either of an individual or an organization. Ketels (2006) elaborates the debate about competitiveness and the most frequently util-ized approach developed by Michael Porter. In answering the question about measures of national com-petitiveness, Lodge (2009, p. 462) summarizes it in “…its share of world markets, its share of world gross national product, and its ability to earn – not borrow – rising standard of living for its people.” Means to these goals can be disaggregated to competitiveness of companies, visible in marketing ori-ented definition of Heseltine (1994, p. 8) where competitiveness is “…the ability to produce the right goods and services of the right quality, at the right price, and at the right time. In a nutshell it means meeting customers’ needs more effectively and efficiently than other firms.” A similar course is taken by Kitson, Martin, & Tyler (2004) in investigating geographical unit competitiveness – his research em-phasizes knowledge and human capital. The ability to meet consumers’ needs and desires in dynamic contemporary markets is in a great extent a function of innovation. Innovation is in focus of Porter’s (1990) argument of building competitive advantage. Innovation is based on intellectual capital, particu-larly its component of human capital. Competitiveness needs to be related to market success, Andrew & Sirkin (2003, p. 77) quote Theodor Levitt, who stresses “difference between being innovative and being an innovative enterprise: the former generates lots of ideas; the later generates lots of cash”. Following the same line of thinking, we will consider competitiveness from the perspective of quality of education in business schools, which we value as an important factor for building enterprises able to win market share, create revenues and enhance standard of living. In analyzing global competitiveness, Fuller (2010) stresses the important interplay between grasping globalization developments, attracting best talents (managing human capital), and boosting innovation capabilities.

The Global Competitiveness Index (GCI) and its rankings, published in Global Competitiveness Re-port, were used as an external measurement of competitive standings for four nations in research (see Table No. 1). GCI is based on Porter’s competitiveness model (Ketels, 2006) and investigates 12 dis-tinctive pillars of competitiveness. Our interest is related especially to categories (pillars) of higher edu-cation and training, labour market efficiency, technological readiness, business sophistication and inno-vation.

Table 1 Selected competitiveness indicators

Label Indicator Countries ranking/142

AUS CRO SER USA Overall GCI rank 19 76 95 5 5.02 Tertiary education enrolment 38 52 50 6 5.03 Quality of educational system 24 89 111 26 5.05 Quality of management schools 34 83 114 12 5.07 Availability of research and training services 5 60 113 11 7.08 Brain drain 27 128 139 3 9.01 Availability of latest technologies 10 51 123 18 11.04 Nature of competitive advantage 12 49 136 20 12.01 Capacity for innovation 12 64 110 7 12.02 Quality of scientific research institutions 21 48 61 7 12.04 University – industry collaboration in R&D 19 77 81 3 12.06 Availability of scientist and engineers 27 88 83 4

Source: World Economic Forum, 2011.

The empirical research of this contribution included senior students in four respective schools in

Austria, Croatia, Serbia and USA. Being close to graduation, senior students have the most experience with higher education and are also already thinking about prospective employment, making their opin-ions most relevant for our research. Findings indicate relationship between perceived quality of educa-

Darko Pantelić et. al Overcoming Future Crises: Quality of Education in Business Schools as a Predecessor of Competitiveness 5


tion and confidence levels, competitiveness and optimism/pessimism. The authors started with a basic assumption that enhancing quality of education is a necessity for creating a future generation of profes-sionals and business leaders capable of functioning in a dynamic global marketplace.

2. Quality of Business School Education: literature overview

Substantial research time is dedicated to determining predecessor of quality in higher education. “Mar-ketization” (Bartlett, Frederick, Gulbrandsen, & Murillo, 2002) and transforming of higher education in to the commodity (Cooper, 2007) led to prevalence of research from service industry perspective. Most of this research utilizes SERVQUAL or SERVPREF models (Ford John, Joseph, & Joseph, 1999; Clemens, Ozanne, & Tram, 2001; Helgesen & Nesset, 2007; Voon, 2007; Gruber, Reppel, & Voss, 2010). Value from business schools management perspective cannot be denied, as well as importance for business school marketing.

The authors’ interest is directed to a less discussed area, far more complex to measure – the quality of education in business schools from perspective of utilitarian (functional) value of knowledge. Knowledge can be accessed as predecessor of competitiveness on a personal level, mezzo level or as a predecessor of competitiveness of a national economy on the global market. Mason, Steagall, & Fabritius (2003), Ng & Forbes (2009) and Appleton & Krentler (2006) advocate the necessity to inves-tigate the quality of business education from other perspectives – not just short term, market driven, meeting enrolment goals. Recent concerns about decline in the quality of education in business schools (Wood, 2011; Glenn, 2011; Zimmerman, 2011) further strengthen the idea of understanding relationship between quality of education, in instrumental capacity, for achieving individual goals, and, circumstan-tially, how this relates to concept of competitiveness.

3. Methodology and empirical research design

In order to provide empirical insight into the problems addressed before, a cross-sectional survey in Serbia (University of Novi Sad), the USA (Portland State University), Croatia (University of Split) and Austria (University of Applied Sciences Upper Austria) was deployed. Its main goal was to investigate the students’ perception of the quality of their education in business studies as well as their perception of their countries’ competitiveness and their future career prospects. We selected four countries from the overall competitiveness ranking of World Competitiveness Report. Austria (rank 19), USA (rank 5), Croatia (rank 76) and Serbia (rank 95) suggest that we work on distinctively different scores of the competitiveness scale. According to their stage of development, two of these countries, namely Austria and USA, are situated in stage three (innovation driven), one in the transition from stage two to stage three (Croatia), and one in stage two (Serbia). This, we assumed, would lead to a different student per-ceptions regarding competitiveness, quality of education and optimism/expectations.

The questionnaire used in this study consisted of three sections: in the first section students’ percep-tion of their countries’ competitiveness was investigated by comparing the influence of the respective countries on the global economy and vice versa, and by exploring the main sources of competitiveness for each country. The second section comprised students’ evaluation of their business schools’ educa-tional quality, their loyalty to their institutions, and their perceptions about preparedness for their future career formed the main part of the questionnaire. This section draws heavily on the items used in the National Survey of Student engagement (Kuh, 2000) and was adapted to the prevailing context of busi-ness school students. Additional items were taken from Wilton (2008) based on the “Class of ’99 Ques-tionnaire” (Purcell, Elias, Davies, & Wilton, 2005). Students were asked to evaluate their overall per-ception with respect to their educational experience so far. In the third section students’ perception of their future development in general and their optimism/pessimism was addressed. For opti-mism/pessimism, some items of the revised Life Orientation Test (LOT-R; Scheier, Carver, & Bridges, 1994) were applied. The questionnaire was completed by demographic information about the respon-dents. Most of the questions were structured as statements that required responses on a five-point scale, with five indicating strong agreement and one indicating strong disagreement or adequate modifications of these poles.

Due to different technical conditions regarding access to students at the participating universities, different sampling procedures were employed. For Austria, the sampling frame was composed of E-



mail listings of last year’s students on the Bachelor as well as on the Master level, and a census using a web survey tool was applied. For Serbia, for lack of E-mail listings, the questionnaires were distributed among students manually. The US students were exposed partly to an online questionnaire and to an in-class paper and pencil survey, while the Croatian data collection was done by paper and pencil only. Following Carini, Hayek, Kuh, Kennedy, & Ouimet (2003), mode effects concerning the chosen survey methods generally tend to be small among student samples. After data inspection and cleansing, a re-sponse of 89 interviews for Austria, 60 for Croatia, 75 for Serbia, and 92 interviews for the USA could be used for further analysis.

4. Empirical Findings

Analyzing the rankings of four countries in the focus of this research we can clearly state that Austria and the US belong to the first quadrant, whereas Croatia and Serbia are ranked in the third quadrant, Croatia closer to the lower boundary, with Serbia being on the outer border. Investigating the graph with average values for all questions (see Graph 1), it can be clearly concluded that we are dealing with four distinctive levels of competitiveness. These findings correspond to the rankings indicated by the World Economic Forum’s research.

Graph 1 Mean values – all question for Austria, Croatia, Serbia and USA Source: Authors

Empirical findings indicate that intellectual capital is perceived as important source of competitive

advantage of all four economies. Austria represents a clear case, Croatian and Serbian students also put emphasis on natural resources and cheap labour, whereas USA students see their economy based on financial and social capital, almost equally as on intellectual capital:

Table 2 Students’ perception on source of competitive advantage

Source of competitive advantage (mean values of answers):

Country Natural

resources

Cheap labour force

Industrial production

Financial capital

Intellectual capital

Social capital

Austria 2.35 1.27 3.88 3.39 4.22 3.65 Croatia 3.67 3.13 2.50 2.28 3.23 2.85 Serbia 3.41 3.56 2.12 1.53 3.61 2.41 USA 3.08 2.00 3.36 4.08 4.12 4.14

Source: Authors

Quality of education was measured with six items in questionnaire. Principle component analysis uncovered a positive and high correlation between these items and a latent variable was identified as quality of education. The principal component accounts for almost 63% of variance of the latent vari-able:



Table 3 Factor analysis (PCA) – latent variable quality of education

Initial Eigenvalues Extraction Sums of Squared Loadings

Component Total % of Variance Cumulative % Total % of Variance Cumulative %

1 3.755 62.576 62.576 3.755 62.576 62.576 Source: Authors

Table 4 Component matrix – Quality of education

Question Component

1

Q4 0.822 Q9 0.845 Q10 0.653 Q11 0.739 Q5 0.846 Q6_2 0.823

Source: Authors

Perceived quality of education significantly differs among students from different countries, and

conducting one-way ANOVA test on our samples we came to a conclusion that Austrian, Croatian and USA students belong to the same sample, whereas Serbian students perceive their quality of education to be lower than the rest of the groups (see Table 7).

Table 5 Descriptive statistics – quality of education

N Mean Std. Deviation

Austria 89 23.92 3.946 Serbia 75 17.08 3.571 Croatia 60 23.83 4.231 USA 92 23.65 3.705

Source: Authors

Table 6 One-way ANOVA

Sum of Squares df Mean Square F Sig.

Between Groups 2,583.866 3 861.289 58.175 0.000 Source: Authors

Table 7 Post-hoc analysis – LSD

(I) Country (J) Country Mean Difference

(I-J) Std. Error Sig.

Austria SER 6,841(*) 0.603 0.000 CRO 0.088 0.643 0.891 USA 0.269 0.572 0.638

Serbia AUS -6,841(*) 0.603 0.000 CRO -6,753(*) 0.666 0.000 USA -6,572(*) 0.599 0.000

Croatia AUS -0.088 0.643 0.891 SER 6,753(*) 0.666 0.000 USA 0.181 0.638 0.777

USA AUS -0.269 0.572 0.638 SER 6,572(*) 0.599 0.000 CRO -0.181 0.638 0.777

Source: Authors



Quality of education and personal competence. As regards different perceptions of quality of edu-cation, we decided to relate the Quality of Education latent variable to the item that deals with students’ perception of readiness to respond to all tasks they might encounter in their professional career. The goal was to relate quality of education to perception of personal competence. Although positive correla-tion exists in the entire sample, it was reasonable to investigate the difference between Serbian students and the rest of the group. The results show that the Serbian sample has a statistically significant and positive correlation (r=0.265, confidence level 0.05, Table 8), whereas its intensity is lower than in the case of Austria, Croatia and USA (r=0.539, confidence level 0.01, see Table 9).

Table 8 Correlation between quality of education and personal competence – Serbia

Serbia Personal competence (Q12)

Quality of education

Pearson Correlation ,265(*)

Sig. (2-tailed) 0.021

N 75 Source: Authors

Table 9 Correlation between quality of education and personal competence – Austria, Croatia and USA

Personal competence (Q12)

Quality of education

Pearson Correlation ,539(**)

Sig. (2-tailed) 0.000

N 241 Source: Authors

The feeling of personal competence raises the levels of confidence, and it is important for positive

attitude in meeting professional challenges. Research data indicate that with raising perception of educa-tional quality we can expect future generations of managers to be more confident and believe in them-selves.

General competitiveness. Students in three countries – Austria, Croatia and Serbia – were asked to evaluate their competitiveness against their peers in respective countries – the EU, the USA and BRIC (Brazil, Russia, India and China), whereas US students compared themselves with students from the EU or BRIC countries. General competitiveness was measured with three items, and together they account for 68.5% of variance.

Data shows that students from all countries feel less “threatened” from peers from BRIC countries, whereas EU students are considered as most competitive (see Graph 2). Austrian students feel most competent, which is in line with fact that their perceptions put them on first place regarding educational quality. BRIC economies are among twelve biggest economies in the world (both by IMF and World Bank data measuring GDP) and regarding GCI they are better ranked than Croatia or Serbia.

Graph 2 Mean value – perceived competitiveness against peers in different countries Source: Authors



Quality of Education and Optimism/Pessimism. The third part of questionnaire contains five dis-tinctive items intended to measure general feelings towards future from employment prospects, exis-tence of positive and engaging environment, to personal feelings and attitudes towards uncertainty. Us-ing factor analysis we determined that these five items account for 56.1% of latent variable we named Optimism/Pessimism:

Table 10 Factor analysis (PCA) – latent variable Optimism/Pessimism

Component Initial Eigenvalues Extraction Sums of Squared Loadings

Total % of Variance Cumulative % Total % of Variance Cumulative %

1 2.807 56.135 56.135 2.807 56.135 56.135 Source: Authors

Table 11 Component matrix – Optimism/Pessimism

Question Component

1

Q14 0.812 Q15 0.744 Q16 0.765 Q17 0.754 Q18 0.663

Source: Authors

Correlation analysis uncovered positive and moderate correlation between quality of education and

optimism/pessimism (r=0.444, confidence level 0.01). Accessing correlation inside national samples significant differences exist, correlation being stronger in Austrian and USA sample, then in Croatia and Serbia.

Rather interesting results were shown in an attempt to determine differences between national sam-ples regarding Optimism/Pessimism. Austria and USA can be considered as one sample, whereas Croa-tia and Serbia show similarities regarding this dimension (see Table 14).

Table 12 Descriptive statistics – Optimism/Pessimism

N Mean Std. Deviation

Austria 89 18.80 2.785 Serbia 75 13.47 4.467 Croatia 60 14.15 3.709 USA 92 18.89 3.326

Source: Authors

Table 13 One-way ANOVA

Sum of Squares df Mean Square F Sig.

Between groups 2,007.487 3 669.162 52.489 0.000 Source: Authors

Table 14 Post-hoc analysis – LSD

(I) Country (J) Country Mean

Difference (I-J)

Std. Error Sig.

Austria SER 5,331(*) 0.560 0.000

CRO 4,648(*) 0.596 0.000

USA -0.094 0.531 0.860



Serbia AUS -5,331(*) 0.560 0.000

CRO -0.683 0.618 0.270

USA -5,425(*) 0.555 0.000 Croatia AUS -4,648(*) 0.596 0.000

SER 0.683 0.618 0.270

USA -4,741(*) 0.592 0.000 USA AUS 0.094 0.531 0.860

SER 5,425(*) 0.555 0.000

CRO 4,741(*) 0.592 0.000 Source: Authors

Scarpetta, et al. (2012) present findings indicating that unemployment rose among populations of

young people, but data also show that those with less education were hit most severely. The same au-thors indicate that an even bigger problem is the inactivity – as a result of “discouragement and margin-alization” (ibid, p. 6). It is indicative that Croatia and Serbia suffer from the same disillusion among senior students, which may be remnant of common history. Stimulating enrolment in tertiary education and raising its quality are worthy goals; however, policymakers have to be aware of the need to create institutional and socio-economical conditions in which new generations can thrive. Lessons can cer-tainly be learned from Austria, highest ranked by quality of education and optimism in our sample.

Results can be corroborated by relating to analytical data. One of the items in battery representing la-tent variable optimism/pessimism represents instrument for measuring brain-drain, used by the World Economic Forum. Croatia and Serbia have extremely high brain-drain, and these nations are ranked 128 and 139 out of 142 countries included in The Global Competitiveness Report (see Graph 3). When asked about opportunities available in their country, 65% students in Croatian sample, and 73% in Ser-bian sample, have the opinion that their countries do not provide sufficient opportunities for young, tal-ented and educated people.

Graph 3 Analytical data on item 17 – measuring brain-drain Source: Authors

USA

Au

stri

a

Cro

atia

Ser

bia



Conclusion and future research

Globalization process is inevitability. It is evident through convergence of lifestyle, culture and educa-tional process, supported through significantly expanded flow of information and knowledge. More than ever different national areas experience similar problems. Our ability to address these issues may greatly be enhanced by sharing research results and learning from different experiences. It is self-evident that that less developed (less competitive) countries can learn from the experience of their better-off coun-terparts; on the other hand, we argue that transfer of knowledge and experience can be mutually benefi-cial. We would expect that students from less competitive nations (i.e. Serbia) would be much more prone to study abroad and eventually move to more developed (more competitive!) countries, thus fur-ther eroding Serbian labour pool and further jeopardizing competitiveness in the long run. Findings also indicate lower confidence levels and lower perceived quality of business education associated with stu-dents from less competitive countries. Quality of education is just one of the competitiveness “pillars”. It is clear from the Croatian sample that, even if there is a perceived quality of education similar to de-veloped counterparts (i.e. Austria and USA), lack of perspective can be demoralizing and also indicates possible brain-drain.

The global economic landscape is ever-changing. Growth is still considered to be a necessity for success in business/economy. Over the last five years period, the Global Competitiveness Report gives us a glimpse of change (Table 15). Further investment in improving competitiveness through intellec-tual capital can be primarily addressed towards less developed countries; however it is of no less sig-nificance for better-off counterparts. Maintaining and enhancing position, to whatever group nations belong, in contemporary setting, is to a great extent the function of intellectual capital.

Table 15 The Global Competitiveness Report rankings 2007 – 2011

2007/08 2008/09 2009/10 2010/11 2011/12 Austria 15 14 17 18 19 Croatia 57 61 72 77 76 Serbia 91 85 93 96 95 United States 1 1 2 4 5

Source: World Economic Forum, 2008, 2009, 2010.

Authors argue that this topic can gain on significance even more. A fair warning has to be addressed

to business school management and policy makers. Education cannot be viewed as just another busi-ness. Stakes are much higher, and circumstances do not reflect ability to use simple “services market-ing” approach.

Major limitations of the study and conclusions are in relatively small sample and narrow scope of re-search. Limiting research to just one higher education institution per nation makes results dominantly influenced by perception of quality and experience with just one institution. Research design, under these circumstances, significantly limits ability to generalize findings on the national level.

Pilot research uncovered certain relations and significance of different items in measurement instru-ment. Further research could include refining the questionnaire and sizing up the samples, pursuing wider distribution of respondents from different schools. Adding at least one BRIC country would also give finer leverage of different economic and socio-cultural backgrounds. Assessing gender and age differences also could shed a different light on differences related to perceived quality of education, confidence, competitiveness and optimism/pessimism. SM

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Education: http://chronicle.com/article/A-Little-Shame-Goes-a-Long-Way/126329/ Correspondence

Darko Pantelić

Faculty of Economics Subotica Segedinski put 9-11, 24000, Subotica, Serbia

E-mail: [email protected]

STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 013-021 UDC 336.27(4) ; 336.02(510) ; 338.124.4(100)

Received: March 20, 2012

Accepted: June 5, 2012

Coping with European Debt Crisis: China’s Fiscal Policy Effect and Orientation

Shi’an Hou , Bo Li, Jingyou Li, Hui Mao Zhongnan University of Economics and Law, Public Finance and Taxation School, Wuhan, China

Abstract From September 2008 onward, the financial crisis in the U.S.A developed into the European debt crisis. As a response, the Chinese government introduced a series of initiatives to expand domestic demand, adjust theeconomic structure and achieve economic growth. Therefore, China's economy developed under the expected direction of macro-control, showing the stable and rapid growth. However, the domestic and international situation China faces is still extremely complex. The main problem isthat rising prices cause great pressure on the macro-level control. Besides, the relationship between invest-ment and consumption is unbalanced, and the gap of income distribution needs to be narrowed. China needs to continue to implement proactive fiscal policy and prudent currency policy, make full use ofvarious policy tools including finance and taxation means, accelerate the economic restructuring and trans-form the mode of economic growth, and foster the new economic growth point. In this way, China may go outof the shadow of the financial crisis as soon as possible and achieve sustainable development. Keywords European debt crisis; China's fiscal policy; effects and trends.

1. European debt crisis: a new test of the global economy

The European debt crisis began in late 2006 and early 2007. Initially, it was marked by the subprime mortgage crisis and the overproduction crisis in the automobile industry in the trans-Atlantic region, which led to the collapse of international financial markets in the summer of 2007. When two major USA mortgage finance companies, such as Fannie Mae and Freddie Mac banks, the largest insurance company in the world (American International Group) and two top-level investment banks, like Lehman Brothers, failed in September 2008, the crisis reached its climax. Then, in the second stage, the crisis developed into all fields of the economic cycling, affecting every part of the global economic system, and leading to the global GDP decline. The world trade decreased by 12%. When it reached the third stage in April 2009, finance, capital and raw materials markets started to recover, but the economic ac-tivities of most countries were still at a low level. In November 2009, the crisis entered the fourth stage and shifted gradually to the public budget. Greece in the first place, then Spain, Portugal, Ireland, Hun-gary, the United Kingdom and other countries were in serious financial difficulties one after another. They had to sell government assets to ease the government’s spending pressures. Eventually, the Euro-pean debt crisis broke out comprehensively and the developed economies became the focus of the global economic crisis.

So far, the economic crisis has lasted five years. The large-scale bailout package announced in the second stage of the crisis resulted in the developed countries’ debt crisis, so the global economic situa-tion is not optimistic. Therefore, we believe that:

14 Shi’an Hou et. al Coping with European Debt Crisis: China’s Fiscal Policy Effect and Orientation


1.1. There may be 2 to 3 years for the global economy to wander in the economic downturn

In the past year, economy declined rapidly. Until now, we cannot determine whether the global econ-omy has reached the bottom. Even if the economy has bottomed out, it needs 2 to 3 years of oscillation in the bottom for the economy to truly achieve a full recovery. This process would be extremely diffi-cult, because it requires all countries to solve this situation by radical institutional changes, structural adjustment, technological progress and cultivation of new industries. Although the global economy may take on a positive growth in the next few years, it will still be facing serious difficulties.

1.2. The global industrial development, trade, investment and employment remain pessimistic

BMI, a country risk and industry research institution, forecasts that because the trade volume continues to decline, the global container traffic industry will be in a grim situation. Shipbuilding, steel, automo-bile and other industries are still in depression, and the real economy shows stagnant as a whole. At the same time, countries have taken self-protection measures to respond to the economic crisis, so trade and investment environment is becoming even worse. As Greece’s unemployment rate has reached 21%, and some countries continue to deteriorate, the global unemployment rate in 2012 will remain high and the employment situation is not optimistic.

1.3. New global inflation is inevitable

In order to cope with the economic crisis, countries take measures to increase the currency liquidity, ease the credit terms and implement low interest rate or zero interest rate policy. This will directly lead to the depreciation of monetary assets. Very low interest rate policy, as Greenspan set in 2000, resulted in the global price bubble and inflation, complicated and confusing price trends of the world's oil, gold and a large amount of commodities such as iron ore a few years later.

1.4. The global industrial structure seeks rapid reconstruction in the economic turbulence

In terms of the industrial structure, due to the influence of fictitious economy bubble burst, countries will attach importance to development of real economy, so that the proportion of the real economy will grow and the fictitious economy will gradually decline. In addition, part of the new industries, such as the new energy, energy conservation and environmental protection, new IT technology, green manufac-turing, the cultural media industry, bio-medicine and health, modern agriculture will be in a rapid de-velopment track. In terms of the space structure, the status of the new emerging economies such as China, India, and Russia in the global industrial pattern will become higher.

1.5. The rise of new emerging economies will be the engine of the world economic recovery

Since 2009, the large-scale global trade and investment protectionism have come back. As a severe vic-tim, Chinese trade surplus dropped sharply and trade volume continued shrinking. Now, with the grad-ual recovery of the production demands, the trade between new economic entities continues expanding and international trade growth situation begins to recover gradually. Therefore, it can be predicted that, as the effects of the crisis fade and the government intervention step back gradually, the new round of cross-border M&A wave will expand step by step. According to the Untied Nations Conference on Trade and Development (UNCTAD), the global foreign direct investment (FDI) in 2012 will amount to $16000 to $ 2 trillion (China Finance Information, 2012).

2. China’s Policy Initiatives

2.1. China’s Policy in 2008

In the second half of 2008, with the international financial crisis striking the real economy, some of the major economic indicators in China went down obviously. As a response to the crisis, Chinese govern-ment introduced a series of policy initiatives to maintain economic growth, adjust the economic struc-ture and expand domestic demand. At the same time, it established the 4 trillion RMB investment plan and 10 industry revitalization plans, as well as implementing proactive fiscal policy and moderate

Shi’an Hou et. al Coping with European Debt Crisis: China’s Fiscal Policy Effect and Orientation 15


monetary policy. In addition, it first introduced a “structural tax cuts” policy to stimulate economic growth.


At the end of 2009, Chinese government decided to continue to implement the proactive fiscal policy and the moderate monetary policy, maintaining the continuity and stability of macro-economic policies, making the policies better targeted and more flexible to adjust to new situations. More attention was paid to enhancing the quality of economic growth and accelerating the change of economic growth mode and structural adjustment. More attention was paid to deepening the reform and opening and en-couraging independent innovations to inject vigour and vitality into economic development. More stress was put on further improving people’s welfare, and maintaining social harmony and stability. The gov-ernment made overall plans for dealing with domestic and international situations to achieve stable and comparatively rapid economic growth.

Based on these, Chinese government introduced eight initiatives to stimulate the economy: firstly, implemented the policy for rural residents to purchase home appliances; secondly, extended the policy for rural residents to purchase motor vehicles until the end of 2010; thirdly, implemented the policy of trading in old home appliances for new ones to 2010; fourthly, provided subsidies for purchasing agri-cultural machinery and tools; fifthly, implemented a project to promote energy efficient products for the benefit of the people; sixthly, set the purchase tax for small-displacement automobiles at 7.5%, and in-creased the subsidy of auto replacement per vehicle form 5,000 to 18,000 Yuan; seventhly, changed the time limit of the business tax on the sale of individual housing from 2 years to 5 years, holding other housing-consumption-related policy constant; lastly, extended the policy that postponed and in some cases reduced their payment of social security contributions for distressed enterprises, reduced or ex-empted reemployment tax and provided flexible employees’ social insurance subsidies and extend the subsidy by 1 year (Xie, 2012a; Xie, 2012b).


In 2010, Chinese government maintained the economic growth rate at about 8% and continued to im-plement the proactive fiscal policy. At the same time, Chinese government paid more attention to eco-nomic restructuring and expanded domestic demand. It carried on ensuring and improving the liveli-hood of the people, encouraging independent innovations and reducing emissions to protect the envi-ronment. Additionally, in order to restrain overspeculation of the real estate market and prevent the real estate market bubble bursting into a chain reaction, the government introduced the tax policy on the real estate market, which cancelled the earlier tax incentive policy for residents to purchase a second hous-ing unit.


In 2011, faced with complicated and serious economic situation at home and abroad, such as the spread of European debt crisis and domestic inflation, Chinese government decided to continue to implement the proactive fiscal policy and the prudent monetary policy. Regarding fiscal policy, Chinese govern-ment determined the extent of intervention, pace and focus when implementing the policies.

2.4.1. Making effort to support people’s livelihood

Chinese government increased the scale of subsidies for grain producers, raised minimum grain pur-chase prices, developed specialized farmer cooperatives, and increased farmers’ incomes by a variety of means. China implemented a more proactive employment policy, supported the mechanism of minimum wage for enterprise employees and improved the remuneration of low-income labour groups. Then, it exempted all road vehicles of fresh agricultural products from toll, in order to lower distribution costs and strived for basic equilibrium in aggregate supply and demand to maintain price stability. At the same time, the government established the linkage between social welfare benefits and price level, and implemented the subsidy policy for low-income groups in urban and rural areas.

It supported pre-school education development, promoted the foundation of countryside compulsory education funds safeguard system and improved schools with poor facilities. Government subsidies for



the new type of rural cooperative medical care and the medical insurance in urban area were raised to more than 200 Yuan annually per person, and the basic drug system was implemented comprehensively in primary-level medical and health care institutions. A new rural pension insurance system covered more than 60% of the country, and a pilot project for a new urban pension insurance system was launched.

Chinese government provided related subsidies of social insurance and public welfare position to construct an employment-support policy system. The central government used the strong national fi-nance to develop low-income housing projects, fully achieved the target of building more than 4 million low-income housing units and started the construction of 10 million new low-income units.

2.4.2. Optimizing the investment structure and supporting the adjustment of economic structure and regional coordinated development

Central government's investment in infrastructure particularly gives support to aspects as follows: low-income Comfortable Housing Project, agricultural infrastructure focusing on water conservancy, educa-tion and hygiene infrastructure construction, energy conservation and emission reduction and ecological environmental protection, independent innovation and development of strategic emerging industry, etc. It set major and special projects on science and technology, improved the capacity-building of national key laboratories and scientific research institutions, promoted the development of strategic emerging industries and services. It devoted major efforts to developing medium-sized and small enterprises, es-pecially low-profit enterprises, and fully established subsidy and bonus system of grassland ecological protection in main pastoral areas provinces. They substantially raised transfer payments for local equi-librium, and promoted urban and rural overall planning, as well as balancing development among dif-ferent regions.

2.4.3. Implementing structural tax cut policy

For personal income tax, the standard cut-off point of salary rose from 2000 yuan to 3500 yuan a month. Chinese government rearranged the structure of tax rate to reduce tax burden for low-income earners and strengthened the regulation of high income earners, continually exercised special preference of in-come tax for some low-profit enterprises, raised the cut-off point of value added tax (VAT) and busi-ness tax, adjusted the policy of individual housing transfer in sales tax system, conducted the pilot of property tax reform in Shanghai and Chongqing, and the pilot of expanding the taxation scope of VAT in Shanghai.

3. Assessment of China’s fiscal policy effects

With the implementation of fiscal and tax policy of the Chinese government dealing with European debt crisis, macro economy has appeared in a good situation: economy is growing steadily and rapidly, CPI index is falling gradually, and the economic structure has been optimized to some extent.

3.1. National economy maintains steady and rapid growth

In 2011, China's GDP reached 47.1564 trillion yuan, increasing by 9.2% compared with the figure of 2010, which was significantly faster than other major countries or regions in the world and contributed to continued rise in the world economic growth. According to the up-to-date data announced by Interna-tional Monetary Fund, in 2011, the world economic growth is predicted to be 3.8%, and those of the United States and Euro zone is 1.8% and 1.6%. In emerging and developing economies, Russia is 4.1%, 7.4% and 2.9% for India and Brazil respectively.

3.2. Fast rising momentum of CPI has been checked

In 2011, China’s CPI rose by 5.4% anually: food prices rose by 11.8%, and fixed assets investment by 6.6%. Producer Price Index rose by 6.0% and 9.1%. All kinds of price indexes have decreased from high figures.



3.3. Effects of regulation policies for the real estate market have appeared

In 70 large and medium-sized cities countrywide, the flat price of new residential buildings on a monthly basis has come down in more and more cities, and the dramatic increase of real estate price has been effectively controlled. Additionally, the real estate prices in major cities have increased at a slower pace; they have even begun to fall back in some cities.

3.4. Driving force of domestic demand has further enhanced

In terms of three major demands of investment, consumption and net exports, their growth rate has slowed down, but still retains the stable and rapid growth interval in 2011. Total fixed asset investment was 311,022 billion, an increase of 23.6% over the previous year in 2011. Total annual retail sales of social consumer goods amounted 183,919 billion, - an increase of 17.1%. The annual total import and export of goods was worth 36,421 billion dollars, including exports of 1.8986 trillion dollars, increased by 20.3%, and imports of 1.7435 trillion, an increase of 24.9%. Import and export trade surplus was 1,551 billion dollars, which is a decrease of 26.4 billion.

At the same time, domestic investment and consumption-led growth momentum was further en-hanced. In 2011, the contribution of investment and consumption to economic growth further increased. Domestic demand contributes to the economic growth rate of 105.8%, in which final consumption ac-counts for the economic growth rate of 51.6% with an increase by 10.1% over the previous year. Gross capital formation contributed to the growth rate of 54.2%, an increase by 1.4%. While dramatically shrinking trade surplus last year, the trade surplus further narrowed and was reduced by 26.4 billion.

Economic growth, by way of strengthening raw power and weakening external dependence, effec-tively promotes the balanced development of internal and external demand growth. The domestic de-mand continues to play a major role in boosting the economic growth. Imbalance between investment and consumption has begun to change (Wen, 2010; Wen, 2011).

4. New situation and problems facing China

Since 2010, China’s economy has continued to move in the expected direction of macroeconomic regu-lation. The domestic and international situation China faces are still extremely complex. The rising prices cause great pressure on macroeconomic regulation. Small micro-businesses have operating diffi-culties. The readjustment of economic structure and energy conservation is necessary. Resource and environmental constraints of economic growth continue to strengthen. The pressure on energy saving and emission reduction increases year by year. The relationship between investment and consumption is still in disequilibrium. Narrowing down income gap needs more efforts. The industrial structure needs to be further rationalized, etc. Especially in the international aspect, the overall debt crisis also triggered a new round of volatility in Greece and other European countries. Those who have greatly global geopo-litical and economic influence, like the Middle East and North Africa now suffer from an unstable eco-nomics environment, which implies that the world is faced with a challenging international economic environment filled with uncertain and unstable factors. Specifically, the new situation and problems facing China can be summarized as follows:

4.1. The gradual recovery of external environment and potential danger coexist

From 2010 and 2011 data, we can clearly see the recovery of external demand grows. The exports of traditional commodities grow steady. Traditional advantage of export commodities appears, including machinery and electronics, clothing, textiles, furniture and other labourintensive commodities. All those greatly promoted China’s traditional manufacturing and processing industry to recover. But there are still potential crises in the external environment:

Firstly, with the depreciation of the EURO, orders settled in EURO suffered serious losses. In the European overall debt crisis, the EURO continued to depreciate, losing over 10% within six months. Thus export enterprises those chose EURO as the currency of settlement at the beginning of the year suffered great losses.

Secondly, the general debt crises in Greece, Portugal, Spain and other countries are so serious that they affect the economic recovery in Europe, and also have a negative impact on the full restoration of the global economy.



Thirdly, in the period of crisis, the trade protectionism is rising. For example, the Obama administra-tion set the objective to double the America’s exports within five years, which created an extremely un-favourable expectation on Sino-US trade.

Fourthly, as the aftermath of the financial crisis, international trade frictions have increased. For ex-ample, the United States took special protective measures on Chinese tires and imposed the anti-dumping and countervailing duties on steel pipes up as high as 90%, since the second half of 2009. In June 2010, the U.S. House of Representatives held congressional hearings about the appreciation of the RMB exchange rate to force the RMB to appreciate, and so on. Those formed great pressure on the re-covery and development of China’s foreign trade.

Lastly, the consumption patterns of consumers in some developed countries have changed signifi-cantly. With rising unemployment rates in the United States and the EURO zone after the financial cri-sis, excessive retail consumption, which supported international economic growth, has changed. The world economic structure is undergoing profound adjustments, and China's external demand environ-ment and export commodities will undergo fundamental changes, too.

4.2. Regarding domestic demand, investment and consumption grow rapidly but with an unbalanced proportion

Among the total demand of the national economy consisting of consumption, investment and exports, consumption, as the final demand, has been proved to be the most effective driving force of economic growth. A growth in consumption can provide a strong impetus for economic growth. But in China, in-vestment plays a significant role for the GDP growth instead of consumption. For a long time, China's three major demands develop unevenly. From 2000 to 2008, investment increased by 17.9%, and net export increased by 34.7%, while consumption only 10.7%. The economic growth of 2009 and 2010 is mainly stimulated by investment. With the weak consumption and the imbalance between investment and consumption, the basis of a steady and sustainable growth of economy is not yet firmly established.

4.3. The overcapacity of traditional industries and under development of new industries coexist.

In terms of industrial structure, the old problem of excess capacity and duplicated construction in some industries is still outstanding. The technology contribution to economic development is not high enough. Economic growth is still dependent on the massive inputs of material resources. It can be shown as follows in a specific way:

4.3.1. Economic growth model of “high energy consumption, high carbon emission” remains

With the incentives to investment and the strong demand for energy-intensive products, high energy-consuming industries develop fast and some backward industries resurge and demand for energy in-crease. From 1978 to 2009, China's total energy consumption rose to 3.1 billion tons of standard coal from 570 million tons. China’s energy consumption per unit of GDP is 11.5 times that of Japan, 4.3 times of the United States, 7.7 times of Germany and France, and has become the world’s largest coal consuming countries, the second largest carbon dioxide emitting countries, so the economic structure of "high energy consumption and emissions” is unsustainable.

4.3.2. Overcapacity is serious in some industries

The national crude steel output is more than 560 million tons in 2009, an increase by 13.5% in compari-son with previous year. The existing capacity reaches 660 million tons, while 60 million tons are in the construction. That is to say that the total number is 720 million tons, and the excess production capacity is over 200 million tons. Cement production capacity is nearly 300 million tons, cement production lines in construction are more than 200, and the new production capacity is over 200 million tons. In addition, the excess capacity is the same serious in the chemical industry, shipbuilding and flat glass industry.



4.3.3. New challenge from the major economies’ strategic new emerging industries plan comes after the financial crisis

New energy, new materials, information networks, biomedicine, energy saving and environmental pro-tection, low-carbon technologies, and green economy, feature as the focus of a new round of industrial development. Fostering new economic growth point has become both the development of new power in the future, but also the strategic choice to seize the highest point of the international economy and sci-ence and technology system. China, however, has not been ready enough in this aspect. Taking the sci-entific research funds for example, the current expenditoure on research and development to amounts just 1.5% GDP, while Europe and the United States this figure is between 2.5% and 3%, which is much higher than China.

5. China's fiscal policy orientation

People may say European debt crisis is due to the decrease of economic growth rate. Actually, it is due to the unreasonable economic growth mode in essence. Therefore, to accelerate economic restructuring, transform economic growth and foster new economic growth point is the strategic choice for China's sustainable economic and social development.

As one of the important means of macroeconomic regulation and control, fiscal policy plays an im-portant role in the implementation of the "structural adjustment, promote transformation” strategy to get out of the crisis. Based on this, the Chinese government will continue to implement the proactive fiscal policy and prudent monetary policy to ensure policy continuity and stability. The government should take full advantage of the various policy tools, including fiscal spending, tax instruments to improve the quality and efficiency of economy. Specifically, Chinese fiscal policies consist of the followings:

5.1. To improve the structural tax cut policies, promote the development of the real economy and guide the consumption

Fiscal policy helps to achieve equilibrium of supply and demand. It adjusts industrial structure, income structure, ownership structure, regional structure and firm size to enable the economy to achieve coordi-nated development. The government will reduce the tax revenue size and growth rate in an appropriate degree through a new round of tax reform and structural tax cut policy. Besides, the government will cut down tariffs on some imported goods and import more energy resources, products, advanced equipment and key components of the product. Also, the government will take measures to raise the cut-off point of value-added tax and business tax to alleviate the burden on small micro-enterprises and continue to implement the income tax for small enterprises with favourable income tax policy. In addition, the gov-ernment will expand the pilot scope carrying out the policy of reforming business tax to VAT in trans-portation and some service industry, to promote the development of services sector, especially modern service industry. Besides, the government will lower tax burden of logistics enterprises, and introduce VAT exemption in the vegetables wholesale and retail sectors. Lastly, the government will implement other various taxes and fees waiver policy and cancel unreasonable, illegal fees. Meanwhile, in order to alleviate the burden of enterprises, it is also necessary to regulate and standardize highway toll.

5.2. To increase the urban and rural residents’ income to expand consumption demand

China’s current income distribution pattern is inclined to government and enterprise, where the corpo-rate profits erode the remuneration of workers, and the rapid growth of government tax revenues re-duced the share of the individuals’ income. The share of the residents’ income cannot be increased due to the weak growth of residents’ property income.

Fortunately, the Chinese government has realized the seriousness of this problem, and will use fiscal policy to regulate the means of income distribution and focus on increasing the income of low-income groups to form a reasonable and orderly pattern of income distribution. Specifically, China will increase the proportion of labour remuneration in primary distribution, raise the wage scale for enterprise em-ployees continuously, and establish the staff wages normal growth mechanism and payment safeguard mechanism. Government will promote enterprises to establish a system for collective bargaining for wages, improve the system of wage guidelines, and improve and comply with the minimum wage sys-tem to raise the remuneration of lower-income groups.



We are working on a full coverage of the new rural and urban social endowment insurance system, and raising the level of the minimum standard of living allowances and partial preferential treatments in both urban and rural areas. The level of basic old-age benefits for retirees from enterprises and increased farmers’ income will be further raised. China will effectively implement the subsidies policies of the urban and rural households in low, the rural households enjoying Five Guarantees (wu bao hu) and col-lege students from impoverished families as well.

5.3. To optimize the investment structure

Keep the reasonable scale of the central budget on infrastructure investment, which is used mainly for supporting the construction of low-income housing project, rural infrastructure focusing on water con-servancy, education, culture and public health, energy emission reduction and environmentally-friendly civilization construction, and self-innovation ability construction and the development of new strategic industries.

5.4. To optimize the public spending composition, and strive to ensure and improve people's livelihood

That consumer spending cannot be the key driving force to spur economic growth is largely due to the shortage of basic public demand, so people have to only rely on the accumulation of their own resources to compensate for the lack of public services. The input into the projects such as social security, com-pulsory education by public finance, will fundamentally solve the worries of the nationals and make economic growth be in a benign circle. The Chinese government will optimize the structure of fiscal expenditure and increase investments on social security and culture, education and health simultane-ously. In terms of spending categories, we will input more public investments in agriculture, rural areas and farmers and try to improve livelihood in the financially weak areas as well.

5.5. To reform the tax system to promote the transformation of economic development mode

From the perspective of the fiscal policies of promoting energy saving and environmental protection, the scope of China's current resource tax collection is too narrow and that would not have an impact on the comprehensive protection of resources and increasing the utilization rate of resources. Therefore, water resources, forests and grasslands should be included in the scope of resource tax. In addition, China lacks the specialized taxes aiming at the activities and products of environmental destruction, so we don’t actually have environmental tax.

In terms of the fiscal policy enhancing the capability of independent innovation, China needs to fo-cus on technological and industrial commanding height in the future, and combine this with nurturing the development of strategic emerging industries better. Insight into the new trends of the current world's technology and industrial development, the Internet, cloud computing, Smarter Planet and other emerging technologies will greatly change people's lifestyle and innovative ways, and there is a huge space for development in new energy, new materials, new medicine, energy conservation and environ-mental protection, aerospace and other industries. Therefore, the government needs to accurately grasp the change direction of these new technologies and industries, and to put emphasis on providing some supporting policy to these industries.

5.6. To improve the fiscal system and fiscal policy constantly

In the long run, proactive fiscal policy is only a short-term measure. With the macro situation improv-ing, the strength and direction of fiscal expenditure will change; eventually, they will return to the nor-mal track which the public finance requires. In the next few years, Chinese government will promote the reform of the fiscal system. The main direction is as follows:

5.6.1. To further perfecting the financial transfer payment system

Chinese government will increase the scale and proportion of the general transfer payments, clear up the special transfer payment program of merging part, perfect the sub-provincial fiscal system, balance the



distribution of the sub-provincial fiscal resource, improve the county-level basic financial guarantee mechanism and strengthen basic public services providing ability of the country government.

5.6.2. To deepen the reform of the budget management system

Perfecting the public budget, improving the normalization and transparency of the government fund budget comprehensively, continuing to expand the application scope of the state-owned capital man-agement budget, enhancing the budget management of the social insurance fund.

5.6.3. To promote the reform of the tax system

Improving the value added tax system, and, in some productive service sectors, introducing reform pilot of changing business tax to the value added tax to solve the coordination problem between goods and services tax policy by use of institution. Perfecting the consumption tax system, rationally, adjusting the scope and tax rate structure of the consumption tax to promote energy conservation and emission reduc-tion as well as guiding rational consumption. Advancing the resource tax reform to promote resource conservation and environmental protection. Implementing pilot reform of the housing property tax. Making the environment protection tax reform program. According to the principles of “tax correction and fee liquidation, classification and standardization”, continuing to regulate administrative charges and integrating government funds. SM

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http://finance.people.com.cn/stock/GB/222942/17192153.html Correspondence

Shi’an Hou

Public Finance and Taxation School Wenquan Building,#1 South Nanhu Road, 430073, Wuhan, China

E-mail: maohhh@126com

STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 022-030 UDC 339.56:338.46(497.4) ; 338:339.137.2(497.4)

Received: February 14, 2012

Accepted: April 5, 2012

The Case of Slovenian International Comparative Advantage in Logistics Services

Marjan Sternad, Darja Topolšek, Matjaž Knez University of Maribor, Faculty of Logistics, Maribor, Slovenia

Abstract Globalization has been changing the “rules of the game” for nations competing in international trade and in-vestment. Competitiveness in the world markets is getting increasingly tougher, and that is why it is crucial forcountries to gain comparative advantages if they want to keep their established market positions in the global international environment in the long run. Active participation in the international trade has become one of themost important keys of economic growth and welfare of individual countries. This paper shows the export and the import models of Slovenia in logistics services (transport and communi-cation), as well as the comparative advantages, defined using the Balassa index. In comparison with the mostimportant foreign trade partners Slovenia is gaining comparative advantages in transport and communication services; however, the transport infrastructure, the technology and the promotion of the exports of transportservices will have to be improved in order to preserve the competitive position of Slovenia in the global inter-national environment. Keywords Global comparative advantage, logistics services, internationalization, export and import performance, Balas-sa Index.

Introduction

In a globalizing economy, regions and firms are competing on an international level. Internationaliza-tion contributes to the economic development of nations, in developing national industries, improving productivity and creating employment. Export oriented entrepreneurship contributes more strongly to macro-economic growth than entrepreneurial activity in general. International trade represents one of the most important national aggregates for small and medium sized economies. Large economies like those of the USA or Russian Federation are actually so big that they can act as self-sufficient. However, for the majority of all other economies – international trade represents an imperative. For a small coun-try like Slovenia, that is a real case scenario. Majority of Slovenia’s GDP or more than 60% of its GDP is being contributed by exports and imports.

Competition in the world markets is getting tougher, and that is why countries have to enhance their comparative advantages if they want to keep their established market positions in the international envi-ronment in the long run. As a distinct branch of the national economy foreign trade is an important fac-tor of economic growth caused by the internationalization of business and determining for the process of globalization. Internationalization and globalization constitute the fundamental features of the early century and millennium. The internationalization of business transactions, understood as the pursuit of such activities across national borders is not a new phenomenon in the global economy (Justinek & Sternad, 2010). The impacts of the economic crisis are visible mainly in individual activities, in which

Marjan Sternad et. al The Case of Slovenian International Comparative Advantage in Logistics Services 23


the international trade significantly has dropped; the consequences are reflected in the logistic sector, in which the demand for transport and communication services is decreasing.

Participation in the international trade has become one of the most important factors of economic growth and welfare of individual countries, reflected by their National Export Performance and their National Import Profile (International Trade Centre, 2003). Countries gain the comparative advantage in products, as well as in services, of which transport services will be highlighted in this article. Javalgi & Martin (2007) draw special attention to the importance of the service sector in the global economy, as internationalization of the services influences the competitiveness of the companies and the increase in comparative advantages of individual countries. The service sector is also an important support factor of the international trade in goods, causing individual countries to make their decisions mainly in relation to the markets in which they should provide their services, in order to gain their comparative advantage, and regarding the potential obstacles to overcome at internationalization of their services. Concerning exporting services, Winsted & Patterson (1998) draw attention to export and import barriers, to interna-tional competition, know-how and limited resources. The authors particularly focus the export motiva-tion with the globalisation of partners as its crucial driver.

Economic progress of a country depends, among other things, on the degree of mobilization and in-tensive use of own resources (human, material and financial), and the efforts of each nation that cannot be isolated from world economic circuit. Participation in the international division of labour and implic-itly to the world economic circuit is likely to enhance the efforts of each nation and accelerate economic progress of all states. The world economy today is no longer a simple sum of national economies and national markets put in contact, but a system of global and universal unity, through relationships be-tween subsystems and components, and is extremely heterogeneous and contradictory in terms of its structure. In a globalizing economy, regions and firms are competing on an international level. Interna-tionalization contributes to the economic development of nations in developing national industries, im-proving productivity and creating employment. However, research on the importance of export for na-tional economies has strongly focused on large multinational enterprises. Recently, some studies have found links between internationally oriented entrepreneurship and economic growth (Justinek & Sternad, 2010). Hessels & Van Stel (2006) find that export-oriented entrepreneurship contributes more strongly to macro-economic growth than entrepreneurial activity in general, both for highly developed countries and transition countries.

The comparative advantages of individual countries can be considered from many aspects. Balassa (1965) presented comparative advantages of countries by the trade flow of goods, as both relative costs and the differences in non-price components are comprised in the traded goods. Numerous authors ap-plied the comparative index (Balassa index or RCA Revealed Comparative Advantage Index) for inter-national comparison, including the indicators of international trade, i.e. imports, exports, as well as the share of each category in the world (Vollrath, 1991). For their analysis of comparative advantages of countries Benedictis & Tamberi (2001) chose the dynamic concept for the RCA index examination, which considers the impacts on the specialization of countries. The specialisation of countries depends also on the economic development of a particular country and on the level of its current development. The diversification of countries pertaining to the various stages of their development is more expressed in the initial stages of the development of each country, whereas in the latter stages it is less expressed; comparative advantages of individual countries closely related to this process (Benedictis, Gallegati, & Tamberi, 2009). Benedictis & Tamberi (2001) examined the comparative advantages of the RCA index at the three levels, i.e. at the intersectoral, interstate and dynamic levels. The intersectoral analysis of the comparative advantages refers to the exports of the selected sector in a particular country in comparison to the world exports, whereas in the interstate analysis the defined RCA indexes of the selected coun-tries are compared, and the dynamic calculation takes into account various time periods and analyzes the dynamics of the changes in the RCA index during a longer time period. Amador, Cabral, & Maria (2009) propose the application of the average RCA index to draw comparison among individual coun-tries, as it allows for the determination of the export profiles of an individual country.

Regarding their strategic position and economic development some countries are competitive in in-dividual products, whereas others are competitive in their services, thus gaining their comparative ad-vantage. In his research Seyoum (2007) compared the advantages in services of developing countries by applying the RCA index and established that certain developing countries have comparative advantages

24 Marjan Sternad et. al The Case of Slovenian International Comparative Advantage in Logistics Services


in various service sectors (business, financial, transport, travelling services), whereas others only in in-dividual service sectors. The author proposes to countries that would like to improve their market com-petition to significantly invest in infrastructure, technology and promotion of the export services. Wang, Cui, & Shuang (2010) established the comparative advantages of the service sector in China, in which the comparative advantages of the transport sector have been increasing since 1988.

1. Methodology

The comparative advantage of an individual country is defined using the RCA index, which was first introduced by Balassa (1965) as a quotient of the exports of an individual country and the total world exports, that is defined as to:

nt

nj

it

ij

X

X

X

X

1 RCA , (1)

where X – stands for exports, i – stands for the examined country, j – stands for the selected service, t – stands for the total export, n – stands for the selected compared countries The comparative advantage is gained when the value of the RCA 1 index exceeds 1 (RCA 1 > 1). Due to the specific characteristics of the service sector, some researchers modified the RCA index

that is focused only on services and does not consider the total exports of an individual country (Seyoum, 2007). The modified RCA 2 index is defined as:

ns

nj

is

ij

X

X

X

X

2 RCA , (2)

where s – stands for the service sector. The comparative advantage is gained when the value of the RCA 2 index exceeds 1 (RCA 2 > 1). As RCA 1 and RCA 2 indexes take into account only exports, it is necessary to consider the com-

parative advantages of the imports as well, when determining the comparative advantages of an indi-vidual sector. For the purpose of determining the competitiveness of the Hungarian agricultural and food sector, Ferto & Hubbard (2003) used the indexes of the import advantages (RMA) and the relative export advantages (RXA), where RXA = RCA 2. RMA is defined as:

Mns

M

M

M

nj

is

ij

RMA , (3)

where M – stands for the imports of the transport and communication services of the selected country.

Marjan Sternad et. al The Case of Slovenian International Comparative Advantage in Logistics Services 25


The modified RCA 3 index is defined as:

RMA2 RCA3 RCA (4)

The comparative advantage is gained when the value of the RCA 3 index exceeds 0 (RCA 3 > 0). The export profile of a country stands for the export performance of Slovenia with its most important

partners in transport and communication services, taking into account the total export of services in 2009 as recorded in the international trade centre data (ITC). Transport services comprise all transport related services, provided by the residents of Slovenia for non-residents and vice versa., e.g. transport of passengers, transport of goods, lease of means of transport with a crew and ancillary transport services pertaining to maritime traffic, air traffic, railway traffic, road traffic, and other traffic. Communication services consist of postal, courier and telecommunication services provided by residents to non-residents and vice versa. Communication services required to be reported on a gross basis rather than on a net basis, as the difference between given and received services (Bank of Slovenia, 2008). Due to the specificity of transport activities, only European countries are considered, of which Slovenia contributes only a small share to the world transport and communication activities. The share of an individual coun-try in Slovenian exports of transport services to Europe is defined as to:

100e

p

X

X, (5)

where Xp – stands for the exports of transport and communication services of Slovenia to a partner country, Xe – stands for the exports of transport and communication services of Slovenia to Europe. When determining the export profile, it is also necessary to consider the import performance of a

five-year period of five important Slovene partners in transport and communications, which are ranked on the basis of the statistical data of ITC regarding the value of the imports of transport services from Slovenia. The import performance is defined as:

10010

0

1

tt

td

td

M

M, (6)

where Md – stands for the imports of the transport and communication services of the selected country, t and t0 – stand for the last and first year of the examination. As regards the defined comparative indicators, some countries are more competitive than the com-

pared ones; however the total imports of transport and communication services should also be taken into account, depending on the size of a particular country and on the development of its transport sector, as well. The value of the import of transport and communication services is defined as:

100e

d

M

M, (7)

where Md – stands for the imports of transport and communication services of the selected country, Me – stands for the total imports of the transport and communication services of the European coun-

tries. The import profile represents the imports of transport and communication services from the Euro-

pean countries and a share of an individual partner country in Slovenian exports, whereby the total im-ports of the transport services in the year 2009 as recorded in the international trade centre (ITC) data is



taken into account. The share of an individual country in the Slovene imports of transport and commu-nication services in Europe is defined as:

100e

p

M

M, (8)

where Mp – stands for the imports of Slovenian transport and communication services from a partner coun-

try, Me – stands for the total imports of transport and communication services of European countries. When determining the import profile it is necessary to take into account also the export performance

of a five-year period of eight most important Slovenian partners in transport, that are ranked according to the statistical data recorded in ITC regarding the value of export of transport and communication ser-vices in Slovenia. The export performance is defined as:

10010

0

1

tt

td

td

X

X, (9)

where Xd – stands for the exports of transport and communication services of the selected country. The export value is defined as:

100e

d

X

X , (10)

where Xd – stands for the exports of transport and communication services of the selected country, Xe – stands for the total exports of transport and communication services of the European countries.

2. Results and discussion

Fierce competition between companies, shorter product life cycles, and recent crisis-related events all call for adjustment of all supply chain participants. Here, logistics management will play an enormous role, as it will influence either the success of businesses or their failure. Therefore, logistic costs will also play a decisive role in business competitiveness on the global market, and belong to advantages that distinguish a given organization from other suppliers in the market. The key mechanisms for main-taining competitive advantage today include a holistic approach to logistics, standardization or introduc-tion of adequate standards, high level of responsiveness, compatibility with other elements of organiza-tional structure and business environments in general. Companies have started to realise the importance of logistics’ organization and hence competitive advantage. Competitive advantage results from innova-tive combination of knowledge, special skills, technology, information and unique business methods that enable the supply of products and services that the buyers appreciate and want to buy (Greaver, 1999).

Slovenia is a prime location for companies doing business with central, east and south-eastern Europe. Thanks to its strategic geopolitical position and decades of close economic ties with its neighbours, the Slovenian companies are real “connoisseurs” of the regional markets. Two Pan-European transport corridors (5th linking Barcelona and Kiev and 10th from Salzburg to Thessalonica) intersect at Ljubljana. An excellent track record of Slovenian companies in this line of business, coupled with modern transport infrastructure, is a proven recipe for high-quality and cost-competitive services

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Slovenia is a highly internationalized economy, which presumes a substantial dependence on its trade partners and their economies, and consequently, has a powerful impact on the export and import profiles of its transport services and on the international competition, which is mainly shown in road transport, which could be confirmed in further research. For a small country like Slovenia, that is a real case sce-nario. Majority of Slovenia’s GDP or more than 60% of its GDP is contributed by exports and imports. There are governmental and public institutions that support Slovene companies when "going abroad". Some institutions, like Ministry of the Economy and Ministry of Foreign Affairs, deal with more sys-tematic measures. They boost internationalization through enabling the right conditions and business climate. SM

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Balassa, B. (1965). Trade Liberalization and Revealed Comparative Advantage. The Manchester School of Economic and Social Studies, 33 (2), 99-123.

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Benedictis, L. M., & Tamberi, M. (2001). A note on the Balassa Index of Revealed Comparative Advantage. Retrieved January 20, 2012, from EconPapers: http://econpapers.repec.org/paper/ancwpaper/158.htm

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Correspondence

Marjan Sternad

University of Maribor, Faculty of Logistics Mariborska cesta 7, 3000, Celje, Slovenia


STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 031-044 UDC 338.431(497.113) ; 658.114:631.1(497.113) ; 005.336.1

Received: April 14, 2012 Accepted: June 2, 2012

The Second Wave of the Global Financial and Economic Crisis and a New Agribusiness Development Model: A Study Case of Vojvodina

Sofija Adžić, Jelena Birovljev, Biljana Štavljanin University of Novi Sad, Faculty of Economics, Subotica, Serbia

Abstract The tide of the second wave of the global financial and economic crisis suggests that Vojvodina needs a radi-cally new agribusiness development model. The key to constituting a new agribusiness development modellies in identifying good solutions for integrating the European concept of endogenous, self-propulsive and self-sustainable development based on scientific knowledge into the overall social and economic structure of farm-ing industry in Vojvodina. The elaborated material is divided into six sections. The first section considers the impact of current competitiveness on public and corporate agribusiness management according to the criteriaof open market economy; the second section presents the results of the analysis of future competitivenessand their implications on a new model of public and corporate management; the third part deals with the is-sues of developing collaboration and cooperation culture in agribusiness, as a key factor in the conversion ofthe farming industry from the current competitiveness level into a new condition. Based on the findings of thefirst, second and third section, the joint assumptions of the fourth, fifth and the sixth sections deal with the ba-sic controversies regarding the advancement of public and corporate agribusiness management in Vojvodina. Keywords The second wave of the global financial and economic crisis, Vojvodina, farming industry, new agribusinessdevelopment model, public and corporate management.

Introduction

Among other, the tide of the second wave of the global financial and economic crises in the second half of 2011 intensified the issue of a new farming industry development concept in Vojvodina, and, in this context, the issue of enhancing the public and corporate management of protagonists within agribusi-ness, as a basic mechanism for its implementation. In scientific terms, the most relevant concept was derived from a development model based on (scientific) knowledge to ensure an increase in food export with a higher share of value added per product unit (Adžić & Adžić, 2011). The approach to the issue of defining the structure and context of this development model in Serbia and Vojvodina are marked by: spontaneity, emotional attitude, irrationality, instability, lack of evaluation of realistic implementation paths and, consequently, unclear, inaccurate and inconsistent approach in preparing and implementing relevant economic and business decisions, entrepreneurial and business initiatives (Izvršno veće AP Vojvodine, 2001; Ekonomski institut - MAT, Ekonomski fakultet - FREN, 2010). In this context, with-out aspiring to give an all-embracing answer, the focus is on the issue of more efficient public and cor-porate management of protagonists in the agribusiness in Vojvodina, within the scope determined by the new global food-production system and the European solution to this problem.

32 Sofija Adžić et. al The Second Wave of the Global Financial and Economic Crisis and a New Agribusiness ...


In order to determine the goals, analysis methodologies and results more precisely we shall present the content of basic concepts used in this article.

The term agro-industrial complex, as used in this article, refers to a large system comprising: (1) ag-riculture; (2) water management related to operations of melioration, irrigation and protection from sur-face and subterranean water; (3) fish farming; (4) related segments of processing industry (food process-ing, beverage production, feed production, tobacco processing, producing chemicals required in agricul-ture, producing agricultural machinery and equipment for food industry, production of food industry equipment, production of plant production chemicals and pharmaceuticals for agriculture; (5) logistic service industry, which includes related segments of traffic industry oriented to transporting raw materi-als, produce, food and drinks, with a complex of macro-logistic bases (silos, cold storage facilities, pro-duce and food storage facilities etc,.); (6) related segments of trade and hospitality industry, involved in the distribution of inputs for agriculture, food, drinks and tobacco; (7) service industry for agricultural machinery maintenance; (8) segments of STIOET (Science – Technology – Information – Organisation – Education – Telecommunication), infrastructure, related to agriculture and food industry; (segments of specialised agricultural administrative structure (agriculture-related service offices, market inspectorates etc.).

The term farming industry refers to a narrower scope of activities within the agro-industrial com-plex, which, in contemporary market economies, features as a unified macro-reproduction entity, com-prising: (1) primary agricultural production; (2) food and drinks industry; and (3) related logistic and trade companies, and, finally, their (4) entrepreneurs, owners and expert teams.

The term agribusiness, which is the central subject of this article, refers to the private sector in the farming industry, which is, based on property rights involved in certain business activities aimed at gaining profit. Its key protagonists are (1) commercial farms, (2) food and drink producers, (4) related logistic and trade companies, and their (4) entrepreneurs, owners and expert teams.

This article is limited to the Province of Vojvodina. The reasons are twofold (Adžić & Adžić, 2009). The first one is that the national farming industry comprises two technological and organisational enti-ties (the Province of Vojvodina and Serbia proper outside Belgrade), which are different and yet com-plementary (the synergetic effects of which are underused, but this issue exceeds the subject of this arti-cle). The second is that challenges related to management are different, first off all, due to the structure of food production in Vojvodina, which faces fiercer competition on the European and global food mar-ket than the rest of Serbia.

The new agribusiness development model in Vojvodina will be accompanied by the emergence and development of new structures: commercial farms, food and drink production businesses, logistic and trade companies, new and complex innovation, organisation, service, finance and IT systems, and new demands related to efficiency and reliability of these structures and systems. These systems are charac-terised as paradigmatic change, giving rise to successfully solve all problems related to new structures, demands and expectations by increasing the effectiveness of public and corporate management of agri-business. The key challenge is generating and using knowledge so as to create conditions for a dynamic development of agribusiness for a multinational environment.

Ever since the economic reforms of 1965, agribusiness in Vojvodina has been faced with the prob-lem of how to increase the effectiveness of (public and corporate) management systems on open mar-kets. Over the past forty-seven years, as the key regulative factor in agribusiness development, the state has launched at least five different models for developing the macroeconomic framework for channel-ling corporate management in this direction (Adžić & Jevtić, 2010). The outcomes have been negative, so that the joint conclusion is that the way towards improving managing protagonists in agribusiness is a bumpy ride, and depends on many variables. For instance, in early 1990s, the Institute for Management Development / World Economic Forum listed over 350 variables affecting the effectiveness of public and corporate management. From the agribusiness aspects, the most prominent ones include: dynamics of the national and regional economy; efficiency of the primary agricultural production, processing and the complex of logistic and distribution services; the dynamics of target foreign markets; human re-sources; natural resources; orientation to knowledge and innovation; social and political stability and ability to achieve consensus between key social and economic groups; structure, availability, and qual-ity of the production assets i.e. capacities: ability to attract foreign direct investment; entrepreneurs’ and

Sofija Adžić et. al The Second Wave of the Global Financial and Economic Crisis and a New Agribusiness ... 33


managers’ technical and marketing expertise, etc. Such a high degree of particularisation results in dis-guising the essence itself (Matejić, 2003).

The analysis of the issue of the effectiveness of public and corporate management in the new agri-business development model in Vojvodina will be limited to elaborating three factors: (1) current com-petitiveness, (2) future competitiveness and (3) developing culture in multinational business as a key factor in linking (1) and (2). In addition to the introduction, the presented material is divided into six sections. The first section considers the impact of current competitiveness on public and corporate agri-business management in Vojvodina according to the criteria of open market economy; the second sec-tion presents the results of future competitiveness and their implications on a new model of public and corporate management; the third part deals with the issues of developing cooperation culture in agri-business, as a key factor in the transition of the farming industry from the current competitiveness level into a new condition. Based on the findings of the first, second and third section, the joint assumptions of the fourth, fifth and the sixth section deal with the basic controversies regarding the advancement of public and corporate agribusiness management in Vojvodina.

1. Current competitiveness and its implication on public and corporate management of protagonists in agribusiness

The key agribusiness protagonists in Vojvodina are characterised by producing food and providing re-lated services, from quite simple to sophisticated, either of poor quality or at high prices, but in both cases with little concern for the external world and its requirements. The same applies for its external environment – provision of financial, IT, educational, scientific and research services, and especially the services of public regulation, characterised by large volume, low quality and high level of unreliability. With the removal of barriers to the external world after the year 2000 and entry of international criteria and benchmarks to the domestic economic, social and political scene, contrary to expectations, the man-agement persisted in its movement along the same trajectory. The key protagonists of public regulation and private sector turned to the export of primary produce, with minimum value added in their process-ing, and proved to be incapable of facing the challenges of raising international competitiveness levels in food production with higher newly created value. Two facts are relevant from the aspect of our topic. The first one concerns the macroeconomic environment of agribusiness, and the other to the behaviour of entrepreneurs, owners and managers of commercial farms, food and drink producers, logistic and trading companies.

The key events on the macro level stem from the fact that the holders of executive and representative power who took over public management after the year 2000 adopted an agribusiness development model structured according to recommendations by key international economic organisations (the Washington Consensus). This model advocated radical reshaping of the agro-industrial complex, by applying three basic mechanisms: deregulation, liberalisation and privatisation, with the aim of strengthening the role of private sector in production, employment and development in the shortest pos-sible period (Buckwell, Haynes, Davidova, Kwiecinski, & Courboin, 1994). Despite the relatively un-productive results achieved by implementing this model in the agro-industrial complexes of other for-mer European Social countries, which forced them to (partially) abandon its application and turn to a more active version of agrarian and industrial policies, Serbia liberalised the national food market, abol-ished most of the barriers to the approach of foreign of commodity, money and enterprise market, and started a rapid (regular and irregular) transformation of public and state-owned property in the agro-industrial complex (Stojanović, 2010). Agribusiness, the market and the population received a false sig-nal about profitability or unprofitability of entire industries, leading to intensified decline in animal hus-bandry and disappearance of export-oriented meat-packing industry, as well as the industries producing agricultural machinery and chemical fertilisers (Adžić, 2008b).

What is it that happened at the level of farms, food and drink producers, logistic and trade compa-nies? Takeovers (privatisation and subsequent changes of ownership) were financed with borrowed funds (which were used for speculation on the real estate market and acquiring other businesses rather than for technological and business-related rehabilitation). With indexed exchange rate, in the most ex-treme cases, these funds are borrowed at up to four times higher interest rates than in the countries of the European economic and monetary Union. Through the expansion of the effects of the first wave of



the global financial and economic crisis, it has become obvious that the risks of excessive indebtedness are high, so that some of the protagonists involved in agribusiness went bankrupt or discontinued pro-duction. Funds allocated for equipment amortisation have not been invested in the agriculture of Vo-jvodina either over the past eleven years. A part of new owners, i.e. management appointed to run large commercial farms or food and drink producing enterprises on their behalf, did not have the required management knowledge or skills, nor were they interested in acquiring and applying them. This has resulted in opening a whole range of new and even more difficult issued when compared to the condi-tion found at the beginning of the century. Despite a dynamic growth in export, in terms of develop-ment, the agriculture of Vojvodina was, in fact, departing from the de targeted European environment. This is only a part of the causes of inadequate public and corporate agribusiness management in Vo-jvodina (Vunjak, Zelenović, Birovljev, & Milenković, 2012). The other part is related to misinterpreted structural specific features faced by its protagonists in open market economy, more precisely, in the new structure of the global food production system, whose formation began in the mid 1980s

The fundamental feature of the global food system in the past three decades has been the fact that the prosperity of any food production must be related to international needs or requirements, and appropri-ate management and marketing for supporting such business orientation (Knutson, Penn, & Flinchbaugh, 2004; Gellynk, Verbeke, & Viaene, 2003; Lawler & Lee, 2003). The main challenge faced by the on public and corporate agribusiness management is how to provide conditions for (a) flexibility and (b) economies of scale and scope. Empiric events, subsequently shaped into relevant theoretical observation. Show that meeting these requirements is based on the principles of including each protago-nist into economic, social and political networking retaining internal competitiveness (thus preventing the emergence of monopolistic behaviour in the reproduction chain) and the advantages of cooperation, providing (combining the effects of economies of scale and scope and (b) rapid and efficient adaptation to change in the external and internal environment. Networking agribusiness protagonists is also done outside national boundaries, and between – until recently – completely unconnected sectors (for in-stance, with large retail chains without intermediaries). Constituting and developing networked organ-isational structures has proven to be a complex economic, social and political process, parallelly using market-related, planning (administrative) and negotiating mechanisms, based on a specific value system (in terms of unifying its elements into an appropriate model of commercial, social and political culture).

The key implications are: management should be performed at the level of networks, connecting all protagonists in the reproduction process, so that (2) the key research subject is the characteristic of the network in question and motives for its constituting and development; consequently (3) management system should be restructured at network level and finally, (4) a specific agribusiness protagonist’s management system can cannot be restructured in isolation; a network must be treated as its initiator and executor. This means that, when identifying a solution for good public and corporate agribusiness management, rather than allocative, one should use the principle of adaptive efficiency, where the cate-gories of existence and development (of the specific commercial farm, food and drink producer, logistic or trade business) are considered within the boundaries of tolerance and efficiency. The competitiveness of specific agribusiness protagonists is not a targeted static condition, but a dynamic process, stemming from interactions in a given economic, social and political network, based on the choice of appropriate goals and mechanisms of their attainment through creating new and more efficient utilisation of existing resources. For these reasons, factors limiting the creation of networks, institutions, behaviour norms and systemic regimens have become more important for the total performance of agribusiness then currency exchange rates efficiency of resource allocation, subsidy and wage levels etc. These changes also have additional consequences for the public and corporate agribusiness protagonists’ management:

Firstly, labour division is substituted with integration and enrichment of task contents through hori-zontal and vertical decentralisation. Normative and real boundaries between individual functions in the reproduction chain and food production and distribution have eroded. Many of the internal hierarchi-cally structured configurations have disappeared. The organigram of the reproduction chain has become shallower, primarily through eliminating intermediaries in sale-and-purchase relationships, i.e. estab-lishing direct relations between producers and retailers. This has yielded substantial gains in productiv-ity, democracy, socialisation and cultural content of tasks and organisation. Creative task performance has become the basic criterion for reproduction chain organisation functionality in agribusiness.



Secondly, externalisation of auxiliary operations and a broad application of cooperation are the nor-mal form of organising business activities in agribusiness (Matthews, 2003). The outcome is the emer-gence of the so-called virtual agro-corporations and new types of employment (temporary and part-time), for instance in the sphere of technical support to introducing innovation in primary agricultural production). The application of these approaches has a reverse as well, as it leads to intensified oppor-tunist behaviour patterns if sine of the reproduction chain participants and increased risk from making inappropriate business decision. This has lead to a stronger role of strategic planning in the realization of the agribusiness management process.

Thirdly, generating and utilizing knowledge as the fundamental paradigm of a new agribusiness de-velopment model has brought the tasks of research and development, and generally speaking, using in-novative potential and behaviour into the forefront of public and corporate agribusiness protagonists’ management system. This is a long-term transition process, for the old management paradigm (stem-ming from Ford model of food production, processing and distribution, and high level of subsidising primary production) is deeply rooted in the economic, social and political system. A special problem is that this process in Vojvodina and Serbia was practically not even started into the scientifically recom-mended direction (Matejić, 2009). The current state of public and corporate agribusiness management in Vojvodina is a mixture of just about anything. Agriculture and agribusiness in Vojvodina are both a product and a constituent of a nebulous, undefined and manipulative transition combined with mixed up ends (to enhance the competitiveness of agriculture on the principle of sustainable economic social and environmental, so as to utilise the enormous natural and man-made resources and improve the living and working conditions in Vojvodina and Serbia proper, outside Belgrade) and means (privatisation, liberalisation and opening to the external environment). Public and corporate agribusiness management in Vojvodina is exposed to subjective voluntarism of agrarian policy makers, the owners of resources, key protagonists and their management. This voluntarism is far from the skills, abilities and talents that are at work in a highly competitive environment in societies dominated by private and personal prop-erty. When considering this problem, one must bear in mind that (macroeconomic and business) man-agement is a mix of science and skill (Begović, Bukvić, Mijatović, Živković, & Hiber, 2003). Science cannot develop methods and tools for a successful resolution of all the problems of public and corporate agribusiness management, but may help understand the world they act in, and find good answers to challenges of the future, which will be elaborated in Section 2 of this article.

2. The factors of future competitiveness and their implication on public and corporate agribusiness protagonists’ management

Considering the issue of future competitiveness of agriculture and its implications for structuring public and corporate agribusiness management protagonists in Vojvodina in compliance with the criteria of the open market is based on three hypotheses.

The key hypothesis is that discourse on the structure and contents of a macroeconomic framework that will encourage achieving enhanced efficiency of public and corporate agribusiness protagonists management in Vojvodina can no longer be reduced to the problems of (institutional arrangement of the power market (multi-party political system), (2) reform of the product and service market (privatisation and liberalisation) and (3) development of the finance market) (by surrendering the banking system to the foreign factor), expecting that these thee markets, and subsidised selected produce from public sources, will spontaneously initiate the process of moving their performance from a standstill.

The second hypothesis is that raising the efficiency public and corporate agribusiness management in Vojvodina must be based on better understanding of problems faced by the transition of the regional agro-industrial complex, including a proper interpretation of models and results of their transition in former European Socialist countries, and current EU members (CEEC-10)

The third hypothesis is that the concretisation of solutions for more efficient public and corporate ag-ribusiness protagonists management will be conducted in an environment shaped by (1) goals, policies and behaviour both of individual players (notably entrepreneurs, managers and owners) and the agro-industrial complex as a whole; correcting mistakes and removing problems brought about by the models of (post)socialist transition and corporate management of agribusiness in Serbia and Vojvodina from the beginning of 1990 till the end of 2011; (3) overall transition of agro-industrial complex in the broader environment, first of all Europe, brought about by the need to find solutions to overcoming the conse-



quences of the second wave of the global financial and economic crisis and collapse of public finance in a number of EU member states, and the increasing pressures to abolish (economically and developmen-tally inefficient subsidies to primary agricultural production; (4) governmental, regional and local cur-rent policies and normative activities on arranging the business conditions for the protagonists of the agro-industrial complex, and (5) interaction of factors (1) to (4).

What are the meanings of these hypotheses to specific structuring of the system of public and corpo-rate management of agribusiness protagonists in Vojvodina. In order to overcome the condition of de-velopmental entropy, it is necessary to initiate a process of constituting a new production and organisa-tion model of agro-industrial complex functioning in Vojvodina along self-organisation principles. In compliance with the European concept of endogenous, self-propulsive and self-sustainable develop-ment, solutions should be sought in (commercial and regional) clusterisation policies and developing innovation systems in large commercial farms and enterprises of agro-industrial complex (notably high-tech companies). In order to achieve these goals, the essential task of the new system of public and cor-porate management of agribusiness protagonists is to place focus on a more precise identification of specific microeconomic (at the level of tasks, processes, commercial farms and enterprises) (Birovljev & Štavljanin, 2011), mesoeconomic (at the level of industries, especially logistic and trading compa-nies) and macroeconomic (local, sub-regional, regional, national) comparative advantages and disadvan-tages, methods and challenges of their transformation, i.e. elimination and, consequently, defining the appropriate business and public strategies and policies, so as to provide for the fulfilment of the follow-ing requirements:

Firstly, consistent appreciation of the principle that modern business and development are based on differentiated processes, which are simultaneously conducted in different spatial and sectoral frame-works, with appreciation of the diversity of natural, ethnic, cultural, social, economic and historical conditions. Specific commercial farms, enterprises and their clusters, i.e. territories, should be viewed as poles of development to be utilised most efficiently. Initiatives for establishing corporate networks and alliances, and export macro-clusters should have a clear individual group-oriented or sectoral, i.e. spatial (primarily sub-regional or local) content and provide a realistic response to specific problems and goals, for which initiatives are launched and implemented by the in-site protagonists of the agro-industrial complex. The concept of conducting business and development along the bottom-up principles will po-tentiate its endogenous feature. Developing awareness of its justifiability will strengthen the conviction of the need to link every business, i.e. development project to opportunities created by the process of European Integrations, i.e. entry into other segments of the global market.

Secondly, the focus of activities on structuring a new model of public and corporate agribusiness management should be on the qualitative, broader and structural development and abilities to create new or complementary activities, raising the newly-created value in the food production along the principles of sustainable (economic, social environmental and cultural) business and development, rather than quantitative augmentation of the existing primary agricultural production with highly capital-intensive in eliminating various (social, environmental and cultural) problems.

Thirdly, in order to created real condition for privatising the development of agriculture in compli-ance with the criteria of open market economy (more precisely, the European concept of endogenous and self-sustaining development based on scientific knowledge), it is necessary to include a broad vari-ety of various protagonists (entrepreneurs, owners, managers, commercial farms, enterprises, logistic and grade companies, institutions, organisations and individuals) that create, develop and apply differ-ent policies and strategies, and integrate them into harmonious and functional operative structures. What should be provided is conditions for partnership-oriented approach, cooperation and participation when creating each business, sectoral and territorial development strategy of farming industry and their im-plementation. This is the only way to secure a consensus of various development protagonists, promote strategic approach and avoid (if, of course realistically possible) overlapping developmental efforts.

Fourthly, it is necessary to create conditions for a holistic approach to the problem of revitalising the existing and developing new commercial farms and food-producing enterprises, appreciating the strate-gic aspect, the aspect of operational structures and the aspect of activity. Therefore, specific (business-oriented and public) projects must be based on a realistic assessment of the nature of economic, social, environmental and cultural problems, affecting a specific commercial farm, enterprises, cluster or set of activities around farming industry (particularly the finance and service industries and large logistic and



trade companies), and the ways in which these can be removed. In implementing the selected strategy, one should utilise numerous operative structure, among which the key role is played by entrepreneurs, commercial farms, enterprises, economic associations, but also banks, large logistic and trading compa-nies, local, sub-regional, regional and national administrative bodies, development agencies, secondary and higher education institutions.

Fifthly, activities that should serve as the basis for the strategy of development of a new public and corporate agribusiness protagonists management model in Vojvodina are (1) encouraging the associa-tion of farming industry protagonists into business networks and alliances and export macro cluster, by means of providing specific public bottom-up support to individual and collective initiatives in the tran-sitional period from launching to self-sustainability; (2) encouraging new, export oriented food produc-ers; (3) promoting private investment in modernising primary agricultural production (4) revitalisation of the existing and development of a new physical infrastructure (first of all, country road network, irri-gation and drainage systems, protective greenbelts etc.,) with a focus on actions at the local level and application of mechanisms of public and private partnerships (PPP) in implementation; (5) support to developing business innovation structure: (a) providing additional education and training; (b) technical and financial assistance in implementing specific research projects and developing new products and processes, (c) providing business consulting services to enhance the sales of food on international mar-kets; (d) technical and financial support to specific IT infrastructure development or modernisation; (6) strengthening business infrastructure, notably facilitating the access of commercial farms and SMEs in rural areas to funds in the realisation of specific development projects and implementation of innovation and developing food export (with a strict respect of principles of firm budget limitation and individual responsibility for abuses and embezzlements) and enhancing the quality of public administration ser-vices (more specifically, raising standardisation and metrology, and related monitoring administration to the European level), etc.

What is the inference to be drawn? In constituting a good system of public and corporate manage-ment of agribusiness, aimed at enhancing competitiveness at open markets, the issues of information, communication, coordination and joint development at the level of each individual protagonist, should be placed in the same plane with the economies of scale, new investments and savings (Matejić), 2003). The question, however, is how to move the public and corporate agribusiness from the current into a new (scientifically recommended) condition. In the authors’ opinion, the key is in developing culture in multinational business, which will be dealt with in the third section of this article.

3. Development of multinational business culture as a prerequisite for enhancing the public and corporate agribusiness management system

Regardless of how deeply rooted in the real problems faced by agriculture in Vojvodina, the change in the management paradigm in the public and commercial sector, has been hindered, prevented and de-layed by entrepreneurs and managers on the one side, and the entire economic, social institutional and cultural system on the other (Begović et. al., 2003, Begović et. al., 2008). The change in the agribusi-ness public and corporate management paradigm has various dimensions, but from the aspect of com-petitiveness, the key one is the dynamic multinational business culture. Before a more detailed identifi-cation of factors that are supposed to bridge the gap in public and corporate management between cur-rent and future competitiveness of business ventures in agribusiness by way of developing multinational business culture, something more should be said about the phenomena of culture related to multina-tional business and organisation of commercial farms and their associations, businesses and groups in export-oriented food producing industries as the fundamental existence and development factor

The key indicator of the specific features of current cultural changes is growth in the numbers of transnational companies (TNCs) and multinational enterprises (MNEs) in agribusiness. However, the growth of (national) commercial farms and their associations, and food and drink producing SMEs con-ducting business operations in multinational and multicultural environment is much faster. Their cul-tural diversity is continuously increasing. Different options are possible. The same association of com-mercial farms may contain different national or regional cultures. The other one is that national and re-gional agribusiness players have a close cooperation with production businesses and logistic and trade companies from other national or regional cultures (firm business networks and alliances, i.e. macro-clusters). The third one is that a participant in (regional) agribusiness has stable customers or suppliers



from other cultures. Finally, by way of inclusion of Serbia and Vojvodina in the economic part of the process of European integration, the overall trend of purchase and sale market internationalisation inevi-tably introduces cultural diversity into the business operations of national and regional agribusiness par-ticipants. The essential point for this analysis is that different cultures view different viewpoints, and that these lead to different interpretations of the same reality. National and regional cultures display proneness to a broad distribution of the problems whose causes are outside the organisation. This also refers to internal problems at lower organisation levels, whereas a tendency towards hiding them exists at top level. A common element for all is that search for solution tends to hide the (normal) ignorance of those in charge of resolving problems. The consequence is postponing its solution, as disclosing this information would lead to awareness of the owners, entrepreneurs’ and management’s incompetence (more precisely, lack of ability to learn and create appropriate solutions).

Participants in agribusiness are marked by a set of basic beliefs and values, which provides placing the members of a specific organisation into mutual relations and interactions, and, on this basis, realisa-tion of specific business activities. The set of these values and beliefs is referred to as organisational cultures (in this case, production of produce, food and drinks and accompanying logistic and distribu-tion services). What is relevant for analysis is that the culture of each specific organisation in agribusi-ness comprises a whole range of subcultures, depending on the affiliation of its members to individual business functions: commercial farming in the sense of integrating entrepreneur and producer functions, management, purchase, production, sales, quality control of products and processes, research and devel-opment, financing, investing etc. Consequently, most organisations have more subcultures than produc-tion programmes. Thus formed organisation culture can be more or less in compliance with the current management paradigm (in the sense of integrated management for advancing food production with higher value added per product unit), i.e. in lesser or greater conflict with its aims and means of realisa-tion (Đurković, Trninić, Vuković, & Raković, 2011). The next problem is that, due to dynamic changes in the environment, organisation culture must be changed every three or four years (for instance, through integration or firm linkage to other organisations, new decomposition of the organisation into segment, change in ownership structure, major technological modernisation or the like, accompanied by changes in labour volume and structure), which inevitably includes changes of each subculture.

There are four conclusions to draw. First, any great change in the location of purchasing or selling market, or in organisation, requires new contents in the culture of agribusiness and its organisation. Second, any change is cultural rather than technical by nature. Third, (re)shaping an agribusiness’ cul-ture and organisation is one of the central problems of public and corporate management of its protago-nist. The fourth and key conclusion is that, unlike those in the developed world (that we are trying to reach) neither commercial farmers, agrarian entrepreneurs, management and owners of enterprises and company owners nor the creators of the public regulation of agricultural industry are qualified to solve these problems. How to overcome these problems, how to change the organisational culture and multi-cultural business so as to transfer the agribusiness protagonists in Vojvodina from the current state of competitiveness to a new state? This article will offer some options.

Firstly, one must start from the fact that the characteristic groups of internal and internal agribusiness are different. Consequently, the messages and behaviour patterns of (public and corporate management) must act so as to disclose the challenges and opportunities of potential multiculturalism rather than hid-ing them. Similarities must be treated as benefits, and differences as normal features. To overcome these, top managements must communicate clear, precise and coordinate messages in their internal and external environments.

Secondly, as the essential element of any characteristic group of external and internal protagonists of agribusiness, people develop in a manner bringing the need for individual respect into the foreground. As a rule, individuals with a higher level of self-respect are more open to other cultures, and accept change, new and different cultural values more easily. Multicultural business required developing deeper relations, down to the level asking and answering private questions. This enables (public and corporate) management) to discover cooperative elements and explain the conflicting ones in manage-rial decision-making more easily.

Thirdly, what is necessary is essential change in management style method and techniques. Change starts from lowering hierarchy levels, enhancing tasks and delegating responsibility, extending the ap-plication of the participation principle, forming the vision jointly, and developing a common culture, so



as to lower the number of subcultures, and finishes with abandoning people management and orienting to process management (including abandoning the extreme management form, reflected in the metaphor that everything must be done as instructed by the top management of the last participant in the repro-duction chain).

Fourthly, what is necessary is a new type of farming entrepreneurs and managers, who ought to be possessed of various knowledge (language skills, history, culture, commercial and employment law of the environment they are working in) and abilities (various communication techniques, rapid compre-hension of new problems, higher tolerance levels etc.). This is a prerequisite for finding successful solu-tions to business management problems in multinational agribusiness.

Fifthly, good farming entrepreneurs and managers must accept the reality that not everything de-pends on them and their own wishes, or expert teams and other co-workers, but on the state and other institutions faced by their business venture, commercial farm, food and drink producing enterprise, lo-gistic or trading company. They should therefore very carefully and systematically submit proposals, objections, critical or supportive statements to the environment, so that their managing work would be adequately supported and obstructed as little as possible. This also applies to unfavourable exchange relationships in the reproduction chain, monopolistic behaviour patterns, tariffs, taxes and subsidies, shortages of farming industry, education and innovation system for agribusiness, and especially bad international economic with other countries etc., until things are settled down. This must be done in such a way that will make those they are dealing with cooperative, rather than disinterested or competi-tive. These requirements directly face the needs for change in the system of public and corporate man-agement of agribusiness participants, where two key ones are prominent.

Sixthly, it is necessary to work consistently on creating a framework for strategic business planning and development of a new culture of public action in agribusiness. Two options are of key importance. First, the time horizon for efficient for efficient (macro-, meso- and business-level) planning must be extended to several years. Second, in conceiving the contents of their aims in actions in the farming in-dustry domain, the state must make an essential breakthrough in promoting phenomena presenting a cultural basis for efficient realisation of agrarian, development, industrial, social and environmental policies in contemporary market economies, such as accountability, transparency, accuracy, expertise, responsibility and trust.

Seventhly, we should clearly and unequivocally accept the position that public and corporate man-agement must be based on knowledge and convictions on how agribusiness protagonists function in open market economy, and that responsibilities in implementing the system of economic goals on the one hand, and the system of social and political goals on the other must be clearly and accurately distin-guished. In this context, the fundamental principles for finding better solutions to public and corporate agribusiness management are (1) multicriteriality of the problem to be resolved; (2) better comprehen-sion of transition side-effects, especially resistance to change that characterises the process of agribusi-ness reconstruction and performance improvement on the one hand and institutions for their regulation on the other; and (3) instability of social preferences in determining the scope, structure and quality of the goals and actions of institutional reforms and policies.

What is the inference to be drawn? Conceiving a new model of farming industry in Vojvodina, based on the concept of enhancing the competitiveness of agribusiness, without the cooperation of public and public sector, and development of new cultural patterns, is an outdated model, because the international food market is not only a venue of competition in product and services, but also knowledge, ideas and (timely) comprehension of reality, and, as such, precede any production and trade.

4. Discussion

The analysis presented above shows that the concept of public and corporate agribusiness management is based on the farming industry model providing a socially organised and institutionally arranged proc-ess of cooperative decision coordination at macro-, meso- and micro-level (Adžić, 2003a; Domazet, 2011). Developing and implementing business and technological innovation and new forms of social and economic organisation and division of labour would thus secure an internationally competent level of food quality and prices (Adžić, 2008a: Adžić & Birovljev, 2011). In this context, the basic task of the new farming industry development model in Vojvodina is to constitute a dynamic structure comprised of commercial farms, food producing enterprises, logistic and trading companies within an agro-



industrial complex, all (without exception) characterised by (1) macro-, meso- and micro-level organisa-tional culture and system of (entrepreneurial and corporate) management capable of efficient produc-tion, transport and distribution of food adapted to differentiated requirements in terms of quality, health production, prices and availability in the fierce and unequal international competition, (2) appropriate physical facilities and personnel, (3) healthy financial structure and (4) flexibility, enabling fast and ef-ficient response to changes in the natural, internal and external socio-economic environment.

The main task of mechanisms for the implementation of the new farming industry development model is to provide: (1) constituting a new production and organisation system (in compliance with cur-rent scientific achievements, as an appropriate reproduction chain in the form of business network and alliance, macro-cluster, multinational enterprise, and – in the more distant future – transnational corpo-ration; and (2) putting the (national and regional) innovation system into development function based on (3) enhancing the performance of authentic regional farming entrepreneurship.

In order to overcome the condition of developmental entropy, as the first step, it is necessary to find solutions to initiate a process of constituting a new production and organisation model of agro-industrial complex functioning in Vojvodina. In compliance with the European concept of endogenous, self-propulsive and self-sustainable development, solutions should be sought in (commercial and regional) clusterisation policies combined with rehabilitating developmental function of food industry across in-dustrial district and local industrial centres, supported by putting the regional innovation system into economic function (Cooke, 2009a, 2009b). In this context, the first and key task of the new public and corporate management model system is initiating a process whereby each protagonist of the regional farming industry would be integrated into a complex and hierarchically constituted production and or-ganisation system with five levels (Adžić, 2008b):

The purpose of the first (basic level is to unify commercial farms into basic reproduction lines (in the case of Vojvodina, for production of: wheat, maize, fruit, vegetable, sugar, oil, milk, poultry, pork and beef). Its basic task is to initiate and support a process of building globally competitive primary agricul-tural producers by means of a complex package comprised of public assets and public administration services, so that the natural and man-made resources in Vojvodina can be put into the function of build-ing a food and drink production industry, in a manner that would support the process of its transition in a proper direction, which is (equally to the entire national and regional industry) orientation to produc-ing food for export with higher value added per physical unit. Forming this level has been delayed for over two decades. The reason lies in two concepts of solving this problem (Stojanović, 2010). Modelled after the organisation of agricultural production in most member countries of EU-15, the first one advo-cates forming a network of family-owned farms sized 50 to 250 hectares as basic production units, and networking them into cooperatives along reproduction principles. The other concept advocates rehabili-tating the role of large commercial farms (sized several thousand hectares and more), directly relying on processing industry (large-scale agribusiness).

The second level should include extending the first level with appropriate food and drink producing companies, gathered into business networks and alliances or export-oriented macro-clusters. Network-ing should provide economically and technologically efficient operation in the conditions of European, i.e. global competitions and other rigidities imposed by protectionism-oriented agrarian policies of de-veloped market economies.

The third level should encompass commercial farms and individual businesses unified in macro-reproduction entities, securing the provision of physical inputs (energy, basic reproduction materials, intermediary products, machinery and equipments) and services (business services, transport, storage and cross-border transfer) under the most favourable commercial conditions. These macro-reproduction entities should also include large logistic and trading companies, both on the input provision side and on the side of marketing, storage, transport, cross-border transfer and placement of food on target segments of the European and global market.

The fourth level should include commercial farms and enterprises in an institutionally arranged framework of the national or regional social and economic environment. Its fundamental task is provid-ing human and financial capital, public commodities and public administration services, in a manner that will stimulate their behaviour in terms of meeting broader social and economic goals (setting up equilibrium in external economic conditions, and enhancing living and working conditions in all rural environments in Vojvodina), based on criteria of increasing competitiveness of products, processes,



commercial farms, production enterprises, related logistic and trading companies, business and macro-reproduction entities. The content of the institutional framework should provide all participants in the regional farming industry: (1) development stimulating business operation; (2) broader application of the participation and decentralisation principles in the realisation of business activities and (3) consis-tent, transparent and precise vision of economic, technological, social and environmental development of food production.

The fifth level should include commercial farms and food production companies within the selected segments of the European or global food market. The basic task is to provide economies of scale and stimulate the development of production capacities capable of reaching the efficiency and competitive-ness in terms of pricing, quality and health protection in the conditions of fierce and unequal interna-tional competition, based on both available production factors, and those to be developed in the future.

The proposed structure of the organisation and production system does not include clear-cut limits between hierarchically determined levels. For instance, scientifically recommendable organisation of an export macro-cluster should include all five above mentioned levels. What is of interest of the structure of this article is the answer to the question: Why is there no critical mass of (private and public) initia-tive for constituting a good structure of production and organisation system, and, within this, a more efficient solution to the problem of public and corporate management of farming business in Vojvodina. In the authors’ opinion, the reply lies in the fact that solving problems that block the development of good farming entrepreneurship in Vojvodina and Serbia is being persistently delayed. In their public statements, most political, business and expert participants in agribusiness point to the following essen-tial problems: low subsidies, high interests on loans for current and extended reproduction, low invest-ment in new technologies, especially storage and transport of food to distant markets, and – rarely – low level of investment in new knowledge and skills. What lacks, however, is discussion on the key topic: Why are there very few individuals in Vojvodina (and Serbia in general) willing and able to organise work and capital in such a way that production could be profitable in the fierce and unequal competition on specific segments of the European and global food market?

5. Conclusion

The prerequisites needed for constituting a good system of public and corporate management of agri-business in Vojvodina are in a poor condition (Matejić, 2008). The key problem is the fact that the past two decades have not seen the formation of a critical mass of productive (production) entrepreneurs, managers and expert teams capable of tackling the problems and challenges of the highly complex revi-talisation of the development function of farming industry in open market economy. The basic findings of this research state that the focal point in establishing good public and corporate management of farm-ing business protagonists should be creating conditions for implementing a European concept of en-dogenous, self-propulsive and self-sustainable development based on scientific knowledge in a new model of developing farming industry in Vojvodina. In this context, its protagonists are faced with re-solving two fundamental tasks (Matejić, 2008). The first one is finding a solution for active inclusion in creating these conditions along self-organisation principles, by means of networking agribusiness play-ers in appropriate economic, social and political networks so as to increase food exports, with higher value added per product, and the second would be that the system of incentives must be more based on higher valorisation of achieving something rather than dealing with something.

6. Implications

The key to the implementation of the new farming industry development model in Vojvodina is that entrepreneurs-owners of commercial farms and owners, entrepreneurs and managers of food production companies, logistic and trading companies, with their expert teams, in cooperation with (national, re-gional, and local) state and science, should set very ambitious (macro-, meso- and business) targets in the domain of food export with higher value added levels, and find genuine paths for their realisation (Adžić & Birovljev, 2011). In this sense, the above stated taxonomy is an attempt at determining the key principles for basing reforms of institutions and policies in developing a macroeconomic framework for good public and corporate management of farming business management:



First, we should clearly and unequivocally accept the position that good public and corporate man-agement must be based on knowledge and convictions on how agro-industrial complex, commercial farms, food and drink production companies, logistic and trading companies function in open market economy, and how social and political goals can be realised in this context parallel with the system of economic goals. In considering the public component of managing farming business management, we must be aware of the fact that, in contemporary society, the choice of goals and establishing their order of priorities is predominantly the result of political struggles between individual interest groups, rather than being a result of an optimum process of social decision making. At any rate, two facts must be ap-preciated. The first one is that there is no direct or final answer to the question of how to provide good public management of agribusiness protagonists in open market economy. The second is that the demise of public regulation of farming industry (and narrowing the space for developing agribusiness) primar-ily stems from incompetent (political) management.

Second, conceiving and conducting reforms of (regional, sub-regional and local) institutions and policies should be based on three criteria: (decentralisation and deconcentration of the functions of pub-lic regulation of farming industry so as to approach user and provide flexibility in work. The main chal-lenge is how to provide coordination and supervision work without obstructing the freedom of work of lower levels of authority system; (2) introducing a standardisation system for public assets and public administration services so as to meet users’ differentiated needs, by means of taking over business tech-niques and orientation to individual expectations and additional means for provision thereof; and (3) advancing regulative mechanisms: raising the quality of normative regulations, lowering the costs of their implementation and improving the execution monitoring and supervision system, y means of tak-ing over the techniques of monitoring and supervision of business activities.

Third, when preparing and carrying out the reforms of (national, regional and local) institutions and policies, one should use the following instruments more efficiently: (1) human resource management, based on scientifically based programmes of human resource selection and employment, inception, edu-cation, human resource development and raising motivation; (2) IT technology, so as to provide a better quality, faster access to public assets and control of their reproduction flows; and (3) market mecha-nism, especially the public and private partnership mechanism. At the operative level, using these in-struments is based on applying management principles in the action of the public factor in the economic sphere (macroeconomic management)

Fourth, the basic objects of public regulation of farming industry are: commercial farms and their as-sociations, business network and alliances and export macro clusters, multinational enterprises and transnational companies. To avoid earlier mistakes in modelling public policies in compliance with the needs of commercial farms, it is necessary to work persistently and devotedly on developing political and economic culture based on broad participation of those who are in any way involved in resolving the problem situation based on the so-called development oriented coalitions, which see networking and resource pooling as an opportunity for entering the target segments of the European and Global food market, as the main source of growth and development in terms of acquiring profit and enlarging per-sonal wealth.

Fifth, measuring the results of institutional reforms and policies aimed at creating conditions for en-hancing pubic an corporate management of agribusiness protagonists in Vojvodina must also contain a component that would aggregate the results of implementing: (1) empirical behaviour patterns of the agro-industrial complex in contemporary market economies and (2) Acquis communautaire in the do-main of food, commercial farms and enterprises. These are the specific basis for constructing a system of standards for evaluating the success of the new farming industry development model, especially in terms of public, precise and transparent determination of individual and group responsibility for busi-ness, development and investment activities. However, their implementation is related to high economic and social costs, with a direct impact on increasing public expenditure and business costs, which di-rectly reduces space for completing other tasks of currently higher priority in the domain of revitalisa-tion, modernisation and extension of physical, business and innovation infrastructure for the needs of farming industry, and developing and restructuring the agribusiness protagonists in Vojvodina. SM



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Correspondence

Sofija Adžić



STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 045-050 UDC 336.71(437.6)

Received: December 13, 2011


The Analysis of Concentration of Slovak Banking Sector

Ivan Brezina, Juraj Pekár, Zuzana Čičková Faculty of Economic Informatics, Bratislava, Slovakia

Abstract The past years have brought a significant impact of financial crisis on the Slovak banking sector. It is an objec-tive fact or it also contributed to its structure. The analysis of banking sector can be realized on the base ofknown indices that are aimed to measure the concentration, particularly the degree of concentration of mstrongest banks, the Herfindahl-Hirschman Index of industry concentration, the Degree of Dispersion, Coeffi-cient of Variation, the Index of Dominance, Theil Entropy Index, the Gini Coefficient, Rosenbluth Index, Com-prehensive Concentration Index, Linda Index, Ellison-Glaesera Index, Maurel-Sedillot Index, Hannah-Kay In-dex of Concentration. Some of the indices were used to analyze the banking sector in Slovakia and we alsoperformed the sensitivity analysis of impact of changing conditions, namely its restructuring. Keywords Concentration, banking sector.

Introduction

The past years have brought significant impact of financial crisis on the global banking sector and also on the Slovak banking sector, although according to many indicators the impact on Slovak sector was not so negative as in other countries. The crisis broke out of the financial markets in 2008, when Slova-kia has been before the adoption of the euro area, which brought a positive impact on the stability of banks. Citizens, in an effort to smooth transition to EUR, put the available funds to banks. Another im-portant moment was the intervention and administrative action to maintain the liquidity in Slovakia. The next year brought the decrease in economic growth, increase of unemployment and that has influenced also the banking sector. In 2010, in many banks there was a consolidation and the profit was improved. Therefore it is interesting to examine whether the effects of the global financial crisis are negative. Is it an objective fact or did it also contribute to its structure?

There are currently 15 banks in Slovakia, one of which is the state bank, two banks are owned by domestic investors, and others are owned by foreign investors. In addition to banks, there are 15 operat-ing branches of foreign banks, of which 4 branches were established in 2010. It is realistic to expect that in the next years the number of banks will be reduced and the number of branches of foreign banks will be increased, because, according to the single European license, it is simple to establish a branch of a foreign bank. For shareholders of foreign banks, that way of obtaining the market is much cheaper than buying the bank, spending money with uncertain outcome in the market, especially if it is a small and relatively saturated market such as Slovakia. So what is actually the Slovak banking market? Is the number of banks sufficient to enable the creation of competitive environment, which is necessary for preventing the abuse of economic position in the market?

The analysis of banking sector can be realized on the base of known incdices that are aimed to measure the concentration, particularly the degree of concentration of m strongest banks, the Herfin-dahl-Hirschman Index of Industry Concentration, the Degree of Dispersion, Coefficient of Variation, the Index of Dominance, Theil Entropy Index, the Gini Coefficient, the Rosenbluth Index, the Compre-

46 Ivan Brezina et. al The Analysis of Concentration of Slovak Banking Sector


hensive Concentration Index, the Linda Index, Ellison-Glaeser Index, the Maurel-Sedillot Index, or the Hannah-Kay Index of Concentration. Some of the indices were used to analyze the banking sector in Slovakia, and we also performed the sensitivity analysis of impact of changing conditions, namely its restructuring.

1. Measuring the sector concentration

The most popular quantitative methods used in market analysis include statistical and econometric me-thods, game theory, and special indexes.

Among the most specific indices to measure the concentration is the concentration ratio of m strong-est companies in the industry (CRM), which is reported also by the U.S. Department of Justice, in its Merger Guidelines (from 1968 until 1982). In 1982 it was replaced with the Herfindahl-Hirschman in-dex of concentration (HHI), which is included in horizontal integration of Merger guidelines to this date. HHI is referred to be a directive also in another countries and it become the most widely used measure of concentration.

The literature quite often refers to the Gini index to measure the unequal distribution of market shares that is based on the Lorenz curve capturing the true distribution of market shares.

Further on, one can mention the use of comprehensive concentration index (CCI), proposed by Hor-vath (1970). Fedderke and Szalontay (2005) measured the sector concentration of production in South Africa. The measurement of concentration includes the use of the Herfindahl-Hirschman index, the Ro-senbluth index and the Gini index. A. Ten Kate (2006) presented in his work that, despite considerable dissatisfaction with the structural approach to the control of mergers and acquisitions, the most antitrust authorities around the world indicate the sector indices of concentration as the first tool in approving mergers. Another well-known index used to measure the concentration is the Hannah-Kay index. The information could be found in the work of the authors Bajo-Rubio and Salas (2002). Other authors who deal with this issue are e.g. Leach (1992), Bikker and Haaf (2002), Mare (2005), Naudé (2006).

2. Sector concentration

The competitive structure of industry can have different character depending on the number and size of firms operating in the sector.

A number of methods that can be successfully used to evaluate the degree of concentration and its implications are published in literature. All are based on market share. Market share constitutes the share of firm in a given market or industry. If n represents the number of firms in a sector and Q represents the total volume of industry output and qi indicates the volume of the i-th firm in the industry, i = 1, 2, ..., n, then:

1

n

iiQ q

.

Thus, the share of the i-th firm to total output of the industry is represented as ( / )i is q Q . This

ratio is called the market share of the i-th firm, which can take values 0 1is and the sum of market shares of all companies operating in the sector is equal to 1. If we dispose of a sufficient amount of reli-able data, we can use the market share, which includes import and export of the product (Brezina, 1994).

Next, we consider the market share in the formula:

ii

qs

Q (1)

where qi indicates the volume of the i-th firm in the industry and Q represent the total volume of in-dustry output.

Ivan Brezina et. al The Analysis of Concentration of Slovak Banking Sector 47


3. Indicators to measure the absolute concentration

The most commonly used indicators to measure the absolute concentration of the industry are:

the Concentration Ratio and the Herfindahl-Hirschman Index.

3.1. Concentration Ratio

Concentration Ratio (CRm) is a commonly used method for measuring the concentration of m strongest companies in the industry in terms of market share of homogeneous production, in other words, it represents the percentage proportion of production of the first m firms with the largest volume of pro-duction on the production of all companies in the industry.

The CRm simply reflects the market share of m strongest companies on the total production of all firms in the industry, and we suppose that: 1 2 3 ns s s s and ( / )i is q Q . The concentration ratio of m strongest companies in the sector is calculated as:

1, pre 1,2,..., , 1; .

m

m ii

CR s i m m n

(2)

This indicator can take values from the interval 0 1nCR . CRm is usually quantified for the m = 4, 8, 10, 25, 50, 100, or m = 3, 6, 10, 25, 50, 100 strongest companies in the industry. Smaller countries do not apply higher classes, i.e. for m = 50 or 100. The most commonly used class is for m = 4 (the four most powerful companies in the industry) that is frequently used by e.g. the Federal Trade Commission in the USA.

To consider the degree of concentration according to the four most powerful companies in the indus-try ( 4CR ) by the Federal Trade Commission in the USA the industry is:

unconcentrated - if the 4 strongest companies produce less than 25% of industry output ( 4 0, 25CR ),

moderately concentrated - if the four most powerful companies produce at least 25% and less than 50% of industry output ( 40,25 0,50CR ),

concentrated - if the 4 strongest companies in the industry producing at least 50% of industry output ( 4 0,50CR ).

3.2. The Herfindahl-Hirschman Index

The Herfindahl-Hirschman Index (HHI) is a convex function of the market shares of all firms in the industry. This rate is defined as the sum of squares of market shares ( / ), 1, 2,...,i is q Q i n of all firms in the industry (Brezina, 1994):

2

1( )

n

ii

HHI s

. (3)

Thus, the HHI index can take a maximum value of 1, which occurs when all the market supply is concentrated by the one firm and a minimum value 1/ n , if all firms in a sector have the same market share. The Herfindahl-Hirschman Index, however, has a structure that essentially does not affect the effect of small firms in the industry, whose share in the production sector is less than 1%.

Market share of the merged company or companies can be used to assess concentration and its sub-sequent approval or rejection. Classification of the degree of concentration in the industry by the calcu-lated index value, which indicates the Federal Trade Commission (FTC)

in USA is:



unconcentrated - if the HHI is less than 0.1, moderately concentrated - if the HHI is in the interval 0,1;0,18 , concentrated - HHI is greater than 0.18.

Another classification of the degree of concentration introduced the European Commission (EC) (Úradný vestník Európskej únie, 2006) in the EU Horizontal Merger Guidelines under the Council Reg-ulation:

unconcentrated - if the HHI is less than 0.1, moderately concentrated - if the HHI is in the range 0,1;0, 2 and HHI is less than 0.025,

concentrated -- HHI is greater than 0.2 and HHI is less than 0.015 (except the special cases).

4. The Slovak Banking Sector

Slovak banking sector is currently comprised of 15 banks, one of which is a state bank (Eximbank), while the two banks are owned by domestic investors and in 15 branches of foreign banks the market also operate.

Commercial Banks (14) located in Slovakia: ČSOB stavebná sporiteľňa, a.s., Československá ob-chodná banka, a.s., OTP Banka Slovensko, a.s., Poštová banka, a.s., Prima banka Slovensko, a.s., Pri-vatbanka, a.s., Prvá stavebná sporiteľňa, a.s., Slovenská sporiteľňa, a.s., Slovenská záručná a rozvojová banka, a.s., Tatra banka, a.s., UniCredit Bank Slovakia, a.s., VOLKSBANK Slovensko, a.s., Všeobecná úverová banka, a.s., Wüstenrot stavebná sporiteľňa, a.s.

Branches of foreign banks (15): AXA Bank Europe, Banco Mais, BKS Bank, BRE Bank, Citibank, Commerzbank, Crédit Agricole Corporate and Investment Bank, Fio banka, HSBC Bank, ING bank, J&T Banka, Komerční banka Bratislava, Oberbank, The Royal Bank of Scotland, ZUNO BANK.

The analyzed data were obtained by individual banks based on publicly available information pub-lished by banks in their annual reports. Analysis was performed on the selected data in Table 1 (2009), and Table 2 (2010):

Table 1 Selected data for commercial banks in 2009

Year 2009 Equity

capital in EUR

Amount of credits (brut-to) in EUR

Deposits in EUR

Staff Labor costs

in EUR

Net profit for the year in

EUR

Net fee and commision

yield in EUR

Income before tax in

EUR

ČSOB stavebná sporiteľňa, a.s. 18871000 94044000 142003000 95 1655000 253000 1803000 288000Československá obchodná banka, a.s.

604834000 3311233000 3500726000 2567 46189000 -14257000 45198000 -13895000

OTP Banka Slovensko, a.s. 91907000 957822000 572000000 607 10400000 -24516000 9625000 -25253000Poštová banka, a.s. 164772000 848003000 1866624000 765 18207000 23835000 20590000 33553000Prima banka Slovensko, a.s. 81397000 1803941000 1873993000 742 16009000 -13238000 12245000 -15891000Privatbanka, a.s. 32591000 108423000 279336000 120 3937000 3035000 1580000 4077000Prvá stavebná sporiteľňa, a.s. 253073000 1667158000 1673577000 392 15380000 28104000 23303000 35899000Slovenská sporiteľňa, a.s. 782000000 5736555000 7835708000 4137 71721000 30505000 110541000 32299000Slovenská záručná a rozvojová banka, a.s.

294154000 331634000 14638000 191 4628000 1909000 879000 3188000

Tatra banka, a.s. 808233000 5484549000 6819770000 3521 75246000 94884000 89550000 121822000 UniCredit Bank Slovakia, a.s. 428046000 150042000 112091000 1295 21996000 22104000 23689000 27442000 VOLKSBANK Slovensko, a.s. 33207000 1019349000 1001158000 590 12530000 -8107000 8054000 -7278000 Všeobecná úverová banka, a.s. 986394000 5863647000 6609926000 3959 71353000 141671000 97221 160528 Wüstenrot stavebná sporiteľňa, a.s.

41531000 193574000 236662000 159 2633000 2396000 3210000 3093000

Source: Authors

Ivan Brezina et. al The Analysis of Concentration of Slovak Banking Sector 49


Table 2 Selected indicators of commercial banks in 2010

Year 2010 Equity capi-tal in EUR

Amount of credits

(brutto) in EUR

Deposits in EUR

Staff Labor costs

in EUR


EUR

Net fee and commision

yield in EUR

Income before tax

in EUR

ČSOB stavebná sporiteľňa, a.s.

21788000 101637000 145127000 100 1578000 1639000 1770000 2271000

Československá obchodná banka, a.s.

664217000 3426894000 3473000000 2349 47778000 65855000 53334000 55051000

OTP Banka Slovensko, a.s. 88566000 906100000 589900000 569 11263000 -3498000 8635000 -3066000

Poštová banka, a.s. 201058000 1156873000 2221427000 916 24496000 55313000 23966000 72846000

Prima banka Slovensko, a.s. 76022000 1982239000 1659386000 749 13627000 1129000 112181000 1367000

Privatbanka, a.s. 35164000 179523000 423285000 134 4620000 3464000 3021000 4732000

Prvá stavebná sporiteľňa, a.s. 252995000 1735978000 1801733000 387 15534000 29355000 27283000 37214000

Slovenská sporiteľňa, a.s. 929000000 5680619000 8169055000 3816 69966000 150122000 114934000 180274000

Slovenská záručná a rozvojová banka, a.s.

281734000 113848000 19390000 169 4376000 -9835000 591000 -11523000

Tatra banka, a.s. 849450000 5769270000 6863226000 3492 78022000 94165000 102194000 124067000

UniCredit Bank Slovakia, a.s. 421551000 150045000 404763000 1264 21606000 11501000 28010000 14533000

VOLKSBANK Slovensko, a.s. 33207000 1051452000 1013669000 573 10503000 2035000 9079000 3308000

Všeobecná úverová banka, a.s.

1043758000 6437675000 7265367000 3970 70989000 150323000 107742 189137

Wüstenrot stavebná sporiteľňa, a.s.

42165000 181794000 272240000 159 2827000 2721000 2984000 3502000

Source: Authors The results for the years 2009 and A2010 based on the relations (2) and (3) for the CR4 and HHI for

each of the selected indicators are given in Table 3.

Table 3 Calculated values of Concentration Ratios CR4 and HHI data for selected commercial banks for the years 2009 and 2010.

Equity capital in EUR

Amount of credits (brutto) in EUR

Deposits in EUR

Staff Labor

costs in EUR


EUR

Net fee and commision yield

in EUR

Income before tax in EUR

2009CR4 0.6885 0.7398 0.7611 0.7411 0.7113 0.8465 0.7677 0.8539

2010CR4 0.7057 0.7382 0.7509 0.7308 0.7072 0.8112 0.7839 0.8656

2009HHI 0.1397 0.1542 0.1654 0.1516 0.1421 0.2621 0.1966 0.2785

2010HHI 0.1432 0.1548 0.1625 0.1493 0.1412 0.1937 0.1736 0.2321

Source: Authors

With respect to CR4 (the degree of concentration for the 4 most powerful companies in the industry), it is evident that all indicators denote to the concentrated sector ( 4 0,50CR ). The data referred to the fact that the selected four largest banks achieved a market share of more than 70% and in the profitabili-ty indicators more than 80%. Thus the results confirm the dominant position of the "Big Four" Slovak banks (Všeobecná úverová banka, a.s., Slovenská sporiteľňa, a.s., Tatra banka, a.s., Československá obchodná banka, a.s.).

An analysis of computed results of the Herfindahl-Hirschman Index, which is based on the classifi-cation of the degree of concentration in the sector according to the European Commission, shows that all the selected indicators are referred to the moderately concentrated industry (all of the calculated val-ues of HHI are from the interval 0,1;0, 2 ), only indicators of profitability are referred to concentrated industry (HHI is greater than 0.2).



Conclusion

The paper deals with the analysis of indicators that are aimed to measuring the absolute concentration in the banking sector in SR, via CR4 and HHI. The calculated results allow characterizing the Slovak bank-ing sector as concentrated, and the indicators remain minimally changed also during the outbreak of the crisis in financial markets. The answer to the questions as to what is the Slovak banking market and what is the sufficient number of banks to create a competitive environment can be obtained based on the presented analysis. The analysis of the selected indicators refers to the fact, that the Slovak banking sec-tor could be characterized as moderately concentrated (according to the values of HHI), where the do-minant positions take the four largest banks (according to the value of CR4). SM

References

Bajo-Rubio, O., & Salas, R. (2002). Inequality foundations of concentration measures: An application to the Hannah-Kay indices. Spanish Economic Review , 4 (4), 311-316.

Bikker, J. A., & Haaf, K. (2002). Measures of Competition and Concentration in the Banking Industry: a Review of the Literature. Economic & Financial Modelling (Summer 2002), 1-46.

Brezina, I. (1994). Hodnotenie vývoja koncentrácie v odvetví. Ekonomický časopis , 42 (3), 218 – 229. Fedderke, J., & Szalontai, G. (2005, December). Industry Concentration in South African Manufacturing: Trends and

Consequences. Retrieved February 24, 2012 from The World Bank: http://www.worldbank.org/afr/wps/wp96.pdf Horvath, J. (1970). Suggestion for a Comprehensive Measure of Concentration. Southern Economic Journal , 36 (4), 446-

453. Leach, D. F. (1992). Absolute vs. Relative Concentration in Manufacturing Industry 1972-1985. The South African Journal of

Economics , 60 (4), 386-400. Maré, D. C. (2005). Concentration, Specialisation and Agglomeration of Firms in New Zealand. Wellington: Motu. Naudé, C. M. (2006). Measures of Manufacturing Industry Concentration – Implications for South Africa. Retrieved June 15,

2011 from Faculty of Commerce at the University of Cape Town: http://www.commerce.uct.ac.za/Research_Units/DPRU/DPRUConference2006/Papers/TIPS_2006_Manu%20Ind%20Conc%20SA_CNaude.pdf

Ten Kate, A. (2006). The Dominance Index in Mexican Merger Control: Does it Perform Better than the HHI? The Antitrust Bulletin , 51 (2), 383-409.

Úradný vestník Európskej únie. (2006). Usmernenia k metóde stanovovania pokút uložených podľa článku 23 ods. 2 písm. a) nariadenia č. 1/2003. Retrieved June 15, 2011 from EUR-Lex - Access to European Union law - choose your language: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2006:210:0002:0005:SK:PDF

Correspondence

Ivan Brezina

Faculty of Economic Informatics Dolnozemská 1, 852 35, Bratislava, Slovakia


STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 051-056 UDC 005.346 ; 004.4

Received: April 5, 2012

Accepted: June 10, 2012

CRM Systems as an Important Component in Overcoming Business Crises Within Organisations

Jelica Trninić, Jovica Đurković, Vuk Vuković University of Novi Sad, Faculty of Economics, Subotica, Serbia

Abstract Customer orientation of the contemporary business, which has proved to be a necessary prerequisite for maintaining competitiveness, has made customer relationship management (CRM) an exceptionally dynamicfield of information technology. Accordingly, the primary goal of CRM is the integration of business processesand information technology for the purpose of satisfying buyers’ preferences in the best way possible. In ob-viously increasingly challenging economic conditions, organizations seek most efficient means of cost cutting.On the other hand, organizations try to streamline their business by following trends. One of the possible and efficient cost cutting solutions in information technology, with minimal negative consequences, is to opt for theapplication for open-source solutions. Such an open-source tool (vtiger) was selected for the analytical dem-onstration of advantages and disadvantages of its implementation for customer relationship management. Keywords Customer relationship management, open-source, vtiger.

Introduction

The necessity of seeking improved and successful business models in the times of evident economic and financial crisis directs organizations to opt for one of the two available strategies, or to implement both in accordance with the available resources. One of the strategies implies that the organization should be engaged in increasing its revenue, while the other is based on activities aimed at lowering organization’s costs. Organizations can opt for one of the listed strategies, or implement both in parallel, which is more effective.

For the implementation of the revenue increase strategy, it is necessary to integrate the concept of customer relationship management into the business concept, among those which are already imple-mented. Customer relationship management represents an approach where the focus is set on building and maintaining long-term relationships with the customers. It is evident that customer relationship management follows and supports customer-oriented business practices. Sufficiently precise meaning of this concept can be illustrated by the following definition: “Customer relationship management is a fun-damental business strategy that integrates internal processes and functions and external measures for the purpose of creating and delivering value to target customers, whilst generating profits. It is based on high-quality data on customers and is facilitated by information technology” (Buttle, 2004). In other words, customer relationship management is an approach whose fundamental purpose is to develop long-term customer loyalty, which should result in the increase in profitability.

For the implementation of the reduction strategy, it is necessary to achieve savings wherever possi-ble, at all levels of the organization. Information and communication technology feature as one of the essential components of organizations in the era of digital economy, regardless of their field of business,

52 Jelica Trninić et. al CRM Systems as an Important Component in Overcoming Business Crises Within Organisations


therefore making costs directly related to the development and use of information and communication technology inevitable. Organizations find that the possibility of using open-source software can lead to s significant increase of ICT costs, all without negative impact on business activities

1. Open-source software

The expression “open-source software”, which is most frequently not translated, in simple terms stands for the software with open and accessible code. Open-source philosophy is based on the free software concept, which was founded by Richard M. Stellman. The basis of this concept is the user's freedom to use, copy, distribute, study, change and improve software. To be exact, the concept of free software en-tails four types of free user access:

The freedom to run the program for any purpose. (Freedom 0) The freedom to study how the program works, and change it to make it do what you wish. (Free-

dom 1) The freedom to redistribute copies so you can help your neighbor. (Freedom 2) The freedom to improve the program, and release your improvements (and modified versions in

general) to the public, so that the whole community benefits (Freedom 3). Access to program code is a prerequisite for this activity. (Joshua, 2002)

A program belongs to the free software category only if and when the users have the listed freedoms. However, the truth is that open-source software is not necessarily also free software. There are nu-

merous open source software products requiring allocation of certain funds, but are also significantly less expensive compared to solely commercial competing software products.

The practice has shown that open source software has surpassed the competing products in numerous fields. For example, Apache web server is the most used web server on the global network, Linux is one of the safest operating systems, Mozilla Firefox is at present the most frequently used web browser, and there are more such examples. It should certainly be emphasized that these software products belong to the category of free open source products.

The extent to which the organization’s costs be reduced owing to the application of particular soft-ware products will be illustrated by the following example. If the organization has, for example, a total of 10 computers, it can save around 800 euros per year by switching form Windows to Linux operating system. By switching to Open Office suite from Microsoft Office suite, the organization can approx-imately save additional 2,000 euros. On the other hand, it should be mentioned that the transition from one platform to another entails costs generated by employee training; however, in this case, it is an iso-lated cost, while software licensing costs recur annually.

Prices of customer relationship management systems can also be compared in such fashion. One ex-ample of CRM systems from the group of open source software products is vtiger CRM, whose functio-nalities will be described in the following sections of this paper, can contribute to the improvement of customer relationships and in thus increase an organization’s quality of business and its revenue.

2. Vtiger CRM

According to the standard classification, vtiger CRM belongs to the group of operational CRM systems. This class of CRM systems’ key role is to facilitate support to business departments under the name of front office, which incorporate sales and marketing. All occurring interactions with customers are stored in the CRM system, thus collecting historical data and information on each customer that can later, as needed, be used for different analyses and for other purposes. Vtiger CRM integrates three CRM func-tions, which are (vtiger, 2012):

Sales automation Marketing automation Customer support services (Figure 1)

Sale automation system provides efficiency and improvement of the phases in the sales process. This system supports tracking customers from the initial phase, which is the first contact with the customers, to the final phase (sale of good or service). Marketing automation system helps to identify first-class

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4. After-sales customer support service

It is logical, of course that every market-oriented organization endeavors to accomplish its ultimate goal, which is to ensure customer loyalty, by fully engaging its marketing resources. Customers’ satis-faction with the purchased product or service is the precondition for transferring them into the category of loyal customers (Cockalo, Vunjak, Djordjevic, Besic, & Spasojevic Brkic, 2012). However, even this is not the only nor the sufficient condition for accomplishing the ultimate goal, that is customer loyalty.

Vtiger CRM offers very practical possibilities in terms of functionalities that provide support for maintaining customer relations that can be vital for the improvement of this process. Some of the rea-sons why it would be wise to use support functionalities available in vtiger CRM are:

Support functionalities in the CRM system aid in gathering and sorting customer requests, sug-gestions and problems related to the sold product or service;

Support features inform customers and users of the CRM on the current progress of providing customer support;

Support sector gets a very efficient tool for tracking consumer complaints and requests related to customers or products;

Sales sector and the management have an insight into support activities related to customers or; Users of the CRM system, among which can also be customers, of course with different privileg-

es compared to company staff, have a very convenient access to customers’ frequently asked questions. This can be of significant help to the organization in reducing customer requests and introducing standard procedures in responding to consumer requests.

Customer’s problems are recorded in the CRM system by use of tickets. Tickets contain information such as: description of customer’s problem, name of the customer who experiences a problem with the product, problem status (unsolved, in process, solved), priorities in solving problems and the employee in charge of solving customer’s problem. (Piepiorra, 2007)

5. Reporting and analysis

The module intended for creating predefined charts and reports according to requested criteria is a very important segment of the vtiger CRM’s monitoring and evaluation system. Two possibilities for pre-senting data from the CRM system are available: dashboard (graphic data representation) and reports (presenting data in the form of a report). There are some predefined reports in the CRM system. How-ever, reports fitting user-defined criteria can be generated for the purpose of obtaining necessary infor-mation.

6. The effects of tracking and alleviating crisis through CRM

The reduction in purchasing power and the lesser demand for products and services from the category of, as to say, luxury goods and services, represent the first indicators that emphasize the obvious times of crisis. The reduction in productive capacities as a necessary, temporary option for organizations that are unable to sell out their output reflects the number of employees, which can further reflect on intensi-fying the crisis within the organization and of its sustenance (Đurković, Trninić, Vuković, & Raković, 2010). In their endeavor to overcome present effect of the economic and financial crisis, organizations seek different solutions to eliminate, or at least alleviate their business problems.

The capability of managing customer relations already represents the first step in comprehending both present problems and possible improvements and solutions. By reviewing transactions that had occurred with clients and comparing them to the historical data, corrective actions that provide fastest and most efficient results can immediately be considered. Keeping track of current consumer prefe-rences using the system and analyzing current consumer services makes their improvement an increase in quality possible. Analytical CRM is especially significant here, for it enables cross analytical cross-comparison and evaluating particular functional groups of activities and business process. Mentioned analyses can contribute to the realization of goals related to approaching consumer wishes and the or-

Jelica Trninić et. al CRM Systems as an Important Component in Overcoming Business Crises Within Organisations 55


ganizations possibility to optimally employ its resources, which represent two complementary segments of a successful business.

It is of utmost importance to concurrently keep track of different groups of customers and their eval-uation of quality. The period of financial crisis additionally highlights the importance of retaining loyal customers, while at the same time seeking new opportunities to attract customers. Loyal customers be-long to the first category by significance, under the condition that they fulfill their obligations to the extent the organization considers satisfactory in terms of confidence. Parameters of confidence can easi-ly be defined within the CRM system and evaluated as the critical factors of success. Negative effects of these indicators demand reviewing the decision to keep this category of buyers as privileged. On the other hand, attracting buyers demands additional engagement and seeking positions at an already unsta-ble market. One of the efficient methods under such conditions is extending the functions of prospect support that already exists as a segment of CRM, which can attribute not only to one-time attracting, but also to permanent securing of a buyer.

From the perspective of prospective savings related to software solutions, organizations have differ-ent possibilities that have to be analyzed and assessed separately according to what represents the best solution for the organization under given circumstances. One of the solutions is to opt for an open source software tool as is, for example, vtiger that was presented. From the business entities’ point of view, it is obvious that price, especially in the times of crisis, significantly limits the choice of tools available on the market. The choice to implement this tool can be right solution, for it has an advantage not only in terms of price, but also provides a set of functionalities that completely facilitate customer relationship management. Efficient solution for a tool obviously does not have to entail large expendi-tures. Being in possession of modern technological solutions that ensure control and evaluation of busi-ness processes, while reducing costs at the same time, represents an important step ahead in overcoming the market and business crisis.

Conclusion

There is no doubt whether it is necessary to use CRM systems in modern business. Benefits directly gained by the implementation of CRM systems are the increase in sales team’s productivity, which re-sults in decreased costs, increased revenue as well as increased market share. Besides that, the increase in quality and customer satisfaction can undoubtedly lead to loyal customers that should turn to the or-ganization for each purchase.

Open source software products have already exhibited significant advantage compared to the solu-tions devised using organization’s own resources or purchased as complete commercial packages. Pos-sibility of their easy modification represents an additional advantage, since they can easily be adapted to specific requests of each individual organization. It is obvious that the future definitely belongs to open source software solutions in all areas of business for which software tools are developed. The efficiency and costs of development and implementation represent one of the key factors while choosing this con-cept in the domain of digital business in its widest sense. SM

References

Buttle, F. (2004). Customer Relationship Management - Concepts and Tools. Amsterdam: ELSEVIER Butterworth-Heinemann.

Cockalo, D., Vunjak, N., Djordjevic, D., Besic, C., & Spasojevic Brkic, V. (2012). Customer satisfaction focused business strategy: An exploratory study in Serbian economy. TTEM - Technics Technologies Education Management, 7 (1), 186-195.

Đurković, J., Trninić, J., Vuković, V., & Raković, L. (2010). Software Support for Organizational Knowledge Management: Technological Aspects and Empirical Research Results. Strategic Management, International Journal of Strategic Management and Decision Support Systems in Strategic Management, 15 (3), 10-17.

Joshua, G. (2002). Free Software, Free Society: Selected Essays of Richard M. Stallman. Boston: Free Software Founda-tion.

Piepiorra, F. (2007). vtiger CRM v5.x. Saarbrücken: Bomots. vtiger. (2012). vtiger CRM On Demand Modules. Retrieved January 2012, from vtiger: http://www.vtiger.com/crm/crm-

features-pricing/crm-modules/



Correspondence

Jelica Trninić



STRATEGIC MANAGEMENT, Vol. 17 (2012), No. 2, pp. 057-062 UDC 658.8

Received: January 22, 2012


Marketing Management in Turbulent Times

Aleksandar Grubor University of Novi Sad, Faculty of Economics, Subotica, Serbia

Abstract The contemporary business setting is increasingly subject to changes, especially in turbulent times, thus im-posing on managers a requirement to find appropriate marketing responses. The networked character of global economy and worldwide economic interdependence are also manifested in turbulent times, in such away that economic crisis and disturbances rapidly shift from one market to others. Turbulent times have resulted in transformed worldwide economy. The subjects of marketing activities increa-singly manifest the need for a strategic overview of fluctuations in the supply and demand ratio, factors leadingto changes in conjuncture cycles, and effects arising from hardly predictable circumstances. Marketing management has both a determined and a creative side, which is the reason to call marketing bothan art and a science. Successful implementation of marketing activities cannot result from random approach; itis rather an effect of careful planning and implementation, with constant changes and refinements, i.e. ad-vancements in marketing qualifications. Increased risk and uncertainty feature as vital characteristics of turbulent times. Rather than striving to maxim-ize return on investment, market decision makers are preoccupied with risk minimization, thus enabling com-panies to survive even in hardest business conditions. Market decision making in turbulent times is neither easy nor simple: how should one adapt the product, at what prices should one sell it, which distributors should be hired, and how should one present oneself to thetarget audience? Keywords Marketing management, economic crisis, turbulent times.

Introduction

Marketing management can be understood both as the art and science of choosing target market seg-ments, in which the company attracts, retains and increases the consumers of its supply, by means of creating, delivering and communicating superior value in comparison with its competitors (Kotler & Keller, 2006, p. 6). Marketing management includes the making of numerous and various decisions, which is not always easy in present-day turbulent marketing environment. Parties involved in the pro-cess of exchange should, and in such an environment aim to find resources that would make this exchange mutually useful, which often requires high levels of qualification, vigorousness and activity.

In turbulent business environment, it is almost a rule for a demand curve to show significant negati-ve movement which further reflects in reduced and selective demand for offerings of a great number of companies. It should be kept in mind that marketing management activities are not oriented towards the fluctuations of primary demand, but they can be focused on transforming the latent into actual demand. Accordingly, marketing management activities can help make the link between business opportunities and market needs even in turbulent times, which further means that the role of marketing as a factor of positive economic development manifests through implementation of given activities.

Globalization, as a present-day world economy phenomenon, also affects the speed and width of the crisis wave and its overflow, the best evidence of which can be found in the last great economic crisis of

58 Aleksandar Grubor Marketing Management in Turbulent Times


2008, which initially occurred on the American market and then quickly shifted to the world market as a whole. The increasing influence of global market forces also results in changed responses of marketing decision makers, because many beliefs from the previous period have become subject to marketing revi-sion.

In turbulent times, activities of marketing management are being focused on adaptation of defined marketing strategy, having in mind the realized market share, intensity of competition, as well as the place and role of the company in the selected marketing environment. Turbulent times for subjects of marketing activity can manifest as highly unfavorable, unfavorable, favorable but also as highly favora-ble from the aspect of prospects of accomplishing marketing goals. Hence, the implementation of mar-keting management should result in taking the measures that would reduce the negative influences of business activities in such circumstances.

1. Marketing challenges in turbulent times

During periods of prosperity, companies aim to achieve rapid growth and development, they combine offensive and defensive marketing strategies, recognize new market opportunities, and take profit growth as an indicator of marketing effectiveness. On the other hand, in turbulent times companies face the decline in demand and the effects of recession and they rapidly take measures to significantly cut costs and investments in order to ensure their market survival. However, this view of marketing enviro-nment seems to be overcome by far.

The point is that market circumstances are prone to sudden and unplanned change. Market shocks are much more frequent and rapid than ever before and under the influence of both market forces and forces of nature (including the influence of so called “force majeure”). These strokes can be found in different segments of world market, the consequences of which are, due to the influence of globalizati-on, transmitted very quickly to the other parts of increasingly integrated global market.

Marketing managers are in demand of a new way of understanding of business environment, as well as new ways of responding to sudden changes of market conditions. It is necessary to start from the fact that environment changes happen almost daily, and the effects of such changes can be immediate, short term and long term, as well as they can initially manifest in any segment of the global market (Drucker, 1992, p. 14).

Business operations in present-day world market impose on marketing decision-makers to deal with a much higher degree of risk and uncertainty then it was the case in previous decades, whether they are the result of big and unplanned market shocks or consequences of general and dynamic technological advances. Such circumstances lead to comprehension of new business normality, which includes the reduction of harmful effects of changes in marketing environment.

A number of well known economists and businessmen point out that the time we are living in is actually a new age, which they refer to as the age of turbulence (Greenspan, 2007). Alan Greenspan, a former chairman of US Federal Reserve, pinpoints the exact economic disturbances and market shocks in question, while suggesting some of the atypical solutions applied in given circumstances and how much the creators of economic measures “got dirty” and “prayed” for their success.

Turbulence, in economic sense, implies the disappearance of stability and business predictability along with the concurrent influence of negative market forces. Frequent turbulences can endanger conjuncture cycle movements by directing economic activities downwards, into recession or prolonged depression. In previous decades, such movements did not last long, while in present-day circumstances, turbulence has become a typical business condition. Victims of economic turbulence can be individual companies, industries but also economies as a whole i.e. countries, the example of which is Iceland and their 2008 experience.

Marketing challenges in turbulent times require the finding of adequate responses and solutions to these unexpected situations. Early warning system development which is to detect first signs of turbu-lence represents the first step in right direction. The functioning of such system enables the development of alternative marketing strategies in the case of abrupt and unpredictable changes of the environment. Early warning system ensures the reduction of growing risk and active confrontation with the increased uncertainty. The next step should be to develop the rapid response system which is to facilitate marke-ting management in turbulent times.

Aleksandar Grubor Marketing Management in Turbulent Times 59


However, most companies, including the most successful ones, are still not in possession of develo-ped systems of this kind, instead, their marketing activities are based on free functioning of market for-ces which should eventually result in the state of balance. The problem is reflected in the fact that pre-sent-day business practice undoubtedly shows that many companies are not in the position to wait for the market balance to be established on its own, and the measures they are taking are not an adequate response to environment changes.

This is why it is necessary for marketers to understand that turbulence, along with its all related consequences, above all, chaos, risk and uncertainty, has become a typical state of present-day compa-nies, industries and markets (Kotler & Caslione, 2009, p. 10). Turbulence as a new normality can be interrupted by periods of prosperity and downward states alternating each other, including recession, even depression. In turbulent times two main consequences feature: vulnerability, against which com-panies should develop a defensive mechanism and opportunities which are not to be missed.

Turbulent times are unfavorable for most companies, but at the same time they can be favorable for a certain number of them. Prerequisite for this to happen is that marketing managers recognize the bene-fits of opportunity in such unexpected circumstances. An opportunity can manifest in taking over of the competitor’s deals or the competitive company itself under changed yet favorable conditions. Further-more, an opportunity can be seen in sustainability of existing marketing budget whereas a great number of competitors have to cut it significantly.

Marketing challenges in turbulent times are, therefore, reflected in new ways of managing marketing activities which represent management based on a new system of adequate decision making. Business activities in high risk and uncertain marketing environment require a different management approach as well as the system which enables marketing targets to be met under such conditions. A great number of marketing managers agree that doing business in present-day circumstances is different even though many of them cannot exactly define what those differences are.

In turbulent times, the emergence of falling market is clearly recognized along with the decline in demand. Bearing in mind different external causes that lead to the formation of falling market (such as changes in production technologies, consumer needs, macroeconomic conditions in marketing environ-ment, etc.) companies which want to survive in such a market should employ aggressive marketing stra-tegies. Falling markets are prone to high concentrations of production in certain industries on just a few producers, along with the price and profit reductions which are accompanied by a substantial indifferen-ce of customers.

It is possible to meet marketing targets in falling markets by applying the following marketing stra-tegies (Aaker, 2001, p. 258):

business liquidation, investments in current business activities with a goal of growth, achievement of profitable survival based on market domination, disinvesting focused on rapid return on investment.

During marketing program implementation, companies continue to face challenges even after the effects of economic turbulence stop, keeping in mind that not even periods of prosperity reflect identically on all industries, markets and companies. In periods if prosperity marketers focus on restruc-turation and renewal of growth, which is achieved by employing one of the standard marketing strategi-es, such as market modification, product modification or modification of marketing program.

2. Strategic marketing responses in turbulent times

The 2008 crisis and the forecasted second wave have brought about the revised understanding of further growth of world economy, dominant effects of globalization process, rapid global markets growth and deepened liberalization of international economic relations. Implementation of marketing programs in turbulent times requires a high degree of elasticity and flexibility, because such an approach probably represents the most desirable marketing characteristic in situations when market survival of a company is in danger. Elasticity in business (Hollensen, 2011, p. 12) enables marketers to translate uncertainty into appropriate marketing actions, while determination facilitates the overcoming of problems percei-ved.



Different functions of marketing management are also subject to marketing revision, among which marketing planning to the greatest extent. Marketing planning should provide solutions for abandon-ment of nonprofitable market segments, elimination of nonprofitable products, product price reductions, reductions in distribution costs, as well as promotional budget cuts.

In turbulent times, marketers are also advised to apply focused and customized strategies of target marketing, with stronger orientation towards outsourcing, reduction in number of suppliers, emphasis on intangible market assets, creation of strong brands based on integrated marketing communication, affirmation of the long term value to the buyers, integration of global and local market operations, while focusing on the market result rather than on evaluation based on financial results (Grubor, 2011, p. 311).

Providing strategic marketing responses in turbulent times requires marketers to develop a new way of thinking, which is focused on influences of the following factors (Kotler & Caslione, 2009, p. 151):

1. maintaining of the existing market share with key buyer segments, 2. aggressive taking over of a larger market share from competitors that matches key buyer seg-

ments, 3. conducting of extensive buyer research, based on their changed needs, requirements and expecta-

tions, 4. focus on increasing or at least maintaining of the existing level of marketing budget, 5. concentrating on safe business aspects while emphasizing key values, 6. rapid elimination of nonprofitable marketing programs, 7. keeping of the existing price level of strongest brands, 8. keeping of strong and abandonment of weak brands from product portfolio.

It should be kept in mind that in turbulent times, buyers i.e. consumers change their behavior substantially because in the process of making a purchase decision, consumers are becoming increasingly driven by the price while at the same time they reduce the frequency and mobility of pur-chase. Concurrently, producers try to significantly cut operation costs which results in reduced number of orders, capital investments, marketing budget, planning costs, new product development, etc.

Strategic marketing responses in turbulent times include both strategic and tactical changes in implementation of marketing activities (Czinkota & Ronkainen, 2010, p. 590). Business experiences in turbulent times indicate that companies which rushed into marketing budget cuts did not succeed to overcome the challenges of such times. Maintaining of the existing marketing budget has proven to be the most significant support by far in keeping the existing level of sales. Besides that, it is necessary to focus on target market segments, having in mind the fact that quite often, the most profitable buyers in the market are proportionally scarce in number, yet they are responsible for achieving high sales results.

The issue of cutting costs (Kotabe & Helsen, 2011, p. 266) as a strategic marketing response in tur-bulent times has to be correlated with the changed behavior of buyers, competitors, distributors, and suppliers. Namely, marketing managers should take into account that, in turbulent times, it is extremely important to maintain the realized market share, as well as to maintain the strongest brands, while accomplishing defined long term goals. Experiences of well-established businesses confirm that, in periods like this, the development of alternative scenarios is, basically, a very effective marketing res-ponse.

3. Sustainability of marketing management in turbulent times

Marketing strategies for entering and expanding in the market are estimated according to the criteria such as market size, achieved level of development, competitors’ positions, the purchasing power of consumers, cultural specificity, etc. The criteria given justified their application in periods of economic prosperity. Under such circumstances companies enter the market in the form of “green field” and “brown field” investments or mergers, acquisitions, appointed representatives, agents, etc. (Keegan, 2002, p. 229).

Nowadays, rightfully raised question is whether marketing management is sustainable in turbulent times. In chaotic times, traditional approach to marketing management, especially marketing planning and development of marketing strategies, has proven to be outdated and almost completely inefficient. The root cause of this is that an approach to marketing management such as this requires precise prog-

Aleksandar Grubor Marketing Management in Turbulent Times 61


nosis, which is not easily achieved in times of uncertainty. This is why traditional approach to marke-ting management is considered risky in terms of companies’ market survival.

The underestimating of influences of chaotic environment has brought marketers in a position that the application of traditional marketing strategies does not only endanger companies’ market positions but it also restricts recognition and materialization of opportunities that arise in turbulent times. This is why marketers should accept that it is inevitable to abandon traditional marketing strategies in times of chaos having in mind the complete inefficiency of their further application.

Sustainability of marketing management in turbulent times requires the development of new mana-gement system, which implies systemic approach to detection, analysis and response to challenges of turbulence and chaos (Kotler & Caslione, 2009, p. 79). Management system of this kind is called Chao-tics, and it consists of three basic components:

detection of turbulence source by developing early warning system, creation of key scenarios in the form of responses to chaotic marketing environment, choice of marketing strategy based on consideration of preferential scenarios and its relation to

risk.

In turbulent times, marketers are in a position to differently combine marketing variables mix, in order to cater for changed target market. This approach also includes variable submixes, based on which strategic marketing decisions should be made (Czinkota, Ronkainen & Zvobgo, 2011, p. 18). Combina-tion of different elements into a coherent program requires changed marketing approach and considera-tion of resources available for realization of marketing efforts.

In changed marketing environment sustainability of marketing management implies the development of marketing program that will result in sustainable marketing benefits, and not only financial indicators (Lee & Carter, 2009, p. 89). Under existing conditions of chaos, the problem of sustainability is seen in rapid increase of global inequality, growing global discontent, hypocrisy of a number of rich markets and enlarged gap between the rich and the poor.

Marketing subjects in turbulent times can take on different roles, so that competitors can become cli-ents, suppliers, distributors, or even investors. In times of chaos, company’s orientation towards annihi-lation of competition may result in endangered market position or market survival. Besides that, under conditions of high risk and uncertainty the questions that arise are the speed of response, unpredictability of further influence of changed environment factors, and overcoming of growth paradox within which the company’s growth as an indicator of success is in inverse proportion to mar-ket flexibility.

In order to achieve sustainable marketing management in turbulent times, it is necessary for marke-ters to take pragmatic steps that are feasible in a business sense. The activities in question are, above all, as follows (Kotler & Caslione, 2009, p. 169):

1. raising of strategic planning efficiency, so that it becomes more mobile, interactive and asso-ciated with shorter time cycles,

2. facilitation of decision making on different levels and functions, that results in increased quality and speed of decision making process,

3. changes in organizational structure, so that large companies become divided into smaller groups and subgroups with a goal to facilitate and enable timely responses.

Marketing management changes in turbulent times are supposed to move towards minimization of duties, empowerment, and responsibilities of top management in large companies. On the other hand, it is necessary to significantly improve the skills of marketing decision makers in order to increase the quality of marketing decision making process (Đurković, Trninić, Vuković, & Raković, 2011). Besides that, function managers as well as managers at middle and lower levels are to be provided with a more direct contact with strategic marketing decision makers.

Conclusion

Increased risk and uncertainty are basic features of turbulent times, but at the same time the common state of modern world economy. In now-current marketing theory, economic turbulence is denoted as “new normality”, which finds verification in business practice, because periods of crisis alternate with



increasingly shorter cycles of economic prosperity and welfare, while downward economic oscillations result in explicit recession i.e. depression.

Marketing managers in turbulent times should understand the potential consequences of such condi-tion of market and economy for subjects of marketing activities. Business operations in turbulent times increase companies’ vulnerability, which results in the need to develop an efficient defensive mecha-nism. At the same time, there are also opportunities that emerge from the period of crisis which need to be recognized and taken by successful companies. The period of crisis is unfavorable for most subjects of marketing activity, but for some companies there are also favorable opportunities. Recognition of opportunity in turbulent times is possible if managers have high level of marketing qualifications.

Valorization of opportunity benefits in turbulent times is reflected in market takeover from weakened competitors, takeover of competitors through activities of mergers and acquisitions, realizati-on of portfolio investments under favorable market conditions or in market elimination of worn down competition. Successful companies, therefore, take advantage of opportunity in turbulent times, based on which they are not forced to drastically cut critical costs, even though in such circumstances, the gre-atest number of competitors is forced to do so.

Implementation of marketing management in turbulent times is facilitated if chaotics system is deve-loped, because it is the best insurance from growing risk and the right response to increased uncertainty in business. Nevertheless, it should be kept in mind that there are risks against which companies are not easily secured, because such conditions hinder the making of quality marketing decisions as well as accomplishment of defined goals. Besides that, marketing management performances, in the form of maximized return on investments, in turbulent times are necessary to be efficiently replaced by reducing the risk to an acceptable level, because in doing so, companies’ market survival is enabled even in the hardest economic turbulences.

There are a lot of challenges marketing decision makers are to deal with in turbulent times. Affirma-tion of globalization process has resulted in rapid transformation and changes in the logics of functio-ning of modern world market. Strategic marketing adjustment is possible if key economic trends are recognized or, in other words, if the influences of changeable factors of marketing environment on effects of marketing activities are predictable. Development of alternative marketing scenarios and mar-keting management on that basis is an adequate marketing response even in times of explicit economic turbulence. SM

References

Aaker, A. (2001). Strategic Marketing Management. New York: John Wiley. Czinkota, M., & Ronkainen, I. (2010). Principles of International Marketing. Georgetown: South Western Cengage Learning. Czinkota, M., Ronkainen, I., & Zvobgo, G. (2011). International Marketing. Hampshire: South Western Cengage Learning. Drucker, P. (1992). The Age of Discontinuity. New York: Harper Colins Publications. Đurković, J., Trninić, J., Vuković, V., & Raković, L. (2011). Implementing knowledge management systems in small and

medium-sized organisations in the autonomous province of Vojvodina. TTEM - Technics Technologies Education Management , 6 (3), 598-605.

Greenspan, A. (2007). The Age of Turbulence. London: Penguin Press. Grubor, A. (2011). Marketing u kriznom periodu. Poslovna ekonomija , 9 (2), 305 - 316. Hollensen, S. (2011). Global Marketing, A Decision - Oriented Approach (5th ed.). Edinburgh Gate: Prentice Hall. Keegan, W. (2002). Global Marketing Management (7th ed.). New Jersey: Prentice Hall. Kotabe, M., & Helsen, K. (2011). Global Marketing Management (5th ed.). New Jersey: John Wiley & Sons. Kotler, P., & Caslione, J. (2009). Kaotika, upravljanje i marketing u turbulentnim vremenima. Zagreb: Mate. Kotler, P., & Keller, K. (2006). Marketing menadžment. Beograd: Data Status. Lee, K., & Carter, S. (2009). Global Marketing Management (2nd ed.). Oxford: Oxford University Press. Correspondence

Aleksandar Grubor



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Ljubojević, T.K. (1998). Ljubojević, T.K. (2000a). Ljubojević, T.K. (2000b). Ljubojević, T.K., & Dimitrijević, N.N. (1994).

Here is a list of the most common reference types: A. PERIODICALS Authors must be listed by their last names, followed by initials. Publication year must be written in pa-rentheses, followed by a full stop. Title of the article must be in sentences case: only the first word and proper nouns in the title are capitalized. The periodical title must be in title case, followed by the vo-lume number, which is also italicized:

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Journal article, one author, paginated by issue Journals paginated by issue begin with page 1 in every issue, so that the issue number is indicated in parentheses after the volume. The parentheses and issue numbers are not italicized, e.g.

Tanasijević, V. (2007). A PHP project test-driven end to end. Management Information Systems, 5 (1), 26-35.

Journal article, one author, paginated by volume Journals paginated by volume begin with page 1 in issue 1, and continue page numbering in issue 2 where issue 1 ended, e.g.

Perić, O. (2006). Bridging the gap: Complex adaptive knowledge management. Strategic Management, 14, 654-668.

Journal article, two authors, paginated by issue

Strakić, F., & Mirković, D. (2006). The role of the user in the software development life cycle. Management Information Systems, 4 (2), 60-72.

Journal article, two authors, paginated by volume

Ljubojević, K., & Dimitrijević, M. (2007). Choosing your CRM strategy. Strategic Management, 15, 333-349.

Journal article, three to six authors, paginated by issue

Jovanov, N., Boškov, T., & Strakić, F. (2007). Data warehouse architecture. Management Information Systems, 5 (2), 41-49.

Journal article, three to six authors, paginated by volume

Boškov, T., Ljubojević, K., & Tanasijević, V. (2005). A new approach to CRM. Strategic Management, 13, 300-310.

Journal article, more than six authors, paginated by issue

Ljubojević, K., Dimitrijević, M., Mirković, D., Tanasijević, V., Perić, O., Jovanov, N., et al. (2005). Putting the user at the center of software testing activity. Management Information Systems, 3 (1), 99-106.

Journal article, more than six authors, paginated by volume

Strakić, F., Mirković, D., Boškov, T., Ljubojević, K., Tanasijević, V., Dimitrijević, M., et al. (2003). Metadata in data warehouse. Strategic Management, 11, 122-132.

Magazine article

Strakić, F. (2005, October 15). Remembering users with cookies. IT Review, 130, 20-21. Newsletter article with author

Dimitrijević, M. (2009, September). MySql server, writing library files. Computing News, 57, 10-12. Newsletter article without author

VBScript with active server pages. (2009, September). Computing News,57, 21-22. B. BOOKS, BROCHURES, BOOK CHAPTERS, ENCYCLOPEDIA ENTRIES, AND BOOK REVIEWS Basic format for books

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Ljubojević, K. (2005). Prototyping the interface design. Subotica: Faculty of Economics.

Book, one author, new edition

Dimitrijević, M. (2007). Customer relationship management (6th ed.). Subotica: Faculty of Economics. Book, two authors

Ljubojević, K., Dimitrijević, M. (2007). The enterprise knowledge portal and its architecture. Subotica: Faculty of Economics.

Book, three to six authors

Ljubojević, K., Dimitrijević, M., Mirković, D., Tanasijević, V., & Perić, O. (2006). Importance of software testing. Subotica: Faculty of Economics.

Book, more than six authors

Mirković, D., Tanasijević, V., Perić, O., Jovanov, N., Boškov, T., Strakić, F., et al. (2007). Supply chain management. Subotica: Faculty of Economics.

Book, no author or editor

Web user interface (10th ed.). (2003). Subotica: Faculty of Economics. Group, corporate, or government author

Statistical office of the Republic of Serbia. (1978). Statistical abstract of the Republic of Serbia. Bel-grade: Ministry of community and social services.

Edited book

Dimitrijević, M., & Tanasijević, V. (Eds.). (2004). Data warehouse architecture. Subotica: Faculty of Economics.

Chapter in an edited book

Boškov, T., & Strakić. F. (2008). Bridging the gap: Complex adaptive knowledge management. In T. Boškov & V. Tanasijević (Eds.), The enterprise knowledge portal and its architecture (pp. 55-89). Subotica: Faculty of Economics.

Encyclopedia entry

Mirković, D. (2006). History and the world of mathematicians. In The new mathematics encyclopedia (Vol. 56, pp. 23-45). Subotica: Faculty of Economics.

C. UNPUBLISHED WORKS Paper presented at a meeting or a conference

Ljubojević, K., Tanasijević, V., Dimitrijević, M. (2003). Designing a web form without tables. Paper presented at the annual meeting of the Serbian computer alliance, Beograd.

Paper or manuscript

Boškov, T., Strakić, F., Ljubojević, K., Dimitrijević, M., & Perić, O. (2007. May). First steps in vis-ual basic for applications. Unpublished paper, Faculty of Economics Subotica, Subotica.

Doctoral dissertation

Strakić, F. (2000). Managing network services: Managing DNS servers. Unpublished doctoral disserta-tion, Faculty of Economics Subotica, Subotica.

Master’s thesis

Dimitrijević, M. (2003). Structural modeling: Class and object diagrams. Unpublished master’s thesis, Faculty of Economics Subotica, Subotica.

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Article in an internet-only journal

Tanasijević, V. (2003, March). Putting the user at the center of software testing activity. Strategic Management, 8 (4). Retrieved October 7, 2004, from www.ef.uns.ac.rs/sm2003

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Faculty of Economics. (2008, March 5). A new approach to CRM. Retrieved July 25, 2008, from http://www.ef.uns.ac.rs/papers/acrm.html

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Jovanov, N., & Boškov, T. A PHP project test-driven end to end. Management Information Systems, 2 (2), 45-54. doi: 10.1108/06070565717821898.

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Jovanov, N., & Boškov, T. A PHP project test-driven end to end. Management Information Systems,

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According to Mirković (2001), “The use of data warehouses may be limited, especially if they contain confidential data” (p. 201).

Mirković (2001), found that “the use of data warehouses may be limited” (p. 201). What unex-pected impact does this have on the range of availability?

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Summary or paraphrase

According to Mirković (1991), limitations on the use of databases can be external and software-based, or temporary and even discretion-based. (p.201)

Limitations on the use of databases can be external and software-based, or temporary and even discretion-based (Mirković, 1991, p. 201).

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The overview is limited to towns with 10,000 inhabitants and up (Statistical Office of the Re-public of Serbia [SORS], 1978). The list does not include schools that were listed as closed down in the previous statistical over-view (SORS, 1978).

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Mirković & Boškov (2006, p. 12) propose the approach by which “the initial viewpoint…

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FOOTNOTES AND ENDNOTES

A few footnotes may be necessary when elaborating on an issue raised in the text, adding something that is in indirect connection, or providing supplementary technical information. Footnotes and end-notes are numbered with superscript Arabic numerals at the end of the sentence, like this.1 Endnotes begin on a separate page, after the end of the text. However, Strategic Management journal does not recommend the use of footnotes or endnotes.

CIP - Каталогизација у публикацији Библиотека Матице српске, Нови Сад 005.21 STRATEGIC managament : international journal of strategic managament and decision support systems in strategic managament / editor-in-chief Jelica Trninić. - Vol. 14, no. 1 (2009) - . - Subotica: University of Novi Sad, Faculty of Economics, 2009-. - 30 cm Tromesečno. - Nastavak publikacije: Strategijski menadžment = ISSN 0354-8414 ISSN 1821-3448 COBISS.SR-ID 244849927 Rešenjem Ministarstva za informisanje Republike Srbije, časopis "Strategijski menadžment" upisan je u regis-tar javnog informisanja pod brojem 2213, od 7. avgusta 1996. Rešenjem Ministarstva za nauku i tehnologiju Republike Srbije br. 413-00-435/1/96-01 časopis je oslobođen opšteg poreza na promet proizvoda kao publi-kacija od posebnog interesa za nauku.

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