Consumer value co-creation: in search of theoretical framework

ACADEMIC ASSOCIATION OF MANAGEMENT AND ADMINISTRATION

AVADA 2013: Current

Interdisciplinary Research

in Management and Administration

Proceedings of an International Scientific Conference

May 27-31, 2013, Vilnius-Net

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“AVADA 2013: Current Interdisciplinary Research in Management and Administration’’, Proceedings of an international

scientific conference, 27-31 May, 2013, Vilnius-Net, ISBN 978-609-95468-1-0

Conference is organized by:

Academic Association of Management and Administration (AVADA)

Conference partners:

School of Economics and Management in

Public Administration in Bratislava (SEMPA)

International Association on Public and

Nonprofit Marketing, Spain, Portugal

Swiss Communication and Marketing

Association of Public Health, Switzerland

Faculty of Economics, Peoples‘Friendship

University of Russia, Russia

Institute of Economics, Methodology and

Informatics, Károly Róbert College, Hungary

Department of Youth Policy under the Ministry of Social Security and Labour of the Republic of

Lithuania

Faculty of Engineering Economics and

Management, Riga Technical University, Latvia

Volyn Institute for Economics & Management

Municipality of Vilnius City, Lithuania

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Scientific committee: Chairs: Assoc. prof. dr. Agota Giedrė Raišienė, Academic Association of Management and

Administration, and Mykolas Romeris University, Lithuania Prof. dr. Mirjana Radovic-Markovic, Institute of Economic Sciences, Belgrade, Serbia, and

Academic Association of Management and Administration Members: Prof. Dr. Manuela Tvaronavičienė, Academic Association of Management and

Administration and Vilnius Gediminas Technical University, Lithuania Prof. Ing. dr. Viera Cibakova, School of Economics and Management in Public

Administration in Bratislava, Slovakia Prof. Ing. dr. Stanislav Filip, School of Economics and Management in Public Administration

in Bratislava, Slovakia Dr. Helena Maria Baptista Alves, University of Beira Interior, Covilhã, Portugal Prof. dr. Jose Luis Vazquez, Leon University and IAPNM, Spain Dr. Mantas Bileišis, Academic Association of Management and Administration and Mykolas

Romeris University, Lithuania Prof. dr. Artur Horbovyy, Volyn Institute for Economics and Management, Ukraine Prof. dr. Oksana Stepanyuk, Volyn Institute for Economics and Management, Ukraine Dr. Tatjana Kreidenko, Peoples‘Friendship University of Russia, Russia Assoc. prof. dr. Aistė Dromantaitė, Academic Association of Management and

Administration and Mykolas Romeris University, Lithuania Prof. dr. Robert Magda, Karoly Robert College, Hungary Dr. Norbert Bozsik, Károly Róbert College, Hungary Assist. prof. dr. Maurice Codourey, Swiss Communication and Marketing Association of

Public Health, Switzerland Dr. Stan McGahey, Saint Leo University, USA Dr. Alexis McKenney, Florida International University, USA. Dr. Andrius Stasiukynas, Academic Association of Management and Administration and

Mykolas Romeris University, Lithuania Prof. dr. Maja Pivec, University of Applied Sciences, Austria Prof. dr. Wieslaw Urban, Bialystok University of Technology, Poland Dr. Rasa Smaliukienė, Academic Association of Management and Administration and

General Jonas Žemaitis Military Academy of Lithuania, Lithuania Prof. dr. oec. Natalja Lace, Riga Technical University, Latvia Prof. dr. Jerzy Telep, High shool of Almamer, Warsaw, Poland Prof. dr. Liudmila Bagdonienė, Kaunas University of Technology, Lithuania Prof. dr. Eglė Bilevičiūtė, Academic Association of Management and Administration and

Mykolas Romeris University, Lithuania Dr. Renata Korsakienė, Vilnius Gediminas Technical University, Lithuania Dr. Remigijus Vitkauskas, Lithuanian University of Educational Sciences, Lithuania

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Organizing committee Managers: Assoc. Prof. Dr. Agota Giedrė Raišienė, Academic Association of Management and

Administration, and Mykolas Romeris University, Lithuania Assoc. Prof. Dr. Mantas Bileišis, Academic Association of Management and Administration,

and Mykolas Romeris University, Lithuania Rūta Tamošiūnaitė, Academic Association of Management and Administration, and Mykolas

Romeris University, Lithuania Stream co-ordinators: Stram A: Assoc. Prof. Dr. Andrius Stasiukynas, Academic Association of Management and

Administration, and Mykolas Romeris University, Lithuania Stream B: Assoc. Prof. Dr. Aistė Dromantaitė, Academic Association of Management and

Administration, and Mykolas Romeris University, Lithuania Stream C: Rasa Ercmonienė-Varnė, Academic Association of Management and

Administration, and Lithuanian University of Educational Sciences, Lithuania Stream D: Prof. dr. Manuela Tvaronavičienė, Academic Association of Management and

Administration and Vilnius Gediminas Technical University, Lithuania

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Table of Content MODERN ASPECTS OF ORGANIZING THE MARKETING FUNCTION – PROPOSAL OF THE IMPROVED MODEL ..................................................................................................................... 6

CORPORATE SOCIAL RESPONSIBILITY AS A COMPETITIVE ADVANTAGE TOOL ................... 17

CORPORATIVE SOCIAL RESPONSIBILITY AS A FACTOR OF COMPETITIVE ADVANTAGES FORMATION OF UKRAINIAN BUSINESS ................................................................................... 27

ANALYSIS OF THE DEVELOPMENT OF THE FOREIGN EXCHANGE MARKET IN SERBIA AS A CONDITION FOR THE DEVELOPMENT OF THE ECONOMY ...................................................... 37

ASSUMPTIONS OF MOBBING MANAGEMENT AT WORK IN LAW OF LITHUANIA ................... 44

DEVELOPEMENT ORGANIC FOOD PRODUCTION IS STABILITY FACTOR OF ECOLOGY SECURITY AND REGION CONNECTION ..................................................................................... 50

ELIMINATING THE KEY PROBLEMS STUDENTS ENCOUNTER SUMMARIZING JOURNAL ARTICLES AND WRITING ACADEMIC PAPERS ......................................................................... 66

ACTIONS OF FLOODLIGHTING AND PROJECTING CREATING THE FUTURE OF A BUSINESS ORGANIZATION ......................................................................................................................... 74

THE SIGNIFICANCE OF INNOVATION AND PROJECTS FOR DEVELOPMENT OF ENTREPRENEURSHIP IN SERBIA ............................................................................................. 83

PECULIARITIES OF 6 TYPES OF IELTS WRITING TASK 2 ......................................................... 95

CONSUMER VALUE CO-CREATION: IN SEARCH OF THEORETICAL FRAMEWORK ................ 106

INFLUENCE OF KNOWLEDGE MANAGEMENT TO THE COMPETITIVENESS OF ENTERPRISES ................................................................................................................................................. 114

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Ljiljana Dimitrijevic1 Maja Cogoljevic2 Marija Cukanovic Karavidic3

MODERN ASPECTS OF ORGANIZING THE MARKETING FUNCTION – PROPOSAL OF THE IMPROVED MODEL

Abstract Purpose: The purpose of the research is to form a complete model of organizing marketing and organized

control system, as well as socially optimal combination of micro-and macro-control framework and content marketing. Were focused on achieving high degree of self-regulation micro marketing and macro narrower framework of regulation would be primarily aimed at the qualitative aspects of the development of market relations.

Methodology: descriptive method Findings and originality: Manage marketing, as in business, so find an optimal way, for his planning

guidance, uobličenog appropriate organizational solution, with constant monitoring and timely and comprehensive measure of control mechanism, the organizational structure, location and role of marketing department, as well as internally, within it.In this sense, has been designed and the proposed model of marketing at the company, based on modern management principles that its structure was strong enough to overcome the existing problems and gaps identified.If the new strategy, the company has not provided a significant rejuvenation of employees, the existing structure must first perform a quality selection, that with proper training and education, can adequately respond to the challenges and demands of the market environment. In this way the overall economy implements control, quality assurance in terms of economic results of operations

This is achieved by analyzing the total economic organizations, as well as a partial analysis of business activities and certain types of results.

Significance: The social significance of the study is to demonstrate that the use of marketing and marketing management, large and small systems helps to streamline their performance and identity in the market.If you are looking for a driving force that will focus the company realized that its mission by producing what is in the interests of the welfare of consumers and society, it is primarily marketing.Therefore it is very important that the management of the company, subject to the requirements of marketing, properly organized and controlled business processes.

Keywords: marketing functions, organization, strategy, management. Research type: viewpoint. JEL classification: M31 - Marketing.

INTRODUCTION Constant striving company achieved a high economic efficiency and in terms of inevitable

changes and demands for transformation, survival structural and global trends, opportunities and threats are incorporated into its internal and external environment, is a challenge and an opportunity for businesses. Create conditions for the marketing strategy consistently implemented, it is not an easy job, and based upon the identification and prediction of internal and external opportunities and

1 Ljiljana Dimitrijevic, Assistant professor Ljiljana Dimitrijevic, Phd, Faculty of Business Economics and Entrepreneurship, Serbia, e-mail: [email protected] 2 Maja Cogoljevic, Msc,Faculty of Business Economics and Entrepreneurship, Serbia 3 Marija Cukanovic Karavidic, Associate Professor Marija Cukanovic Karavidic, Phd, Faculty of Business Economics and Entrepreneurship, Serbia

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threats, as well as the creation of human and organizational basis for its application. As the aim of the research is that Starting from the relevant literature and critical studies of business practice, and review the importance of factors, according to them, the models suggest an adequate organizational structure, control and audit as a key marketing tool for the vitality of enterprises, through the effective and efficient accomplishment of the mission of the company market economy.

The purpose of the research is to form a complete model of organizing marketing and organized control system, as well as socially optimal combination of micro-and macro-control framework and content marketing, which would allow the regulation, whose focus was on achieving a high degree of self-regulation of micro marketing, and narrower frame macro regulation would be primarily focused on the qualitative aspects of the development of market relations.

The essence of management is not only in decision making but also in the style of leadership, communication, motivation of employees, and a variety of other management tools and skills. It is not limited to controlling people, but the extent of management depends on the depth and scope, and the degree of coordination and control of the company. Marketing should inspire new ideas and coordinate their work and other holders of business activities. It is a center where basic information is flowing, and from which they are used, and thus represent management support, both in decision-making and in management.

Marketing organization should provide effective ongoing operations and provide a basis for the development possibilities of the company. What will be the form of the company to choose and place marketing functions in it, depends primarily on the business of enterprise, its preferences and ambitions of management and resources at its disposal and the business opportunities that are available to him.

Modern marketing concepts required and requires integration, synchronization and coordination of activities related to the operations of the company. All marketing activities should contribute to economic efficiency and meeting the needs of consumers, business and society. Marketing essentially means, such management and running of the organization, which provides an accurate evaluation and symbiosis of market, economic and broader social interests.

Management theory, has defined a business practice has confirmed the existence of different forms of organization of marketing activities. No two companies in the same industry, which accepted marketing concept, need and (usually) do not have the same form of the marketing activity. Even one and the same company at different points in their development has a different organizational structure of marketing. If we start from the premise that marketing organization largely depends on the product - the market among the relevant models can be distinguished are

- functional model - a model of organization marketing the products - a model of organization marketing the customers - a model of organization by markets - combined model (matrix or network organization), and - the corporate model. In addition, in recent years, the business community, defines a several new models of

organization. Within these forms of organization were found to be business processes and projects as well as criteria for the design of organizations in the enterprise (organization of processes and project organization). In addition, the newspaper does and dealing with the phenomenon of modular and virtual enterprises. At the same time the modular organization refers to an organizational arrangement within the company, while the virtual enterprise concept in the forefront of a network of several companies. Finally, there is one form of co-operation - the management of product categories, indicating new ways of organization of producers and trade cooperation.

Contemporary authors dealing with marketing issues, share the following viewpoint.Managers can select the most effective envoys to implement marketing orientation. Also, the strong synergistic effect between internal marketing and market orientation suggests that top managers who want to implement market orientation more effectively must first sell the organization itself not only to middle

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managers but also to expert peers in work groups (Ahearne, Lam, Mathieu, and Bolander, 2010,65-79).Top managers should be aware that network size may dilute organizational members’ learning processes to become more market oriented. Although the focus of the study is on market orientation, the findings should also generalize to the diffusion of customer orientation throughout the organization(Lam, Kraus, and Ahearne,2010,61-79). Successful marketers today do not sell products and they sell packages that provide the benefit.(Kotler and Keller, 2010).

The structure of this study, therefore, was designed by two several parts. In the first, the theoretical review, the following principles of organization of marketing, given the planned approach. The following factors are processed marketing organization, foregrounding the critical success factors of this ambitious endeavor. In the third part, the authors contribute to the development of theory and business practice, formulating new models of a marketing tool, with a precise definition of responsibilities, accountability and control. The part relating to the conclusions the authors make recommendations marketing experts, based on the findings of their own research

1. PRINCIPLES OF MARKETING ORGANIZACION When designing marketing organization, the criteria is taken into account, which particularly

points out its importance for the success of the company. In addition to the criteria which applies to all areas of the company (such as cost, time, relieving senior level management, motivation), designing marketing organization requires special consideration to the following principles (Meffert, 1998.977):

• The organization must provide integrated marketing, ie. there must be both efficient coordination of all marketing activities, as well as an identical match between other marketing and other business activities (purchasing, manufacturing, finance, R & D, etc.).

• Marketing organization must meet the requirements of high flexibility, and despite frequent changes in conditions of the environment (market dynamics), must maintain its effectiveness. At the same time it must have the ability to flexibly respond to changes in market conditions (for example, the general state of the economy), and the specific requirements such as the entry of a new competitor, the emergence of substitute products respectively).

• Preference will be given to such organizational forms that enhance creativity and innovation readiness of all employees. This means that there must be at least a highly productive conflicts between the elements of the system, in order to come up with integrated solutions contributed by all participants.

• The organizational structure should be set up so that the participant is guaranteed a reasonable specialization of the participants according to function, product group, customer groups or territory sales.

In the development of the organizational structure for the field of marketing, it is also necessary to take into account the specific situation of the company. If the company is perceived as a social construction, which is integrated into its environment, then its organization must be at least partially influenced by environmental factors and circumstances. Marketing organization, is influenced by a number of internal and external factors, so there is no universal way, a model that is applicable anywhere, anytime. It is primarily influenced by the nature of the business activities of the company, goals and business philosophy that chose its direction of growth and development, personnel training and adopted the culture of the organization, the nature and characteristics of the environment in which it operates and from which it draws its resources and more. Therefore, some general rules may be conceived, which are a kind of principles and rules, which in general should be followed in the conceptual and formal-organizational structuring of marketing in a company.

2.FACTORS OF MARKETING ORGANIZATION Given that the company is focused both on the market and the environment, because it draws

resources out of it and returns its results back to it, expecting their valuation, its operation is a

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complex and demanding process. Therefore, it is necessary to plan carefully and organize marketing department, as an important, both in substance and form, stage management processes in order to increase efficiency, as a response to the challenges and opportunities in the environment. Marketing philosophy says that we should always listen to the needs of consumers, and thus all the parts are imbued with this idea, which leads to its own objectives and interests of all stakeholders are met with high probability. The basic guideline for adjusting the organizational structure of the company is marketing and its research and operational activities. Its strength is strong and broad relationship with the market, consumers and the entire property. At the same time the basics of marketing concept are based on the compliance of companies with the environment in which it operates and the market opportunities in it. The organization of marketing is in the function of the application of the current business strategy, strategy-oriented growth and development in the future.

Defining organizational structure is based on a large number of marketing information and research activities. Some information can be found in the organizational part of marketing, and have a high degree of reliability, because of their depth in research directions and can leave a big impression on the market trends. In almost all companies, changes in some sectors are more likely than changes in the company as a whole. The company, which operates in a market economy is in a constant process of adaptation in order to meet the needs of citizens as consumers, business and society. It is necessary to continuously strive to establish a permanent balance between the changing circumstances in which marketing activities take place and organizational changes in the marketing sector. In the event that the organization of marketing activities is rigidly established, it could soon overcome changes in the conditions of the marketing activities. In addition to environmental conditions, both growth strategy and business development significantly affects the organizational structure of the marketing sector.

The organizational structure should provide a formal definition of the division of labor in the performance of marketing activities and identify the individual who carry them out. Marketing organization is created starting from the market towards the company and not the other way around. An important step in the creation of organizational structure is to identify the lines of responsibility for integrating and coordinating individual roles. The complexity determines the number of professions and jobs that need to be done. The business organization system provides balance between the needs and capabilities. Thus, taking into account the factors, both internal and external nature designs a creation of defined marketing objectives. The organizational structure is a factor of competitive efficiency of the company, as it contributes to the achievement of marketing strategy. In this regard, it allows the company a coordinated set of activities undertaken in the community, realistically viewing its good and bad sides, and thus responds to the challenges and opportunities in the region.

The organizational concept of marketing has its immediate and wider dimensions. It leads the corporation to ensure profits and other effects for employees and work teams as a whole. At the same time it meets the criteria and requirements of the community, creating satisfaction on a grand scale and positive effects. The significance of organization is a results from a role that the component has in the structure of the global concept of marketing management.

In the process of forming, the marketing is concerned on the relevant factors and circumstances, which are typical for other executive positions in the company, but because of its specificity, the marketing function is also affected by other relevant factors that are unique to it. First, the process of separation and differentiation of content and business activities, which includes the concept of specificity that stems from the need and imperative that the marketing and business thinking must permeate and encompass all other business functions in a manner that its philosophy be adopted as a strategic focus. In relation to this, a specific connection exists which this function must have with other organizational departments, which are at the same level in the hierarchy.

In establishing the concept of organizational structure, and the place and role of the marketing function within it, one should bear in mind several categories. It concerns the internal performance and limitations of the company, external conditions and environment in which the company operates. When we take into account internal factors that influence the creation of adequate marketing

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organization, it is referred to: the type of activity and product phase in the life cycle of the product, the method of sale, number, type and frequency of consumers, distribution, resources, innovation, strategy, communication system and secondly, a strategy of growth and development, vision and ambition of management, management attitude towards marketing and more. As others but no less important factors of organization of enterprises, the ownership concept and culture of the organization is emphasized. The centralization of power and control at a high strategic level standardizes business process and formal communication dominates as a means of coordination. The external factors that should be considered are: political - legal organization, the dispersion of the market, development of marketing institutions, etc.

Constant changes in the environment require that the organizational structure changes and adapts to the changes that occur in the environment. Such changes impose new market conditions, the development of science and technology, changes in laws and regulations, new standards, new political relations, changes in ecology, new financial conditions, etc.

In the development of the organizational structure for the field of marketing it is necessary to take into account the specific situation of the company. If the company is perceived as a social construct, which is integrated into its environment, then its organization must be at least partially influenced by external factors. Its dynamics is concretized in the frequency and intensity changes as well as (in) the regularity with which it acts. Its complexity is the result of the number and variety of relevant factors. These factors are: type, number, size and diversity of markets and strategic business unit of the company, the phase of the product life cycle (level crossing), the number, structure, needs, purchasing power, consumer behavior when purchasing; competitive situation; legal norms; political and social relations; technological development and others.

In addition to external factors, when including and structuring marketing organization, a number of internal factors should be taken into consideration. These are, for example, previously made decisions that is, crude conditions created by the company, which are not be overlooked. When it comes to internal factors, we should bear in mind the goals, age and size of the business, capacity, and financial position, qualification structure, the type, number and heterogeneity of its products, as well as the available channels of distribution, growth strategy and development, to marketing companies stance, mission, management ambition, business culture, motivation of the personnel, needs and requirements of the control, etc.

2.1. The anticipation of the critical success factors for the organization of marketing In order to implement a number of individual and global business objectives, the company has

implemented a wide range of corporate and functional policies. Then, for the most part, the critical success factors of the company become prominent. They can never, be seen in isolation. Based, of course, on a wide and deeply applied marketing activity of the company. Their orientation towards all dimensions of business management is very important. Certain factors have a greater or lesser impact on operations and business success. It often happens that a small number of factors have a decisive influence on the results. It is called the critical factors, because at that point in time, the industry in which the company exists, are constituting a critical mass of value and power, enabling the company to separate itself from the competitive bid. Sources advantage in a company is acquired based on the exploitation of critical factors which can be different. A detailed analysis of the environment, recognizes the business environment in which the company operates with all the opportunities and constraints offered, which is an insight into the characteristics of business sectors. Then, the competitive position of the company is analyzed, given the current market position and prospects to maintain or improve it. Nothing less important should be paid to the analysis of the general environment, where it is desirable to determine the significance of individual factors (energy resources, transportation, etc.). In today's economy as key factors for the survival of the company is perceived organizational and management resources, managerial know - how, image, and more.

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Critical success factors of the company that is most often cited ranges from increasing the volume of traffic, to increased margins, increased productivity, reduced operating costs and more. These factors are generally accepted, but the practice often indicates that the company may lead to success a factor that can be considered negligible, and which is not given enough attention in the strategy and the competition may overlook it and forget to use in order to achieve their own success. Critical success factors are the basis for the appropriation of specific objectives. The quantification of objectives is a roadmap for the implementation of corporate strategy.

2.2. Allocation of the macro position in marketing Marketing at a macro level is treated as a system or as a macro system. From this point of view

there must be adequate policies for its implementation and regulation, so that the system taken as a whole with the corresponding performance. As marketers optimality is determined by an appropriate combination of marketing mix elements, it is clear that the social system, influencing the elements, aims to achieve an optimal marketing mix at the macro level, that such a combination of marketing elements that will enable the satisfaction of various targets businesses. This task is not simple, because it is necessary that the social impact of combining these elements is dosed to the extent to eliminate conflicts between businesses and the environment, while providing the desired output characteristics of the macro system and its overall effectiveness.

A thorough application of marketing concepts to the company level is a key prerequisite for convergence of objectives, which are conceived as a process, both in businesses and the general social goals. Long-term individual and social efficiency of the subject matter is determined by the consistent application of the marketing concept, and so it could be fully implemented and contributed to the convergence of individual and social goals, it is necessary that the marketing processes be regulated, with control instrument to be of the utmost importance.

Macro organizational modeling company implies designing macro organizational structure , definition and division of powers and responsibilities and organizational arrangements of the relationship between organizational units within the company. It also includes the relationships between the parts and the executives of the company so that the company operates as a single business system. Modern business demands imposes a strong corporate marketing, which is characterized by a focus on customers, and strong cooperation between the various departments of the company, in which the leading role is marketing. The design of the macro organization can be shaped into the following phases:

1. Defining the concept of development - the basic directions of the company, 2. Designing the basic concept of business policies and objectives at the enterprise level, 3. Defining organizational concepts, 4. Defining the criteria for the organization, 5. Designing options of organization, 6 .Comparative analysis of the possible options and the optimal case, 7 .The design of the macro organization for the selected variant of the organization. The role of marketing in the organization is changing. It ranged from simple mediation between

customers and understanding their attitudes to other departments of the company delivering value to the market. Changes in the structure of the organization lead to the possibility that everyone communicates with end customers, since all have the same mission to satisfy their needs. Coordinating and integrating role of marketing is to meet a common goal, mobilizing all internal power companies, which are gathered around a shared activity, and function to meet the needs of consumers. They have to act as a unified whole, all the company stakeholders, especially our customers. The efficiency of the macro system of marketing need not be viewed solely in the light of its output.

Marketing essentially assumes rational use, that is, the economy of all resources, while achieving optimal benefits and outcomes for all participants in the exchange process. Accepting the marketing concept is imperative for any business system, whether it is profit-oriented or not. It is not essential

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weather the company has a separate part called marketing sector. Much more important than that is the mindset of every employee, where ever they are In the company. Think marketing is to think pro-actively, to be interested in the work and results, to identify the supreme objectives and their own interests. In doing so, it is not enough to use the power and authority to marketing accepted, as declarative slogans. The results and satisfied customers who keep coming back are a measure of acceptance of marketing as a business philosophy and attitude towards internal resources, the environment and the community. For a conception of the company to be successful, each functional part has to do their job the best way possible while cooperating with one another. Constant innovation, listening to customers, close contact with them, the development of knowledge, a realistic assessment of their capabilities, creating a positive image, are just some of the attributes which should be characterized by business functions of the company that has embraced the concept of marketing business. Marketing companies must enter through the front door, proclaimed from the top and accepted by all, without the need for other parts to be seen as a potential threat to the waste of resources out of control and substantive requirements. Like any avant-garde, it is adopted and gradually overwhelmed by the time anyone from the viewpoint of their functions is thinking the same way, with one goal, only domains and contributes to differ, but the commitment is the same.

3. PROPOSAL ORGANIZATIONAL MODEL MARKETING FUNKCIONS OF THE COMPANY The requirement to minimize, or even better, neutralize effects of factors, which the company

identified as negative for our economy raises some important changes in the organizational structure, place and role of marketing department, as well as internally within it. In this sense, model of marketing at the company is conceived and proposed, based on modern management principles that its structure was strong enough to overcome the existing problems and discrepancies identified. If the new strategy does not provide any significant rejuvenation of employees, from the existing structure, firstly there must be made a quality selection of personnel who, with the proper training and education, can adequately respond to the challenges and demands of the market environment.

The focus of the implementation of the strategy employed is in the marketing department and the personnel of the company who is in direct contact with customers, and coordinating role between general managers and other organizational units. From the success of marketing to quality performances and presents the business activity of the company, in order to integrate the activities of the other holders of certain business functions, a lot depends on satisfaction and also, customer loyalty. To make this part of the company strong enough to successfully cope with a variety of user preferences and needs, in addition to the basics, that is - employees with a certain level of knowledge and working skills, the requirements are:

• High level of communication and cooperation between departments and sectors on both the end of perpetrators as well as at higher structural levels. Sometimes a lot of time is spent on information and coordination within teams, which significantly slows down the flow of information.

• Quality level of vertical communication, which includes timely and clear information flows downward and uninterrupted flow of feedback to the top management.

• Continued support of IT services and the creation of a structured and efficient teamwork that will result in customer satisfaction in terms of technical support.

• Permanent indirect and direct monitoring by senior management Necessary knowledge and skills that must be employed in the Marketing Department include: • Knowledge of the product - is crucial to the success of the sale. Customers are willing to

directly contact with the marketing and sales operations, and it starts from the assumption that they have the expertise to assist in making the right decision. If he does not fulfill this expectation, the buyer is unlikely to be able to sell the product or service.

• Knowledge of competition - helps retailers to adequately prepare for any customer complaints that he can bring in a sales conversation. Knowing the competition, retailers plan better strategies of

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the market. Therefore motivating sellers to monitor market developments and collect important information should be in the company’s interest.

• Knowing the customers and their needs, retailers are able to directly contact the customers in order to discover their needs and desires. Personal contact with members of the customers allows them to gain knowledge, which they cannot reach by conventional methods of research based on questionnaires or surveys. Two-way communication allows the entire process to discover additional information at the beginning the customer was unable or not ready to transfer.

System of permanent education, marketing department, comprehensive and continuous monitoring by management enables continuous monitoring of all employees in marketing and other functions, both in terms of direct relations with customers, as well as internal relations. In addition to a good and comprehensive training in order to create quality human resources, which will largely operate according to the principles of modern marketing paradigm, it is necessary to build an adequate level of motivation of employees. Should these elements through a new strategy be properly implemented, in conjunction with a good implementation of the training program, they would result in the marketing function being ready to meet the challenges posed by modern business and the environment. Precursor to any successful management of change must be complex analysis, both external as well as internal factors.

The designed model serves as the basis for an organizational structure that contains the appropriate elements and meets the requirements of modern management paradigm. The organization is structured according to the principle business function, where the marketing has the "first among equals" functions. Marketing department is formed personnel selection and assignment activities based on a defined strategy of growth and development of the company. Vice president of marketing is the head of the marketing department, subordinate to the general manager. Given that the company should foster both strategic as well as operational activities, the model predicts a distribution of marketing activities on a strategic and operational level. The head of team strategy and team activities for operational activities are directly subordinate to the Head of Marketing Department.

The team of strategic activities, defines and monitors the implementation, growth strategy and enterprise development. This team is a "right hand" management corps, which gives and provides general guidance plans and business policy. The strategic team is responsible for controlling the implementation of the adopted marketing strategies. The team of strategic activities is constantly in charge of investigating and analyzing the long-term market opportunities and trends, characterizing the high degree of flexibility to react to perceived changes in a timely manner and signal management structure. In this organizational work, innovative activities related to research and development are carried out, marketing, human resources development, sales promotion, new forms of promotion, improved product performance, strategy research profile of demand, the development of international standards and cooperation, technology development, new image, new ways organizing distribution chains and the like. Within a team of strategic activities, sections can be organized according to the design principle. The head of the team is responsible for resolving conflicts in and between the various sections. A separate section of the strategic activities make new activities and jobs.

The team of operational activities is responsible for the implementation of current operations on the principle product of the numerical product range and / or identification of particular market segments or across national borders. The independent unit product / market, they can be treated as a strategic business unit, which determine the internal structure of individual areas of activity, such as prices, market research, product development and, secondly that their division of labor is delegated by these activities. Control over certain functions is implemented by SBU managers, who are subordinate to the Team Leader of Operations. The head of the team responsible for resolving conflicts in and between the various sections. He is directly responsible to the Vice President of Marketing.

Thus, implementing total economic control is carried out, quality assurance in terms of economic results of operations. This is achieved by analyzing the total economic organizations, and partial analysis of business activities and certain types of results. The strategic business team is at the

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same time responsible for the resolution of conflicts between and within project teams, while the general manager is responsible for resolving conflicts between individual project teams and business functions.

The analysis of the total enterprise economy leads to a conclusions about the measures that should be undertaken in the field of business policy, to bring about the realization of set goals, and to achieve optimal results. What is the effect of certain factors, objective and subjective nature on which the economic results of operations depend on – is the result of a partial analysis of the economy. It can be said that the judicial review must occur in all phases of the work. It pervades equally comprehensive both research and development, planning, commercial office, as well as the functions of production and finance.

Is not enough to proclaim control as a function, commitment and tools that will be applied. A precondition for the success of control, i.e. its maximum effectiveness and efficiency is achieved by an elaborate network of analytical procedures and methods, with the necessary cooperation with other features, that is, in other levers of executive function.

Some of the advantages of the proposed model in Figure 1. are: •The employees in marketing working within operating activities, specialize in work on specific

projects and also acquire new, additional knowledge, skills and experience. This increases the productivity of labor - because teams are closer to customer response, and are able to spot opportunities and threats that management does not see;

• The effectiveness of this kind of teamwork is reflected in the ability that more functional teams have broader horizons than individuals or groups with the same knowledge, resulting in a synergy effect - the results of a team is much better than the sum of individual results in the same number of individuals.

• It is cost-effective because team leaders can directly control sections of the project costs and these costs are evident in each project. Staff costs of individual functions are also controlled by the project managers.

• This system of marketing organization is highly customizable and flexible. Real needs are those imposed by the requirements of the project teams that constitute and solve specific problems.

• Although the members of the project teams specialize in specific problems and business areas, the nature of the problem allows them to "transfer" to other projects, which is due to the nature of problems in current operations, but their knowledge and experience gained in the implementation, be applied in new circumstances.

• Satisfaction with the performance and results which are measurable, great opportunity to gain knowledge and experience too, and a sense that their own efforts achieve strategic objectives and corporate marketing in general.

• In this way, communication and decision-making process is improved - sharing information and work creates conditions for better decisions.

• Integrating diversity, teams improve the process, because the process is treated as a whole. Rewarding system is linked to the achievement of the objectives. Money is one of the major

awards for the recognition of superior performance. Being rewarded through bonuses of those who earn high scores can be a substantial portion of salaries of the successfully employed, sometimes as many as 20 or 25%. The prizes of no cash component can be just as important in motivating people to work. This primarily refers to participation in governance and decision-making important in the team, because people are typically motivated if they are consulted by management on issues that affect them. If the job of the team continues to be enriched by removing repetitive tasks, which comes into play the creativity and innovation that positively affects team members and thus, equally to senior and junior executives.

The basic postulates on which the new organizational model is based, which enable marketing effectively to function as a business function as a system are:

• Organizing teams around processes, not around tasks;

15



• Reconcile the organizational hierarchy with parallel teamwork performance of various sub-processes;

• Provide the team for strategic and operational responsibility for activities and performances of the process;

• Join together the performance and development of all activities with customer satisfaction; • Measure the performance of the team, not individuals; • Assign the strategic management team demanding tasks; • Train staff using the principle of "just in time"; • Provide team members with operational activities contact with customers; • Continuously improve the performance of business teams.

Figure 1. A new model of organization marketing (Dimitrijevic, 2010, 274)

This, project - team manner of marketing functioning is important for the success of the

enterprise as a whole, and each type of teamwork is important for the development of human resources of a company. Teamwork is important because all team members share a common goal, they are jointly engaged to continuously influence each other, and they define themselves as members of a team.

CONCLUSIONS The problem and phenomenon of organizing marketing is a very significant challenge for

economic theory and practice. The complexity of the organization of marketing, which is caused by the action of a number of factors, many of which produce the impact and effect that cannot be predicted nor measured, requires special attention and considerable efforts in the search for appropriate ways to monitor the implementation of performance marketing through propulsive control system.

Organizing must be a function of motivating, through the accountability for results, and as such is an important factor in effective control. Since planning is the premise of the control mechanism, that is relevant, that it considered when discussing the mechanism of control. Advantage in the modern

Management

Marketing

The team for strategic activities

Researching demand profile

development of

international standards

and cooperation

New jobs

The team for operative activities

Product/Market 1

Prices

Product development

Market research

Promotion

Product / Market 2

Product / Market 3

Production Finances

Common Services

16



economy is acquired not only a reliable and timely explanation between planned and realized, but considering the relations between the actual, planned and potential.

If a driving force is sought that will guide the company to its mission through producing what is in the interests of the welfare of consumers and society, then that is primarily marketing. It is therefore very important that the management of the company, according to the requirements of marketing, properly organize and control business processes, innovate and timely marketing decisions in an array of new circumstances. Marketing consists of objectives, activities, stakeholders, the combination of instruments and the like, and is important to establish adequate and self-encouraging relations between them. Successful implementation of marketing involves the consistent and viable organization for real vigorous marketing ideas. Organizing as a phase of marketing management includes both positioning and micro structuring of marketing department, selection and motivation of staff, so it is important to understand the relations of marketing to other business functions, and the management style of the company. A planned approach to marketing organization is a necessary requirement for the operation of an effective marketing organization. From the management point of view it is necessary to understand and implement multi-dimensional relations that exists between the organization, the information system of the company, the system of motivation and control.

It is essential that the marketing organizational structure creates some of the key success factors and key tasks that need to be implemented using strategy. Successful organizations must make their limits permeable and flexible in response to changing environmental conditions and demands.

REFERENCES 1. Ahearne, Michael and Lam, Son and Mathieu, John, and Bolander, Willy (2010), Why Are Some Salespeople Better

at Adapting to Organizational Change?, NY Journal of Marketing ,Vol. 74 May 2010, 2.Dimitrijevic, Ljiljana (2010), Contemporary challenges, critical factors, models of organizing, control and audit of

marketing, Unpublished doctoral dissertation, University Slobomir, Republic of Srpska 3.Drucker, Peter(2001), MANAGEMENT CHALLENGES FOR THE 21st CENTURY, Harper Business, USA. 4. Kotler, Philip and Keller, Kevin (2011) Marketing Management, Belgrade, Data status. 5. Lam, Son, and Kraus, Florian, and Ahearne, Michael (2010). The Diffusion of Market Orientation Throughout the

Organization: A Social Learning Theory Perspective. Journal of Marketing: Vol. 74, No. 5. 6.Macmillan, Hue and Tampoe, Mahen(2000), Strategic Management: Process, Content and Implementation, Oxford

University Press, Oxford. 7.Meffert, Heribert (1998), Marketing: Grundlagen marktorientierter nternehmensführung, Konzepte - Instrumente -

Praxisbeispiele., Wiesbaden, vollständig neubearbeitete und erweiterte Auflage, Gabler 8.Milisavljevic, Momcilo and Todorovic, Jovan (2000), Marketing Strategy, Belgrade, Faculty of Economics 9.Porter, Michael and Van Der Class, Linde (2000), Green and Competitive, HARVARD BUSINESS REVIEW ON

BUSINESS AND THE ENVIRONMENT, Harvard Business School Press, USA. 10. Robbins, Stephen and Coulter, Mary (2005), Management, Belgrade, Data status 11.Todorovic, Jovan (2003.), Strategic and Operational Management, Belgrade, Consit

17



Zina Gineitienė1 Aistė Diržytė2

Vita Remenytė3

CORPORATE SOCIAL RESPONSIBILITY AS A COMPETITIVE ADVANTAGE TOOL

Abstract Ongoing global integration, increasing social disparities and climate changes cause alterations of global

business environment. Increasing social expectations and community requirements force companies to change their traditional business approach. To stay competitive in the market it is not enough anymore to focus only on financial objectives. To maintain a competitive advantage in the long term, companies should behave in a socially responsible way and take into account public needs and requirements.

Purpose. Changing global business environment stipulates a need to look for new measures to ensure competitiveness. The aim of this study is to analyze corporate social responsibility (CSR) conception in the theoretical aspect and find out how corporate social responsibility effect business competitiveness. The main targets of the study are:

to define the essence of CSR; to point out key areas and means of CSR implementation; to measure what benefits CSR gives to business while seeking a competitive advantage; to investigate Klaipėda‘s region business managers view of CSR and to identify key difficulties faced by

enterprises in carrying out socially responsible activities. Design/methodology/approach. The authors used the following methods in the study: analysis of

scientific literature, analysis of secondary and legal documents, review of projects in the area of the subject, and a questionnaire method.

Findings and Originality. The research confirmed the hypothesis partially: companies integrating corporate social responsibility in their activities have greater competitive advantage then those which only follow the law and apply minimal ethical standards. CSR implementation strengthens company's reputation, loyalty of employees and customers, better treatment of financial and governmental regulation institutions, ect. Application of social responsibility provides benefits not only for business, but for the community as well, which becomes more cohesive and healthier.

The research showed that among small-and medium-sized enterprises corporate social responsibility is still not widely known and understood. This proves the need to take more respective actions in informing public and business about the benefits of CSR and implementation opportunities.

Keywords: corporate social responsibility, business. Research type: research paper. JEL classification: M14 - Corporate Culture; Social Responsibility.

INTRODUCTION Constantly changing business environment forces companies to look for new measures to

ensure competitiveness. Businesses are no longer sufficient to offer products of high quality at an affordable price only. Changes in business require that companies would take responsibility for their

1 Zina Gineitienė, Assoc. Prof., Dr., Mykolas Romeris University, Lithuania, [email protected] 2 Aistė Diržytė, Assoc. Prof., Dr., Mykolas Romeris University, Lithuania, [email protected] 3 Vita Remenytė, International Business School at Vilnius University, Lithuania, [email protected]

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own activities. There is a nescessity to take into account the needs of the society and save the nature. Practical application of social responsibility in business is important to companies that are encouraged, and sometimes forced by foreign partners or stakeholders to implement social responsibility principles. Recently, there has been an increase of interest in benefits of corporate social responsibility (CSR), and how this has influenced the competitiveness of enterprises.

Currently, CSR in Lithuania is still a scientific problem, though the number of scholarly publications on this topic increases rapidly in journals of management, economics, and ethics. There are no well established boundaries of the object, research methods, and evaluation indicators. However, there is an evident nescessity for research in various scientific disciplines (economics, ethics, management, sociology, etc.).

The aim of the article is to analyze the CSR concept and applications in enterprises, to figure out ways to help the socially responsible companies gain a competitive advantage and long-term continuity, and to identify measures for CSR implementation in Lithuanian companies.

• To conduct the research that would disclose small and medium-sized business (SMB) business leaders approach to CSR in Klaipeda region and their understanding of CSR principles and their integration into the company's activities;

• To identify socially responsible companies that implemented CSR activities / programs and find out whether the public is informed about their socially responsible activities;

• To evaluate the benefits of CSR companies seeking to gain competitive advantage; • To identify the main obstacles faced by companies carrying on socially responsible activities; • On the base of survey results to offer effective CSR problem-solving measures to ensure

business continuity and competitiveness in the long term. Research methods: literature analysis (Lithuanian and foreign authors), analysis of secondary

documents (articles, online sources, etc.)., legal documentation, review of research and projects on the topic, empirical study based on the self – administered questionnaire.

To explore executives‘approach to the CSR, its application in business opportunities, the benefits of understanding the competitive advantage, there was conducted a special survey of Klaipeda region executives’ opinion. The obtained results allowed revealing the CSR importance in Lithuanian companies, and defining the directions of future actions. There is an evident nescessity to encourage companies to integrate the CSR into their operations in Lithuania and take advantage of its benefits for the company itself and the public, as well as the environment.

1. THE CONCEPT OF CORPORATE SOCIAL RESPONSIBILITY In order to begin to talk about corporate social responsibility (hereinafter - CSR), it is important

to analyze the different definitions of the CSR in the scientific literature. It should be noted that there is no single definition of the term so far. Various literature sources offer different CSR concepts: corporate social responsibility, sustainable development, responsible entrepreneurship, corporate social responsibility, corporate social responsibility and so on. Although these terms are identical, this article will use the term corporate social responsibility. There are different interpretations of the CSR term, since it is a broad term encompassing the systematic significance of environmental, social, ethical, and financial integration.

It should also be noted that the CSR is closely related to sustainable development. World Commission on Environment and Development and the long-term its leader Gro Harlem Brundlandt notes that this is the development that matches the current needs of population and the needs of future generations, ie there is no contradiction between the demands of different generations. John Elkington indicates that sustainable development is associated with the intent to harmonize environmental and social issues with economic and financial issues, and to promote measuring of performance-related side effects (Gudoniene and Leipuviene, 2007).

Enterprises should pay attention to two aspects of the activities: 1. the company's management quality, that is to say take into account the needs of workers and their working conditions (internal

19



environment) and 2. the impact on the environment, society and other external stakeholders (external environment) (see Figure 1).

Source: Mallen Baker// http://www.mallenbaker.net/csr/CSRfiles/definition.html

Figure 1. Corporate Social Responsibility – What does it mean? Socially responsible company takes care of their employees first and decides on investment in

intellectual capital, health, safety, and other tasks. It matches up its operations with the principles of sustainable development. In this way, development activities of the company can ensure its long-term competitive advantage for growth.

At the same time the company is dependent on the local community and: they employ the majority of workers from the local labor market and are interested in community health, education and other needs. Companies’ social activities can be promoted by outside operating groups: competitors, customers, suppliers, subcontractors. This corporate social responsibility covers the entire supply chain. (Gudoniene and Leipuviene, 2007, p. 47).

Discussions on the CSR topic are not new. CSR begginings can already be seen in the 19th century, and then it spread rapidly. In the sixties and early seventies the role of business in society and the responsibility to the public have been widely discussed. CSR in the sixties was examined in the detailed theoretical aspects. Such scholars like Carroll AB, Davis K (2001) were trying to find out what really CSR means, what is the content of the phenomenon, what could be a formal definition of CSR.

If in the past, scientists have tried to figure out the meaning of the theoretical concept of CSR, currently they are trying to find the practical feasibility of this concept and to determine what benefits the company receives while implementing the principles of social responsibility in their business. However, it is obvious that the CSR is now becoming attractive in commercial terms. The CSR is no longer the only form of responsibility which companies should accept because of the high external pressures. It has become increasingly managerial concept.

20



L.N. Rue, L. Byaers et al. (2003) highlights managers' changes in attitude to social responsibility. This is important because the socially responsible behavior depends mainly on the moral of managers of organization. One of the most important management requirements is a social responsibility.

Z. Monkevičienė and E. Rybakov (2003) highlights that CSR is one of the most important elements of sustainable development because sustainability promotes socially responsible business. D. Štreimikienė and N. Vasiljevienė (2004) points out that each company that is doing business in country should be prepared to take responsibility for the consequences of their activity.

G. Slatkevičienė (2004) distinguishes two approaches to corporate social responsibility: • Complying with the law and the minimum ethical norms. In this case, the company must

comply with certain regulations, which are governed by certain laws or guidelines (nature protection, financial requirements, and certain rules of conduct). Rather, it is to be described by the word "rule" rather than a voluntary responsibility.

• The provisions of actions and measures, which are supported in the organization's activities and relations with stakeholders on a voluntary basis. It voluntarily integrates the priority of social interests with ethical standards and environmental protection.

Therefore, corporate social responsibility means the voluntary efforts of businesses to incorporate social and environmental concerns into their overall activities and relationships with stakeholders (Gruževskis et al., 2006).

Often social responsibility is defined as the activities of the organization, going beyond the legal requirements, including not just the usual economic operations, but also social and environmental aspects of the growing startup that contribute to the sustainable development (Ruževičius, Serafin, 2006). If we perceive the social responsibility as the organization's activities, it can be said that the company was already realizing certain normative commitments and values (Gižienė V. et al, 2011).

In Kasparavičius (2007) opinion, if company strives to implement the CSR initiatives, the greatest attention should be paid to the internal systems integration. Management Standards are yet another tool to help companies implement specific CSR initiatives. Quality, environmental and workplace standards allow the company to establish social and environmental issues, promote cooperation of stakeholders in business decisions and activities.

Table 1 shows how the standards provide a management tool to ensure compliance with each of the aspects of company’s social responsibility.

Table 1. Social responsibility standardization initiatives

Work place standards

SA 8000 Social Accountability ILO - OSH 2001 ILO Guidelines on occupational safety and health

management OHASAS (BS) 18001 Work health and safety zone

Quality management standards ISO 9001 ISO Quality management standards (130 member states). EFQM Quality of business model. AA (Account Ability) 1000 System for stakeholders. ISO CR MSS ISO CSR standard.

Environmental protection and management standards EMAS Eco- management and audit scheme. ISO 14001 Environmental protection and standard.

Management systems integration in enterprise activities may further improve business

processes. If an organization has implemented an integrated management system (including quality management, environmental management, social responsibility management, employee health and safety and other management systems) that meet international standards, it will facilitate the integration of social ownership and management system (Bagdonienė, Paulavičienė, 2010).

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Hart (1995) notes that companies that pay particular attention to nature preservation, and enhance their competitive advantage. Environmental pollution prevention is intended to reduce environmental toxic waste, and to use efficiently natural resources. This includes products used for recycling, "smart" resource acquisition, the optimal production process. This strategy not only reduces the negative impact on the environment, but also reduces costs. In developing the idea of Hart, Russo and P. Fount (1997) conducted empirical research and found that there is a direct correlation between company’s funds allocated to nature conservation and the positive financial results. This dependence was subsequently confirmed by other researchers (Orlitzky, Shmitd, Rynes, 2003), who analyzed the financial indicators and the costs not only for conservation, but also for other social responsibility programs (Juščius, 2007 p. 54).

Environmental pollution has a significant negative effect on everyone: an increase in health problems in society, undermining the surrounding environment. Therefore, it is important that business companies would perceive responsibility for pollution. Companies should take the responsibility to restore the environmental damage caused by introducing natural resource-saving technologies, and to promote human health friendly materials (biological substances instead of hazardous chemicals) and manufacturing processes.

Company's image could be improved by effective use of enterprise resources, protection of the environment, caring for brownfield revitalization. Consumers choose production of socially responsible companies producing 'green' products that are suitable for processing, saving energy and other resources. Reducing consumption of resources or the optimal use of the production process significantly reduces the company's cost of production. In caring for the environment, it is necessary to pay attention to the entire production process, from acquisition of raw materials to recycling of used production.

Corporate social responsibility is not the shortest path to business success; however, it is an investment that pays off in the long run. It provides advantages, such as in terms of staff retention and recruitment, staff development and motivation, customer loyalty and reduced energy costs. In the knowledge economy, it could become a growing source of innovation, and it may facilitate access to information and sharing. The management in more strategic and deliberate way can make better use of these advantages. Therefore, CSR is associated with the ongoing development and should be understood as a modern business improvement model.

Moreover, the CSR gives more potential for successful emergency management. Information about CSR for the target groups helps the public to absorb that company may work not only "good", but "right" and to prevent long-term crises (Vogulytė, Gudonienė. 2007).

2. EMPIRICAL STUDY OF CORPORATE SOCIAL RESPONSIBILITY AS A SOURCE OF

COMPETITIVE ADVANTAGE IN ENTERPRISES A special survey was conducted to help figure out how the principles of corporate social

responsibility are applied in enterprises of Klaipeda region. Moreover, it was studied the methods by which the socially responsible companies can gain a competitive advantage and continuity in the long term, and this was a key objective of the study.

To reach the study purpose the following tasks were developed: • To reveal the Klaipeda region managers approach to corporate social responsibility; • To explore the Klaipeda region managers understanding of corporate social responsibility

principles and their integration into the company's activities; • To evaluate corporate social responsibility benefits to businesses as competitive advantage; • To identify the main obstacles faced by companies in their activities based on the CSR

principles. As it is unclear whether the Lithuanian companies understand the essence of corporate social

responsibility and its benefits, the research aimed at figuring out the problem content, composition, that is, to carry out prospecting of qualitative nature. The study does not claim to be complete survey

22



reflecting situation in Lithuania. This study does not follow a strictly defined interpretation of the phenomenon under investigation, and quantitative research and evaluation are used here only as a secondary means of support.

The study used a structured questionnaire, that is, using a pre-prepared questionnaires to a certain order of questions.

The questionnaire consisted of twenty questions. Some questions are general in nature, with the aim to investigate whether respondents are aware of the research object, how they understand their role in society, which interest groups have the greatest impact on business. Other questions were rised to reach research goals and objectives. At the end the respondents are asked to provide general information about the specifics of the company and the respondent's office. In order to find respondents’ deep motives, beliefs, and attitudes, a Likert scale was used to determine the extent to which respondents agree or disagree with the items of the positive and negative characteristics of the object or phenomenon.

The study was carried out in April 2012. Questionnaires were sent for company owners and senior and mid-level managers. For this study appropriate sample was chosen according to the financial constraints. There were randomly selected 60 companies in Klaipeda region. Of the 60 questionnaires sent by e-mail, 43 questionnaires returned back, with the 71.67% return rate.

The study sample encompassed a variety of demographic characteristics of workers from different organizations. Most of the respondents were middle-level managers 58%, top managers 19%, and the owners of 23%. The survey was also interested in the areas where the company actively takes socially responsible practices. Respondents identified three main activities: manufacturing, service, and trade. Most of the interviewed were executives of service companies, (56% of all respondents), and the remaining respondents represented manufacturing (30%) and shopping (14%). The survey involved mainly Lithuanian capital companies (93%), while foreign-owned firms represented only about 3%. Because of that it was impossible to identify factors associated with the implementation of CSR principles according to the origin of the capital. Distribution of the respondents according to the company’s operating period allowed determining which companies (with many years of experience or young) are focused more on the changing business environment and new challenges. It was also interesting to explore how much the company is responsible and allocates funds for socially responsible business. For this purpose, respondents identified the company’s size (number of employees). More than half of the respondents works in medium-sized organizations employing 50-249 employees.

Most of the CEOs asked how they understand corporate social responsibility have indicated that it is an ethical behavior, environmental protection, transparency, decreasing of social inequalities. But few CEOs understand CSR as companies’ operations according to the interested parties. Such an understanding of CSR in part reflects the company's leaders rather narrow understanding of what it is. Most of the managers of companies participating in the survey understand the role of jobs and job security, as well as the payment of taxes, environmental protection. This response confirms that corporate executives understand the importance of their activities and impacts on society and the environment, and the need to take responsibility for them. Most of the surveyed business leaders recognize that interest groups do not make a low impact on the company's activities; mostly they pointed to shareholders, customers and employees.

33% of respondents say that their company has implemented any social responsibility program, 37% say that it is not implemented any social responsibility program, and the rest do not know anything about it.

The main reason why the company would not pursue socially responsible business, corporate executives indicated a lack of resources. Other reasons are lack of information on how the CSR could be useful for the enterprise.

35% of respondents had never tried to assess the benefits of implementation of CSR and 49% believe that there is no way to measure the effect of CSR on operating companies. However, more and more companies recognize the benefits of the CSR through the increase in clients (81%), loyalty of

23



employees (72%), better relations with business regulators, local community, and an interest of potential investors and media.

Even 56% of surveyed managers believe that social responsibility is important to increase the competitiveness of companies. 5% think that the CSR is very important, 37% have some doubts and only 2% of respondents think that CSR is irrelevant to competitiveness. The maximum effect is achieved through the dissemination of the CSR good practice to the public. However, the studied companies rarely use this option. Only 30% of the respondents indicated that they inform the public about their activities. The vast majority (63%) does not take any special steps to inform about their ongoing business and social activities.

One of the questions was "What problems is facing the company as part of socially responsible activities?". The respondents believe that the main problems are:

1) Lack of understanding of the importance of social responsibility (16.8 percent.)

2) Socially responsible business cost (15.8 percent).

3) Not guaranteed financial success (14.7 percent).

There also were pointed out the least important problems:

1) Performance management (2.2 percent.)

2) Lack of consultative institutions (5.1 percent.)

3) Employee resistance (6.2 percent). (See Figure 2).

Figure 2. Respondents’ approach to the problems that company faces as part of CSR

According to the respondents, and the majority of respondents do not know is performed company’s CSR audit (66 percent). 19 percent respondents believe that it is not carried out, 8 percent considers that it is performed once a year and 7 percent consider that the audit is carried out twice a year.

11%

6%

16%

15%

5%

17%

2%

14%

4%

10%

Complicated reports of CSR activities

Employee resistance

Socially responsible business cost

Not guaranteed financial success

Lack of consultative institutions

Lack of understanding of the

importance of social responsibility

Managers resistance

No obvious results

Other

No problems

24



To the question "Do you think it is important for employees to know what are the benefits and the cost of socially responsible activities?” majority of respondents (84 percent) answered that it is important. Only 4 percent respondents answered it is not important and 12 percent had no opinion on the matter.

One of the last questions was: "What obstacles prevent Lithuanian organizations from involving into socially responsible practices?". Most respondents believe that the main obstacles are the following: operating costs (28.9 percent.), not guaranteed financial success (27.7 percent). Very few respondents see as an obstacle government resistance (4.8 percent) and unfavorable government policy (7.6 percent). (See Figure 3).

Figure 3. Respondents’ answers on what obstacles prevent Lithuanian organizations from involving into socially responsible practices

In response to the question, "What, in your opinion, is the CSR’s contribution to society?", the

largest share of respondents (50 percent) mentioned the reduction of social problems, 22 percent think that it has the intangible benefits, 15 percent believe it is a protection of the environment, 10 percent think it is a balanced development of the country, and 3 percent pointed out that there are no benefits of CSR.

The studied CEOs think that the main problems faced by the companies carrying out socially responsible activities are the operating costs, the precarious financial success, and the lack of advisory bodies that would help businesses absorb the CSR principles and apply them in practice.

Most of the surveyed CEOs think that for implementing socially responsible policies it would be helpful to promote tax reliefs (86%) and grants (51%), as well as labor law reform, and the specific obligations of public authorities. Lithuanian enterprises still are reluctant to take the initiative in the field of the CSR, they still need a range of financial incentives, regulatory / obligation measures.

CONCLUSIONS 1. Analysis of the literature suggests that there is still no unanimity of CSR term and definition

of it’s scope. Various literature sources describe the same phenomenon in different terms and definitions, such as: responsible entrepreneurship, corporate social responsibility, corporate social responsibility, sustainable development, etc. Understanding of this phenomenon is changing not only in companies, but also on national and regional levels. Also, different interest groups stress different

28%

28%

16%

15%

8% 5%

operating costs

not guaranteed financial success

no obvious results

short – term benefits

unfavorable government policy

government resistance

25



aspects of this multifaceted term, which partially adapt their interests. In a broad sense, CSR includes voluntary, systematic environmental, social, ethical, and financial aspects of the integration of the company's policies, taking into account the interests of stakeholders.

2. Most of the executives of Lithuanian companies, asked how they perceive the social responsibility of business, pointed out that it is an ethical behavior, environmental protection, transparency, and elimination of social inequalities. Only a small proportion of CEOs understand CSR as companies’ operations according to the interested parties.

3. Business leaders understand the importance of their activities and the impact on society and nature, and recognize the need to take responsibility on the interested parties. The most important tasks of the surveyed companies in district of Klaipeda are to take care of the interests of customers, employees, suppliers and shareholders / owners. It can be assumed that such an approach developed not on voluntary business initiatives, and co-operation with the local community, NGOs and scientific organizations is not well established yet.

4. Lithuanian companies recognize the benefits of the CSR for satisfaction of customers, increased employee loyalty, better relations with business regulators, local community, and a potential increase in investors and media interest. Also, more than half of the Klaipeda district business managers agree that social responsibility is important for the competitiveness of firms in the long term.

5. According to CSR practices in foreign companies, competitive advantage is achieved when the companies inform the parties about socially responsible activities, emphasizing mutual benefits. However, Lithuanian operating companies rarely use this option, only a little more than 30% of the respondents indicated that they inform the public about the social activities. The majority does not take any special action to inform about their social activities.

SUGGESTIONS 1. Only a small part of the Klaipeda region companies have implemented some form of social

responsibility programs. The main problems faced by the companies in carrying out socially responsible activities are the resources and the lack of information and consultation bodies, which could help businesses to absorb the CSR principles and apply them in practice as well as the precarious financial success of such activities.

2. In the surveyed CEOs view, to implement the principles of CSR in enterprises would help several factors: business-friendly government policies, financial incentives and decrease in taxes.

3. Lithuanian companies seeking to implement the CSR principles in their activities should pay more attention to informing the public about the value created for consumers. Publicly available information about the company's social responsibility would help to form a more confident and ethically attractive image of a company for the society, authorities, employees and other stakeholders.

REFERENCES

1. Archie, B. C. 2001. The Pyramid of Corporate Social Responsibility: Toward the Moral Managemant of Organizational Stakeholders. http://www-rohan.sdsu.edu/faculty/dunnweb/rprnts. pyramidofcsr.pdf; Accessed May 2012.

2. Bagdonienė, D., Paulavičienė, E. „Socialinės atsakomybės ir organizacijos vadybos sistemos integravimas”. Ekonomika ir vadyba 15. (2010): 366 – 373.

3. Bennet, C. Įmonių socialinė atsakomybė ar įmonių atskaitomybė? NVO perspektyva. Verslo etikos kelrodė. (Vilnius: Eugrimas, 2007), 66-91.

4. Blowfield, M., Murray, A. Corporate responsibility: a critical introduction. (OXFORD University press, 2008). 5. Čiegis, R. Darnus ekonomikos vystymasis. (Šiauliai: ŠU leidykla, 2008), 97-113. 6. Čiegis, R. Darnus vystymasis ir ekonomika. Ekonomika. (Kaunas: VDU leidykla, 2006), 296-300. 7. Corporate Social Responsibility: The WBCSD’s journey. http://www.wbcsd.org/

DocRoot/I0NYLirijYoHBDflunP5/csr2002.pdf; Accessed May 2012. 8. CSR Europe. Europos mažos ir vidutinės įmonės bei socialinė atsakomybė. Verslo etikos kelrodė. (Vilnius:

Eugrimas, 2007), 41-45.

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9. Geoffrey, P. Lantos. The Ethicality of Altruistic Corporate Social Responsibility. 2001. http://faculty.stonehill.edu/glantos/Lantos1/PDF_Folder/Pub_arts_pdf/Altruistic%20CSR.pdf; Accessed May 2012.

10. Gineitienė, Z. Verslo kūrimas ir valdymas. (Vilnius: Rosma, 2005), 96-100. 11. Gruževskis B., Vasiljevienė N., Kleinaitė I., Moskvina J. Įmonių socialinė atsakomybė. Aktualūs socialinės politikos

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(Vilnius: Viešosios politikos ir vadybos institutas, 2007). 18. Juščius, V. “Verslo socialinės atsakomybės teorijų raida”. Ekonomika 78. (2007) 48-64. 19. Kučinskas, V. Vadovavimo etika: monografija. (Klaipėda: Klaipėdos universiteto leidykla, 2007), 194-202. 20. Kundrotas V., Vyšniauskienė D. Verslo etika. (Kaunas: Technologija, 1999), 96-112. 21. Laurinavičius, A., Reklaitis, J. Darnaus verslo socialinė atsakomybė. (Vilnius: MRU, 2011). 22. Leonavičius, J. (1993). Sociologijos žodynas. (Vilnius: Akademia, 1993). 23. LR socialinės apsaugos ir darbo ministerija. Įmonių socialinė atsakomybė.

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2003), 50-58. 27. Peter Asmus. CSR as a Business Strategy. http://www.businessweek.com/adsections/2008

/pdf/CSR_Section.pdf; Accessed April 2012. 28. Pruskus, V. Verslo etika: laiko iššūkiai ir atsako galimybės. (Vilnius: Enciklopedija, 2003), 216-231. 29. Ruževičius, J.; Serafinas, D. Socialiai atsakingo verslo plėtra Lietuvoje. 2006. Inžinerinė Ekonomika – Engineering

Economics (2): 36–44. 30. Solomon J., Solomon A. Corporate Governance and accountability. (John Wiley and Sons, 2004), 187-211. 31. Štreimikienė, D., Vasiljevienė, N. 2004. Etiniai darnaus vystymosi aspektai ir jų ryšys su socialinėmis ir

aplinkosauginėmis darnaus vystymosi dimensijomis. Organizacijų vadyba. 32, 187 – 206.

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Artur Horbovyy1 Oksana Stepanyuk2 Iryna Zablotska3

CORPORATIVE SOCIAL RESPONSIBILITY AS A FACTOR OF COMPETITIVE ADVANTAGES FORMATION OF UKRAINIAN BUSINESS

Abstract Together with economic factors social and responsible functions of the enterprise begin to play a great

role in the providing of competitiveness, achievement of high productiveness and profitability. In the research stages of business social responsibility development, main types of approaches to the conception of business social responsibility, competitive advantages, which the enterprise get during the realization of business social responsibility system, are cleared up.

Purpose – to determine the influence of business corporative social responsibility on the competitive advantages formation of Ukrainian business.

Design/methodology/approach – during the research methods of analysis, generalization, synthesis, system approach, deduction and classification were used.

Findings and Originality – grouped approaches to the conception of business social responsibility; synthesizing of influence of business social responsibility components on the competitiveness of Ukrainian enterprises.

Keywords: business social responsibility, effectiveness of business processes, conception of business social responsibility, strategic approach to business social responsibility, competitiveness.

Research type: situational research. JEL classification: M14 – Corporate Culture; Social Responsibility, L21 – Business Objectives of the Firm,

M21 – Business Economics

INTRODUCTION Processes of Ukrainian economics transformation into market led to the refusal from the

practice of state paternalism, which changed the understanding of the role of enterprise as a public institute and formed a new approach to the valuation of its effectiveness and successful activity. Together with economic factors social and responsible functions of the enterprise begin to play a great role in the providing of competitiveness, achievement of high productiveness and profitability of production. Different questions are included into the competence of the enterprise: support of nature protection measures, realization of development programmes of vocational technical schools, medical centres, kindergartens, health centres and another institutions of enterprise social infrastructure, formation of the systems of social, educational and psychological support of workers, introduction of ethical behaviour principles in the relation with providers and consumers. Such transformation of public values and priorities needs changes of the active practice of enterprises management, integration of principles, methods and instruments of social responsibility into the enterprises activity.

1 Artur Horbovyy, Doctor of Technical Sciences, Professor, Volyn Institute for Economics and Management, Ukraine, [email protected] 2 Oksana Stepanyuk, PhD, Associate Professor, Volyn Institute for Economics and Management, Ukraine, [email protected] 3 Iryna Zablotska, senior teacher Volyn Institute for Economics and Management, Ukraine, [email protected]

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Important changes in the relations between the state, public institutions and private companies are observed in the whole world. Along with economic factors uneconomic indices of enterprise work begin to play a big role in competitiveness providing, high productiveness achievement and production profitability. They are level of the workers social support, development and realization of the programmes of boarding schools, hospitals and schools support, introduction of the mechanism of quality control on the enterprise, introduction of ecologically safe and energy-efficient technologies etc. Special changes are observed in private sector, which is now becoming deeper strategy form of cooperation with the state as well as with the public. A term “business social corporate responsibility” personifies this cooperation.

A term “corporate social responsibility” was first formulated by General Secretary of United Nations Organization Kofi Annan in 1999. There are some definitions of this term. In scientific literature corporative social responsibility (CSR) is the advancement of the practices of responsible business, which are useful for business and society and are favourable to social, economic and environmentally stable development by the maximization of positive influence of business on society and minimization of negative (F. Kotler, 2005). CSR is the achievement of commercial success by the ways, which value the environment and moral and ethical principles of community. In wider understanding corporate social responsibility is responsible attitude of any company to its product or service, consumers, workers and partners. It is an active social position of company, which is based on harmonious coexistence, interaction with society, participation in the most important social problems solving (U. Baffett, 2008). In general business social responsibility is the policy, which is consciously and purposefully chosen by the company not only to exist and get income, but to make its positive contribution to the development of modern society.

Corporate social responsibility can be also defined as a free choice of the company to increase the level of society welfare with the help of appropriate approaches to business conducting and corporate resources allotment. In general understanding, according to M. Faidor (2008) corporate social responsibility is all actions of a company, which have positive influence on society.

First scientific approaches to the understanding of corporate social responsibility, its principles and practices were conceived in the 50s of the twentieth century. Leading role in their development belonged to American scientists, while in Europe the conception of corporate social responsibility was officially formed at the end of the XX century and reflected in the document of the European Commission "Green Paper" which was published in 2001.

In 1953 the first fundamental work concerning social responsibility appeared. It was "Businessman Social Responsibility" by Houard R. Bowen, who analyzed how the CSR conception can be applied in business and the understanding of the broader social aims in decision-making can bring social and economic benefits for society.

The debates on CSR began in 70-80s of last century, when the public began to learn about the hidden negative effects of the companies activities: city of ghosts who died along with enterprises, disasters caused by the activities of industrial enterprises, rivers, where you can't swim, lost health on the factories without further social protection. With the publicity of such problems a discussion about the role of business in society and the companies social responsibility began. Today in the USA CSR is often associated with the programmes of employees volunteering and charity. European understanding of CSR is to conduct business in a socially-responsible way (McWilliams A, 2001).

In spite of some decades of practical use, the term “business social responsibility” is still a subject of theoretical discussions. There are a lot of approaches to determine the content of corporative social responsibility. As the leading role of social responsibility advancement belongs to international organizations, definitions proposed by them became the most widespread (table 1).

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Table 1. Determination of the category “business social responsibility” on international level

Definition Source

Integration of social and ecological aspects into daily commercial activity of the enterprise and their voluntarily cooperation with interested parties

Green book of European Union, 2001

Obligation of business to be favourable to fixed economic development to improve the quality of life of workers, their families, local community and society in general

World business council for stable development

Approach, thank to which integration of urgent economic, ecological and social imperatives is achieved; such imperatives take into consideration the needs of future generations

International financial corporation

Obligations before workers, their families, local community and society in general, which the private sector must fulfil to achieve stable economic development and harmonization of business interests and priorities of social development

European agency on the environment

Help to responsible business practice, which gives the profits to business and helps to achieve social, economic and ecological stable development by the increase of business positive influence on the society and by minimization of its negative influence

International forum of business leaders

Philosophy of behaviour and conception of activity development by business circles, companies and separate business representatives, directed to expectations satisfaction of interested parties with the aim of stable development

Committee of Russian managers Association

Responsible attitude of each company to its product or service, to consumers, workers, partners; active social position of company, which is based on harmonious coexistence, cooperation and regular dialogue with society, participation in the most urgent social problems solving

Forum of socially responsible business of Ukraine, 2006

Organization's responsibility of the influence of its decisions on the society and environment by ethical behaviour, which is favourable to stable development, health and welfare of the society. It takes into consideration the expectations of interested parties, corresponds to legislation and is coordinated with international norms of behaviour. It is integrated into the activity of whole organization and is realized by it in the practice of interrelation

Project of ISO Standard 26000 “Guidance on social responsibility”

But the idea of CSR became widespread only in the mid-90s of XX century. At that time not

corporate mood was strongly manifested in the society. It was the reaction to the decision of the company Shell UK to flood oil tower «Brent Spar» in the North Sea, to published materials about unethical business approaches (eg, child labor), which are practiced in countries of the "third world" by some famous corporations (eg, Nike). It was the time when the companies began to indulge actively in CSR in order to create an image of socially responsible and thereby win the favor of consumers.

In order to combine the efforts of entrepreneurs with the activities of trade unions, public organizations, government agencies and to direct them to support and use of ten universal principles of human rights, standards of work, environment protection and anti-corruption, the UN Global Treaty was signed in 1999 to unite socially responsible companies to share experiences on the realization of relevant projects and programs.

Today Treaty brings together several thousand companies from more than 100 countries, thus having created one of the largest voluntary initiatives on CSR in the world. It should be mentioned that Ukrainian business structures were quite active in signing this agreement - 93 companies joined the initiative. However, only each third director in Ukraine is aware of the conception of CSR and uniform standards and rules for Ukrainian business has not been established yet.

But in scientific literature there is no common opinion as to basic components of business social responsibility conception, formation of motivational mechanisms of business social responsibility, influence on competitive positions of the enterprise on the market and general results of enterprising

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structures activity. That's why the aim of the research is determination of the influence of corporate social responsibility on enterprise competitive positions on the market.

Objectives of the research are based on the substantiation of theoretical and methodological bases of the development of social responsibility mechanism formation as a factor of enterprise competitiveness increase and practical recommendations concerning its introduction into enterprises management.

During the research stages of development, approaches and levels of corporate social responsibility will be studied, specifics of the development of corporate social responsibility in Ukraine will be outlined, consequences of corporate social responsibility system introduction for the enterprise will be determined and directions for further research will be outlined.

1. STAGES OF BUSINESS CORPORATIVE SOCIAL RESPONSIBILITY DEVELOPMENT Business social responsibility is a responsible attitude of any company to its product or service,

to consumers, workers and partners; active social position of a company, which lies in harmonious coexistence, cooperation and constant dialogue with society, participation in solving of the most important social problems. Social responsibility is voluntary. It covers social as well as ecological aspects – it is a business contribution in the achievement of aims of the constant development, which expects the balance of economic, social and ecological aims of society, their integration into mutually beneficial directions and approaches.

Nowadays problem of business corporate social responsibility is becoming more urgent. Around the world, both large multinational companies and small local companies are redefining their functioning and formulate new strategies that would enable them to better respond to the needs of consumers, partners, society and the environment.

Principles of social responsibility are becoming one of the components of successful strategy, which strengthens company's image and reputation, attracts clients and supports best workers.

For Ukrainian business this problem is new and, therefore, it is not developed enough both in theoretical and applied aspects. In view of this, research of foreign experience in the sphere of corporative social responsibility manifestation, determination of the specific of CSR programs in Ukraine and ways of improving of corporate social responsibility in Ukraine are urgent today.

The researches of corporate social responsibility of companies from the countries with developed economy show that it includes different spheres.

At first, corporate social responsibility includes a business practice as to its own staff, that is all, that concerns the improving of the quality of employees working life or the company. At second, corporate social responsibility also envisages the introduction and spread of fair business relations on the market. At third, there is another aspect of corporate responsibility, which is based on positive relationships of enterprise with community. And without a doubt, measures of corporate social responsibility concerning the environment are important.

Business social responsibility can't be separated from business strategy of company – it is not a superstructure or addition to business, but a way to improve the effectiveness of company work in short-term as well as in long-term periods.

To realize business social responsibility it is important how the companies cooperate with internal and external groups of influence (workers, clients, societies, public organizations, state structures etc.).

Well-introduced conception of business social responsibility can ensure competitive advantages for the company: wider access to capital and market, more sales and incomes, improved processes of decisions making and risks management, economy of operational charges, increase of productivity and quality, effective base of human resources, strong reputation, higher loyalty of buyers etc.

Business social responsibility on the level of separate company and country in general undergoes some stages of development:

1. Observance of active legislation – companies fulfil normative and legal norms, determined

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by the legislation of the country, in which they act. Most of the Ukrainian companies are on this stage. Strict demands of legislation often determines the unwillingness of the companies to think over their own social responsibility.

2. Beneficial activity – companies make sponsoring contributions to social projects (cultural, sport, educational etc.) voluntarily. With the increase of beneficial activity companies determine its strategy (strategic charity). In Ukraine a lot of companies were created, which work at strategic charity and support long-term social initiatives. In Ukraine Forum of Good-doers works.

3. Usage of public relations – to increase their own reputation and create marketing advantages companies realize projects, directed to public relations on the basis of social projects and point initiatives. Such activity encourages companies to possess the information about development condition of another groups of influence (in particular external), to take part in public debates on social and ecological themes. Most of big Ukrainian companies have in their structure departments of relations with the public and use them actively for the promotion of their own social projects.

4. Improvement of business processes effectiveness – companies realize projects, which lead to the increase of activity profitability and solving of social and ecological questions. Such projects are often connected with the economy of resources (energy, increase of work productivity, lessening of agrarian resources use etc.), necessity to put up capital (improvement of corporative management) and they are initiated by the higher leaders of the company. During last five years big Ukrainian business has been actively introducing such point improvements without tying in to business social responsibility.

5. Strategic approach to business social responsibility – companies determine the strategy of their own social responsibility, which includes main business processes of the company (production, sales, marketing, strategic management etc.), determines medium-term and long-term aims, create the system of process monitoring, expects the tooling of aims achievement (also in the cooperation with another groups of influence) and the reporting as to such progress. Business social responsibility is controlled by higher leaders and shareholders. Business social responsibility is used as the instrument of corporative development to get competitive advantages.

2. APPROACHES TO THE CONCEPTION OF BUSINESS CORPORATIVE SOCIAL

RESPONSIBILITY Modern enterprises owners are divided into two groups according to social responsibility. The

first group is widespread enough among modern enterprises owners. Their attitude lies in the fact, that the role of enterprise comes down to the user of energy, raw materials and resources in the activity and is directed to the increase of profit under the condition if enterprises follow rules and norms: pay taxes, take part in open competitive struggle and don't addict themselves to swindle. The second group of the enterprises owners is small. Its attitude to social responsibility expects, that the enterprises are responsible over society, where they function. Besides ensuring of effectiveness, employment, profit and legality they have to allot some of their resources and efforts to solve social problems, allot funds for the use and improvement of the society. So, the attention is paid to social responsibility, which means the voluntary participation of the enterprise in social problems solving.

Of course, such social orientation and responsibility must be based on the double-sided relation of the enterprise and society. Needs of the society and possibilities of the enterprise determination must be favourable to balanced social activity of the enterprise and adequate valuation of this activity by the society. Combination of certain rules, norms, demands and elements of social behaviour of the enterprise must be conscious, directed, must have systematic character and must be realized within one conception.

In many developed theories conception of business social responsibility is often replaced by another definitions, which in scientists' opinion reflect better the essence of relations between the enterprise and the society. To combine this variety of approaches A. Carol offered to study the

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conception of business social responsibility as a peculiar “nucleus”, which coordinates with another theories or transform into them (Archie Caroll B, 2001).

And this, in its turn, allows to group all existing theories and distinguish four main types of approaches to business social responsibility:

1) instrumental approach, according to which enterprise is an instrument for wealth creation and all its social activity is directed to the achievement of economic result (U.Blagov, 2004). So, acting in such way, organization fulfil its economic function, producing goods and services, which are necessary for the society, making new jobs and ensuring the maximization of income for shareholders.

Some present-day researches, adherents of instrumental approach, emphasize on the fact, that only maximization of income in long-term prospect determines real responsibility of business, because such approach allows to combine the interests of the shareholders as well as of another interested parties.

2) approach from the position of political influence, which is based on the fact, that enterprises can have an influence on the society. So, they have to use this ability responsibly. Social power means an ability to have the influence on the results of important social processes with the aim to solve social problems independently of political institutes. In narrow meaning role of the enterprise comes to philanthropy, social investments and some generally recognized social duties. In wide meaning enterprise has to be responsible for those spheres, in which the state can't protect its citizens.

3) approach from the position of social demands, according to which enterprise has to concentrate its activity on the determination of social demands and replying for them, while helping to strengthen its positions. In 1970-s a conception of corporative social responsibility changed a little its position from “what is good for the society” to “what the society demands from business”. Taking this into consideration activity of any enterprise in the sphere of corporative social responsibility must be determined by the expectancy of the society from it.

4) approach from the position of ethics, main peculiarity of which is the idea of moral duty of business and some managers before the society. According to this approach enterprise is morally responsible not before the society in general, but only before interested persons, such as shareholders, enterprise workers, suppliers, consumers and territorial associations, in which enterprise works.

Among another approaches “triple bottom line” of American economist J. Elcington and normative approach from the position of interested parties of his colleague E.Freeman should be mentioned. According to Elcington's approach (Elkington J., 2000) each enterprise is responsible economically, ecologically and socially for the society, ensuring its vitality. J.Elcington's ideas developed and reflected in the theories of “universal rights” and “stable development”. Theory of “universal rights” is based on the recognition of human rights, rights in the sphere of work and on the respect to the environment as necessary conditions for enterprises work. Theory of “stable development” is based on the idea, that an enterprise in its activity is responsible not only for the present, but also for the future generations. That's why it must control economic as well as social and ecological indices of its activity. But according to the Freeman's theory (Freeman R. Edward, 2006) enterprise is morally responsible not for the society in general, but only for the interested parties. They are: shareholders, enterprise workers, providers, consumers and territory communities, in which the enterprise acts.

Companies that are engaged in charitable activities, are more prone to developing CSR strategy, which covers business processes within the company. Over time, charitable programmes grow into programmes of CSR.

3. TYPES OF CORPORATIVE SOCIAL RESPONSIBILITY Enterprise social responsibility presumes, that its owner has to make a decision and act in order

to increase the level of well-being and meet the interests of the society as well as of the enterprise. At first, every owner of the enterprise understands the necessity and the possibility of social activity in a different way. At second, the level of social responsibility of enterprise owners is different, so costs and

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programmes will be also different. At third, motivation and aims of enterprise owners to social activity are different: personal convictions, demands of the society, conscious investment of costs in good relations, positive attitude of the society etc.

Business social responsibility is of multilevel character (Simon Zadek, 2003). 1. Basic level presupposes treaty obligations accomplishment: timely payment of taxes,

payment of wages and extension of staff if possible. 2. Second level presupposes ensuring adequate work and life conditions: increase of

qualification level of workers, prophylactic treatment and building of dwelling, social sphere development. Such type of responsibility can be called “corporate responsibility”.

3. Third level of responsibility presupposes charity. T.Syvaeva in her work “Factors of business social responsibility formation”, 2012 distinguishes

outside and inside corporate social responsibility, which reveals the structure of CSR types (table 2).

Table 2. Types of corporate social responsibility

Inside CSR Outside CSR 1. Work safety 2. Wages stability 3. Support of socially significant wages 4. Additional medical and social insurance of workers 5. Development of human resources by the programmes of staff preparation and qualification increase 6. Help for the workers in critical situations

1. Sponsorship and corporate charity 2. Assistance in environmental protection 3. Cooperation with local community and local authority 4. Readiness to take part in crisis situations 5. Responsibility before consumers of products and services.

Processes of Ukrainian economics transformation into market led to the refusal from the

practice of state paternalism, which changed the understanding of the role of enterprise as a public institute and formed a new approach to the valuation of its effectiveness and successful activity. Together with economic factors social and responsible functions of the enterprise begin to play a great role in the providing of competitiveness, achievement of high productiveness and profitability of production.

In Ukraine institute of business social responsibility is forming. But, as the experience of developed countries shows, social investment is favourable to new competitive advantages forming, to the increase of business reputation level and capitalization of companies.

4. DEVELOPMENT OF BUSINESS CORPORATIVE SOCIAL RESPONSIBILITY IN UKRAINE Researches of the practice of CSR in Ukraine show, that for a long time developed system of

social maintenance was perceived by native enterprises only as a source of not based additional expenses. For the last years thank to the achievement of stable economic development and the increase of population life level, changes of public values and priorities take place. Today company's good reputation depends not only on its commercial success and high quality of production, but also on its activity in solving of urgent problems of the territory, where this company acts. That's why companies use the conception of CSR more often. The confirmation of this is, that on April 2006 “Global Treaty” of United Nations Organization was successfully introduced in our country. Now more than 100 leading companies, business associations, work groups and public organizations, which are active in the sphere of social responsibility, have joined Global Treaty and confirmed their obligation to fulfil its 10 universal principles.

Leaders in CSR programmes introduction are big enterprises with durable work experience on the market, which meet competition from Ukrainian and foreign entrepreneurs.

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Accent on inside companies' social programmes, directed to workers, can refer to the peculiarity of business corporate social responsibility development in Ukraine. One of the explanations of this is formed high dependence of the effectiveness of companies' work on the productivity of employees work and loyalty to their companies. In spite of unemployment in Ukraine, there is still a need in qualified and professional workers on the enterprises.

In Ukraine the most widespread are two classical directions of realization of enterprises social policy types: allotment of social compensation in money equivalent and allotment of social services.

Outside CSR is less developed and is realized in such forms: support of social infrastructure, charity and participation in big social projects.

In most cases on native enterprises measures on CSR are realized fragmentary and are seldom the component of the strategy of companies’ development. In general, all companies spend no more than 17-20% of their income on social programmes. Less than a third part of companies have special social budgets.

That's why native companies should start the development of social responsibility from the chose of the most perspective forms of social investment, which the companies began to be interested in long ago. It means, that business social responsibility will be integrated not only into the system of company management, but also into general corporative business-strategy, including social, economic and ecological aims. But in this case business social responsibility shouldn't be identified only with philanthropy. On the contrary, it expects forward-looking social initiatives of the company, which form active partnership with interested persons (personnel, consumers, owners, territorial associations, state representatives etc.). It means, that corporative social responsibility is manifested in the influence of managerial decisions and results of company's work (goods, services) on the society and the environment.

5. FACTORS OF COMPETITIVE ADVANTAGES OF UKRAINIAN BUSINESS FORMATION BY

THE INTRODUCTION OF CORPORATIVE SOCIAL RESPONSIBILITY SYSTEM Rightly introduced conception of business social responsibility can ensure competitive

advantages for the company: wider access to capital and market, more sales and incomes, improved processes of decisions making and risks management, economy of operational costs, increase of productivity and quality, effective base of human resources, strong reputation, more loyal buyers etc.

On O. Dudkin's opinion (2008) construction of the system of business social responsibility has a wide range of consequences for the enterprise, which lead to positive changes in its functioning and become competitive advantages:

1. Forming of favourable conditions for business functioning in future. Business social responsibility can be an instrument of social instability overcoming.

2. Correspondence to expectations and mood of society. During last years an evolution of consumers' values in the direction of socially responsible goods and services took place. In these conditions social responsibility of the enterprise is considered as the biggest competitive advantage of the company and its goods.

3. Forming of the attractive prestige of the company. For many companies the most valuable assets is a trading mark. Social responsibility is closely connected with the reputation of brand and emotional component. So, it can't be ignored.

4. Increase of the value of non-material assets. Market capitalization of the company can excel its property cost by the increase of business and social reputation of the company, by lessening of risks from the possible market losses. Access to new markets is improved thanks to best reputation. When the main part of assets depends on the reputation of the company, social responsibility is a substantiated direction of activity.

5. Forming of closer relations with the circle of interested parties. As business in the whole world functions in the environment with the relations, which become closer, it has to find a balance of the interests of different groups, connected with the activity of a company.

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6. Improvement of the effectiveness of processes and, as a result, improvement of the economic results of activity. During the introduction of business social responsibility programmes companies reveal covert methods of the effectiveness increase, which otherwise couldn't be seen. Especially it concerns technologic processes. For example, if not to look for the ways of emissions lessening, technologies can change very slowly.

7. Involvement of additional partners. Today financial community considers the report on social responsibility as an important condition of risks management.

8. Involvement of qualified personnel. Thanks to internal social measures directed to personnel problems solving additional motivation of workforce is achieved. External social direction forms the attractiveness of enterprise in the eyes of future workers. As all workers of the company are at the same time citizens, consumers, parents and inhabitants of a certain city, a care about community and society will be a care about workers. Psychological factors of motivation to work are very important for every organization.

These factors increase competitiveness of the company, although somebody can doubt. It is clear, that business social responsibility frees in a certain way a field for the activity of competitors, which don't occupy active social position. Making of some decisions in the limits of business social responsibility needs a big will power and a leadership from the company leaders.

CONCLUSIONS Development of business social responsibility is conditioned by the changes of competitive

advantages bases, which took place during last decades. They are understood as a possibility of company to organize and fulfil certain types of activity while creating values for the clients. In different times competitiveness was connected with the possibility of firm to support the increase of production without additional expenses of rough, working and financial resources, but with the quality of production and observance of duties. Today for most of the enterprises fulfilling of such demands is a norm. And social component of enterprise activity can be as a competitive advantage.

With the beginning of new economic cycle in the world economy and expected beginning of such cycle in Ukraine, questions concerning the factors of companies differentiation on the markets and companies capitalization will increase the role of business social responsibility as a managerial strategy directed to the increase of competitiveness not only on the native, but also on the international markets. Such processes will determine the development of business social responsibility in Ukraine:

Business social responsibility will become a part of the most companies strategy (private and state, closed and public) and will be examined by supervision councils.

Programmes and projects of business social responsibility will be introduced on the basis of long-term plans, which will take into consideration the need to develop new markets and extend existing markets.

Business social responsibility strategies of certain companies will take into consideration national and international priorities of social and economic development, international tendencies (especially branch) and the best results concerning the introduction.

Financial and credit institutions and capital markets (especially international) will take into consideration the criteria of business social responsibility, stimulating financially socially responsible companies from Ukraine and in Ukraine.

Better and wider introduction of business social responsibility by Ukrainian companies can help to create new markets in Ukraine and abroad, to solve social and ecological problems, to improve the access of companies with Ukrainian capital to international markets, to increase capitalization and competitiveness of Ukrainian companies and ensure constant development of the country in general.

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SUGGESTIONS Nowadays special steps have been made to form CSR of Ukrainian business. Business social

responsibility in Ukraine is developing very fast without any institutional support (organizations – mediators, which could collect the ideas for CSR and give services for companies to realize their social measures) and state attention. There is a question: what are the future perspectives of CSR development in Ukraine? International experience shows that social responsibility is useful for all – companies, state and society. To our mind, the state position will determine future development of CSR of Ukraine. State as strategically oriented subject could compel the business to socially directed actions by special stimula: fiscal means of encouragement of business social responsibility; active propagation of values and standards of socially responsible business; state support of national and international initiatives connected with social responsibility.

REFERENCES 1. Carroll Archie B. 2001. «The Pyramid of Corporate Social Responsibility: Toward the Moral Management of

Organizational Stakeholders» Business Horizons. http://bas.sagepub.com/cgi/content/refs/38 /3/268 2. Elisabet Garriga. August 2004. Domиnec Mel Untangling the Jungle of Corporate Social Responsibility Theories.

Journal of Business Ethics 53: p. 51-71 3. Elkington J. 2000. Cannibals with Forks: The Triple Bottom Line of the 21st Century. Business Capstone Publishing. 162

p. 4. Frans Paul van der Putten. 2005. A Research Agenda for International Corporate Social Responsibility. NRG working

paper series November 2005 no. 05-09 www.nyenrode.nl/download/NRG/workingpapers/NRG05-09.pdf 5. Freeman R. Edward, S. Ramakrishna Velamuri, Brian Moriarty. 2006. Corporate Stakeholder Responsibility: A New

Approach to CSR Business Roundtable Institute for Corporate Ethics. 77 p. 6. McWilliams A., Siegel D. 2001. Corporate Social Responsibility: a Theory of the Firm Perspective Academy of

Management Review. 91 p 7. Благов Ю.Е.. 2004. Концепция корпоративной социальной ответственности и стратегическое управление.

Российский журнал менеджмента №3. С.17-34 8. Дмитро Баюра. Корпоративна соціальна відповідальність – новий імпульс для розвитку бізнесу та

суспільства. www.uspp.org.ua/interview/ 24.korporativna-socialna-vidpovidalnist-noviy-impuls-dlya-rozvitku-biznesu-ta-suspilstva.htm

9. Дудкін О.В. 2008. Соціальна відповідальність як складова маркетингової стратегії промислового підприємства. Механізм регулювання економіки. № 4. Том 2. p.101-107

10. Мескон М.Х., Альберт М., Хедоури Ф. 1993. Основы менеджмента; М.: «Дело», Пер. с англ. 703с. 11. Социальный портрет бизнеса. Путеводитель по социальным программам российского бизнеса. 2004. The

Platzdarm Group, Альпина Бизнес Букс. 196 с. 12. Хилтон С., Гиббонс Д. 2003. Бизнес во благо. Делаем деньги, делая мир лучше М.: ООО «Издательство

«Добрая книга». 384 с. 13. Якісне дослідження методів впровадження соціальної відповідальності бізнесу в Україні. www.corporate-

sitizenship.org.ua

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Goran Kvrgic 1 Radomir Vujadin2

Natasa Vujadin3

ANALYSIS OF THE DEVELOPMENT OF THE FOREIGN EXCHANGE MARKET IN SERBIA AS A CONDITION FOR THE DEVELOPMENT OF THE ECONOMY

Abstract Purpose- From the year 2000 until today’s day, the Serbian foreign exchange market has noted a

significant development. The emergence of a higher number of investments, the process of privatization, economic reforms, as well as the strengthening of the banking sector in relation to prior years, have set off many activities in this part of the financial market. Thus, this paper gives emphasis to the interbank foreign exchange market during the last ten years. In particular, it stresses that at this point, the foreign exchange market uses only the Euro and that the intervention of the National Bank of Serbia has been reduced to a bare minimum, in the aim of securing as free market as possible on which the foreign currency exchange-rate is formed under the influence of the demand and supply of foreign currency by business banks. So, the purpose of this paper was to show the relationship between the trading volume in the foreign exchange market in Serbia and the exchange rate EUR RSD as the impact of the aforementioned relationships to improve economy.

Design/methodology/approach - descriptive method Findings and originality- more developed and active economy leads to more advanced foreign exchange

markets and vice versa Keywords: foreign exchange market, foreign currency, purchase and sale of foreign currency, trade,

foreign currency exchange rate Research type: viewpoint JEL classifications: D53 - Financial Markets

INTRODUCTION The foreign exchange market is an important segment of the financial market in each country. If

we want to define the foreign exchange market, it is best to say that it represents a place where foreign means of payment (foreign currency and foreign cash) are bought or sold; it coordinates the supply and demand in order to determine the exchange rate and it manages national reserves. We can describe foreign exchange market more easily as an area in which the demand and supply of foreign currency meet. Foreign currencies represent all the demands expressed in foreign monetary means of payment or currencies (Pušara 2012, 96). Many activities are performed at the foreign exchange market in each country: purchase and sale of a national currency for foreign currency, purchase and sale of one type of foreign currency for another, operations with financial derivatives, short-term foreign securities trade, etc. Commercial banks and the central bank are certainly the most active participants in these operations in this segment of the financial market.

1 Professor Goran Kvrgic, Ph.D. College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia, [email protected] 2 Assistant professor Radomir Vujadin, Ph. D. College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia, [email protected] 3 Natasa Vujadin, M.A. College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia, [email protected]

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During the last few years, the foreign exchange market of the Republic of Serbia has recorded an increase in the foreign currency exchange transactions which indicates a positive trend in its development. But, in spite of the positive shift, interbank market in our country is still lagging behind the developed countries because of the lack of rapid progress. Banks and the National Bank of Serbia have the highest participation in the work of the foreign exchange market in our country, whose participation varied depending on the conditions prevailing in the region. In this paper, we shall analyze trading and the exchange rate trends in the Serbian market and what was the cause of it.

1. FOREIGN EXCHANGE MARKET AND EXCHANGE RATES: A THEORETICAL FRAMEWORK The development of commodity and financial markets in general has led to a huge expansion in

the development of foreign exchange markets around the world. An important factor that influenced the intensive progress of the aforementioned market is establishing convertibility of currencies in many countries. Another important factor that influenced the enormous growth of foreign exchange markets is the rapid progress of computer and telecommunications technologies, which enabled a much faster transmission of information and, more importantly, the electronic transfer of money. (Ćirović 2000, 163). As the foreign exchange markets improved, the share of foreign trade transactions in total foreign currency transactions is waning, and the share of foreign currency transactions relating to the transfer of short-term and long-term capital is increasing.

Before the introduction of the euro, there were 150 currencies circulating in the world market, but only 30 of them were actively used in trade. The most important international currencies, which are used in trade mostly, are: the U.S. dollar, the euro, the Japanese yen, the Swiss franc, the British pound, the Canadian dollar and the Australian dollar. In table 1, we will show codes for the aforementioned currencies in which the largest number of transactions are performed.

Table 1: The list of the most common currencies in the foreign exchange markes

Currency Currency code

Euro EUR American dollar USD

Swiss franc CHF British pound GBP

Canadian dollar CAD Australian dollar AUD

Organization of the foreign exchange market may be different. Sometimes it is incorporated in

the money market and then we name it an interbank foreign exchange market, and sometimes it is a completely independent institution, and then it is known as a foreign exchange stock market. Regardless of the type of the organization, foreign exchange markets are said to be organized places where the demand and supply of foreign currencies meet, with clearly defined business rules, time of trade, participation of subjects and rules regarding delivery and payment of assets. Anyway, foreign exchange market is treated as an integral part of the financial market in one country.

Foreign exchange market is different from other segments of the financial market: 1. Because we buy and sell foreign currencies in it and they themselves are special 2. A lot of macroeconomic factors have impact on the operations of the aforementioned market 3. Foreign exchange market is sensitive to all political issues in the country and area 4. It is subject to changes due to the different trends in the foreign trade policy 5. Foreign exchange market is characterized by certain business rules which are not present in

other segments of the financial market 6. Foreign exchange market is a reflection of the economic development of a country

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7. Foreign exchange market is a link between the national economy and the international environment (Pušara 2012, 97)

Different types of transactions with various foreign exchange markets in the world and motives such as the arbitrage, speculative and hedging transactions are performed in the foreign exchange market. Arbitrage transactions include a prompt purchase and sale of a currency in order to gain profit from the price difference at different foreign exchange markets in the world where arbitrageurs do not enter the foreign currency risk because they buy and sell the same currency at the same time. Speculative transactions include the purchase and sale of currencies based on assumptions about changes in the currency exchange rate. Speculators enter into foreign currency risk in order to gain capital profit. Hedging transactions involve protection from exchange rate risk. Subjects who participate in foreign trade business mainly deal with hedging. (Export and import)

Functionally, foreign exchange markets can be seen as: prompt and spot markets, forward markets, futures market and options market.Prompt and spot foreign exchange market is the main market for purchase and sale of national currencies with maturities on the same day (prompt) or at least two working days (spot) after the agreed trade. In forward markets, purchase and sale of foreign currencies is arranged according to a certain rate, while the supply of foreign currency is provided at some future date, which normally exceeds a period of two working days. The most common terms for futures purchase and sale are 1, 3, 6 or 12 months or longer. When a bank agrees on a forward transaction with its customers, it adapts deadlines to their needs. If forward transactions are agreed between banks, then the terms are usually 30, 60 or 90 days. Forward rates on this occasion differ from those that are currently listed in the market. Futures and options are traded in special markets, with a note that futures are just another form of forward contracts. (Kvrgić, Vujadin and Vujadin 2012).

It is necessary to pay attention to the participants who concluded the largest number of transactions in this segment of the financial market. The most important participants in the foreign exchange market are commercial banks, but additionally there are also foreign trade companies, financial institutions such as insurance companies, pension and investment funds as well as central banks. Commercial banks trade their deposits denominated in different currencies. However, the minimum amount which banks trade in the foreign exchange market is 1 million USD / so-called one lot /. But in national foreign exchange markets, lots may vary; for example in Serbia, a lot may be 500.000 EUR and 1 million EUR. Sometimes lots may be lower or higher than these, but rarely.

An important participant in the foreign exchange market is also the central bank. In the capital market, its role is much more prevalent than in the foreign exchange market. The central bank appears as a participant in the foreign exchange market from time to time. It conducts periodic interventions to prevent large fluctuations in exchange rate or to maintain a certain level of it. In this respect, the central bank buys or sells foreign currencies. The message that the central bank sends through its intervention is much more important, and it is reflected in its monetary policy and in the effects it has on the exchange rate. (Kvrgić, Vujadin and Vujadin 2012).

The participants influence the formation of the exchange rate through their activities. Exchange rate represents the price of foreign currency in the domestic market. It can also be defined as a value of a foreign currency expressed in a domestic currency. Formation of the exchange rates depends on the relationship between supply and demand for foreign currency in the domestic market. If the formation is left to a free interaction of supply and demand, exchange rates may fluctuate unlimitedly. Equilibrium is established at the level at which prices are equalized in the country and abroad. This equalization represents the establishment of parities of purchasing powers. Monetary authorities can intervene in the foreign exchange market within certain limits in order to maintain exchange rate fluctuations. Exchange rates are usually recorded in a local currency for one monetary unit, with the exception of the Japanese yen whose exchange rate is recorded for 100 monetary units. (1 EUR = 111 RSD 100 JPY = 90 RSD)

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2. ANALYSIS OF THE FOREIGN EXCHANGE MARKET IN THE REPUBLIC OF SERBIA The foreign exchange market of the Republic of Serbia has gradually developed and changed

depending on the economic, social and political conditions in the country and the world. By the early nineties of the 20th century, there was no organized interbank foreign exchange market in Serbia. Purchase and sale of foreign currency by that time was performed in a limited amount directly between banks, which certainly indicates the beginning of the foreign exchange market in the former Yugoslavia.The nineties were the years of crisis in our country, which was certainly reflected in the functioning of financial markets, too. Hyperinflation, war in the ex-Yugoslav republics, UN sanctions and an unstable economic environment completely stopped the progress in the development of the foreign exchange market. In the early nineties, the interbank foreign exchange market was characterized by a dominant share of the National Bank of Yugoslavia. The interbank foreign exchange market operated on the principle of meetings which were attended by authorized representatives of commercial banks and the National Bank. Banks purchased foreign currencies for their clients’ needs directly from the Central Bank at the exchange rate which was strictly determined. There was almost no sale of foreign currencies in the market, and even if a commercial bank made an offer to sell foreign currencies, the National Bank of Yugoslavia was the most common purchaser. Commercial banks rarely traded with each other.

In the second half of the nineties, economic situation was slowly calming down. Interbank foreign exchange market moved into the premises of the Association of Banks. However, the intensity of trading did not change much. The National Bank was still carrying out all of the sales of foreign currencies and foreign cash. Commercial banks were still buying foreign currencies for their clients, and not in order to maintain their own liquidity.

After the year 2000, the organization of the foreign exchange market in Serbia is changing. First, the NBS intervention in meetings was exclusively in Euros with a note that the central bank was increasingly retreating and it allowed banks to buy foreign currency for their needs, too. The goal of the NBS was the formation of the exchange rate as a result of facing the supply and demand of foreign currency leaving the possibility of intervention in the case of larger fluctuations in the market. A new exchange rate regime has started in Serbia. Floating exchange rate system is introduced with the goal of the development and strengthening of the Serbian financial market.

Meetings of the interbank foreign exchange market on which the central bank intervened stopped in 2006. The aim was to allow the free operation of the mechanism of supply and demand of foreign currencies and foreign cash. All commercial banks introduced computing platform (system), so-called the dealing, through which they exchange their warrants for the purchase and sale of foreign currency, agree on business and then report to the National Bank on completed sales transactions. Dealing application is unique in all the banks in our market and it is supported by Reuters, which is also its creator. Of course, the National Bank may appear on the side of the buyer or seller and conclude the sale or purchase with a commercial bank in a direct contact.

Table 2 presents the information which clearly shows what the intensity of foreign exchange trading in the foreign exchange market in Serbia in 2012 was like. (National Bank of Serbia 2013).

Table 2: Turnover in the foreign exchange market in Serbia in 2012,

expressed in millions of Euros

Month Trading in

a fixing meeting

Trading bank-bank

Trading bank-NBS

Trading bank-residents and non-residents

Total foreign exchange trading

and cash January 0 1.819,2 60 4.833,4 6.892,2

February 0 1.691,2 257,5 3.566,9 5.630,8 March 0 1.017,4 368 4.256,6 5.778,2 April 0 816,6 230 4.133 5.316,1 May 0 1.086,3 480,7 4.049,7 5.772,9

End of table in next page

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Beginning of tablo in previous page June 0 1.820,3 131,6 4.147,1 6.250,4 July 0 1.496,7 78,5 4.600,2 6.062,4

August 0 1.609,7 21 4.284,4 6.062 September 0 1.224,7 8 5.742,8 7.139,5

October 0 1.883,2 35 5.998 8.086,9 November 0 1.650,9 26 5.006,5 6.819,2 December 0 1,267,3 16 4.798,2 6.221,1

In order to do an adequate comparison, we will show the movement of average values of the

exchange rate EUR / RSD and USD / RSD in 2012 in table 3, so the connection between the movement of exchange rates and trading volume in the foreign exchange market could be seen more clearly. (National Bank of Serbia 2013).

Table 3: The average value of the exchange rate in 2012

Month EUR/RSD USD/RSD January 105,8385 81,4112 February 108,1038 81,6184 March 110,8994 83,9135 April 111,6258 84,7516 May 113,6014 88,9362 June 115,7713 92,2384 July 116,4641 94,6657 August 117,8899 95,1269 September 116,3999 90,5164 October 113,8594 87,8376 November 112,5413 87,9326 December 113,5413 86,5572

In table 2, we can clearly see that the greatest trading volume was conducted between

commercial banks and their clients, i.e. residents and non-residents. The highest trading volume was achieved in October- 5998 million euros. Banks traded between each other mostly in October- 1,883.2 million euros, and least in April 816.6 million euros. The table shows that there were no fixing meetings in 2012, which indicates that there was no rigid intervention of the National Bank of Serbia in the market. But the National Bank of Serbia participated in the sale and purchase of foreign currencies from commercial banks, preventing rapid fluctuations in exchange rates. They traded most in May- 480.7 million euros and least in September- 8 million euros.

In table 3, the movement in the exchange rate EUR / RSD indicates the decline of the dinar (depreciation) in 2012. Our national currency depreciated most at the beginning of the aforementioned year, i.e. in February compared to January. In February, the exchange rate of dinar was higher for 2.2653 RSD (January 105.8385, February 108.1038). If we make a comparison of the trade volume, we will see that we have the largest decrease in the total trading volume from 6829.2 million euros to 5630.8 million euros exactly in the aforementioned period. So, devaluation of the dinar affects the behavior of all participants in the foreign exchange market in terms of reducing the number of transactions. At the beginning of the year, the National Bank of Serbia has mostly traded with commercial banks (January 60 million euros, February 257.5), which indicates a larger fluctuation in exchange rates.

This kind of situation in the Serbian foreign exchange market at the beginning of 2012 is the reflection of not only decreased economic activity, but also of the political situation. In the mentioned period, Serbia actualized the question of getting the status of candidate for EU accession again, and,

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more importantly, new presidential and parliamentary elections, which were held in May, were being prepared.

It can be clearly concluded that deeper economic crisis slows the growth and development of the foreign exchange market in Serbia. Reduced economic activities induce the reduction of the volume of transactions concluded in the market, which affects the movement of the exchange rate. If the economy intensified its growth, it would inevitably be reflected in the growth and development of not only the foreign exchange market, but also the financial market as a whole.May brings Serbia elections and new turbulences. In June, compared to May, dinar devalued again in almost the same percentage as at the beginning of the year (May 113.6014 and June 115. 7713).September, October and November are months in which the appreciation of the domestic currency against the euro was recorded. In September, the highest appreciation of the dinar 3% was recorded, in October 1.5% and in November 0.6%. (National Bank of Serbia 2013)

In the aforementioned period, the National Bank of Serbia did not intervene in the foreign exchange market, except in October when it bought five million euros. Appreciation of the national currency increased its activities in the foreign exchange market. Thus, in November, the participants traded for 947.4 million euros more than in October. Strengthening of the dinar had a positive effect on the deepening of the national foreign exchange market. Appreciation is certainly the result of amplification of economic activities, i.e. industrial production growth. The largest growth in this period was recorded in the manufacturing and automotive industries.

The end of 2012 brings the growth in the exchange rate of the dinar against the euro again and stagnation in the development of the foreign exchange market. This was most evident in decreased volume of trade between commercial banks. In December 2012, the turnover in the interbank foreign exchange market fell for 383.6 million euros. Total turnover in the foreign exchange market was decreased for 598.1 million euros in December compared to November of the same year.

CONCLUSIONS The foreign exchange market of the Republic of Serbia is extremely turbulent. The economy,

which has already been in the transition phase for a certain period of time, causes that the foreign exchange market cannot grow quickly enough to enter the ranks of developed markets. Unstable domestic currency adds to the instability and changeability of the foreign exchange market.Generally speaking, the interbank foreign exchange market of Serbia is still in the development stage. The success of the interbank foreign exchange market is conditioned by the developments in the global financial markets. Negative trends due to the economic crisis certainly indirectly affect the slower progress of domestic foreign exchange market, too.Improvement in terms of activity and increasing the number of participants is certainly present in relation to the nineties, but trading volume remains at a much lower level compared to the developed countries of the world. Financial instruments which are used for trading in our foreign exchange market are very scarce. The largest volume of concluded transactions is related to the sale and purchase of foreign currencies, slightly less to foreign cash and very few financial instruments such as forwards, swaps and options. (Kvrgić, Vujadin and Vujadin 2012).Depending on the overall economic situation, the market will be activated or will stagnate in its development. Banks choose to buy or sell due to the inflows of foreign currencies. The inflow of foreign currencies into the market, based on foreign investments or sale (privatization) of domestic enterprises, increase the supply of foreign currency, which strengthens the domestic currency and has the positive effect on the increase in imports. On the other hand, higher import requires a greater need for foreign currencies in order to settle obligations to foreign partners. The increased demand for foreign currencies results in increased rates of foreign currencies and weakening of the domestic one. Our economy is import-oriented and requires a lot of effort to turn to export. The inflow of foreign investments would help the development of production that needs to be run, and then place its products in domestic and foreign market. The inflow of foreign currencies in the market from exports will strengthen the domestic currency and the economy as a whole.

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The foreign exchange market of the Republic of Serbia has progressed, but not enough. The potential is there, but, as long as the economic conditions are unfavorable, the foreign exchange market cannot rapidly move forward. Volume of concluded transactions varies depending on how the economic activity of the country moves. This part of the financial market will be more successful when the economy strengthens and when the economic growth is provided. But although the economic development declares the development of foreign exchange market, we must note that the foreign exchange market affects the economic development. If the range of activities that are concluded in the foreign exchange market is wider, then the impact on the economic trends is more positive.

Progress of the aforementioned part of the financial market is also reflected in the expansion of the list of currencies that can be traded. Thus, the National Bank of Serbia passed a decision on the types of foreign currencies and foreign cash that can be bought and sold in the foreign exchange market, which allowed the purchase of the Russian ruble. Considering the intensity of trade with the Russian Federation, Central Bank felt that the expansion of the list of currencies that can be traded is certainly justified. Although the payment with the aforementioned country is mostly done in U.S. dollars, some economists believe that there was no need for such a decision of the Central Bank. But in any case, the foreign exchange market in the country is being promoted and developed by increasing the number of currencies used in trading.

Of course, there is political (in)stability that declares Serbia as a high-risk country for investments. Political factors slow down the development of the complete financial market in Serbia in many ways. A rapid change in terms of the progress of the foreign exchange market is not expected in the near future.

SUGGESTIONS In order to deepen the Serbian foreign exchange market, the volume of transactions must be

increased first. An increased turnover is an indicator of development. The laws which regulate foreign exchange transactions and the decisions which regulate the operations of the foreign exchange market have enabled a wide range of operations, from standard purchase and sale of foreign currencies and foreign cash to the operations with financial derivatives. Suggestions for further development of this part of the financial market would be placing the emphasis on the operations which the participants would use for protecting themselves against the risk of exchange rate fluctuation. Hedging transactions and operations with financial derivatives (forwards, futures, options and swaps) are not sufficiently familiar to most participants in the foreign exchange market. Transactors need to be educated and informed about the benefits of using hedging instruments. For now, only forward and swap contracts are made in our foreign exchange market. Development of the financial derivatives market as an integral part of the foreign exchange market would improve its work in many ways, and it would also initiate the economic activity.

REFERENCES

1.“Decision of the National Bank of Serbia on operating terms and procedures in the foreign exchange market”,

National Bank of Serbia, accessedApril15,2013, http://www.nbs.rs/internet/cirilica/20/index_dev.html 2.“Foreign exchange reserves and movements in the interbank market”, National Bank of Serbia, accessed April 14,

2013, http://www.nbs.rs /internet/cirilica/scripts/showContent.html 3.Frederic Mishkin, Monetary economy, banking and financial markets( Belgrade:Data Status,2006) 4.Goran Kvrgic, Radomir Vujadin and Natasa Vujadin, “Analysis of the development of the foreign exchange market in

Serbia as one of the conditions of economic and entrepreneurship development” ( paper presented at the international conference Employment, education and entrepreneurship, Belgrade, Serbia, December 12-14, 2012)

5.Milutin Cirovic, Exchange rate( Belgrade: Bridge University, 2000) 6.Milorad Pusara, International banking( Banja Luka: University of Business Engineering and Management, 2012)

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Dominyka Lapienytė1 Agota Giedrė Raišienė 2

ASSUMPTIONS OF MOBBING MANAGEMENT AT WORK IN LAW OF LITHUANIA

Abstract Purpose. The goal of the article is to analyze the law documents of Lithuania in order to find out what

legal defense possibilities exist for organization employees to use in case of psychological pressure and emotional violence.

Design/methodology/approach – The research was implemented on the analysis of scientific literature and analysis of Lithuania’s law regulations and legal acts.

Findings and Originality – Evaluating from a perspective of mobbing prevention and coping, only general legal acts are functioning in Lithuania that indicate the necessity of creating „normal work conditions“ for every employee that would allow to maintain their health and ensure their safety. Legal acts also guarantee a leader of organization or employee representatives an opportunity to evaluate psycho-social risk factors in organization. However, there is no proper and legally accepted methodology that would allow carrying out this evaluation. In Lithuania’s legal acts and documents, there are no defined procedures which would have to be followed by a State institution or private organization itself in which mobbing was identified.

Keywords: mobbing, psycho-emotional violence at work, organizational management, workers’ legal defense, Lithuania.

Research type: literature review. JEL classification: K31 - Labor Law; K32 - Environmental, Health, and Safety Law.

INTRODUCTION Globalizing economics, changes in labor market, tense routine of life, intensive competition

between organizations and inside organizations between employees – all those challenges motivate leaders’ to recognize new phenomenon of management, which were in the background until contemporary times. These include, for example, the need to more actively take care of mutual tolerance between groups and individuals in organizations, maintenance of ethic relations and conflict management. The neglect of these factors gives start for psychological pressure and violence – a problem of employee relations and organizational culture, which is one of the most difficult to identify and control. It is important to notice that employee relation problems exist and influence the workers‘ efficiency and productivity and organizations‘ effectiveness independently of the attitude towards them – whether they are recognized or neglected and treated as non-existing. Scientific researches have determined a significant correlation between work conditions in organization, worker‘s health condition and his efficiency (Pajarskienė 2010). Due to this reason, solving and eliminating the problems of employee relations should be one of the most important leaders‘ areas of interest.

Researches show that unethical behaviour, conflicts and psychological pressure (mobbing) at work is more characteristic for public sector organizations than for private companies (Yaman, 2009). In the West, not only managerial solutions are invoked to control these problems, but legal instruments are being used as well. In the spoken areas, the most advanced are Scandinavian countries

1 Dominyka Lapienytė, Key Account Manager, LTP Texdan, Lithuania, [email protected]. 2 Assoc. prof. dr. Agota Giedrė Raišienė, Mykolas Romeris University, Faculty of Politics and Management, Lithuania, [email protected]

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and Germany. Unfortunately, in Lithuania there are no special legal acts that regulate legal possibilities of coping with psychological violence. In addition, there is a lack of government programs dedicated to decrease this phenomenon. It is important to note that mobbing manifestations in public sector have influence on an especially wide circle of people. Due to the fact that State Management Organizations provide services for the society, a decrease in employee work quality and poor work results caused by mobbing can become a threat for citizen welfare and an economical burden for the society.

In general, psychological pressure (mobbing, bullying) problematic are widely researched and recently such empirical researches are being organized even more often (Civilidag and Sergin, 2013; Topa and Moriano, 2013; Bortoluzzi et al., 2013; Bailien at al., 2013; Hutchinson, 2013). The first one to investigate psychological pressure in organizations was professor H. Leymann (Leymann 1990). Works by Einarsen, Hoel and Zapf (2003), Dietz, Robinson, Folger, Baron and Schulz (2003), Farmer (2011) are also notable.

In spite of the problem‘s relevance, mobbing and bullying topics are of low interest in Lithuania. Only a few authors that have examined the phenomenon of psychological pressure at work are worth mentioning, which include: Žukauskas, Vveinhardt (2009); Pacevičius, Janušytė(2009); Vveinhardt(2009); Pajarskienė(2010). There is a lack of information about the problem and its control possibilities in periodical press as well. Information Retrieval Systems on the internet give only several publications: Astrauskaitė (2008), Dereškevičiūtė (2010), Vveinhardt (Publications at public press...), Raišienė (2013).

The fact that the topic of mobbing and its control possibilities is poorly researched and undefined by legal acts in Lithuania encouraged a closer further investigation. The goal of the article is to analyze the law documents in order to find out what legal defense possibilities exist for organization employees to use in case of psychological pressure and emotional violence. The first section of the article examines the phenomenon of psychological pressure and emotional violence at work in theory. The second section presents the results of Lithuanian legal framework analysis. In the third section, research conclusions and insights are formulated.

1. MOBBING IN ORGANIZATIONS Mobbing is a discrimination of an individual or a group of individuals caused by inadequate

power of another person or group in organization. On a scientific discourse, this phenomenon is being analyzed for more than three decades.

Unfortunately, during this period of time only a small part of countries around the world recognized mobbing as a predominant social issue. Germany and Scandinavian countries provide a lot of attention for solving this problem. In these countries, a strong legal framework is established to cope with the issue – special anti mobbing laws control the phenomenon of mobbing and its development in organizations. Due to this reason, these countries are strong economically, because harmonious work environment is one of the guarantees ensuring high economical efficiency.

Swedish sociologist H. Leymann is one of the first scientists who examined individuals’ withdrawal from labor marked due to inadequate relations in work environment and who analyzed the mobbing development in organizations. (Leymann H. 1990) H. Leymann has a lot of follower scientists. On the basis of his researches, mobbing was examined in various aspects: K. Björkqvist, K. Österman et al. (1994) named mobbing as aggression between employees and a hidden aggression between sexes. Zuschlag,(1994) defined mobbing as employees’ harassment and mockery, Neuberger (1994) offered a comprehension that mobbing is a “bad game” in organizations, M. Vartia-Väänänen (1996) analyzed the relation between mobbing and organizational environment etc. (cited from Vvenhardt, 2010) Speaking about terms, it should be noted that psychological pressure is mostly named as mobbing, whereas in publications and in practice bullying, employee abuse and work terrorism are used as synonyms; the term mobbing is most widely spread in german-speaking countries, Sweden and Italy, while in French literature mobbing is called harcèlement moral. (engl. mental fatigue, torture)(cited from Vveinhardt and Žukauskas, 2010).

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Mobbing is dangerous for employees’ health, self-esteem, confidence, efficiency, ability to learn and react to changes effectively. An employee that experiences mobbing feels psychological tension, fear, danger of social isolation, various neural and psychophysical disorders. Relations damaged by mobbing are never limited to mobber and his victim. Instead, they spread out into the organization: employees are split, reluctance to collaborate is increasing, negative socio-emotional consequences in groups are observed, the effectiveness of groups decreases (Einarsen et al., 2003).

Favorable conditions for the abovementioned psychosocial risk factors form when organizations lack ethic and clear culture of communication, the necessity of conflict management is ignored, employees‘ values are not taken into consideration and work relations lack attention in general.

2. LAW SYSTEM OF LITHUANIA AGAINST THE PHENOMENON OF MOBBING AT WORK Mobbing is more or less present both in public administration institutions and private sector

organizations, despite of the country in which the organization is operating. Unfortunately, the legal act and document analysis has shown that there are not enough documents in Lithuania what could prevent mobbing. It was revealed that psychological pressure is treated as „factor of psychosocial risk“ in Lithuanian legal acts. It is not a wrong comprehension however, mobbing indeed falls into the coverage of such description, but the term is too general and trivial to speak particularly about psycho-emotional violence in organizations.

Evaluating in general, situation in Lithuania is not unambiguous. On the one hand, Lithuanian Republic Constitution‘s 21st clause consolidates an inviolability of person‘s dignity. Also, resolutions of Constitutional Court highlight that „The purpose of the country as a whole political organization is to ensure person‘s rights and freedoms (...)“. (Constitutional Court, 2003). According to this, any psychological violence at work is forbidden and if an individual has no possibilities of protecting himself, he must be protected by the country. In this case, there is often a lack of information about possible help organizations. However, in most cases such help cannot be provided due to the fact that there are no sub-statutory acts that would define the responsible institutions and necessary procedures.

In Lithuania, work relations are controlled by a main document – Lithuanian Republic Work Codex. The resolutions listed in this document are referred when various legal work relation incidents occur. Speaking about mobbing, it should be marked that LR Work Codex only includes a provision which states that the employer must concern about ensuring normal work conditions: LR Work Codex 191st clause states that an employer must ensure normal work conditions in order for employees to be able to accomplish their work norms. Unfortunately, Work Codex does not mention psychological pressure and related social risk threats and does not name it as an aspect for „ensuring normal work conditions“. LR Work Codex 259th clause may be invoked to control mobbing, which regulates the conditions of employee safety and health assurance: „Employees‘ safety and health are all preventive means of protecting employees‘ efficiency, health and life at work that are being used or are planned to be used in all stages of organizational activity in order to protect employees from professional risks or at least reduce these risks.“ Due to individual‘s health not being only physical welfare, a conclusion may be mage that Work Codex, let it be indirectly, foresees a presumption to protect employees‘ health and save them from physical, emotional and psychological damage.

Another important document that enables an employee who experienced violence at work to take measures to stop mobbing in an organization is the Lithuanian Republic law of employee safety and health (Lietuvos Respublikos Darbuotojų saugos ir sveikatos įstatymas...) and general regulations of Professional risk evaluation (Žin., 2012, Nr.126-6350). These were approved by the minister of Social protection and work and the minister of Healthcare on october 25, 2012. These legal documents provide the leader of company, institution or organization with a right to determine the risk factors that could possibly be threatening to personal health and efficiency. Although mobbing is not named as a particular dangerous psychological factor, the term „risk factors“ can be widely interpreted.

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Risk due to psychosocial factors is determined following methodical guidelines and relevant standards. Psychosocial risk factors are determined following Psychosocial risk factor research methodical guidelines, approved by the minister of social protection and work, as well as the minister of healthcare on August 24, 2005 on an order No. Nr. V-669/A1-241 and following the approved Psychosocial risk factor methodological guidelines that define the general principles of evaluating psychosocial risk factors.

Due to this reason, according to the 39th clause of Lithuania‘s law of employee safety and health and the 5th clause of general guidelines of Professional risk evaluation, a leader of organization has a right to independently make a decision on carrying out risk evaluation regarding a possible risk or risk factor changes in the organization. The process of such decision may be initiated by employee representatives following an order described in Work Codex and collective agreement. This means that both the leader and employee labor union can identify and trace risk factors and put effort to stop mobbing.

In addition, LR State Work inspection (further - SWI) is controlling the way employees comply with legal acts that regulate employees‘ safety, health and work relations and normative guidelines defined in collective agreements. LR State work inspection also executes the prevention of work relation infringements following a competence set by laws. If an employee suspects that his rights and work laws are infringed and the employer is not upholding the conditions indicated in the employment contract, the employee has a right to address SWI with a written complaint. It should also be noted that employee can defend his possibly infringed rights (honour, dignity and other non-property rights) in a magisterial way (civil procedure, on more serious cases – criminal procedure).

Unfortunately, legal acts and institutions that protect employees‘ rights discussed in this section compose the whole Lithuania‘s legal basis that anticipates the possibilities of controlling the psychological pressure manifestations in organizations. Obviously, there are no specialized laws and legal documents that would create conditions for an employee to defend himself from psychological and emotional violence at work directed to him or that would oblige employers to create a psychologically favorable work environment.

CONCLUSIONS AND SUGGESTIONS Fast life pace, intensive competition between and inside the organizations along with other

challenges of today are motivating leaders of organizations to evaluate the conditions that would allow their employees to properly concentrate on the assignments in order to accomplish them qualitatively and on time. The competitiveness of organizations themselves are heavily influenced by employees‘ initiative, skill and motivation to collaborate, which makes adjusting interpersonal and intergroup relations an important objective for all management of organizations with a long-term work perspective. Unfortunately, some manifestations of improper interpersonal relations are not noticed or even ignored in some cases. The reason for that is the fact that practicians in organizations lack knowledge and evidence on how heavily improper relations damage the efficiency of an employee that experiences psychological violence and how it affects the employees that are not directly experiencing mobbing. In other words, few managers realize that the phenomenon of mobbing is detrimental for organization in which it has rooted both in terms of time and financial resources.

Some Western countries have implemented a legal system that protects workers from psychological and emotional violence at work. In these countries, practice of mobbing prevention is usually regulated on both state and organizational levels. Unfortunately, Lithuania does fit into these countries.

Evaluating from a perspective of mobbing prevention and coping, only general legal acts are functioning in Lithuania that indicate the necessity of creating „normal work conditions“ for every employee that would allow to maintain their health and ensure their safety. Legal acts also guarantee a leader of organization or employee representatives an opportunity to evaluate psychosocial risk factors in organization. However, there is no proper and legally accepted methodology that would

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allow carrying out this evaluation. On the other hand, there is a lack of procedures following which some specialists would have to take the responsibility and commit to take particular measures to eliminate the harmful psycho-emotional risk factors found during evaluations. Furthermore, there are no defined procedures in Lithuanian legal acts and documents which would have to be followed by a state institution or the organization itself in which mobbing was identified.

Lawmakers in Lithuania are recommended to take the consequences of mobbing on individuals and organizations into consideration, especially due to the reason that mobbing is more widely spread in public sector institutions than in private sector organizations. It is recommended to strengthen the legal basis that could allow stopping psychological pressure and emotional violence manifestations at work.

REFERENCES

1. Astrauskaitė M. (2008) Mobingas – tylus emocinis terorizmas, Psichologija Tau, No. 3. 2. Baillien E., Bollen K., Euwema M., De Witte H. (2011) Conflicts and conflict management styles as precursors of

workplace bullying: A two-wave longitudinal study. HUB Research papers, Economics & management, Vol. 39, KULeuven. 3. Björkqvist K., Österman K., Hjelt. Bäck M. (1994). Aggression among university employees. Aggressive Behavior, 20,

173.184. 4. Bortoluzzi G., Caporale L., Palese A.(2013) Does participative leadership reduce the onset of mobbing risk among

nurse working teams? Journal of Nursing Management, Upcomming issue, Onlyne version http://onlinelibrary.wiley.com/doi/10.1111/jonm.12042/references

5. Civilidag A., Sargin N (2013) Academics’ Mobbing and Job Satisfaction Levels, The Online Journal of Counseling and Education, Vol. 2(2), 55-66.

6. Constitutional Court 2003 m. December 30 d., 2004 m. December 13 d., 2004 m. December 29 d., 2006 m. January 16 d., 2006 m. September 21 d. Resolutions) Online ref: http://www.vtek.lt/vtek/index.php?option=com_content&view=article&id=455%3Ateism praktika&catid=32&Itemid=50 [2013.01.04]

7. Dereškevičiūtė E. (2010) Mobingas, arba psichologinis teroras darbe, Aš ir psichologija, No. 6. 8. Dietz, J., Robinson S. L., Folger R., Baron R. A., Schulz M. (2003). The impacts of community violence and an

organization's procedural justice climate on workplace aggression. Academy of Management Journal, Vol. 46, No. 3, 317–326. 9. Einarsen, S., Hoel, H., Zapf, D. ir kt. Bullying and emotional abuse in the workplace.London:Taylor&Francis,

2003.P.119 10. Farmer, D. (2011). Workplace Bullying: An increasing epidemic creating traumatic experiences for targets of

workplace bullying. International Journal of Humanities and Social Science, Vol. 1, No. 7 [Special Issue –June 2011], 196–203. 11. Hutchinson M. (2013) Bulling as workgroup manipulation: a model for understanding patterns of victimization

and contagion within the workgroup. Journal of Nursing Management, Vol. 21(3), 563-571. 12. Yaman E. (2009). Psychological violence - mobbing in the workplace with regard to management psychology.

Ankara: Nobel Publication and Distribution. 13. Leymann, H. (1990). Mobbing and Psychological Terror at workplaces. Violence and Victims, Vol. 5, No. 2,119–

126. 14. Neuberger O. (1994). Mobbing: Übel mitspielen in Organisationen. München: Rainer Hampp Verlag. 15. Pacevičius, J., Janušytė E. (2009). Mobingas kaip organizacinio gyvenimo problema: priežasčių, raiškos ir

pasekmių įvertinimas ir analizė. Ekonomika ir vadyba: aktualijos ir perspektyvos, Nr. I(14), 187–196. 16. Pajarskienė, B. (2010). Psichologinis smurtas darbe – nauja sveikatos problema Lietuvoje. Nacionalinės

sveikatos tarybos metinis pranešimas „Urbanizacija – nauji iššūkiai žmonių sveikatai“, p. 46–48. 17. Raišienė A.G. (2013) Intrigos darbe – klastingas būdas pakirpti sparnus, Psichologija Tau, Kovas-Balandis. 18. Topa G., Moriano J. (2013 ) Stress and nurses' horizontal mobbing: Moderating effects of group identity and

group support, Nursing Outlook, Vol. 61(3), 25-31. 19. Vartia. Väänänen M. (1996). The sources of bullying . psychological work: enviroment and organizational climate.

European Journal of Work and Organizational Psychology: Mobbing and victimization at work. London, 203-215. 20. Vveinhardt J. publications at public press www.mobingas.lt/straipsniai/spaudoje connected 2013/05/27 21. Vveinhardt, J. (2009). Mobingo kaip diskriminacijos darbuotojų santykiuose diagnozavimas siekiant gerinti

Lietuvos organizacijų klimatą. Disertacija. Vytauto Didžiojo universitetas. 22. Vveinhardt, J. (2010). Mobingo koncepto semantinės išvestinės // Profesinės studijos: teorija ir praktika-

Professional Studies: Theory and Practice, Nr. 6. Šiauliai: Šiaulių kolegijos leidybos centras, p. 218-226. ISSN 1822-3648. [Semantic derivatives of the concept of mobbing, In Lithuanian].

23. Vveinhardt, J.,Žukauskas, P. (2010). Mobingo specifiškumas: lietuviškojo mentaliteto bruožai // Vadybos mokslas ir studijos – kaimo verslų ir jų infrastruktūros plėtrai-Management theory and studies for rural business and infrastructure development, Nr. 20(1). Kaunas: Akademija, p. 173–186.

http://www.mobingas.lt/straipsniai/spaudoje%20connected%202013/05/27

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24. Zuschlag B. (1994). Mobbing: Schikane am Arbeitzplatz. Goettingen: Verlag fuer angewandte Psychologie. 25. Žukauskas, P., Vveinhardt J. (2009). Diagnosis of mobbing as discrimination in employee relation. Inžinerinė

ekonomika, Nr. 4 (64), p. 103-113.

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Bozidar Mihajlovic1 Dragana Vojteski Kljenak2

Jovanka Bajcetic3

DEVELOPEMENT ORGANIC FOOD PRODUCTION IS STABILITY FACTOR OF ECOLOGY SECURITY AND REGION CONNECTION

Abstract Purpose: During the period of world, as well as domestic economic crisis every project, like the one which

will be presented here, can play an important role in making strategic decisions of society about new developmental programms. Namely, the market instructs us to find the solutions, particularly in the form of enriching the offer of products, which are very important in population nourishment and prevention against the modern seaknesses of humanity. The solutions have to be searched for in the frame of available and renewable resources. Therefore we are faced with an open question of detecting and defining all the relevant factors, which will make the significant contribution to the successful project realization and goal accomplishment. Although the market is one of the relationships regulators in market economy, it does not necessarly mean that the market can solve all the problems by itself. So, there is a need for additional measures, which belong to the state as a system, because the state, by making the proper ambient for work, becomes, more or less obviously, the important partner. Therefore we consider that the concept of sustainable development has to be stressed even more, because the world economic crisis has shown that the neoliberal economy should be directed, in order to achieve the rational exploitation and continual renewal of natural resources. That is particuraly important for developing countries, like the Serbia. The recent acceptance of the project „Plum - national brend“ additionaly confirms that also on the highest state level there is the understanding, recognition and support for such development concepts and strategies.

Methodology approach:descriptive method Findings and originality: Modification of new production of GM food is seriously jeopardizing human

health. The production of healthy, organic food represents opposition to such tendencies. Europe still has the conditions for that, it has clean fields.Serbia has them as well.

Keywords: organic food, organic food market, the economic crisis, projects of organic food country like a partner

Research type: viewpoint JEL classifications: Q01 - Sustainable Development

1. BASIC CHARACTERISTICS OF ORGANIC FOOD

The food produced according to the principles of organic agriculture does not contain any

artificially synthesized substances or pesticides. Rather, this food contains larger nutritional values from the food produced by conventional production. Research carried out by German laboratories has shown that organic food products have a significantly higher content of oligo minerals, especially potassium and iron, as well as higher levels of magnesium, phosphorus and vitamin C. Similar results have been obtained by American laboratories, which found that these products have 63% more

1Full Professor Bozidar Mihajlovic PhD, College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia [email protected] 2Associate Professor Dragana Vojteski Kljenak PhD, College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia, [email protected] 3Assistant Professor Jovanka Bajcetic, College for business economy and entrepreneurship, Mitropolita Petra 8, Belgrade, Serbia, [email protected]

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potassium, 73% more iron and 125% more calcium than the products produced in conventional agricultural production processes.

Organic food, therefore, is based on biological control and the suppression of the use of any kind of chemical substances. That, further, entails a healthy soil, chemically untreated seeds, and the prohibition of using any kind of spraying products. Due to high demands set on the farmers, it is expected that only a smaller number of manufacturers can meet the specified requirements. The goal of organic agriculture is to strengthen the link between the town and the country by recycling nutrients and humus.

The two basic characteristics of ecological agriculture are care for the basic functions of nature and the idea of global solidarity.

During the period of seven years, the network of environmental associations has been spreading in Serbia. These are the manufacturers which have opted for a safe production on the one side, and an uncertain placement on the other side. For example, the total organic fruit demand was greater than the supply on the Belgrade market. It is a good sign that the consumers have made a big step forward in determining these kinds of products, so the manufacturers from this production area can count not only on exporting but also on a strong domestic market.

Our experiences are showing us, in the same context, that in the offer of organic food products and their production for the market (and profit as a goal) the costs of production are reduced to an acceptable size. Namely, the fields in which organic soybeans have been planted for the first time in our country were far from industrial sites and lacking in any chemicals, although nearly overgrown by weeds. The average yield results on those parcels were 10t per ha, and the price was about 30 RSD per kilogram, while, for a kilogram of conventional soybeans, the price was 12 RSD. Thus, the demand for organic soybeans certified as healthy products, with no chemicals and polluters, recorded a high growth, which counts as stability and justifies investments.

And equally, on the other hand, the manufacturers of raspberries with organic production certificates, had no problems with exporting and the price on the European and world markets. Thus, various protests are only a waste of time and energy, while specialization of organic production brings profit.

In the Worldwatch Institute’s report for the previous year, special attention was paid to the wasting of arable land and the waste of cereals via inefficient use. For the nutrition of the world population, about one quarter of the arable land would be sufficient. On one ha of land, 50 kg of beets or 4,000 kg of apples, 8,000 kg potatoes, 10,000 tomatoes or 12,000 kg of celery can be produced.

Meat consumption in the world has increased dramatically, as great forests are being destroyed to extend pasture lands. On the other hand, a half of the world’s harvest is spent on fodder. In industrial countries, the share of fodder is a huge two thirds of the production. About 60% of the total import of fodder comes from developing countries, where about 40,000 children starve to death every day, and 1.3 billion people suffer from malnutrition, while in one year, 50 million people starve to death, or are dying from a disease caused by starvation (Source: FAO- Food and Agriculture Organization of the United Nations).

About 90 million ha of global land will have to be transformed into agricultural lands until the year 2011, in order to achieve a global food supply. A half of these lands will be deforested, which may have negative consequences on the global climate conditions and biodiversity. In the present conditions, another danger for the planet is the loss of agro-biodiversity, and that, apart from the other factors, causes pesticide usage and conventional fertilizers which contain toxic substances.

2. ORGANIC FOOD PRODUCTION IN THE WORLD, WITH A SPECIAL REFERENCE TO

FRANCE, THE UNITED STATES OF AMERICA AND GERMANY. Organic food is produced either fresh or processed, depending on the processing method. Fresh unprocessed organic food, like fruits and vegetables, can be bought directly from the

manufacturers at market places, supermarkets, health food markets, health food stores, etc.

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Unprocessed products such as products of animal origin, meat, eggs, milk, etc., can rarely be found fresh.

Most of the products which can be found in the supermarkets are considered to be processed organic food. Occasionally, it happens that organic food is placed together with conventional food, but they differ by price, organic food being more expensive. The better part of organic food comes from major food manufacturers which also produce and sell canned food, frozen fruits and other types of conventional food stuff.

In the world, processed organic food occasionally contains only organic elements without artificial additives and is produced by applying several methods and special materials under special conditions. This process does not involve chemical and conventional methods of processing. These products are potato chips, cookies and different types of snacks, as well as oat flour, buckwheat flour, etc.

Demands for this type of food are growing on the world organic food market. Even if it took only about 1% of the total world market, a large increase would be noted in numerous segments of its consumption. A profit of some 45 billion dollars has been noted per year from organic food (Source: FAO).

About 31 million ha is used for growing organic food in the world. Regarding leading countries with a high technical, technological and health culture, a large part of their credit potential is directed towards creating smaller or bigger farms. According to FAO data, at this moment in the world some 120 countries are producing organic products. This involves about 0.7% of arable land, which means that there are 634,000 farms on this land.

In the world, organic food development trends are clearly defined. This is understandable, say the experts, considering the measures and the processes which are used in conventional production: intensive land treatment, growing only one sort over the large areas (contempt for crop rotation), mineral fertilizers use, chemical control of weeds, pests and diseases, and genetic manipulation of cultivated plants, as they have as a goal productivity increase. But these activates question the conditions which will contribute to the long term maintenance of soil fertility.

Table 1. The countries with the largest areas where organic food is grown

Country Areas under organic agriculture (ha) Australia 11,800,000 Argentina 3,100,000 China 2,300,000 USA 1,600,000 Italy 1,200,000 Brazil 845,000 Germany 700,000 Austria 300,000 Switzerland 110,000 Hungary 105,000 Serbia 6,000 +9,000= 15,000 Bosnia and Herzegovina 1,150 Croatia 120 Europe – total 6,900,000 European Union 6,000,000

Source: FAO, EBRD, World Bank.

Regarding Serbian indicators, the size of 6,000 ha and plan for an additional 3,000 ha, and the

6,000 ha which are under investigation and monitoring, is not satisfactory. Compared to the total area of 4.2 million ha of arable land, this is a mere 0.3%.

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The growth of the area under organic food is the most marked in North America and Europe. The structure of the products under organic food is:

- Organic citrus...................................................Italy - Coffee...............................................................Mexico - Cocoa................................................................Dominican Republic - Grapes...............................................................Italy, Spain, France - Olives...............................................................Spain, Tunisia With government support, the natural potential, and due to culture and tradition, developed

countries lead in the development of organic food production. Besides 31 million ha of arable land, wild fruits also grow on the 62 million of uncultivated land. The biggest part is taken up by bamboo shoots (36% of the total fruits), wild and berry fruits (21%) and different kinds of nuts (19%).

Serbia has the potential to be the world leader in collecting organic juniper, as well as ecological grapes, soybeans, and some other kinds of agricultural crops (cabbage, peppers).

2.1. Organic agriculture in europe At the beginning of the 90ies, a rapid development of organic food production started in

European countries. Since the year 2005, development has increased. On 6.9 million ha in Europe, organic food was produced on 160,000 farms. In the European Union, 6.3 million ha (on 160,000 farms) was cultivated, this being 3.9% of the total farming land. The country with the largest number of farms and the largest areas under organic food is Italy.

Support for organic agriculture in the European Union includes grants within the program for rural development, legal protection which gives a recently reviewed regulation on organic economy and the realization of the European Action Plan for Organic Food and Farming from the year 2004. The countries which are not co-opted into the European Union had similar support.

Table 2. Organic food world markets in millions of Euros

Markets Retail in 2003 Euros Percent of organic food

sales (assessments) Expected annual growth in 2003 - in percent

France 1,300 1.0-1.5 5-10 Germany 3,100 1.7-2.2 5-10 Great Britain 1,750 1.5-2.0 10-15 USA 13,000 2.0-2.5 15-20

Source: Yussefi@Willer, 2003, p. 24.

Switzerland has the largest share of organic food on the market, and the biggest consumers of

organic food in the world are the Germans, the Italians and the French. The citizens of Switzerland spend 100 Euros per person on organic food. But on the other hand, the development of the European market has the going rate of 10-15%

per annum. The value of the organic food market in Europe is estimated at 15-16 billion Euros. 2.2. Organic food production in france The consumption of organic food in France has definitely shown dramatic growth, thanks to

French consumers. After 1980, the position of France as a leader of organic agriculture had gradually decreased, until the middle of the 90ties. That reduction, however, is a consequence of nonexistent government support, a decline in demand, an inefficient manufacturing and processing sector, and a high level of ineffectiveness as well as a poorly developed distribution system. Furthermore, this sort of situation lasted until the mid-90ties. A five-year French government action plan stimulated the

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expansion of organic manufacturing, and the number of farmers and arable land transformed into organic agriculture increased dramatically during 1998 (Figure 1.).

Figure 1. USDA – American agricultural service report 1999

Even with the food manufacturing growth in France, there is still a need to import large amounts

of organic grain (mostly from Central Europe) in the aim of satisfying these demands. Otherwise, this country is on the fourth place in Europe regarding organic agriculture, after Italy, Germany and Austria.

The newest research of the Association for Organic Food in France shows that with 10 ha of organic manufacturing, high incomes on 100 ha of conventional production could be reached.

2.3. Features of the french organic food market Experts consider that France has one of the largest European organic food markets. The annual

turnover is 1.300 million Euros, and the percentage of the consumption of organic food is about 2% or 260 million Euros (Yussefi and Willer, 2003, p. 24). The expected annual growth rate is 5-10%.

France, generally speaking, is considered a very complicated country for importing products from other countries. The French import about 10% of organic products (Lohr, 2001, p.71, Paris, 06). The problems on this market are incurred due to cultural differences, such as occur in nationalism, in terms of the slogan “our products are the best”, as well as language and regulations barriers. For success to occur on the French market, it is crucial to make a connection with the local importer/distributor, considering the fact that local representatives and local personnel will be very important in creating strong business connections. Otherwise, conventional stores dominate the organic food market and take 55% of the space. Other stores take up 30%, while direct sale take up 15% of the market share.

According to a consumer study in one of the biggest French retail chains, the highest sale records are with products such are cookies, juices, marmalade, pasta, rice and bread. The biggest organic food retailers in France are Biocoop, Carrefour, Auchan, Leclerc and Promodes (Source: Documents of the Economic Attaché in the French embassy).

2.4. Organic food production and consumption in the usa In Table 1, we showed that in the USA, there are some 1.6 million ha under organic food. The

amount of 13,000 billion dollars which is realized on the total food market in America shows that there is room for organic food products. Namely, the current value percentage of those products was

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ranged from 2.0 to 2.5%, which is about 26 billion dollars. This only confirms the preference of American consumers for proper nutrition and for an inclination to consume healthy food. In the USA, about 50% of the consumers buy organic food at least once per month (Rural Solutions SA, 2003, p. A-3). Regular organic food buyers take up about 10% of population which buy from the USA food market. The level of the prices is some 10-30% higher in regards to conventional alternatives (Rural Solutions SA, 2003, p. A-3).

Organic food markets in the USA have the highest rate of growth in regards to other developed western countries. The rate of growth was about 20% per year, and until the year 2007. American researches show that about 49% of organic food is sold in conventional stores, while specialized stores take about 48%, and 3% of the products are sold by direct sale (Dimitri and Greene, 2002, p. 2, New York, 2004).

It is very interesting to mention that in the USA there is a program on CBS network called News, which shows sales growth and organic food consumption. Similarly, the retail chain whole food market is a company which has a large influence on organic food market development in the USA and whose worth, before the recession, was estimated at 7 trillion dollars (Kortbech-Oelsen, R., (2002), United States Market for Organic Food and Beverages, The International Trade Centre, United Nations conference on trade and development, World Trade Organization).

Consumers in shops are offered a number of different varieties of organic food, including 1,800 different types of wine, 600 sorts of cheeses, etc.

In the USA, a wide assortment of different processed organic products is produced (same as above). America has increased the importing of organic products, so there is an opportunity for other organic food exporters which would like to be present on this market.

One of the biggest and the most important completely integrated organic store chains on this market is, as mentioned before, the Whole Foods Market and the Wild Oats Market.

2.5. Basic features of organic food production and the german market Germany represents the largest organic food market in Europe. The orientation of German

consumers towards using organic products in everyday consumption opens new spaces for all manufacturers from other countries, due to the fact that domestic production is insufficient. Namely, the annual turnover reaches 900 million Euros, and represents about 1.7-2.2% of the total food market. The tendency in consumption increase is about 10% per year (Yussefi and Willer: Organic food consumption in Germany, 2003, p. 24).

In Germany, the market channels for this type of production are equally represented in conventional and specialized shops, as well as in direct sales. The specialized shops are market leaders and through them, some 36% of the production is placed (Furemar, 2007, p. 32). The conventional shops sell about 35% of organic food, and 29% is sold through direct sale channels.

The trend of organic food sales in specialized shops continues in a satisfying tempo. Only during 2006, some 40 new objects were opened. Also, discount shops specialized in organic food have appeared in the meantime (Notiser, 2006, p. 18).

German consumers are considered to be some of the most demanding in terms of organic food quality. Special attention is paid to transport, design, and processing. It is required that each new manufacturer should inform the consumers of the manufacturing methods, from the soil to the water used for irrigation. The fact that the water used for irrigation should be “food grade”, meaning good quality, says much about the seriousness of the market and the big effort of the manufacturers to claim a space on it.

The frequency of organic food purchasing in Germany is estimated at 32% of the population (Lohr, 2001, p. 73). These are mostly consumers which are in the group of regular organic food buyers. Considering the fact that the prices of the organic food are generally lower compared to other countries, the consumers are less willing to spend their money irrationally. Thereby, this may be a warning to the manufacturers in terms of the quality level. Occasionally it happens that an amount of

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organic food is returned, due to differences in quality. Simply, there needs to be a striving for perfection, something manufacturers and providers from Serbia must keep in mind.

2.6. Production and the organic food market in serbia Organic food production projects in Serbia are mostly innovative. The total fund of arable land in

Serbia is about 4.2 million ha. From that amount, 6,000 ha are already cultivated for organic food production and 9,000 ha have implemented works for the preparation of oil for that type of production, so soon there will be about 15,000 ha. This is by no means a big number, but it is important that it is a beginning and that improvement will ensue. However, if we compare this with the European average, it is 13 times less.

Regarding the structure, organic certification of soil is carried out on 2.400 ha. There are 2.155 ha under conversion (transferring organic standards). If we consider that Serbia has a huge experience in crop production, that it has good climate conditions and land potential for organic food production, it can be said that it has a good base for a dynamic production development.

In order to obtain a certificate for organic production, the soil should not be treated with chemicals for at least three years. Instead, it should be treated and primed with organic fertilizers, either biological or fluid, and furthermore, recently, great results have been obtained by soil treatment with zeolites. These are minerals which, as great absorbers, reduce the time of soil purification. Serbia is rich with zeolites, and they are also among the best in the world, nearly on the same par as those from Australia.

In the report by the Ministry of Science and Environmental Protection for the year 2002, it is claimed that 651,000 ha are fit for organic production. On the sample of 868ha of the examined land, satisfying results have been observed, meaning there are no heavy metals, pesticides, or residues of classically produced mineral fertilizers. Moreover, the soil is not polluted or acidified. This especially relates to hilly and mountainous areas, and brands can be created such as: “Ivanjica potato”, “Zlatibor prosciutto”, “wine from Rajac breweries”, “Futog cabbage”, “Leskovac paprika”, etc.

If, on the other hand, we look at the development concept of organic production, we can ascertain that such an approach can reduce the differences between our underdeveloped or less developed areas and those which have a highly developed conventional, and now also organic food production. The dispersion of organic food production would significantly impact the export products’ performances, which would, via constant production improvement (by way of educating manufacturers) exert some influence on consumer awareness and the potential habits in the consumption of this type of effective agricultural production.

However, Serbia is deficient in knowledge of the work organization system, and not only in the mentioned activity. Namely, organic production requires an exact division of labor, from production to consumption. Researchers from this project were pleasantly surprised by the realization that there is a huge interest for interest-based associating. Not even the start-up production funds were a problem. The manufacturers, or future manufacturers, only insisted on the facilitating of placements. They had their own resources for the purchasing of the machines and devices, and are ready to reimburse the experts which will follow the annual production on all levels (there is a possibility of three harvests per year in certain production areas). As the winegrowers are recompensing enologists as well, they can also remunerate experts for insight into field and vegetable crops. Moreover, some 20,000 to 40,000 people of different professional groups can be employed on these projects, from the primary production to the market and products consumption.

The biggest percent of the land under organic production in Serbia grows vegetables (about 70%). Vegetables are grown on the farms which are not highly specialized, which in effect are the majority of the small farms. The normal use of these products is about 500 g per person and in Serbia, this amount is about 150-200 g. Due to a lack of basic vitamins, metabolic diseases occur, and it is a well known fact that nutrition impacts human health. Also, vegetable production is located in the valleys of the major rivers as well as in the lowlands and nearby cities, where there are shopping malls

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which trade with the largest amount of these products. The highland areas reduce the types of vegetable crops which can be grown, but the microclimate in those areas reduces the appearance of some diseases and pests which can cause big problems in these areas.

3. STANDARDS, CERTIFICATIONS AND ACCREDITATIONS In 2006, the institutional frameworks in the world had a very important task in the area of

developing legal regulations for organic agriculture. The process of revising UN Rule Book 2092/91 about organic agriculture attracted the attention of experts and international institutions. The adopting of this document has enabled more than 60 countries in the world to benefit from the Law on Organic Manufacturing, including Serbia.

Within the current activities, 395 organizations around the world offer services for certifying organic food manufacturing. Most of these organizations are in Europe (160), in Asia (93) and in North America (80). The countries which have the largest number of certifying bodies are the USA, Japan, China and Germany. Numerous certifying bodies act outside of their mother country, 40% of them are confirmed by the European Union, 32% possess 180 85 (code) accreditation, and 28% are accredited on the basis of the US national organic program.

Considering the fact that there is no unification of accreditation documents, this represents a huge problem in further commerce development, market development as well as in establishing trust between the various factors on the market. Thus, this is the reason why the Accreditation Program of IFOAM which estimates certifying bodies according to IFOAM norms (the basic standards of organic agriculture) is an important initiative for international harmonization. At this moment, 32 certifying bodies which act in more than 70 countries around the world have accepted the process of IFOAM accreditation. Also, recently formed was an international body for harmonization and uniformity in organic agriculture which as its goal the achieving of a general consensus on the harmonizing of private standards and regulations with those issued by the governments of certain countries and the world at large.

4. CONTEMPORARY ACHIEVEMENTS OF CHEMICAL SUBSTANCES USAGE IN ORGANIC FOOD PRODUCTION

In order to protect plants, control diseases, pests and weeds, the allowed products in organic

production are the following: botanical pesticides; soaps; oils; propolis. Various: pheromones, bacterial and viral products, mechanical methods, powder, clay, water in

which soaked insects, tree bark, etc. are soaked. Propolis has antibacterial and antifungal features and is used as an insecticide (by numerous Italian and German eco fruit growers and winegrowers).

Table 3. The effect of propolis against diseases and parasites in fruit growing.

Fruit Diseases or parasites Usage

Citrus Mold fruits Before or immediately after harvest Scale hosts Coat attacked branches Olive The olive fruit fly Destruction of fly’s eggs Scale hosts Coat branches with propolis oil Peach Leaf curl pathogen The appearance of symptoms Vine Grey mold The appearance of symptoms

Mineral based preparations; Aqueous solutions Alcohol solutions Hydro-alcoholic solutions Hydro-alcoholic solutions mixed with colloidal sulfur

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Propolis oil For the protection of most crops, commonly used is a mixture of hydro-alcoholic solution

with the addition of egg white and soya bean lecithin (0.125-02%) with colloidal sulfur. The treatment is conducted every 10 days during sunset as a fungicidal and insecticidal agent.

Various - The ash of insects and other animals: before application it is recommended to mix it up with sand and thus there is a bigger effect in preventing weeds and pests. Also, the water in which the insects and the bark of some trees were soaked (such as oak, walnut, apple, and others) was also used. Here it is more important to take the tree bark which harbored different types of lichens, etc., as it clashes with the disease agents. Bacterial and viral preparations in the fight against insects are based on insect susceptibility to metabolic products, as for example mz. Bacillus thuringiensis against corn insect pest, apple moth, cabbage butterfly, mosquito, etc. Application: treatment of the plants with the spores and crystals in the period of larvae formation. After entering the digestive tract, it causes a paralysis of the larvae which prevents further consumption and leads to death. Opinions about application of the viral preparations are divided.

In organic production, in the fight against weeds, three basic factors were applied: 1. Prevention (weed reduction by applying numerous prevention measures); 2. Direct measures of control. The decision time regarding the applying of the control measures through implementing

information technologies focused on fighting against weeds. 1. Prevention - Prevention measures are an important factor for an effective fight against weeds

observed for a longer period. To integrate different measures and procedures of weed reduction, it is necessary to focus attention on them. These measures and procedures have to preclude a renewal of seed reserves and other reproduction organs of weeds, and their expansion in field areas. Thus, in protecting cultivated land areas from weeds, all measures which prevent weed seeds on cultivated land are taken into consideration.

2. Direct measures of control - Mechanical; chemical; physical; biological.

Tabela 4. The effect of propolis against diseases and parasites in fruit growing

Material Basic use When they are applied How they are applied Compost Fertilizes the soil, increases

fertility, suppresses weed, heats soil

During planting and year round

Cover the plant once or twice.

Mown grass Fertilizes the soil with nitrogen and organic matters


Some 1-4 cm around the plant.

Litter Fertilizes the soil, suppresses weed, regulates soil temperature

During planting and as a winter cover

In a 3 cm layer.

Newspapers Suppresses weeds, retains humidity

During planting Fasten with soil or organic mulch.

Pine tree needles Suppresses weeds, is effective against fungal diseases

During planting and as a winter cover

In a 2-4 cm layer, is not used for plants which do not like acidic soil.

Straw Fertilizes the soil, suppresses weeds, cools down the soil

During planting and as a summer cover

In an 8 cm layer around the plant, but not touching it. The best is oats straw.

Scrapings, wood chips and chopped bark

Suppresses weeds, cools down the soil and retains water


It is best to compost it prior to use, and it is used in 1-2 cm layers.

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5. INITIATIVE PROPOSAL FOR THE REGIONALIZATION OF ORGANIC FOOD PRODUCTION IN SERBIA

Specific climate conditions in Serbia create opportunities for the regionalization of certain

organic products production, similarly with vineyards, plums, raspberries, etc. Basically, raspberry and also plum and paprika require adequate soil structure for maximum yields, and Serbia has the needed prerequisites. The areas on which organic food production is organized also consider the possibilities of two annual harvests. It is certain that mountain areas cannot have the same conditions as the flatlands, due to, for example, energy consumption. With that type of saving, we only can improve the competitiveness of our product, and that is the reason why we have come to the idea that certain regions can be declared as carriers of the brand. For example, the production of peppers in the Leskovac area has a better quality than the production in some other region of the country which has no conditions for the same type of production. Also, the pepper known as ‘aleva paprika’ from the area of Novi Knezevac does not have a certain quality related to the content of vitamin C in industrial production, and the same is valid from the cabbage from Futog, as already mentioned. In fact, all agricultural products, selected by the types which are currently bred in Serbia can have the features of the region of their origin. What can occur, however, is the problem of the current state of ecological pollution in the environment. Thus, it is necessary, before the start of any possible investment, to carry out an analysis of the soil, and then decide about the possible production and which one which is demanded by the market.

As an example, let us take the situation in the world. Namely, on the 62 million ha of uncultivated land, the following fruits can be found:

- Bamboo shoots (63%) - Wild fruits and berries (21%) - Different kinds of nuts (19%) Research has shown that in Serbia organic juniper can be grown on uncultivated land, and

this kind of breeding can make Serbia a leader in the world. In regards to organized production, there is a lack of organic seeds and protective measures.

Also, there is a need to constantly follow the latest achievements in the world, as well as all marketing and market activities.

For some years, the Organic Food Manufacturers Association has been following the expansion of ecological associations dealing with organic food production networks. Very significant is the data which shows that, for example, the total demands for organic fruit on the Belgrade market were bigger than the offer of organic fruit. This suggests that the population has started to be aware and is oriented differently in regards to organic food consumption. There is also a raised awareness of the manufacturers that certain articles from their production area can be sold on the domestic market as well.

This kind of production strategy supports the fact that it is possible, through organic production, for poor regions to take up a position and role which belongs to them, based on nourishing land and a healthful environment. By establishing a professional link with powerful institutes (fruit, vegetable, organic food, etc.), science could, together with manufacturers, contribute to a high quality production and a creating of a national trade mark under the recognizable title Made in Serbia.

6. LEGAL REGULATIONS AS A PREREQUISITE FOR APPLYING THE ORGANIC FOOD

PRODUCTION LAW In 2006, the government of the Republic of Serbia enacted the Law on Organic Food Production

and Products. This law clearly defines the conditions for organic food production and for other products which are produced by organic production methods. The law also regulates the issues related to the producing, storage, transportation, marking, decelerating and marketing of those products.

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Certification and recertification, and other issues related to the mentioned economic activity are stipulated by this law.

Also, a significant part of this issue is regulated by special regulations regarding organic production. The law has as its goal the regulating of the issue of aligning the products with the confirmed production procedure, as well as consumer protection, thus setting the mark which clearly shows the way and the methods of organic production, specifically bearing in mind the protection of the natural resources from pollution, as well as long-term maintenance and the increase of soil fertility, biodiversity preservation, and as a positive result of all these activities, sustainable socio-economic rural development.

It is necessary to create such a system of organization and procurement of products and raw materials, as all this should represent the interest of organizations via which a higher price could be carried out by their collective appearance on foreign markets. Thus, the international market would become more and more attractive for Serbian production, and we could focus on the comparative advantages which we have at the moment related to the countries in southeast Europe and Asia (Bulgaria, Turkey, etc.).

The certifying of laws is directed toward those organizations which are authorized by the Ministry of Agriculture. In turn, the Ministry keeps an Organic Production Register which inspects the certifying bodies and suggests measures for organic agriculture development.

In the world today, there are 32 certification bodies which act in more than 70 countries around the world, and which recognize the accreditation processes of IFOAM (International Federation of Organic Agriculture Movement) which in turn is recognized all over the world.

Otherwise, current research shows that we are in an inferior position regarding knowledge about modern production and organic food usage. Thus, it is necessary to systematically work on the training of new personnel, using specific courses and professional institutions. Of course, this entails creating new programs, textbooks and other specified literature. In the so-called ‘good old times’, seminars for consumers as well as experts were organized. All this is especially important regarding the use of standards. Also, we consider that it is necessary to continue with constant activities on harmonizing with EU standards, as well as the standards of IFOAM. We can recognize the standards of USA, Japan, Canada, Switzerland, as their standards can be equivalent to domestic standards. Thus, this is the reason for founding a basis of our orientation on the very demanding EU market of organic food.

7. ECONOMIC AND POLITICAL MEASURES FOR THE IMPROVEMENT OF PLACEMENT

PRODUCTS ON DOMESTIC AND INTERNATIONAL MARKETS - THE STATE AS A PARTNER In Serbia, small and medium-sized companies can be some of the main bearers of these

activities. About 65% of them are engaged in the service industry, and some 35% in manufacturing. And that percent should be turned towards production to avoid the risk of market loss or state protectionist measures on whose markets the organic food is placed. The newest data from the Chamber of Commerce of Serbia shows that small and medium-sized companies in Serbia participate with 50% in importing of different products, and 45% in exporting. In a very small time interval, these number values can be changed and Serbia could become a large exporter of organic food. A good example is the total export effect which Serbia realizes within CEFTA. But, as the orientation of Serbia is the European Union, the highest consumption of organic food occurs in that association of European countries. As it is known, numerous Serbs of the second and third generation work in EU countries, people who may wish to spend their pre-retirement days in their mother country, perhaps doing some light jobs. These projects could be very significant for their health, extending their working lives and helping them to benefit from this production. In this context, we have paid special attention to the remittance of our workers from abroad and, eventually, the engaging of those resources on organic food products. The public secret is that due to the economic crisis and bank failures, a large part of those resources are kept privately, and thus this will be our target group for investment offers. This is the possible remittances method:

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In billion Euros - 2004.................................................1.9 - 2005.................................................2.2 - 2006.................................................2.5 - 2007.................................................2.6 - 2008.................................................2.6 - 2010.......................................about 3.0 - 2012.......................................about 5.0 Source: National bank of Serbia

In the last five years, foreign currency earnings from the total remittances were 11.8 billion

Euros (Source: NB of Serbia). In effect, Serbian citizens sent most of their money via informal channels, which is a way of avoiding paying high banking fees. Most of the money comes from Germany, as this is the country where most Serbian guest-workers live. Data also shows that most of the monies come from Ireland, as the least expensive money transfers can be enacted from this country. According to the German Society for Technical Cooperation data, some 400,000 Serbs send money to Serbia by remittance. During this year only, about 243 million Euros were remitted from Germany alone, and 3 more million ensued from pension funds. Research by the World Bank shows that the same amount of money also came through informal channels, so the total remittances which come from Germany are about a half billion Euros. On the other hand, according to research of the German GTZ, more than 87.5% of the respondents sent money as financial help for their relatives and friends, and one quarter financed their real estate property in Serbia with the money. This given data is sufficient for the existing economic diplomats to start becoming active, as this kind of project represents a challenge and incites constant marketing activities.

7.1. State subventions and government support The fact is that developed countries give support to their manufacturers to develop their

product and to win over organic food markets. Moreover, the European Union subsidizes 600 Euros per ha for one-year crops in a five-year production deal. Also, for perennial agricultural crops, the European Union subsidizes 900 Euros per ha (Decree no. 125/99).

It would be very optimal to be able to access EU funds for supporting Serbian production, and earmark them for organic food production. The previous support for Serbia was not a great amount, due to the current financial situation Serbia is faced with. It is likely that there will be some of the mentioned support during the next period, but it is very important that there is some interest of certain ministries, in the aim of following that direction. The bottom line is that we have the personnel for this type of production, and it is left to us to define the strategy of the development of this type of economic activity. By consulting manufacturers, we have come up with the following optimum values which can be shown by these parameters:

o 200 euro/ha for the costs of certifying o 600 euro/ha for biological protection equipment o 800 euro/ha for increase of labor costs o 350 euro/ha for marketing costs One of the positive things is that, during the current year, 4,600 farmers have received 26

million Euros of subvention loans. By submitting this research to the Scientific Society of Economists, we did not come up with the data which part of this amount is being directed towards organic food production, and yet we found out that a part of the funds has been approved for this production.

In regards to taxes, this could amount to some 8% in the initial production stage. And also, marketing activities could be taxed to the same amount. In this area, information about the value of certain articles is very important, but on the other hand, it is also relevant to protect human health by using organic food products.

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Also, the margin which belongs to the trade for covering all activities should also be determined. At the moment, it is from 30 to 50%, what is not in favor of increasing organic food consumption. In general, the margin should be limited to 25%, as it would be a good stimulant for consumption, if the desire is to direct most people towards organic food usage at least once per week, and also, taking into consideration the fact that the average salary in Serbia is currently about 31,500 RSD.

In the same context, the initiative launched by the Organic Food Manufacturers Association for markets and shops to take up 25-30% of the capacity for organic food products is also a positive one. Namely, there is a big stacking up of the organic food price, as certain markets have fixed the price of the article per m2, though there is no real need for this. The cost of being on the shelf will for sure be lower with increased sales. Here also there should be an estimate between the market and the manufacturer, so that a joint interest can be found. This is due to the reason that the longer the organic food remains on the shelf, the more this dislocates the renewal of the production cycle and work inefficiency.

Furthermore, in regards to planting material, there is a certain tradition in Serbian production. This is the means by which the state, via its measures and stimulants, manages the division of the planting material to minimal prices, helping the manufacturers of the planting material thus, as well as those who use that material in the further reproduction process. This is also a way to influence the ongoing initiative on regionalization and direct the production of the planting material according to soil composition and the climate conditions in Serbia. Also carried out can be planning as an essential factor of prediction of future happenings in this sector of production.

Procuring machines and equipment can be done without customs and other similar state policy impositions. That factor could be avoided as the newest EU negotiations show that importing products without big fiscal and customs impositions is now possible from these countries.

In concerning credit arrangements, it is sure that low interest rates, such as they are in the West (1.5-2.0%), can have a positive impact on procuring modern equipment and planting material, if they do not exist already. For credit lines directed at organic production, a grace period of 3-5 years would be appropriate. That period would depend on the credit loan amount and its purpose. For plantings up to 5 years, the calculation shows positive results, as the biggest amount requires an initial stage – setting up greenhouses and the appropriate equipment.

7.2. The market - domestic and international The increase of product presence on domestic and international markets involves good

organization and marketing, as well as good planning. An indiscriminate offer could endanger production in Serbia, especially in the area of balance of payments, and in the importing of certain components necessary for production in Serbia. The Serbian organic food market has just started to expand, as, simply put, there is a category of people who cannot afford these products. Thus, it would be optimal if the Serbian market expanded by at least 20% per year.

In regards to the international market, complying with the regulatory standards is the sine qua non of our presence on it. In addition, the prices on the international market are attractive for our manufacturers. And yet, it is without doubt that only a serious offer and good quality can guarantee larger incomes and the stability of the production as well as the offer in the longer term. This is due to the fact that now we are in the phase of conquering the market and some specific market segments, and importing technological and technical equipment would have to be harmonized with the latest achievements. Until today, the rule was to sell us technical equipment of the second and third generation. As the situation stands now, one step to the EU could allow us to obtain solid technical equipment and machines. With comparative advantages, where the most important role, among others, is taken up by our geographical position, we could be competitive in all elements of calculation parameters. In the same sense, it is not unreal to expect that this country can, in five years, reach an export placement of 300-500 million Euros. The total effect of the exporting of products, then, would be more than 2 billion dollars.

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Also, there are many companies which are now realizing significant export potential, the best known being the following: Foodland, Zadrugari (raspberry growers from Ljubovija); BMD (forest products for export mushrooms, as well as spices) from Arilje; Marni (sweets), Lion Food, Suncokret (oil and seeds) from Hajdukovo near Subotica, and Status from Svrljig (premium cider, wine and spirit vinegar).

7.3. The interest organization of the manufacturers as a basis for joint participation on

the international markets The newest law on interest organizations should allow the harmonizing of the temporary partial

interests of the manufacturers and the merchandisers as well as creating the foundations for a joint participation on the international market. There were many such experiences in the past. Due to a disorganized performing on the international market, everybody was at a loss, the state as well as the manufacturers. Unvarying repeated events with raspberry growers demonstrated our individual incapability to align interests. It is for sure that it is necessary to cease with this type of behavior and organize such an organization which will allow everyone taking part in the chain of production and traffic to obtain the necessary resources for further investments and increase of production.

The beginnings of the interest organization have already been achieved. In Serbia, a couple of organized associations based on mutual interest have been organized, whose leaders are those in Svilajnac and Belgrade. It is well known that the Subotica association is organized well, as well as the one in Kragujevac, and a couple of smaller ones from the areas of Ivanjica and Arilje. These associations have no mutual coordination, and probably when organic production becomes more serious and they encounter problems, they will then call the competent institutions for help. Nowadays, it is imperative to connect the related production activities, on one side, with the interest organization, on the other, and to rely on systems or bigger manufacturers which have the possibilities for technical, technological and human resources which follow modern achievements in the world. More will be mentioned in the further text about the Association for Organic Food Production from Svilajnac and the association Aura Vitae from Belgrade, which are distinctive by their approach to specific forms of the organic food production.

Basically, this concerns a special approach which has as its goal the revitalization of Serbian features, as the age structure in this country is not appropriate. Unfortunately, as a nation, we are growing old. Relevant data shows that the average age in Serbia is 41 years of age, and that the mortality rate is bigger than the birth rate, and thus, with this dynamic of revitalization, it can be concluded that by the year 2050, as a nation we will slowly disappear. With all the blights which the young generations have been facing, it is certain that with all the possibilities which underlie the mentioned economic activity, employment for 50,000-70,000 people could be provided. The potential for knowledge is not lacking, but only an efficient organization of work, distribution of competences and the harmonizing of higher further education in the area of organic food production. This should in effect include all the multidisciplinary elements, from agronomy, to economy, as well as marketing, and of course, the market as a regulatory factor of supply and demand. A consequence of all the mentioned should be a positive calculation, as well as constant marketing-oriented thinking.

CONCLUSIONS 1. Modern global trends regarding healthy nutrition and the production of those kinds of

products are becoming more and more significant. 2. In this context, Serbia has taken appropriate measures and it is the first time for us not to be

late on the world market. 3. The modern diseases of mankind (cardiovascular diseases, cancer, diabetes, etc.) show that

stronger preventive measures must be taken in the area involving the using of these products in nutrition, which will contribute to its stable development and maintenance.

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4. In Serbia there are conditions for practicing organic food manufacturing of the most different scope and types of products.

5. From 4.2 million ha, around 610 thousand ha is available to be, in a short timeframe, directed towards organic food production.

6. Today in Serbia, organic food is produced on about 15 thousand ha, which represents a mere 0.3% of arable land.

7. With an appropriate upgrade of the system conditions of economic activity on the side of the state and eventually, by establishing partner triangular relations (manufacturer, market, state) exporting and a foreign exchange flow could be achieved.

8. The organic product prices on the domestic and international markets are higher by about 30-40% compared to the prices of conventional products.

9. Human resources for this kind of production do not exist. 10. There are also all types of planting materials. 11. It is necessary to carry out a regionalization of the production of certain crops, as it is

already done with viticulture, raspberries, plums, etc. 12. The support of the system’s economic activities (subventions and other support) can be

done with the help of the following parameters: A. 200 euro/ha for the costs of certifying B. 600 euro/ha for biological protection equipment C. 800 euro/ha for an increase of labor costs D. 350 euro/ha for marketing costs

13. A tax amount of 8% in the beginning of the production process. 14. A tax amount of 8% for marketing and promotion activities. 15. The mark-up should be limited to a maximum of 25%. 16. Display of goods on the market shelves and organized green markets should be provided at

30% of the available retail space. 17. The price of m2 of retail space should be in affirmative function, and not the source of big

profit for the owner of the retail space. The market and the manufacturer have to create partner relationships, as well as to accelerate the processes of capital and goods turnover, and allow joint investments in production.

18. The interest rate for the procuring of machines and planting material should be around 1.5-2% per year.

19. For larger investment activities in the production part, a grace period of 3-5 years should be provided, depending on the type of production and the beginning of product exploitation.

20. The organization of organic production products should be accomplished through interest associations of the cluster type, which, with joint policies, can compete on the international market.

21. Constant work on connecting science with specialized institutes and manufacturers. Also, in promotional activities, there should be an effort to educate and inform the market and the consumers about the value of organic food on the health, protection and environmental revitalization plan.

22. The goal group to which investments in organic food production should primarily be targeted is the families of our guest-workers from abroad, which receive income.

23. Priority in crediting and subventions should be given to those households which own agricultural land, and which can be used for a planned production of organic food.

24. In the second turn, credit lines should be offered to the unemployed on the list of the National Employment Service, if they come from families which possess arable land. With land ownership and a rejection of production work, they could be removed from the National Employment Service unemployed list.

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REFERENCES 1. Dimitri C., and Greene C., (2002): Recent growth pattners in the US organic foods market, Agriculture Information

Bulletin No. AIB777, Economic Research Service, Service United States Department of Agriculture. 2. Gauthier R., and Paison F.J. France: Organic Food Report, Global Agriculture Information Network, GAIN Report –

1071, United States Department of Agriculture 1999. 3. Kortbech-Olesen, R., (2002): The United States market for organic food and beverages. The International Trade

Centre, The United Nations conference on trade and development, World Trade Organiyation. 4. Lohr L., (2001) Factors affecting international demand and trade in organic food products. Outlook Report No.

WRS 011, Economic Research Service, United States Department of Agriculture. 5. Rural Solutions SA, (2003): The market opportunities for organic products – appendices Discussion paper for the

Premiers Food Council – Innovation working group. Government of South Australia, Primary industries and Resources SA. 6. Yussefi M., and Willer, H. (2003), The World of Organic Agriculture Statistics and Future Prospects 2003.

International Federation of Organic Agriculture Movements. Internet: 7. http://orgprints.org/544(01/world.of organic.pdf 8. http://www.fas.usda./gov/gainfiles/199910/2554502.pdf 9. http://www.ers.usda.gov/publications/wrs011/wrs011j.pdf 10. http://www.pir.sa.gov.au/byteserve/showcase/ind_devel/the_market_opportunity_organicproduct_appendices.pdf 11. http_//www.ers.usda.gov/publications/aib777/aib777c.pdf 12. http://www.intracen.org/mds/sectors/organic/foodbev.pdf 13. http://www.poljoberza.net/autorskitekstovijedan.aspx?ime=AG0054htm@autor=11.

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Svetlana Sorokina1

ELIMINATING THE KEY PROBLEMS STUDENTS ENCOUNTER SUMMARIZING JOURNAL ARTICLES AND WRITING ACADEMIC PAPERS

Abstract Abstract. The contemporary society has an urgent demand for a well-educated professional capable of

self-actualization, self-development, independent thinking and dealing with different sources of information. The article addresses the experience in training the forth-year students of management department to analyze and summarize journal articles and write academic papers in English.

Purpose: The paper aims to reveal the main problems the students encounter completing their assignments. The research results help to systemize common mistakes students make analyzing and summarizing journal articles and in the sequel develop work out the most appropriate approaches to eliminate the problem.

Design: The analysis is based on the observation of the students’ work on their papers and the assessment of the papers themselves as the result of the students’ efforts.

Findings and Originality: The findings demonstrate that the key difficulties the students face pertain to their knowledge of academic genres and their ability to apply critical thinking skills. The research outcomes may help teachers of English practicing in academic writing training to anticipate and rectify students’ mistakes, and assist the students and post graduate students seeking to improve their academic writing skills.

Keywords: scholarly text categories, publishing conventions, critical thinking, argumentation, analytical approach

Research type: analytical viewpoint JEL: I2 Education and Research Institutions

INTRODUCTION Social, economic and political changes have an immediate impact on the system of higher

vocational education setting new requirements for developing professionals. According to the Concept of Federal Education Development for 2011-20152 and the Concept of Long Term Social and Economic Development of Russian Federation by 20203 the content and technologies of higher education need to be aimed at building specific knowledge, skills and abilities necessary for carrying out professional duties and building a successful career. Consequently, the system of higher education needs to provide graduates not only with the sufficient amount of specific knowledge but also impart certain techniques letting them obtain necessary knowledge on their own. Since knowledge extension and updating presuppose search for new data and consequently professional communication for sharing experience, modern teaching technologies aim to develop communication, team working, and IT skills. In addition an increase in academic mobility strengthens the significance of foreign language leaning not as an end in itself but as the means of gaining and processing data, while the basis for accumulating, storing, and transmitting knowledge is accepted to be a written text.

Relating to foreign language teaching, written texts used to be mainly exploited for developing verbal communication skills. However, recently the interest has shifted towards written communication due to the growth of research activity in universities. It is generally acknowledged that

1 Svetlana Sorokina, National Research University Higher School of Economics, Russia, Email: [email protected] 2 http://www.garant.ru/products/ 3 http://base.garant.ru/194365/

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the results of investigation are usually reported in writing that requires the ability to clearly and logically deliver ideas, set problems or hypotheses, provide well-grounded arguments and reasoning. Thus, such areas of language teaching as developing data processing, interpretation, and summarizing skills have become really important since scholars as well as graduates and post-graduates are expected to be involved in writing essays, proposals, summaries, literature reviews etc.

1. SCHOLARLY TEXT PECULIARITIES Scholars have considered the issues of text, its structural and semantic aspects from various

perspectives. According to Prof. Koshevaya (Koshevaya 2012: 124) being the most comprehensive speech unit, any text regardless of its genre is perceived a close completed system, synthesis of perspective and a pragmatic aspects, i.e. text content, text semantics, text composition, text structure, semiotics. The definition emphasizing both structural and semantic aspects of text building that occurs at three levels is provided by Prof. Sviridova: 1. correlative level as a logical and intensional level where the link with the object of thinking is established; 2. corrective level as a language level where all language tools at a certain period are presented; 3. elective level as a speech level where the synonymous language tools are analyzed and the most appropriate ones are selected by the text author with the purpose to communicate the information with the highest accuracy possible. (Sviridova 2011: 63-66)

Focusing specifically on the text study Prof. Grinev-Grinevich S.V. (Grinev-Grinevich 2012: 64-76) suggests distinguishing the following levels: 1. intentional - where semantic pillars of a literary composition are defined, 2. linguistic – where the hierarchical usage of various linguistic forms can be traced, 3. architectonic – that serves a basis for the literary composition. Going further, combining linguistic and logical perspectives, Prof. Sviridova maintains that the architectonic level possesses both structural and semantic features correlating with the logical-intensional level. (Sviridova 2011: 63-66). This assertion underlies the present research perspective that considers these levels of abstraction as integral for creating a written composition through correlating the idea with the object and communicating it in the written form where, selected at the corrective level, language forms gain the status of speech units. This process allows for the maximum accuracy of communicating the essence of the author’s message and, consequently, the identity of creating and rendering the author’s thoughts can be achieved.

Given the fact that scholarly text is to comply with standardized rules and regulations typical of the academic writing it should be mentioned that these requirements do not remain unchanged, some of them turn into innovative ones or become obsolete, others are subject to be corrected. This paper considers the invariable requirements aimed at representing the cognitive process structure. Thus, we maintain that scholarly papers tend to be built on a certain system of concepts underlying a particular science; all the premises put forward need to be justified; the arguments are expected to be logically delivered and critical thinking employed. Critical approach presupposes speculation, poly-theoretical description, and interpretation variety that results in varied wording seeking to explain and clarify complicated notions and to justify the author’s standpoint. Prof. Galperin suggested the following categories a scholarly text is based on (Galperin 1981:27):

- information value – i.e. texts seek to communicate various data depending on the pragmatic goals

- integration – i.e. every further text segment is semantically linked to the previous one and there is a linear perception of the information even though there may be some deviations from the main narration stream;

- segmentation – i.e. scholarly texts are subdivided into particular segments within their structure depending on the paper type, the invariable segments are introduction, main body and conclusion; research proposals and article also include methodology and result analysis parts, the main requirement is structural clarity;

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- modality – i.e. the category aimed at the writer and concerned to reflect the writer’s attitude to the potential or actual implication of the data presented in the paper (Tarnikova 1979 : 67);

- prospective exposition – i.e. further facts are declared beforehand letting the reader concentrate on reading, mentally prepare for understanding the message and refer to their knowledge background that is crucial for the comprehension of scholarly information;

- retrospective exposition – i.e. the author refers to the previously presented issues essential for further narrative or for reconsideration in new circumstances;

- accentuation – i.e. the author emphasizes meaningful issues and attracts the reader’s attention with the help of interpreting, clarifying, highlighting with the final aim to convince the reader.

Since there is a lack of direct contact with the recipient in written communication, the importance of clarity, consistency, cohesion and coherence increases. To meet these requirements academic texts employ generally accepted terms, clichés, and lexical and grammar patterns. In addition academic papers intended for publishing have to conform to the conventions of scholarly publishing such as MLA (Modern Language Association)1 applied to papers in humanitarian sciences, APA (American Psychological Association)2 typical of papers in medicine, sociology and economics, CMS (Chicago Manual of Style)3 used in some social science publications and historical journals, and less spread ones such as AAA (American Anthropological Association)4, CSE (Council of Science Editors)5 and others. Whatever the variety of scholarly publishing conventions might be, first of all it is necessary to define the underlying characteristics of academic style of writing. They are as follows:

1. at the lexical level the usage of - terms (e.g. decimal point - in mathematics, balanced scorecard, benchmarking - in management,

fusional language, hedged performative – in linguistics) - iteration within a short context (e.g. A key question in the managerial cognition literature is the

extent to which individuals within organizations have similar or different cognitions. The focus of empirical studies, however, has been on cognition related to industry and competition rather than a more comprehensive set of external and internal factors. Cognitive researchers have also been interested in the connection between shared cognitions and behaviours in organizations. )

- clichés or rather extended word collocations accepted in academic writing (e.g. not devoid of some serious drawbacks, a deviation from the mainstream, root and branch transformation, it should be stated at the outset)

- academic vocabulary (e.g. hypothesize, subsequent, perspective, portray, invariably) 2. at the morphological level the usage of - abstract nouns (e.g. argumentation, concept, importance) - verbal nouns (e.g. evaluation, collaboration, exaggeration) - words of Greek and Latin origin (e.g. academic, heterogeneous, schematic, many words starting

with ph-, ps-, sch- – of Greek origin; nexus, insinuation extricate, intricate – of Latin origin) - passive voice (e.g The data were collected from 105 chief executive officers of Canadian

companies. In this paper, a cross-sectional study using a 3-stage organizational life cycle model… is adopted in the examination of the changes in environmental challenges.)

3. at the syntactical language the predominance of - complex and compound sentences (e.g. Further greenfield ventures provide an option to expand,

increasing the investment incrementally as more information about the market becomes available, allowing firms to create a smaller operation (compared to an acquisition) if demand turns out to be lower than expected, and finally provide a mechanism for abandonment at lower cost than an acquisition (which requires the entire investment be made at the start) if it becomes clear that demand will not materialize.)

1 http://www.mla.org/ 2 http://owl.english.purdue.edu/owl/resource/560/01/ 3 http://www.chicagomanualofstyle.org/home.html 4 http://www.aaanet.org/publications/guidelines.cfm 5 http://writing.wisc.edu/Handbook/DocCBE.html

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- declarative sentences since the key goal of scholarly papers is to report either accumulated or generated knowledge (e.g. The evidence suggests that acquisitions are a good choice only when firms enter markets containing low demand uncertainty and when these firms possess acquisition-based strategic flexibility.)

- noun-based phrases rather than verb-based phrases (e.g. multistage life cycle models; the examination of the changes in environmental, university-based technology commercialization )

Thus, academic text has one central theme and every part contributes to the main point. It uses language precisely and accurately placing emphasis on the information and arguments rather than feelings and personal views.

2. METHODS AND ANALYSIS OF THE RESEARCH OUTCOMES The present paper reports the outcomes of the research devoted to the students’ ability to

produce effective academic text-types among bachelor undergraduates in National Research University Higher School of Economics. The specific aspects focused on were the main problems students frequently encounter while writing their papers. It needs to be mentioned at the outset that among the variety of academic papers the students under research are involved in producing analytical summaries and project proposals, including literature reviews as one of the sections, in English that is being learnt as a second language.

A hundred students’ papers of different types have been proofread, verified, and analyzed and the analysis reveals that the most typical flaw is the misunderstanding of the difference between various types of academic papers. Actually, by the time they start their work on academic papers in English they have gained some experience in writing certain academic papers in their first language. However, the local and international conventions differ; in addition, the only academic written assignment they might have dealt with by the time is an essay that leads to their confusion over the way of structuring their papers, selecting and organizing the information.

Although it is self-evident that any academic paper is expected to be written based on the existing literature related to the subject, in other words reading underlies writing, the process of reading does not serve as a process of decoding and memorization but the students are required to construct new knowledge from the text and critique this knowledge. Thus, it brings critical reading into the foreground as the task both for lecturers and students.

First of all it is necessary to explain to the students that to be critical does not mean to criticize in a negative manner rather it requires to attempt to understand the topic from different perspectives (i.e. read related texts, use their background knowledge) and in relation to the theories, approaches and subject frameworks, to question the information and opinions in the text, and present own evaluation or judgment of the text. It definitely demands an understanding of not only the content of the text but also an understanding of the text’s purpose, the intended audience, the structure. The linguistic knowledge provides for text analysis skills in terms of the ability to separate the content and concepts of a text into their main components and then understand how these interrelate, connect, and possibly influence each other.

When students start their work on the text they are expected to understand the text types, their main purpose and structure. It may help them identify the key premises of the paper. While reading, students are recommended to underline the key information words that are usually nouns, adjectives and verbs, make side notes and record their own thoughts at the time since critical reading is active reading. Information can be also set down in a visual form in a concept map or diagram. Making notes first of all helps engage with the text, keeps focused while reading highlights areas for further development, and enables to locate certain issues, to draw conclusions, to draw links to other research.

In the university EAP course the students use the information elicited from the articles to write either a summary or a literature review that will be included part of their research proposal.

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As far as a summary on a single article is concerned the students generally cope with the assignment. However, when they have to deal with a few articles to process for their paper, and to write a literature review or an analytical summary based on a few articles turns the task seems to be more challenging as by their final year of bachelor program they do not have experience in producing papers of such a format and submit poorly structured draft papers. They feel confused about the approach to combining various views into a unified paper and end up with listing books and articles touching upon their main standpoints.

e.g. It is necessary to start with a book called PMBOK®. The publisher of this book is Project Management Institute, Inc. (also known as PMI). So there is no specific author and lots of people were involved into process of creating this study. The authors give us information about managing in each section of project. The book was a core for the present project proposal, because there, it is possible to find all answers. That book is not just a point of view of some person, but it is synergy of views presented there.

The second book was written by two authors Tom DeMarco and Timothy Lister. They focused on human resources and how to use them in the frames of project management. As they claimed – the proper team is a key to success. They shed light on such important questions as how to hire the right employee….

Such way of presenting information collected cannot be accepted appropriate as the main purpose of the assignment to elucidate and compare the views existing in the literature is not met. Besides such an argument for selecting a book as the basis for the research as because there, it is possible to find all answers cannot be considered a proper justification or at least it is poorly formulated. When students submit papers organized in such a way, they are given detailed instructions on the reading techniques. The focus in this case is placed on developing the skills of synthesizing, comparing, and contrasting through analyzing premises and arguments, distinguishing between facts and assumptions, defining cause and effect.

In addition to the structural problems the research has revealed the following drawbacks diverting the papers from being impressive.

Bearing in mind that summaries are expected to be short, students tend to over-generalize ideas leaving the article’s main premise unclear and ambiguous.

e.g. The present paper deals with some questions concerning the relevance in business and management studies. The problem issues considered present great interest for those who aimed to eliminate the unbalance in the given field of studies with regard to academic and practical gap for last decades. By providing readers with the critical review of the major research the author oversees the problem issue development and describes different approaches relevant to the given investigation sphere Finally, it is necessary to mention, that through analyzing a broad range of scholar standpoints the author arrives to conclusion that the considered question remains up-to-date nowadays and also emphasizes that debates related to the problem discussed will continue in future.

It is one of such over-generalized summaries that generate a number of questions rather than shed light on the issues presented in the article under consideration. The purpose of the article remains unclear as well as the reasons for the research that are presumably reported on in the article. This problem is again explained by the wrong approach to the reading process when students fail to identify the most relevant points in the article and decide to do with general phrases.

If students try to correct the mistake producing a new summary they often overdo it including all details possible since it proves to be one of the most difficult tasks to maintain the balance between being summative and informative enough. It occurs that analyzing articles students fail to select the most meaningful standpoints but include irrelevant issues.

Being requested to pursue the academic writing style the students understand it as making the delivery as complicated as possible it leads to making their papers overcrowded with clichés, sophisticated words and expressions which sometimes do not match the context.

e.g. It is impossible to overestimate the extraordinary importance of their contribution since the study provides a window into the complex nature of value creation in e-business and offers a model of the

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sources of value creation, grounded in the rich data obtained from case study analyses and theoretical literature of entrepreneurship and strategic marketing.

Such approach impairs sentence structure and, consequently, complicates the narration that inevitably results in the deterioration of the comprehension process.

The further analysis at the lexicological level has demonstrated that students might misuse certain words confusing their meaning with similar sounding in their own language, Russian in our case.

For instance, Russian students often mistake the word actual used to emphasize “that something is real not imaginary; true or exact compared with a general idea”1 to render the concept topical, urgent as in Russian there is a word aktualniy/ actualniy that conveys the meaning urgent and sounds similar to the word actual.

e.g Building properly structured system of relationships with customers is one of the most actual problems.

The same misuse occurs with the noun perspective – “a way of thinking about something”2 that is perceived as an adjective with the meaning expected or expecting to be the specified thing in the future in Russian as it sounds similar to the word perspektivniy with the meaning expected. The verb speculate may also cause certain misunderstanding as in Russian the word spekulirovat means to gain an income due to the difference between purchase and sales prices but in academic English it is rather used with the meaning “to consider or discuss why something has happened”3.

The students in some cases feel uncertain with the word problem that has two meanings “something that causes trouble or difficulty”4 and “a question that someone is given to answer as a test”5, i.e. a research question. The word is more frequently used in the first meaning that is why when asked to define the research problem stated in a certain article students may touch upon the research flaws.

e.g. The main research problem is that the empirical literature points inconclusively to any association between business plans and venture performance

In addition to the structural and lexicological difficulties students face the problems of academic communication etiquette that is valued in the academy since it demonstrates reticence, tolerance and respect to different opinions. Without feeling it students may

- use the wrong tone e.g. After defining the role of marketing, let’s clarify how wide the scope of its tasks actually is. - use too many personal pronouns that is not commonly acceptable, though it depends on the

conventions depending on the sciences e.g. For the following reason I have chosen to emphasize this research on the order-lead time

reduction. In conclusion I would like to indicate briefly the main ideas of the research - sound too straightforward e.g. Management of an average company does not pay attention to its marketing productivity (The

statement could have been softened, for example, by adding “does not pay proper attention”) - sound too pretentious e.g. This paper will make a major contribution to gamification practices in marketing. The research outcome will be extremely important for the science development. In order to avoid conflict, release emotional effect, understatements or softening strategies of

less direct statements can be applied as they allow to diminish negative or extremely strong argument and to share the responsibility for the claim. The difference is evident in the following examples taken from scholarly articles:

1 www.macmillandictionary.com/ 2 ibidem 3 ibidem 4 ibidem 5 ibidem

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Table 1. Examples of understatements

Indirect Direct

There may be changes in the composition of women giving birth.

There are changes in the composition of women giving birth.

A common problem in effectiveness research is to equate the construct of organizational with outcomes that may have little to do with the organization or its performance.

A common problem in effectiveness research is to equate the construct of organizational with outcomes that may have nothing to do with the organization or its performance.

In the second case, it is assumed that the manufacturer can approximate the failure function with historical data

In the second case, the manufacturer can approximate the failure function with historical data.

The analysis of students’ performance during academic writing course demonstrates that the

writing process based on the understanding of scholarly text peculiarities, analytical approach, and proper reading and writing skills proves to be a challenging task especially in a foreign language.

CONCLUSIONS In order to help the students prevent potential mistakes first of all it is necessary to give them

clear accurate instructions concerning academic paper variety explaining their main peculiarities and differences. The students definitely need detailed guidelines regarding the publication conventions. It is highlighted time and again that the reading process needs to be active and since the fourth-year students are greatly involved in extensive reading to collect data for their final research paper the above mentioned techniques are defined and explained to them at the beginning of their work on the academic literature.

To enable the students to deliver their ideas in the most impressive way including relevant details and providing proper reasoning within the framework of academic communication etiquette a system of exercises has been developed that train the students

- to analyze the structure of academic texts defining the main parts and their standpoints; - to define similarities and differences in different papers’ structure explaining their use and

justifying certain deviations from the conventional ones (if there are any); - to analyze and speculate on the articles and other scholarly materials with the purpose to

define the author’s axiological perspective and the language tools used; - to transform grammatical and word patterns to match a particular requirement; - to analyze the techniques the author uses to express a certain idea, to interpret it and build

own argumentation The process of reading, analyzing a scholarly article and writing own academic paper develops

high potential skills and abilities. Students definitely benefit from this creative activity since they broaden their mind, gain a certain flexibility in thinking and assessing the collected information. They learn to consider the collected information with respect to the existing theories, possibly in the historical retrospective or prospective view providing well-grounded arguments to justify their premise. Getting involved in such analytical research process students learn to select relevant sources of information, to synthesize, compare and contrast various issues and make appropriate conclusions.

REFERENCES 1. A.A. Ivin. Argumentation Theory. Moscow: Gardariky, 2000. 2. F.H.van, Eemeren and R., Grootendorst. Argumentation, Communication and Fallacies/ A Pragma-Dialectical

Perspective/ Hillsdale, NJ:Lamrence Erlbaum. 1992. 3. F.P. , Alekseev. Argumentation. Cognition. Communication. Moscow, 1991.

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4. Fundamentals of argumentation theory: a handbook of historical background and contemporary developments/ H. van Eemeren, Frans …[at al.]

5. N., Melchuk. Communicative Organization in Natural Language. The Semantic-Communicative Structure of Sentences. Amsterdam/Philadelphia: Benjamins, 2001.

6. I.G., Koshevaya. Text Building Structures in Language and Speech. Moscow: Book House «LIBROKOM», 2012. 7. I.R. , Galperin. Text as an Object of Linguistic Research. Moscow: Science, 1981. 8. J., Swales. Genre Analysis: English in academic and research settings. Cambridge University Press, 1990. 9. J., Tarnikova. English modals a textually dependent category /Linguistiche studien. Berlin. 1979. 10. L.K., Sviridova. «Iteration as an Identity Speech Form in Drama.» Herald of Moscow State Regional University.

«Linguistics».2011. No.6, Vol.2 11. L.K., Sviridova. Role of emotional constructions in realizing the category of identity in dramatic concept of plays.

Doctoral thesis: 10.02.19 Moscow,2004. 12. N.A., Taranets. «Game Ontology in Post-Modern Discourse.». Philology as the Nexus of Knowledge on the World.

Collection of Scientific Papers. Krasnodar: Prosveshcheniye-South, 2008. 13. N.E., Enkvist. Text Cohesion and the Coherence. Cohesion and semantics. Publications of the Research Institute of

the Abo Akademi Foundation, 1979. 14. S.G., Sorokina. «Argumentation in Scientific Research Reporting.» English Education in Russia – Past, Present and

Future: Material of the First International Theoretical and Practical Conference (Taganrog, 28th February 2011) Collected scientific articles/ Edited by candidate of pedagogical science V.N. Nazarova – Мoscow: «Sputnik+», 2011. 72-76.

15. S.I., Gindin. What is a Text as a Basic Notion of Text Linguistics. Text as Sentence Continued. Hamburg, 1981 16. S.V., Grinev –Grinevich. Basics of Semiotics. Flinta Nauka, 2012. 17. T., Dudley-Evans. Developments in English for Specific Purposes Paperback. Cambridge University Press, 2008.

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Laima Jesevičiūtė-Ufartienė1

ACTIONS OF FLOODLIGHTING AND PROJECTING CREATING THE FUTURE OF A BUSINESS ORGANIZATION

Abstract Purpose. The purpose of this article is according to empirical research validate the relation between an

action of the floodlighting and the projecting with development of a business organization creating its future. Design/methodology/approach. This article is equipped with these methods: analyses of the literature

and the questionnaire interview. The quantitative research is made confidently questioning executives of business organizations. In the process of the quantitative research, 113 filled in questionnaires were collected with the required coverage of 96. The methods employed in result analysis were descriptive statistic analyses, correlation analyses and factorial analyses.

Findings and Originality. This article elaborates two of twelve organization’s future creation actions. M. Rac (Рац, 1991/12, 1993) analyzed organization’s future creation actions were prognostication, floodlighting, projecting, programming, planning, scenario making, project implementation, author supervision, expertise, monitoring, organization and management. This article is made to discus peculiarity of floodlighting and projecting in the context of Lithuanian organizations.

There is important to talk about floodlighting and projecting as separate organization’s future actions. This actuality depends on organization’s manager who is in the first place human and has his/her own singularity. Frequently the manager creates picture of his/her organization’s future restricting to his/her creativity with fears and complexes of realization possibilities. This is the reason why some unique ideas might be ignored and rejected. This is the reason why the picture of organization’s future might be very narrow and bounded.

M. Rac (Рац, 1991/12, 1993), J. Kvedaravičius (2006) maintain that in the first place manager has to create picture of organization’s future without any boundaries. Just after that this picture could be reconsidered according to possibility of realization. This is an action of projecting. The floodlighting is linked with creation of ideal organization’s future picture.

This article theoretically and empirically defines actuality of floodlighting and projecting. There is discussed and shown how these two (floodlighting and projecting) organization’s future creation actions are used in Lithuanian organizations. According to research results made by author of this article the tendencies of floodlighting application in Lithuanian business organizations are negative, as the coordination of ideas with management experience is considered the most important aspect of idea creation process. An insufficiently comprehensive picture of organization future is formed. Projecting activity is carried out in Lithuanian business organizations, but all available inner resources are not used exploited, as a tendency prevails that organization future image visualization is to be performed by one person (the owner or the manager).

Keywords: floodlighting, projecting, development, future creation actions. Research type: research paper. JEL classification: D83 - Search; Learning; Information and Knowledge; Communication; Belief; L1 -

Market Structure, Firm Strategy, and Market Performance, L10 – General; L2 - Firm Objectives, Organization, and Behavior, L20 – General.

INTRODUCTION Every organization wants to be efficient and productive. But during this financial and economic

crisis in the World lots of organizations lost their way to develop or even to survive. The World

1 Laima Jesevičiūtė-Ufartienė, Lithuanian Sports University, Lithuania, [email protected]

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organizations have to review their strategies and find how to improve their management. In this process the main subject is leader’s or manager’s mind activity and it’s creativity.

According to M. Rac (Рац, 1991/12, 1993) organization’s future creation actions are prognostication, floodlighting, projecting, programming, planning, scenario making, project implementation, author supervision, expertise, monitoring, organization and management. Prognostication as future creation action was discussed in earlier works of this author. This article is devoted to floodlighting and projecting.

To talk about these two future creation actions is important because the manager’s creativity could be bounded by person himself/ herself. Bounders could harm creation process of new strategy in an organization. Thus an organization might not be able to find new effective way to survive and develop. Thus we have to talk about floodlighting as mind activity without bounders. At the same time we have to talk about projecting as the process of turning creative ideas to reality.

This article develops how floodlighting and projecting actions in an organization are related with manager’s mind activity and development of an organization.

The purpose of this article is according to empirical research validate the relation between floodlighting and projecting actions with development of a business organization creating its future.

This article is equipped with these methods: analyses of literature and questionnaire interview. Quantitative research is made confidently questioning the executives of business organizations. In the process of the quantitative research, 113 filled in questionnaires were collected with the required coverage of 96. The methods employed in result analysis were descriptive statistic analyses, correlation analyses and factorial analyses.

1. THEORETICAL IMPLICATIONS OF FLOODLIGHTING Floodlighting is described as future creation action taking no attention to any boundaries

(Kvedaravicius, 2006). According to J. Gharajedaghi (2006) two products of an interactive modeling are formulation of problems and creation of decisions. Formulation of problems is understood as description of the chaos. Creation of the decision involves idealization process. The problem is that frequently manager creates new strategy of an organization with bounded creativity. This is because he/ she have some fears and complexes thinking about realization possibilities. This is the reason why some unique ideas might be ignored and rejected. This is the reason why the picture of organization’s future might be very narrow and bounded.

R. L. Ackoff (1985) maintains that creativity is stimulated and targeted to personal and organization development while ideal project is made. The creativity of person is bounded by him/her-self. Thus simple situations become into complicated problems. The creativity comes when difficulties have been eliminated. The creativity depends how wide person is able to use his/her mind activity and thinking, how person perceives reality.

On the other hand the floodlighting is linked with analyses and research of a present situation. Firstly, as M. Rac (Рац, 1991/12, 1993) maintained, an action of the floodlighting needs the manager who has to be disappointed about the present situation. For example, if the manager is disappointed about present quality of product, he/she should know how the new qualitative product would look like. According to it and as J. Gharajedaghi (2006) maintained, problems could be formulated in these ways:

1. Formulation of problem as the deviation from norms; 2. The deficiency of recourses (financial, time, information and etc.) According to M. Рац (1991/12) while problems are being analyzed and the future situation is

being described the manager has to use his/ her contemplation and reflection. On the other hand the author of this article thinks that for the floodlighting as for other future creation actions is required the mind activity of the manager. The mind activity includes the contemplation and the reflection, and the intuition, and the perception, and the awareness. As a result of mind activity is formulated a new

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floodlight of an organization which gives an opportunity to make a new and unique management decision.

2. THEORETICAL IMPLICATIONS OF PROJECTING The projecting is defined as rethinking of organization’s picture after it was created during the

floodlighting action (Kvedaravičius, 2006). This means that an ideal picture of an organization is remade according to practical possibilities in reality. This real picture of organization is still enough wide because of the manager’s abstract thinking and his/ her perception of influencing facts. Using the reflection the manager is capable to aware and to feel intuitively his/ her potential boundaries.

M. Рац (1990/6) maintains that the most important is to create something and to move into the future. In this context today’s World is connected with future’s World by using the projecting. This is how J. Jonsom (Рац, 1990/6) describes projecting.

During the projecting action the manager has to evaluate the real circumstances of an idea implementation because the projecting is made for systems and its’ management (Рац, 1990/7). At the same time the manager has to describe essential mechanisms and components for the real circumstances of an idea implementation. Thus the manager has to estimate techniques and methods that theories of management suggest. The manager has to motivate how these techniques and methods could be useful and advisable. Thus during projecting while the manager is using the abstract thinking, the reflection, the intuition, the rational thinking and perception, he/she has to estimate necessity of his/ her selected methods.

3. RESEARCH RESULTS OF FLOODLIGHTING Floodlighting is linked with creativity, retrieval of ideas and capability to disassociate from an

evaluation during creation process of future picture. Having in mind that concept of floodlighting might be unknown, the research questionnaire was made asking about action and used mind activity that usually are needed to do during floodlighting action.

The research was made to find out how the respondent looks for new management ideas. There were considered that the respondent might not make the floodlighting action at all. Thus 78,4% respondents maintained that when they were looking for new management ideas they combined their management experience and knowledge of new management theories (fig. 1). 43,2% respondents maintained that when they were looking for new management ideas they combined their intuition and knowledge of new management theories (fig. 1). Hence there could be stated that in an organization ideas are found and created using manager’s experience. An intuition is not the main and most important factor while creating new management ideas.

Figure 1. Factors of ideas trawl

7,9% respondents commented and suggested their own factors of new ideas trawl. Respondents

maintained that while they are looking for new ideas there were important: To estimate ideas’ realization possibilities and risk;

11.7

78.4

43.2

2.7

0 20 40 60 80 100

I am looking for new ideas without attention to …

I am looking for new ideas combining my …

I am looking for new ideas combining intuition and …

I am not looking for new ideas

%

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Do not pay attention to ideas’ realization possibilities if ideas are implemented using the particular endeavor;

To consult with colleagues, do not trawl for ideas individually. According to Spearman correlation (fig. 2) between separate formulated mind activity factors1

and floodlighting factors that are linked with continual trawl of new ideas, there could be noticed, that for the process of creativity is important intuitive thinking (0,428**, fig. 2)2, rational thinking (0,324**, fig. 2) and reflection (0,352**, fig. 2). Such factors of mind activity as the usage of new management theories, perception, the communication, an experience of the manager and awareness are less relevant for Lithuanian respondents than intuition, rational thinking or reflection.

Figure 2. Correlation between floodlighting and mind activity and its factors and development of an organization

There could be noticed that the mind activity is correlated with the trawl of new ideas thus there

could be interpreted though respondents were not enough conversant with concept of the mind activity, they unconsciously practice the mind activity in management and development of an organization.

Analyzing relation between manager’s creativity and factors of mind activity (fig. 2) there could be noticed that creativity mostly influenced is with intuition (0,658**, 0,669**, fig. 2) and reflection (0,291*, 0,325**, fig. 2).

Generally the creativity is correlating with development of an organization (0,291*, fig. 2). Hence in organization manager’s creativity is promoted intuitive and reflective thinking. This creativity could serve like a force which stimulates development of an organization. Accordingly there could be just interpreted how an absolute thinking, a perception, awareness or a management experience used in creativity process could influence development of individual or organization.

On the other hand after estimating relations between intuitive creativity and development and self-development of an organization (table 1) there could be noticed that development of an organization is linked with self-confidence and intuition of the manager (0,476**, table 1) and an initiative of employees (0,334**, table 1) and heir intention to develop themselves (0,251*, table 1). Accordingly in an organization the creativity could be perceived as a result of the teamwork when the manager and employees together participate in the process of ideas generation or even they estimate and make final decision.

1 Separately factors of mind activity were formulated as results of factorial analyses. 2 Here and further in text the significance of Spearman’s correlation (p) is: * - 0,01 < p < 0,05; ** - p < 0,01.

-0.1 6E-16

0.1 0.2 0.3 0.4 0.5 0.6 0.7

Absolute thinking

Experience of management

Intuition

Rational thinking

Perception Reflection

Awareness

Mind activity

Development

I as a manager continually trawl for new ideas while expanding the business

Our creativity depends on our capability to use intuition

Development

Mind activity

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Table 1. Relation between floodlighting and development of an organization1

Floodlighting Self-development

I as a manager continually trawl

for new ideas while expanding the

business

Our creativity depends on

our capability to use

intuition Development of an organization rely on confidence and self-confidence of the manager

S ,365** ,069 N 100 98

Development of an organization rely on manager’s self-actualize

S ,205* ,081 N 96 94

Development of an organization rely on manager’s trust of his/her intuition

S ,167 ,476** N 97 95

Development of an organization rely on manager’s ability to use real facts

S ,127 ,029 N 98 97

Development of an organization rely on employees’ intentions to develop themselves

S ,223* ,251* N 100 100

As manager practicing knowledge of management I am creating a process of organization’s self-development

S ,202* ,149

N 101 97

Manager practicing knowledge of management motivates to self-develop other organization’s members

S ,281** ,085 N 100 100

Development of organization’s personal resources rely on individual development of every employee

S ,123 ,334** N 99 99

People who have high IQ are able to develop affectivity of their work while they are training their thinking

S ,225* ,256* N 98 100

When we want to create picture without bounders of organization’s future there are important

manager’s intention trawl for ideas continually. There are important manager’s ambitions to make innovative decisions which help to develop an organization. According to the research results (table 1) there could be maintained that on intention to expand the business the trawl of new ideas for an organization might rely on manager’s confidence and self-confidence (0,365**), on manager’s self-actualize (0,205*), on training his/her thinking (0,225*). Furthermore the manager who are trawling for new ideas continually admits that development of an organization requires employees intention to develop themselves (0,223*). In general the development of employees (0,281**) and development of an organization (0,202*) might be effective while the manager is practicing new management knowledge. Hence we may conclude that the trawl of new management ideas during floodlighting action is related with development of an organization and even with its self-development.

4. RESEARCH RESULTS OF PROJECTING During projecting action the new idea is estimated according to realization possibilities. With

references to research results (fig. 3) the estimation of ideas’ realization possibilities is fathered on the job of the manager or owner. 55,3% respondents (31,2% owners-managers, 11,6% managers, 12,5% owners) is thinking that ideas should estimate manager or owner of an organization (fig. 3).

1 Here and further in tables: N – the number of suitable respondents; S – Spearman’s correlation; significance of Spearman’s correlation is: * - 0,01 < p < 0,05; ** - p < 0,01.

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Figure 3. Who is estimating ideas in organization of research respondents? Just 27,7% respondents maintained that ideas should estimate some group of employees. This

situation could be explained by the fact that managers or owners-managers are managing finances that are required for the idea realization. Thus they feel responsibility and are not willing to share it. On the other hand there should be noticed that group-work or even teamwork has more advantages than individual work. The teamwork is able to make more effective results and win synergy in management.

Considering the research results shown in table 2 we could notice that estimation of ideas is related with absolute thinking or theoretical knowledge of management (0,263**, table 2) and related with rational thinking (0,389**) and management experience or using in the practice management theories (0,383**). According to opinion of respondents intuitive thinking is correlated negatively with projecting action (-0,258*, table 2) where floodlight of idea is estimated and enlisted to realization possibilities. Thus we could maintain that while managing and developing organization projecting action is based on consciousness thinking: the manager frequently is using rational thinking and analyses his/her practice and he/she rarely is demanding on intuition or intuitive thinking.

Table 2. Relation between factors of mind activity and realization possibilities of idea

Projecting action

Factors of mind activity

Only after all ideas have been formulated I start to estimate them according to their

realization possibilities

Development of an organization rely on manager’s ability to use knowledge of management theories in practice [ absolute thinking]

S ,263**

N 96

Results of implemented idea are evaluated combining knowledge of management theories with practical experience [management experience]

S ,383**

N 89

Results of implemented idea are evaluated according to financial data [rational thinking]

S ,389**

N 95

Results of implemented idea are evaluated using intuition [intuitive thinking]

S -,258*

N 88

Accordingly analyzing estimation of ideas in the bounders of realization possibilities or

analyzing correlations between projection action and factors1 of the mind activity (fig. 4) there could be noticed that estimation of the idea in the bounders of realization possibilities is required rational thinking (0,251*) and perception and communication (0,295*; 0,279*).

1 Separately factors of mind activity were formulated as results of factorial analyses

12.5

31.2

11.6

27.7

3.6

13.4

0 10 20 30 40 50

Owner(s)

Owner-manager

Manager

Managers from different …

Specially made workgroup

Other

%

80



Figure 4. Correlation between projecting and factors of mind activity and self-development

According to figure 4 there could be stated that projection action requires more absolute

thinking, management practice, rational thinking than unconsciousness or intuitive thinking which is more required during floodlighting action.

0,257** (fig. 5) correlation between opinions of respondents ‘are courses for employees organized in a purpose to develop them as individuals’ and ‘who is doing evaluation of ideas realization possibilities’ let us notice if there are intentions to develop employees as individuals in organizations, the estimation of ideas are made by managers from different levels. If there are not intentions to develop employees as individuals in organizations, the estimation of ideas are made by single manager or owner. Hence there are expected that self-developing employees will take part in management of an organization and thus there will be developed organization’s management. Furthermore those organizations might be more prepared to implement an innovative idea.

Figure 5. Correlation between development of employees and estimation of ideas

realization possibilities in projecting action Analyzing relation between development of an organization and estimation of ideas’ realization

possibilities in projecting action there could be noticed weak but statistically significant Spearman’s correlations (table 3).

0 0.1 0.2 0.3 0.4 0.5

Absolute thinking

Management practice

Intuition

Rational thinking

Perception Reflection

Awareness

Mind activity

Development

Only after all ideas have been formulated I start to estimate them according to their realization possibilities

7.1

% 2

8.2

%

14

.1%

31

.8%

3.5

%

28

.6%

42

.9%

4.8

%

9.5

%

4.8

%

0.00%

25.00%

50.00%

Owner(s) Owner-manager

Manager Managers from

different levels

Specially made

teamgroup

Are courses for employees

organized in a purpose to develop

them as individuals?

Who is doing evaluation of ideas realization possibilities?

Yes No

Development

Mind activity

81



Table 3. Relation between projection and development

Projecting Self-development

Only after all ideas have been formulated I start to estimate them according to their

realization possibilities Development of and organization rely on manager’s self-actualize

S ,271** N 92

Development of an organization rely on manager’s ability to use real facts

S ,311** N 96

Development of an organization rely on employees’ intentions to develop themselves

S ,240*

N 98 Development of an organization rely on manager’s ability to interconnect purposes of organization with available resources

S ,332** N

97

Development of organization’s personal resources rely on individual development of every employee

S ,203* N 97

In the light of these correlations (table 3) there could be stated that there is essential in

projecting action manager’s self-actualize (0,271**) and his/her ambition to improve and to develop him/her-self (0,240*, 0,203*). On the other hand development of an organization more involved with manager’s features of rational thinking which are correlated with projecting action as ability to use real facts (0,311**) and ability to interconnect purposes of an organization with available resources (0,332**).

Hence projecting action is related with development of an organization and this relation might influence self-development of an organization. Thus the manager has to expand his/her mind activity energetically using management knowledge as absolute thinking and responsibly estimate real data and available resources as rational thinking. Furthermore the manager should not forget to listen into his/her intuition because it might explain some things which could not be explained according to logic.

CONCLUSIONS The tendencies of floodlighting application in Lithuanian business organizations are negative, as

the coordination of ideas with management experience is considered the most important aspect of idea creation process. An insufficiently comprehensive picture of organization future is formed. Respectively, correlation analysis confirms that creation process employs rational thinking, intuition and reflection as well. It means that there are rather narrow creativity boarders drawn in floodlighting activity.

Projecting activity is carried out in Lithuanian business organizations, but all available inner resources are not used exploited, as a tendency prevails that organization future image visualization is to be performed by one person (the owner or the manager) based on such mind activity factors as rational thinking and perception.

SUGGESTIONS Considering the research results there could be suggested that both floodlighting and projecting

actions are related with management, development and self-development of an organization. Thus managers should have in their mind that these actions could help survive and expand their business organizations casually and during economic and financial crisis.

Floodlighting and projecting actions are based on manager’s ability to use his/ her mind activity. Thus the manager has to develop his/her intuition for more efficient floodlighting action. Thus the manager has to develop his/her rational and absolute thinking for more efficient projecting action.

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The manager who is developing his/her mind activity could easier influence improvement and development of his/ her employees’ individuality. In this case the management of an organization could be improved and developed.

REFERENCES

1. Ackoff Russell. L. Планирование будущего корпорации. Москва: Прогресс, 1985. 2. Gharajedaghi Jamshid. Systems Thinking: Managing Chaos and Complexity. San Diego: Elsevier, 2006. 3. Kvedaravičius Jonas. Organizacijų vystymosi vadyba. Kaunas: VDU, 2006. 4. Рац Марк. Что такое экология или как спасти природу (взгляд методолога). Москва: Касталъ, 1993. 5. Рац Марк, Ойзерман М., Слепцов Б. “Строителстьство будущего: Изыскания”. Человек и природа. Москва:

издательство “Знание”. 12/91 (1991): 7-44. 6. Рац Марк. “Анализ ситуации. Материалъно-вещественная среда.” Человек и природа. Москва: издательство

“Знание”. 6/90 (1990): 51-58. 7. Рац Марк. “Анализ ситуации. Материалъно-вещественная среда.” Человек и природа. Москва: издательство

“Знание”. 7/90 (1990): 64-78.

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Sladjana Vujicic1 Zorana Djuricic2

Saveta Vukadinovic3

THE SIGNIFICANCE OF INNOVATION AND PROJECTS FOR DEVELOPMENT OF ENTREPRENEURSHIP IN SERBIA

Abstract Purpose:Innovations have become not only a significant determinant of successful development of

business entities, but their necessity too. Constant pressure of competition at the market forced business entities to develop innovative activities. If we consider entrepreneurship without the innovations we can see that it becomes plain copying, that everything comes down to supply of the same products and services in the same way. The ability of business entities to compete in innovations is a very important factor of their competitiveness. Constant searching of possibilities for improvement of the process, product, or services has enabled growth, development and renewal of business entities, which makes it difficult for competition to keep up. The consciousness of the need for introducing innovative activities, in Serbia, is still underdeveloped, because there are limiting market factors and the lack of funding. The first pilot project for strengthening of innovation of business entities was conducted in Serbia in 2009. Since then, various state level projects have dealt with strengthening of innovation of business entities. However, nowadays there is the possibility of applying for projects that deal with innovation, and programs that are funded by European Union. Low degree of being informed about the prerequisites for using these projects has caused a small number of realizations of international projects of financial support to the sector of economy in Serbia.

The aim of this paper is to point out the significance of innovations for the development of entrepreneurship in Serbia, as well as the role of the projects in that development through attaining financial support for development of innovative activities.

Methodology approach:descriptive method Findings and Originality – The activities in this project are unique and as such they demand an

innovative approach. Financial means can be obtained through various projects but that calls for ideas, and their lack leaves a large amount of financial means unused. The fact that innovations call for financial means, and that financial means can be obtained by innovative approach, shows that Serbia is moving in a circle from which it cannot find the right way out, for the time being, so the development of entrepreneurship in Serbia is very difficult..

Keywords: entrepreneurship, innovation, innovative activities, projects, business entities, Serbia. Research type: viewpoint JEL classifications: L26 - Entrepreneurship, G31 - Capital Budgeting; Fixed Investment and Inventory

Studies; Capacity.

INTRODUCTION Nowadays competitive advantage is very important for all countries. We can say that innovation

is the cornerstone of competitive advantage includes not only the use of new technologies, but also the implementation of new production processes, new organizational designs, a new way of resource management etc. In countries as well as in companies that operate in them creating an innovative environment that will help develop innovation is of great importance. With the implementation of an innovative culture that should cover all aspects of organization, conditions for the development of

1Sladjana Vujicic, Faculty of Business Economics anf Entrepreneurship, Belgrad, Serbia, [email protected] 2 Zorana Djuricic, Faculty of Business Economics anf Entrepreneurship, Belgrad, Serbia, [email protected] 3 Saveta Vukadinovic, Faculty of Business Economics anf Entrepreneurship, Belgrad, Serbia, [email protected]

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creative individuals will be created and organizations will thus become innovative with the ability of relying on their own potential, which will enable an even faster development of innovations. Organizations that base their competitive advantage on innovation can maintain it only by constant improvement. In today's world, knowledge-based innovation is of great importance for creating competitive advantage. It is important to keep track of everything that is going on the market and with the competition, as well as continuous investment in new technologies, but all of this requires certain financial resources. Serbian companies are in a bad financial position and therefore cannot invest a lot of money in innovation. This is the result of not only the global economic crisis but also the very situation in the country, therefore the programs for the development of entrepreneurship in national and international institutions were welcomed with relief.

1. REVIEW OF LITERATURE Entrepreneurship is a multidimensional concept that is very difficult to define ((Carree and

Thurik, 2005). There are numerous theoretical and empirical studies that consider that attributes such as risk-taking, innovation, the need of development and management skills are very important for entrepreneurship (Karlsson et al. 2004). The father of the theory of entrepreneurship, Schumpeter (1936) pointed out that innovation is the way for the development of entrepreneurship. Stevenson and Gumpert (1985) further indicate that innovation is the “heart of entrepreneurship”. The entrepreneurship might be involved in an economic function, as bearer of uncertainty, as distributor of resources or as innovator. It might also refer to certain behavior, inherent characteristics, creation of new organizations or the role of an owner or manager of a company (Karlsson, Friis & Paulsson 2004 (Figure 1).

Agent of change

Innovator

Entrepreneur

Carrier of uncertainties

Resources Distributor

Source: Karlsson C., Friis C., Paulsson T (2004). Relating entrepreneurship to economic growth, September, www.businessgrowthinitiative.org

Figure 1. Characteristics of the entrepreneur Nowadays, innovation is one of the most important components of entrepreneurship and the

basis of competitive advantage of organizations. There are many definitions of innovation, the main difference being the type of innovation that is being defined i.e. to which dimension the author gave more importance. Although definitions of innovation are different, they all put emphasis on the development and practical application of new knowledge. '' Innovation is the specific tool of entrepreneurs, the means by which they use change as an opportunity for the execution of various production or service activities. Innovation is the act that endows resources with a new capacity to create wealth. Innovation, in fact, creates the resource. There is no such thing in the world, such as a resource, as long as people do not find use value of something in nature, and until they bestow economic value upon that something. Innovation also represents all that brings changes in the potential of producing wealth from existing resources "(Drucker, 1996).

"Innovation that leads to technological change is the ability to create something new that the company will only use to improve products or processes, or let others do so (by selling the rights for the use of industrial property). Innovation is the ability to apply your own or other people's inventions _ on products or production processes of the company (Milosavljevic, 1996). Innovation is the implementation of a new or significantly improved product, service or process, marketing method or a

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new organizational method in business, work organization or the business entity's relationship with the environment (OECD, Oslo Manual, third ed., 2005). Innovation is the introduction of something new; innovation is a new idea, method or device (Merriam, 2007). '' The term innovation is synonymous with successful production, adoption and use of innovations in the economic and social sphere'' (Krstic, 2012).

All of the abovementioned definitions of innovation show that innovation is something new that brings a change that will improve the process, product or service.

The sector of small and medium-sized enterprises (SMEs) represents 99% of the total number of enterprises and their innovative abilities are correlated with the recovery and further development of the European economy. The way companies do business nowadays is unimaginable without the introduction of innovations. The most common barriers to introducing innovations are the lack of financial resources, high introduction costs, high risk etc. According to (Tidd & Bessant, 2009) success in managing innovation depends on two key elements: technical resources (staff, equipment, expertise, financial resources) and the ability of the business system to manage them.

2. THE PROCESS OF INNOVATION According to (Certo & Certo, 2006) from the perspective of management innovation is defined as

''the process of applying new ideas for the improvement of processes, products or services''. The process of innovation is based on the creative process. Figure no. 2 shows Cougerov model of the innovation process. This model includes copyright protection as an important element of innovation.

Source: Couger, J. D., 1995. Creative Problem Solving and Opportunity Finding. Boyd and Fraser Publishing Company, USA.

Figure 2: The process of innovation

Creativity is the starting point of innovation in the aforementioned model. The first three phases (discovery, invention and innovation) dependent on creativity, i.e. they are the result of the creative process. The innovation process can be represented in a more structured form through the following stages (Mauer et al., 1995):

1. The first stage is the innovative process of generating ideas, including the development of solutions to problems and the identification of possibilities.

2. The second stage is the battle to convince others within the existing organization in the validity of the idea and providing resources for its implementation.

3. The third stage is the stage of implementation through the enforcement of projects by balancing between available resources and organizational needs.

4. The fourth stage is the stage of '' gate keeping'', and monitoring the influence outside the organization.

5. The fifth stage consists of introducing, encouraging and assisting members of the entrepreneurial team.

P. Drucker (1996) points out that there are seven sources of innovative possibilities (Figure 3). The first four sources can be found within the company and they are the indicators of the changes that have already taken place (internal sources), or can occur with little effort. Other sources come from the environment (external sources).

Those sources are (Krstic, 2012):

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Internal: 1. unexpected 1.1. unexpected success, 1.2. unexpected failure, 1.3. unexpected external event, 2. incongruity - between reality as it is now and what it should be, 3. innovation based on the need of a certain process, 4. changes in the structure of the economy or the markets that come as a surprise to everyone. External: 5. demographic trends – changes, 6. changes in perception, mood and meaning, 7. new findings: scientific and non-scientific.

Source: Krstić M. (2012) ,, Upravljanje inovacijama,, Visoka škola za poslovnu ekonomiju i preduzetništvo, Beograd

Figure 3: Sources of innovative possibilities of the business system according to Drucker

The innovativeness of small and medium enterprises is reflected primarily in the that they are

open to change. We could say that the innovation process, begins with creative individuals. Creativity can be defined as the process of generating new ideas, which means that innovations are the successful implementation of new ideas.

Creating value is the expected result of innovation. Every investment project carries a risk that is associated with the emergence of future events. Risk can be defined as '' the possibility of realization of an unwanted consequence of a certain event''(Ćupić & Tummala 1997). The process of innovation itself carries risks, depending on the course , stage and stability of the process. A higher degree of innovation represents greater investments and higher risks, which is why the research of the aspects of the risk of innovation results in the proposals of an analytical approach, which should be based on (Liberatore 1990):

- identifying current and prospective ''challenges'', at least throughout the next 3-5 years, in order to take into account the fact that the competition is probably developing their own program; assessing the relative strengths and weaknesses of the company compared to the competition , for each line of production and each market , as the basis for assessing the appropriate benefits which would result in increased investments in this area;

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- assessing risks, costs and problems for different combinations of investments, including the adoption (acceptance) of already developed technologies and initializing your own research, again in comparison to the analog activities of the competition;

- exploring the changes that should be made in the areas of finance, marketing, personnel and organizational elements that are estimated to be necessary for the appropriate use of the innovational potential.

It is fair to say that innovations can be found at the core of the success of any organization, because they enable the organization to improve product quality as well as reduce costs, increase efficiency and sales. Human resources play a major role in the innovational process. The initiative for innovation largely depends on the knowledge of the staff, their expertise and commitment as key inputs in the creation of value. The role of the employees is important in all processes that are carried out in the enterprise, because the knowledge that the educated staff possesses is the driving force of the innovational activities.

3. COMPETITIVE ADVANTAGE AND INNOVATIONAL ACTIVITY IN SERBIA According to the World Economic Forum report for the year 2012 ranked 95th on the list of 144

countries with a Global Competitiveness Index (GCI) of 3.87. Compared to other countries in the region Serbia was only possitioned better than Greece.

Table 1: Global Competitiveness Index (2007-2012)

Slovakia Albania Croatia Slovenia Serbia Greece Romania Montenegro Hungary F.Y.R

Macedonia

Bosnia and Herzegovin

a 2007 4,45 3,48 4,20 4,48 3,78 4,08 3,97 3,91 4,35 3,73 3,55

2008 4,40 3,55 4,22 4,50 3,90 4,11 4,10 4,11 4,22 3,87 3,56

2009 4,31 3,72 4,03 4,55 3,77 4,04 4,11 4,16 4,22 3,95 3,53

2010 4,25 3,94 4,04 4,42 3,84 3,99 4,16 4,36 4,33 4,02 3,70

2011 4,19 4,06 4,08 4,30 3,88 3,92 4,08 4,27 4,36 4,05 3,83

2012 4,14 3,91 4,04 4,34 3,87 3,86 4,07 4,14 4,30 4,04 3,93

Source: WEF (2007,2008,2009,2010, 2011, 2012)

In comparison with the year 2011 according to the Global Competitiveness Index, Serbia

retained the same 95th position in the year 2012. Progress in the year 2012 was achieved by Bosnia and Herzegovina and Slovenia.

Table 2: The ranking of countries according to the Global Competitiveness Index (2007-

2012)

Slo

vak

ia

Alb

ania

Cro

atia

Slo

ven

ia

Se

rbia

Gre

ece

Ro

man

ia

Mo

nte

neg

oo

Hu

nga

ry

F.Y

.R.

Mac

edo

nia

Bo

snia

an

d

Hez

ego

vin

a

2007 (131 countries) 41 109 57 39 91 65 74 82 47 94 106

2008 (134 countries) 46 108 61 42 85 67 68 65 62 89 108

2009 (133 countries) 47 96 72 37 93 71 64 62 58 84 96

2010 (131 countries) 60 88 77 45 96 83 67 49 52 79 88

2011 (142 countries) 69 78 76 57 95 90 77 60 48 79 78

2012 (144 countries) 71 89 81 56 95 96 78 72 60 80 89

Source: WEF (2007,2008,2009,2010, 2011, 2012)

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If we take a look at the structure of the GCI in 2011 and 2012 _ by the pillars of competitiveness,

we can see that there haven't been any major changes. As for innovation in the year 2012 there was a drop in comparison with the year 2011 of 0.11.

Table 3: The value of the GCI by the pillars of competitiveness

2011 2012 Institutions 3,15 3,16 Infrastructure 3,67 3,78 Macroeconomic environment 4,18 3,91 Health system and primary education 5,82 5,73 Higher education and training 3,98 3,97 Goods market efficiency 3,49 3,57 Labor market efficiency 3,94 4,04 Financial market sophistication 3,74 3,68 Technological capability 3,63 4,10 The market size 3,61 3,64 Business sophistication 3,08 3,11 Innovations 2,90 2,81

Source: WEF (2011, 2012)

In most cases, measuring of the innovational activity and its benefits is difficult to implement

within companies. Recognizing the key role of innovation for the growth and development of each country, the Confederation of Indian industry (Confederation of Indian Industry) together with INSEAD (Business School for the World), and Canon India has developed the Global Innovation Index (Global Innovation Index - GII) (Radukić, Radovic 2011). This index aims to point out the growth of innovation in countries. Basic principles on which the Global Competitiveness Index is based on are as follows (Radukić, Radovic, 2011):

1. There is a difference between the input and the outcome when measuring innovations in the economy. Entries represent the factors that contribute to the inhancement of innovation, while outcomes show the results of innovativeness within the economy.

2. The Global Innovation Index observes five input factors: institutions and their business policies, human capital and research, general and information and communication (IT) infrastructure, market and business sophistication.

3. GII shows the two output factors that make up the results of the innovativeness of the economy based on the development of knowledge, competence and wealth creation, and they are: scientific results, which cover different aspects of knowledge (creation, dissemination and impact) and creative results (intangible assets, as well as goods and services).

Based on the values of the indicators of innovation and the anlysis of innovative trends, countries are classified into one of four categories (Report on SMEs, 2011):

- Innovation Leaders (Innovation Leaders): Denmark, Finland, Germany, Sweden, whose performances are at least 20% above the EU-27 average;

- Innovation followers ( Innovation followers): Austria, Belgium, Cyprus, Estonia, France, Ireland, Luxembourg, the Netherlands, Slovenia and the United Kingdom, whose performances are around average, or less than 20% above and more than 10% below the EU average -27;

-Moderate innovators (Moderate innovators): Czech Republic, Greece, Hungary, Italy, Malta, Poland, Portugal, Slovakia and Spain, whose performances are below the EU-27 average, between 10% and 50% below the EU average and

- Modest innovators - the countries joining innovators (Modest innovators -Catchingup countries): Bulgaria, Latvia, Lithuania and Romania, whose performances range is far below the EU-27 average, more than 50%.

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According to the Global Innovation Index for the year 2012 Serbia ranked 46th in the world out of 141 countries studied while by the index of innovative activity (IEI) Serbia occupied the high 7th place.

According to data published by the IUS for the year 2011, according to the innovation performance Serbia is in the group of moderate innovators (with Poland, Slovakia, Malta, Greece, Hungary, Spain, the Czech Republic, Portugal and Italy), which is an improvement compared to the year 2010, when it was in the group of the most modest innovators (Turkey, Lithuania, Bulgaria, Macedonia, Latvia and Romania). Serbia moved up into the group of moderate innovators, even though the Innovation Index in the year 2011 went down by 0.2 percentage points (from 0.284 to 0.282) compared to the year 2010.

The aim of introducing innovation is to improve business. In practice, some companies are better in implementing innovative activities compared to other companies, as according to (Robbins, Colter, 2005) an adequate business environment is characterized by three sets of variable values that promote innovation:

-organizational structure, -(organizational) culture and -changes in human resources. In order to create better conditions for the development of innovation in Serbia, the ''Strategy of

competitive and innovative SMEs for the period between the years 2008-2013'' was made , in order to encourage investments of the SME sector in innovations, seeing as they are a key factor in the development and competitiveness of enterprises. This Strategy is based on five key pillars which include: the promotion and support of entrepreneurship and the founding of new companies, human resources for a competitive SME sector, financing and taxation of SMEs, SMEs competitive advantage in export markets and the legal, institutional and business environment for SMEs in Serbia.

The SME sector in Serbia is characterized by the lack of innovation network, lack of research, lack of business innovation, the poor reputation of domestic products, the lack of support in terms of finance and infrastructure, paucity of laboratories and research facilities, as well as the absence of the key factor - the infrastructural network for the development of innovation. The main activities should be directed at establishing the proper structure of innovative achievements of enterprises, interconnection (especially with knowledge centers), the formation of a critical mass of innovative enterprises, the implementation and compliance with applicable international standards and creating conditions for the internationalization of business innovation within the economy (Brkanović, 2010).

4. INNOVATIONS IN SMALL AND MEDIUM ENTERPRISES IN SERBIA The research of the State Bureau of Statistics on the indicators of innovative activities in the

Republic of Serbia in the period between the years 2008-2010 , showed that 70% of large business entities are innovative, while 44% of small and 57% of medium business entities are.

Table 4: Business entities according to innovation, activity and size, 2008-2010

Total Innovators Business entities that

are not innovative The rate of innovators

Total 12141 5812 6329 47.9 Small business entities 9347 4143 5204 44.3 Medium business entities 2237 1280 957 57.2 Large business entities 557 389 167 69.8 Manufacturing business entities 4141 2314 1827 55.9 Service business entities 8000 3498 4502 43.7

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The same survey showed that the revenue structure of innovative business entities is dominated

by the share of sales income of unmodified or slightly modified products , which is around 35%, while the share of sales of products / services that are new for the business entity is 7.3%.

Source: http://webrzs.stat.gov.rs/WebSite/repository/documents/00/00/55/83/IA01_2010_srb.pdf

Figure 4: The structure of the income of innovators

The following table shows the same research on the most important effects of introduced

innovations (increasing the range of products and services, replacing outdated products and services, improving the quality of products and services, etc.).

Table 5: The most important effects of introduced innovations

EFFECTS TECHNOLOGICAL INNOVATORS

TOTAL SMALL MEDIUM LARGE Increase in the range of products and services 24.0 21.8 29.7 29.6 Replacement of outdated products or processes 20.0 18.9 21.3 26.7 Access to new markets and increase in market shares 15.6 13.1 21.1 23.7 Improvement in the quality of products or services 29.7 28.2 30.9 42.4 Increase in the flexibility of products or services 17.7 17.6 15.9 24.2 Increase in production capacity/volume of services 18.4 16.3 23.8 22.9 Reduction of labor costs per unit of product 15.2 14.0 18.0 18.5 Reduction of the cost of materials and energy per unit of product

11.6 10.3 14.1 17.5

Reduction of the damaging impact on the environment 14.2 12.5 17.2 21.9 Improvement of the health of employees 17.0 15.4 20.7 22.1

However, the study found that there were factors that hindered innovation such as ,firstly, the

lack of funds in the business enterprise as well as outside the business entity. Furthermore, high costs of direct innovations are an obstacle to implementing innovations. As success in innovation depends on knowledge too, it was also a factor that made it difficult to introduce innovations. The following table lists the results of a research on the factors that hindered innovation.

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Table 6: Factors that have hindered innovation

Cost factors Lack of financial resources 36.4%

Lack of funding from the sources outside the business entity 26.3%

Excessive costs of direct innovations 30.0%

Expertise factors Lack of qualified personnel 5.5%

Lack of information about technologies 3.4%

Lack of information about markets 3.9%

Difficulties in finding cooperation partners 11.1% Market factors Markets dominated by positioned business entities 14.5%

Uncertain demands for innovative goods or services 14.0%

As the most frequent partners with whom contracts of innovation are made with, surveyed SMEs

cited suppliers of the equipment, materials or software (79.9%), while the lowest percentage of contracts are concluded with governmental research institutes.

Source: http://webrzs.stat.gov.rs/WebSite/repository/documents/00/00/55/83/IA01_2010_srb.pdf

Figure5. Most frequent partners with whom contracts of innovation are made with

5. SUPPORT MEASURES FOR STRENGTHENING INNOVATION OF COMPANIES AND

ENTREPRENEURS IN SERBIA Entrepreneurship is very important for the competitiveness, because by starting a new business

the number of undertakings increases which increases the competitive pressure between them, so they are forced to introduce innovative solutions and thereby also strengthen the competitiveness of the overall national economy.

The development of entrepreneurship in Serbia is an important factor for the creation of a more favorable position in the global market. To develop entrepreneurship it is necessary to create favorable conditions for its development and an important role in that is the role of small and medium-sized enterprises. As the driving force of economic development in developed market economies, these companies encourage innovation, stimulate initiative and help develop entrepreneurial spirit. For Serbia to achieve economic growth and development it is necessary to develop a competitive economy based on knowledge, innovation and new technologies (Ivkovic, Čukanović & Vujicic, 2012).

Based on Table 6, we can conclude that the most common barrier to the development of innovative activities in the surveyed companies is the lack of financial resources, both from within

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them and from sources outside the business entity. Figure no. 6 shows the structure of support of innovativeness in Serbia.

Source: http://www.icip-serbia.org/assets/Uploads/Project-brief-interim-brochure-SRB-FINAL.pdf

Figur 6: Structure of support of innovativeness in Serbia

Figure no. 7 shows the structure of financial support to innovators based on the research of the

National Bureau of Statistics on the indicators of innovative activities in the Republic of Serbia in the period between the years 2008-2010.

Figure 7. The structure of the financial aid provided for innovators (%) The first project for the promotion of investments in Serbia was launched in 2009. The project

budget was 44.4 million RSD and was used to fund 85 small and medium enterprises. In the following year, 2010, the Ministry of Economy and Regional Development (MERD), with the support of the National Agency for Regional Development (NARD), continued with the implementation of the Project to encourage enterprises to invest in strengthening innovation whereby they refunded 37.1 million dinars for a total of 91 users (Erić. et al., 2012). SME support measures for strengthening innovation in the year 2011 was aimed at supporting the development of the culture of investing of small and

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medium-sized enterprises, entrepreneurs and cooperatives in innovation to enhance competitiveness. Funds were approved for 70 SMEs in the total amount of 32.3 million RSD. In addition to funds provided to small and medium-sized enterprises to develop innovative activities, funds are also provided for the development of innovative clusters. Within the Program on the allocation and use of funds for the development of innovative clusters in the year 2010, projects have been approved for 8 clusters, worth 17.4 million RSD.

Support measures for the sector of small and medium-sized enterprises were continued in the year 2011, as well. The Ministry of Economy and Regional Development in cooperation with the National Agency for regional development for strengthening innovation in Serbia approved 28.9 million RSD. The traditional contest for the best technological innovation was also organized and funds in the amount of 5.8 million RSD were awarded. In the year 2011 they started with the implementation of the "Integrated support innovation is made with," project from the IPA10 programming cycle. The project will last until the end of 2013, with the total value of € 3 million. The main components of the project are: the improvement of the national innovation system and the development of new instruments of financing innovative SMEs (SME Report, 2011).

The Innovation Fund was established in the year 2011, with the aim of providing funds for financing innovative activities in cooperation with international organizations, financial institutions, donors and the private sector.

Through the investment framework for the Western Balkans _ funding for the Program for enterprise development and innovation of the Western Balkans has been approved, which will establish three complementary mechanisms for SME support: the Foundation for Innovative Companies (venture capital fund for financing innovative SMEs which are in the starting phase of development ), the Foundation for Enterprise Development (private equity fund that will focus on the already established SMEs with high growth potential) and a line for credit guarantees, while the competent institution for Serbia will be the Innovation Foundation (SME Report, 2011).

The Ministry of Economy and Regional Development (MERD) with the support of the National Agency for Regional Development (NARD) launched a project for investing in the strengthening of innovation, in the year 2012. The project refunded an amount of 37.1 million RSD for a total of 91 users.

To increase the productivity and competitiveness of local enterprises and entrepreneurs by clustering, as well as strengthening cooperation between small and medium-sized enterprises with scientific research organizations in the year 2012 12 million RSD were approved for 15 clusters.

One of the programs that can be set aside as a support to innovation in Serbia is the Integrated Innovation Support Program (IISP) funded by the European Union, whose main partner is the Ministry of Economy and Regional Development along with the National Agency for Regional Development and the Ministry of Education and Science as other partners. The goal of this 24-month program, which will last until October 2013 is to support the development of small and medium enterprises in Serbia, by strengthening innovations and competitiveness in them.

In the year 2013 the programs for the development of innovation and innovation support in Serbian enterprises were continued. The Innovation Activity Fund has announced the continuation of the Public call for the Program of early development (MINI GRANTS), and the program for co-financing innovations (MATCHING GRANTS). The goal of the Program of early development is to encourage early the creation of innovative enterprises based on knowledge, through private start-up or spin-off enterprises, by financing market-oriented innovative technologies, products and services with high potential for commercialization. (http://www.inovacionifond.rs/?page_id=1598).

The goal of the Program of co-financing innovation is to foster the commercialization of research and development, as well as further development of existing innovative enterprises based on knowledge, encourage the creation of collaboration / partnerships with international companies / organizations and increase the number of technology companies and their preparations for additional investment opportunities (http://www.innovationfund.rs/documents/matching_grants/MATCHING_GRANTS_Program_Grant_

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Manual_Serbian.pdf). Funding is granted on the basis of the needs of each project, but it does not exceed the amount of € 150.000 for the first year. Continuation of financing for the second year depends on the assessment of the independent Investment Committee of the Fund, based on the submission of the required documentation at the end of the third quarter of funding. (http://www.innovationfund.rs/documents/matching_grants/MATCHING_GRANTS_Program_Grant_Manual_Serbian.pdf)

CONCLUSION If companies nowadays want to survive on the market they have to be prepared to accept

changes in order to develop their business. In entrepreneurship, innovation is of key importance for the duration of the business. Innovation has become a necessity for survival in the conditions of rapid growth and development. Introducing innovation in companies operating in Serbia is a prerequisite for its competitiveness. Innovations are what enable companies to create additional value, satisfy consumer needs and the needs of the enterprise itself.

Entrepreneurs must keep up with current trends and market demands, which requires constant improvement of products (services).

The conclusion is that innovations are a key feature of entrepreneurship because they make the entrepreneurial job ''entrepreneurial''.

However, the lack of financial resources is the main obstacle to creating an innovative climate and the development of innovative activities. This problem occurs because of the limiting factors of the market, but it is safe to say, also because of the lack of awareness and knowledge, as well as the lack of information. Through various programs, both governmental and internationally aided, business owners in Serbia have the possibility to apply for funds intended for the introduction of innovation, but it looks like the lack of information about these programs is the main reason why the interest of small business owners for these programs is so low.

REFERENCES 1. Carree Martin Thurik Roy (2006). Understanding the role of entrepreneurship for economic growth. Entrep. Econ.

Growth, 134(2): 68-79. 2. WEF (2007,2008,2009,2010, 2011, 2012) 3. Ivković Dragan, Čukanović Karavidić Marija, Vujičić Slađana,, Small and medium-sized enterprises as a factor of

serbian economy,, Journal of ,, Economic Analysis,, No.3-4/2012, Institut ekonomskih nauka, Beograd 4. Karlsson C., Friis C., Paulsson T (2004). Relating entrepreneurship to economic growth, September,

www.businessgrowthinitiative.org. (CHARLIE KARLSSON, CHRISTIAN FRIIS AND THOMAS PAULSSON) 5. Krstić M. (2012) ,, Upravljanje inovacijama,, Visoka škola za poslovnu ekonomiju i preduzetništvo, Beograd 6. Liberatore M.,ed. (1990), Selection and Evaluation of Advanced Manufacturing Technologies, Springer-Verlag 7. Stevenson Howard, Gumpert David(1985). The heart of entrepreneurship. Harvard Business Review, 63(2), 85-

94. 8. Tidd Joe, Bessant John (2009) Managing Innovation: Integrating Technological, Market and organizational Change

4th, http://www. managing-inovation.com 9. Tusman Michael and Anderson Philip,(1997)Managing Strategic Innovation and Change ,, Oxford University Press 10. Certo Samuel, Certo Trevis (2006) Modern Management, 10 th ed.,Pearson prentice Hall, New Jersey 11. Čupić M.,V.M. Rao Tummala (1997) ,, Savremeno odlučivanje-metode I primena,, Naučna knjiga, Beograd 12. Erić Dejan, Beraha Isidora, Đuričin Sonja, Kecman Natasa, Jakišić Bozana (2012),,Finansiranje malih i srednjih

preduzeća u Srbiji,, Institut ekonomskih nauka & Privredna Komora Beograd, Beograd 13. http://www.innovationfund.rs/documents/matching_grants/MATCHING_GRANTS_Program_Grant_Manual_Serbi

an.pdf) 14. http://www.inovacionifond.rs/?page_id=1598 15. http://www.icip-serbia.org/assets/Uploads/Project-brief-interim-brochure-SRB-FINAL.pdfhttp://www.icip-

serbia.org/assets/Uploads/Project-brief-interim-brochure-SRB-FINAL.pdf 16. http://webrzs.stat.gov.rs/WebSite/repository/documents/00/00/55/83/IA01_2010_srb.pdf 17. http://www.wipo.int/freepublications/en/economics/gii/gii_2012.pdf

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Yulia Volynets1

PECULIARITIES OF 6 TYPES OF IELTS WRITING TASK 2

Abstract An increasing popularity of IELTS as an admission tool to universities all over the world makes this exam

a common choice of many ESL students. Although there is a great variety and availability of IELTS preparation materials, many people still encounter problems with writing part two.

Purpose - This article aims at the analysis of six types of IELTS writing task two, pinpointing their structural peculiarities and suggesting a step-by-step guide to completing this assignment successfully.

Design – For carrying out this research, responses to different types of IELTS writing part 2 assignments were collected from students, graduating from NRU-HSE and taking IELTS for entering Master degree programs in foreign universities, the problems and pitfalls that students encounter while completing these tasks were examined, which resulted in a kind of practical guideline to IELTS writing part 2. The research is based on a comparative analysis of various types of writing task 2 and people’s essays on them, which are in their turn subjected to benchmark analysis. The approach adopted is observational rather than statistical.

Findings and originality - The findings reveal that the key difficulties people face concern understanding a task itself, applying critical thinking skills and employing the right structure and arguments at the stage of preparation. The research results help to systemize common knowledge and mistakes people make completing this part of IELTS exam and suggest the most appropriate approaches to the task, schematic essay plans and a range of structures and linking words to use. The research outcomes are likely to reveal specific features of different essay types and therefore assist both teachers and students preparing for IELTS.

Keywords: IELTS writing task 2, critical thinking, structure, argumentation Research type – Viewpoint , Research paper JEL classification: I2 - Education and Research Institutions

INTRODUCTION

At present there is the continuous concern for IELTS both among ESL students, who use the

results of this test for entering universities all over the world, and among educational institutions that require IELTS results as a kind of a guarantee of students’ language skills and their ability to study in English-speaking environment. These facts account for a great variety of preparation materials, on-line self-study programs and special language courses at students’ disposal.

However many ESL learners still encounter problems with the writing module, especially writing part two. As it is listed on www.ielts.org this section requires candidates to write an essay in response to a question, argument or a problem. The candidate’s ability to use appropriate register, rhetorical organization, style and content is assessed. The task type defines the right organization of the candidate’s answer, which is then assessed according to its meeting the aim of solving the problem, presenting and justifying an opinion or comparing and contrasting implications. Thus certificated IELTS examiners mark the paper regarding the four criteria and basing on the IELTS Writing Test Band Description: task response, coherence and cohesion, lexical resource, grammatical range and accuracy (www.ielts.org 2013).

Consequently, for practical reasons this research aims at suggesting a step by step guide to writing this assignment successfully by analyzing the challenges students experience and revealing the peculiarities of each task type.

1 Yulia Volynets, National Research University Higher School of Economics, Russia, [email protected]

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1. TASK TYPE IDENTIFICATION

All IELTS essay topics can be divided into two major types: a controversial one, where a candidate should present contradictory or debatable arguments, and a general situational type, which requires a student to describe advantages and disadvantages, explain the causes that may create the situation mentioned in the task and suggest how to deal with them, or discuss problems and offer possible solutions. The task could also include two parts, in other words comprise both controversial and general situational types: for instance, there may be a controversial topic followed by a series of questions that ask to provide a possible solution to a problem or explain its causes. In that case a candidate should try to write different essay parts in an appropriate form.

Figure 1. Essay task types

Examples of essay task types: 1. Mobile phones have changed the way many people communicate. Nowadays people cannot

live without them if they want to be a part of society. To what extent do you think this is true? Why do you think some people have not adapted to this type of communication.

2. People nowadays work hard to buy more things. This has made our lives generally more comfortable, but many traditional values and customs have been lost and this is a pity. To what extent do you agree or disagree? Children over 15 should be allowed to make decisions about their lives without the interference of their parents or teachers. Society should accept that children mature at a younger age these days and should adjust the law accordingly. Do you agree or disagree?

3. Some people believe that studying at university or college is the best route to a successful career, while others believe that it is better to get a job straight after school. Discuss both views and give your opinion.

4. There are more cars on the roads these days and more accidents. As a result, some politicians have suggested that people should take regular driving tests throughout their lives, rather than one single test. What do you think the advantages of repeat driving tests? Do they outweigh the disadvantages?

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5. Unemployment is a curse for society. Discuss the causes and possible ways of prevention of unemployment.

6. Children are spending more time on computers today than on playing with their friends. What are negative consequences of it and how can these problems be solved?

Figure 1 provides a general overview of different essay tasks, giving their major type classification basing on a kind of task. The understanding of this classification and the right identification of essay task type can allow forming a general perception of a task and choosing a suitable approach to developing the argument.

2. APPROACHING THE TASK AND ESSAY PLANNING Since an essay should be relevant to the task, the primary aim of students is to read the task

carefully and understand it. Finding answers to such a series of questions as ‘What is the topic?’, ‘How many parts does the task have? What are they?’, ‘What proportion of an essay should be given to each part?’ ‘Are there any examples given in a task itself?’(Jakeman and McDowell 2008,119-120) and underlying or circling key words in a task contributes to its correct interpretation and forms a solid grounding for further topic analysis.

Referring back to the technique of choosing main words, it is worth noting that this approach may help candidates to build a logically associative link between the selected words and establish examples and spheres of their common use.

Example: Children over 15 should be allowed to make decisions about their lives without the interference of their parents or teachers. Society should accept that children mature at a younger age these days and should adjust the law accordingly. Do you agree or disagree?

Once the key words are chosen, a student should think about what can tie them all together, this particular example makes candidates reflect about typical life situations when adults advise teenagers what to do: the choice of university or future career, and different laws connected with age: getting a driving license, buying alcohol and cigarettes, getting married.

Next a plan of an essay is to be figured out. All essay task types have the same communicative purpose to make candidates express opinions on a topic of general interest, and although the layout will also be the same, with an introduction, paragraphs for each key idea and a conclusion, the organization will vary depending on the specific type of question.

These draft plans show a possible way of organizing ideas, taking into account peculiarities of each essay type.

Controversial topic. 1-2 questions

&1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach ; 2) stating the problem providing a personal example) &2 a candidate’s opinion main idea

- supporting idea - supporting idea

&3 answer to question 1 main idea


&4 answer to question 2 main idea


&5 conclusion + in any part of an essay a candidate is to present 1 personal example, which may be used instead of a supporting idea

Do you agree or disagree? / To what extent do you think this is true? / To what extent do you agree?

&1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach; 2) stating the problem providing a personal example) &2 a candidate’s opinion main idea


&3 main idea - supporting idea - supporting idea

&4 main idea - supporting idea - supporting idea


In this task type a candidate can completely agree or disagree with the statement, or even present both sides of the argument, but the presentation of the idea should be organized

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Writing this task type students usually face a difficulty concerning a correct organization, which requires both the presentation of contradictory or debatable arguments and answers to questions. Following this draft plan is expected to help candidates organize the essay answer in a right way without missing any parts.

in a logical pattern, thus the opinion of a candidate is expected to be developed in further parts, which do not contradict each other.

Discuss both these views and give your opinion &1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach; 2) stating the problem providing a personal example) &2 a candidate’s opinion, which coincides with one of the views stated in a task. main idea


main idea - supporting idea - supporting idea

&3 other people’s opinion main idea


(&4 refuting others’ opinion+ explaining why) optional &5 conclusion + in any part of an essay a candidate is to present 1 personal example, which may be used instead of a supporting idea

A common mistake made by candidates in this type concerns presenting their own supporting ideas in &3 instead of explaining other people’s position. Example: “ Having said that there are some people who claim that space exploration is a waste of time and money, by this I mean (the correct variant is – by this they mean…)”

In &3 a candidate is required to present ideas of other people and provide arguments from their perspective.

What do you think are the advantages of …? Do these outweigh the disadvantages?

&1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach; 2) stating the problem providing a personal example) &2 a candidate’s opinion advantages or disadvantages main idea



&3 advantages or disadvantages main idea




In this task type describing first advantages or disadvantages depends on a stated personal opinion of a candidate, it is advisable to start with the part, which coincides with and supports a student’s position. Sometimes the formulation of a task does not directly ask candidates to describe disadvantages but a question “Do advantages outweigh the disadvantages?” presupposes it.

Discuss the causes and possible ways of prevention…/ What are the problems and how can they be solved…

&1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach; 2) stating the problem providing a personal example) &2 a candidate’s opinion causes / problems main idea



&3 prevention/solutions main idea



Discuss the causes and possible ways of prevention…/ What are the problems and how can they be solved…

Another possible organization of information

&1 introduction (two types :1) rewording a task+stating a problem, using a deduction approach; 2) stating the problem providing a personal example) &2 a candidate’s opinion cause/problem-prevention/ solution main idea


&3 cause/problem – prevention/solution main idea


&4 cause/problem – prevention/solution main idea

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Correct identification of a task type and consideration of its key features is expected to assist students in approaching the task easily and not making common mistakes.

Therefore a correct understanding of a task is likely to result in a relevant topic response, while

the identification of a specific question type and the choice of a suitable essay plan may assist students in avoiding common mistakes and writing a logically organized essay.

3. MIND MAPPING AS A TOOL FOR WRITING AN INTRODUCTION In an introduction a candidate is expected to state the topic and the problem, or main points for

discussion, a personal position may also be given. The main problem students face there is lifting from the task, using the same word combinations; these copied words are ignored by an examiner and are not included in the total word count. The easiest approach to writing an introduction is to paraphrase words given in a task, but it may also present some difficulties as sometimes doing it candidates produce a simple task rewording and do not state the problem.

Basing on the analysis of a great number of techniques used to teach students to start an essay, mind mapping is suggested to be the most appropriate. Usually this strategy is advised as a plan for the whole essay while the present paper mostly regards it as a technique for writing an introduction. Whatever the topic is, it is always a good idea to think about the issues that surround that topic and mind mapping is an excellent and effective tool for brainstorming.(www.adelaide.edu.au, 2013) It presupposes writing down a central theme and thinking of new and related ideas which radiate out from the center.

Figure 2. Mind mapping. Introduction

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Example: Differences between countries become less evident each year. Nowadays, all over the world people share the same fashions, advertising, brands, eating habits and TV channels. Do the disadvantages of this trend outweigh the advantages?

Figure 3. Mind mapping. Example

This technique can also be used for generating ideas for further essay writing.

Figure 4. Mind mapping. Essay

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The advantages of mind mapping are various, being an ideal strategy to use for thinking, it can

be used for generating, visualizing, organizing, note-taking, problem-solving, decision-making, revising and clarifying topics, so that one can get started with tasks.(Wikipedia, 2013) Therefore this approach assists candidates in finding related spheres, working out associations and establishing interrelations between them, which enables students to produce a diverse and comprehensive introduction.

Argument structuring: main and supporting ideas

As it is stated above before writing an essay a candidate is advised to start with a plan, where main and supporting ideas should be mentioned and then organized in deliberate groups. While brainstorming, a candidate can draw a table or a bubble diagram, and then group ideas into main and supporting. Main ideas are somehow “wider”, they act like a theme that comprises supporting ideas, while the latter ones provide evidence, reasons or examples that either justify or prove the main idea. Argument structuring does not only help candidates to generate ideas and avoid further repetition by integrating similar ideas into one part but mostly contributes to writing a coherent paragraph.

A large number of students experience difficulties with avoiding repetition both of lexical and semantic units. As candidates are expected to organize sentences in a coherent whole, they need to use linking words for connecting ideas. There are several ways of linking ideas at candidates’ disposal: using conjunctions, adverbial expressions, prepositions, linking expressions.(Hopkins and Cullen, 2007, 200-202) Example: Nowadays computer games are increasingly popular with teenagers, but there has been some controversy recently about the benefits and risks of this pastime. Therefore some parents try to forbid children to play them. In spite of their attempts a great number of children are fond of this activity as there are a lot of TV commercials targeted at teenagers and encouraging them to want these games. As a result, it leads to misunderstanding and quarrels in families.

The paraphrasing of main words and the substituting of nouns by pronouns or reference words also assists in avoiding repetition. Example: People’s views vary on the subject of space exploration. Those (=some people) who perceive it as a part of technological progress usually support this activity, while others claim that it is a waste of money as most projects fail.

While training essay writing students may practice using a zigzag pattern, the essence of which is enclosed in presenting main information at the end of a sentence and starting a new one with either developing an idea mentioned in the previous sentence or employing lexical rewording, it helps to present ideas in a logical sequence and to provide a convincing argument.(Hopkins and Cullen, 2007, 193)

Example: The idea that smoking should be banned in public places is supported by many people, who claim that it has a negative effect on non-smokers and shows a bad example to children.

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Figure 5. Zigzag pattern

It is recommended that candidates vary words and structures as one can hardly produce a

complex sentence without linking ideas.(Appendix) 4. ARGUMENT BUILDING

Once a draft plan is ready, ideas that form the basis of an essay are to be organized into clearly

and appropriately expressed arguments. There is a variety of expressions that can be used to present arguments in an appropriate essay style, moreover these structures act as signposts and help the examiner follow the development of an essay. (Jakeman and McDowell 2008,127-130)

Stating a personal opinion

A candidate’s personal opinion should obligatory be given. It can be stated in any part of an essay, but as a candidate’s position is important to the content of an answer it is a good idea for candidates to express their main point of view as a part of introduction.

Example: From my point of view, it is still parents , who should take care of what their children eat.

Presenting other people’s opinion

When a candidate is asked to consider an argument from both sides, they are expected to give other people’s opinion.

Example: Some people think that the invention of the Internet has brought only benefits to society, while others…

Giving a general statement

Example: It is generally believed that technological process has facilitated people’s lives Stating facts

Example: In my university most rooms are equipped with up-to-date computers, which makes it possible to use the Internet as a studying recourse

Making a concession

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Considering arguments different from a candidate’s position before presenting own views is believed to be a good practice as it assists in building a sound objective argument. Concession is a useful tool for writing a conclusion especially in the task type where a candidate is asked to discuss both views as it can summarize pros and cons.

Example: In spite of being one of the most convenient transport means, private cars should not be banned in city centers, which are mostly organized as tourist zones with a great number of attractions.

Refuting an argument

This technique means presenting one’s own view after rejecting an idea that is opposite or not supported by a candidate. It is said to be a forceful way of expressing a view and is advised to be used in the task type to what extent do you agree for avoiding similar structures of giving and developing a candidate’s own opinion.

Example: I am unconvinced that typing written tasks on a computer is a good idea as this device corrects spelling mistakes and leads to illiteracy among pupils.

Defining and explaining

Defining and explaining can form a part of a supporting argument. General terms or ambiguous ideas explained by a candidate also help to organize ideas in a logical way.

Example: I am unconvinced that typing written tasks on a computer is a good idea as this device corrects spelling mistakes and may lead to illiteracy among pupils. By this I mean that not practicing handwriting and being always corrected by a computer in case of mistakes makes children not learn any rules.

Most of these structures also act as linkers as they connect different arguments.

CONCLUSIONS

Whereas the aim of this research paper was to provide a step-by-step guide to IELTS task two it has become a kind of summary of recommendations, which concern overcoming main pitfalls students experience writing this task. The paper systemizes common knowledge and depicts mistakes people make completing this part of IELTS exam, providing thorough plans for each essay task type and highlighting their structural peculiarities. In this study ways to approach the task are examined and suggestions how to write an introduction are made, which results in the description of such methods as mind mapping and zigzag pattern. The different ways to build arguments are presented in the paper and supported with explanations and recommendations on how to use them. Moreover theoretical material is illustrated with practical examples, which facilitates the understanding of the given information. Therefore this study provides insights into peculiarities of preparation and assists both teachers and students in preparing for IELTS. The further investigation of how candidates employ the strategies described would be of practical use for future item writing.

SUGGESTIONS

The suggestions made in the foregoing research are summarized in the following set of specific recommendations:

1. It is recommended that a candidate should start IELTS writing part 2 with identifying a task type and choosing a particular essay plan.

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2. The task itself should be attentively read as only a clear understanding of it may guarantee a relevant topic response.

3. It is advised that a candidate should write a diverse introduction and approach a task by using mind mapping.

4. It is suggested that a candidate should structure an argument correctly giving main and supporting ideas and using a variety of structures and linking words for their logical and semantic sequencing. (App.1)

5. Following suggestions given in this research, a candidate is recommended to write each essay task type and then compare their similarities and differences, focusing on the peculiarities of each one.

REFERENCES

1. Diana, Hopkins , and Pauline , Cullen. Grammar for IELTS. (Cambridge: Cambridge University Press,2007),193,

200-202. 2. Peter, Mickan, Stephen, Slater and Carol, Gibson 2000 “A study of response Validity of the IELTS Writing

Subtest.” IELTS Research Reports, Vol.3 Report 2 http://www.ielts.org/researchers/research/volume_3.aspx 3. Peter, Mickan, Stephen, Slater and Carol, Gibson 2000 “A study of response Validity of the IELTS Writing

Subtest.” IELTS Research Reports, Vol.3 Report 2 http://www.ielts.org/researchers/research/volume_3.aspx 4. Rae, Everett and Judy Colman 1999 “A critical analysis of selected IELTS preparation materials.” IELTS Research

Reports, Vol.5 Report 1 http://www.ielts.org/researchers/research/volume_5.aspx 5. Tim, Moore and Janne, Morton 1999 “Authenticity in the IELTS Academic Module Writing Test: A Comparative

Study of Task 2 Items and University Assignments.” IELTS Research Reports, Vol.2 Report 4 http://www.ielts.org/researchers/research/volume_2.aspx 6. Vanessa, Jakeman, and Clare, McDowell, 2008, New insight into ielts.(Cambridge: Cambridge University

Press,2008),119-135. 7. Uysal, H. H. 2010. “A critical review of the IELTS writing test.” ELT Journal, 64(3), 314-320. 8. Adelaide.2013. Accessed April 20

http://www.adelaide.edu.au/writingcentre/learning_guides/learningGuide_mindMapping.pdf 9. IELTS.org. 2013. Accessed April 14, http://www.ielts.org/PDF/Information_for_Candidates_booklet.pdf,

http://www.ielts.org/researchers/score_processing_and_reporting.aspx 10. Wikipedia.org.2013, https://en.wikipedia.org/wiki/Mind_map Last modified 14 April 2013

Appendix

making an introduction (state the problem) Nowadays a large number of people tend to do

something…on the contrary, many adults/ teenagers consider…Who is right? Is something as harmful as it may seem?

People have various preferences so it is natural…Yet many people believe

Due to recent technological advances a growing number of people …Moreover, some people claim …But is it really so effective?

In most countries…However, this way of something has both advantages and disadvantages…

There is no doubt that…Nevertheless, Something is becoming increasingly popular

nowadays…. People often argue about the role of …in the

development of our civilization Something has become an inalienable part of our

life Over the last 10/20/30 years we have done

something

expressing a personal opinion I agree/ disagree In my opinion In my view It seems (to me) that I tend to think that From my point of view To my mind As for me, I believe / I do not see/ I consider As far as I am concerned There are several arguments in favour of

something I am in favour of

expressing an opposing opinion

on the other hand having said that, there are some people who on the contrary nevertheless in their opinion while some people think

http://www.adelaide.edu.au/writingcentre/learning_guides/learningGuide_mindMapping.pdf

http://www.ielts.org/PDF/Information_for_Candidates_booklet.pdf

https://en.wikipedia.org/wiki/Mind_map

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Over the past few years something has become … many people are sure this is not a coincidence

Modern life is impossible without…But does it really broaden our minds?

No wonder that it is difficult to make a choice between something and something

It is often believed that something is much worse than it used to be in the past

however some/ Most people argue/ think/ say that it is understood that there is a tendency to believe that

giving reasons for the opposing opinion for this reason therefore/ that is why thus something happened –because of - as a result of

- owing/ due to - as a consequence of

what is more/last of all/ furthermore/ actually as a matter of fact

explaining why one does not agree with the opposing opinion

I cannot agree with this because …to some extent I agree with this idea I partly support this idea I am unconvinced that It is doubtful whether I disagree with the view that Personally, I

making a conclusion restating one’s own position Taking everything into consideration, I tend to

think In conclusion, I strongly believe that/ I can say/ I

would argue/ To sum up To conclude, I would argue that On this basis, I can conclude that In conclusion. I would like to stress that All in all, I believe that

defining and explaining By this I (don’t) mean.. In fact… That is not to say that… In other words, … That is to say, … To be more precise,… Here I’m (not) referring to

making concessions While/although Despite the fact that Even though It could be argued that Admittedly/certainly…but/however it may be true that

refuting an argument I am unconvinced that… I don’t believe that Some people find it hard to accept that It’s doubtful whether There is little evidence to support the view that It’s unjustifiable to say that I disagree with the view/ argument that I am uncertain whether

using linking words and expressions for example/ for instance of course firstly/ for one thing a good example of this is in fact/ indeed if this is/ were the case naturally/ understandably in my experience

giving reasons for one’s opinion firstly/ secondly/ what is more/ last but not least the first thing, I would like to consider is apart from that what matters most in this case is to begin with at first glance in addition/ first of all besides moreover what is more/additionally all in all in addition another argument for is finally as a result more than that

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Indre Sizovaite1 Rasa Smaliukiene2

CONSUMER VALUE CO-CREATION: IN SEARCH OF THEORETICAL FRAMEWORK

Abstract Purpose – The paper aims to analyze some of the challenges associated with consumer value creation,

suggesting that there is a need for a broader approach in order to develop a comprehensive and at the same time applicable theoretical framework that focuses on consumer value co-creation.

Design/methodology/approach – The paper examines four theoretical approaches. It compares and contrasts three theoretical models for consumer value co-creation. The first approach towards consumer value co-creation is base on personalized consumer experience and is known as DART model. The second approach represents an idea on value-in-use when spheres of provider and customer are overlapping each other. Finally the third approach stand for consumers’ networking and consumer-to-consumer interaction. The theoretical flow from individual to collective involvement into consumer value creation represents our research design.

Findings and Originality – The paper raises some interesting issues about current consumer value creation approaches. The paper expands the debate on consumer value creation in nowadays business environment where changes in technological environment and consumer behaviour take place.

Keywords: value co-creation, networking, customer-to-customer interaction. Research type: literature review. JEL classification: M31 – Marketing; M14 - Corporate Culture, Social Responsibility

INTRODUCTION Consumer value co-creation has created a new label for modern marketing and received a

substantial amount of research attention in the last decade. Majority of research has investigated in consumer value co-creation from individual’s perspectives and consumer-provider interaction (Prahalad and Ramaswamy, 2004a, 2004b; Payne and Storbacka, 2008; Vargo and Lusch, 2008; Grönroos and Ravald, 2011; Grönroos and Voima, 2012). Analysis of value co-creation conducted in previous section showed that co-creation occurs through interactions between supplier and customer, where individual experiences are generated. Dialog between consumer and provider is the main topic in this research papers. Looking more broadly, iinternet empowered consumers by enabling possibilities to develop dialogues through virtual networks that went beyond supplier to customer relations and included customer to customer interactions outside the supplier’s sphere of influence. A few research studies provide alternative approach towards consumer value co-creation and introduce consumers networking perspective (Ramaswamy, 2009; Hoyer et al, 2010). They analyze consumer value co-creation as a consumer to consumer interaction by stressing the need for integration of consumers’ resources and supplier place in this process.

The paper aims to analyze some of the challenges associated with consumer value co-creation, suggesting that there is a need for a broader approach in order to develop a comprehensive and at the same time applicable theoretical framework that focuses on consumer value co-creation.

The paper examines four theoretical approaches. It compares and contrasts three theoretical models for consumer value co-creation. The first approach towards consumer value co-creation is

1 Indre Sizovaite, Vilnius Gediminas Technical University, Lithuania. [email protected] 2 Rasa Smaliukiene, Vilnius Gediminas Technical University, Lithuania. [email protected].

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based on personalized consumer experience and is known as DART model. The second approach represents an idea on value-in-use when spheres of provider and customer are overlapping each other. Finally the third approach stand for consumers’ networking and consumer-to-consumer interaction. The theoretical flow from individual to collective involvement into consumer value creation represents our research design.

1. PERSONALIZED CONSUMERS’ EXPERIENCE IN VALUE CO-CREATION The meaning of value and the process of value creation shifted from a product-centred and firm-

centred view to personalized consumer experiences. Indicated value shift to consumer experiences requires market to become a forum where conversation and interactions between consumers, consumer communities, and firms could be held. However, co-creation management have to start with the building blocks of interactions between the firm and consumers that facilitate co-creation experiences. These blocks consist of dialogue, access, transparency, and understanding of risk-benefits that are central to the next practice in value creation (Prahalad and Ramaswamy, 2004a, 2004b).

Prahalad and Ramaswamy (2004a; 2004b) offer the DART model (Figure 1) for managing co-creation of value processes and linking to consumer experiences. The DART model is a popular model in co-creation process that can ensure value co-creation is embedded in the early stage of development of a system and is widely used in creating holistic models for value co-creation.

Source: Prahalad and Ramaswamy, 2004a; 2004b

Figure 1. The DART model for managing co-creation of value processes

The main building blocks of the DART model suggested for value co-creation and co-creation

experience generation are made up of four components: D-dialogue, A-access, R-risk assessment and T-transparency:

Dialogue - is defined as interactivity, engagement and a propensity to act – on both sides. Dialogue implies shared learning and communication between companies and consumers as two equal problem solvers. Dialogue helps to create and maintain loyal community. Dialog must centre issues of interest to both and rules of engagement must be clearly defined in both sides.

Access - information and tools are necessary for the access, it could be described as company that has given its customers access to data on its manufacturing processes, design and fabrication libraries, and quality processes. In other words, access challenges the notion that consumers can experience value only through ownership.

Co-creation of

value

Access

Dialogue

Risk-benefits

Transparency

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Transparency - traditionally companies have benefited from information asymmetry between the consumer and the firm, but asymmetry is rapidly disappearing and firms can no longer assume opaqueness of prices, costs, and profit margins. Creating new levels of transparency becomes increasingly desirable as information about products, technologies, and business systems becomes more accessible.

Risk assessment - refers to the probability of harm to the consumer, active co-creators of value with companies will demand more information about potential risks of goods and services and they also may also bear more responsibility.

By combining these building blocks there can be achieved better results in engagement of customers as collaborators in value creation and interactions between the firm and consumers that facilitate co-creation experiences. According to Prahalad and Ramaswamy (2004a), it helps in four ways: (1) access and transparency enhances the consumer’s ability to make informed choices; (2) dialogue and risk assessment enhances the ability to debate and co-develop public and private policy choices; (3) access and dialogue enhances the ability to develop and maintain thematic communities; (4) transparency and risk assessment enhances the ability to co-develop trust.

By evaluating the DART model, we can say that it highly represents an individual consumer approach toward consumer engagement. This approach helps in business in four ways: increase ability to make informed choices, enhances the ability to debate and co-develop public and private policy choices, heightens the need to develop thematic communities and develop a trust between supplier and consumer.

2. VALUE CO-CREATION THROUGH INTERACTION BETWEEN CUSTOMER AND PROVIDER

Additionally to individual consumer approach toward value creation, majority of researcher stress on integration between consumer and provider. In a simplified model it can be seen as two interconnected parties in value creation: consumer and provider. Value co-creation occurs somewhere between provider’s sphere and customer’s sphere. In this interactional point the provider participates as co-creator of value (value-in-use) with the customer (Grönroos and Ravald, 2011). Researchers can regard marketing as a set of processes and resources with which the company seeks to create value propositions; focus on processes is a key feature of the process-based co-creation model (Payne et al., 2009). These processes include procedures, tasks, activities, mechanisms, and interactions that collectively support the co-creation of value.

Process-based co-creation model proposed by Payne et al. (2009) is given in Figure 2. The most important parts in process-based co-creation model are customer’s value creating processes, supplier’s value creating processes and encounters that indicates interaction between the first two. Customer' sphere - in a provider-to-customer relationship, the processes, resources and practices which customers use to manage their activities. In a provider-to-provider relationship, the processes are ones which the customer organization uses to manage its business and its relationships with suppliers (Payne et al., 2008). The customer’s value creation process is a series of activities performed by the customer to achieve a particular goal.

Within the customer processes can be outlined three elements of the relationship experience expanding traditional goal-directed activities consisting of cognition, emotion and behaviour (Thompson and Fine, 1999; Payne et al., 2008):

1) Hedonic values, subjectivity and experiences – are related to experiential consumption that usually includes feelings, the flow of fantasies in which processes are more sub-conscious and private in nature.

2) Cognition, emotion and behaviour – in general point of view it indicates goal-directed activities including searching, confirmation, evaluating alternative options and decision making, but from co-creation perspective, it is more related to elements of information processing (searching for information, evaluating alternatives and generating choice sets), the intention here is to provide

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customers with knowledge and facts, and for them to make decisions, which encourages customer involvement in co-creation behaviours.

3) Consumer communities, user innovation and design - the development of the Internet provides substantial opportunities for online involvement, such as participative experiences in communities and social networks, where customer-to-customer interactions and the customer has the opportunity to participate actively in the co-creation process through their innovation and product design.

Provider’ sphere - the processes, resources and practices which the supplier uses to manage its business and its relationships with customer and other relevant stakeholders (Payne et al., 2008). The supplier’s process of creating value for the customer begins with an understanding of the customer’s value-creating processes which links to opportunities for co-creation. And in later stages planning, implementation and metrics are required.

An interaction between customer and provider create encounter’ sphere. It is the processes and practices of interaction and exchange that take place within customer and supplier relationships and which need to be managed in order to develop successful co-creation opportunities (Payne et al., 2008). Encounters occur where (usually) on-going interactions are involved in creating these experiences (Payne et al., 2009). As it was discussed in previous parts of thesis, encounters indicate interactions between customer’s sphere and supplier’s sphere, where supplier participates in customer’s value-in-use (Grönroos and Ravald, 2011; Vargo and Lusch, 2011; Grönroos and Voima, 2012).

Sphere-based co-creation model illustrates interconnected processes between supplier and customer and locus of value co-creation process (Figure 2). The arrows in the middle point in both directions supplier and customer process which highlight interactive nature of interactions and represent different encounters between the customer and the supplier occurring as a result of their respective value-creating processes.

Source: adopted from Payne et al., 2008; 2009

Figure 2. Payne‘s process-based co-creation model

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White arrows that are shown between customer processes and customer learning indicate that during co-creation and relationship experiences customer is engaging in learning process too, which in turn has an impact for future relationship and engagement in value co-creation activities with the supplier. Similarly to customer learning, the arrows shown in between of supplier processes and organizational learning also indicate that supplier learns more about the customers and opportunities that could be available for further improvements of the relationship experience design and enhance co-creation with customers.

To sum up, this model indicates that supplier needs to recognize customer processes and understand where supplier’s offering fits within the customer’s overall activities. In this case supplier’s motivation is oriented to customer practices improvement in order to build value for the customer and a more valuable role for itself in the customer’s activities. Quantity and quality of interactions or encounters between customer and supplier determines meaningful value co-creation and framework, that includes customer’s, encounter’s and supplier’s processes, can be used by marketers in designing and structuring relationships that forms the core of the co-creation processes.

3. VALUE CO-CREATION THROUGH NETWORK AND CUSTOMER TO CUSTOMER INTERACTIONS

Previous models have addressed the role of interactions between customer and supplier, as

well as resource integration in order to better understand value creation processes (Prahalad and Ramaswamy, 2004b; Payne et al. 2008, 2009; Aarikka-Stenroos and Jaakkola, 2012; Grönroos and Voima, 2012). Those models mostly indicated relationship and co-creation only between two actors - customer and supplier, however Gummesson and Mele (2010) provide model where value co-creation process occurring through interactions of networks (Figure 3).

Source: Gummesson and Mele, 2010

Figure 3. Value co-creation through actor-to-actor interaction and resource integration in

many-to-many network setting

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Value co-creation in this case is enabled by actor-to-actor involvement and commitment, the

whole process has two core phases (Gummesson and Mele ;2010): Actor-to-actor interaction – interaction should be seen as service interaction, it enables an

actor to enter the value creating processes of other parties, support them, and benefit from them. The model highlights three phases of actor-to-actor interaction: dialog is set up, knowledge and other resources are transferred, and then learning takes its place.

Dialog - leads to constructive interaction, where comparison of ideas, knowledge and experiences could be made. However differently than in the DART model (Prahalad and Ramaswamy, 2004b), dialog is more extent to social interaction and networks, where knowledge is not solely produced by a single actor within its practices but by a network of actors committed to co-create value.

Resource transfer – the members of a network can access financial, human, technical, physical and other resources through interaction. Knowledge, products, services, and solutions are exchanged and shared by actors according to their specific evaluation (value-in-exchange) and they are activated in their value-creating processes in order to achieve certain goals (value-in-use).

Learning - purposeful interaction and conversation drives learning by enabling processes of socialization through which knowledge arises and activates the knowledge spiral within the network. indicated shared information as the basis for learning during the value creation process, which is fostering the development of common mental models.

Integration of actor resources, which in accordance with their expectations, needs and capabilities – determines value co-creation, similarly as it was illustrated in Gummesson and Mele (2010) model. The integration can assume different forms: complementarity, redundancy, mixing, where in all of these situations the actors try to match resources, processes and outcomes in order to co-create value.

Value co-creation model through actor-to-actor interaction and resource integration in many-to-many network setting was the first that has included networks in value creation process. In this many-to-many network conceptualization, the value is not only in the customer’s sphere but it is the concern of each actor who performs a role in the network (Gummesson and Mele, 2010).

This model gives strong intentions also rethink value co-creation among different actors, that might also be customer-to-customer co-creating value or experience in their phase of value-in-use, as well as supplier-to-supplier, and their resource integration is a key mechanism in value creation, where each actor contributes to value creation by integrating available resources through which they get benefits.

DISCUSSION

Consumer value co-creation process requires particular attention on interaction between

supplier’s (provider’s) sphere and customer’s sphere (Payne et al., 2008, 2009; Grönroos, 2011; Grönroos and Voima, 2012; Aarikka-Stenroos and Jaakkola, 2012), however interactions of value co-creation can occur not only between supplier and customer interaction, but also customer to customer interactions through the network (Gummesson and Mele, 2010; Grönroos and Voima, 2012).

Value creating interactions are not only direct, which are central to the joint sphere of provider and customer, but interactions can be also indirect separately in providers and customers sphere. Providers in its indirect value creation can only facilitate value or in other words, create potential value-in-use. Unlike provider, customer always determines value and always is value creator (Vargo and Lusch 2004; 2006; 2008; Grönroos and Voima, 2012), even in indirect interactions occurring in customer’s sphere, customer independently is creating value individually or co-creating value collectively with other customers in their phase of value-in-use.

Independent social value co-creation occurs when the other actors/activities/resources interact with the customer’s resources/processes/outcomes (visible and/or mental) in a

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collective/social value creation process (Grönroos and Voima, 2012). However this value co-creation interaction requires particular consumer behaviour, such as customer participation behaviour, including information seeking, sharing, responsible behaviour and personal interaction, and customer citizenship behaviour, including feedback, advocacy, helping and tolerance (Yi and Gong, 2012).

Internet empowered consumers by enabling possibilities to develop dialogues through virtual networks (Ramaswamy, 2009; Hoyer et al, 2010) that went beyond supplier to customer relations and included customer to customer interactions outside the supplier’s sphere of influence (Grönroos and Voima, 2012). Level of non-reciprocal marketing has increased, such as user-generated content (Di Gangi and Wasko, 2009) and highlights the need to investigate value co-creation process within customer to customer interactions. Supplier providing platforms for customer-to-customer interactions can learn more about its customers and enhance value facilitation.

Prahalad and Ramaswamy (2004b) emphasized experiences as a relevant part of co-creation, which is occurring during value-in-use phase. User experience sharing is one customer-to-customer interaction types (Nicholls, 2010), where customers engage in co-creation behaviour to evaluate and enhance their consumption experiences. Similarly to experience sharing, Gruen et al. (2007) suggested customer-to-customer know-how exchange, where customers can enhance value through sharing information based on their knowledge and prior experience. Those co-creation types indicates customer’s willing to share their own experiences and learn from experiences that are shared by the others, what leads to unique solution design and better experiences value-in-use.

CONCLUSIONS

Marketing literature analysis on consumer value co-creation conducted in previous sections showed that value co-creation process requires particular attention on interaction between supplier’s (provider’s) sphere and customer’s sphere, however value co-creation can be implied within networks too, where value can be co-created between different actors, including not only interactions between supplier and customer, but also customer to customer interactions. All those interactions are occurring in value-in-use and generating experiences that lead to higher consumer satisfaction that, in fact, is the goal of the marketing.

Management of consumer value co-creation was also analysed through different perspectives, such as co-creation experiences, defining customer’s-provider’s processes and encounters of value co-creation, investigating process of collaborative activities around the core of value-in-us) and also through emphasis on integration of resources of different actors within the network as a basis for value co-creation. Despite of this contribution to marketing theory development, framework on how consumer value co-creation should be implemented within online service provision is not suggested, however it is possible to extract main components consisting of processes and elements that would be useful in constructing value co-creation models in online service provision.

From literature analysis, basic processes and elements could be extracted as important constructing parts for a framework of consumer value co-creation, where interactions and value co-creation occurs not only between provider and customer, but also customer to customer. Constructed framework consists of six main blocks: (1) building co-creation experience; (2) interactions and encounters; (3) interacting and matching resources; (4) value co-creation process (supplier with customer); (5) value co-creation (customer with customer); (5) learning.

REFERENCES

1. Aarikka-Stenroos, L., Jaakkola, E. (2012). Value co-creation in knowledge intensive business services:

A dyadic perspective on the joint problem solving process. Industrial Marketing Management, 41(1), pp. 15-26. 2. Di Gangi, P.M., Wasko, M.M. (2009). The co-creation of value: Exploring user engagement in user-

generated content websites, Procceedings of JAIS Theory Development Workshop

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3. Grönroos, C. (2011). Value co-creation in service logic: A critical analysis. Marketing Theory, 11(3), pp. 279-301.

4. Grönroos, C., Ravald, A. (2011). Service Business Logic: Implications for Value Creation and Marketing. Journal of Service Management. Vol. 22 Issue 1, pp. 5 – 22.

5. Grönroos, C., Voima, P. (2011). Making sense of value and value co-creation in service logic. Hanken School of Economics, Working papers 559. Helsinki, Finland.

6. Grönroos, C., Voima, P. (2012). Critical service logic: Making sense of value creation and co-creation. Journal of the Academy of Marketing Science, pp. 1-18.

7. Gruen, T.W., Osmonbekov, T., Czaplewski, A.J. (2007). Customer-to-customer exchange: Its MOA antecendents and its impact on value creation and loyalty. Journal of the Academy of Marketing Science, 35(4), pp. 537-549.

8. Gummesson, E., Mele, C. (2010). Marketing as value co-creation through network interaction and resource integration. Journal of Business Market Management, 4(4), 181-198.

9. Hoyer, W. D., Chandy, R., Dorotic, M., Krafft, M., Singh, S. S. (2010). Consumer co-creation in new product development. Journal of Service Research 13 (3), pp. 283–296

10. Yi, Y., Gong, T. (2012). Customer value co-creation behavior: Scale development and validation. Journal of Business Research.

11. Payne, A. F., Storbacka, K., Frow, P. (2008). Managing the co-creation of value. Journal of the Academy of Marketing Science, 36(1), 83-96.

12. Payne, A. F., Storbacka, K., Frow, P., Knox, S. (2009). Co-creating brands: Diagnosing and designing the relationship experience. Journal of Business Research, 62(3), 379-389.

13. Prahalad, C.K., Ramaswamy, V. (2004a). The future of competition: Co-creating unique value with customers (hardcover): Harvard Business School Press.

14. Prahalad, C.K., Ramaswamy, V. (2004b). Co-creating unique value with customers, Strategy & Leadership, Vol. 32 Iss: 3, pp.4 – 9.

15. Ramaswamy, V. (2009). Leading the transformation to co-creation of value, Strategy & Leadership, Vol. 37 Iss: 2, pp. 32 – 37.

16. Thompson, L., Fine, G. A. (1999). Socially shared cognition, affect, and behavior: A review and integration. Personality and Social Psychology Review, 3(4), pp. 278-302.

17. Vargo, S. L. Lusch, R. F. (2006). Service-dominant logic: Reactions, reflections and refinements. Marketing Theory, 6(3), pp. 281-288.

18. Vargo, S. L., & Lusch, R. F. (2008). Service dominant logic: continuing the evolution. Journal of the Academy of Marketing Science, 36(1), pp. 1–10.

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Tatjana Simaskiene1 Aiste Dromantaite2

INFLUENCE OF KNOWLEDGE MANAGEMENT TO THE COMPETITIVENESS OF ENTERPRISES

Abstract Purpose – to analyze Knowledge Management conception and to show it‘s all important elements, to

analyze relation between Knowledge Management and Competitive advantage, how and which way Knowledge Management influences the effectiveness of the Company‘s activity and how it‘s forming stable competitive advantage.

Methodology, approach and design: sistematic analysis of theoretical literature, it‘s generalization and comparison, thematic analysis data investigation.

Findings and originality: In this article is analysing influence of Knowledge Management system to the Competitive advantage. Correlation between Knowledge Management and Competitive advantage investigation is made by Strategic Management system. Analyzing scientific literature, are systematized given Knowledge and Knowledge management conceptions and is made their evaluation with regard to Competitive advantage. Performing analysis is noticed, that Knowledge Management can help to make better company activity‘s efficiency, this way company can achieve succsessful Competitive advantage. But if we want to get utility of Knowledge management, it‘s necessary to harmonize all Knowledge Management aspects, depending on context of company‘s activity. Searching for the answer, how succsessfully realize iniciation of Knowledge management and to give the company Competitive advantage, during this investigation was designed model of theoretical Knowledge Management realization.

Research type: theoretical analysis. Keywords: Strategic Management, Resource standpoint, Knowledge, Knowledge Management,

Comptetitive advantage.

JEL classification: L20-Firm objectives, Organization, and Behavior.

INTRODUCTION

Modern economy is characterized by quick and impulsive changes, globalization and savage

competition. An old economy was characterized by high level industrialization and production organization, company had three Competitive advantage strategy options: leader costs, leader niche and differentiation strategy (Porter 1998). Company, which was trying to live out in such difficult conditions, had to find invariably modern adaptation ways and abilities to compete in competitive surrounding. In such surrounding, which quickly change, company has the problem with resource management problem. That‘s why modern economy‘s angular stone is effective use of material and nonmaterial knowledge resources in order to reach Competitive advantage.

As say scientists (Zuboff, Maksim and others), the newest economy gives more expectancies to live out companies, which are projecting and using the information, knowledge and resource controlling systems and networks, which help rationally control material and nonmaterial resources (Zuboff, Maksim 2002).

1 MBATatjana Simaskiene, Mykolas Romeris University, Faculty of Politics and Management, Management department, Vilnius, Lithuania, [email protected] 2 Assoc.prof.dr. Aiste Dromantaite, Mykolas Romeris University, Faculty of Politics and Management, Management department, Lithuania, [email protected]

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Knowledge Management of late 10 years have progressed from embryo till more and more accepted scientific area, but the most part of Knowledge Management works have describing character, they are directed to the definition creation and integration to the existing describings. That‘s why are not comparatively many investigations (the most of them reviews), which pay their attention to the Knowledge Management from other organizational factors viewpoint. Lithuanian scientists also are mentioned in this article – works of Melnikas, Smaliukienė (2007), Atkočiūnienė (2006), Zalieckaitė and others (2007), Savickienė ir Pukelis (2004), Marčinskas (2001), Vasiliauskas (2001), Beniušienė, Svirskienė (2008), Raudeliūnienė (2012), Piliutytė (2007) ir Lobanova (2001).

Also this theme in many ways was analysed by many foreign scientists, such as Porter (1985, 1998), Zuboff, Maksim (2002), Enz (2009), Lamb (1984), Nag et al. (2007), Amit, Schoemaker (1993), Jackson, Hitt, DeNisi (2003), Thomas et al. (2005), Fahy, Smithee (1999), Thompson ir Martin (2010), Hawryszkiewycz (2010), Probst et al. (2006), Chen et al. (2005), Becerra-Fernandez et al. (2004), Jashapara (2004), Walters et al. (2002), Davenport and Prusak (2000), Skyrme (1999), Newell et al. (2002), Al-Hawari (2005), Boshoff (1996), Bowersox (1995), Wilson (2002), Shannak (2009), Reid (2010), Chua and Lam (2005), Osborne ir Gaebler (1993).

Essential background, which impulsied Knowledge Management study, is that creating, putting, saving and giving very important knowledge, organization acivity becomes perfect, but to found it we missed empirical proofs.

This investigation aim is to fill in and remove all fixed failings and assemble practical empirical proofs about connection between Knowledge Management and Competitive advantage and to find method, which‘ll help to secure gain of Knowledge Management for Competitive advantage.

The aim of this article – theoretical sources to analyze conception of Knowledge Management and to define the main it‘s elements, to analyze Knowledge Management and Competitive advantage relation in order to give understanding how and which way Knowledge management influences the company activity efficiency and how does it forming sustainable Competitive advantage. In order to continue in another article will be given qualitative investigation, and theory in this article is based on it.

Investigation methodology – in accordance with principal of pragmatism, is chosen such direction of this work – Knowledge Management accordingly with inductive approach is shown like strategic resource and as Competitive advantage tool. Whereas this work was restricted by volume and time, was chosen cross-section method. Primary data was collected through semi-standardized interview. As the interview method is characterized by particular flexibility, was collected enough information. All collected information is analyzed using a thematic scientific literature analysis.

1. STRATEGIC MANAGEMENT CONCEPT ANALYSIS Strategic management influence growth can be associated with the competitive environmental

development, transport and communication technologies, global markets modernization and technological advancements (Enz 2009). Strategy is defined as the organization's long-term position, where decisions are made; which benefits organization is willing and is able to provide users, joining and aligning their operational systems and find ways effectively recover the long-term investment (Melnikas, Smaliukienė, 2007).

Accordingly Lamb (1984), Strategic Management is a continuous process, which estimates, controls, implements re-evaluate the objectives and strategies in order to catch up and overtake the current and potential competitors.

Essentially, Strategic Management – it’s a set of initiatives, which describe how to use the available resources in order to increase the efficiency of the company in the context of the market (Nag et al. 2007).

Strategic Management process is focused on the following company’s key issues:

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- Which markets the company has to compete? What are the ways to compete in selected markets in order to create a competitive advantage? How to make, that created Competitive advantage be sustainable and hardly simulated by competitors.

Answering to these questions, and practicians and scientists differently understand Competitive advantage, that’s why they have and different answers. However, by grouping all possible answers accordingly directions, are defined three strategic management options:

- Traditional option - traditional entity (company’s) strategy; - Intangible and / or intangible resources strategy; - Interested parties strategy – it’s an approach, which that interprets the company like

relationship between network of interested parties. This article is a starting point for resource-based approach, which deals with the company as a

whole of resources and skills that are directly competitive advantage depends on the rare (or serious imitated) resource management (Amit, Schoemaker, 1993, 33-46; Jackson, Hitt, decks, 2003). Resources in this context are perceived as a company of the tangible and intangible assets and skills set (Thomas et al. 2005).

Resource-based approach can be considered the foundations of Competitive advantage theory. Competitive advantage theory focuses on how to achieve and maintain competitive advantage. Resource-based approach gives the answer to the question, that Competitive advantage is effective strategic resource, which have value and is difficulty simulated, management and use. Therefore, resource approach supports management of the company in accordance with the strategic decisions, which create or formulate ways to use the company's most important strategic resources in order to increase economic returns (Fahy, Smithee, 1999).

In this sense, resources are strategically important for the Competitive advantage. In other words, the resource value and uniqueness makes them "strategic" resources. There are no predefined parameters to specify what do resources mean, because these parameters are different, and depend entirely on the context. However, there are signs, which describe which resource is strategic. Thompson and Martin (2010) provide general resource values accordingly audit principles, specifically:

- Competitive advantage - it is the value of resources and the competitiveness of the relative comparison;

- Replication limitation – influences resource growth, in case of increasing restrictions to restore or imitate;

- Durability - describes how much time can be maintained in the first two above listed characteristics;

- Convertibility - determines whether it is possible to replace the outdated resources alternative ones;

- Individuality – it is an expression, when company “controls” resources and provides profit, differently than resources managed by the company.

In summary, the resources based strategic approach, which analyses company as a resource, skills, abilities, Knowledge Management as a whole, become a key, building an exclusive Competitive advantage features (Jackson, Hitt and DeNisi, 2003).

2. KNOWLEDGE CONCEPT ANALYSIS IN THE CONTEXT OF SCIENTIFIC MANAGEMENT Knowledge is difficult to understand in the concept of discussions. Knowledge concept

evaluation depends on the context, in which it is examined. But whatever the context for different types of knowledge, the majority of scientists (Hawryszkiewycz, 2010; Zalieckaitė et al., 2007, Atkočiūnienė, 2006; Probst et al. 2006, Chen et al., 2005, Becerra-Fernandez et al. 2004 Jashapara, 2004) agree, that knowledge is certain collected information, which is used for achievement estimated goals.

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Knowledge is the new generation intangible resource, it’s completely different from the traditional resource, such as manufacturing facilities or industrial technology. However, it is equally and may be more effectively influences company's efficiency.

Intellectual form of capital – knowledge - characterizes strategic resources properties by Thompson and Martin (2010) described principles. Strategically important knowledge makes them unique, because they are difficult imitated and reproduced on the abstract nature. Also knowledge is a lasting resource, protected by the company's personnel thoughts or systems, and it’s can be assembled and gathered.

Accordingly Walters et al. (2002), exists another interesting feature of knowledge - that knowledge, being a strategic resource is the only resource, which is increasing when is used, while the others, when are used, disappeared. This knowledge feature further increases their value. We can say that knowledge is a strategic resource, which can be used for Competitive advantage. However, exactly the same as having resource in itself doesn’t affect the level of competitiveness, so and “having” knowledge in accordance with the same principles can’t do it. Therefore, knowledge as an important Strategic resource, must be effectively managed, that company would receive benefit from the ability to provide added value, nourishes and supports company's Competitive advantage.

3. KNOWLEDGE MANAGEMENT DEFINITION AND THE MAIN IT’S ELEMENTS Knowledge Management is an ambitious discipline, included in the generally accepted range of

subjects, but due to its novelty isn’t fully defined and this leads to some confusion regarding the concept of discussion. This uncertainty arises because of the Knowledge Management discipline - a variety of scientific disciplines, such as anthropology, strategy, information science, computer science, economics, human resource management, psychology, philosophy, sociology, management science, synthesis of compounds. Whereas knowledge management is a very rich area, it’s researched of variety of complementary and scientific perspectives.

Knowledge Management's multi-property feature has many definitions, which stem from the foundational disciplines. In order to more clarify the concept of Knowledge Management, it is appropriate to give a few of basic sciences in the definitions.

Davenport & Prusak (2000) define Knowledge Management as a process, which is based on the company's resources with an emphasis on information systems and human resource management practicians in the integration. This definition is based on information, education and perspective of human resource management integration. Skyrme (1999) described Knowledge Management as an explicit and systematic company’s management and vital knowledge and processes, connected with knowledge creation, accumulation, organization, dissemination and use in order to achieve its aims. This definition arises from an information science perspective.

Newell and others. (2002) defined Knowledge Management as a set of Knowledge Management processes and with their help company uses knowledge assets in a changing environment in order to attract regular innovations. This definition is derived from the strategic perspective. Knowledge Management helps the company to create, collect, organize, share, analyze, update and use knowledge, as rationally managed resources, lets the company to adapt to the changes and to compete successfully in the market. In conclusion - Knowledge Management – it’s an organization’s strategic process, which is directed to strategic capabilities developing, enabling to deal with turbulence in the business environment, which lastly helps to achieve a Competitive advantage.

This is Knowledge Management description, based on strategic approaches. Regarding the nature of knowledge, different aspects of Knowledge Management definition and

Knowledge Management inevitable formation, it is necessary to describe the essential Knowledge Management processes. Jashapara (2004) Knowledge Management’s cycle described as a learning company’s effective synthesis with knowledge creation, organization, sharing and use, and as a result is improved company's intellectual capital and increases the company's productivity, which leads to the Competitive advantage.

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Knowledge Management cycle consists of 4 main processes: 1).The first process involves the creation of knowledge (also known as "the accumulation,

updating or invention"), which takes place every day in organizations, using a variety of methods. Knowledge creation is an endless process, which combines new ideas, new theoretical and methodological aspects of the search and bring them together into a new whole system (Jashapara 2004).

2) The second process involves the knowledge of organization (management). This is knowledge storage, recording and sorting, it is making them easy to recover or receive if it’s necessary.

3) The third process - the knowledge Sharing (also known as "sharing and dissemination). This is a mutual action, in which knowledge is distributed and spread between individuals through mechanical and other than mechanical databases. Most of Knowledge Management success depends on the knowledge sharing and exchanges. In other words, Knowledge Management cycle depends entirely on the ability of people to exchange and share knowledge. In this part especially comes out influence of company’s culture to the knowledge transfer.

4) The fourth process - use of knowledge itself, which is connected with deals with the efficient 'functional' knowledge, in order to solve the problems, to manage processes and to create a good working environment for the creation of knowledge (motivation, the importance of working environment). According Raudeliūnienė (2012), knowledge is defined as the process of using Knowledge Management implementation phase, where knowledge is transformed into concrete results. Knowledge using cycle – is knowledge transfer in a finite service or product (Jashapara, 2004).

Knowledge Management for Multidisciplinary origin, as discussed, is estimated from different points of view, that’s why different scientists have different approaches to Knowledge Management core. Some publications about Knowledge Management analyze information systems, that’s why may be given an impression, that Knowledge Management - is an information management. Other sources emphasize more intellectual resources creation and diffusion, which suggests that Knowledge Management - is intellectual resource management.

Therefore, analyzing Knowledge Management, it’s useful to plug insight Knowledge Management dimensions. Dimension – is an area, which is very important for the estimated object quality and more or less determines existence by features, which are necessary for the quality of the measured object. (Savickienė, Pukelis 2004).

Knowledge Management framework by Jashapara (2004) components are: - Strategy – it’s intellectual capital management’s strategy optimization in order to optimize the

company's activities; - Culture - framework company culture phenomenon, that significantly revealed in

implementing and managing alterations; - Company’s learning - the company level of knowledge search, dissemination and use of process

capability; - Systems and Technologies - systems and tools for practical Knowledge Management;

Knowledge Management systems -there are systems, that support Knowledge Management and support business functions (Jashapara 2004).

From Knowledge Management dimensions purified three essential Knowledge Management dimensions: people, processes and technologies.

The first aspect - people. Whereas Knowledge Management is primarily based on people, people's willingness to Knowledge Management system is the most important task of Knowledge Management. This preparation for Knowledge Management system depends on the company culture (including values and behaviors), which is the most important factor in Knowledge Management. It is important for the company to support and encourage continuous learning and knowledge sharing culture, motivate and encourage people to create, share and apply knowledge; maintain openness, mutual respect and support for culture.

The second aspect - processes. In order to improve the exchange of knowledge, company must adapt internal processes, and sometimes even enterprise structure. For example, if a company is

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structured in such way, that the different it’s parts compete for resources, then it will be probably a barrier to knowledge sharing in process. Looking to the many aspects of how in organization are functioning processes, it’s necessary to find processes, that constitute an obstacle to the knowledge management process. They need to be modified or replaced by other processes that encourage or motivate people to create, modify, and use knowledge.

And the third aspect - technologies. A common misbelief is that Knowledge Management is just technologies. We suppose, the intranet technology, which is connecting people via e-mail and is generating information databases, and so on, is often a very important Knowledge Management assurance. Intranet technology helps to connect people with information gathering and with one another. However, this is not the most important. Most importantly, in use of technologies include people and processes, otherwise without them it can’t be used.

These three components scientists often visually compared with a tripod - if at least one foot is not available, a tripod will collapse. However, one "leg" people are taken more seriously than others. Particular company’s attention should be given to the knowledge, facilitating creation of culture, which shapes people's attitudes to change and acceptance of Knowledge Management systems. That’s why a person is one of Knowledge Management component.

With respect to analyzed theory, concept of Knowledge Management in the context of this study is defined as a collective learning process, related to the search tacit and explicit knowledge, its transfer and utilization (Jashapara 2004). In this process, a set of knowledge are identified or developed, assembled, stored, updated and pooled in order to improve the company's performance. When these processes are effective and sustainable, the company can take advantage of the potential benefits of Knowledge Management, thus creating a Competitive advantage.

4. KNOWLEDGE MANAGEMENT, BASED ON COMPETITIVE ADVANTAGE Following the scientific literature (Al-Hawari, 2005; Boshoff, 1996; Bowersox, 1995, David Long,

2001; Marčinskas, 2001, Piliutytė, 2007 Vasiliauskas, 2001) suggest, that in the global scientific community, there is no common approach to competitiveness. This is because the competitiveness - is particularly complex category, rather than a situation or condition that is measured by one or more parameters.

Competitiveness is often determined by the entity (state, companies, groups or individuals) the economic and social welfare, prestige, and too little competitiveness can be a big loss, shock or even the cause of the collapse (Beniušienė, Svirskienė 2008, 32-40). Competitiveness of the company is directly linked to the company's ability to respond quickly to the urgent changes in the market and maintain their position in it.

M. Porter (1985) stated, that there are "two basic types of Competitive advantage of the company - low cost or differentiation, which in combination with a specific business" rate "- the target market segments range - allow you to create" three general strategies for the company to achieve higher than average performance: cost leader, differentiation and focus, or scale reduction.

Cost leader - such company's competitive strategy, which essence is the ability to produce the right quality product or service cheaper than its competitors, which enables to realize a lower cost than other market participants. Such strategy is achieved in consequence of production economies with sufficient expertise and investment in technology sphere.

Differentiation competitiveness strategy - company’s products or services stand out from our competitors in certain properties, which are treated as customers better products and services than the relevant competitors' products. In this way company produces or provides unique products and services. The company can offer high quality, good service at the right price.

Focusing - is the company's strategy on competitiveness, which requires attention to a focus on small market segments. The company can focus on certain groups of users, or certain areas (Porter 1985).

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An enterprise for itself chooses how to provide services or goods to your customers and clients. While receiving the desired goods and services at the right price, company customers will receive the required value, for good quality. Consequently, the company's Competitive advantage derives from the value, which company can provide for its customers (Porter 1998). This value can be an equivalent product in the form of lower price, or unique, but expensive product or service form. This advantage over the competition means, that the company has a competitive advantage over your opponents in the market. Thus providing the maximum value, is increasing Competitive advantage, covering the sequence of added-value activities, as a result is formed company activities circuit. This activity chain’s aim is to provide greater value, which will be recoded into a competitive advantage and profit margins (Porter 1998). Resource-based strategy’s approach provides the company's valuable, when rare and difficult to simulate resource successfully are used for high-value aims.

Basically competitiveness - is the company’s advantage, more then competitors’ advantage, achieved by using a value-added processes and application of differentiation, cost or leadership niche strategies (Porter 1998). The advantage is displayed of increasing revenue, greater customer satisfaction, increased customer volume, improvement of brand image and other methods tunes.

Knowledge Management, as we found out, is a set of processes, associated with retrieval, tacit and explicit knowledge transfer and use in order to increase the company's intellectual capital and business performance. (Jashapara 2004). According Raudeliūnienė (2012), the essential purpose of Knowledge Management - to make personnel intellectual knowledge of sustainable competitive advantage, i.e. effective targeting of intellectual capital in the right direction. Long-term sustainable competitive advantage for organizations associated with the use of Knowledge Management systems and resources (which have not competitors) enhancement.

Competitive advantage, based on Knowledge Management - this is Knowledge Management, processes and business initiatives to gain an advantage over competitors. This advantage can be achieved through cost leadership, market leader in a niche and differentiation strategies using Knowledge Management as a critical factor.

From discussed theoretical material context, we can conclude, that Knowledge Management – is strategy, company culture, company’s learning, systems and technology interaction with people, processes and technologies in order to increase the company's intellectual capital and business performance.

5. KNOWLEDGE MANAGEMENT IN ENTERPRISES In this part of the article is discussed theoretical analyzing of that, what is known in the field of

Knowledge Management. The analysis reveals new insights about Knowledge Management and Competitive advantage interfaces. Analysis is based on the theoretical part of the theoretical and conceptual frame.

The study was aimed to realize the target, i. e. in practical environment to explore relation between Knowledge Management and Competitive advantage and to analyze, how Knowledge Management influences Competitive advantage. Thus, after discussing relationship, of Knowledge Management and Competitive advantage and after examination that fact, how Knowledge Management influences Competitive advantage and after data analysis and their interpretation, were made following generalizations:

- Knowledge Management - is a methodology, that combines technological information systems and Knowledge Management aspects, which enables knowledge to use in its proper context, which assists in the Strategic management of intellectual property and achieve a Competitive advantage and implement the company's goals, while making it an effective framework in order to facilitate staff daily work.

- Knowledge Management - is a multidisciplinary field, which can be analyzed from a variety of complementary treatment perspectives. This shows the complexity of Knowledge Management, and proves, that there are no generally accepted theories, appropriated to define this phenomenon and

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identify the fundamental lack of theoretical and empirical material. On the other hand, this area provides a variety of perspectives and Knowledge Management advantages; that makes it a great company's competitiveness-enhancing measures and undermines the assertion, that Knowledge Management resource is useless.

- Knowledge Management - is mix of three elements: people, processes and technologies. This leads, that a lot of Knowledge Management initiatives focus on one area, collapsed, because were ignored following aspects of diversity. So, Knowledge Management is not a plethora of options, as stated (Wilson, 2002), and there are many aspects of one sphere. This is an another argument, which provides Knowledge Management complexity, and helps to understand why Davenport and Prusak (2000) noted many failed Knowledge Management initiatives, which were concentrated in one area. It is important to stress that in order to create vital Knowledge Management system, in creation process it’s necessary harmoniously coordinate all aspects of Knowledge Management, according to the business context. Knowledge Management - is a set of Knowledge Management processes. These processes include knowledge in a given environment, the collection, storage, distribution and use. An effective knowledge collection, storage, distribution and use secure efficient Knowledge Management system’s presence. Only an effective Knowledge Management can transform company's activities to the efficient and secure Competitive advantage.

Knowledge exchange is Knowledge Management process, by which knowledge is disseminated, that becomes available to the circle of people interested in. And this process of knowledge storage and accessibility provides to the enterprise transparency and makes it more understandable to its employees. The most important feature of the process of knowledge sharing - accessibility. Knowledge must not only be stored, organized and divided, but they can also be easily made available to people, who intend to use them. If knowledge is managed, but inaccessible, they lose all importance and can’t provide benefits. This is because resources, based on the description of resources, make profit only when are used in enterprise. Equally is important, that knowledge opening procedure be short and as possible simple. In extreme circumstances, when a decision must be taken within a very short time, the simplicity and brevity of the procedure helps quickly to get the information and knowledge. Therefore, the most appropriate and expeditious knowledge opening speed is an important consideration in determining the level of success of the company in the market. Timely decision could significantly change the market players’ positions, to influence new formations and the leadership originate. Uptime and its speed are also determined by the transparency of the company, because knowledge and information are easily accessible, which leads to openness, through systematic reporting procedures to the responsibility of the employees.

Technology and system infrastructure are necessary for successful Knowledge Management system construction and can’t be forgotten. However, the technology component of Knowledge Management is not required, because it’s not an end in itself, but a tool, that helps people to manage knowledge. It should also be noted, that technological systems, directed to supporting Knowledge Management processes are so effective, how effectively they’re managed by people. People are Knowledge Management initiative’s essence, because they are the ones, who carry out Knowledge Management tasks. Technologies for Knowledge Management support may be the most advanced, but if there are not people who will participate in Knowledge Management processes, then all efforts are in vain.

To ensure the success of Knowledge Management initiatives, are necessary general company personnel and management efforts for preparing for the implementation of the project. Preparing of workers for the introduction of specific measures isn’t possible, the company doesn’t have the values, norms and procedures to help in preparing for such changes. Joint efforts and universal preparation for implementation of the project can be only in cases, if company’s culture plays an important role in shaping the open, ready to change company.

Knowledge Management Initiative as a joint effort, which forms company’s culture, is shaped by people and their actions. Environment of the company must be open to change, so it’s very important for Knowledge Management initiatives supporting, which is derived from the company's culture, from

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people, who shaped it. Company’s culture is a factor, which helps to prepare for the changes, which will determine the company's openness to knowledge exchange. Therefore, in company should be encouraged workers cooperation and exchange of knowledge, what determines the mutual support, trust and becomes company's value.

In summary, can be said, that Knowledge Management is summation of people, processes and technologies, that support knowledge creation, collection, storage, transfer and use. People are the main component of Knowledge Management, because only it can perform Knowledge management processes through technology.

6. THEORETICAL FRAMEWORK FOR KNOWLEDGE MANAGEMENT IMPLEMENTATION In order to illustrate how Knowledge Management as a resource can be used in getting

competitive advantage and in order with basis of theoretical analysis of scientific material as well as the results obtained during the investigation, was formed knowledge implementation model (see Figure 1).

Source: Was created by Jashapara (2004) and results of made investigation.

Figure 1. Knowledge management implementation model At Knowledge Management implementation model (see Figure 1) was tried to visualize, how to

implement Knowledge Management system in the company; that would help to achieve a Competitive advantage. This interview is based on the analysis of information, obtained theoretical Knowledge Management dimensions and aspects of the model results Jashapara (2004). Based on this model, can be said, that in order to ensure the successful implementation of Knowledge Management initiatives, company has to form:

Company's strategy, which Knowledge Management estimates as a strategic resource and understands the profit of successful Knowledge Management initiatives. The strategy is already in the process of preparation has to plan the knowledge management opportunities offered in order to gain a Competitive advantage. Only such strategy is formed by an open company’s culture knowledge; a culture, that fosters openness, transparency and willingness to change.

People

Processes

Technologies

Strategy Culture

Company‘s

learning

Processes ir

technologies

Help creation

Influence

poveikis

Sharing

Empower

Support

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Company’s culture has to motivate and support Knowledge Management initiative, but then the company has a chance to complete a successful Knowledge Management initiative;

Company’s learning, which sells processes of knowledge searching, collecting, sharing, and use.

Systems and technologies, which support organizational learning and Knowledge Management processes.

When Knowledge Management project is designed by focusing on all four Knowledge Management framework, and is focusing to the overall pre-set goal, the initiative becomes practicable.

It is also important to ensure the company's personnel (human) support. If you ignored the workers' motivation and readiness for Knowledge Management system implementation, all the initiative becomes doomed to fail. The system can’t run by itself, also the strategy can’t establish by itself and to implement by itself, the culture can’t exist for itself, the company’s learning doesn’t exist without training participants; all of these processes depend on the person and only he can carry out them. Therefore it’s very important to ensure a unified whole staff support and interest to Knowledge Management System. Only then, the company can expect to have benefit from Knowledge Management.

7. ENSURING BENEFITS OF KNOWLEDGE MANAGEMENT IN ENTERPRISES It can be considered, that one of the most important and equally challenging aspects is the ability

to ensure that Knowledge Management actually provides benefits to the company. The most effective way to find out if Knowledge Management is good - to measure it. Although Knowledge Management comes to the companies promising benefits, but it has to be universally understood and accepted.

Unadvisedly hastily to recognize the investment to Knowledge Management benefits without hard evidence. Knowledge Management and its impact measurement is still a matter of debate (Shannak 2009, Reid 2010). This debate stems from the fact that knowledge is abstract and difficult to shed variable, its measurement is very difficult. One of the claims of knowledge management performance, accordingly Ibrahim, and Reid (2010), is that it is difficult to determine on how Knowledge Management is "valuable." That’s why even more difficult to find a mechanism, which will be able to measure Knowledge Management "valuability." This leaves allayed earlier statement, that Knowledge Management lacks potency, clearly to show and define the relationship between Knowledge Management and its potential benefits. The unclear relationship between Knowledge Management and enterprise performance and Competitive advantage provide pabulum to the view, that Knowledge Management is just a fad, and not a real management practices.

However, in recent years, opinions about Knowledge Management existence is stabilizing because were disclosed new facts in the field of Knowledge Management. This led Knowledge Management transformation to the widely applicable management practices. Result of this investigation is another step in this direction, which helps to explain unanswered yet questions and to deny knowledge management criticism.

In this investigation was formed an idea, how to make connections between Knowledge Management and advantages clear and understandable. This is achieved by previously discussed Knowledge Management implementation model in addition with advisability and measurement criteria.

Expedience ensures, that Knowledge Management initiative is introduced reasonably and purposely, and is based on a specific action plan. Knowledge Management initiatives should be based on pre-raised objects and targets. The result with the help of Knowledge Management must be planned clearly and concretely, it’ll have enough attention and an action plan in order to achieve this result. According to Chua and Lam (2005, 6-17), the most Knowledge Management projects failure reasons are: bad management and control, inadequate support for the execution and unclear aims. Objective Knowledge Management initiative eliminates these obstacles and provides a reliable chance

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to achieve potential benefit. Therefore, we can say, that expediency is the first successful Knowledge Management initiatives’ assumption.

Measurement is directly related to the directivity, if initiative is focused and directed towards a specific goal, it allows, taking into account the objectives set, to assess the real benefits of the initiative.

For example, if Knowledge Management initiative is focused on the problem of operating costs in order to reduce them, the company firstly has to analyze operating costs before implantation Knowledge Management project. This analysis must be clear and concise, realistic and fit the company’s context, and most importantly, to assess the actual cost of the problem. In other words, you need to find the problem financial expression, precisely the problem "price."

With the problem financial expression, it becomes easy to measure the impact of Knowledge Management – it’s enough to value change of “price” problem. Measurement promotes to understand, what is measured. In order to perform accurate measurements it is necessary to have detailed understanding of what are you measuring. In addition, the company can’t manage what you can’t measure. Measurement supports resource management. This process was excellently described by Osborne and Gaebler (1993): "If you don’t measure results, you can’t separate success from failure. If you can’t see success, you are unable to reward it. If you can’t reward success, you're probably award failure. If you can’t see failure, you can’t learn from it. And if you can’t recognize failure, you can’t correct it. "

Use of expediency and measurement principles, implementing knowledge management initiatives, can be beneficial to the company, which intends to improve operational efficiency and achieve competitive advantage. In the limelight appears that fact, that Knowledge Management system should be introduced not so-so, but to achieve common business goals.

The assessment also can provide a lot of important things. Measurement function’s definition – in the limelight occurs an expression, which is measured. When attention is focused on the activities, that are changing, occurs an interest to these activities, and when occurs an interest to the activities, the chances that this activity will succeed, increases.

Another measurement’s importance reason is - understanding that measured expression increases people's interaction with the measured expression. In order to understand whether the situation is improving after the introduction of the initiative, it is necessary to gain more insight into the situation in context and concepts. Uninterrupted measurement inevitably leads to a deeper understanding of the measured entity.

In addition, the more important is fact that an entity can’t manage what you can’t measure (Osborne and Gaebler, 1993). Measurement enriches quality of decision-making process and supports the company's resources. The information, gathered during the measurement process, can be used in making management decisions in order to change and improve certain organizational processes.

These statements, of course, aren’t quite flawless. First of all, not all problems are easily transformed into a financial sense. If problem is wrong, the observed change will be likely also negative. However, this doesn’t mean, that method is completely unsuitable for use, and reflects the fact, that the initial and final evaluation should be oriented properly, so that the measurements will be correct. There are also other factors, which must be considered, using principle of measurement.

The modes of action are preliminary, their expedience and measurement require further consideration in order to optimize them, so this work is just the first step in this direction, and can be further developed.

CONCLUSIONS The intention of this article was to realize the goal - in practical environment to explore

relationship between Knowledge Management and Competitive advantage and to analyze, how Knowledge Management influences Competitive advantage. Thus, after discussing relationship between Knowledge Management and Competitive advantage, was examined how Knowledge Management affects competitive advantage and after providing a model, that helps to ensure

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Knowledge Management effects on business competitiveness, also after making data analysis and interpretation, reached the following conclusions:

1. Knowledge is valuable, continuously used in the company strategic resource, which provides to Competitive advantage and helps to achieve business goals.

2. Knowledge Management - strategic process of organization, seeking to develop strategic capabilities, enabling to deal with businesses environmental turbulence, which effectively helps to achieve Competitive advantage.

3. Knowledge Management can be defined as a strategy, company’s culture, organizational learning, systems and technologies’ interaction with the people, processes and technologies. When this interaction is effective and sustainable, company can take an advantage of potential benefits of Knowledge Management.

4. Knowledge Management - multidisciplinary field, which can be analyzed from a variety of complementary approaches perspectives. Variety of areas and perspectives provides Knowledge Management advantages, which makes it a great company's competitiveness-enhancing measure and undermines the proposition that knowledge management resource is useless. In order to create a viable Knowledge Management system, in creation process it’s necessary harmoniously regulate all aspects of Knowledge Management, depending on the company's context.

PRACTICAL SUGGESTIONS AND RECOMMENDATIONS For successful Knowledge Management initiative during its implementation it’s necessary to pay

special attention to Knowledge Management dimensions and Knowledge Management processes. Responding to the question, how to implement Knowledge Management initiative, how make it successful and provide the company competitive advantage, this investigation was designed for Knowledge Management implementation model, which will help to answer to this question. Knowledge Management implementation model suggests, that Knowledge Management will be successful if company will form a strategy, which will seek maximum use knowledge for reaching aims of company. Such company’s strategy is forming company’s culture, which promotes and supports Knowledge Management. Such are forming values, which promote Knowledge Management processes.

Company’s learning process also must be associated with knowledge creation, storage, dissemination and use of processes. And these companies learning processes need to be supported by systems and technologies, which become effective and accessible.

All dimensions of Knowledge Management must be interrelated and focused on person, who will use them. Knowledge Management concept is intertwined with people, managed by people and for people. Disregard to human factor in Knowledge Management process system raises intolerance, that’s why is necessary to direct this process to a person. In summary we can say, that all of Knowledge Management factors must be balanced with each other.

Implementation of Knowledge Management system implementation of initiatives and in order to get a positive result, it is necessary to follow the expediency and measurement principles. Expediency ensures, that Knowledge Management initiative is introduced for a reason and purpose, and is based on a specific action plan. Measurement promotes understanding of what is measured. In order to perform accurate measurements, it is necessary to have an exhaustive understanding of what you are measuring. In addition, the company can’t manage what can’t measure. Measurement supports resource management.

This work presents the implementation of Knowledge Management model, based on expediency and measurement criteria, it can be used as a practical success of Knowledge Management initiatives in the implementation of the template.

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“AVADA 2013: Current Interdisciplinary Research in Management and Administration ‘’,

Proceedings of an International Scientific Conference, 27-31 May, 2013, Vilnius-Net, p. 127. ISBN 978-609-95468-1-0 “AVADA 2013: Current Interdisciplinary Research in Management and Administration”

aimed to advance discussions and cooperation among researchers that would transcend institutional and disciplinary barriers with the intension to increase applicability of research in Social Sciences in practice. Papers that demonstrate both best practice and potential future development of such an approach are published in those proceedings.

Texts are not edited

Prepared for publishing – Rūta Tamošiūnaitė

Published by – Academic Association of Management and Administration, Konstitucijos pr. 11, Vilnius, Lithuania

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