Ural State University of Economics

Institute of Control Sciences of RAS, Moscow

Karaganda Economic University of Kazpotrebsojuz, Kazahkstan
Omsk State University
Peoples Friendship University of Russia, Moscow
University of Trento, Italy
Ural Federal University

V Eurasian Youth Economic Forum

Congress of young economists

Management and Marketing Challenges

of the XXI Century
Collection of scientific papers
on the international scientific article competition of young scientists and students
in English language

Yekaterinburg
2014
UDC 339.138+338.24=111(082)
31

Executive Editor-in-Chief
L. M. Kapustina, doctor of economics, professor,
deputy chairman International marketing and management department
of the Ural State University of Economics

31 Management and Marketing Challenges of the XXI Century : collection

of scientific papers on the international scientific article competition of young
scientists and students in English language / [Executive Editor-in-Chief
L. M. Kapustina] ; Ministry of education and science of the Russian Federa-
tion, Ural State University of Economics. Yekaterinburg : Publication of the
Ural State University of Economics, 2014. 139 p.
ISBN 978-5-9656-0182-0

UDC 339.138+338.24=111(082)

ISBN 978-5-9656-0182-0 Ural State University of Economics, 2014

 Contents
Adegoke Muritala Adedapo. Environmental Conservation and promoting
eco-friendly goods and services ........................................................................................... 4
Babushkina D. S. The global competitiveness of Switzerland ...................................................... 7
Baggio M. Responsible entrepreneurship in South Africa: curbing endemic corruption
by exploiting the synergy between corporate social responsibility and social capital ...... 13
Bocharnikova E. Unified brand image formation and maintenance in terms of mergers and
acquisitions in the global market ....................................................................................... 17
Budlyanskaya D. D. Knowledge management as the basis for increasing
the competitiveness of the integrated industrial companies .............................................. 22
Emiri Aniekan Dafe. Individual consumer and organizational buying behavior
for engineering software .................................................................................................... 31
Djegot A.P. Creating and selling innovations: CFT ..................................................................... 35
Dyrdonova A. N. Clusterization approach as the mechanism to enhance the competitive
strength of the territory and promote the innovative processes in the region .................... 38
Md. Nazmul Hossain. Power of microcredit to remove the poverty in Bangladesh ................... 44
Kizilova M. V. Marketing strategies based on voluntary environmental certification ................. 52
Kondratenko J. Managing international workforces problems and principles......................... 58
Lkhasaranova S. B. The problems in management of sustainable fish production..................... 63
Marinelli L., Moscatelli L. The adoption of social media in companies of Marche Region.
Opportunities for innovative marketing ............................................................................. 68
Migunow R. Sustainable development of agricultural sector institutions
(by the example of Bashkortostan Republic RF) ............................................................... 73
Myasnikova O. Personnel resource formation and its quality management
in commercial bank ............................................................................................................ 75
Nikolaeva V. Analysis of innovation diffusion perspectives in Ukraine...................................... 83
Portnov N. Andreevich investment attractiveness ranking of countries ...................................... 90
Pukhovskaya A. Internet marketing in academic research: case study
of Global Green University................................................................................................ 93
Patrikeev S. The technology platform as the base of effectiveness increasing of the industry.... 99
Samohvalova A. A. The Mobility of manpower for innovative business .................................. 106
Simonova Z. G., Kuzmina V. M. Non-economic methods of stimulation
of working capacity of the Soviet people
(the historic experience of the industrialization in the USSR) ........................................ 109
Stepanenko K. S., Arkhipova A. A. Balance of team roles is success
of modern companies ....................................................................................................... 115
Sysoeva T. The experience and the efficiency of the event marketing in car-selling industry
in Russia ........................................................................................................................... 122
Tsybrova M. Barriers in automotive world trade ....................................................................... 126
Uman A. The job characteristics model by Greg R. Oldham and J. Richard Hackman:
analysis and modern implementation in human resources management
of organization ................................................................................................................. 130
Yaranceva D. D. Image formation and design of the city by advertising and PR ..................... 132
Sairambay Yerkebulan Askaruly. Problems of export competitiveness of enterprises
in Kazakhstan and their solutions .................................................................................... 135

3
 Environmental Conservation and Promoting
Eco-Friendly Goods and Services
Adegoke Muritala Adedapo
Peoples Friendship University of Russia
(Moscow, Russia)
E-mail: adedapo.adegoke@gamil.com

Abstract
Jacobs Cherian & Jolly Jacobs (2012). "Green Market: A study of Consumers Attitude
towards Environmental Friendly Products". Canadian Center for Science and Education. The
authors at Abu Dhabi University discussed the increase in the consumer awareness of lack of
environmental protection. Also a review of concept that dealt Green marketing and to identify
the relationship between the various consumer attitudes and green marketing. The manner and
the approach which this article was written would make it exciting to any reader dealing with
this topic [1].
Key words: environment, conservation and eco-friendly goods.

Introduction
One of the most discussed issue in modern day is pollution, the sources of pollution and
how it can be reduced has been a subject of discussion over the previous decades. Green source
of energy offers a lasting solution to this problem, but the society needs to be aware of the eco-
friendly technology. Also, the sources of green energy which are pollution free to the
environment. The eco-industries which are producers of goods and services aiming at the
protection of the environment and the sustainable management of natural resources [2].
The proliferation of environmental claims and eco-labels has confused many consumers,
creating uncertainty about which claims to trust and how best to make environmentally friendly
purchases. No matter what they are or how theyre presented, these claims all have the same aim:
to attract consumers and convince them to buy one product over another. But there are other
benefits too. involved in measuring environmental impact to drive innovation and make supply
chains more sustainable [3].
Cleaning products are necessary for maintaining attractive and healthful conditions in the
home and workplace. In addition to the obvious aesthetic benefits of cleaning, the removal of
dust, allergens, and infectious agents is crucial to maintaining a healthful indoor environment
[4]. Which is why promoting these goods is necessary, a short-term price reduction will promote
eco-goods, publicity also informs the society about environmental conservation .In addition,
Retail marketing is also needed to promote these products and retailers are usually efficient at
grassroots level.
Research Methods
This article research was based on quantitative and qualitative approach, which involves
data and experimental results from related topic of discuss as a control for this research.
Environmental information relevant to green energy, marketing of goods and service were
subject for assessment of people's view, opinion and behavior as a technique to focus on this
research article.
Results and discussion
The result has been an increased drive to communicate the environmental attributes of
products and services to customers, in both business-to-business and business-to-consumer
markets. This drive has usually involved claims of improved environmental credentials, often
with entire product lines receiving an environmental make-over. Weve seen improvements in

4
product sourcing (particularly in relation to forests and fish), cleaner manufacturing processes
and the use of less harmful chemicals. Weve also seen some companies take steps to reduce
Consumers are making increasing use of online resources to inform their purchasing and are
demanding more detailed product information [3].
Choosing less hazardous products that have positive environmental attributes (e.g.,
biodegradability, low toxicity, low volatile organic compound (VOC) content, reduced
packaging, low life cycle energy use) and taking steps to reduce exposure can minimize harmful
impacts to custodial workers and building occupants, improve indoor air quality, and reduce
water and ambient air pollution while also ensuring the effectiveness of cleaning in removing
biological and other contaminants from the building's interior [4].
Most service and business sectors now have green options and alternatives. Green dry
cleaners, green cars, green buildings, green mutual funds, and even green luxury hotels. Green
also covers issues as diverse as organically grown, no genetically modified organisms (GMOs),
biodegradable, carbon footprints, locally grown food, sustainable seafood and forest products,
cruelty free, shade grown (coffee), or humanely raised farm animals. There are also much fuzzier
green label claims like environmentally friendly, all natural, and others that have little actual
meaning besides the feel good factor [5].
In 2000 the EU Flower re-launched to include services as well as products. In 2003 the
Energie-Cits Display Campaign posted energy-efficiency data on European buildings.
Companies now use labels as part of broader eco-promising strategies, and many have developed
quite sophisticated approaches [6]. For example:
Wal-Mart has pledged to make all its North American wild fish MSC-certified. It also
buys more organic cotton than any other entity in the world. Its drive towards organic sourcing
has reduced the quantity of pesticides, herbicides and synthetic fertilizers used to produce its
clothing by 50-60,000 pounds (22 27,000 Kgs) [7].
Customers and other stakeholders are looking to companies to be ever more transparent
about their practices and the impacts they have on the environment and society. There are
significant benefits in disclosing this information. It can improve relationships with pressure
groups and can deliver competitive advantage. Being open and honest can play a valuable role in
securing brand loyalty [7].
Theoretically, competing on environmental friendliness should be a win-win for
companies and society. But often, say critics, companies are not competing on environmental
innovation but rather on environmental messaging. The result? A recent study by Terrachoice of
1,018 consumer products in North America found that the claims of all but one were
demonstrably false or potentially misleading [8].
When asked, consumers say they want to know more about the products they buy.
However, consumers are often locked into different consumption patterns through habit, price,
and access to different shops and goods. Additional environmental information may well be
over-looked given the many other competing demands and messages [9].
Shoppers in the UK, Europe and the US are increasingly overwhelmed with information
about what different labels stand for, what issues they cover and whether they can be trusted.
With few universally accepted definitions of specific terms, increased demand for environmental
products and services has led to an increasingly chaotic labeling landscape. Research shows that
a number of logos and claims are vague, meaningless, non-transparent, or lacking in standards
or verification [10].
A number of businesses have begun committing themselves to making their entire
operation more environmentally friendly. Thus corporations are becoming more aware of their
responsibilities towards the environment. This has forced the law makers, environment groups,
consumers, financial institution, insurers and the organization's own employees to become more
aware of environmental aspects and this in turn has led to an increase in the number of policies
and schemes and regulations at both the national and international levels [11].

5
 Conclusion and further research
Environmental worries are obvious concern in the society which prompted environmental
consciousness to setup ideas where it can be discussed. Recently, a large group of people have
realized that marketing eco-friendly goods and services have a direct impact on some ecological
problems. people are now attentive to these threats and risks, by considering environmental
issues when shopping e.g. checking if the products wrappers can be recycled and purchasing
eco-friendly products.
Various studies associated to environmental preservation shows a clear indication that
organizations are producing quality goods and services for costumers and creating awareness
through advertisement. Re-package of goods has been adopted by many companies which has
made it easy for consumers to see that they are actually purchase eco-friendly goods.
Encouraging government policies towards eco-friendly goods and services especially in
EU countries, Canada and United States, has helped to develop the initiatives of eco- friendly
goods which has become a sphere of influence on organizations to sponsor green research in
various tertiary institutions.
Further research may be based on existing fundamentals and ideas, especially, how to
continuously promote marketing of eco-friendly goods and services, how to improve the quality
of eco-friendly goods and services, how to encourage government policies to promote eco-
friendly businesses across the globe.
Direction
The main idea of this research is to promote eco-friendly goods to deal with the
challenges of environmental pollution and evaluate the current state to which individuals and
societies are conscious about eco-friendly goods.
Literature
The literature review was carried out for the purpose of this study, product design and
development is usually a complex process that may vary a lot among different companies based
on their needs, resources and product specifications. It can be defined as a combination of
activities that aim to bring a product into the market and usually involve design, marketing and
manufacturing functions Looking at the life cycle of a product, different environmental loads
may arise through different stages. Products manufacturing processes and use phase can be
material and energy intense with a number of direct and indirect effects on the natural
environment (i.e. depletion of resources, emissions of pollutants to air and water and more). The
ability to assess the life cycle environmental performance of the goods produced and used in our
societies has therefore become of a great importance in order to control and minimize their
impact at a local as well as global level [12].

References
1. http://www.ccsenet.org/journal/index.php/ass/article/viewFile/20767/13589
2. http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Environmental_goods_and_services_sector
3. http://www.bsr.org/reports/BSR_Eco-Promising_April_2008.pdf
4. http://www.epa.gov/epp/pubs/cleaning.htm
5. http://www.enterpriseworks.org/pubs/GreenMarketingTrendsTool_-%2010-23-09.pdf
6. http://www.bsr.org/reports/BSR_Eco-Promising_April_2008.pdf
7. http://www.orginicexchange.org
8. TerraChoice Environmental Marketing (2007). The Six Sins of Greenwashing A Study of
Environmental Claims in North American Consumer Markets. TerraChoice Environmental Marketing.
www.terrachoice.com
9. Brooker S, Warning: Too much information can harm, (2007), Better Regulation
10. TerraChoice Environmental Marketing (2007). The Six Sins of Greenwashing A Study of
Environmental Claims in North AmericanConsumer Markets. TerraChoice Environmental Marketing.
www.terrachoice.com
11. http://www.ccsenet.org/journal/index.php/ass/article/viewFile/20767/13589
12. http://www.diva-portal.org/smash/get/diva2:550522/FULLTEXT01.pdf

6
 The Global Competitiveness of Switzerland
Babushkina Daria Sergeyevna
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: babushkina2078@gmail.com

Scientific adviser: Kapustina Larisa Mikhailovna, Doctor of Economics, Professor

E-mail: lakapustina@bk.ru

Abstract
The countrys level of competitiveness is an important indicator reflecting the overall
picture of the countrys development. In this paper we consider the competitiveness of
Switzerland, which is a leader in the Global Competitiveness report for 5 years. The main pillars
were examined and key factors of Switzerlands success were identified.
Keywords: competitiveness, Switzerland, institutions, business environment, innovations.

Introduction
Competitiveness is a set of institutions, policies and factors that determine the level of
productivity of a country [1]. Competitiveness is how countries create the best economic, social
and environmental conditions for economic development. Striving for competitiveness is striving
for raising prosperity, it means creating more opportunities to improve people life. A competitive
economy is most likely to grow sustainably. There are 12 main elements that drive the
productivity of a country:
Institutions. The institutional environment is determined by the legal and administrative
framework within which individuals, firms and governments interact to generate countrys
wealth.
Infrastructure. It is an important factor in determining the location of economic activity
and the kinds of activities or sectors that can develop within a country. Well-developed
infrastructure reduces the effect of distance between regions, integrating the national market and
connecting it at low cost to markets in other countries and regions.
Macroeconomic environment. The stability of the macroeconomic environment is
important for business and, therefore, is significant for the overall competiveness of a country.
Health and primary education, which increase labor efficiency and productivity.
Higher education and training. It is a crucial for economies that want to move up the
value chain beyond simple production processes and products. It is necessary for innovative
development.
Good market efficiency. Countries with good market efficiency are well positioned to
produce the right mix of products and services given their particular supply-and-demand
conditions, as well as to ensure that these goods can be most effectively traded in the economy.
Labor market efficiency. The efficiency and flexibility of the market are critical for
ensuring that workers are allocated to their most efficient use in the economy and provided with
incentives to give their jobs.
Financial market development. An efficient financial sector allocates the resources saved
by a nations citizens, as well as those entering the economy from abroad, to their most
productive uses.
Technological readiness. It measures the agility with which an economy adopts existing
technologies to enhance the productivity of its industries.
Market size. The size of the market affects productivity since large markets allow firms to
exploit economies of scale.

7
 Business sophistication. The sophisticated business practices are conducive to higher
efficiency in the production of goods and services.
Innovation, which are necessary for economic development [2].
All these elements are taken into account in the global competitiveness index (GCI),
which is calculated by the method of the World Economic Forum (WEF). This index gives
insight into development of a country, and also reflects the effectiveness of the policies pursued
by all countries.
The paper is dedicated to the competitiveness of Switzerland due to the fact that it is a
leader in the ranking of Global Competitiveness during 5 years. In 2013, its index was 5,7 points,
the highest level among all countries [2]. So, what are the key factors of Switzerland success?
Research and Results
Despite the financial crisis in the euro area in recent years, Switzerland has displayed an
impressive growth performance. Switzerland economy is one of the most stable in the world,
while many neighboring economies continue to struggle in this direction [2]. One of the many
reasons is using a "debt brake" since 2003, which aims at maintaining a balance of government
income and expenditure. After peaking at around 130 billion Swiss francs in 2005, Swiss
national debt was cut to around 110 billion by the end of 2011 (Figure 1). Such fiscal instrument
is oriented to reducing federal debt [3].

Figure 1 Development of Swiss national debt (1990 to 2016), gross debt in billion Swiss
francs, debt ratio in percent of GDP

The second important feature of well-developed economy is a low inflation that shows us
the stability of the economy. As you can see in Figure 2, there are 2 years when inflation rate
was even below zero (2009 and 2012).
GDP per capita of Switzerland had been growing faster till 2009 in comparison with the
world, but the latest trend has changed (Figure 3). In 2010, in Swiss economy a noticeable trend
of slower economic growth has become. Experts attribute this process, first of all, with a
significant strengthening of the Swiss franc against major world currencies and, accordingly,
reduced growth of Swiss exports. Nevertheless, according to the rating of the IMF, Switzerland
ranks 4th in the world in GDP per capita that amounted to $ 80,276 in 2013.

8
 Figure 2 Dynamics of Switzerlands inflation, %, 2007-2012 [13].

Figure 3 Dynamics of GDP per capita annual growth (%) of Switzerland and World [10]

Although Switzerland is not a member of the European Union (EU), its economy is
actually highly integrated with other European markets, particularly through existing bilateral
agreements. An export of goods to the EU was about 56% of the total, import 75% in 2012.
Germany, Italy, France are the main trading partners, which shares in exports are 19,7%, 7,1%,
7% respectively. In imports their shares are a bit higher: Germany 29, 3%, Italy 10, 2%,
France 8, 4% [8].
The effects of the sovereign debt crisis in Europe on Switzerlands monetary policy have
also highlighted just how highly connected the Swiss economy is, to its European neighbors [2].
The crisis affected the country's exports - due to a significant inflow of foreign capital, the Swiss
franc rose against the dollar.
In spite of such strong integration with the EU, which recent years carried a negative
effect, Switzerland has 3 main drivers of development that contribute to the economic stability of
the country. These include: high quality institutions, the dynamism of the domestic market and
the strong potential for innovation [2]. However, it should be understood that other factors also
have a significant contribution to the development of Switzerlands economy.
High quality of institutions. Government institutions in Switzerland are among the most
efficient and transparent, taking 5th place in the world in 2013. Switzerland is different from
other countries for its unique governance structure. In addition to its highly decentralized form of
federalism, seven members of the Federal Council act as a collective head of state. A president is

9
nominated each year from among the seven federal councilors, which takes on only
representative functions. Another important feature is a strong collective culture, which is shared
by all stakeholders (government, business and individuals). The main idea is that all sides work
together for the benefit of the state and collectively take important decisions. Governance
structure - including an independent judiciary, the rule of law and strong public sector
accountability - ensures a level playing field, increasing business confidence, thereby enhancing
competitiveness [2].
As we can see in Table 1, Switzerland had high positions in many institutions indicators
over the last 5 years. However, it should be noted that private organizations are faced with some
difficulties. Although Switzerland has a high corporate ethics, quite good level of auditing and
reporting standards, investor protection index, which is calculated by the World Bank, fell from
127 rank in 2010(that was already bad) to 134 rank in 2013.

Table 1 The Global Competitiveness Index in detail: institutions indicators

for 2008, 2010, 2013 [1], [2], [4]

Indicators 2008 2010 2013

Rank(1-134) Rank(1-139) Rank(1-148)
Property rights 1 1 3
Intellectual property protection 1 4 5
Public trust in politicians 5 12 12
Irregular payments and bribes - 10 9
Judicial independence 7 4 9
Wastefulness of government spending 11 9 8
Efficiency of legal framework in setting disputes - 10 6
Ethical behavior of firms 9 6 4
Strength of auditing and reporting standards 19 25 21
*Strength of investor protection, 0-10 (best) - 127 134

A positive environment for doing business. Switzerlands economy benefits from a highly
developed service sector, led by financial services, and a manufacturing industry that specializes
in high-technology, knowledge-based production. Switzerland economy is a service economy,
where service sector accounts for 72,5% of GDP while manufacturing and construction is about
26,8% of GDP in 2012 [8].
Accounting for 11,1% of GDP in 2012 and employing around 261,000 people (5,5% of
employed population in Switzerland), the Swiss financial sector is one of the key economic
sector. There are a lot of different services, which you can use in such financial areas like privet
banking, asset management, wealth management and insurance. The banking sector alone
accounts for CHF 34 billion of value added, corresponding to 6% of overall value added. The
corresponding amount for the insurance sector is CHF 28 billion respectively 5%. Including
indirect effects, the added value of the whole financial sector increases from CHF 62 billion to
CHF 86 billion, which is equivalent to 15% of Swiss value added [9]. Switzerland share in the
international private banking is 27%, which makes it a world leader in this market [5].
As of year-end 2012 there were 297 banks, 3,294 branches in Switzerland (Table 2). In
addition banks in Switzerland dispose of 263 branches abroad. Banks in Switzerland managed
around CHF 5,565 billion as at the end of 2012, 51 percent of which came from abroad [9].

10
 Table 2 Number of banks and total assets, 2012 [9]

Number of banks Total assets in CHF billion Proposition of total assets, %

Big banks 2 1,365 49,1
Cantonal banks 24 482 17,4
Foreign banks 131 406 14,6
Raiffeisen banks 1 165 6
Asset management banks 47 125 4,5
Regional and savings banks 66 104 3,7
Private bankers 13 62 2,2
Other banks 13 69 2,5
Total 297 2,778 100

The long history and stability of many Swiss banks are not the only features that made
them popular places to store wealth. Another important reason that Swiss banking became so
popular is the policy in place at most major Swiss banks of using numbered accounts. Instead of
keeping records directly associated with the name of an individual or company, every account is
issued a specific number. Someone at each bank has always had access to the names associated
with every account, but this information was not widely known and was never disclosed to the
public or even other employees. In most cases Swiss banking law prevented governmental
authorities from accessing the names associated with an account unless it was proven that a
crime had been committed. However, the anonymity of Swiss banking has made it easy for both
individuals and businesses to use Swiss bank accounts to hide assets. Thats why in the past five
years, tax authorities in the United States have prosecuted several Swiss banks with American
holdings and won the right to gain access to formerly secret account records [5].
Competitiveness is also supported by well-functioning labor market, which is the second
in the world in 2013 [6]. In Table 3 you can see that the rate of unemployment is quite low. In
2013 it was 4,2%.

Table 3 Unemployment in Switzerland [6].

1991 2000 2011 2012 2013

Unemployed 39 222 71 987 122 892 125 594 136 524
Proportion of whom are long unemployed, as % 4,4 20,1 20,1 15,3 15,3
Unemployment rate, % 1,1 1,8 2,8 2,9 4,2
Men, % 1,0 1,7 2,8 2,8 3,2
Women, % 1,2 2,0 2,9 2,9 3,1
Swiss, % 0,8 1,3 2,1 2,1 2,2
Foreigners, % 2,1 3,7 5,2 5,5 6,0
15 24 years, % 1,1 1,8 3,2 3,2 3,4

The main reason of it is a good education system, which is perceived as outstanding,

producing a highly skilled labor force that continues to receive important on-the job training.
Unlike many other countries, Switzerlands labor force is growing, thanks to the migration of
particularly skilled labor, boosted by the bilateral agreements on free circulation with the
European Union that entered into force in 2002 [2].
Switzerland is the 1st country in the world on quality of the education system, quality of
management schools, availability of research and training services and extent of staff training
while it was 2nd and 3rd on these indicators in 2008. Growth was due to increased funding for
developing and modernization it. The state finances in education 5,3% of GNI annually since
2008 (2007 5,1% of GNI) [1], [2]. In 2011 it amounted CHF 30,9 billion [6]. Moreover,
institutions are always in constant cooperation with companies and research centers. It allows
creating higher-qualified workers for the jobs which are able to produce well-qualified products

11
and create innovations. Women as well as man have a quite high level of professional education
(Figure 4). However, finding ways to integrate more women into the labor force will be
important for enhancing the countrys talent pool further.

Figure 4 Education level of Switzerland in 2012, %.

As a result, Switzerland has the highest quality of products and very sophisticated
products range. Indeed, financial and insurance services, manufacturing watchers for industrial
machinery and pharmaceuticals, have allowed the country to maintain the competitiveness of the
1st place in spite of the strong depreciation of the national currency in recent years.
Innovative potential. Nowadays, it is one the most important factors for developing
economy. In Switzerland, great innovation system was created largely to attract highly qualified
professionals. Today, it is a close relationship between universities, enterprises and research
institutes that make Switzerland a major innovator. According to the report of Global
Competitiveness 2013-2014, the country is a leader in innovative capacity of the market (5.8
points out of 7) and in the level of costs that companies spend in research and development of
new products (6 points out of 7), the quality of scientific research institutions - 2nd place in the
world (6,3 points out of 7 ) . So strong innovative potential relates Switzerland on 2nd place in
the world in patenting per capita (290 applications per million population). Thus, the main policy
of Switzerland is the development of the educational system and innovative development [2].
The highest place of Switzerland in the global competitiveness is justified. Switzerlands
economy is characterized by an excellent capacity for innovation, well-qualified intuitional
environment, very sophisticated business culture, traditionally reliable financial sector, very
strong and effective education system, productive labor market and high spending on
Research&Development (R&D). Switzerlands scientific research institutions are among the
worlds best, and the strong collaboration between the academic and business sectors ensures
that much of this research is translated into marketable products and processes, buttressed by
strong intellectual property protection. This strong innovative capacity is captured by the high
rate of patenting in the country.
Going forward, it will be important for Switzerland to resist drifting toward complacency.
It is clear that, at present, it is a magnet for global talent and an excellent innovator. Its banking
sector is, however, under scrutiny, and this traditional economic engine is necessarily undergoing

12
great change. In the future, it will be important for the country to continue to build on its
competitive strengths and resist overregulation and protectionism.

References
1. The Global Competitiveness Report, 2008-2009 [Text]. World Economic Forum, 2008. 513 p.
2. The Global Competitiveness Report, 2013-2014 [Text]. World Economic Forum, 2013. 569 p.
3. Debt brake: a mechanism for sustainable success [Text]. Swiss Business Federation, 2012. 20 p.
4. The Global Competitiveness Report, 2010-2011 [Text]. World Economic Forum, 2010. 516 p.
5. Wealth management at a global level and in Switzerland, November 2013 [Electronic resource].
Access made: http://www.swissbanking.org/en/20131025-2400-vermoegensverwaltungsstudie_web-awe-rva.pdf
6. Statistical Data on Switzerland 2014 [Text]. Federal Statistical Office FSO, 2014. 51 p.
7. Bilateral agreements Switzerland EU [Text]. - Integration Office FDFA/FDEA, 2009. 44 p.
8. Federal Statistical Office FSO [Electronic resource]. Access made:
http://www.bfs.admin.ch/bfs/portal/en/index.html
9. Swiss Banking Association [Electronic resource]. Access made:
http://www.swissbanking.org/en/home.htm
10. World Bank [Electronic resource]. Access made: http://www.worldbank.org/

Responsible Entrepreneurship in South Africa:

Curbing Endemic Corruption
by Exploiting the Synergy between
Corporate Social Responsibility and Social Capital
Marianna Baggio
Universit degli Studi di Trento
(Trento, Italy)
E-mail: marianna.baggio@unitn.it

Abstract
Entrepreneurs, and their businesses, are often accused of fostering corruption by
engaging in illegitimate deals in order to guarantee competitive advantages or close substantial
deals. While society points the finger at the corporate world, demanding more transparency and
constant improvement in their social, environmental and economic performances, entrepreneurs
are facing the shift from public to private dimension regarding crucial economic decision. In
such a complex scenario responsible entrepreneurship could be linked to social capital in order
to generate a positive trail in which not only the type of cooperation that underlies collusive
arrangements cannot take place, but also good reputation can be built and performances
accounted for.
Keywords: entrepreneurship, corporate social responsibility, corruption.

Introduction
Transparency International rated in 2013 South Africa at the 72nd place of its Corruption
Perception Index (CPI) chart, giving a score of 42 CPI, whereas the less corrupted countries
(Denmark and New Zealand) have a 91 CPI and the most corrupted one (Somalia) obtains an
appalling 8. In 2012 South Africa attained a score of 43 and the 69th position. Not much as
changed during the past years, and corruption is still perceived as a major challenge for the
young South African democracy. A clear signal are the daily reports of medias about the
phenomenon, the high number of governmental agencies and offices dedicated and committed to
fight bribery and extortion, and the citizens doubts about the integrity of the nation.
In South Africa bribery is not an accident but a reiterated behaviour: it is more a norm
rather then a deviation from it. Endemic corruption has been established as an equilibrium in the

13
long run, therefore it may not be sufficient a short run-incentive, but more probably another,
opposite an stronger, long-run equilibrium.
Model Statement
In Tirole s model of collusion (1996) three agents are involvedc:
- A principal, i.e. an elected public authority, which we consider to be the government
and label as G;
- An agent, i.e. a public or private firm that we consider to be a private firm and label as
E; and
- A supervisor, i.e. a bureaucratic public agency created by G to control and report cost
conditions1 over E, which we label as Sv.
Precondition is asymmetrical information between G and E, which needs, to be
overcame, the presence of a third neutral party (Sv) able to gather the necessary facts useful to
reduce the informational gap.
Utilities of agents are described with the following functions:
- Government G: UG = S w s + E U E + SvU Sv , as G is benevolent his function
includes also other subjects utilities (S is the consumers surplus), reduced by the costs borne
(payment w for E and s for Sv);
- Private firm E: U E = w , where w is the money transferred from G to E, as a
compensation for the costs sustained, which are indicated as . can be high (+) or low (-) and
this depends on the technology used by the firm ( (-, +)); and
- A supervising bureaucratic public agency Sv: U Sv = s c , where s is the compensation
received by the supervisor for her job, and c is the cost borne.
Corruption, or collusion, takes place when Sv is dishonest and makes an agreement with
E to declare + even in the case of -. For E the advantage is obtaining an extra income of =
+-- (minus the bribe b paid to Sv for the false declaration which is under the constraint
0<b), while for Sv the gain is kb (where 0k1, and represents the cost of the bribing
activity).
Thus utility functions for E and Sv, in case of collusion will be2:
U E = w + b and U Sv = s c + kb
Tirole, in his work, argued that it is possible for G to build an efficient system of
incentives and bureaucracy to avoid corruption and collusion. His model is based on k as a
parameter of honesty and/or bribe costs: if k0 corruption is highly expensive, thus incentives
to E and Sv are cheap and practical3; but if k1 corruption is not at all expensive, unlawful deals
between E and Sv are easy and incentives delivered by G are not strong enough. Consequently
bureaucratic contracts are needed4. Our opinion is that if G was really able to distinguish
between k0 and k1, corruption, especially endemic, should not exist in reality. If G
experiences asymmetrical information over how can it be possible that he has complete
information over b and k, which are defined as a bribe (paid to avoid income discrimination) and
related costs? E wants to keep secret her costs , but both E and Sv want to maintain undisclosed
their illegal agreement5: social and legal sanctions are not a desired prospect. A perfect
knowledge of b and k for G is hardly achievable.

1
We consider cost conditions as deriving from regulation of G over E, regarding for example quality
standards, or from a contract between the two parties
2
For the moment we suppose Gs utility function as unvaried, compared to Tirole s model.
3
The underneath logic suggests that even a small monetary incentive cancels negative inducements.
4
For G is not worth to discriminate payments to E on the basis of the costs she bears: when corruption is
easily accessible is better to pay directly + - no matter of the real costs are coincident - to the agent and avoid
collusion and its negative consequences.
5
This can be seen also as an effect of bonding social capital, which tends to exclude external members not
only from the benefits of the network but also from the relevant information.

14
 Furthermore k can be seen as a measure of negative bonding social capital: this is a
formal demonstration that bonding social capital, defined as strong links among members of a
small group of individuals that facilitates co-ordinated actions via trust, norms and networks, can
be used to realize illegal outcomes as well. It is reasonable to believe that such ties reduce
transaction costs due to asymmetrical information, specific investments, bounded rationality, and
most of all opportunism1. When k1 negative social capital is strong and efficient for the
dishonest purposes of its members, whilst in the opposite case (k0) we argue that, there is
either a positive social capital oriented to legal outcomes, or a negative but weak and irrelevant
negative social capital. In other words, endemic corruption within Tirole s framework is due to
asymmetrical information (for G) and strong negative bonding social capital (between E, Sv).
The model suggested in this paper is an extension of Tiroles and it is based on the
assumption that the agents involved are four: E, G (both as previously defined), C (citizens that
elect G and buy/consume services/products from E) and STK (the category of stakeholders). It is
also assumed that G, in order to overcome asymmetrical information, introduces an agent with
the responsibility of monitoring Es behaviour. With endemic corruption the set of relationship is
modified as follows:
a) C, E: gEC< 0 while gCE 0;
b) G,C: gGC 0 while gCG< 0;
c) G, Sv: if Sv is dishonest, does not he have enough incentives to act in the interest of G,
and the costs of corruption are low, i.e. k1, a collusive agreement between E and Sv is settled,
and the relation G, Sv becomes deficient for the government. We have that gGSv 0 and gSvG<0;
d) E, G: gGE0 and gEG<0, which is a direct consequence of the previous point compared
to scn3 (E is not monitored because colludes with Sv, thus he can profitably defect); and
e) Sv, E: the two agents find convenient to collude, and a mutual relation is established in
order to achieve illegal purposes: gSvE 0 and gESv 0.
An external relation is introduced and consists in the adoption of corporate social
responsibility practices2. Previously it has been shown that the agent E is the one that makes
corruption possible by paying a bribe. The firm thus needs to be involved in an additional
external mutual relation that resets positive social capital, restarting the benefits of social capital
and reducing the level of corruption. The agent that takes up the role of an external player is the
category of stakeholders (STK). In this case STK are defined as those who have an interest at
stake since they have made specific investments in the firm. In this light, when two agents ex-
ante decide to enter in a corporate social responsibility relation, they have conformist preferences
to act honestly (or equally to not become corrupted). Punishment consists in the ending of the
cooperative relation between STK and E, and in the communication, made by STK to the rest of
the network, of the unfair behaviour of E. STK do not only observe the present behaviour of their
direct counterpart and of the whole network, but has the capacity to monitor the past history of
both direct counterpart and the entire network.
Discussion
At this stage some reasonable questions might arise: why is C not able to detect and
punish E, while STK can easily overcome informational problems? Or, in other words, why is C
not a good watchdog as STK? Why do we need CSR?
Primarily, the relation between C and E is characterized by asymmetrical information3.
This is not an assumption taken in order to make our model feasible, but rather a reality.

1
Illegal contracts: how criminal organisations manage transaction costs, Corruption and Networks, and
Downsides and negative social capital.
2
This stratagem is not merely academic or tailored for the purpose of this dissertation, but reflects reality,
and thus can be implemented in existing situations.
3
As we already saw there is asymmetrical information also between G and E, which is solved by the
government with the introduction of Sv, who can be dishonest and collude with E making all the efforts of G
useless: corruption is settled and no information enhancement is produced.

15
Consumers do not have enough tools cognitive and tangible to give a proper judgment on
firms and/or products/services. Partially this is due to limited sources of information, where word
of mouth, direct experience and advertising are the main available ones. In addition consumers
are subject to a cognitive constraint: even if an individual can obtain reliable data, how can he
correctly analyze it? Which are the parameters he can use? Is he able to give the right weight to
all different dimensions? Furthermore it is not possible for a single client to go beyond the walls
of a firm and investigate on topics like levels of pollution, exploiting of workforce, unfair
financial agreements, and so forth. Moreover, not all consumers interests are protected by state
laws: maybe a multinational company that exploits children to manufacture a good in a foreign
country (where such practice is allowed) does not act against a specific law but more in contrast
with a moral and ethic preference of consumers. How can a single consumer force the company
to act in conformity with such norms?
Even STK could be the weak part in the relationship with E. What is different between the
masses of citizens/consumers as a whole (so we do not refer to associations of consumers which
represent the interest of the category but involve just a small portion of them) and the grouping
of stakeholders is that the latter detains the chance of being involved in a powerful relation:
corporate social responsibility. They are directly involved in the definition of the social contract
underneath the adoption of CSR practices, like negotiating the principles included in the ethical
code of the firm, or the definition of CSR standards. This process does not involve the single
consumer, for the same limits and constraints listed above. If truth is told STK are somehow
activists of CSR (some examples are NGOs or ethic finance organisations) as they are not only
active part in the definition of corporate social responsibility policies but also are able to use its
standards and tools.
In fact CSR is not only an extended model of corporate governance but also a cognitive
gap filler. Economic agents are endowed with bounded rationality and therefore the belief that
reputation may depend on commitments defined with reservations over any possible state of the
world is improbable. Reputation can become thwarted if the firm does not know how to be
identifiable or against what benchmark to allow evaluation of his trustworthy behaviour when
unexpected contingencies emerge. This is when the cognitive role of explicit, even though
voluntary, business ethics norms (like as a Ethical Code or CSR management standards)
becomes decisive. Where there is asymmetrical information the construction of trust, and then of
reputation, is complicated: the expectation that a protagonist of the game will act in a
cooperative or fair manner is function of the information that the agent can retrieve about
others likely behaviour, which, in turn, is a function of agents own information-processing or
cognitive structures. CSR helps reactivate the effects of trust and reputation. Corporate social
responsibility management system, and the standards that regulate it, give a path to follow and a
comparable benchmark that facilitate the evaluation of CSR performances.
Conclusion
When a specific external mutual relation (CSR), involving E and STK, is based on
conformist preferences, the incentives to deviate and bribe are eradicated. In Tirole no one could
punish E for his deviation, but now STK (given his perfect information) can penalize him not
only getting out from the relationship, but also transmitting information to the damaged
counterparts G and C, who will exit from the network or choose another company as partner:
reputation becomes relevant thanks to CSR. Therefore the incentives to swerve are drastically
reduced via a credible threat from STK, and E fair behaviour can be plausibly expected. On top
of this, CSR retains the role of cognitive gap filler: the asymmetrical information that
originates corruption in G-E-Sv is overcome through the benchmark of CSR managerial logic.
The incentive related to collusive agreements vanishes also because E endorses ex ante the
principles of CSR. Furthermore, thanks to the renewed circularity of social capital, corporate
social responsibility is an ex post desirable prospect.

16
 References
Lippert, S. and Spagnolo, G. (2005). Networks of Relations and Social Capital, SSE/EFI Working Paper
in Economics and Finance, No. 570.
Sacconi, L. (1997). Watch Dogs Vs. Collusione tra Regolatori e Regolamentati: il Ruolo dei Codici di
Condotta della Pubblica Amministrazione, Liuc papers n. 41. Serie Economia e Impresa.
Sacconi, L. (2004). Corporate Social Responsibility (CSR) as a Model of Extended corporate
governance. An Explanation Based on the Economic Theories of Social Contract, Reputational and Reciprocal
Conformism, Liuc Papers n. 142, Serie Etica, Diritto ed Economia 10, supplement of February.
Tirole, J. (1996). A Theory of Collective Reputation (with Applications to the Persistence of Corruption
and to Firm Quality), The Review of Economic Studies, Vol. 63, No. 1.
http://www.transparency.org/cpi2012/results
http://www.transparency.org/cpi2013/results

Unified Brand Image Formation and Maintenance

in Terms of Mergers and Acquisitions in the Global Market
Elena Bocharnikova
Institute of International Relations
(Yekaterinburg, Russia)
E-mail: elenatime713@mail.ru

Scientific advisor: Galina Timokhina, candidate of economic science, associate professor

Abstract
In case of merger there is a danger of changing the perception of the brand and its values
by actual consumers which can reduce the cost of the brand or loss of place in the market.
Before the merger companies must answer important questions and choose a strategy which will
strengthen the company's market position: the strategy of buyer of corporate brand; the strategy
of joint brand; flexible brand strategy or creation of a new brand. It is necessary to conduct
market research and create a set of measures which will maintain a unified brand image in
consumer's eyes.
Keywords: brand name, value, consumer, company, marketing research, strategy,
merger, market.

1. Relevance and problems of the research topic

Development of the world economy and globalization processes lead to the fact that
companies are merged in order to minimize the number of competitors, increasing its market
share, thereby strengthening its position in the market. These processes, which have become
common in the modern world economy, introduce the combined companies to a number of
issues, some of which are the following: global brands displace local ones, the image formed by
a single brand and its values in the minds of consumers is blurred.
Trend of mergers and acquisitions is being rapidly spread in the Russian market. This
being the case, Russian companies are involved in international transactions both as target
companies and buyers. To date, the growth rate of mergers and acquisitions in Russia exceeds
the average growth rate more than 3 times [6].
One of the motivating factors to conduct mergers and acquisitions, is a synergistic effect,
manifested in the creation of additional value from a merger or acquisition. Economic benefits
from the merger arise only when the market value of a company, formed as a result of mergers or
acquisitions, is greater than the sum of the market values of its constituent companies before
aggregation. The companys market value increase is determined by the increase of the value of
intangible assets, in particular the value of the brand.

17
 However, in case of a merger there is a risk of altering the perception of the brand and its
actual values by its consumers, which may lead to a decrease in brand value. Consumers may
lose clarity on the following: who is the manufacturer of this product now: the former company
or another one, which merged? Also doubts may arise concerning the quality of previous
products under the new brand name.
Relevance of problem, its theoretical and practical significance determined the choice of
the aim and the research objectives.
The aim of this work is to study the features of unified brand image values formation for
consumers and opportunities for their conservation in terms of mergers and acquisitions.
As part of this goal the basic problems should be solved such as conducting marketing
strategies desk research for brand development by Russian and foreign companies in terms of
mergers and acquisitions, development of marketing solutions to maximize the preservation of a
single brand image among consumers after mergers and acquisition.
Theoretical and methodological foundation of research was based on proceedings of the
Russian and foreign scientists in marketing, brand-management and consumer reaction: Aaker
David Allen, Ambler Tim, Asaul Anatoly, Bagiev George, Drucker Peter, Gad Thomas,
Gerchikova Irina, Goldstein Joseph, Golubkov Eugene, Keller Kevin Lane, Kondratiev Nikolai,
Kotler Philip, McCormick Sirus Hall, Peters Tom, Porter Michael, Roll Martin.
General scientific and interdisciplinary methods, methods of cognition and action,
methods of logical and systematic analyzes, marketing research were used in the process of
solving problems of research.
2. Theoretical and practical aspects of the problem of maintenance of a unified
brand image in terms of mergers and acquisitions
After a merger or acquisition brands activate a number of potential customers
expectations that rely on an overall credibility of established businesses, or else raise some
concerns. Such reactions of consumers should be examined in greater depth in order to reveal the
true motives of consumer behavior and decision-making.
According to Martin Roll, before choosing the route of merging its brand with another
one, a company must fully answer a number of critical issues (table 1) [7].

Table 1. Questions to be answered by a company before choosing the route of merging its brand
with another one [6]

Question Comments
Will shareholder value This is the main issue that needs to be set to any brand / company yourself before
increase as a result of mergers choosing the route of mergers and acquisitions. Since the primary purpose of any
and acquisitions? commercial organization is to increase shareholder value, this factor in determining
the development strategy of the company, must be measured. Many mergers and
acquisitions take place at the time of increasing of prices of individual brands. But
the value created as a result of mergers and acquisitions should be analyzed in the
long term. We must ensure that the rising cost of shares was not an aberration in the
market, and truly reflects the potential of the newly formed organization.
Will the merger and There are many reasons why companies choose the route of mergers and
acquisition let a new acquisitions. One of the main activities of the desired outcomes of mergers and
organization take a dominant acquisitions - to be on the market dominance and leadership. This goal can be seen
position in the market? as embedded in the objective of increasing shareholder value. If two brands come
together, it is anticipated that the combined resources of the two brands will allow
the new organization to dominate on a quite vigorous market. This dominion must
be greater than the sum of individual brands ruling (synergy). But this is not always
the case.

18
Will the merger and
acquisition provide the
maximum synergy between the
brands in the field of culture,
organizational capabilities and
market coverage?
Will the mergers and
acquisitions allow to achieve
proprietary compatibility of
brands?
One of the main reasons for the failure of any mergers and acquisitions is a conflict
between the combined companies. Mergers and acquisitions can be a good example
of strength of organizational culture, but with a serious and competent approach,
which is not always used. It is very often mistakenly believed that having set the
main objectives of market dominance - profitability and growth it will be possible
to cope with the difficulties of integration. But in the end it turns out that it is
necessary to respond to some of the most important questions:
- Can the two brands achieve cooperation in terms of their culture?
- Can merge and absorption maximize organizational capability in terms of brand
portfolio, market share, financial, managerial and technological resources?
- Can the leadership of the new organization succeed in achieving market
penetration and growth without sacrificing the well-known brands?
Proprietary compatibility - a broad term that refers to the level of joint action
achieved by brands of both companies, which are parties to mergers and
acquisitions.
Any brand is distinguished by its strong identity, a unique personality and the main
branded culture / philosophy. These three aspects are explosive and ready for
conflict when they are forced to adapt to the new situation. It is necessary that
identity, personality and philosophy of brands of merging companies matched or at
least had the possibility of a peaceful existence. If the main purpose of mergers and
acquisitions must be achieved- increasing shareholder value and market dominance
- it becomes important to provide a very high level branded Compatibility

Well-known brands have a pledge of confidence among consumers, they bring

customers benefits to the front. Brands of the two merging companies usually have their own
identity, unique personality and major branded culture and they carry their philosophy, also have
their own logo. Therefore companies need to accurately determine the strategy for conservation
and development of the brand after the merger or acquisition: creation of a single, joint, flexible
or completely new brand.
Martin Roll proposed [7] four brand selection strategies for such companies, depending
on market power, brand identity and product line (Fig. 1).

The strategy of brand

The strategy of Creation of an

buyer of corporate The strategy of Flexible brand
entirely new
brand joint brand strategy
brand

Figure 1. Brand selection strategies in terms of merger and acquisition.

1. The strategy of buyer of corporate brand.

Most often, the buyer's corporate brand replaces the acquired corporate brand. In this
case, the buyer's corporate brand becomes a brand of the combined entity. This is the case when
the buyers brand - the market leader, and the purpose of the acquisition is primarily the
strengthening of its position with the help of acquired brand capital or market penetration and
growth.
For example, a buyers corporate brand of Apple, having absorbed 45 companies since
1999, as a rule, becomes a brand of the combined entity [8]. Since 1999, Apple consistently gets
several companies per year, adding to its portfolio of business, and at the same time replaces the
corporate brand of the absorbed company by its own strong and easily recognizable corporate
brand and individual brands of its high-tech products [8].
2. The strategy of joint brand.
This is the case when a combined brand will be a combination of brands of a buyer and a
seller. It is advisable to resort to this strategy when mergers and acquisitions occur between

19
equal companies. Moreover, such a brand strategy is suitable if the merging companies are
similar in terms of such variables as market position, market reach and brand.
An example of a successful co-branding strategy can be traced in the absorption of the
British-Dutch company Unilever, one of the world's leading food companies, and household
chemical goods concern "Kalina" in 2011.
This deal has solved a number of important tasks for Unilever [9]:
- differentiated product portfolio of "Kalina" allowed Unilever to expand its presence in
the attractive and growing market.
- Unilever portfolio was replenished by successful Russian brands in the segments of
skin, hair and oral care products.
- own technology has allowed Unilever to bring these brands to a new level.
- For the Russian company this deal was useful in terms of:
- having the possibility of getting Russian brands to a new level
- the emergence of new opportunities for the development of the Russian company
brands.
Today the brands of the Russian concern are even more in demand, the production
equipment meets the strictest international standards, the product quality has improved
significantly, suppliers being the largest companies in the world for the production of raw
materials for perfumery and cosmetic products.
Thus, the absorption of the Russian concern "Kalina" by "Unilever" had positive
consequences for both companies. Most of the success is due to the maximum preservation of
the image-known brands in the eyes of consumers, resulting in preserving the number of
consumers, and the correct definition of the value of brands after absorption.
3. Flexible brand strategy.
This strategy is based on the geographical division. It is appropriate when two famous
brands come together, and each of these brands is a major brand in its geographical area. The
combination of both brands, however, usually reflects a predominant brand in a corresponding
geographic region. This strategy works well when each brand is highly regarded in its core area
and the non-use of its name would be detrimental to the brand.
Renault-Nissan is a striking example of this strategy. Nissan is a very famous brand in
Asia and the US. Renault is also a well-known brand in Europe. There is a geographical
division of markets. In accordance with a flexible strategy, Nissan is the preferred brand in the
USA, and Renault - in Europe [7].
4. Creation of an entirely new brand.
In this case, you must pay attention to the accord of the brands name with its
components, its scope and strategy. In case of discrepancy the new brand will not be successful.
It is also advisable to develop a new logo of the combined company, as the existing logo may not
correspond to the "sprawling" company. It should be taken into consideration that the creation of
a new brand and taking it to the leadership position requires a serious long-term work, which
includes both imaginative and creative efforts and costs. Achieving the level of brand awareness
of 90% requires marketing support of tens of millions of dollars and several years of work [10].
Verizon is an American telecommunications company, created in the image of the new
brand. Bell Atlantic bought GTE on June 30, 2000 and changed its name to Verizon
Communications Inc [8]. And it became one of the largest mergers in the history of the USA
business. Also, the merger is a good example of creating a new brand strategy after the merger,
as the company was a huge success in the market and has captured even more market share.
Consumers prefer brands with high value, since it is easier to learn and understand what
the advantages of the brand are, they trust it more and gain a deeper satisfaction using the
product. Based on a careful study of consumer preferences of brands and market segmentation,
the company must optimize its portfolio of brands after mergers and acquisitions. Streamline

20
business brand portfolio will allow the combined companies to maximize profits from the
portfolio.
Let us consider the case in the brand portfolio optimization of the Swedish company
Electrolux, which participated in 14 mergers and acquisitions from 1919 to 2011 [11]. Electrolux
conducted a marketing research, exploring the West European market not by countries, but by
the contrary consumer segments. In the study, the company has not only established that the
former approach to market segmentation had some flaws, but also identified four distinct pan-
European consumer segments: pubs and department stores; airlines, hotels and hospitals; office
canteens and family restaurants; elite restaurants.
In Electrolux it was decided to win the last three segments, each with a single brand,
which corresponded more in scope and positioning to a certain segment. These brands have
become Electrolux, Zanussi and Molteni respectively. Later, the company has created a new
brand - Dito, to gain a foothold in the first four of the selected segments. Electrolux has declined
ten other brands of kitchen equipment, and two more brands - Juno and Therma have been
transferred to the category of sub-brands with the expectation of further their disposal [11].
Replacing 15 local brands by four Pan-European ones, Electrolux had the opportunity to
manage their portfolio of brands more effectively. The company has developed tools for
international marketing and communications: a new advertising concept, showrooms, websites,
newsletters, roadshows, exhibitions, which had to convince clients that each of Electrolux brands
is the best in its consumer segment. Also, now, with a clearer understanding of the needs of their
customers, the company could create within each brand products that best meet the needs of
customers [11].
As a result, despite the "murder" of 12 brands, sales of kitchen equipment havent
decreased, and in 2001, the department whose operating losses in 1996 amounted to 55 million
kronor ($ 8 million) gained a profit of $ 390 million Swedish kronor (about $ 37 million) [11].
3. Conclusions of the results of the research
To date, the growth rate of mergers and acquisitions in Russia more than 3 times exceeds
the average growth rate [12]. These data show the relevance of marketing solutions for the single
brand image conservation in the mind of the target market in terms of activation of these
processes.
After combining the companies need to maintain and preferably to enhance consumers
confidence in the brand production of the combined companies, because consumer loyalty and
brands are closely linked. Consumer loyalty in the long term depends on relationship marketing.
To ensure such companies increase revenues in the first place should be an investment in
an existing brand, because it is already known to consumers. A global experience shows that
attracting new customers is 3-4 times harder and 5 times more expensive than keeping existing
ones [13]. Therefore, releasing a similar but under a different brand product, manufacturer /
seller must understand that the chance that the consumer recognizes the former brand is small.
Consumer would rather suggest that the goods under the famous brand have lost their place in
the market. Because of this, the company with the associations or acquisitions may lose a
significant portion of consumers as well as market share. Especially relevant is choosing the
right strategy for conservation and development of the brand, which will allow these companies
to strengthen their market position.
Companies must accept the decisions on the choice of brands strategies based on a
thorough marketing research of the perception of brands by consumers, marketing analysis of
brand portfolio, market power of combined brands, its features, degree of recognition by
consumers The monitoring of consumers perception of brands values of combined companies
allows correcting the selected strategies in order to create an additional cost from a merger or
acquisition.

21
 References
1. Aaker D. Building Strong Brands / D. Aaker. 2003. 440 p.
2. Matantcev A. 600 ways to promote the brand / A. Matantcev. 2010. 353 p.
3. Lovchinovskey P. Analysis of experience processes of mergers and acquisitions in Russia and in
countries with the transition economy [Text] / P. Lovchinovskey // Finansovyy menedzhment. 2005.
4. Elonova N. Mergers and acquisitions: types, causes, protective tactics [Text] / N. Elonova // Sovetnik
urista. 2010. 2.
5. Grechuhin R. The strategy of merger and acquisition: planning stages [Text] / R. Grechuhin //
Rossiyskoye predprinimatel'stvo. 2005. 9 (63).
6. www.finman.ru
7. www.marketing.spb.ru
8. www.wikipedia.org
9. www.allretail.ua
10. www.rusnauka.com
11. www.advertology.ru
12. www.bre.ru
13. www.ci-journal.ru

Knowledge Management
as the Basis for Increasing the Competitiveness
of the Integrated Industrial Companies
Budlyanskaya Daria Dmitrievna
Urals Institute
Branch of the Russian Academy of National Economy and Public Administration
under the President of the Russian Federation
(Yekaterinburg, Russia)
E-mail: Darya-budlyanskaya@yandex.ru

Abstract
The article presents a theoretical model of knowledge management system maturity of the
integrated industrial corporation. A special mechanism for assessing knowledge management
system maturity was carried out on the basis of the model. The proposed methodology can be
considered as a way for increasing the competitiveness of the integrated corporate structure.
The key elements of the mechanism, advantages and limitations of its practical implementation
into the integrated industrial company are also analysed in detail. Suggestions for future
research are provided.
Key words: knowledge-based economy, knowledge management system maturity,
integrated industrial corporation, mechanism for comprehensive assessment.

I. Introduction
Rapid change of markets, depreciation of technology, and increase of the number of
competitors are becoming the key indicators in post-industrial age. Exactly these factors
determine the need for the development of innovative activity and increase the volume of
resources involved directly in the innovative process.
Thus, the process of search of the most effective ways of the development of a company
in the knowledge-based economy acquires special importance. It aims not only to create
innovative technologies and to produce unique goods and services, but also to form corporate
culture, involving all staff in the knowledge management process. Creation of corporate
knowledge management system is one of such approaches that are acquiring particular
importance in knowledge based economy. The fundamental building material of a modern
corporation is knowledge, says Valery Kanevsky [1].

22
 Today the company can become successful only if it specifically creates new knowledge,
widely distributes it within the organization and quickly implements it in new technologies and
products. Thus, knowledge management becomes a solid basis of sustainable competitive
advantages of the company and a stimulus for its innovative development.
Accordingly, from the authors point of view it is important to create a methodology for
the assessment of Knowledge Management System (KMS) in an organization.
The principal aim of the research is to propose a model of KMS and to develop a
mechanism for assessing Knowledge Management System in the integrated industrial
corporation.
Objectives of the research:
* To analyze the theoretical foundations of Knowledge Management.
* To create a theoretical Model of Knowledge Management System Maturity of the
integrated industrial corporation.
* To work out a special mechanism for assessing Knowledge Management System
Maturity of the integrated industrial corporation.
* To identify the key hypothesis and to formulate aims and objectives for future research.
II. Literature review
Competitiveness of a company in the knowledge-based economy
Both Soete and Ashok are sustaining the idea that we are moving to a new social
paradigm, in which the importance of knowledge as input for economical processes has
fundamentally changed. This dynamic leads to important changes in the way of how economy
functions and it brings modifications for both economical and political environments [2].
In the knowledge economy, the value of knowledge as input and output is growing,
knowledge is a key ingredient of what is bought and sold (both explicitly and implicitly),
knowledge resources are rising in importance relative to traditionally recognized resources, and
new technologies and techniques for managing knowledge resources are emerging.
The author pointed out four main characteristics of the knowledge-based economy:
* The impact of new key technologies on the process of knowledge production,
accumulation and diffusion, and consequently also on economic growth.
* The intensification in the production, diffusion and implementation of technological,
organisational and institutional innovations;
* The widespread impact of the transition on almost all aspects of society.
In this context, the author believes that knowledge can be perceived according to these
general ideas:
* Knowledge is important as input for processes, both qualitative and quantitative.
* Knowledge can be seen as a product. We are actually trying to develop new activities
by trading knowledge products.
* Knowledge economy is based on the advances in information and communication
technologies (ICT), because of the positive changes in physical constraints and because of the
lower costs for collecting and disseminating information. Starting from the well known ideas of
Francis Bacon, where knowledge means power, Alvin Toffler stated that, from a social
perspective, knowledge based societies represents the climax of human development, only when
knowledge becomes the main economic resource and the most important source of power [3].
In the emerging knowledge-based economy, also called learning economy, economic
growth depends more directly on investment in knowledge, which increases productive capacity,
than on traditional factors of production. In other words, knowledge raises the returns on and the
accumulation of other types of investment. Figure 1 illustrates Porters Framework extended for
knowledge society.

23
 UNPREDICTABLE GOVERNMENTALPOLI
ELEMENT CIES
STRATEGY
COMPETITION

DEMAND NECESSARY
KNOWLEDGE
INDUSTRIES
ORGANIZATION

Generalfactors:
Qualifiedwork
Infrastructure

Figure 1. Porters Framework extended for knowledge society [4]

Integrated Industrial Structure

Integrated IndustrialStructure is a holistic organizational and economic entity, consisting
of a certain aggregate of enterprises and relationships between them, founded on the basis of
constituent documents or agreement [5].
Vertical integrated corporate is a form of business organization in which all stages of
production of a good, from the acquisition of raw materials to the retailing of the final product,
are controlled by one company. A current example is the oil industry, in which a single firm
commonly owns the oil wells, refines the oil, and sells gasoline at roadside stations. In horizontal
integration, by contrast, a company attempts to control a single stage of production or a single
industry completely, which lets it take advantage of economies of scale but results in reduced
competition.
Horizontal integration in strategic management, the term describes a type of owner-
ship/management control consisting in the acquisition of additional business activities that are at
the same level of the value chain in similar or different industries. Horizontal integration occurs
when a firm is being taken over by, or merged with, another firm which is in the same industry
and in the same stage of production as the merged firm. If the products offered by the companies
are the same or similar, it is a merger of competitors.
Strategic approaches
The author identifies four main strategic approaches for achieving the competitiveness of
firms in the knowledge-based economy:
* Resource-based view;
* Knowledge-based view;
* Dynamic Capabilities view;
* Relational view.
The resource-based view (RBV) as a basis for a competitive advantage of a firm lies
primarily in the application of the bundle of valuable interchangeable and intangible tangible
resources at the firm's disposal. To transform a short-run competitive advantage into a sustained
competitive advantage requires that these resources are heterogeneous in nature and not perfectly
mobile. Effectively, this translates into valuable resources that are neither perfectly imitable or
substitutable without great effort.
Knowledge-based theory of the firm. The knowledge-based theory of the firmconsiders
knowledge as the most strategically significant resource of a firm. Its proponents argue that

24
because knowledge-based resources are usually difficult to imitate and socially complex,
heterogeneous knowledge bases and capabilities among firms are the major determinants of
sustained competitive advantage and superior corporate performance.
Dynamic Capabilities view.The concept of dynamic capabilities arose from a key
shortcoming of the resource-based view of the firm. Dynamic capabilities attempt to bridge gaps
between previous theories by adopting a process approach: by acting as a buffer between firm
resources and the changing business environment, dynamic resources help a firm adjust its
resource mix and thereby maintain the sustainability of the firms competitive advantage, which
otherwise might be quickly eroded.
Relational view.In management the relational view by Jeffrey H. Dyer and Harbir Singh
is a theory for considering networks and dyads of firms as the unit of analysis to explain
relational rents, i.e., superior individual firm performance generated within that network/dyad
[6]. This view has later been extended by Lavie [7].
Knowledge management
Knowledge management (KM) comprises a range of strategies and practices used in an
organization to identify, create, represent, distribute, and enable adoption of insights and
experiences.
Knowledge management is the foundation of the innovative activity of any company. In
the future knowledge acquired by the company will become the main source of innovations. No
one can identify better the role of knowledge in the innovation process than Peter Drucker, the
founder of the theory of modern management. He wrote: When we apply knowledge to tasks,
which are already able to solve, we call it performance. When we learn to apply knowledge to
new tasks, we call it innovation [8].
Knowledge management becomes a key component of corporate strategic management,
activating the relationship between marketing, research and production, and modifying the way
organisations function.
Knowledge Classifications
The kinds of knowledge that are required in the knowledge-based economy and the
innovation process vary and comprise for instance technological and scientific knowledge,
education, information processing and organizational knowledge. These types of knowledge can
take various forms such as tacit knowledge (in human beings or equipment) or explicit
knowledge (in articles, blueprints, patents, software and databases).
* Tacit Knowledge: documented, tangible factors embedded in individual experiences. In
many organizations the tacit knowledge asset is ten times greater than their explicit knowledge
assets. This provides a high risk to the organization because when individuals leave the
organization, or even transfer from one job assignment to another job assignment in the
organization, they take most of their tacit knowledge with them. One of the primary objectives of
a good Knowledge Management System is to convert tacit knowledge into explicit knowledge
* Explicit Knowledge: documented and qualified knowledge. Although explicit
knowledge is often available in quantity, most organizations have not organized it in a format
that makes it readily available to the people that need to use it. Forty percent of the US economy
is directly attributable to the creation of intellectual capital. Yet, knowledge workers will spend
up to forty percent of their time searching for the knowledge they require to further their
assignment.
According to the Third European Report on Science & Technology Indicators (2003) it is
possible to distinguish six different types of knowledge:
* Scientific knowledge;
* Technological knowledge;
* Innovations;
* Human Capital;
* Skills (Competences);

25
 * ICT (Information) [9].
Main characteristics of knowledge
There are four specific characteristics of knowledge which should be taken into account
while we are speaking about knowledge management:
* Valuable;
* Rare;
* Costly to imitate;
* Exploited by the organization.
Table 1 illustrates level of influence of knowledge characteristics on the competitive
advantage of the company[10].
Table 1
Knowledge characteristics (VRIO)
Valuable Rare Costly to imitate Exploited by the organization Competitive implication
No No No No Competitive disadvantage
Yes No No No Competitive parity
Yes Yes No No Temporary competitive advantage
Yes Yes Yes No Unexploited competitive advantage
Yes Yes Yes Yes Sustained competitive advantage

Knowledge Management System

Todays organizations have to be flexible and fast, able to transfer and share knowledge,
deal with zettabytes of structured and unstructured data, innovate, and engage and impact their
communities and customers in positive ways. The platforms, processes, and programs have to
respond in a timely fashion to make this happen. The culture of the organization, the people,
enables the transformations and innovations within any enterprise.
Knowledge Management System is a proactive, structured system by which value is
generated from intellectual or knowledge-based assets and disseminated to stakeholders. Too
many organizations think of a KMS as a group of databases - a data warehouse that uses analysis
programs to convert data into information that is stored in the information warehouse. The
information in that warehouse is then categorized, analyzed, and selected parts of it go into the
knowledge warehouse. This is dangerous thinking as knowledge management is as much
culturally change-driven as it is technology driven. A knowledge management system is not just
an IT strategy, but it is also a well-balanced mixture of technology, cultural change, new reward
systems and business plans.
A knowledge management system could be seen as composed of various components that
interact and influence one another in order to maintain and ensure the management of
knowledge.
In the article TheconceptofknowledgemanagementinModernOrganizations B.Z. Milner
highlights three main elements of the knowledge management system: human component
(values, level of communication), technological (information support) and organizational
(principles, facts, skills and techniques that provide business activity of the company and its staff
potential) [11].
Knowledge Management System Maturity
The organizational maturity might refer to the state of an organizations effectiveness at
performing certain tasks. As defined in the ISO/IEC 15504-7 (2008), organizational maturity is
an expression of the extent to which an organization consistently implements processes within a
defined scope that contributes to the achievement of its business goals (current or projected)
[12].

26
 The maturity of KMS therefore is defined as the state of development of this system. It
identifies the quality and effectiveness of knowledge management process and the
appropriateness of socio-technical environment for managing knowledge in an organization at
the moment.
III Methodology
Knowledge Management System of the Integrated Industrial Company
On the basis of literature review and analysis of practice the author identifies five main
levels of the knowledge management system of the integrated industrial corporation:
* Mental level;
* Institutional level;
* Cognitive level;
* Process level;
* Technological level.
In addition to the key elements it should be possible to define the most important factors
that influence the development of the knowledge management system. From the authors point
of view all factors can be selected into three large groups:
* Internal factors (companys size, organizational structure, support structures, level of
decentralization, financial situation);
* Meso factors of integration / Relationship factors (organizational intent, knowledge-
sharing intention, mutual trust, level of commitment and collaboration, opportunism-related
risk);
* External factors (Industry - market share, location, competitors and National National
innovative system, Government control).
The proposed knowledge management system has the following features:
* Flexibility, i.e. the ability to respond quickly to the changes in the external and internal
environment of the company and also to be in the integration with other types of activity;
* Variability, i.e. the possibility to change the composition in accordance with the
strategic aims of the development of the company;
* Hierarchical structure, i.e. the presence of a certain order of subordination, which
allows to identify the extent and nature of the correlation between the levels and elements;
* Openness, i.e. ensuring a continuous process of sharing of intellectual resources within
the integrated industrial company and also in the intercompany sphere.
* Emergence, i.e. the ability to ensure the creation of integrative characteristics that are
not inherent to the different elements of the knowledge management system.
A detailed structure is presented in the Figure 2.
Knowledge Management Maturity Model
The literature on knowledge management provides us with some maturity models
elaborated by researchers and practitioners. On the basis of literature review the author
developed a new model which combines the strengths and eliminates the inadequacies of the
previous models.
The knowledge management model of the intagrated industrial company is based on
themodel that was proposed by the specialists of the Siemens German Multinational
Corporation working in the sphere of electrical engineering, transport, medical equipment and
lighting.
The proposed model had to meet the following requirements:
* To take into account specific features of the integrated industrial corporation;
* To be abstracted from the individual characteristics of the specific enterprise and to be
applicable for any integrated industrial company;
* To ensure a high level of flexibility, scalability, and customizability, which provide the
opportunities for quickreaction to the changes in the environment.

27
 Competitiveness of the Intagrated Industrial Company

Productivity Innovation Agility Reputation

Mental level

External factors
Motivation Organizational Resistance to change
culture

Institutional level

Coordination Strategy Leadership

Relatioship factors
Cognitive level

Intellectual property Client capital

Personnel

Process level

Acquisition Exhange Co-creation Selection Assimilation

Internal factors
Measurement Control Protection

Technological level

Codification technologies Personalization technologies

Figure 2. Model of the Knowledge Management System

of the Integrated Industrial Company

The authors knowledge management maturity model is based on the following

theoretical statements:
* Knowledge management system of the integrated industrial corporation is an active
systematic process of acquisition, sharing, selection, use and protection of the intellectual capital
of the organization, motivation of the personnel, and creation of knowledge-oriented
organizational culture, ensuring co-creation of new knowledge, development of common
information space, and getting positive synergistic effect.
* The development of a single entity is simplified and described with a limited number of
maturity levels.
* Levels are ordered sequentially, from an initial level up to an ending level (the latter is
the level of perfection). During the development, the entity progresses forward from one level to
the next. No levels can be skipped.
* Each maturity level is considered as a sustainable in time and space status of
organizational knowledge management system characterized by certain requirements,which the
entity has to achieve on that level, practices, methods and technologies in the field of knowledge
management.

28
 Expert level
Total
KM

Advanced level
ProactiveKM

Middle level
Reactive Knowledge Management

Core level
Discrete Knowledge Management

Initiallevel
Chaotic Knowledge Management

Figure 3. Knowledge Management Maturity Model

Mechanism for assessing Knowledge Management System Maturity

In order to assess the level of expression and maturity of KMS, a special mechanism was
carried out. The proposed mechanism includes three key elements:Knowledge Management
Maturity Model (Maturity levels, Key elements of KMS, Quantitative &Qualitative metrics),
Algorithm of the assessment, and Assessment methods.
A number of indicators (sub-indicators), which characterize all key areasof the
knowledge management system form key maturity indicatorsof each level (KMIM, KMII, KMIC,
KMIP, KMIT). Aggregated Maturity Indicator will be defined as a result of all key maturity
indictors. System of indicators is presented in figure 4.

Aggregated MaturityIndicator

Knowledge Maturity Indicator of Mental Level

KMIM

Knowledge Maturity Indicator of Institutional Level

KMII

Knowledge Maturity Indicator of Cognitive Level

KMIC

Knowledge Maturity Indicator of Process Level

KMIP

Knowledge Maturity Indicator of Technological Level

KMIT

Figure 4. System of indicators

The proposed mechanism has several limitations that must be considered.

1. The development of KMS is dealing with various organizational factors that could be
intangible by nature. That is why it is difficult to choose the exact criteria that let to assess the
expression and maturity of knowledge management system.

29
 2. Managers had no training in knowledge management before the survey. That is why
their understanding about knowledge management may vary and may cause the lesser reliability
of the results.
Assessment methods
For assessing implicit knowledge a special questionnaire was developed by the author.
The main part of the questionnaire consists of seven blocks (A-G), which correspond to the
structural elements of KMS of the integrated industrial company. At the beginning of the
questionnaire, the demographic information is inquired. Respondents can also leave a feedback
on the questionnaire and mark the questions that are unclear for them.In addition to the survey
the followin methods can be used: in-depth interview of experts, confirmatory factor analysis,
desk research (involves collection and analysis of secondary information from available sources:
regulatory documents, statistic data, etc.), Knowledge-SWOT Analysis, knowledge audit.
It is worth mentioning that confirmatory factor analysis (CFA) is a special form of factor
analysis, most commonly used in social research. It is used to test whether measures of a
construct are consistent with a researcher's understanding of the nature of that construct (or
factor). As such, the objective of confirmatory factor analysis is to test whether the data fit a
hypothesized measurement model.
IV Key hypothesis
The main hypothesis of the research can be formulated in the following approval: all
other things being equal, the competitiveness of the integrated industrial company is higher in
the situation of the more mature knowledge management system.
V Conclusions
The proposed knowledge management system maturity mechanism can be seen as an
effective tool for increasing companys competitiveness. It can be used for several purposes.
Firstly, this mechanism can be applied as a diagnostic tool for organizations self-assessment in
order to identify the current level of knowledge management system maturity and the expression
of different structural elements of this system. Secondly, the proposed mechanism can be used
for strategic planning, determining the guidelines for the development of knowledge
management system and strengthening its essential parameters. Thirdly, the mechanism can be
used for the comparison of different organizations or organizational units of the integrated
industrial corporation in order to outline the good practice and to show organizations current
position in the industry or its developmental progress over time.

References
1. Harrington, J., Voul, F. Knowledge Management Excellence: The Art of Excelling in Knowledge
Management [Text] / Paton Press, 2006. - P. 170.
2. Cristea, D., Capatina, A. Knowledge Economy and the Necessity of Knowledge Management [Text] /
The Annals of Dunarea de Jos University of Galati Fascicle. Economics and Applied Informatics, 2010. - 1.
3. Toffler, A. The Third Wave [Text] 1980. - 448 p.
4. Porter, M. E. The Competitive Advantage of Nations [Text] / London, - 1996.
5. Vinslav, Yu., Dementyev, V., Melentyev, A., Yakutin, Yu. The Development of Integrated Corporate
Structures in Russia [Text] / Russian Economic Journal. 1998. - 11-12. P. 27-30.
6. Dyer, J.H., Singh, H. The relational view: Cooperative strategy and sources of interorganizational
competitive advantage [Text] / Academy of Management Review. 1998. - 23. - PP. 660679.
7. Lavie, D. The competitive advantage of interconnected firms: An extension of the resource-based view
[Text] / Academy of Management Review. 2006. - 31. PP. 638658.
8. Drucker, P. The Age of Discontinuity: Guidelines to Our Changing Society [Text] - M.: Williams, 2007.
9. Third European Report on Science & Technology Indicators 2003. Towards a Knowledge-based
Economy.
10. Standing S., Chad L. A Framework for Managing Knowledge in Strategic Alliances in the
Biotechnology Sector. [Text] / Edith Cowan University, Australia. 2002.
11. Milner B. The concept of knowledge management in Modern Organizations [Text] / Russian Journal of
Management. 2003. - 1. PP 57 70.
12. ISO/IEC 15504-7. Information technology - process assessment. Part 7: Assessment of organizational
maturity [Text] / Technical Report, 2008.

30
Individual consumer and organizational buying behavior for
engineering software
Emiri Aniekan Dafe
Peoples Friendship University of Russia
(Moscow, Russia)
E-mail: koldafe@yahoo.com

Abstract
This work aims at investigating the forces influencing individual and organizational
buying behavior when purchasing engineering software. It further examines differences and
similarities between both behaviors.
Keywords: Individual consumer, organizational buying behavior, engineering software

1. Introduction
The notion of Individual consumer and organizational buying behavior is emphasized in
literature A vivid insight on the subject would determine the success of an existing or new
software package. This study also compares the similarities and differences of both behaviors as
outlined in literature and investigate if they hold true for engineering software [1].
Individuals Consumers
Consumers are individuals who buy products and services for personal consumption.
Sometimes it is difficult to classify a product as either a consumer or an organizational good [4].
The characteristics of Individuals Consumers behavior include:
* Consumer behavior is part of human behavior.
* Learning the consumer is difficult and complex as it involves the study of human
beings.
* Consumer behavior is dynamic
* Consumer behavior is influence by psychological, social and physical factors.
* Study of consumer behavior is crucial for marketers
* Consumer behavior is a continuous process as it involves the process starts before the
buyer and continuing after purchasing.
Organization buying behavior
Organization buying behavior is the decision-making process by which formal
organizations establish the need for purchased products and services and identify, evaluate, and
choose among alternative brands and suppliers according to Webster and Wind.
The characteristics of organizational buying behavior include:
1. Consumer market is a huge market with millions of consumers, where organizational
buyers are limited in number for most of the products;
2. Organizations always purchase multiple licenses;
3. Organization maintain close relationships with software producers;
4. Demand is derived from both production and sales;
5. Demand fluctuations are high as purchases from buyers magnify fluctuation in demand
for their products.
6. The organizational buyers are trained professionals in purchasing;
7. Several persons in organization influence purchase and
8. Organization deal direct with manufacturers.
2. Objectives statement and methods
Research ideas: Identify how consumers choose a product that meets their needs.

31
 Table 1. Illustrate the differences between organizational and individual buying processes [2]

Buying Step Organization Consumer

Problem recognition Anticipates and plans for purchase on a
routine basis
General need description Extensive, objective cost-benefit analysis
Product specification Precise technical description using
techniques such as value analysis
Information/ Supplier search Extensive search that extends to the search
for supplier
Proposal solicitation Formal, such as in a tender process if large
volumes or values involved
Supplier selection Made after extensive evaluation of objective
information
Order-routine specification Routine calculation of re-order points as
well as time and place of delivery
Post-purchase performance Extensive comparison made and feedback Little basis for comparison
review given, concern with quality management at
source
Reacts to needs when they arise
Limited analysis of benefits; concern
with total cost
Description more in terms of benefits
Limited search geographically and in
terms of sources
May be verbal
Limited analysis with subjective and
anecdotal information influencing the
decision
Not routine

Spending time understanding these differences enables manufacturer develop solutions

that satisfy both needs and wants of customers. In some cases, consumers do not feel the need of
a particular product or service. The developer has to convince the prospective client of the
benefit of his product. Base on this fact, its numerous advantages over exiting software.
According to one of my great Prof. Peter Jan Pahl who is a pioneer in bauinformatik (Java based
programing) employed such tactic, trying to woo key players in the government, educational
institute and students. His innovative idea is presently been used in Germany, however not
without challenges of well-established software packages like AutoCAD. Since consumers trend
to stick to old software until they senses a need for software that can help them maximize sales
revenues, market share, profit margins and productivity. This transition is usually made only
when the benefit outweighs the cost of such changes. Therefore, analyzing market conditions and
trend is paramount for the success of any software.
Hypotheses
If the manufacturers of engineering products study the behavior of consumers, it leads to
higher sales. They equally need good product management, marketing strategy in short, and long
term.
The methodology of this research is based on my personal experience at the university.
Present publications on the subject were consulted. Interviews were conducted with individual
end-users as well as organizational representatives.
The following persons were interviewed:
- Dr. Galishnikova Vera Vladimirovna Head of structural engineering department at the
Peoples Friendship University of Russia.
- Ekpobodo .O. Raymond (M.Sc.) in Civil Engineering; Ph.D.
- Alfred Meseko practicing Architect and end user of engineering products.
The results of these interviews are discoursed below.
3. Results
Irrespective of present publications, only a limited amount of work is available about the
individual consumer and organizational buying behavior for engineering software. What makes
people buy a certain software against other software? The following factors influences whether
people buy a software: Basic needs; convenience; upgrading; prestige or aspirational purchase;
lower prices; great value; name recognition; innovation; compulsory purchase; ego stroking;
niche identity; peer pressure; addiction; location and language; after sales support [3].

32
 Basic Needs We buy things to fulfill our needs and want, Engineers relied heavily on
computer software for IT services, mechanical engineering, business process outsourcing,
knowledge process outsourcing, data management/back office support services, e-learning and
translation services, visualize ideas, implement, execute, test, increase accuracy, save, store,
share information, save time, cost and Present product. Software are indispensable in todays
world. However only the right choose would result in better productivity. Therefore, consumers
search carefully for a software that really meets their needs. All three persons who were
interview said basic need was foremost on the list.
Convenience You need something now and will take the easiest or fastest path to get it.
Interviews revealed that people do not necessarily buy the best product available. A suitable
software may require vigorous installation process and licensing. To avoid such inconvenience
he may choose another software with would incur less effort on his part. The size of a program
also play a role in some case, very heavy packages are frowned at. Like in nature, the size of a
creature could have a great impact on its speed and mobility. Lager programs often run slowly on
computers, and this is not desirable. Purchase is made to increase comfort or efficiency.
Upgrading Sometimes you buy because you need to upgrading old things you have.
Change is constant! Therefore, individuals and organization want to make themselves salable.
For this, they buy new software to enhance their work, Market their skills on the global market.
People learn new programs and updating their knowledge
Prestige or Aspirational purchase Something is purchased for an esteem-related reason
or for personal enrichment. This is a rather rare case!
Lower prices This is a major factor influencing consumers decision, Engineers are
result oriented and would go for any cheap software that provides accurate and reliable solution.
Therefore, when something we identified earlier as a want is now a lower price than before we
go for it. Consumer often budget a limited amount of resources to purchase a software, so the
software they purchase would fall within the range of their budget. Both individuals and
organization pay enormous attention to this factor, Present publications reveal this factor was
also top on the list of influencing factors.
Great Value When the perceived value substantially exceeds the price of a product or
service. This is something you do not particularly need at the moment but feel could be very
useful in future; you just feel it is too good a deal to pass up. Receiving discount or a promo code
could trigger a software purchase.
Name Recognition When purchasing a category you are unfamiliar with, branding plays
a big role. People who work outside the sphere of engineering know some popular engineering
software, if they are given the task of purchasing one they would mostly likely go for a well
know brand. Like in other areas of life, we may buy a product because we saw on advert on TV.
We hear friend talk about a software and begin to feel an association with the product even if we
know little about it.
Innovation Everybody wants the latest and greatest. Despite the fact that we all see the
need for innovation, Individual consumer are often note willing to pay the price for innovation.
Humans become comfortable with the past, Therefore innovation should be introduced gradually
and at a reasonable cost. Organizational on the other hand pay more attention to innovation.
Compulsory Purchase Some external force, like school, government, professional
association, your boss asked you to a software, makes it mandatory. This often happens in
companies were only a limited licensed software are available and workers are required to use
this program in the workplace. Employees may want to work at the convenience of the homes, so
they would evidently obtain the same software as used by their establishment.
Ego Stroking Sometimes you make a purchase to impress/attract the clients. Desire to
have something bigger/better than companies, friends, etc. To look like an expert/aficionado; to
meet a standard of social/organizational status, often exceeding whats realistically affordable to
make it at least seem like you operate at a higher level.

33
 Niche Identity Something that helps bond you to a cultural, religious or community
affiliation. Because the origin/history of a software, an organization may refuse to do away it,
out of respect or memorial for the developer.
Peer Pressure You purchase something because your friends want you to. Either to
make sharing information easier. Since most software read data in quite different ways. Valuable
information is lost by importing or exporting details. Cloud service is more effective if all stark
holders use the same. Therefore, a single platform is preferred when exchanging data. Pressure
could mount to use a particular software.
Addiction This is outside the range of the normal human operating system, but it
certainly exists and accounts for more sales than any of us can fathom. Can you think back to the
last time you bought something and fully explain the reason why? This is true with engineering
software. As professional become skilled at using a certain program they trend discourage the
use of other software. Once this addiction is formed, it becomes contiguous and the software
usage continues for years.
Location and Language I have never heard of it that could be the reaction of people
when they visit other countries and learn of long exiting software they never heard of. Curiosity
leads many to explore these programs; they are often at times shocked to see very efficient
programs developed abroad of which they have no idea about. Exploring these programs can be
difficult as it may be in the language of the origin country. The use of this software can be very
popular in that geographical location but remain totally unknown to the rest of the world. Civil
engineers in Russia trend to use Lira () and SCAD for designing. These programs are not
popular outside Russia and form USSR countries. Alfred Meseko who was interview explained
to me that the software his company used was highly influenced by its location.
After sales support: Engineering firms have to deal with a large range of problems.
Therefore, they value/require after sales support to solve complex problems. As revealed to me
by Dr. Galishnikova this was a key factor for her organizational software choose.
4. Conclusion
Research shown that clear differences and similarity exit between Individual consumer
and organizational buying behavior for engineering software.
Therefore, software developers and marketers need a clear understanding of their end-
users in order to promote the sales of their engineering programs/software package, they need to
invest in gathering useful information of their consumers. Such trends are already used in the
advertising/marketing industry and should be considered when aiming for high sale of
engineering software.
The five most influential factors are basic need; lower price; convenience; innovation and
after sale support. Location and language is interlink by convenience. Software that are available
is several languages are more popular on the global market. Their success can be attributed to
effective market analysis and customizing their market strategies to both individuals and
organizations trends alike.

References
1. http://www.smartcompany.com.au/marketing/sales/22378-20111007-marketing-strategies-
organisational-buyer-behaviour.html#
2. http://nraomtr.blogspot.ru/2011/12/organizational-buying-processes-and.html
3. http://www.bryaneisenberg.com/what-makes-people-buy-20-reasons-why/
4. http://www.wiziq.com/tutorial/666310-Consumer-Behaviour-It-s-Characteristics-and-Factors-Affecting-It

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 Creating and Selling Innovations: CFT
Djegot Anna Pavlovna
Peoples Friendship University of Russia
(Moscow, Russia)
E-mail: a.degot@yandex.ru

Scientific adviser: Ivanova T.B., candidate in sociology, docent of the Engineering business
and enterprise management department of the Peoples Friendship University of Russia

Abstract
The article investigates marketing of innovations in the Russian market of information
technologies. After analyzing the IT-company's activities, aimed at the creation and
implementation of innovative ideas to the market, it can be possible to learn from its experience,
predict future needs of customers and create an innovative product in the banking sector.
Keywords: innovations, information technology, IT-company, banking sector,
Application, marketing, product, software, business, experience, creation and implementation.

Usage of information technology has become an objective need in credit institutions as it

allows to embed new banking products and services, improves the reliability and quality of these
services, increases the speed of the settlement operations and simplifies client access to bank
products.
There is a strong competition among developers of banking software, so they should
always create innovations and analyze the patterns of their successful promotion to the market to
meet the competition. To do this, it is necessary to follow the regulations of the Central Bank of
Russia, work with existing and potential customers to identify their needs, be aware of the global
trends in the information security of the banking system.
The higher costs of R & D and innovations were the fact that Center of Financial
Technologies (CFT) was awarded by the Ministry of Economic Development in 2013. Referring
to the CFT company's website we analyze how CFT responds to market demands and creates
innovations.
It takes only to say that all companys innovative solutions are put in the form of
Applications to the basic program CFT-Bank. These new Applications are available to buy
when the new version of program issues, about two times a month.
In December 2012 the Application Integration with State Information System on state
and municipal payments (GIS GMP) was issued with a new version of the basic program [1].
The impetus for the issue of this Application was the release of the federal law number 162 of 27
June 2011 with the requirement of rapid exchange of information on the payer's debts and
payments between banks and GIS GMP [2]. Thus with help of this Application it become
possible to organize the reception and transmission of payments from individuals and legal
entities. According to the Russian news agency Interfax 54 banks use this Application in our
days [1].
The next example is the Application "Electronic messaging the information of the general
contracts to a repository" issued in June 2013 [3], which corresponds to the Order of FFMS of
Russia 11-68/pz-n of December 28, 2011 [4]. It says that all banks are required to send
information about repurchase agreements, contracts derivative financial instruments, the other
types of contracts concluded on no-organized trading conditions on the General Agreement
(single contract) to the repository.
CFT also uses another ways to create innovative products. One of them is to ask banks
customers online [5]. CFT publishes the list of applications that could be developed on its

35
website. Stakeholders - the company's clients, both current and potential, vote for the projects
that are interesting for them, thus they help to identify the most sought-after Application, which
rises to a higher level in the rankings. According to the results of voting CFT developers begin to
implement these sought-after Applications. Then implemented Applications issue with an
updated version of the basic program.
For example, version 14.1 released in February 14, 2014 contains Application "Single
Window" which became the first in the voting. [6] This product is mainly focused on rapid
customer service in SW mode. Today banks should quickly and efficiently give service not to
lose a customer. Using this Application allows banks to reduce the costs of attracting new
customers and retaining existing ones, updating the product line and training of the bank
specialists.
Banks needs may also be identified in a special survey, when some bank wants to buy a
program "CFT-Bank". During the survey CFT staffs identify gaps between the current software
system of bank and "CFT-Bank". One of revealed gaps was the necessity in creating of
indicators of the bank. These indicators should be introduced directly into business processes of
bank. Today CFT is making this project, which is scheduled for release in 2014. The indicators
are automatically calculated on the basic credentials (contracts, payment instruments, balances,
etc.) and are displayed in a simple and understandable form (graphs, pictures, tables) in
individual interactive dashboards for each of the bank's employees (see Pic.1). Indicators give
analytical tools to each employee of the bank - from the Chairman to the operator and require no
special training [7]

Pic. 1. Indicators of bank

Considering the global trends in the information security of the banking system there is a
necessity to hide the PAN-code number on plastic cards from bank employees who do not have a

36
need to view the entire PAN-code number. CFT prepared the new Application "Masking card
number" which will ensure the confidentiality of data and improve the security of payments with
bank cards of international payment systems [8].
On a par with global trends CFT also keeps track of any changes in Russian domestic
security of the banking sector. Since the beginning of 2013 the Central Bank revoked the license
in more than 27 small and medium-sized banks. The responsibility for the service of customers
of these banks transfers to large banks, and therefore the demands on their hardware and
software increase. Highly productive IT solutions capable of working with large volumes of data
are becoming necessary. CFT is working in the segment of large and medium-sized banks, so it
prepares for new projects in 2014.
So responding quickly to market demands, regulatory changes and legal framework of the
banking sector, CFT creates relevant innovative product, the promotion of which is carried out
by the following methods:
1. Discounts for first banks-customers of a new Application;
2. Monthly distribution of catalogue of Applications to banks-clients;
3. The company's participation in conferences, exhibitions (for example, 25-26 February
2014 - Conference on Derivatives in Russia) [9], the organization of webinars and "round
tables" for customers (for example, 2/25/14 - Webinar Payroll projects ) [10];
4. Interview of companys leaders in the media (Andrei Fomichev: With the
consolidation of the banking sector is a growing demand for large-scale and high-performance
IT-solutions) [11].
Tracing the complex path from identifying needs and innovative solutions to their sales,
we can confidently say that this approach allows the CFT:
1) to increase the competitiveness of its new products;
2) to improve its image;
3) to enter new markets;
4) to increase the cash flow.
This research is novel because the topic devoted to successful market introduction of
innovations on the example of IT-company working in the banking sector has not been
previously examined.
After analyzing the company CFT aimed at the creation and implementation of
innovative ideas to the market, effectiveness of methods used has been proven. Other market
participants can learn from her experience, thereby take their business to a new level.

References
1. ()
http://catalog.cft.ru/cftbank/sitepages/app.aspx?code=1b025020
2. , 27 2011 . N 162- .
"
" "", . 20, . 2
http://www.rg.ru/2011/06/29/fz1-dok.html
3. (),
http://catalog.cft.ru/cftbank/SitePages/App.aspx?Code=1B567010
4. , 28 2011 . N
11-68/- . " ,
( ), ,
, ,
( )
"
http://www.rg.ru/2012/10/16/fin-reestr-site-dok.html
5. (),
http://catalog.cft.ru/cftbank/SitePages/Apps.aspx?view=compact#/demand:1
6. (),
http://catalog.cft.ru/cftbank/SitePages/App.aspx?Code=1B365001
7. (), 300

37
 http://www.cft.ru/press-center/Documents/NEW-300ind-26-02-2013.pdf
8. (),
http://catalog.cft.ru/cftbank/SitePages/App.aspx?Code=1B350035
9. (),
http://www.cft.ru/events/Pages/index.aspx
10. (), , -
http://www.cft.ru/events/Pages/events.aspx
11. Bankir.Ru, :
IT-
http://bankir.ru/publikacii/s/andrei-fomichev-po-mere-konsolidatsii-bankovskogo-sektora-budet-rasti-
spros-na-masshtabnye-i-vysokoproizvoditelnye-it-resheniya-10004618/

Clusterization Approach as the Mechanism

to Enhance the Competitive Strength of the Territory
and Promote the Innovative Processes in the Region
Dyrdonova Alena Nikolaevna
Nizhnekamsk Institute of Chemical Technology
(Nizhnekamsk, Russia)
E-mail: danauka@lenta.ru

Absttract
In the current environment, the economic clusterization, which contributes to closer
interrelations between the businesses operating within this system and promotes development of
the involved regions, represents one of the key factors relating to competitive ability
improvement of the active businesses. The principal scheme and algorithm of complex evaluation
of regional economic systems clusterization potential is suggested and tested in the present job.
Further investigation trends of cluster formation development on the territory of the region are
specified.
Keywords: cluster, clustering potential, region, industry.

I. Introduction
The continuously growing competition makes it vital to seek new ways to promote a
faster development and better competitive ability of the regional economic systems. One of the
advanced forms of such development is a clusterization.
From the systematic approach perspective, a cluster represents a combination of
businesses running in the interconnected industry sectors amalgamated into a single
organizational structure the elements of which are intrinsically interrelated and interdependent
and jointly functioning for a definite purpose. Formation of highly effective technological chains
out of a number of separate business entities is a strategically important step that requires certain
long-term investments into the implementation process, and perhaps the idea is realizable only
by way of self-organization of these chains as a result of an interaction between the prerequisites
formed both inside and outside of these potential systems. Such interaction must bring additional
benefits for each of the involved business units, and create a motivation for setting up a unified
functioning system, while ensuring its integrity.
It should be noted that a cluster-type economic development is considered to be a specific
business instrument. A market-oriented community sets up business rules through different laws,
interrelationships, banking sector, institutions of support etc. Therefore, a cluster existing within
the frame of such rules represents nothing else but a specifically arranged environment that
allows a successful development of large and small size businesses, suppliers (equipment, OEM
accessories, or specialized services), infrastructure, R&D centers, higher educational institutions

38
and others. It is important here that a cluster permits achieving a synergetic effect since the
involvement of competitors becomes mutually beneficial.
The new form of arrangement of industrial production systems brings a variety of
significant advantages for the businesses, through which the clusters may influence the
competitive struggle. In the first place, a better performance of the firms and industry sectors
making part of the cluster; in the second place, increasing opportunities for an innovative and
industrial growth; and in the third place, encouragement of new businesses expanding the cluster
boundaries.
As opposed to the conventional forms of cooperative and commercial relationships
between small, middle and large size businesses, the cluster type systems incorporate the
following specific features:
availability of a big leader that sets a long-term commercial, innovative and other
strategy for the entire business system;
geographic concentration of the bulk of business entities involved in the cluster
system;
stability of commercial relations between the business entities involved in the cluster
system, and a predominant value of such relations for the majority of members of the cluster
system;
a long-term coordination of the interaction between the members of the cluster system
within the framework of its production programs, innovative processes, main control systems,
QA/QC systems, and so on.
II. Literature review and hypotheses
Fundamentals of the cluster approach were set up by the US school of new forms of
production process management, which was represented by theoretical and applied investigations
carried out by M. Porter, M. Larenzen, P. Maskell, S. Rosenfeld, M. Storper, M. Enright etc. The
founder of the cluster approach M. Porter created a theory of industrial clusters which was based
on the following conclusion from the theory of the Diamond Model of Competitive Advantages:
conditions for giving rise to a competitive advantage for the involved regions become better
when the firms functioning in one particular industry sector are geographically concentrated [1].
According to the theory of regional clusters developed by M. Enright, competitive advantages
resulting from performance of clusters emerge at the regional level rather than at the national one
[2]. Regional clusters represent the specific objects where the cluster policy can be implemented.
It is the regional clusters that require the state authorities attention and support for R&D
organizations. From this point of view, the basic determinants for development of the regional
clusters are the four sides of the rhomb of competitive advantages as defined by M. Porter.
Another foreign scientist S. Rosenfeld further developed the theory of regional clusters
and investigated the communication channels between the firms (members of the cluster) and
related organizations. M. Rosenfeld considered such communication channels as a significant
element of the clusters [3]. According to his approach, a regional cluster is more than just a
geographically outlined concentration of interdependent firms. The firms also should have
channels designed to facilitate production related transactions, dialogues and communication
between middle and small size enterprises. This idea was further explicated by P. Maskell and
M. Larenzen in the conclusion that setting up a networking cooperation between the firms based
on a trust in the partner principle is the main prerequisite for formation of a competitive regional
cluster and enhancement of the competitive ability of the firms being members of the cluster [4].
French scientists J. Tolenado and D. Soulie defined a cluster as draw dies, or an
interdependence between different economic sectors in terms of technological complexity levels,
which is based upon a necessity of creation of technological links between industrial and
economic sectors for proper realization of their potential advantages [5, 6]. A Swedish scientist
E. Dahmen defined a cluster as a combination of sectors, or development blocks where a
prerequisite for progress is availability of a linkage between an ability of one sector to develop

39
and its ability to contribute to progress in another sector [7]. In such conditions, development
should take place on a phased basis, or along a vertical line of actions within one industry
sector connected with other sectors. Such a method may help achieving competitive advantages.
According to V. Feldmans point of view expressed in his later theory, a cluster is a diversified
group of industries interconnected by the supply and purchase correlations based upon a cost
output matrix [8]. A benefit of such an approach is that it proceeds from extensive empirical
studies of diversification forms in different countries.
A number of Russian scientists also conducted researches into origination and
development of cluster formations, among which are, for example, A. Granberg, S. Glazyev, Zh.
Mingalaeva, S. Polyakov, A. Seleznev, R. Fatkhutdinov. Their studies helped adapt the M.
Porters cluster concept to the Russian reality. Some aspects associated with clusterization
mechanisms and instruments for promotion of clusterization were considered in the studies by
M. Vinokurova, A. Yermishina, A. Migranyan, V. Pechatkin, T. Uskov, T. Tzikhan etc.
III. Global experience
The cluster related technologies have found quite a wide application in the world. Most of
European countries worked out the most adoptable cluster strategies for their economic and
industrial development. In doing this, governments of the involved countries focus on supporting
the existing clusters and setting up new networks of the companies which never dealt with each
other. The state not only assists in creation of clusters but per se becomes a member of the
networks. As an example, in 1995 Germany launched the Bio Regio program that was aimed to
contribute to creation of biotechnological clusters in the country. In the United Kingdom, the
government defined the districts around Edinburgh, Oxford and Southeastern England as the
main regions for location of biotechnological firms. In Norway, the government provides
incentives for cooperation between the firms being members of the marine clusters. Finland has a
very well-developed wood industry cluster comprising wood production and wood products
manufacturing, papermaking, furniture fabrication, printing machinery and related equipment
manufacturing sectors.
The global clusterization experience shows the following:
First, the cluster-oriented structuring of the economy has a substantial influence on the
entire national economic policy. It is primarily associated with a support to the science, risk-
bearing innovations, export activities, creation of required infrastructure, and educational
background.
Second, the cluster-oriented policy leads to enhancement of the competitive ability at the
national level. For example, the economic policy of Finland based upon a clusterization. As a
result, during the recent years the country has been at the top of global current and future
competitiveness ratings.
Third, clusterization provides new opportunities for the businesses, contributes to better
soundness of small entrepreneurship, improves environmental responsibility of enterprises, and
leads to expansion of voluntary environmental activities carried out by the enterprises.
IV. Methodological fundamentals of regional clusterization potential evaluation
Investigation of a possibility to form clusters in the region calls for sizing up its
clusterization potential. The clusterization potential lies in availability of competitive advantages
with the industry sectors, enterprises, and infrastructure organizations functioning in the region
as well as a possibility of combining these advantages into one group for further application
aimed to improve competitiveness of the region. It should be noted that to date no unified
methodology has been worked out for clusterization potential evaluation. At the same time, some
studies of this issue are already available. They are generally based upon determination of the
geographic concentration indices, per capita production indicators, specialization of industry
sectors etc.
Using the above mentioned concept as guide, we decided to adapt it with a view to
address the issue of clusterization potential identification in different geographic areas. The areal

40
clusterization potential evaluation algorithm includes a numbers of stages as follows [9, 10]:
1) Calculation of specific clusterization potential indicators:
location ratio based on the scale of output (L1) is calculated as a ratio of the specific
weight of this industry sector in the regional production structure to the specific weight of the
same industry sector in the national production structure;
location ratio based on the number of operating organizations (L2) is calculated as a
ratio of the specific weight of operating organizations of this industry sector in the overall
number of operating organizations in the regional industry to the specific weight of operating
organizations of the same industry sector in the overall number of operating organizations in the
national industry;
location ratio based on the number small businesses (L3) is calculated as a ratio of the
specific weight of small businesses of this industry sector in the overall number of small
businesses in the regional industry to the specific weight of small businesses of the same industry
sector in the overall number of small businesses in the national industry;
location ratio based on the fixed assets value (L4) is calculated as a ratio of the specific
weight of the fixed assets value of this industry sector in the overall fixed assets value in terms of
the regional industry to the specific weight of the fixed assets value of the same industry sector
in the overall fixed assets value in terms of the national industry;
location ratio based on the fixed capital investments (L5) is calculated as a ratio of the
specific weight of the fixed capital investments in this industry sector in the overall volume of
fixed capital investments in terms of the regional industry to the specific weight of fixed capital
investments in the same industry sector in the overall volume of fixed capital investments in
terms of the national industry;
location ratio based on the balanced financial results (L6) is calculated as a ratio of the
specific weight of the balanced financial result of this industry sector in the overall volume of
balanced financial result in terms of the regional industry to the specific weight of the balanced
financial result of the same industry sector in the overall volume of the balanced financial results
in terms of the national industry;
location ratio based on the average monthly wage (L7) is calculated as a ratio of the
average monthly wage in this regional industry sector to the average monthly wage in the
national industry sector;
per capita industry sector output ratio (I) is calculated as a ratio of the specific weights
of the regional sector output in the same national industry sector output and the regional
population percentage in the national population;
specialization ratio of the region in a particular industry sector (S) is calculated as a
ratio of the specific weights of the regional industry sector output in the same national industry
sector and the regional gross domestic product in the national gross domestic product.
2) Determination of an integrated index showing the clusterization potential level of the
geographic area. The integrated index will be calculated as follows:

ICP = (L1 + L2 + L3 + L4 + L5 + L6 + L7 + I + S) / 9. (1)

In case that a value of the integrated index is over 1, the industry sector in question
displays a potential for clusterization. When considering the clusterization processes and
choosing among the most preferred clusters it is required also to evaluate dynamics of the
obtained integrated index because any increase in its value may suggest cluster growth prospects,
while any decrease in the integrated index value may suggest lack of such prospects.
V. Research findings
For the purpose of experimental approval of the devised methodological approach, a
clusterization potential evaluation of an area was carried out with respect to the Republic of
Tatarstan as an example. Tables 1 4 show the results of the calculations which were made on

41
the basis of the 2010-2012 economic performance indicators of the Republic of Tatarstan.
Table 1. Specific clusterization indicators of the regional industrial complex
(Case Study: Republic of Tatarstan, 2010)

Indicators
L1 L2 L3 L4 L5 L6 L7 I S ICP
Industry sectors
Electric power 0,98 1,20 0,73 0,85 0,66 0,45 0,84 0,99 1,45 0,91
Fuel 1,83 2,45 2,03 2,66 1,84 2,75 1,32 1,02 0,64 1,84
Ferrous metallurgy 0,01 0,02 0,01 1,09 1,86 0,07 0,02 0,01 0,33 0,38
Nonferrous metallurgy 0,01 0,01 0,01 0,12 0,23 0,01 0,01 0,01 0,80 0,13
Chemicals and petrochemicals 3,03 3,53 2,85 1,31 1,45 3,56 4,50 5,85 1,36 3,05
Machinery and metalworking 1,24 1,51 1,37 1,33 1,39 2,02 1,88 1,31 0,81 1,43
Forestry and woodworking 0,56 0,44 0,41 0,52 0,55 0,63 0,23 2,67 1,14 0,79
Construction materials 0,72 0,88 0,80 1,23 1,10 0,67 0,83 0,45 0,86 0,84
Consumer goods 0,59 0,77 0,65 0,98 0,90 0,94 0,41 0,00 1,07 0,70
Foodstuff 0,59 0,73 0,66 0,73 0,50 1,10 1,30 0,24 0,91 0,75

Table 2. Specific clusterization potential indicators of the regional industrial complex

(Case Study: Republic of Tatarstan, 2011)

Indicators
L1 L2 L3 L4 L5 L6 L7 I S ICP
Industry sectors
Electric power 1,02 1,22 0,89 1,21 0,87 0,63 0,96 0,99 1,46 1,03
Fuel 1,60 2,56 1,98 2,85 1,45 2,98 1,65 2,69 0,87 2,07
Ferrous metallurgy 0,01 0,02 0,01 1,03 1,80 0,04 0,01 0,02 0,39 0,37
Nonferrous metallurgy 0,01 0,01 0,01 0,13 0,24 0,01 0,01 0,02 0,84 0,14
Chemicals and petrochemicals 3,45 4,12 2,93 1,45 1,48 4,97 4,96 3,96 1,19 3,17
Machinery and metalworking 1,33 1,44 1,46 1,31 1,46 2,02 2,56 1,34 1,87 1,64
Forestry and woodworking 0,35 0,40 0,41 0,52 0,55 0,61 0,14 2,73 1,18 0,77
Construction materials 0,78 0,89 0,84 1,23 1,12 0,55 0,83 0,01 0,84 0,79
Consumer goods 0,62 0,74 0,67 0,98 0,92 0,99 0,14 0,02 1,08 0,68
Foodstuff 0,55 0,63 0,59 0,74 0,48 1,14 1,36 0,21 0,91 0,73

Table 3. Specific clusterization potential indicators of the regional industrial complex

(Case Study: Republic of Tatarstan, 2012)

Indicators
L1 L2 L3 L4 L5 L6 L7 I S ICP
Industry sectors
Electric power 1,42 1,23 0,78 1,11 1,05 0,95 1,45 1,23 1,98 1,24
Fuel 1,82 2,89 2,05 3,06 2,13 3,41 1,87 2,98 1,20 2,38
Ferrous metallurgy 0,01 0,02 0,01 0,99 1,82 0,05 0,01 0,02 0,14 0,34
Nonferrous metallurgy 0,01 0,01 0,01 0,14 0,19 0,01 0,01 0,01 0,81 0,13
Chemicals and petrochemicals 3,66 4,13 3,02 1,68 1,56 5,51 5,33 4,90 1,25 3,45
Machinery and metalworking 1,43 1,56 1,49 1,31 1,42 2,45 2,69 1,47 1,90 1,75
Forestry and woodworking 0,36 0,40 0,38 0,49 0,51 0,65 0,06 2,94 1,15 0,77
Construction materials 0,82 1,20 0,85 1,20 1,07 0,55 0,88 0,40 0,79 0,86
Consumer goods 0,56 0,70 0,62 1,01 0,97 0,98 0,05 0,02 1,08 0,67
Foodstuff 0,50 0,54 0,52 0,78 0,33 1,10 1,35 0,14 0,89 0,68

42
 Table 4. Integrated index of clusterization in the regional industrial complex
(Case Study: Republic of Tatarstan)

Industry sectors 2010 2011 2012 Dynamic

GROUP 1:
Chemicals and petrochemicals 3,05 3,17 3,45
Fuel 1,84 2,07 2,38
Machinery and metalworking 1,43 1,64 1,75
Electric power 0,91 1,03 1,24
GROUP 2:
Construction materials 0,84 0,79 0,86
Forestry and woodworking 0,79 0,77 0,77
Foodstuff 0,75 0,73 0,68
Consumer goods 0,70 0,68 0,67
GROUP 3:
Ferrous metallurgy 0,38 0,37 0,34
Nonferrous metallurgy 0,13 0,14 0,13
Note: downtrends, growth trends.

Proceeding from the clusterization potential evaluation results as shown in Tables 1 4,

all industry sectors operating in the Republic of Tatarstan can be structured into 3 groups, where
Group 1 will consist of the industry sectors displaying a higher development level than on
average in Russia. Group 1 includes chemical and petrochemical, fuel, machinery, metal
processing, and electric power sectors. The coefficients over 1 as specifically calculated for these
industry sectors manifest the growth trend.
Group 2 will consist of the industry sectors displaying a slightly lower development level
than on average in Russia. Group 2 includes forestry, woodworking, pulp and paper making,
construction materials, consumer goods, and food industry sectors. The integrated index value
here varies between 0.4 and 0.9.
Group 3 consist of the industry sectors that did not evolve in the Republic of Tatarstan.
These are ferrous and nonferrous industries. The calculated integrated index value does not
exceed 0.4.

Fig. 1. Integrated index values for industry sectors operating in the Republic of Tatarstan
over 2010 2012

43
 The dynamics of the integrated index of the clusterization potential as shown in Figure 1
suggests that the integrated index value for the regional industry sectors in Group 1 displays an
uptrend. For enterprises falling under Group 2 and 3 it appears impossible to determine any
development trend because the dynamics of the values is characterized by a differently-directed
movement: now upwards, then downwards.
However, despite the identified peculiarity, the integrated index values for the industry
sectors Group 2 appear to be relatively high. Such a dynamics, in our opinion, may result from
the fluctuations on the industrial markets. The situation around the industry sectors Group 2 calls
for further studies in order to identify the basic enterprises being of great importance for the
region, determine main and allied suppliers that can be included into the cluster, and requires a
further investigation into the production factors necessary for carrying on a competitive struggle.
VI. Conclusion
Thus, application of a cluster-oriented approach is a naturally determined stage in the
development of the regional economic systems. Formation and development of clusters within
the region will contribute to creation of new job places for the local population, increase tax
deductions into the budget, manufacture new types of products, increase both quality and
quantity of the output products, replace imported goods by domestic products owing to the use of
science-driven, resource-saving and environmentally friendly technologies, considerably
increase the role of science, education, R&D centres, design and engineering organizations,
academic institutions and higher schools, increase both a transfer level of technologies and
R&Ds and effectiveness of their implementation.

References
1. Porter Michael E. On Competition. Boston: Harvard Business School, 1998. 320p.
2. Enright M.J. Why Clusters are the Way to Win the Game? // Word Link. 1992. 5. pp.24-25.
3. Rosenfeld S.A. Bringing Business Clusters into the Mainstream of Economic Develop-ment // European
Planning Studies. 1997. 5. pp.3-23.
4. Maskell P., Larenzen M. The Cluster as Market Organization // DRUID Working Paper. 2003. 14.
pp.29.
5. Tolenado J.A. Propjs des Filires Industrielles // Revue d'Economie Industrielle. 1978. 4. pp.149-158.
6. Soulie D. Filieres de Production et Integration Vertical. Janvier: Annales des Mines, 1989. 223p.
7. Dahmen E. Business and development of Swedish industry, 1919-1939. Stockholm, 1950. 420p.
8. Feldman V. Innovation in cities: Science, based on diversity, specialization and localization competition
// European Economic Review. 1999. 43. pp.409-429.
9. Dyrdonova A.N. Evaluating the effectiveness of cluster formations: methodical approach //
Regionologiya. 2010. 4. pp.83-88.
10. Dyrdonova A.N. Methodic approaches to identification and evaluation of clusters in regional economics
// Regional Economics: Theory and Practice. 2010. 28 (163). pp.25-32.
11. The draft program for the development and deployment of the productive forces of the Republic of
Tatarstan on the basis of the cluster approach to 2015 and for the period up to 2030. M.: 2007. 135p.
12. The project The concept of cluster policy Russia. Moscow: Academy of National Economy under the
RF Government, a consulting company Bauman Innovation, 2005. 158p.

Power of Microcredit to Remove the Poverty in Bangladesh

Md. Nazmul Hossain
Peoples' Friendship University of Russia
(Moscow, Russia)
E-mail: mdnazmul197@gmail.com

Abstract
Bangladesh is one of the poorest nations in the world. The total population of
Bangladesh is 180 million of them 52 million live with absolute poverty (PPP below $1.25).
Around 1 million people die cause of starving and malnutrition and .25 million without
treatment/year. Around 2 million is homeless [IMF 2012]. The level of poverty is relatively very

44
high due to the fact that employment opportunities are limited & average income level is low.
Around 85 million is unemployed. If dynamism doesn't come to the job market its impact would
be very disastrous for the socio-economic lives in Bangladesh.

Introduction
Poverty is a national issue which has multidimensional characteristics in Bangladesh.
Together with low income, poverty has been cause of poor quality of living and limited access of
basic services including education, healthcare, water, shelter & sewerage. For peace & affluence
in Bangladesh stricken with hunger, homelessness, diseases & woe, tremendous poverty has to
be removed to ensure the fundamental rights which include the rights of food, cloth, shelter,
education & healthcare. International aid, which is joke to the impoverished, has deepened the
problems rather than alleviate a bit. To pave the way for first and foremost task is either to create
direct employment or create condition to create employments. Micro-credit banking, which on
one hand create direct employment and on the other hand patronize borrowers to create small
scale production lines or enterprises to create employments & bring financial sustainability, is
one of the most remarkable options to alleviate the poverty.
Poverty & its impact on socio-economic lives
Poverty, a complex society issue, is a condition when people are not able to meet their
fundamental needs including food, cloth, shelter, education and treatment properly in proper way.
It is a global issue and cause of socio-economic depression. Poverty not only pushes the
improvised to poor living conditions but also slashes the access to basic needs including food,
water, sanitation, health care & education. The letter undermines and limits their capabilities
and their opportunities to secure employments aftermath prolonging and confinement of the
poverty circle.
Together with poor living standard of impoverished, poverty is being cause of various
misfortunes which are prevailing in the society, such as crimes, illiteracy, unemployment and
diseases like depression, anxiety and stress therefrom not only the poor rather hole society is
suffering.
So poverty is a call to action---for the poor & the wealthy alike---a call to change the
world so that many more may have enough to eat, sufficient shelter, access to education and
health care, prevention from violence and uncertainty and a voice in what happen in community.
Microcredit banking is one of the most potential options to bring the desirable changes.
Scientific and apt implementation of it could bring the potential breakthrough.
Labor productive is an effective force to conquer the tremendous poverty and for this
quest micro-credit is an efficacious tool to accelerate individuals' involvement in micro-
enterprises or financial activities.

Low labour Low

productivity income

Low demand
for goods &
services

Figure 1: Emphasizes the interlink between low labor productivity & vicious cycle of poverty

What is Microcredit?
Microcredit is a financial innovation that refers to various kinds of small loans &
financial services meant for the impoverished borrowers who are currently operating businesses
or aspiring to introduce businesses or simply unemployed to introduce businesses or financial

45
activities to improve their living standard. The borrowers of micro credit usually lack of
collateral, steady employment & variable credit history, thus fail to qualify for regular bank loan.
It's designed not only to support employment and combat against poverty but in some cases to
empower women & uplift entire communities by extension.
The main purpose of microcredit is to break the cycle of no income, no investment, no
profit to small income, small investment, and small profit by increasing capital from outside
into the economic life of poor people.
Money, says the proverb, makes money. When you have got a little, it is often easy to
get more. The great difficulty is to get that little -Adam Smith
Low income individuals are capable to lifting themselves out of poverty, if given access
to financial service-Dr. Muhammad Yunus
Over the above concepts microcredit evolved first in 18th century and got momentum
only after the establishment of 'Grameen Bank' in Bangladesh by Prof. Muhammd Yunus in
1976. As of 2013 microcredit activities are being manipulated in about 100 countries around the
world including USA, India, China, Bangladesh and many other African nations and have
brought many changes.
Existent Microcredit Banking and Common Scenarios
In developing and list developed countries like Bangladesh where women are neglected
due to their dependability on male partners, microfinance provides them with beneficial banking
they need to start up business ventures and actively participate in economy. It gives them
confidence, improve status and make them more active in decision- making, greater accession to
financial resources, greater social network and greater freedom of mobility thus encourage
gender equality.
One of the largest roles that microfinance has in local economies is providing credit to
low-income and poor families to startup financial activities with the means to becoming
financially stable that helps breaking the cycle of poverty in the current generation and work
toward ending poverty for the future generation.
A study conducted by Zohir & Martin in 2004 suggested that clients who join and stay in
microcredit program have better economic condition than non-clients, suggesting that programs
contribute to these improvements. Households who are involved in program are able to send
more children to school for longer period and to make greater investments in their children's
education [Litterfield and Hoshemi, 2003].
By reducing vulnerability and increasing earning & savings, micro-financial services
allow poor households to make the transformation from everyday-survival to planning for the
future.
But the impact of microcredit on poverty alleviation is highly a debatable issue. Since
its debut, microcredit has not had very positive impact to alleviate poverty rather has led many
borrowers into debt trap or in some cases leading suicide or selling organ [Milford, 2010 &
Kathrin, 2012].
A study conveyed by Wastover & Khandaker noticed that among six representatives, five
found no evidence that microfinance reduced poverty though they found other positive impacts,
e.g acceleration of individuals business, children's education etc; Study selected from sample of
more than 100 studies as being methodically sound [Wastover & Khandker, 2008].
An another study conducted by Chowdhury & Hussain (2011), showed that micro-credit
programs in Bangladesh between 2000 and 2010 that was when only 7% of micro-borrowers
were able to rise themselves out of poverty line.
Kathrina Hartman, the German Journalist told about trapping in debt of a woman whom
she met in 2012 at Kurigram district in Bangladesh. The rural women who were the borrower of
microcredit told her about the brutal methods of enforcing debt repayment, including the forced
to sale of cattle, house utensils and lands. In order to be able to repay loan, newly indebt men and
women even sold their kidneys, as discovered by the police in summer 2011. In order to repay

46
the loans children are dropped out of school to earn money and food expenditures are cut down
significantly.
Professor Moniruzzaman from the department of Anthropology at Michigan State
University has been researching the organ trade in Bangladesh since 1990 stated that such a
selling organ to make repayment and they felt no choice but to sell a body part.
Mohammad Mehedi hasan 24, from Molagari village in Bangladesh sold his lever at
$9690 to repay the loan which was taken from a microfinance institution in 2005.
Why Micro-credit doesn't work?
It is a fact that microcredit borrowers, who don't have necessary requirements to receive
loan from the conventional banks, are marginal and disadvantage inhabitants of the society. They
don't know how to receive loan, how to invest the capital effectively for well return on
investment, how to produce units, how to marketing.
Suppose, if you somewhere meet a man who is blind and deaf and direct him to go to a
certain destination where he will get proper maintenances, he will never reach the destination
rather will lose the former shelter if you don't convey him to.
Like the blind and deaf microcredit borrowers will be dropped into debt trap or driven
into loan cycle if the borrowers are not apt patronized by the lender from credit receiving to
profit making.
Non-effective investment:
As microcredit borrowers are marginal and lack of business and professional experience,
they don't know how and which sector the capital should be invested in for well return on
investment. Most often, the borrowed money are invested either in list profitable or non-
profitable sectors fail to earn a well return to repay the loans' capital. The credits are very often
used to buy durable products or consumer goods instead of productive investment [Milford, 2010
& Kathrin, 2012].
Credit giving strategy, High interest rate & Repayment structure:
Loan functions of existent microcredit institutions are non-effective to fight against
poverty. Micro-credit banks in Bangladesh form a group of five potential borrowers and train
them how to receive and repay loan instead of how to go to the production or invest the credit
effectively.
Fail
Giving loan to Giving loan to
Regular repayment other 2 members last person
Forming a Training on Oral
Grameen policy Loan giving to
group of examination
(7 days) 2 members
five Regular repay Ineligibility of group
Not regular repay until loans repaid

Figure 2: shows the loan functions of first modern micro-credit institute 'Grameen Bank'

Moreover, high interest rate & repayment structure limit its effectiveness. Global average
interest rate of microcredit bank is 37%. In Bangladesh loans are repaid by 52 installments in a
year and first installment is started in fifteen days of receiving loan then every week. If
borrowers don't manage to earn at list 37% rate of return, eventually ended up poorer as a result
of accepting loans.
How Micro-credit will succeed?
To reach the poverty alleviation goal, Microcredit policies are needed to be implemented
and managed effectively & services are needed to be designed to meet the need of clients.
Thereby not just only clients but also their families and the wider communities will be benefited.
The most important task is to find the ways how banking & investing can:
Strenth local community
Support good green business
Lift families out of poverty &
How can be started effectively today

47
 When loans are associated with an increase in assets, when borrowers are encouraged to
invest in low risk income generation activities and when very poor are encouraged to save; the
vulnerability of the poor people is reduced & improved of the poverty condition [Hulen &
Mosley, 1995].
Entrepreneurial skills of recipients are the most important factor to make credit more
productive.
But all people don't possess the skills of vision, creativity & persistence to be deserved
entrepreneurial [Aneel Karnani, 2007:37]. So, rests have to convert into skilled producers.
So, together with credit other complementary factors are vital including selection &
motivation of entrepreneurs, identification of livelihood opportunities, business & technical
training, establishing of market linkage etc. to reach the poverty alleviation goal.

Micro-credit Poverty Alleviation

Effective
environment

Figure 3: Emphasizes the balance of micro-credit & poverty alleviation on proper environment

If microcredit activities encourage and patronize borrowers to resolve easy accessible

regional raw materials into commercially valuable products, it will be doubly effective. On one
hand commercial production industry will be established with huge economic potentiality and on
the other hand regional raw material industry will be accomplished commercially & more
effectively to bring massive development for local, national and world economy.
Micro-credit promises not only to break the vicious cycle of poverty by enhancing individuals'
involvement in financial activities but also promise to initiate a whole new cycle of self-
enforcing economic empowerment.
Unlocked individual involvement to financial activities

Micro-credit Higher labor High income

productivity
Repayment

High demands for

goods & services

Improved Better healthcare Better education

Nutrition

Escape from
poverty

Figure 4: Micro-credit promise

48
 Research Methods
Data collection (Questionnaires, books, thesis works), Data Analysis, SWAT Analysis,
PEST Analysis & Competitive Analysis
Proposed Project
Creation of microcredit bank & invention strategies to create direct employment & create
condition to create employments patronizing microcredit borrowers to create small scale
production lines or enterprises by microcredit banking, microcredit loan and other relevant
entrepreneurial activities.
Target is to encourage and patronize borrowers to establish regional raw materials based
production industries & low risk income generation activities. Moreover, other potential sectors
where there are rooms available to develop will also be promoted, e.g., poultry farming,
fisheries, dairy milk processing, packaging & marketing etc.
We'll select the borrowers on the basis of financial vulnerability and skills first and train
them to be skill producers or entrepreneurs. They will also be given very basic knowledge about
management & marketing. Then they will be given loan to introduce small scale production lines
or enterprises.
For sustainable development of a nation, education standard needed to be promoted to
create talented human capital, the nation will discover its own ways to develop. For this prospect
we'll establish preparatory and primary schools with computer labs, internet access and libraries.
The goal of the project is to represent poverty free Bangladesh to the world in 25 years
and represent the model as global poverty alleviation tool. If implemented successfully it will be
extended to other regions to remove the poverty and promote the standard of living.
Application
The project will be manipulated by the name '' MPFW (Mission for Poverty Free World)
Microcredit Bank'' with the slogan ''Poverty Free World for Global Peace & Prosperity''.
Instead of manipulating the project's activities over the entire country all together, well
divide the country into several regions according to the geographic location. Every region will be
divided into many small branches and developed the branches one after another gradually.
A branch will be picked up and activities will be manipulated for number of years till
annihilating the poverty, transforming the branch into self-dependable and improving the quality
of living.
Aim is to produce commercially valuable products by easy accessible regional raw
materials. So, we'll remark the regional raw materials of the region where we'll initiate the
project's activities and invent the most effective ways to produce commercially valuable
products.
Other potential sectors where there are rooms available to develop such as poultry
farming, fisheries, dairy milk processing, packaging & marketing etc. will also be initiated.
We'll select the borrowers & train them to be skilled producers or entrepreneurs. Well
equip training centers will be established in the branches on the basis of production which we'll
produce.
Loan will be given to the borrowers to introduce small scale production lines or
enterprises when they will be efficient to go to the production & manage effectively.
We'll patronize them to marketing their products.
We'll open & operate selling centers throughout the country by the brand name ''MPFW
Bank's Green Product'' with the slogan ''Be Green to Save the Globe''.
We'll buy the products from the producers (borrowers) and sell them in project's run
selling centers. The products will also be offered to other retailers who are offering the same
products we are producing and offering. The producers are also free to marketing their products.

49
Banking structure

Banking Microcredit Selection of Forming groups with Training to Lending

borrowers 5 members each the borrowers the
for production borrowers
Commercial Educational
activities Supervise their Patronize them
ground activities for marketing

Pay back
Loan will be paid back with 10% annual interest rate. Repayment will be started after a
month of their receiving loan as they will start receiving revenue from their portfolios at that
time. Total loan of a borrower will be paid back with 12 installments during a year. Borrowers
also can open saving account to the bank and deposit for the rainy day.
Implementation
The project is designed to implement in Bangladesh. Poverty, epidemic, famine and
hardship of life are the common phenomenon in Bangladesh though there are huge potentialities
and lots of rooms to promote for economic sustainability and social stability through promoting
handicraft, SMEs and various forms of micro-industrial, small scale commercial &
entrepreneurial activities. Through microcredit banking, microcredit loan & effective
entrepreneurial activities, the project will pick all of the potential sectors up into account to
develop.
Instead of initiate the project's activities over the entire contrary all together; we'll divide
the country into four regions (South-West, North-West, South-East & North-East) according to
the geographic location and initiate the ground activities in the South-West region first. We'll
divide the region (South-West) into 2500 small branches and pick a branch up and manipulate
the activities till annihilating the poverty and promoting the standard of living, then the rest of
branches gradually.
We'll remark the regional raw materials of the reasons and take initiative to invent the
most effective ways to produce commercially valuable products by the regional raw materials.
If jute and bamboos are available and cheap in the selected branch like most of the areas
of Bangladesh, we'll produce shoes, vanity bags, and shopping bags by jute and jute's garments
thereafter and souvenir, toys and household products by bamboos. If the area is surrounded by
grasses, we'll introduce dairy firming and small scale dairy products industries. If the area is
surrounded by water, we'll go to fisheries and poultry farming. If the area possesses no physical
resources but mud, we'll produce attractive souvenirs, ornaments and households things by clay.
This is important to mention that jute was the main export item of Bangladesh where
there were 537 jute mills with about 2 million of employees in 1990s since then 433 jute mills
have been closed & millions of employees have lost their jobs as we could not diversify the jute
product. The successful implementation of the project would revive the very glorious financial
sector of Bangladesh.
Women, almost half of the total workforces of Bangladesh but 85% of them are
unemployed. Keeping a vast population unemployed, sustainable development of a nation can't
be expected. So target is to empower the women involving them in financial activities.
Ground Activities
The ground activities of the project will be initiated on 1st of April 2014 from the village
Jaduboyra, a branch in South-West region of the project's planned geographic location.
Target is to transform the village Jaduboyra as a poverty free self-dependable village by
2015.

50
 Jaduboyra is a village of 4sq. Kilometers & 6124 inhabitants. Among them 500 students,
20 government employees, 50 in NGOs & other sectors, 800 farmers and vast majority of 1660
are completely unemployed. The total workforces are 2530 of them 98% are marginal farmers.
Like most of the rural inhabitants of Bangladesh, dwellers of the village Joduboyra
cultivate their lands yield crops and live on it round the year. But agriculture in Bangladesh
completely depends on natural climate. If weather is hostile, for example, drought, heavy rainfall
or flood, either crops are destroyed or cultivation of farmland is not commenced in time,
hardship of living is started.
Every year 'Monga', a seasonal food crisis, snatch numbers of lives during the months
December-January that is when farms are not cultivated and people don't have work at hands or
other alternative to survive.
Like most of the areas of Bangladesh, arable lands of the area are very fertile for jute.
Every year farmers cultivate jute but they don't get sufficient market value of it
Besides, huge livestock including lactates are also physical asset of the area. Inhabitants
use the milk of cows either for household purposes or sell it at villages' markets at very cheap
price.
As the village Jaduboyra is thrived with jute like most of the areas of Bangladesh,
primarily, we'll produce summer & winter shoes, shopping bags and vanity bags by jute and
research to produce more innovative products to keep up pace with global demand through
project's R&D center.
Moreover, we'll launch other entrepreneurial activities including poultry farming,
fisheries and milk processing, packaging and marketing for rapid and sustainable development.
We'll establish necessary numbers of preparatory and primary schools with up-to-date
curriculum. Educational institutions would be accomplished with computer labs, internet access
and libraries.
In next couple of years (from 2014- 2015) the village Jaduboyra, the first targeted branch,
will be changed for poverty free self-dependable village and standard of living. By the time five
preparatory schools and a high school, five fisheries and five poultry firms will come under full
operation. 500 direct jobs will be created through schools, fisheries, poultry farming and milk
processing, packaging & marketing activities. Further 500 small scale production lines, which
will create employments for another 1200 employees, will be created through loan program.
1700 families will come out from tremendous poverty. In next couple of years poverty will be
removed and massive changes will be brought in socio-economic lives in the village then
activities of the project will be extended to other branches with the same massage and mission.
Consequences
A. Poverty free Bangladesh in 25 years and selves-dependable villages
B. Increased the sources and level of income and standard of living
C. Talented next generation through up to date education program
D. Empower the women and gender equity through involving them in financial activities
E. Regional raw material based green product, cheap & innovative
F. Diversification of economy, financial sustainability & social stability
Conclusion
Microcredit banking is a very useful component to alleviate the poverty. But it doesn't
work itself. How and when poverty can be reduced through microcredit depends among other
things on whether and how successfully micro-credit program address the real constraints faced
by the poor in a certain context & area and how effective measures are taken for productivity and
surpass the constrains. Effective strategies and proper implementation are indispensible to reach
its poverty alleviation goal. Effective & efficient micro-credit policy and apt implementation of
it can represent poverty free prosper Bangladesh.

51
 Referances
1. Kathrin Hartmann:"Erlsen kann uns nur der Tod" ("Only Death Can Save Us"),Frankfurter Rundschau,
30 August 2012
2. Milford Bateman (2010-09-01). "The illusion of poverty reduction". Red Pepper magazine.
3.Chowdhury, M; & Bhuyia, J. (2004). The wider impact of BRAC poverty alleviation. Doctoral
dissertation. Department of economics, University of Stirling, Scotland
4. Karnani, Aneel (2007:37) Microfinance Misses its Marks Stanford Social Innoviation Review,
Summer.
5.Wastover & Khandker. (2008). The social inpact of microcredit, journal of international development.
Vol. 16, issue 3, Wastover & Khandker. (2008). The wider impact of BRAC poverty alleviation program in
Bangladesh. Journal of International Pp. 95-110; April 2004.
6.Litterfield & Hoshemi (2003). Assessment of the role of microcredit in development of social capital.
Doctoral dissertation. Lund University centre for East & South East Asian students.
7. Mahajan, Vijay (2005) From Microcredit to Livelihood Finance Economic & Political Weekly,
London, UK, October8, 2005
8.Adeolv, B; & Alini T. (2004) Microfinance as a poverty alleviation measure. Journal of social science,
Vol. 3. 2004. Pp. 111-117
9.Ahmed, Z, S. (2002) Poverty & Microcredit. New Realities and Strategies issues, Palli Karma Sahayad
Foundation (PKSF) Bangladesh.
10.Bislev. A.K (2002). Women's network and Microcredit; in Yunnan. Doctoral Dissertation Department of
economics, University of Stirling, Scotland
11.Burra, N .Women and Microcredit; Some challenges Note prepared for national commission for
farmers. Published on online: www.informaword.com/index/791302028

Marketing Strategies
Based on Voluntary Environmental Certification
Kizilova Mariia Volodymyrivna
National Mining University
(Dnipropetrovsk, Ukraine)
E-mail: mariakizilova@gmail.com

Scientific adviser: Paliekhova Ludmila Lvivna, PhD in Economics, associate professor

Abstract
This paper studies the use of voluntary environmental certification as a tool for creating
competitive advantages of Ukrainian enterprises in transition economies. The main marketing
strategies are analyzed that may be based on a voluntary environmental certification as a major
factor for creating competitive advantage. The possible effects and problems regarding the use
of strategies based on voluntary environmental certification in the Ukrainian realities are being
investigated.
Keywords: voluntary environmental certification, competitive advantage, marketing
strategies.

Introduction
Gradual clarification of irreversibility effects of industrial activity on the environment has
led to efforts consolidation of the world community in developing the principles of energy
production processes harmonization and the creation of strategic objectives image called
"sustainable development". The basic principle of the new management concept is the
achievement of economic growth due to the standards of social and environmental justice
implementation. In this context, modern science and best practices give a big role to voluntary
environmental certification (VEC), which aims to provide an environmentally sustainable

52
approach to the production management, implying sparing use of natural resources, preventive
environmental protection, loss compensation to the population that suffers from the business.
Western literature emphasizes that the VEC program should not be viewed as inevitable
costs, but as a tool for market development, especially for manufacturing enterprises [1].
D.Thompson and others are studying the possibility of environmental certification to enhance
market power producer and to improve its image in the target markets [2]. Moreover,
A. Matuszak-Flejszman and others argue that the VEC program can give direct economic
benefits by increasing the capacity, energy saving, raw materials saving, reduction of rejects,
reduction of waste treatment costs, reduction of idle times, insurance cost reductions, public
incentives, etc. [3].
For Ukraine, the voluntary use of international standards, including environmental ones,
is a fundamentally new phenomenon. Against the backdrop of the economic crisis our country
has long maintained the principles of strict control of all production activities, applying the
requirement of mandatory certification. Today, under the influence of globalization of trade and
financial relations business conditions in the former Soviet space have changed dramatically.
Having the right of free choice the entrepreneurs have to make their own decisions about the
need to shift to high environmental standards. In this context, the problem is to choose the model
of market behavior on the basis of the voluntary environmental certification and eco-labeling.
However, Ukrainian, Russian and other former Soviet Union scientists have still poorly studied
marketing opportunities of VEC and focused mainly on the technical aspects of its
implementation [4]. That is why the topic of this study is relevant and has a scientific and
practical significance.
Problem Statement
The main purpose of this study is to identify possible marketing strategies of industrial
enterprises that can be built on the basis of the properties and capabilities usage of voluntary
environmental certification. Accordingly, the following research objectives were assigned: to
formulate the definition and basic characteristics of VEC as a marketing tool; to find out the
specifics and capabilities of VEC as a marketing tool; highlight the main marketing strategies for
industrial enterprises, which can be built based on the use of the properties and capabilities of
voluntary environmental certification.
The hypothesis of the research is that the VEC is a specific tool for creating competitive
advantages; strategies based on the VEC can be used to maintain positions or access to markets,
for which environmentally sustainable production and products are valuable.
Research methods
In this paper the secondary information, including the latest scientific publications and
analyzes regarding the research topic, was studied. In addition to this the experience was
analyzed of VEC implementation by Ukrainian enterprises in the context of the selection of
alternative marketing strategies. Primary research was conducted on the basis of studying the
condition of management of four Ukrainian industrial enterprises that have implemented various
programs of VEC. For research an anonymous survey and in-depth interviews of top managers
were applied. In-depth interviews were conducted using laddering method.
Results
In recent years Ukraine has conducted enhanced reforms that are designed to meet the
requirements of the World Trade Organization (WTO), UkraineEuropean Union Association
Agreement and other international agreements, as well as increased external and internal market
relations. Also these reforms should reduce centralized technical regulation in the manufacturing
sector, and help to introduce the practice of voluntary environmental certification for compliance
with sustainable development standards. Consequently, the list of manufactures in Ukraine,
products and services that are subject to mandatory certification has declined by almost 70% [5].
Unlike technical regulators of compulsory execution voluntary certification, including
ecological, is based on market mechanisms and promotes free and fair competition. However, it

53
should be noted that the majority of industrial enterprises cannot adapt to the liberalization of
business conditions. As of 01.01.2013, only 92 companies are certified to ISO 14001 compliance
[6] and 60 Ukrainian producers eco-certified its products to 230 labels [7]. One of the reasons for
the low activity of the application of this tool is misunderstanding of the role, functions and
capabilities of environmental certification as a marketing tool.
First of all, we note that in the literature there are different definitions of voluntary
environmental certification, most of them understand it as a test procedure (or verification audit)
for the detection of environmental safety (or ecological purity) of production (or production
management system) [4; 8]. However, this approach does not reflect the dynamic and flexibility of
voluntary environmental certification, which is so important for its use in marketing strategies.
Therefore, in the context of marketing the following definition is proposed. Voluntary
environmental certification as a marketing tool is a procedure which confirms the compliance of
the certified facility (management or product) with the requirements defined by standards system
for environmentally sustainable economic development, and on this basis forms competitive
factors for potential target markets.
The proposed understanding allows to formulate systematically the main tasks of VEC as
a marketing tool, its features and capabilities.
The world community has developed different systems of voluntary environmental
standards, each performing its specific task. In this case all of them can be divided into two types
- general (intersectoral) and special (intersectoral) standards. Common environmental standards
form requirements for any businesses and industries, these include Eco-Management and Audit
Scheme (EMAS) and ISO 14000 series. In general, their objectives are the same, but EMAS
contains more stringent requirements such as continuous improvement with the latest
achievements and economic feasibility [9].
Sectoral environmental standards are developed for specific industries, their task is to
ensure the sustainable development of all participants in the process from resource extraction to
product sales to the final buyer. Such standards, for example, are Forest Stewardship Council
(FSC), The Initiative for Responsible Mining Assurance (IRMA) standards, etc.
At the same time, according to Steven A. Melnyk and others, all systems of
environmental certification perform common tasks such as: (1) creating an environmental policy;
(2) setting objectives and targets; (3) implementing a program to achieve those objectives; (4)
monitoring and measuring its effectiveness; (5) correcting problems; and, (6) reviewing the
system to improve it and its overall environmental performance [10].
As you can see, all the selected tasks are entirely within a context of the formation of
competitive advantages. Obviously, each of these tasks is confirmed in accordance with
development problems of the enterprise on a specific market and specific chosen system of
environmental standards.
Studying VEC functions as a marketing tool requires consideration of its role in the
extended format marketing mix, i.e. in the context of product, pricing, place, promotion, process,
personnel, and tangible evidence.
First of all, VEC generates ecological orientation of all components of product policy of
the enterprise, including the ensuring greening of qualimetric characteristics, the choice of
product categories, range, packaging, that are environmentally friendly. Accordingly, the objects
of environmental certification may be products of the company, materials and packaging.
Environmentally sustainable product policy is a powerful competitive factor [10].
The second important function of VEC in marketing is the promotion on the market for
which ecological orientation is important. Of which VEC can perform some of the functions of
advertising and PR carry information to the target audience about how ecological is their
activities. Information about the transition to certain standards gives signals to potential partners
about the possibility of cooperation with such enterprise. It is to underline the ecological function
of branding as a basis of the creation of "green" brand enterprise.

54
 Direct attributes of VEC - environmental certification and eco-labeling execute the
function of tangible evidence, guarantee environmental friendliness of management, trademark
and environmental qualities of goods.
The study has showed that it is possible to identify a number of strategies that allow
efficient use of voluntary environmental certification for different purposes. To elucidate the
factors that cause the use of marketing strategies based on the VEC, Ukrainian producers were
investigated.
First, the group of positioning strategies will be considered, which are among the main
strategies in which VEC can be used as one of the elements. Internal positioning is mainly
directed at the personnel of the enterprise. Why is emphasis made on personnel? The employees
of the enterprise are an essential component that significantly affects the effectiveness of
marketing strategy because the strategy itself is not implemented by the company, but by the
individuals personnel. Thus PJSC "Westa-Dnepr" uses this strategy, focusing on the promotion
among personnel who fully supports the focus of the enterprise on environmental certification
and is aware of the benefits that accrue to them, personnel, when VEC is used (for example,
since the adoption of ISO 14001 "occupational diseases cases have not been documented") [11]. It
should be noted that the strategy of consumer positioning highlights certain positive qualities of
the goods without comparison to competitors' products, and the use of VEC is one of the main
factors on which the company makes focus, or it greatly complements the existing. For example,
subsidiary "Suntrade" has certified its product TM "Oleina" with ISO 14024 standard and
focuses when positioning on high qualities of products, which are now more environmentally
friendly and that distinguishes it among the rest and gives a competitive advantage [12].
Positioning strategy on the image is based on the acquired reputation among consumers by the
firm. Thus Nemiroff company builds its image on social responsibility through sustainable use of
natural resources and ISO 14001 is a documentary evidence of this [13]. LLC "Prana" is a live
example of successful application of positioning strategy in terms of quality, which certified its
goods dishwashing detergent TM "JUKA", emphasizing high quality and how environmentally
friendly is their product [19].
By viewing the group of Porter competitive strategies, differentiation and focus strategy
can be selected, which enterprises started to implement to achieve competitive advantages
through the adoption of VEC. While using a differentiation strategy, company produces various
kinds of one product different from competitors' products and having something unique from the
consumers point of view. Effective differentiation strategy implemented with VEC adoption can
be seen on the example of LLC Industrial Enterprise Compressor" certified with ISO 14024. It
uses a strategy of product differentiation, which is based on the demonstration of high
environmental characteristics of the production processes and the products offered. Focus
strategy assumes that the firm concentrates its efforts on one or just a few market segments and
offers products based on the needs of these particular groups of customers. This way the
company Tetra Pak, presented the first in Ukraine ecological FSC-certified container from
renewable resources that satisfies the need of such customers as LLC "Sandora" and PJSC PA
Odesskiy konservniy zavod", which strive to position their products as an environmentally
friendly [20].
When considering the competitive strategies depending on the competitive position and
direction of the enterprise, for example, ISO 14024 certified hotels, we see that the eco-hotel
"Artemida" is using a leader strategy. It became the first hotel who decided to implement VEC
and now is actively pursues positioning on the eco-image [14]. After this a mountain hotel
"Kovcheg" was certified, but he is using the niche strategy, focusing on only one specific
segment of the market [15]. Hotel-restaurant complex Kozatskyi Stan uses the follower strategy
it does not aims to be a leader, but it successfully operates in the market and retains its
prestigious position [16].

55
 Global marketing strategies are crucial when VEC is used, precisely because of the
globalization of markets Ukrainian enterprises began to certify themselves that would give them
ability to compete and for further development. One of the global strategies is
internationalization strategy, which provides the adaptation to new markets, and exactly the
implementation of VEC promotes the release of Ukrainian companies on the European market.
For example, a manufacturer of galvanized rolled in Kryvyi Rih LLC "Yunstl" by adopting ISO
14024 has started exporting their products to the EU [18]. Globalization strategy involves
standardization of products based on the definition of common characteristics of markets that do
not depend on the specific countries. Interpipe NMPP corresponding to the requirements of ISO
14001, exports its products to various countries, thus expanding and globalizing their market [21].
Most companies in order to remain competitive constant growth is needed, so a growth
strategy is used, suggesting marketing objectives achievement through the intensification of
existing resources. Depending on the direction of growth intensive growth strategy can be
distinguished, which involves the growth within the existing market base. When company is
using product development strategy, occurs sales development of new products that are certified
with VEC for old customers; and when is market development strategy, occurs sales
development of new product in new markets. Successful use of a combination of these strategies
can be seen on the example of LLC "PA -Donbass" [18] which certified their tissues in
accordance with the international standard ISO 14024, which will attract new customers and
satisfy old market in a new way.
Among target-market selection strategies under which VEC is the main element product
specialization, concentration and single-segment segment specialization strategies can be
distinguished. These strategies with an emphasis on the environmental aspect is not yet popular
among the enterprises of Ukraine as abroad, but in the future they will be developed and used.
Analyzing examples of companies that use the VEC and the benefits that they have
achieved, it is necessary to consider the possible reasons for the decision and concerns proceed
to VEC. Most authors, considering from different perspectives VEC, relentlessly highlight the
benefits of its use. For example, Edwards highlights among the benefits of the use of VEC four
reasons why every organization must take into account environmental factors in the management
processes [22]:
ethical - allowing to liaise with customers better, showing that the company take care of
the environment;
economic - saving on cost due to conserving resources and not generating waste
products or wasting energy;
legal - improving the reputation of the enterprise that will allow to enjoy confidence of
the inspection bodies and public organizations;
commercial - more and more large organizations undertake environmental
responsibilities, and they expect their suppliers and subcontractors to do the same.
But even if the use of VEC has a huge number of advantages, entrepreneurs in Ukraine
still have difficulties in adopting such standards.
Such factors may include:
poor knowledge and understanding of how the VEC and what it can bring to the
organization;
low level of management;
lack of strategic objectives and evaluation system for environmental performance;
indifference of employees of the organization;
the enormous costs associated with the need to carry out reconstruction, replacement of
equipment, etc.
Conclusions and directions of further investigations
In transition economies voluntary environmental certification should be an effective
marketing tool to gain a competitive advantage for domestic producers. Generalizing the

56
theoretical and practical experience in this field, in the study is given its own definition of
voluntary environmental certification and formulated tasks of VEC in marketing. Study of the
functions of VEC as a marketing tool has proven its particular abilities in product policy
formation, promotion policy and some other aspects of marketing. It is shown, that they are all
executed in the context of environmental sustainability and competitiveness of business.
In the study are highlighted a number of marketing strategies using VEC, which allow to
develop steadily in the transition economy. For Ukrainian enterprises special attraction may have
the following group of strategies: differentiation strategies (with a focus on product and image)
and focus, positioning strategies (with a focus on personnel, image and consumer positioning),
competitive strategies (leader strategy, niche strategy), target market selection strategy (product
specialization, single-segment concentration and segment specialization).
Ukrainian experience of marketing strategies implementation on the basis of voluntary
environmental certification demonstrates their high efficiency in a transition economy. However,
the study of practical experience has shown the factors and difficulties that impede the active use
of strategies with VEC.
In this regard, the need for further research is shown on the development of marketing
strategies with VEC, which will incorporate the requirements of industrial markets.

References
1. Gonzalez-Benito J. et al. An Analysis of the Relationship between Environmental Motivations and
ISO14001 Certification / J. Gonzalez-Benito, O. Gonzalez-Benito // British Journal of Management. 2005.
No.16. . 133148.
2. Thompson D. et al. Green Segmentation and Environmental Certification: Insights from Forest Products
/ D. Thompson, R. Anderson, E. Hansen, L. Kahle // Business Strategy and the Environment. 2009. No.19(5).
. 319334.
3. Matuszak-Flejszman A. Benefits of Environmental Management System in Polish Companies
Compliant with ISO 14001 / A. Matuszak-Flejszman // Polish Journal of Environ. Stud. 2009. Vol. 18. No.3.
. 411419.
4. Semak B. B. Ecological certification of textile products the guarantor of its success in the market / B.
B. Semak // Efficient economy [electronic resource]. No.13. 2013. 5. Internet address:
http://www.economy.nayka.com.ua/?n=12&y=2013, last accessed on 23.02.2014 (in Ukrainian).
5. Official web-site of Ukrainian Scientific-Research and Training Center on Standardization, Certification
and Quality. Internet address: http://www.ukrndnc.org.ua/, last accessed on 23.02.2014.
6. Official web-site of State Statistics Service of Ukraine Statistical Information. Internet address:
http://www.ukrstat.gov.ua, last accessed on 23.02.2014.
7. Official web-site of All-Ukrainian non-governmental organization Living Planet. Internet address:
http://www.ecolabel.org.ua/, last accessed on 23.02.2014.
8. Shevchuk V.Y. Environmental management: a textbook / V.Y. Shevchuk, Y.M. Satalkin, G.A.
Belyavskaya - Kyiv Lybid, 2004. (in Ukrainian)
9. Official web-site of EMAS = Eco-Management and Audit Scheme. Internet address:
http://www.emas.de/, last accessed on 23.02.2014
10. Steven A. Melnyk, Robert P. Sroufe, Gyula Vastag, Environmental Management Systems As A Source
of Competitive Advantage [electronic resource]. 1998. Internet address:
http://www.bus.msu.edu/erm/assets/images/ems-ca.pdf, last accessed on 23.02.2014.
11. Official web-site of Komsomolskaya Pravda in Ukraine. Corporation "WESTA" held an eco-tour.
2013. Internet address: http://dp.kp.ua/daily/200613/400043/print/, last accessed on 23.02.2014.
12. Official web-site of TM Oleina. Today more and more Ukrainians are choosing organic products.
2013. Internet address: http://oleina.ua/eco, last accessed on 23.02.2014.
13. Official web-site of Nemiroff. 2013. Internet address: http://www.nemiroff.ua/production.php, last
accessed on 23.02.2014.
14. Official web-site of Recreation center "Artemida". Ukraine's first eco-certified hotel complex, received
the status of "eco-friendly". 2013. Internet address: http://www.boartemida.ru/eco_certificat.html, last accessed
on 23.02.2014.
15. Official web-site of Eco-mountain hotel Kovcheg, Environmental Certification. Internet address:
http://www.megura.net/eco-sertificat/, last accessed on 23.02.2014.
16. Official web-site of Hotel-restaurant complex Kozatskyi Stan, Environmental certificate. 2012.
Access mode: http://www.kstan.com.ua/en/news/show-ekologichniy-sertifikat-12/, last accessed on 23.02.2014

57
 17. Information portal of the city of Kryvyi Rih, "Yunistil" enters the European market. 2011. Internet
address: http://kr2012.com/news/news.php?ELEMENT_ID=205821, last accessed on 23.02.2014.
18. Official web-site of ALLTEX, LLC Textile-Contact. Internet address: http://alltex-
expo.com.ua/company/tekstil-kontakt,-chp/, last accessed on 23.02.2014.
19. Official web-site of LLC PIRANA. Internet address:
http://www.pirana.ua/predprijatie/sertification.html, last accessed on 23.02.2014.
20. Official web-site of private company Tetra Pak, Package with FSC sign: new recipe for success.
2012. Internet address: http://www.tetrapak.com/su/documents/FormaZhizni_Leto_web.pdf, last accessed on
23.02.2014.
21. Official web-site of INTERPIPE NMPP. Internet address:
http://interpipe.biz/en/company/productions/nmtz/ last accessed on 23.02.2014.
22. Edwards A.J. ISO 14001 Environmental Certification Step by Step. Elsevier. 2004. . 1-2.

Managing International Workforces

Problems and Principles
Julia Kondratenko
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: julkon@yandex.ru

Abstract
The article describes specific of international human resource management and
peculiarities of managing international workforces in multinational companies. Based on foreign
researches and studies of the experience of several international enterprises in the field of
human resource management in the article are developed classification of main types of modern
international assignments, determined threats and problems which have international
corporations with managing of international employees. As the result of the present research,
was developed system of principles, that allows to increase the efficiency of managing
international workforces and reduce the level of risk caused by multicultural distance.
Key words: International human resource management, international assignment,
multicultural team.

Introduction
The globalization of business is making it more important than ever to understand how
multinational enterprises can operate more effectively. A major component of this understanding
appears to be the field of Human Resources Management (HRM).
The business environment has changed dramatically in the recent years and these changes
have had a significant impact on organizational efforts to be successful. One of the major factors
of success in organization is the people who work for company. The most important task for
company to get the maximum out of their employees. Such a realization has had a significant
impact on the practice of HRM.
International HRM is HRM that cuts across national boundaries. International human
resource management (IHRM) is the process of selecting, training, developing, and
compensating personnel in overseas positions.
As we move further into the 21st century it is becoming absolutely clear that the effective
management of an organizations human resources as a major source of competitive advantage
and may even be the single most important determinant of an organizations performance over
the long term. Organizations have started to realize that their success is dependent on their ability
to attract, develop and retain talented employees.

58
 Tasks of the research
Globalization has created an array of employment scenarios based on such variables as
citizenship, location to whom the person reports and the term of assignment. Multinational
corporations (MNCs) usually defined as companies with organizations in more than one country
are growing in numbers and complexity. An example of this complexity is an organization
building a manufacturing plant in Spain to produce engine parts designed by another company in
Japan for motorcycles to be sold in Europe and the USA.
HRM mangers in MNCs must achieve two somewhat conflicting strategic objectives.
First, they must integrate HRM policies and practices across a number of subsidiaries in
different countries so that overall corporate objectives can be achieved.
At the same time the approach to HRM must be sufficiently flexible to allow for
significant differences in the types of HRM policies and practice that are most effective in
different business and cultural settings.
This problem of balancing integration (control and coordination from headquarters) and
differentiation (flexibility in policies and practices at the local subsidiary level) has long been
acknowledged as a common dilemma facing IHRM and other functional managers in MNCs.
Our tasks in the present research to determine the main types of assignments which are
used now by MNCs, to define the problems in managing international workforces, caused by
above mentioned dilemma and in the result to offer system of principles which allow to increase
efficiency of IHRM and reduce the risk level from using foreign employees.
Results of the research
There are three factors that are beginning to have large impact on IHRM for the 21st
century:
1. the changing role varying from country to country of trade unions and workers
associations in the operations of businesses around the world
2. changes in employment legislation in different parts of the world with particular
emphasis on laws relating to a range of forms of discrimination in the workplace
3. greater emphasis on flexible working and improving the work-life balance [3].
When you are working in Germany, for example, you should remember about strong
position of workers associations and obligatory participation of the workers in management
processes.
There are three well-known basic source of personnel talent that ICs can tap for positions:
Parent country national (PCN) or expatriates reside abroad but are citizens of the
parent country
Purposes for selecting PCN: strategic control, knowledge transfer, management
development
Host country nationals (HCN) local people hired by IC
Purposes for selecting HCN local responsiveness, cost savings, supporting on favorable
local image.
Third country nationals (TCN) citizens of countries other than the home or host
countries.
Purposes for selecting TCN viable PCN alternative (when PCN is determined to be the
best choice for foreign assignment but circumstances are such that a sufficiently qualified PCN is
unavailable, a qualified TCN may be considered as alternative), building regional leadership (to
create center of competence or regional headquarters), building a global talent network [2].
But in fact nowadays we can detail the present classification significantly, because there
are new types of international assignment. We offer to classify it into 5 groups:
Long-term employees or expatriates - they live and work abroad more than 1 year, can
have residential accommodation and very often the family accompanies this staff.
Short-term employees - they live and work abroad several months and usually their
family does not accompany them.

59
 Weekly business-traveler - such persons have weekly or several weekly trips and
occasional temporary relocation.
Frequent business-traveler - they have regular short-term international trips and do not
have relocation.
Virtual traveler they have senior managerial responsibility at home and abroad and in
other words they are frequent business-traveler combined with e-mails, video conferencing and
telephoning.
The reasons of appearance such types in modern world are the necessity to be more
flexible, to reduce the costs and avoid staff resistance to moving. Such assignments are not only
common at the highest levels, where CEOs and chairmen have always employed the latest means
of communication and can combine flights around the world with teleconferencing, but have
increasingly been among middle class, among managers.
This classification were tested not only by studying of foreign MNCs, but also was
confirmed by studying Russian big enterprises, leading international activity. Particularly, we
studied the situation in JSC PA Ural optical and mechanical plant (JSC PA UOMZ) big
Russian state production enterprise, which exports medical products, surveying instruments and
lighting devices in 85 countries all over the world and has 4 foreign subsidiaries abroad in
China, Switzerland, Germany and Belorussia. It is not MNC and the index of transnationalizaion
is significantly lower than in the biggest transnational and multinational corporations, but even
at this enterprise in order to coordinate and manage by its foreign daughters are used all five
types mentioned in our classification. If we see statistic of JSC PA UOMZ (particularly,
department responsible for development of international activity) and its foreign subsidiaries
approx. 35% is long-term employees, 4% - short-term employees, 16% - weekly business-
traveler, 32% - frequent business-traveler, 13% - virtual traveler.
The main problems of effective managing international workforces are caused by the
differences between countries legislation, political, economical, social and cultural distances.
Differences in economic systems among countries also translate into intercountry
differences in HRM practices. In free enterprise systems, for instance, the need for efficiency
tends to favor HRM policies that value productivity, efficient workers, and staff cutting where
market forces dictate. Moving along the scale toward more socialist systems, HRM practices
tend to shift toward preventing unemployment, even at the expense of sacrificing efficiency.
According to our opinion the most serious problems are caused by cultural distance.
Wide-ranging cultural differences from country to country require corresponding
differences in HRM practices among a company's foreign subsidiaries. For instance, incentive
plans in Japan still tend to focus on the work group, while in the West the more usual
prescription is still to focus on individual worker incentives. Similarly, in a study about man-
agers from Hong Kong, the People's Republic of China, and the United States, U.S. managers
tended to be most concerned with getting the job done, while Chinese managers were most
concerned with maintaining a harmonious environment; Hong Kong managers fell between these
two extremes.
The mix of cultures in the subsidiaries of an MNC and the level of cultural difference
among the subsidiaries will restrict the IHRM approach taken by an organization. As the number
and level of cultural differences among subsidiaries increase, it becomes much more difficult for
HRM staff at the MNCs headquarters to formulate and implement consistent HRM practices
worldwide. Thus, even though an MNC might prefer an ethnocentric approach to managing
human resources, the policies and practices formulated at backgrounds and preferences. The
subsidiary's HRM personnel must help all employees adapt to the HRM practices operating in
the subsidiary, even though these practices may be derived from cultures very different from
their own.
In spite of cultural distances, of economic, political and social barriers the task of head
quarter to manage by its foreign daughters successfully, to control its activity properly, to

60
provide necessary level of freedom and to receive maximum possible margin. From our point of
you it is important to create and use system of principles which can help head quarters to become
effective leader in the complicated network of foreign daughters. Taking into account experience
of foreign and Russian international enterprise we offer the following range principles of
managing people across the borders in international companies (ICs).
1. Centralization the principle refers to the extent to which power is exercised by ICs
head office instead of its subsidiaries. Companies that concentrate power in the center must find
the way to motivate subsidiary managers so that they feel valued. If subsidiary employees are
supposed to focus on their host country alone it is important that they fell at home in this
environment. Otherwise they will need to have more of regional or global outlook.
2. Hierarchy this principle is rooted in the recognition of authority. In corporate
environments which are more or less undemocratic and have often been compared to military
organizations, this would appear to be a relatively straightforward principle. Whereas employees
in the domestic company usually work in proximity to their boss, ICs employees often have two
bosses their local country manager and the person in charge of their product or functional area.
And if the person has 2 bosses pursuing 2 different business philosophies it can also be very hard
knowing whom to please.
3. Specialization in small and medium enterprises this principle is difficult to use
because the people have several roles, the collective is small. When you use this principle in big
ICs it can cause such problem as tunnel vision when the people cannot see how their
personal mission fits in with what colleagues in other departments or locations are doing.
4. Coordination - each employee has the territory to manage. This territory can be
defined along functional lines, but also in terms of products or geographic area. The company
need to ensure that all these territories fir together in cost-efficient manner and in a way that they
are defined minimizes and duplication of efforts while maximizing speed of action. This can be
achieved through organizational planning and design and by getting different territories to adopt
similar language systems. Problems can arise when boundaries change between employees
territories because the company perceives a need for greater coordination, because one
employee has the ambition of taking over the territory or due to external circumstances
5. Control visits of subsidiaries by staff from head office, global reporting system, but
information transmitted over long distance and it does not allow to receive full picture of what is
happening in foreign subsidiaries. On the one hand, country managers have a bested interest in
protecting their local units from head office interference and there for may not communicate all
relevant facts. On the other hand, head office executives suffering from information overload
may not have the time to cope with anything more than a short and necessarily incomplete
document. It is common for example, for a manager seeking permission to enter e new market to
be asked to describe the opportunity on single sheet of paper.
6. Learning international newsletters, conferences, trainings it is now very important
part of companys effective work in the international markets. In European companies the most
popular method of learning is training and there are the following types of programs:
a) environmental briefings used to provide information about such things as geography,
climate, housing and schools
b) cultural orientation designed to familiarize the individual with cultural institutions and
value systems of the host country
c) cultural assimilators using programmed learning approaches designed to provide the
participants with intercultural encounters
d) language training
e) sensitivity training designed to develop attitudinal flexibility
f) field experience which send participant to the country of assignment to undergo some
of the emotional stress of living and working with people from different culture [2].

61
 7. Integrating international teams it is impossible to start effective work in new country
with another culture and traditions without process of integration the team which include people
from different cultures. But in order to create effective team it is necessary to take into account
some rules:
a) Forming of leader qualities of head of the project team and team coordinators. The
good leadership helps reduce control level and avoid conflicts. But is it important to determine
optimal type of leading behavior, taking into account cultural and psychological peculiarities of
the team members and under the control to create informal network among project coordinators.
b) Including in the team people with different skills, abilities and modes of thought. The
main mistake which can be done is building the teman only from creative people or only good
hand-makers. In both cases the team will be inefficient. Also very often the team is formed
based on only proffesional skills of the employee or his positions in the company. And
individual features, character of the person are not taken into consideration. It is not effective
because value of the employee for company is determined first of all by the knowledge and
intellectual property of the employee. One person can have encyclopaedic knowledge, the
second can have excellent logical thinking, the third can have good communication skills and so
on. It is necessary to determine such people and include it in every international team. It will
help in brain storms, in creating ideas, because when the team combines different unique persons
there is no fear to tell any idea, no standard and restrictions, because people have different level
of knowledge, education, different abilities and qualification. The good team should include
both creative people and good hand-makers in order to be able not only to generate ideas and
innovations but also to implement it successfully.
c) Forming trust in the team. The most foreign researchers describes the trust as the
basis of team management [4]. The forming of the trust is the task of the project leader and it
should be carried out in three stages:
to determine the necessary trust level for complicated projects the level of the trust
should be higher,
to define week communication channels in project team and establish the connection
between all team members
to form the trust in the beginning of the project between team leader, team coordinators
and key team members.
The most effective method to form the trust is personal meeting. If it is too expensive for
the company (for example, in global project teams) to use it, it is possible to organize several
video conferences and find out common interests of the team members. The common interest is
the basis for team joining. And it is important to support the trust during the whole project.
d) Forming the practice of personnel responsibility of the team members for determined
sphere, that help increase personnel motivation and initiative.
e) Forming the atmosphere of intensive information interchange and open communication
system, which allow to increase the efficiency of the team because quick access to information
and visibility of data are the basis of innovations and prompt development.
f) Forming the team as network and not hierarchical structure. It will help intensify
decision-making process and create equal terms for all members.
For example, in the European companies in international teams are used democratic
principles in decision-making process, the team leader takes decision within determined
competences and the members of the team have determined spheres of responsibility [4].
g) Forming clear and understandable motivation system for team members. Usually
participation in the team is the additional job for the employee and should be paid additionally.
The type of motivation can be determined by each enterprise individually depending on its
activity, but it is important to understand that motivation should not used as the method of
pressure to prompt the work or to increase the planned figures.

62
 The rules and principles, described above we developed based on researches of such
economists as A. Verbeke, AT. Tavares-Lehmann, J.H. Dunning, A.M. Rugman, R.M. Hodgetts,
H.P. Wiendahl and others and then we tested its efficiency in three enterprises - in the company
Trialptek GmbH, Switzerland (was created virtual international multicultural team), in
company UOMZ-Mezhou, China (were checked principles of control, coordination, learning
and specialization) and JSC PA UOMZ, Russia (was created international project team).
Conclusion
International corporations may take any one of a number of different approaches to
IHRM, with the choice depending on political and legal regulations; the managerial, educational,
and technology development in the host country; and differences between the home and host
cultures.
But taking into account that the headquarters-based managers must coordinate IHRM
operations in a variety of countries, each with its own local cultural, legal, and traditional
influences, it is important to have strict principles and rules, which can help them carry out more
flexible policy, taking into consideration local variations.
In the present research were described the modern tendencies of IHRM, determined and
classified new types of assignment of employees in international companies and offered the
system of principles which can help increase efficiency of managing all types of foreign
workforces. The present research will be useful for mangers of the companies, leading
international activity and opening subsidiaries abroad. The study of the present topic can be
continued in the following directions developing organizational mechanism of management of
foreign daughter enterprises based on determined in the article principles and rules, creating
classification of foreign subsidiaries depended on the types of employees and offering specific
methods for its effective managing.

References
1. Khazanchi D., Zigurs I. Patterns of effective management of virtual projects: an exploratory study: PMI.
USA, 2006, 320 p.
2 Redding G., Stening B.W. Cross-cultural management 2 Vol., Cheltenham, UK, Vol.1 Theory of
culture, 707 p. Vol.2 Managing cultural differences, 742 p.
3 Sitkin A., BowenN. International Business. Challenges and Choices. Oxford university press, NY,
2010, 375 p.
4. Wiendahl H.P. Erfolgreich kooperieren: Best-Practice Beispiele ausgezeichneter Zusammenarbeit.
Heidelberg: Physica-Verl., 2005.

The Problems in Management

of Sustainable Fish Production
Lkhasaranova Sarana Bayarovna
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: suezilin@list.ru; suezilin@icloud.com

Scientific adviser: Kapustina Larisa Mikhailovna, Doctor of Economics, Professor

E-mail: lakapustina@bk.ru

Abstract
This article represents a close study of fish industry data and the Food and Agriculture
Organization statistics to explain not only the importance of this industry in economy of
developing countries but also its impact on the environment. There are some information about
world exports and imports of fishery and global capita consumption of fish. Marine ecology

63
struggles a lot nowadays because of overfishing. With technical revolution and modern
motorized fishing vessels there is unlimited capacity for fish on board and extended areas of
fishing. Lack of local and international laws worsen the problem of overfishing even more.
However, there some measures taken and not only internationally but also by local companies
and even by grocery stores. This fact shows that sustainable fishing and managing business
wisely helps to prevent global catastrophes. Even if it is a drop in the ocean, this kind of little
steps will help the society to save world ecosystem and make a sustainable production.
Key words: fish trade, world fisheries, marine ecology, overfishing, sustainable
production, seafood.

I. Introduction
Fishing Industry has a huge impact on financial security of developing countries, world
exports and imports continuously increase through last decade. Fish consumption per capita
keeps growing and causing the problems of overfishing. Overfishing may be decreased by
effective fisheries management on international, governmental and business layer.
According to a study published in the Journal of the American Dietetic Association.
About 61.5 percent reported using the nutrition facts panel when deciding to purchase food.
Which means that nowadays proper pay more and more attention to healthful food. That is why
substituting fish for meat is one of the dietary changes that people make for their family.
Much of the research on the benefits of fish stem from research on Inuit natives and their
high consumption of salmon with a correspondingly low rate of heart disease. Over time society
has come to understand that this is because they are eating fish that are high in monounsaturated
fats, especially Omega 3 fats.
There's lots of research on the power of fish to prevent heart disease. This means fatty
fish or "dark fish" like tuna, salmon, sardines, swordfish, mackerel or bluefish, which are all high
in Omega 3 fatty acids. There's also evidence for fish being beneficial for many health problems,
including osteoporosis and infections. There are even studies that show that fish has a major role
in the prevention of cancers, including kidney, skin and colon cancers.
II. Statistical review on Fishing industry
Moving closer to economic perspective on fish there is a need to give a definition to the
fishing industry. The fishing industry includes any industry or activity concerned with taking,
culturing, processing, preserving, storing, transporting, marketing or selling fish or fish products.
It is defined by the Food and Agriculture Organization (FAO) as including recreational,
subsistence and commercial fishing, and the harvesting, processing, and marketing sectors [1].
The commercial activity is aimed at the delivery of fish and other seafood products for human
consumption or as input factors in other industrial processes. Directly or indirectly, the
livelihood of over 500 million people in developing countries depends on fisheries and
aquaculture [2].
Because seafood is quick to spoil, fish markets are historically most often found in
seaside towns. Once ice or other simple cooling methods became available, some were also
established in large inland cities that had good trade routes to the coast. Since refrigeration and
rapid transport became available in the 19th and 20th century, fish markets can technically be
established at any place. However, because modern trade logistics in general has shifted away
from marketplaces and towards retail outlets, such as supermarkets, most seafood worldwide is
now sold to consumers through these venues, like most other foodstuffs.
Millions of people work in the seafood industry, contributing to local, regional and global
trade on a massive scale and maintaining livelihoods, earnings and employment. It's not just
about fishing. As it mentioned before seafood-related jobs include processing, packing, transport,
retail and restaurants. Through these diverse businesses, the seafood economy generates financial
security for individuals and a valuable source of Gross domestic product (GDP).

64
 In 2012, total world exports of fish and fishery products reached United States Dollars
(USD) 129.1 billion, a 121% increase from 2002, it further grew in 2013 with exports valued
USD 136 billion. Fish imports rose by 108% from 2001 to 2012, reaching USD 129.4 billion.
Developed countries accounted for about 73% of imports, in value terms. Since 2002, China has
been the world`s largest exporter of fish and fishery products. In 2012 its exports reached USD
18.2 billion. In the same year the major exporters were Norway with USD 8.9 billion followed
by Thailand exporting USD 8.1 billion, Viet Nam - USD 6.3 billion, The USA - USD 5.8 billion,
Chile - USD 5.1 billion [3].
In 2012 Japan was the leading importer of fish and fishery products, with imports valued
at USD 18.0 billion. In the same year, the second major importer was the USA with USD 17.6
billion and Italy - USD 5.6 billion [3]. The dynamic of fisheries production is represented on
figure 1.

Figure 1 - World fisheries production and quantities destined for export, million tonnes

Trade in fish products can play a key role in the growth strategies of many developing
countries. In particular, fish trade represents a significant source of foreign currency earnings.
Developing countries net exports of fish products have been increasing rapidly in recent years.
The share of developing countries in total fishery exports was 54% by value and 61% by
quantity(live weight equivalent) in 2012. The net exports of fish by developing countries has
increased continuously over recent decades, from USD 4.0 billion in 1982 to USD 15.5 billion in
1992, USD 17.4 billion in 2002 and to USD 35.3 billion in 2012 [3]. This figures were
significantly higher than those for other agricultural commodities such as rice, coffee, tobacco,
milk and tea.
Shrimp continuous to be the most important commodity traded in value terms, accounting
for about 15% of the total value of internationally traded fishery products. The other main groups
of traded species are salmon and trout (14%), ground fish (10%) and tuna (9%) [3].
In 2010, global capita consumption of fish was estimated at 18.9 kilogram(kg), with fish
accouting for 16.7% of the global population`s intake of animal proteins and 6.5% of all proteins
consumed. Globally, fish provides more than 2.9 billion people with almost 20% of their average
per capita intake of animal protein, and 4.3 billion people with 15% of animal protein [3].
Aquaculture continues to boost overall fish supply, pushing quotations down from earlier
levels. Fish consumption per capita keeps growing with aquaculture in the process of overtaking
capture fisheries as the main source of supply for direct human consumption.
III. Results: Overfishing and measures to prevent the damage
However, there is a problem of overfishing that has a long chain of consequences.
According to marine ecologists, overfishing is the greatest threat to ocean ecosystems today [4].
Overfishing occurs because fish are captured at a faster rate than they can reproduce [5].
Advanced fishing technology and an increased demand for fish have led to overfishing, causing
several marine species to become extinct or endangered as a result [6,7]. In the long-term,

65
overfishing can have a devastating impact on ocean communities as it destabilizes the food chain
and destroys the natural habitats of many aquatic species.
Pacific
North Near East and
America 3% Oceania
Europe 4% 1%
4%
Africa
7%

Latin
America
9%

Asia
72%

Figure 2 - Distribution of motorized fishing vessels by region in 2010

In the past, fishing was more sustainable because fishermen could not access every
location and because they had a limited capacity for fish aboard their vessels. Today, however,
small trawlers and fishing boats have been replaced by giant factory ships that can capture and
process extremely large amounts of prey at a given time. These ships use sonar instruments and
global positioning systems (GPS) to rapidly locate large schools of fish. Fishing lines are
deployed with thousands of large hooks that can reach areas up to 120 kilometers deep. The
trawling vessels and machines can even reach depths of 170 kilometers and can store an
extraordinarily large volume of fish. Each year, these huge trawling ships comb an area twice the
size of the United States. They use massive nets 50 meters wide with the capacity to pull the
weight of a medium-sized plane [5]. They also have several plants for processing and packing
fish, large freezing systems, fishmeal processing plants, and powerful engines that can carry this
enormous fishing gear around the ocean. Because these ships have all the equipment necessary to
freeze and tin fish, they only need to return to their base once they are full. Even when the ships
are filled, however, the fish are often transferred to refrigerated vessels in the middle of the
ocean and are processed for consumption later. As such, industrial fishing has expanded
considerably and fishermen can now explore new shores and deeper waters to keep up with the
increased demand for seafood. In fact, it has been reported by the United Nations Food and
Agricultural Organization (FAO) that over 70 percent of the worlds fisheries are either fully
exploited, over exploited or significantly depleted [5].
Not surprisingly, it has been reported that industrial fishing takes between only 10 and 15
years to wipe out a tenth of whichever species it targets [5]. In fact, several marine species have
already been fished to commercial extinction, and this number is rapidly increasing. One of the
reasons for this is that the regulation of fishing vessels and the fishing industry is universally
inadequate. Roughly two-thirds of the ocean is free of laws and fishing vessels only follow the
laws ratified by their country of origin. However, most fishing countries have not ratified any
international convention to protect the sea or marine life. Moreover, fishing factory ships and
companies are given access to fisheries before the longterm impact of their fishing practices is
understood.

66
 While it is often overlooked for other environmental issues, overfishing has historically
caused more ecological extinction than any other human influence on coastal ecosystems,
including water pollution. Unfortunately, due to a lack of data, the extent of this damage has only
recently been recognized.
Fortunately, some measures at the international level are being taken to help stocks to
regenerate, recognising that the process can take up to a century, or even more. For example, in
2012, 48 member countries of the International Commission for the Conservation of Atlantic
Tuna (ICCAT), agreed to maintain eastern and western Atlantic Bluefin tuna (Thunnus thynnus)
quotas in line with the scientific advice [5].
There are a variety of measures that can lead to more sustainable production, trade and
consumption of fish and fish products including:
Adopting, implementing, improving and respecting effective fisheries management and
conservation measures, such as output controls, input controls and auxiliary measures,
using both market-based and command and control policies;
Building monitoring, control and surveillance infrastructure;
Phasing out harmful subsidies;
Introducing incentives to change the behaviour of consumers and economic operators;
Creating marine protected areas;
Supporting sustainable artisanal fisheries;
Investing in innovation of fishing and aquaculture techniques;
Ensuring transparency and sustainability in transfers of fishing rights; and
Reducing by-catch, discards and post-harvest losses.
There also some measures taken on business level. Albion Fisheries, Santa Monica
Seafood, Seattle Fish Co. and other major seafood companies have formed Sea Pact, an industry
coalition to advance environmentally sustainable fisheries and aquaculture practices. The main
idea is to help build a long-term sustainable seafood industry by financially contributing to
improve the fishing and fish farming systems from where they source their seafood.
Six US and Canadian companies currently make up Sea Pact. Other founding members
are Fortune Fish & Gourmet, Ipswich Shellfish Group and Seacore Seafood. All members have
committed to publicly state goals for a more sustainable seafood supply chain and monitor and
measure progress towards the goals. The coalition grew out of Santa Monica Seafoods
Responsible Sourcing/Vendor Partnership Program, a collaboration with FishWise that applied a
percentage of the companys purchases toward projects aimed at improving fisheries and
aquaculture efforts at home and abroad.
Individual companies dont have the financial means to make meaningful improvements
in the industry. But through pooling their resources and combined buying power, Sea Pact
members can sponsor sustainability projects that would otherwise be too large in scope. Sea Pact
receives fiscal sponsorship from nonprofit New Venture Fund and sustainability counsel from
nonprofit organizations FishWise and Sustainable Fisheries Partnership [8].
Whole Foods, Safeway and Trader Joes - American chain grocery stores - are the only
three grocery chains to earn a green rating in Greenpeaces annual report evaluating and ranking
supermarkets on their sustainable seafood policies [9].
The grocery chains earned scores of 7.3, 7.1 and seven, respectively, in the scorecard,
which has been released each year since 2008. Seven is the lowest score that qualifies for a green
rating, according to Greenpeaces 2013 Carting Away the Oceans report. Ratings evaluate
retailers on a variety of factors including the sale of so-called red list seafood, transparency of
supply and engagement with conservation initiatives. Those are examples of a well-done
management. Working productively and still being sustainable is possible and this is the model
that every fishery should seek for.

67
 IV. Conclusions
Fishing is a food source for millions of people, attempting to solve the problem of
overfishing not easy, especially for developing countries. However, research suggests that
fisheries are able to recover or stabilize their populations when responsible management and
regulations are in place [10]. With pressure on seafood resources set to increase further, fisheries
that are poorly managed may quickly collapse. Fisheries need to be well-managed and
sustainable, especially given the uncertainties and implications of global climate change.
Considering the rising global population and the pressure that it has, and will continue to
exert on the Earth's resources, a more sustainable method of fishing is necessary if humans wish
to utilize its natural abundance.

References
1. FAO Fisheries Section: Glossary: Fishing industry. Retrieved 28 May 2008.
2. Fisheries and Aquaculture in our Changing Climate Policy brief of the FAO for the UNFCCC COP-15 in
Copenhagen, December 2009.
3. Fact sheet: International fish trade and world fisheries. Available at http://globefish.org
4. Overfishing Emptying our Seas (2008). Available at
http://www.greenpeace.org.uk/oceans/problems/overfishing-emptying-our-seas (25 November 2011).
5. Overfishing: Oceans are Dying (2010). Available at http://www.oceansentry.org/lang-
en/overfishing/campaign.html (25 November 2011).
6. M. Floyd. Long-lived deep-sea fishes imperiled by technology, overfishing. (2007). Available at
http://www.eurekalert.org/pub_releases/2007-02/osu-ldf021307.php# (25 November 2011).
7. Overfishing Fact Sheet (2011). Available at http://www.ypte.org.uk/environmental/over-fishing/29 (25
November 2011).
8. Overfishing: A Threat to Marine Biodiversity (2006). Available at
http://www.un.org/events/tenstories/06/story.asp?storyID=800# (25 November 2011).
9. Seafood Industry Forms Sustainable Fishing Coalition. Available at
http://www.environmentalleader.com/2013/07/25/seafood-industry-forms-sustainable-fishing-coalition/ (25 July 2013)
10. Bassan, Janine (MayJune 2011). "Not all seafood is equal". South African Journal of Science 107
(5/6): 810.

The Adoption of Social Media

in Companies of Marche Region.
Opportunities for Innovative Marketing
Luca Marinelli
Universit Politecnica delle Marche, Facolt di economia "G. Fu" (Italy)
E-mail: l.marinelli@univpm.it; lucamarinelli@gmail.com

Laura Moscatelli
Universit Politecnica delle Marche, Facolt di economia "G. Fu" (Italy)
E-mail: l.moscatelli@univpm.it

Abstract
The ICTs development, especially the new networking technologies, has generated
important consequences in the telecommunications and information technology first, but also it
has produced a substantial innovation in all economic activities, consisted in transforming the
existing operating processes, changing products, generating new industries and changing
competitive environments. Companies around the world are giving rise to new forms of
marketing and communication by adopting tools such as social media, where the reputation of a
brand is built through an extensive network of relationships with customers and consumers.

68
Seizing the opportunities provided by the network, especially in this period of uncertainty and
global crisis, means being able to compete in markets where it is necessary to this kind of
presence. This article will be presented and discussed the results of a research conducted by the
Research Lab Network Lab1 on the adoption of social media (Facebook, Twitter, LinkedIn,
YouTube and blogs) by a sample of companies of Marche Region.
Keywords: social media, ICT, SMM, social media marketing, SME

Introduction
The aim of this work is to verify whether and to what extent, companies surveyed are
using social media for marketing purposes. In this article we will discuss the case of the
companies of Marche Region whose enviroment is particularly representative of the italian
industrial tissue. In the first part will be a literature analysis on the topic of social media by
describing the main characteristics of the platforms from the perspective of opportunities for
businesses. The secondo section will present and discuss the data of the research conducted by
NetWork Lab between 2011 and 2013, on the adoption of the social media (Facebook, Twitter,
Linkedin, YouTube and Blog) from the top 100 manufacturing enterprise of Marche Region. The
work ends with an analysis and verification of some of the assumption made during the study.
Literature overview
Social media are among the latest tools from the world of ICTs. One of the most
authoritative definition is that provided by Kaplan and Haenlein (2010), wich describes social
media as a group of internet-based applications base on the ideologies and technologies of Web
2.0 and that allow the creation and exchange of user-generated content. Berton, Pitt, Plangger
and Shapiro (2012) describe social media as part of a structure result of the interrelationship
between the following dimensions:
Web 2.0: the technical infrastructure that allows the diffusion of social media collective
and facilitates the production of consumer-generated content;
Social media tools with which these contents are generated;
Creative consumers: the producers of such content.
A similar concept is being developed by Kietzman, Hermkens, McCarthy and Silvestre
(2011) which give to social media the dual function of media and content platform that spread
through interaction between individuals and organizations. According to Mangold and Faulds
(2009), social media consist of new sources of information online such as social networks, blogs
chat rooms, portals, photo sharing sites and videos, and podcasts, created and used for
educational purposes on topicc including products and brands. Because of their ability to create
networks and to stimulate interactions are several authors who identify the opportunities in social
media marketing. Social media, which initially were considered mere instruments of
entertainment, have become the latest marketing phenomenon thanks to their considerable
advantages in most areas of business (Kirtis and Karahan 2011). Luke (2009) states that social
media are very important to the marketing environment. So how Steinman and Hawkins (2010)
consider that the viral nature of social media bringer of benefits to the business: advertisers are
conveying promotions using social media to get more attention and increase participation among
consumers and to maximize the exposure of brand. One of the most important research topics in
this field is the study of the advantages obtained by companies thanks to social media marketing.
Typically, social media are characterized by high accessibility and scalability, or the ability to
reach a wide audience (Brogan, 2010; Zarella, 2010).
From market research by Breslauer and Smith (2009) and e-Marketer (2010) emerges that
firms are using social media to build direct relationships with consumers, increase traffic to the
website, identify new businesses opportunities, create community, disseminate content, collect

1
NetWork Lab is a research laboratory consisting of researchers and PhD students o the Polytechnic
University of Marche. Born as a place of observation, analysis and sharing of knowledge on issued related to the
world of the Web, with a focus on marketing for businesses.

69
feedback from customers and generally, to support its brand. At the same time it is important to
know what are considered the main barries or resistance to adoption. Michaelidou, Siamagka and
Christodoulides (2011) show that the main barries to enterprise are the perception of a lack of
social relevance for the sector, the uncertainly about the when and how social media can
support a brand the cultural resistance of staff within the organization.
Social media are a variety of instruments with similar characteristics, functionalities and
different purposes. Gundecha and Liu (2012) present a classification of these tools:
Online social networking: Online social networks are Web-based services that allow
individuals and communities to connect with real-world friends and acquaintances online. Users
interact with each other through status updates, comments, media sharing, messages, etc. (e.g.,
Facebook, Myspace, LinkedIn).
Blogging: A blog is a journal-like website for users, aka bloggers, to contribute textual
and multimedia content, arranged in reverse chronological order. Blogs are generally maintained
by an individual or by a community (e.g., Hungton Post, Businessinsider, Engadget).
Microblogging: Microblogs can be considered same a blogs but with limited content
(e.g., Twitter, Tumblr, Plurk).
Media sharing: Media sharing is an umbrella term that refers to the sharing of variety of
media on the Web including video, audio, and photo (e.g., YouTube, Flickr, UstreamTV).
A significant contribution to the research has been provided by Kirtis and Karahan (2011)
who consider the introduction of social media one of the main drivers for a marketing strategy at
affordable cost in a contest of global crisis. They claim that, due to their ability to reduce
marketing costs, social media tools are being used by marketers during the crisis. In some cases,
companies may use free marketing data from the social universe (Hardey, 2009).
Research methods
The survey was conducted over a period of three years with two session of
measurements: the first between November 2011 and February 2012, and the second between
November 2012 and January 2013. The sample examined was obtained through a desk analysis
on the top 100 manufacturing enterprises of Marche Region, using as source the ranking of the
Foundation Aristide Merloni. We proceeded with a mapping of their presence on the major
social media. This mapping was carried out in two steps: the first step was observed on the
official website of the companies to verify the presence of any direct links to the social profile
pages. In the second step the research of the social pages has been carried out using both Google
searc and the search engine internal to social media. Social media examined are the most
representative of their type and are Facebook, Twitter, YouTube, Linkedin and corporate blog.
Results presentation
The first fact that emerges from the research is that the proportion of firms that have at
least one social media. In 2012, 59% of the top 100 manufactoring enterprises of Marche Region
has at least one social media. The percentage rises to 65% in 2013 representing an increase of
social inclination of 10.2%. Picture 1 shows the graphs of the use of social media by enterprises
in the year 2012 and 2013.

Picture 1 Social media spread in the top 100 manufacturing firms in the Marche Region,
years 2012 and 2013

70
 In both years Linkedin is the most adopted social media, however, the record is shared
with Facebook which went from 27% to 40%. The growth trends of YouTube and blogs are very
significant, even Twitter, albeit to a lesser extent, increased.

Picture 2 Social media spread for sales level year 2012

Picture 3 Social media spread for sales level year 2013

From the above pictures we can see that in both cases the companies with a greater
turnover are more likely the adoption of social media. However, it is only right to point out that,
while in 2012 the gap between the top 10 and bottom 10 companies by turnover of the sample is
very marked, in 2013 the gap, even if present, tends to be reduced significantly. Even in 2013, it
was found that Twitter is being more adopted by companies with a lower turnover.
Recommendations and conclusions
In this paper, we discussed the relationship between business and social media and their
gradual entry into the marketing strategies of different organizations even more traditional. The
overview provided by this research may be useful to have new keys to understanding this
phenomenon and to study its evolution in a business environment such as the Marche region,
often used as an example of the industrial fabric of excellence. The adoption of social media for
communication purposes outside is a clear signal that a new paradigm of marketing is being
consolidated at any level of business. The study of this phenomenon, observed under different
points of view, has given rise to a number of considerations that are outlined below:
The social media approach by manufacturing companies in the Marche Region in
steadly increasing even if there are several marketing opportunities to be seized.
Companies are expanding their portfolio of social tools used with the objective of
managing multiple platforms simultaneously.
The level of turnover is no longer a determining factors in the decision to adopt or not
social media.
Companies have difficulty in adopting a unified strategic vision of using multiple social
tools.

71
 References
Berthon, Pitt, Plangger e Shapiro (2012). Marketing meets Web 2.0, social media, and creative consumers:
Implications for international marketing strategy. Business Horizons 55, 261 271
Blackshaw e Nazzaro (2004). Consumer-Generated Media (CGM) 101: Word-of-mouth in the age of the
Web-fortified consumer. http://www.nielsenbuzzmetrics.com/whitepapers
Breslauer e Smith (2009). Social media trends around the world! The global web index (GWI). ESOMAR
Research, Online Research, Chicago.
Brogan (2010). Social media: 101 Tactics and tips to develop your business online. Hoboken, NJ: John
Whiley & Sons.
Camagni, Capello (2005). ICT and territorial competitiveness in the era of internet The Annals of
Regional Science, 39, 421 438.
Castells, Hall (1994). Technopoles of the world: The making of the 21st century industrial complexes.
Routledge, London.
Daj, Chirca (2009), The adoption of digital marketing in financial services under crisis. Bulletin Of The
Transilvania University Brasov, 2(51), 161 166.
e-Marketer (2010). Leveraging best practices for social media, November 23 2010. Disponibile su
http://www.emarketer.com/Article.aspx?R=1008057
Gillespie, Williams (1988). Telecommunications and the reconstruction of regional comparative
advantage Enviroment and Planning A 20, 1311 1321.
Gundecha, Liu (2012). Mining Social Media: A Brief Introduction Informs 2012.
Hanna, Rohm, Crittenden (2011). Were all connected: The power of social media eco system Business
Horizons 54, 264 273.
Harris, Rae (2009). Social networks: the future of marketing for small business, Journal of Business
Strategy, Vol. 30 Iss: 5 pp. 24 31.
Kaplan, Haenlein (2010). Users of the world, unite! The challenge and opportunities of social media
Business Horizons 53(1), 59 68.
Kietzman, hermkens, McCarty e Silvestre (2011). Social media? Get serious! Understanding the
functional building blocks of social media. Business Horizons, 54 (3), 241-251.
Kirtis, Karahan (2011) To Be or Not to Be in Social Media Arena as the Most Cost-Efficient Marketing
Strategy after the Global Recession Procedia Social and Behavioral Sciences 24, 260 268.
Laroche, Habibi, Richard (2012). To be or not to be in social media: How brand loyalty is affected by
social media? International Journal of Information Management.
Michaelidou, Siamagka, Christodoulides (2011). Usage, barries and measurement of social media
marketing: An exploratory investigation of small and medium B2B brands Industrial Marketing Management, 40,
1153 1159.
Mangold e Faulds (2009). Social media: The new hybrid element of the promotion mix. Business
Horizons 52, 357-365.
Packer (2011). Social Media Marketing: The Art of Conversational Sales WSI Social Media Strategist
2011.
Shih (2009). The Facebook era: Tapping online social network sto build better products, reach new
audiences, and sell more stuff. Boston, MA: Prentice Hall.
Smith, Fisher e Yongjian (2012). How Does Brand-related User-generated Content Differ across
YouTube, Facebook, and Twitter? Journal of Interactive Marketing, 26, 102 113.
Steinman e Hawkins (2010), When marketing through social media, legal risks can go viral Intellectual
Property & Technology Law Journal, 22(8), 1 9.
Zarella (2010). The social media marketing book. North Sebastopol, CA. OReilly Media.
http://www.coneinc.com/
http://www.fondazione-merloni.it/
http://www.google.com/think/research-studies/wildfire-social-marketing-strategies-report.html
http://www.iab.it/news/social-media-marketing-strumento-strategico-di-business.-italiani-sempre-pi-
presenti-sui-social-network-per-comunicare-seguire-attualit-e-programmi-tv-radio.html
http://www.networklab.univpm.it/sp/it/home.3sp
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http://www.zeroventiquattro.it/web-2-0/le-pmi-scoprono-i-social-network/

72
 Sustainable Development
of Agricultural Sector Institutions
(by the Example of Bashkortostan Republic RF)
Rishat Migunow
Russian State Agrarian University --
Moscow Agricultural Academy named after K. A. Timiryazev
(Moscow, Russia)
Email: migunovrishat@mail.ru

Scientific adviser: Rafkat Gaisin, Doctor of Economics, Professor

Abstract
This paper is devoted to forming sustainable rural development in Russia. The aim of this
research is to give ground of the necessity of sustainable development of the agricultural sector
in Bashkortostan Republic, one of the Russian regions. The objects of our scientific research are
making an analysis of meso-and micro- environment of the region; to explain the choice of the
developing strategy; caring out conducting the targeting process and determination of the
implementation mechanisms of the strategy.
Keywords: sustainable development, agricultural sector, agriculture reforming,
agribusiness, business development program.

Social and economic development of Russia in the twentieth century was generally
oriented to the rapid growth rates of economics. And this process resulted in great environmental
damage. The natural resources and the ability of the natural self-restoring and supporting the
development of society were not unlimited. The increased power of the economics has become
destructive to the biosphere and a human being. To remove the existing contradictions is only
possible in a stable socio-economic development without destroying its natural basis, which is
possible in the framework of sustainable development.
The Republic of Bashkortostan, which was one of the most backward regions of the Soviet
Union 50 years ago, has developed to one of the foremost regions of the Russian Federation (if we
say in socio-economic terms). The Republic of Bashkortostan is the leader in grain and animal
husbandry, dairy farming and honey production, in the number of cattle stock and horses. The
Republic of Bashkortostan takes the fifth place in the volume of agricultural output out of 83
Russian regions. Davlekanovskiy region is one of the largest regions of Bashkortostan in
production and processing of agricultural products. It is among the top ten municipal regions of
Bashkortostan and this region made the greatest contribution to the national loaf.
In the first part of our study it is necessary to determine the place of Davlekanovskiy
region in the system of sustainable agricultural development. For these reasons we trade to
identify typological features of territorial variations of rural areas. The were also identified
relative importance coefficients of indicators. In assigning the relative importance of the criteria
it should be taken into account that at a certain level, their sum must be equal to one.
So, for example, in determining the relative importance of the factors at the level of
sustainable development their sum is 0.4 (Economic sector) + 0.3 (Social unit) + 0.15
(Environmental unit) + 0.15 (Integrated unit). We calculated the dynamic rate and it shows
trends and pace of territorial development, and the sustainability factor, which characterizes the
change in development (it can be both positive and negative). The evaluation of meso-
environment of agriculture in Davlekanovskiy region can say that its resistance is average, while

73
maintaining the level of development in comparison with other municipalities of the
Bashkortostan Republic.
The development of Davlekanovskiy region has always tightly linked with the
development of its agricultural sector. At present, enterprises of agro-industrial complex have no
yet clear understanding of developing. Progressive Agriculture in the Bashkortostan area was
based in the early XXth century by residential Germans. A little later, there were built the first
creameries and mills. Modern agribusiness in the region includes four spheres.
The first sphere is represented with the motor-tractor station and maintain shops of
agricultural machinery. The second area is formed mainly due to 17 major agricultural
organizations. In 2012, they collected 370 thousand tons of grain, 85 tons of sugar beets, 50
thousand tons of sunflowers from 86 thousand hectares. 7,000 tons of milk and 800 tonnes of
meat were also sold. The third sphere consists of two bakeries (processing capacity is 18
thousand tons per month) and dairy factory (processing capacity is 2 tons of milk per month.)
The fourth sphere is represented by companies that provide consulting services to agricultural
organizations.
After the analysis of micro-and macro environment of Davlekanovskiy region we have
got the following standard matrix of SWOT-analysis. After identifying the environmental factors
and developmental factors we concluded that the further development of Davlekanovskiy
agriculture can not be carried out on the old principles of management and planning. To ensure
sustainable agricultural development of this region there should be formed reasonable
development strategies, goals and objectives of agriculture in this region in the current
conditions of economical activity.
All strategic and tactical factors supplied in this analysis gives the conclusion that the
strategy of agricultural development of Davlekanovskiy region is sustainable in all spheres and
organic development of rural areas. Targeting process is made by the method of "tree of
objectives" Tree construction is "top-down", that is, from the general to the particular strategic
objective, by their decomposition and reduction.
The main goal of agricultural development of Davlekanovskiy region is defined as a
sustainable development. This should be carried out on the basis of three areas: 1st aim: to
increase agricultural productivity; 2nd aim: to develop the processing enterprises; 3rd aim: to
promote alternative employment in rural areas. It is impossible to implement all aims of
development at once. It can not be made both in terms of funding and necessity of primary
agriculture reforming as the basis of sustainable development of regional agriculture. The most
important step is to give further analysis of filling-up "objectives tree" with programmatic
content. Each of the strategic goals can be further decomposed into a set of complementary goals
of the lower level, and each of them can be achieved by identifying and implementing strategic
program.
According to the "Strategic Climate change forecasts of the Russian Federation up to
2015", the territory of the Republic of Bashkortostan assigned to unpredictable hazardous agro-
meteorological phenomena. The most important negative feature of the expected climate change
is almost universal growth of aridity. Thus, the grain harvest losses can be as high as 11%. The
main event of anti-arid climate should be the building of melioration (actually irrigation) systems
throughout the republic. Calculation of the efficiency melioration measures in Davlekanovskiy
region was held at one of the crop rotations Co Ltd "Agrarian Tradition." During the design
analysis there were identified three scenarios: dry, conditionally supplied with moisture and
provided with moisture. For each of the options we have selected their values of costs and
benefits. High rates of NPV and IRR indicate the profitability of the project.
The republican target program "Development of dairy cattle and milk production
increase" in 2012-2016ss may attract additional governmental grants and loan resources for the
reconstruction of dairy farms. Calculation of the efficiency of the activities in Davlekanovskiy
region was held at one of the dairy farms Co Ltd "agrarian tradition" There were built three

74
versions of the project (depending on the expected operating conditions): pessimistic, average
and optimistic. Provided that the pessimistic variant shows little deterioration in the project, it
can be said that the whole project is riskless and profitable for the enterprise. The
implementation of measures for improving agricultural productivity in the region also gives
opportunities to processors of integration of production and to enter new markets.
To determine the prospects of the third agribusiness of Davlekanovskiy region ("export
potential" - milk products and grain processing) is necessary to define territorial directions of
product supplies of these enterprises. To do this, we analyzed the consumption of agricultural
products in neighboring municipalities (on the bases of consumption rates from the research
institute and Russian Academy of Medical Sciences). Furthermore, we have carried out an
ecological assessment of food produced in neighboring areas and standards of living.
Based on the analysis it can be concluded that: 1. Supply of dairy products and grain
processing of Davlekanovskiy region based on their ecological compatibility and compared to
products from other regions is possible to: Belebeevsky, Ufa and Sterlitamak regions. At
saturation of the markets the supply is possible to: Karmaskaly, Tuimazinsky and Sharansky
regions. 2. Development in the direction of lower competition is for milk processing:
Karmaskaly Sharansky areas and for grain processing: Sterlitamakskij, Tuimazinsky and
Sharansky areas. 3. Development for the consumer is toward Belebeevsky and Tuimazinsky
areas Sterlitamak agglomeration (Sterlitamak, Salavat, Ishimbai) and the city-millionaire - Ufa.
Development of alternative rural employment is an important and promising direction of
improving the sustainability of rural areas and economy in Russia: unapproved small business
development program, not fully formed social policy for individual entrepreneurs and just
starting support of alternative activities. To offer a particular action is difficult. Thus, to ensure
the sustainability of agricultural development of Davlekanovskiy region must be given priority to
agricultural productivity, based on the reclamation and renovation of dairy farms. Such
agricultural should lead to further consolidation and merger of production of the second and the
third areas of agribusiness. Processed food should be sent to new markets, or should meet the
increasing "domestic demand" with the help of the tourism development (agro-tourism and
health tourism).
Implementation of measures and targets permit to achieve sustainable agricultural
development in Davlekanovskiy region.

Personnel Resource Formation

and Its Quality Management in Commercial Bank
Olga Myasnikova
Peoples Friendship University of Russia
(Moscow, Russia)
E-mail: o_myasnikova@mail.ru

The scientific adviser: Alekseenko V.B., PhD in Technical Sciences, Professor

Abstract
Modern quality management methods for banks personnel, based on motivational
stimulation are analyzed. Competence level diagnostic is represented for mass professions
employees of front offices. The differentiated approach to work stimulation of various staff
categories is approved. Its made by the hierarchical principle with application of complex
compensation synchronization for manpower turnover decreasing and commercial banks
activity efficiency increasing. It is found that such approach allows not only ensuring the labor
quality and speeding up the internal environment adaptation, but also it accelerates the

75
development, interest in the results, as well as simplifies the management process and reduces
turnover in the front offices system.
Key words: quality management of the personnel, professional competence level,
motivational policy, salary complex synchronization, commercial bank, regional branches
management.

Introduction
Traditionally the principle of good and fast customer service is pursued in banking
services system. It provides a considerable gain of the customer base, but doesn't promote
formation of high level of their commitment and loyalty. In turn, such approach prevents a
reliable, long-term relations and mutually beneficial cooperation.
In Russia, in most commercial banks traditional principles of interpersonal
communication, as well as employees and customers mentality lie in the foundation of
customer service culture, while in the west companies the consumers service culture is created
and is provided purposefully and specialized practical courses are organized for the staff. This
aspect is one of the major strategic tools in foreign organizations while service culture and
customer experience grows rather slowly in the domestic companies [1].
Now, when commercial banks offer their clients approximately the same set of banking
products at the similar prices, quality service and staff professional serving level becomes such
competitive advantage which helps to dominate in the financial market.
In works of domestic and foreign experts [2, 3] direct dependence of customer service
quality from the personnel productivity is defined. According to the results of their research, the
personnel having more high efficiency, provides services quality improvement on the average for
30%.
Thus the Russian experts in personnel management field note that implementation of
labor productivity increasing programs require planned and systematic preparation [4, 5].
Particular importance is attached for the existing shortcomings analysis in human resources
management. Diagnostics of problem situations is carried out by various methods among them
the most widespread is staff turnover testing, workers skill level assessment and also social and
psychological researches [6]. Detailed study of human resource documentation helps not only to
define manpower fluidity dynamic in various time periods and to monitor dismissed staff
cyclicality in different regions, but also promotes problem professions identification and social
and psychological characteristics creation for new-employed and layoffs. This approach allows
identifying the reasons of the work force dissatisfaction, planning priority areas for their
elimination [7].
Considering a human factor influence on the consumer satisfaction level, managers of
commercial banks move emphases from the speed of customer service on providing personnel
work qualitative characteristics. Besides, carrying out of incidental trainings, educational
programs, ratings of experts of mass professions is situational, instead having system character.
Therefore now the commercial banks strategic policy is orientating to quality management
system development and increased focus to customer service and certain standards introduction
is actual.
Goal setting
The system of actions for personnel quality management development using motivational
incentives in the individual commercial bank was the aim of this research. This experience can
be spread to similar financial structures and organizations activity.
The tasks of personnel fluidity decreasing, customer service quality improvement and
activity efficiency increase of commercial bank front offices are set and solved in the scientific
work for the main goal achievement. An essentially new algorithm of actions directed on banks
human resource quality improvement is proposed and piloted in JSC MCB
Moskomprivatbank. Employees professional competences diagnosis of various levels, allows

76
not only revealing their compliance to commercial bank intellectual and behavioral standards,
but also predicting action in various arising situations. For labor costs optimization it is
expedient to introduce such a differentiated approach to the calculation of both constant and
variable salary part, which will help to keep a direct dependence of these expenses on a
performance level of each employee.
Research Methods. During JSC MCB Moskomprivatbank work analyzing, it was
established that there was a continuous annual personnel updating. High level of fluidity (about
40-50%) in 2010-2012 is observed generally among mass professions employees contacting with
clients directly. It leads to the problems connected with the staff compensation expenses increase
in the bank branches. Besides, continuous process of vacancies search and replacement not only
prevents ensuring continuity in business processes management, but also is reflected in work
deterioration with the banking services consumers, partial clients loss as well as a whole offices
budgetary profit reduction. This analysis was made by empirical methods.
So, in connection with the countrys unstable economic situation in the 2009-2010 there
was a considerable personnel reduction (more than 60%) excluding the skill and competence
level of employees being terminated. This cost optimization method by manpower number
reducing led to a gradual decline in client activity and their outflow due to dissatisfaction with
the quality service. Therefore, in 2011 the needs for quantitative structure were newly defined,
the banks front offices staff was completed and more than 1000 employees in all regional
divisions were recruited for direct consumers service of banking services.
Due to the growing popularity practice of introducing the annual professional competence
level assessment of each employee in the global banking system, the system of degree definition
both intellectual, and emotional preparation as for the purpose of rational selection
implementation appropriate candidates on positions according to the functions and
responsibilities, developed on the basis of the European credit and transfer system (ECTS) was
offered by us and was approved in JSC MCB Moskomprivatbank [6].
In 2011, the entrance testing of all working and newly employed front-officers was held.
During experts testing on this principle, various background parameters were considered and
general index of theoretical knowledge and practical experience was estimated. Competence
level of banks mass professions experts was performed by the ability factor AQ and emotional
factor EQ. AQ index obtained during the professional suitability audit evaluates theoretical
book learning skills possession in the professional field, the practical experience presence in
applying them in the real life, the perception of complex tasks as opportunities for personal and
professional development, the desire to get feedback (criticism), the willingness to innovative
projects participation for knowledge and skills expanding as well as enthusiasm for new
challenges, spacious mind, and more. EQ, in turn, helps to determine the degree of
communication skills development and the level of interpersonal relationships and emotional
control.
In accordance to the grading system for the professional competence evaluating of front-
office employees the total index was used. It consists of the AQ factor points, which share makes
60% and the EQ factor points, with 40% of specific weight. At that an employees hiring was
limited for persons whose points amount of each factor was less than 60%.
Total competence index of the banks front office employees according to the score
testing was calculated by the formula 1:
Ipc = AQ 0,6 + EQ 0,4, , (1)
where Ipc professional competence index;
AQ Ability factor;
EQ Emotional factor.
Results
The analysis of the staff professional competencies level results in
JSC MCB Moskomprivatbank showed that more than 68% working and newly hired

77
employees have professional competence index in the range between 60 and 70%, and only
approximately 10% of mass occupations workers reach 80% or more. There were about 20%
employees with a high professional competence index over 80 points and 21% in the range from
70 to 80 points among retired in 2011. The quantitative staff ratio of various levels of
employees competence in the branches is graphically represented in Fig. 1 and Fig. 2.

Fig. 1. The distribution of newly hired and working employees on the professional competence
levels in the bank branches in 2011

Fig. 2. The distribution of retired employees on the professional competence levels in the bank
branches in 2011
According to fig. 1, there is unequal distribution of various competence levels employees
almost in each banks regional division. Most newly hired and working employees have not high

78
professional grade and they have Ipc less than 70%. It is connected with competition on a labor
market among bank employees while JSC MCB Moskomprivatbank isn't always ready to offer
attractive conditions and advantages in both material and non-material stimulation. Such workers
need continuous trainings, office rotations for practical skills acquisition in different areas of
relational customer care. But first experience hours of consumers banking service for such
workers often happen only after acceptance for employment. A large number of bank officers
without sufficient preparation can lead as to expenses increase connected with their professional
qualities and knowledge development as to customer service quality deterioration.
The diagram in fig. 2 illustrates that within a year in banks personnel structure in
connection with employees dismissal, considerable changes are observed. It should be noted
that there is a negative trend and about 40% retired professionals have competence level more
than 70% and long experience in the bank sphere. Moreover, intensive labor movement is the
result of numerous staff enrollment of workers with low professionalism indicators who dont
stay for a long period on a workplace. The average length of such employees varies from one to
three months.
Turnover personnel rates or rotating door indexes of banks regional divisions were
determined for identification the reasons of manpower instability (Fig. 3).

Fig. 3. Personnel turnover rates in JSC MCB Moskomprivatbank branches in 2011

In accordance to fig. 3 medium door turnover index through Russian divisions is about
42%. The most unvarying staff structure is in Belgorod, Ivanovo and Vladimir branches. At the
same time Sochi regional division struggles with the greatest difficulties in qualified staff
retention as the annual turnover rate exceeds 50%.
A high percentage of ex-employees with low professional competence rate indicates an
insufficient selection and recruiting quality of HR officers and front-office managers in 2011. So,
it turned out that labor productivity of more than 60% employees didn't meet their expectations,
or bank requirements for overall performance in efficient sales and marketing efforts. High
turnover of newly hired employees, whose competence lack can lead to service quality decrease
and existing customers loss, creates a threat of further development slowdown in a commercial
bank. During the analysis of the questionnaires completed by dismissal workers in different
regions of Russia, variety of reasons generally connected with banks imperfect motivational
policy were defined. It was found that approximately 90% of respondents expressed a

79
dissatisfaction with existing material stimulation system because the constant level and variable
(bonus) part of the salary was divided in equal proportions 50: 50.
More than 40% of respondents whose Ipc was more than 70% indicated that one of the
main reasons for workplace change was a difficulty with horizontal and vertical growth inside
JSC MCB Moskomprivatbank. Staff movement hardships are connected with the front office
structure which is rather non-uniform and is represented by vast number of position having
various functions. Frequently the ability of the banks staff internal movements is limited by the
influence of interpersonal manager and subordinator relationships while career ladder advance
and the decision on transition to vacant positions is a prerogative of line head in most cases.
Thus the principle of rational search of the most worthy candidates in regional candidate pools
isn't regulated by intra bank administrative documents and therefore is practiced by the office
heads exclusively at their will. Primarily, this is due to the fact that the rotation inside the
regional division entails changes in the wage level even in similar positions. In this case, the
employees face with the bureaucratic approval obstacles even if the change of the base salary is
insignificant and less than 10%.
Under this disadvantages in front offices motivational policy of JSC MCB
Moskomprivatbank effort estimate criteria is not always used correctly and that situation
results in staff turnover, overall performance decrease and banks profitability reduction.
The requirement for stable personnel structure preservation and professionals retention
inside the bank resulted in needs for compensation system modification for employees of some
categories.
In JSC MB Moskomprivatbank, as well as in other commercial banks, there are, so-
called, mass professions which are similar on official functions and duties. The salary level of
each employee is set subjectively in most cases. In the practice, used motivational programs have
complicated pay grades of compensation. It leads to a situation when workers replaceability is
broken, their movements on similar positions with receiving monetary compensation inside one
office is at a loss and all that negatively influences on staff turnover (Table 1).

Table 1. Staff turnover rates among mass occupations employees in 2011

Mass professions name Fact 2011 ., % Fluidity change Medium Plan on 2012 ., % Planned relevant
in comparison relevant professional
General fluidity

General fluidity
replacement of

replacement of
a weak link

a weak link

with 2010, % professional experience,

Including

Including

experience, month
month

1 Cashiers 34,8 11,7 -56,2 17 25 10 20

2 Client-managers 44,5 16,5 - 6 20 10 12
3 Heads of the offices 20,9 12,3 -41,8 24 28 5 28
4 Specialists personal Managers 31,9 9,9 +9,6 20 25 10 24
(VIP Business)
5 Retail service sales-managers 53,6 15,8 +5,6 12 20 10 14
(Retail Business)
6 Credit cards specialists 56,9 16,9 -20,6 19 30 10 23
7 Specialists working with the 28,7 4,2 -12,4 25 20 10 28
trade companies
8 Financial managers (Small and 40,8 10,1 +15,7 14 30 10 17
Medium Business)

According to the data in the table 1, the intense fluidity is observed among Credit cards
specialists, and also Retail service sales-manager (more than 40%). Considering that "client
manager" profession appeared in the front offices staff list of in 2011, their fluidity level is the
highest, but it can't be considered indicative. Normal staff turnover for mass professions
employees is conditionally taken for 10%. It promotes positive manpower updating because of
partial retirement, leaving the workplace for various reasons, including banks initiation, and "a
weak link" replacement. Such changes among bank-workers content are continuously, they are

80
desirable and don't offer special measures from management. However, too active personnel
updating process as in JSC MB Moskomprivatbank gives significant expenses raise,
customer service deterioration and profitability decrease in regional divisions.
For regulation of the personnel efficiency activity indicators we proposed to introduce
motivational synchronization of employees income level for mass professions [7]. Horizontal
synchronization provides universal synchronous indicator application for making equal
compensation to categories with similar functional duties and standards. So, for example,
synchronized compensation realization by the horizontal principle assumes salary levels
comparability in front office, in this case the specialist in the credit cards, earlier having low
salary, without any claims can replace the Retail service sales-manager who was highly paid
before.
By this synchronization principle the average income of the cashier (the most mass
profession in the bank) is taken as a unit and coefficients to income size for other professions are
established. Thus the income of employees occupied the similar professions identifies
approximately and becomes the same for some of them. But surely in the context of such
synchronization it is expedient not to allow more than 15% growth of the cumulative income of
one profession in comparison with the others.
Besides, even small income difference of employees who occupy the same profession
leads to incorrect efficiency assessment of their work and sometimes becomes a real problem.
The basic motivational principle is that more productive employee has to be more highly paid.
Such dependence must be held not only in variable (bonus) income part which has direct
connection with quantitative standards implementation, but also in a constant salary part which
also should be varied depending on work efficiency indicators.
Employees computer questionnaire was organized for getting feedback. During this
interview we carried out that the most desired for majority is motivational incentive. Most people
suggested that salarys constant component increasing would encourage work quality
improvement.
It can be explained by many factors appointed by the linear head which influence on the
fixed salary level during the recruiting process, but, unfortunately, efficiency does not always
dominate. Regional coefficient corrector is always taken into account and depends on the
division. Therefore vertical synchronization can be effective measure in the rational
compensation system development. It involves establishing of uniform pay category within base
position and monthly extra charges for efficiency. It makes sense to count such extra charge
indicators centrally at Head office and they should be based on staff top list. This
synchronization type assumes that the workers constant income component (a salary + an extra
charge) has to change in such a way that in the best group the profit should be doubled at least,
in good group increased by half, in middle-level group stays at former pay level, and in the
worst group remains on minimum stage. The rational payment policy due to the constant salary
component is able not only to optimize compensation costs, but also to serve as additional
motivational incentives and to increase professional level of many employees.
Recommendations and conclusions
As a result, the algorithm of policy-mix is offered being sensible on the fact that
nowadays it is very important raise personnel productivity in commercial banks (Fig. 4). Thanks
to this scheme it is possible as to kindle people interest in their skill level development, as well
as to increase banks profitability at the expense of consumers quality service improvement and
compensation costs optimization.

81
 Step 1. Check-level of mass professions employees competence, %

Step 2. Staff turnover definition in various competence categories, %

Step 3. Rational calculation of adequate labor costs at different levels of plan productivity implementation

Step 4. Calculation and carrying out vertical synchronization in payments of mass professions employees

Step 5. Calculation and carrying out horizontal synchronization in payments of mass professions employees

Step 6. Comparative analysis of the economic effects before and after the introduction of measures

Fig. 4. Algorithm for determining and efficiency calculating in personnel quality management

With reference to the foregoing algorithm (Fig. 4) the author has calculated and has
analyzed economic efficiency indicators before and after innovations introduction in banks
branches. The comparative analysis of algorithm application results allowed proving its
economic usefulness in commercial banks business.
Proposed motivational policy based on the principles of a complex salary synchronization
will allow providing not only selection of competent employees and speed up internal
environment adaptation inside the bank, but also it will accelerate the development, interest in
the results, as well as will simplify the management process and will reduce turnover in the front
offices system. On JSC MCB Moscomprivatbank example it is shown that the changes in the
motivational assessment principles concerning mass professions workers can provide cost
savings thanks to payment minimization of inefficient employees, which, in turn, will lead to the
profitability increasing of particular front offices.

References
1. Sait Enciklopedia marketinga [Electronniy resurs]: www.marketing.spb.ru
2. Shoul D. Pervoklassniy servis kak konkurentnoe preimushestvo. M.: Alpina Biznes Buks, 2006. s. 208.
3. Esina L.B. Vnutrenniy marketing kak instrument povisheniya proizvoditelnosti truda personala i kachestva uslug gostepriimstva i
turizma : dissertatsia ... kandidata ekonomicheskih nauk : 08.00.05 / Esina Ludmila Borisovna; [Mesto zashiti: Penz. gos. un-t] - Penza, 2008
Kolichestvo stranits: 210 s. il. Penza, 2008 210 s.
4. Zhuravleva E.A. Rol obrazovaniya v formirovanii trudovogo potentsiala // Vestnik assotsiatsii VUZov turizma I servisa. 2013.
3 (26). s. 8-11.
5. Korporativnaya kultura I effektivnost upravleniya predpriyatiya [Text]: Monografiya / T. B. Ivanova, E. A. Zhuravleva.
M.:RUDN, 2011. 152 s.: il.
6. Myasnikova O.Y., Lisitskaya S. M. Rol pokazatelei otsenki urovnya kompetentsii spetsialistov pri ispolzovanii trudovogo
resursa v kommercheskom banke // Mareriali IV mezhdunarodnoi nauchnoi konferentsii Innovatsii v sozdanii I upravlenii biznessom. 2013.
Moskva, 4-6 sentyabrya. s. 109-113.
7. Myasnikova O.Y. Povishenie effektivnosti personala kommercheskih bankov s ispolzovaniem metodov motivatsionnogo
menedzhmenta // Ekonomika i predprinimatelstvo, 4. 2013 . s. 203-207.

82
 Analysis of Innovation Diffusion Perspectives
in Ukraine
Valeriya Nikolaeva
State Higher Educational Institution National Mining University
(Dnipropetrovsk, Ukraine)
E-mail: valeriya.intel@gmail.com

Abstract
Effective usage of considerable potential of Ukrainian mining enterprises is being hampered
because innovative ideas are not implemented. As Ukrainian international policy is EU oriented,
the countrys industries should be developed on the basis of innovative potential priority. Based on
the established tendencies of innovative activity in the EU countries, the position of Ukraine in this
process was determined.A scientific idea of using assessment of impact of natural factors on the
mine performance as an instrument of implementing innovation diffusion into mining industry is
realized in the paper.Some results of economic assessment of natural factors impact are given,
which for the first time enabled quantitative determination of the degree of complexity of mining
and geological conditions at every single enterprise. This enables determination of perspectives of
attracting innovations in different mining and geological conditions.
Key words: innovation diffusion, innovation activity, industrial enterprises.

Introduction
A countrys social and economic growth can be achieved largely due to active
implementation of innovative ideas into scientific potential of enterprises.
Numerous studies determined [1-3] the following characteristics of scientific and
technical development of Ukraine on the present stage:
technical and technological lagging behind the developed countries of the world;
high level of resource-intensiveness (energy, material, fund and labor consumption) of
the production process;
low level of labor productivity;
scientific work largely aimed at military needs;
certain isolation in terms of international scientific and technological exchange;
non-rational use of countrys scientific and technical potential etc.
As for the main branches of Ukrainian industry is concerned, scientific and technical
policy should facilitate the transformation of technological and production structures, usage of
advanced technologies for structural reconstruction of the economy in general and solving social
and economic problems of the society.
Fuel and energy complex, metallurgical complex, machine building, chemical and
building industries and forestry should be referred to as the main branches of industry in
Ukraine. They account for 87% of basic production assets, 78% of employment and almost 78%
of gross industrial product (about 58% of gross national product). This determines the
importance of these industries for the countrys economic development.
Mining complex accounting for over 36% takes special place among the main industries.
Research Decision
Taking into account the fact that Ukrainian international policy is aimed at EU
membership, we can say that further development of the country should be intensified according to
clear objectives and priorities of development based on the innovative potential of the country [4].
In this respect analysis of the tendencies of innovative activity in the countries of the
European Union in comparison with the current situation in Ukraine is of the most immediate

83
interest for optimization the ways of raising innovative potential of the main branches of
Ukrainian economy as a whole and mining industry in particular.
Research Results
European Union is an integrated association of 27 countries with different level of
economic development. This difference allows for common tendencies of development in the
sphere of innovations to be combined with individual way of development in every single
country.
General trend of encouraging innovations is manifested in creating a common European
research and innovation environment, expansion of vertical and horizontal coordination of
innovative policies, strengthening local innovation policy and constant increase in financing
scientific research and development [5]. All abovementioned shows that the EU countries have a
coordinated strategy in the sphere of innovative development. This has enabled the appearance
of common internal market of innovations and, consequently, quicker diffusion of innovations
between countries and companies in the EU.
Within the common strategy every country has its own innovative systems which differ in
their ways, methods and means of governmental control of innovative activity, including
intensity and ways of supporting interaction between scientific, industrial and educational
components [5].
Well developed countries (Germany, the Netherlands, Belgium, Austria and others) have
taken up the most rapidly growing and therefore the most perspective segments of innovative
technologies and world market products. This allows them to maintain a high level of innovation
activity.
Innovation activity is a complex characteristic of business which includes its intensity,
timeliness and ability to raise enough potential of necessary quality and quantity. It is defined as
percentage of enterprises engaged in innovation activity to the total number of enterprises in the
country.
The level of innovation activity of enterprises in the EU was calculated on the basis of
statistical data for 2012 (Fig. 1) [5, 6]. The same strategy was used for Ukraine [7].
0,75
0,6
0,6
0,49
0,45 0,46 0,46 0,45 0,46 0,46
0,45 0,41
0,36 0,36 0,36
0,32 0,32
0,27
0,3 0,21 0,24 0,2 0,2
0,13 0,128
0,15
0,05
0

Fig. 1 Level of innovation activity in the countries of the European Union and in Ukraine

As the result of the research all countries were divided into 5 groups according to the
level of their innovation activity:
Group 1 is represented by Germany which level of innovation activity (60%) is the
highest in the EU
Group 2 consists of the Netherlands, Belgium, Austria, Portugal, Finland, Sweden and
Luxembourg. The level of innovation activity in these countries is in the range of 40-50%
Group 3 unites countries which level of innovation activity is between 30 and 40%:
Norway, the Czech Republic, Spain, Italy, Estonia, France and Lithuania.
Latvia, Hungary, Slovakia and Romania belong to Group 4. Innovation activity in these
countries is 20-30%

84
 Countries with the lowest level of innovation activity (less than 20%) were included
into Group 5 (Greece 13%, Ukraine 12.8% and Bulgaria 5%).
As we can see, Ukraine is one of the least developed countries as for the level of
innovation activity.
A detailed analysis of innovation activity of Ukrainian enterprises showed that the total
number of industrial enterprises that put innovations into practice during 2007-2012 went up by
23.2 (from 958 to 1180). In the beginning of 2012 the level of innovation activity of Ukrainian
industrial enterprises is still low at 12.8% or 1411 enterprises. In 2004-2009 there was a decrease
of implementation of new technological processes by 32.5% and a slight rise in the number of
commercial productions of innovative goods (by 8.5%). The dynamics of implementing
innovations at Ukrainian industrial enterprises in 2007-2012 is shown in the Fig.2
The analysis of the innovations spheres Ukrainian business entities developed showed
that the majority of enterprises spent money on purchasing automobiles, facilities, equipment,
other fixed assets and covered other capital costs associated with implementation of innovations
(7% of total industrial enterprises or 767 units). Only 0.8% of all industrial enterprises or 90
companies spent money on buying new technologies and 2.9% of enterprises or 324 business
entities carried out research and development [8].
The structural analysis of implementing innovations in manufacturing sector showed that
such industries as chemical, petrochemical and machine building were the most active in this
process. The greatest number of innovative products was produced by machine building industry
(average of 43.4%), food industry (19.5%), chemical and petrochemical industries (12.4%) and
the smallest in mining and extraction industries (1,5%) [7].
3978
4000
3500 3152

3000 2685
2408 2526 2446
2500
1808 1893
2000 1727 1647
1419
1500 1145

1000
500
0
2007 2008 2009 2010 2011 2012

process innovations product innovations

Fig.2 Dynamics of implementing innovations at Ukrainian industrial enterprises in 2007-2012,

units [9]

According to the report made by the experts of The Directorate-General for Economic
and Financial Affairs of European Commission, the level of innovative activity of a country
depends on its industrial structure [5, 6].
These data were used to develop the diagrams of industrial structure of each of the
countries under consideration. The diagrams show the industrial structures of the countries which
were earlier grouped according to the level of innovation activity (as shown in Fig. 2). The
branches of industry were classified according to the EU standards [5, 6]:
mining industry which includes mineral resource industry, oil and gas industries;
manufacturing industry: machine building, metal-processing industry, construction,
chemical, light and food industries;
transport and communication services;
computer and other business services;
other industries.

85
 To conduct comparative research, a similar classification of Ukrainian industrial structure
was made based on the data given by the State Committee of Statistics for 2012.
The results of the research showed that in Germany manufacturing industry accounts for
42.57%, while mining for only 0.43%, computer and other business services are rather developed
(15.95%) as well as transport and communications (17.72%). In Austria manufacturing industry
accounts for 48.86%, while mining for only 0.8%. In Spain mining industry has a share of 1.09%,
manufacturing accounts for 60.93%, transport and communications 10.36%, computer and other
business services 3.79%. In Ukraine the share of mining industry in the industrial structure of the
country is 11.39%, manufacturing accounts for 64.37%, transport and communications for
5.58%, computer and other business services for only 1.08%. As we can see, the share of mining
industry in Ukraine is 10-15 times exceeds this level in other countries, which directly affects the
lower level of innovation activity in the country.
Prior to studying the innovation activity of Ukrainian mining industry, the structure of
innovation diffusion methods should be analyzed. Business enterprises can act in two ways:
generate innovations or adopt them from outside.
The analysis of levels of generation and adoption of innovations in the countries of the
EU and Ukraine was carried out (Fig. 3). The innovation generation coefficient was calculated
by determining the share of enterprises that generate innovations independently in the total
number of businesses performing the innovation activity in the country.
Germany
Austria
0,43% 0,80%
23,33%
28,79%
42,57%
48,96%

15,95%
7,20%

17,72% 14,25%

Spain
Greece
1,09%
10,31% 0,81%
23,83%
3,09%
4,16%

3,79%
60,93%
10,36%
81,63%

Slovakia
Ukraine
0,87%
17,58% 11,39%
29,58%
1,08%
5,58%
54,92%

7,71%
64,37%
6,92%

Extractives industry Manufacture industry Transport and communications Computer and other business services Other
Fig. 3 Industrial structure of the economy of European countries

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 The adoption coefficient was determined by the number of enterprises that adopt
innovations in the total number of businesses performing the innovation activity in the country. It
was taken into consideration that innovation adoption occurs if it was designed either in
cooperation with other enterprises or by other enterprises independently.
The countries of the EU have a common tendency to generate innovations; their index
of generation largely prevails over that of adoption (Fig.4).
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

Product innovation rate Product adoption rate

Fig. 4 Level of generating and adopting innovations in the countries of the EU

In Germany (Group 1) business enterprises aim mainly at generating ideas than at

adopting (level of generation is 37.2%, level of adoption is 22.8%)
Maximum value of the level of innovation generation in the countries of Group 2 ranges
from 17.1 to 37.8%.
In Group 3 France has the highest level of generating innovations 27.4% (adoption
level is 13.6%). In the countries of the fourth group generation level is 11-12.5%, adoption level
is 5-6%.
The countries of the fifth group have the lowest level of generating and adopting
innovations (2.8% and 2.2% correspondingly).
In Ukraine percentage of enterprises generating innovations is 7.15%, percentage of
enterprises that adopt innovations is 3.85% [7].
Nowadays branches of the mining industry develop under complex and sometimes
contradictory influence of socio-economic and natural factors. The product of the mining
industries is mineral raw materials which are non-renewable unlike other natural resources. This
natural characteristic is functionally important. It predetermines the necessity for each mining
enterprise to expand in space extending the period of its operation. The level of economic and
technological progress determines the degree and boundaries of enterprise expansion in the area.
Non-renewable nature of mineral raw materials dictates the necessity for each enterprise
to deepen their development. But at certain depths it becomes technically difficult and makes no
economic sense to continue working by both open-cut and underground method of extraction. So
the enterprise has to be closed or restructured in the way that enables its future operation.
Real situation is much more complicated than the principal scheme offered above. Not
only natural but also social, economic and environmental factors affect the state of affairs.
Ukrainian mining industry is characterized by a number of features some of which are
favorable for further development, some have a hampering effect.
Among favorable features the following can be named: large deposits of coal of different
ranks suitable for generating electric and thermal energy for technological needs; close proximity
of coal, iron ore and other mineral deposits; proximity of large fuel- and energy intensive
manufacturing plants and consumers of metal (metallurgical, chemical, machine-building and
other enterprises); developed infrastructure; large industrial potential of working mining
enterprises.

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 Unfavorable features are the following: difficult and extremely difficult mining and
geological conditions; low coal content; the necessity to extract black coal and anthracite only by
underground method; poor condition of mines that work for a long time without reconstruction
which resulted in deterioration of their engineering characteristics; large-scale wearing of main
assets, especially equipment; low level of mechanization in cargo-handling, transportation and
auxiliary processes.
The general characteristic indicating the condition of mining complex is its structure in
respect of the operation period since construction and after last reconstruction. The increase of
this period increases the complexity of extraction and, consequently, the cost of reconstruction.
Nowadays there exist 167 working mines and 4 quarries in Ukraine. 102 of them have
production capacity of 600.000 t\y, 32 from 600 to 1million t\y, 33 more than 1 million t\y.
Operation period of 50% of all mines reaches 50 years, out of which 74 mines (33%) are being
exploited more than 50 years, 38 (17%) for more than 70 years. In the last 30 years only 34
mines were opened (about 15% of the general number of working mines). For the 50 years
period only 30.1% of all working mines were reconstructed; over the last 25 years only 10%.
This means that 90% of mines that were reconstructed work for more than 30 years after the
reconstruction. We can say that during such long period the reconstruction has become obsolete
and the mines need a new one.
At the present stage of the mining industry development mining enterprises whose work
was considered economically non-feasible are being closed down. At the same time in the course
of economic reforms in Ukraine some decisions are being taken about transformations in the
mining industry. Hence, starting from 2011, only the mines that prove their feasibility will
continue the operation [8-10]. On the basis of the analysis of all factors influencing the work of
mining industry, the reconstruction of 40 mines of 18 mining corporations is considered to be a
top priority. Among them there are 9 mines which produce the most valuable and scarce ranks of
coal (coking, fat, non-baking coals). They are situated mainly in Donetsk-Makeevskyi and
Central regions, which are characterized by extremely difficult mining and geological conditions
due to the great depth of working.
In this respect an important decision should be made on whether generation or adoption is
the best way to attract innovations. It is largely determined by the specific character of a coal
mine as a complex manufacturing system. This issue should be addressed in detail.
Ukrainian coal extraction enterprises are concentrated in three regions: Donetsk, Lviv-
Volynian and Dnepr coal basins. In the first two basins black coal and anthracites are extracted,
in the Dnepr coal basin brown coal. There are 21 geological industrial areas in the Donetsk
coal basin but mines operate in only 14 of them. The regions are characterized by similar mining
and geological conditions and coals of definite ranks. All mines are divided in certain
connections to the boundaries of geological industrial areas, so some mines are characterized by
great diversity of mining and geological conditions. The thickness of seams range from 0.8m to
1.8m; the seams dip at different angles low, shallow, sloping and steep; temperature conditions
range from difficult to very difficult; the level of danger is very high; gas presence is excessive.
Mining and geological conditions of the Lviv-Volynian basin are difficult due to the small
and unstable thickness of seams, instability of rock, high methane content of coals and rocks and
necessity of specific shaft sinking methods. The thickness of industrial seams ranges from 1.5m to
6m. Their area and thickness are unstable; the depth varies from 10 to 150m, which enables open-
cast mining of a considerable amount of deposits. Mining and geological conditions of operation
are rather complex due to high level of watering of loose water-bearing sands.
Technological coal deposits are mainly concentrated in 5 regions: Donetsk-Makeevskyi
(44% of all industrial deposits), Krasnoarmeyskyi (16.3%), Central (10%), Almazno-Maryevskyi
(8.3%) and Lugansk-Krasnodonskyi (9.8%). The most valuable and scarce ranks of coal
(coking, fat, non-baking coals) are mainly situated in Donetsk-Makeevskyi and Central regions,

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which are characterized by extremely difficult mining and geological conditions due to the great
depth of working.
Energy coals are extracted in all regions, while anthracites can be found in two of them,
Chistyakovo-Snezhnyanskyi (Donetsk region) and Krasnoluchsko-Antracitovskyi (Lugansk
region).
A number of natural factors affecting the choice of methods of mining and means of
mechanization and their specific character doesnt allow to directly adopt innovations generated
for certain deposits in Ukraine and other countries.
The degree of natural factors impact on the production process of some mines allows for
a forecast to be made about the expediency of generating innovations for their development. If
the enterprises are unable to considerably improve their economic results due to difficulty of
mining and geological conditions, it is rational not to waste investment funds on generating or
adapting innovations.
On the basis of the developed method of assessing the degree of influence, quantitative
estimates for determining the directions of Ukrainian mine restructuring were obtained.
The expenses associated with the most serious natural factors affecting the increase of
production costs were calculated for each mining enterprise. The ratio of these expenses to a ton
of production gives us the portion of the production cost that depends on natural factors. The
calculations showed that this figure is different for every mining enterprise. On the mines of the
Donetsk region, for example, due to great depth and excessive gas presence, the portion of the
production costs is high for such processes as whole mine ventilation, mine workings ventilation
and excavated rock temperature. On the contrary, due to the relatively big thickness of the seams
and low watering, the portion of the cost of these processes is low. The situation on the
Pavlogradugol mines is almost opposite: the part of the cost connected with the seam thickness
and watering is high, the part of the cost depending on the depth of extraction, gas presence and
geodynamic aspects is low. So, to get the unbiased assessment of the natural factors impact, that
is to obtain the part of the production costs that depends on the natural factors, we have to
compare a single mine production costs with industry average figure.
This method enables us to draw a fairly grounded conclusion that on the Pavlogradugol
mines, for example, average 16% of overall production costs are connected with the impact of
natural factors, so, to raise the efficiency of operation, innovations can be implemented for 84%
of the costs. Whereas on the Dobropolieugol mines as much as 30% of the production costs are
connected with natural conditions, on the Donetskugol mines this figure is even bigger 45%.
If the part of the production costs connected with unfavorable natural conditions of
mining is very high, the economic expediency of additional investment in innovation projects is
questionable. On the other hand, such approach is not universal and requires additional expert
evaluation of innovation projects offered for generation or adoption. This is explained by the fact
that there are some technical solutions aimed at decreasing the impact of natural factors on the
production processes which can improve the operating efficiency of the mining enterprise. As a
result, it can join the list of mines recommended for restructuring.
Conclusions
The analysis of innovation activity as a comprehensive characteristic of industrial
enterprises of the EU and Ukraine showed that Ukraine lags behind in this process.
The mining sector that takes a significant position in the structure of Ukrainian industries
(36%) is especially appropriate for the diffusion of innovations.
A specific feature of Ukrainian mining industry in comparison with other countries is its
complex mining and geological conditions. The expert evaluation of these conditions should
influence the decisions of economic expediency of innovations diffusion.
The suggested method of assessing the degree of natural factors impact on the
production process allowed giving quantitative estimates of the complexity of mining and

89
geological conditions. The estimates could be used in analyzing the perspectives of attracting
innovations.

References
1. The official site of the President of Ukraine Access: www.president.gov.ua.
2. The program of economic reforms in 2010-2014. The Committee on Economic Reforms under the
President of Ukraine. Access: www.president.gov.ua/docs/Programa_reform_FINAL_1.pdf
3. Geiec, V. Liberal democratic foundations: a course on modernization of Ukraine, 2010, Issue 3. pp. 4-
20.
4. Chuchno, A. Scientific and technological development as the object of Evolutionary Economics Theory
// Economy of Ukraine, 2011, Issue 1. pp. 12-22.
5. Surinach J., Autant-Bernard C., Manca F., Massard N., Moreno S. The Diffusion/Adoption of Innovation
In The Internal Market (Economic Papers), European Communities, 2009. 340 p.
6. http://epp.eurostat.ec.europa.eu/portal/page/portal/statistics/themes.
7. State Statistics Committee of Ukraine Access: http://www.ukrstat.gov.ua.
8. The Ministry of Energetic and Coal Industry of Ukraine mpe.kmu.gov.ua.
9. Sobkevich, O., Sukhorukov, A., Savenko, V., after. Zhalilo Y. Development of the industrial potential of
Ukraine during the post-crisis recovery, Kiev, Nishi, 2013. - 48 p.
10. Statistic Information of Ministry of Coal Industry Access: www.mvp.gov.ua.

Investment Attractiveness Ranking of Countries

Portnov Nikolay Andreevich
KPMG
(8 Voevodina str., Yekaterinburg, Russia)
E-mail: portnov.nikolay@gmail.com

Scientific adviser: Kapustina Larisa Mikhailovna, Doctor of Economics, Professor

Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: lakapustina@bk.ru

Abstract
The article describes developed by the author methodology of countries investment
attractiveness assessment. Sources of information are also provided in the article. The offered
method is applied to a set of 146 countries. On the results of application these 146 countries are
ranked and grouped by their investment attractiveness.
Keywords: Investment, investment attractiveness, foreign investments, transnational
corporation, globalization, investment risks, legal environment, comparable analysis, ranking.
The last decades are characterized by large scale of international capital transmission and
creation of sophisticated production chains. Foreign direct investments are conducted by
transnational companies (TNCs) in order to get closer to resources or to consumers. TNCs
choose countries with big market size, high return on investments and low risks. The most part
of states conduct liberal to foreign investments policy. These states benefit from being chosen by
TNCs as an investment destination in different ways: new work places, transfer of technologies
and management models, and coverage of investment resources deficit. That is why countries
compete with each other to benefit from globalization through creation of favorable investment
climate. A potential investor always conducts study of business environment of a country as well
as industry-specific regulations. Final choice of investment destination is always a result of deep
and complex analysis of very specific aspects related to the specific investment project. And still
there are basic features of a countrys business and social environment that favor all investment
projects. These features are analyzed and systemized in this article.

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 The article describes methodology of evaluation of countries investment attractiveness
and groups 146 main countries-economic players into 4 groups on their attractiveness for foreign
investors.
This methodology does not include any industry-specific factors, but offers basic
overview of investment attractiveness of each country.
For complex assessment of social and business environment of a country for foreign
investors the methodology includes evaluation of 3 main parameters for each country:
Economic attractiveness of investing into the country
Easiness of starting and operating a business in a country from legal aspect
Risks that an investor may face in a country
Key factors of each parameter are presented in the table below. Sources of information
for assessing the factors are databases of the following international organizations: The World
Bank, World Economic Forum, and The Fund for Peace.

Table 1 Key factors of investment attractiveness

Parameter Indicator
Macroeconomic stability (me)
Labor market effectiveness (l)
1. Economic attractiveness of investing Infrastructure (inf)
into the country Institutions ( inst)
Internal market size ( im)
Technological development (tech)
Innovation ( innov)
2. Easiness of starting and operating a Starting a business
business in a country from legal aspect Dealing with construction permits
Getting electricity
Registering property
Getting credit
Protecting investors
Paying taxes
Trading across borders
Enforcing contracts
Resolving insolvency
Demographic pressure (dp)
Group grievance (gr)
3. Risks that an investor may face in a Criminalization of official bodies (cr)
country Human rights (hr)
Factorized elites (el)
Security apparatus (sec)
External intervintion (int)

The methodology is applied to 146 countries as this is a number of countries that are
presented in all sources of information for this methodology.
Considering difference in sources of information for the study author offers matrix
approach to defining of investment attractiveness. The coordinate plane is used for presentation
of the results in which OX value reflects integral rating on investment attractiveness block, OY
value reflects rating on legal attractiveness block. Bubble size for the respective country means
absence of risks for an investor.

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 OX value is calculated basing on World Economic Forum database by the following
formula (all indicators in the database are presented as score):

OY value is calculated basing on Doing business rating by the following formula:

Where r is rank of one of 146 countries basing on Doing Business ranking

Bubble size demonstrating inverse value to risk level is calculated basing on The Fund
for Peace database by the following formula (all indicators in the database are presented as
score):

The described methodology was approbated on BRICS countries. The results are
presented below

Figure 1 Application of methodology to BRICS countries

To rank all 146 countries on their economic attractiveness the following method is
applied:
All countries are ranked from 1 to 146 on each parameter of the methodology where 1 is
the most favorable for an investor rank
After ranking all countries get scores based on their rank on each parameter based on
the formula presented below:

Scores for each countries are summed

Basing on total score of each country the ranking is created (maximum score gets the
highest rank)
Basing on the performed ranking all countries are classified into four groups on their
investment climate. The classification is presented in the table below.

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 Table 2 Classification of countries on their investment attractiveness

The most attractive Finland, Sweden, Norway, Singapore, New Zealand, Denmark, United States,
countries Switzerland, Australia, United Kingdom, Germany, Canada, Netherlands, Ireland, Korea,
Rep., Iceland, Austria, Japan, Belgium, United Arab Emirates, France, Portugal,
Luxembourg, Lithuania, Estonia, Chile, Slovenia, Malaysia, Qatar, Mauritius, Latvia,
Spain, Poland, Hong Kong, Oman, Czech Republic
Above average Italy, Hungary, Slovak Republic, Taiwan, South Africa, Panama, Malta, Saudi Arabia,
attractive countries Bahrain, Bulgaria, Brunei Darussalam, Uruguay, Barbados, Macedonia, Cyprus,
Botswana, Kazakhstan, Thailand, Montenegro, Costa Rica, Peru, Greece, Croatia, Israel,
Mexico, Romania, Armenia, Kuwait, Brazil, Georgia, Seychelles, Turkey, Azerbaijan,
Namibia, Colombia, Ghana
Below average Morocco, China, Russian Federation, Rwanda, Mongolia, Indonesia, Argentina,
attractive countries Albania, Vietnam, Jamaica, Tunisia, Guatemala, Ukraine, El Salvador, Moldova, India,
Dominican Republic, Serbia, Zambia, Jordan, Guyana, Ecuador, Philippines, Paraguay,
Nicaragua, Sri Lanka, Gabon, Bosnia and Herzegovina, Cape Verde, Suriname,
Honduras, Lesotho, Kyrgyz Republic, Senegal, Bhutan, Tanzania
The least attractive Swaziland, Gambia, Bolivia, Cambodia, Mozambique, Kenya, Benin, Algeria, Lao PDR,
countries Madagascar, Nepal, Iran, Bangladesh, Lebanon, Nigeria, Egypt, Pakistan, Mali, Sierra
Leone, Uganda, Venezuela, Ethiopia, Liberia, Cameroon, Burkina Faso, Malawi, Libya,
Cte d'Ivoire, Angola, Timor-leste, Burundi, Yemen, Mauritania, Zimbabwe, Myanmar,
Guinea, Haiti, Chad

Analyzing the whole set it is possible to conclude that the most part of developed
countries are presented in The most attractive countries group. Russia is presented in Below
average attractive group.
Basing on the results of methodology application it is possible to conclude that the
methodology is suitable for defining comparable investment attractiveness and may be used as
an analytical tool in the sphere of investment attractiveness of a country.

References
1 The World Bank Doing business: methodology [Online]: Access mode http://www.doingbusiness.org/
2 The World Bank Doing Business 2013 Smarter Regulations for Small and Medium-Size Enterprises
[Text]: Washington, DC: The World Bank, - 2013.
3 Schwab K World Economic Forum The Global Competitiveness Report [Text]: Geneva : World
Economic Forum, - 2013
4 The Fund for Peace The Failed States Index [Online]: Access mode: http://ffp.statesindex.org/rankings.

Internet Marketing in Academic Research:

Case Study of Global Green University
Alina Pukhovskaya
Vitez University of Travnik, PhD student, Bosnia and Herzegovina (distance learning)

Mexico City

Abstract
Everyday internet gives us new possibilities and instruments, which can make a
difference in the way we do things. Today, internet is already used as one of the important
sources of information for an academic research. It made an instant breakthrough in organising
and communicating of global knowledge compared to traditional library system.
However, the internet is still not popular enough for a purpose of research promotion or
- in case of social research as a way of communication with the target audience. The aim of
this article is to learn to promote the academic research as any other product.

93
 Keywords: global green university, academic research, data collection, internet
marketing, social media, web page.
Introduction
The days when academics communicated just with each other have been passed. As state
Wimmer & Dominick (2011): Scientific research is public. New ideas and projects should be
presented to the broader audience and implemented in the real world instead of being kept just
on the pages of the scientific journals. It is already widely accepted that sharing of the research
through internet can finally help to reduce the gap between theory and practice. But the question
remains, what exactly could do a researcher, step by step? The answer is to develop a balanced
marketing mix.
Today, with the expansion of digital technology, the most popular way of marketing is
internet (online) marketing. It can be used to promote products, services, projects, organizations
or even personalities. Therefore it could be perfectly applied to a research activity, which is
analogical to a project.
Application of internet marketing techniques for a research will be regarded on the case
study of Global Green University (GGU) project. The major study objective of the stated project
addresses analysis of the differences and similarities in understanding of green issues among
scientists, professionals and people involved in the higher educational system worldwide. Today
green issues is one of the most discussed topics, which represents a growing challenge for
every economy. Nevertheless, it is a relatively new field of investigation, which still does not
offer sufficient amount of publications. Therefore, the lack of available data has motivated me to
use the modern information technologies as a main research technique for a data collection - both
for primary and secondary data.
Internet marketing overview
At the beginning it is important to understand, what would motivate a researcher to make
such an effort and to go public with the research project. First of all, it is a personal marketing,
which is important for a professional growth and acknowledgment in the field. It is also
important to build an online identity it could be checked by typing the full name in the Google
searching engine. Secondly, by publishing the research question online and successfully
promoting it to a large network would make it easier and faster to collect the primary and
secondary data. Communicating with like-minded people helps to get access to relevant
publications, articles and industry news. In this way it is easier to stay up-to-date, get new ideas
and gather secondary data for the current research. We will come back later to the practical
examples of primary data collection.
Internet marketing refers to online advertising efforts that use email and web. Online
marketing could be subcategorized into the following three areas: web marketing; email
marketing and social media marketing [Webopedia, Internet Marketing]. Each of these types of
marketing can be successfully used for an academic research.
Web marketing
Web marketing combines marketing activities on the internet site and search engine
optimization [Webopedia, Internet Marketing]. First step of the internet marketing campaign is
to create a good web page. Website provides an opportunity to create a space with high quality
content, which is defined exclusively by the site owner. It will be the milestone of the campaign
and landing point for any other online activity [Designer Daily, 2013].
In case of the research projects there is no need to invest into expensive web design. First,
choose a name for the website, then check its availability and once found it - purchase the
domain from one of the domain name registrar (e.g. GoDaddy). The yearly hosting fee of the
web page can be as low as 10$USD. Next step would be to create the web page itself. It can be
done through the same site, where the domain is purchased, or from a different one. Second
option gives some independence from the web host. The website builders offer free templates for
web design, which can be edited without any coding knowledge (e.g. WIX). Also it would be
helpful to include a free analytics program (e.g. Google Analytics). This service tracks the
website traffic, generating thorough statistics about the visitors. Analytics programs might seem

94
very complex at the first sight, but it should be used at least to get one type of data, i.e. where the
page visitors come from (blog, Facebook, twitter etc.) [Dubois, 2010].
Search engine optimization (SEO) is quite a complicated topic, but the basics are essential
for the entire concept of internet marketing. SEO is a number of tactics and strategies, which serve
to acquire a higher ranking in the search engine results pages (e.g. Google) [Webopedia, Search
Engine Optimization]. In case of a web page dedicated to a research project, we are more
concerned about the organic SEO - natural and unpaid search results. In order to increase visibility
of the site it has to be linked to many other sources, for example, leave a link to your website in all
blog entries and articles in internet [Designer Daily, 2013]. Moreover, it is important to have strong
content on the website and to use keywords [Webopedia, Organic SEO].
Social media marketing
Kaplan & Haenlein (2010) specify social media as a group of internet-based applications
that build on the ideological and technological foundations of Web 2.0, and that allow the
creation and exchange of User Generated Content. Social media is presented in many forms:
blogs and micro-blogs, social networking sites, content communities, collaborative projects and
so on [Kaplan & Haenlein, 2012].
In common practice, companies make a research about their target audience and its social
media choice [Skelton, 2012]. Social media requires constant maintenance and updates, hence it
is impossible to be presented in all online communities. In case of the Global Green University
the preference was given to Facebook and LinkedIn as social networks; Twitter as a micro-blog;
social media sharing sites such as Slideshare and YouTube; and blogging in general. Each one of
these channels has different features, which can open a whole range of possibilities.
In order to promote the academic research in social media it is essential to have an online
hub of detailed scientific content - either in form web page or blog [Skelton, 2012]. The blogging
has recently become quite popular among scientists, what shows a tendency of expansion of
social media for the research promotion [Kjellberg, 2010].
A blog is similar to a diary and consists of many relatively short posts, usually time-
stamped, and organised in reverse chronology so that a reader will always see the most recent
post first [Mortensen & Walker, 2002]. There is a number of different types of blogs, which can
be used depending on pursued purpose. Personal blog is an easy way of promotion of a specific
research or of the researcher himself. Such a blog can be created free of charge on WordPress,
Tumblr, Blogger etc. Blogging on the science blogs ScienceBlogs, ResearchBlogging etc. -
can help to connect with other researchers for the further ideas interchange [Kjellberg, 2010].
Nevertheless, in order to reach the general public, businesses and industries blogging should be
also done outside of the researchers communities. For example, if the research field is
environmental issues like in the case of Global Green University, then blogging could be done
on one of the leading green blogs, such as TreeHugger or Inhabitat [Scribol, 2007]. Some of
the professional blog sites partially loses its initial form of short posts and becomes a free
publication tool for articles. For example, a relatively new platform called TheConversation
permits free submission of the articles to everyone belonging to the professional research
community. This portal tries to create an alternative way of journalism.
Kjellberg (2010) has investigated the functions of the blogging from the point of view of
active blogging researchers. The functions were summarized into six points: disseminating
content, expressing opinions, keeping uptodate and remembering, writing, interacting and
creating relationships. The same investigation has presented three motivating reasons for
blogging: the blog helps the researcher share with others, it provides a room for creativity, and
it makes the researcher feel connected. [Kjellberg, 2010].
Another type of blogging is a micro-blogging, which is used for real-time news sharing.
Twitter is the largest micro-blogging site with over 100 million active users in a day. Tweeting
has some special signs, such as # and @. While tweeting use appropriately the hashtag sign
especially for the keywords of your research, for example #globalgreenuniversity. This trick
would help to increase visibility of the research project in social media and drive traffic to the
website [Skelton, 2012]. Twitter allows posting small sized text content, pictures, links and other

95
materials. It can be also easily integrated into the web page, blog, email body or social
networking profiles.
Facebook is the largest social networking site with 1,310,000,000 of monthly active users
[Statistic Brain, 2014]. There two types of accounts individual profiles and business pages. The
Facebook businesses pages were first launched in November 2007 [Pearlman, 2007] and counted
in November 2013 with 25 million small businesses worldwide [Sterling, 2013]. The Facebook
page is also a right option for a public profile dedicated to a research project. There are some
differences to a private profile: you have fans not friends (restricted access to private
information); extra advertising possibilities with Facebook Social Ads to attract new followers;
admin panel and interface to collect insights into visitors behaviour; 3rd parties applications to
enhance the social experience [Hof, 2007].
In order to create a Facebook fan page, first choose a unique name. Facebook gives an
option to get a short, easy to remember name I have chosen a
www.facebook.com/globalgreenuniversity. Second, add detailed information about the project
and people involved; add link to the website; install applications, which would integrate other
social media tools into the Facebook page (Twitter, YouTube etc.); include information about the
creation history and the mission; post some pictures. Third, once the Facebook page has some
interesting content invite your Facebook friends (if available) to like the page. Also send out
an email to existing network inviting them to visit the public page. Forth, create a paid campaign
(optional). Facebook ads are highly customized and allow reaching exactly the right people out
of over a billion users. Choose the location(s), age group, gender, language, workplace, and
education; specify interests. For example, if I target for my GGU project only the university
students located in Dubai and Hong Kong (my testing regions), who are over 20 years old, both
male and female the campaign potential is to reach 22,0001 Facebook users. Facebook ads
provide an extensive reporting, which can be accessed on any given day for any specific day in
the past. And last, but not least, after reaching the first 30 fans and check the page insights.
These are detailed statistics about all activities around the Facebook page: age and gender
distribution (e.g. the majority of GGU fans are between 25 and 34 years old; 55% of all fans are
women); country, city and language distribution (76% of GGU fans are located in Hong Kong,
UAE, Russia, Germany and Mexico, which are the exact 5 focus regions of the research); timing
when the fans are online, so it is a good time to update the content; the engagement of the fans
into specific posts, which they find more interesting than the other ones; and much more of the
useful data [Facebook, 2014].
There is no rule how often the content has to be updated on the social networking sites. It
should be neither too often nor seldom. It is helpful to analyse the insight statistics in order to
find out the balanced pace. Nevertheless, what matters is the interesting content that motivates
people to participate in discussion, share posts and expand the network.
Another popular social networking site is LinkedIn, which is the largest professional
network online with more than 200 million members in over 190 countries [Rabindranath, 2013].
It is one of the todays untold business rules to have a detailed, well presented LinkedIn profile.
The platform provides different opportunities for the research promotion. First, it is the best
place to do networking with the people who share common aims or professional specialisation.
The more confirmed contacts you have, the easier it gets to expand the network. My trick is
constantly to search for interesting and useful contacts of the second grade (contacts of existing
contact) and either use the introduction function or write them directly mentioning the name of
the common contact - it gives you the common ground. Second, LinkedIn provides a platform
for professional discussions in the theme specific groups [Skelton, 2012].
Content communities are created with the purpose to share the media content [Kaplan &
Haenlein, 2010]. I would like to review only two of such communities. First is YouTube, which
is the largest video sharing website and the third most visited webpage [Rabindranath, 2013]. It
can be extremely useful for an experimental research. Second is the SlideShare platform for

1
All examples about Global Green University Facebook page are based on the data checked on 27.02.2014

96
sharing of PowerPoint presentations. It is a great tool that makes available online the
presentations and which can be further shared through all social media accounts.
Online encyclopedia Wikipedia, so-called social knowledge platform, could be also an
excellent way to promote a new well-defined idea, term or definition [Lo, 2012]. Nevertheless, it
is quite difficult not to overstep the border between the contribution to community knowledge
and the advertisement of own activities. If Wikipedia decides that the first option takes place
then your idea or keyword will take the first places in the search results on the search engine
results pages. However, if your entry will be regarded as a system abuse, it will not only be
deleted and blocked for a substantial period of time, but also the publisher might get to a black
list (an IP address of the whole organisation can be banned) [Lewis, 2007].
Email marketing
In relation to targeted audience Email marketing can be conducted in two ways: sending
Emails to existing clients and/or by sending bulk emails to a list of new contacts, which is
normally purchased from a specialized company. In case of promotion of research activities, the
first option would be the most adequate one. It would guarantee a more personal and trustful
approach without putting your reputation in risk. As stated by Sterne & Priore (2000): A sharp
line divides real email marketing and spam.
Email is a comfortable way of communication with the existing contacts. By sending out
regular newsletters you can keep your network updated on the topics of common interest
(relevant links, articles, publications), your social media activities or new findings. The purpose
of the newsletters is to keep you contacts informed. [Sterne & Priore, 2000]
Moreover through Emails you can also conduct a survey. However the web surveys offer
more technical possibilities and visual variety. If you give preference to the web survey, just
invite the chosen contacts to participate in it by sending out an email.
While writing the email it is important to follow some standard rules, which apply for
email marketing in general [Sterne & Priore, 2000; MyEmma, 2014]:
Choose a clear Subject Line message
Use only simple fonts and formatting
Make sure that you send the email to a person, who is actually interested in it
Reply to emails coming in return
Do not send just one large picture (in many cases they will be filtered out by email
programs or displayed improperly) or any heavy files in general
Check all the links before sending out the email
Write a short email, which the recipient can read instantly and get some value
Send the newsletters or emails on the regular basis in order not to remind about yourself
If possible, try to personalize the emails
Constantly expand the contact base
Research methods
The first phase of the GGU research promotion was done through web and email
marketing. In collaboration with European Retail Academy I have created an online platform
dedicated to Global Green University project: www.european-retail-academy.org/GGU. The
popularity of the web page of European Retail Academy (ERA) positively affects the ranking of
the GGU website. Further on, with the growth of the project, it can be moved to a separate
domain. The content of the page is constantly expanded and updated. A part of research diary is
kept in a form of News" posted once a month. Such an approach helps to avoid
misinterpretation of research data and provides some interesting findings to the visitors.
The website is also used for Computer-Assisted Self Interviewing (CASI) by means of
published online questionnaires, which permit the collection of primary data for the research. For
the online survey is chosen a popular flat HTML form-based survey format, which is an
extremely convenient and fast research tool [MacElroy, 1999]. It is a single web page
questionnaire displaying consequently all types of questions. This list includes mainly open-
ended questions, but also requires answers to closed-ended questions, which allows collecting
parallel qualitative and quantitative data [Creswell, 2014]. An open-ended question is an
instrument, which helps the participants to express their views [Creswell, 2014] and share

97
opinions in own words. Closed-ended questions in their turn help to gather the socio-
demographic facts and details about present situation of the responders.
I have prepared a special email on behalf of European Retail Academy and sent it out to
all members of ERA network. Email contained a brief explanation of the GGU project and link
to the online survey. We have encouraged ERA network to fill in a short questionnaire and as an
incentive offered to receive research results in the future.
When the questionnaire is filled in online, it has to be submitted all at once. Afterwards,
in order to have a better control over the received data, the responders have to leave their email
contact so that the communication can be carried on.
Results presentation
I have prepared and published a Questionnaire for Universities on the GGU website in
the beginning of October 2013. Afterwards, with the help of European Retail Academy we have
sent out on 5th of October 2013 emails to all 218 ERA members. In the first month of application
of this strategy (by 5th of November), we managed to gather professors opinions on green
issues from 41 universities from 22 countries of the world. After 3 months (beginning of
January 2014) we have received replies in total from 47 universities from 24 countries. This
provided the total of 119 unique answers on the question What is a green issue? - which is the
central question of the Global Green University research.
Recommendations and Conclusions
This significant result shows the instant power of internet as a modern way of fast
knowledge interchange. Such an innovative approach helps to go beyond the geographical
limitations and time-zone constraints and assists in reaching out people who would not be
accessible in another way [Miles & Gilbert, 2005]. Moreover it permits to work with up to date
information and to have a constant dialogue with the research participants.
Modern researcher has a lot of new possibilities and tools in the current digital age.
Nevertheless, we still need to learn how to use them in the research environments in order to
obtain high-quality results.
Disclosure: I am neither related nor profit from any of the mentioned brands or
companies.

References
CRESWELL, J.W. (2014) Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. 4th
edition. London: Sage.
DESIGNER DAILY. (2013) The Different Areas of Internet Marketing. [Online] Available from:
http://www.designer-daily.com/the-different-areas-of-internet-marketing-38191 [Accessed: 27 February 2014]
DUBOIS, L. (2010) 11 Best Web Analytics Tools. Inc. [Online] Available from:
http://www.inc.com/guides/12/2010/11-best-web-analytics-tools.html [Accessed: 27 February 2014]
FACEBOOK. (2014) Facebook for business: How to use Facebook for business marketing. [Online]
Available from: https://www.facebook.com/business/overview [Accessed: 27 February 2014]
HOF, R. (2007) Facebook Declares New Era for Advertising. Business Week. [Online] 6th November 2007.
Available from: http://www.businessweek.com/the_thread/techbeat/archives/2007/11/facebook_declar.html
[Accessed: 27 February 2014]
KAPLAN, A.M. & HAENLEIN, M. (2010) Users of the world, unite! The challenges and opportunities of
social media. Business Horizons. [Online] 53 (1). p.59 68. Available from:
http://www.michaelhaenlein.eu/Publications/publications.htm [Accessed: 27 February 2014]
KAPLAN, A.M. & HAENLEIN, M. (2012) Social media: Back to the roots and back to the future. Journal
of Systems and Information Technology. [Online] 14 (2). p.101 04. Available from:
http://www.michaelhaenlein.eu/Publications/Kaplan,%20Andreas%20-
%20Back%20to%20the%20roots%20and%20back%20to%20the%20future.pdf [Accessed: 27 February 2014]
KJELLBERG, S. (2010) I am a blogging researcher: Motivations for blogging in a scholarly context. First
Monday. [Online] 15 ( 8 2). Available from: http://firstmonday.org/ojs/index.php/fm/article/view/2962/2580
[Accessed: 27 February 2014]
LEWIS, J. (2007) SES: Promote Your Site With Wikipedia. Web Pro News. [Online] 12th April 2007.
Available from: http://www.webpronews.com/ses-promote-your-site-with-wikipedia-2007-04 [Accessed: 27
February 2014]
LO, J. (2012) Measuring Social Media Impact with Web Analytics. Online Behavior. [Online] Available
from: http://online-behavior.com/analytics/social-media-impact [Accessed: 27 February 2014]
MACELROY, B. (1999) Comparing seven forms of online surveying. Quirks Marketing Research Media.
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 MILES, J. & GILBERT, P. (2005) A Handbook of Research Methods for Clinical and Health Psychology.
New York: Oxford University Press.
MORTENSEN, T. & WALKER, J. (2002) Blogging thoughts: personal publication as an online research
tool. Skikt Konferansen. pp. 249-279. Available from: http://imweb.uio.no/konferanser/skikt-
02/docs/Researching_ICTs_in_context-Ch11-Mortensen-Walker.pdf [Accessed: 27 February 2014]
MYEMMA. (2014) Email Marketing Solutions, 10 things to avoid in email newsletters. [Online] Available
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Wadsworth Cengage Learning.

The Technology Platform

as the Base of Effectiveness Increasing of the Industry
Sergey Patrikeev
Peoples Friendship University of Russia
(Moscow, Russia)
E-mail: p-a-t@inbox.ru

Scientific adviser: N. Sopilko, PhD in Economics, associate professor

Abstract
This article identifies the countries potential economic partners of Russia, reveals the
most adapted to the introduction of various innovative approaches branches of industry and the
possible variants and options of the cooperation and interaction within them. Also discussed, is
the joint Russian-Ukrainian development of the technology platform, as the form of innovation
and production activity, in the shipbuilding industry for the realization of scientific and
technological cooperation projects and for the building of new production chains to produce the
synergetic effect on the domestic and international markets.
Key words: inter-branch collaboration, branch priorities, partner countries, technology
platform and shipbuilding industry.

Introduction
The current state of the world economy is being formed by the influence of globalization
processes. These processes determine its new system qualities, including the domination of

99
supranational rules of economic development in regard to the national regularities, the existence
of the world integrations trends and the expansion of industrial relations between countries
(based on the innovation development). The development of integration processes stimulates the
transformation of the countries-competitors in the world market to countries-partners, with
which it is possible to accord the measures for the realization of economical and social programs,
as well as partially mitigate the internal national economic contradictions.
The intercompany production and the inter-branch cooperation at various levels
compensate for the lack of the certain resources at the expense of their reallocation, that provides
the continuity of the reproduction process and gives a lot of additional effects. The production
and technological integration contributes to increase the efficiency of the use of the potential
capacity of every enterprise and then of entire country. Thus, there is an opportunity to obtain a
synergetic effect of the whole innovation union, not available at the independent functioning of
the subjects [1].
Many authors such as Glazev.S, Klotsvog A., Krechmer B., Kuzyk L., Shkvari L.,
Navrotzkaya N., Zvarych I. and others ground the advisability of economic cooperation of
partner countries, the identifying of their branch priorities, and the integration of different
innovative approaches in the industrial branches. In this context the main objects of our research
are the determination of the most adapted (for the foregoing approach) industrial fields, the
determination of potential partners (as domestic, as foreign) and of their cooperation forms.
These will allow to achieve new development level of a needed field and to propose new
methods of its development.
Materials and methods
The methodological base of the research consists of the analytical scientific publications
and materials of the Russian and foreign scholars and experts, of the government statistics of
Russia and Ukraine and international organizations. To explore the production processes of the
interstate branch interaction, the structural and functional methods, methods of comparison, of
analysis and of synthesis were applied.
Research and results
The extensive development of Russian industry has exhausted the possibilities. The most
actual problems of a contemporary stage of potential Russian industrial formation is the
increasing competitiveness of national products and of investment effectiveness, the
augmentation of incoming flows of international capital and the reinforcement of domestic
enterprises both in domestic and in international markets.
There are a number of important conditions, which greatly determine the direction of the
economic development in Russia. For example, it has a huge resource potential; high openness
of the economy; dependence on external demand; weak focus on the domestic market;
considerable internal regional differentiation; poor infrastructure; and specific production
structure, which is oriented towards mining and the development of the raw materials industry,
contributing to a majority the countrys exports. The main problem is the poor export
diversification in the presence of a technically advanced mining industry. The main raw material
industries, such as metallurgy and chemical industry, are rendered obsolete both morally and
physically. The global economic crisis has led to the considerable reduction of prices and
demand for raw materials that in the conditions mono-export structure of the Russian economy
and the lack of domestic markets development only reinforces the negative external effects.
The essential danger for Russia arises with changes of the dominating tenors of
technology in the most developed countries of the world [2]. Mass production, cars, airplanes,
heavy engineering and industrial chemistry characterize the 4th tenor of technology. Computers,
low-tonnage chemistry, telecommunications, electronics, and Internet, in turn, characterize the
5th tenor of technology. The 6th is connected with biotechnologies; nanotechnologies; new
medicine foundation; robotics; high humanitarian technologies; future design and management;
technologies of social actors assembling or destruction; compact and ultraefficient power

100
engineering; utilization of hydrogen as ecologically clean energy product and environmental
management (high eco-technologies); perfect devices of energy creation; the development of
biofuel from the agriculture and forestry industry waste (also from the sea plants) and its
utilization; new harmless technologies of coal utilization; funds, water and labor saving.
The determined directions of the technological development will be directly affected by
the main fields of Russian economy, in connection with radical upgrade in the world mining,
power, metallurgical and chemical industries. In these conditions, with weak innovative activity
in the country, not only the above-mentioned industries may become uncompetitive, but also
those, that are currently the subjects of the national pride: the space and nuclear power industry,
aircraft building, electrical engineering, machine-tool construction and instrument-making
industry. In the absence of the 6th tenor of technology innovations, the Russian products of these
fields may not be required in comparison with fundamentally new technological innovation of
developed countries.
The transition to a new technological level is possible only by technical improvement of
traditional technologies. The share of technologies of the 5th tenor of technology in Russia is
about 10% only in the most developed fields: the military-industrial complex and aerospace
industry. Over 50% of technologies refers to the 4th tenor of technology, nearly one-third to the
3rd. Therefore, the science and technologies faces quite a difficult challenge moving beyond the
5tt tenor of technology to achieve the 6th in 10 years. In the last speech of the President of
Russian Federation with his annual address to the Federal Assembly (12/12/2013) there was a
necessity to address the creation of the modern system of the technical and ecological regulation,
in order to get rid of the outdated, ineffective and harmful technologies in the economy. In the
plan applied, it was noted that this development is possible and should be based on technology
platforms, aimed at the practical introduction of the projects at to getting the patents and licenses.
In Russia today the contribution of the added value, generated by intellectual property turnover,
is less than 1%. For example, in the U.S. its about 12%, in Germany 7-8% and in Finland 20%
[3]. In other words, the country needs to generate domestic demand for high-tech industry.
In conditions of the global business competition development, the production process of
large companies in different countries is natural. The enterprises are technologically
interconnected and are separate centers of international production. Their technological tie
makes financial and economic relations, which find expression in the various forms of
international partnership [4].
Experience of the EU countries shows that the development of close mutual trade,
production and investment flows leads to intensification of corporate integration [5]. Many
western European countries that joined the EU were gradually deepening and expanding their
innovation and investment opportunities, which ultimately led to infrastructure and
manufacturing changes expansion of relations of industrial and production cooperation. At the
same time, these countries received a significant increase of economic growth indicators in the
period of stay in the EU, according to Unctad, Cyprus has increased GDP from $ 4 to 24 billion,
the Czech Republic from 38 to 215, Italy from 109 to 2189, Estonia from 4 to 22, Slovakia from
13 to 96, Poland from 252 to 514, etc.) [6].
The analysis of preconditions and tightness of interactions between different countries
potential partners of Russia will provide an opportunity to identify the most perspective fields of
cooperation, joint development of which will generate the additional economic benefits.
For most countries, especially in the post-Soviet space, which until recently were closely
related by production cooperation interaction, the most important factor of their successful
integration into the system of microeconomic ties is their activity in the processes of the national
competitiveness augmentation through further cooperation development that requires a specific
approach in the choice of the partner country.
In order to determine the partner country, the complementarity index (of conformity) has
been calculated on the basis of trade data of Unctad by the following formula 1 [7]:

101
 , (1)
Where the share of commodity i in total export of country j;
the share of commodity i in total imports of country k.
The value is zero if country j exports nothing to, and imports nothing from, country k.
The index value is 100 shows the absolute coincidence of the export and import shares of the
countries j and k. The high value of the index indicates the most favourable opportunities for the
bilateral trade development of the two countries.
The advantage of this economics indicator is the ability to compare several countries at
once as to one that is not associated with large calculations. At the same time, it can compare
two countries to each other, or a whole country and economic association.
As well as Gatev and Ryabtsev indices of structural changes, the complementarity index
is appropriate to apply with individual industries for the most suitable industry determination to
further partnerships [6]. The most perspective branch for introduction of innovative technologies
and the production of goods with high added value, in our view, was chosen the mechanical
engineering. In that way, the complementary index has been calculated directly for the main
groups of mechanical engineering products of Russian and other potential partner countries. The
results are presented in Figure 1:
As shown in the diagram (Fig.1), out of almost all of the selected countries, Russia is less
of an important economic partner in the industry than they are for it. As a result, Ukraine is the
most significant for Russia (with an index value 49). In summary, it is among these countries
there is the firmest interrelation. It is due to the fact, that, until recently, these countries were
closely related by the cooperative production interaction.

Fig 1. The complementarity index of the mutual trade

between Russia and potential partner countries

Choosing a partner country, it is necessary to consider the level of technological and

innovative development to receive the synergetic effect. After comparing Russian and Ukraine
with several EU countries (for the comparison have been chosen Italy (as the oldest member of
the EU) and Czech Republic (as the youngest member of the EU), we can note their significant
lag, although Italy and Czech Republic currently are not the EU leaders (Fig.2). Moreover, the
indicators have a tendency to deteriorate (in comparison with the period 2012/2013) [8]:
As seen from the statistics, the general features of the Russian and Ukrainian economies
are low government procurement of advanced tech products (which is very important for
industry development), low university-industry collaboration (which does not allow to pass on
effective intensive development), lack availability of scientists and engineers, bad firm-level
technology absorption. The positive aspects are the high capacity for innovation, high quality of
scientific research institutions, that makes perspective the innovative development in case of the
lagging indicators increasing.

102
 Fig 2. The comparison rating of the technological level of Russia and Ukraine
with several EU countries*
*The countrys position among the 148 economies covered by the GCI 20132014

In order to identify the main trends in the Russian and Ukrainian mutual trade
development of the industry, its dynamics over the last 17 years was considered, based on the
commodity nomenclature of foreign economic activity on the territory of CIS (Fig.3) [9]:

Fig 3. The development dynamics of the mutual trade between Russia and Ukraine.

103
 According to these graphs (Fig.3), it is obvious that in general there were not the strong
fluctuations of the complementary index and structure changes in mutual imports and exports in
the industry between Russia and Ukraine. This fact reflects the stability and high mutual
necessity activities. Higher values in the middle of the 90s concern to the collapse of the Soviet
Union and, as consequence, to stronger dependence of two different countries.
To determine a concrete branch, by the method of Gatev and Ryabtsev indices
calculation, we have examined the structure changes of different groups of industrial products
[6]. This method has made it possible to choose the most suitable industry for innovation
integration that will provide the fastest payback of mutual investments. As the most promising
groups of industrial goods aircraft industry and shipbuilding were allocated.
At present, in shipbuilding there are various offers of the necessity of production
development cooperation from both countries. Moreover, the Memorandum on cooperation
activity intensions in the shipbuilding field between the Ministry of Industry and Trade of the
Russian Federation and the Ministry of Industrial Policy of Ukraine recently was signed. Russia
is interested in the Northern Fleet reviving, of its development (to transport the liquefied gas).
For Ukraine the very important direction is the development of the southern maritime complex.
In 2014, Russia has already invested $ 4 million in Ukrainian shipbuilding, as in the USSR,
about 70% of the fleet was being renovated and modernized by Ukrainian enterprises [10]. These
facts confirm the choice and prospects of the considering branch to proposed innovative
introductions.
The creation of technology platform is the most effective form of innovation introduction
and, as shown by practical experience, it allows faster arrival to the required result. Combining
scientific potential, productive capacity and capital, Russia and Ukraine will develop together the
lagging field. At present, there is one active technology platform in Russia United
Shipbuilding Corporation. It includes a variety of enterprises and planning and design
departments of the West, North, South and Far East regions. This technology platform realizes
80% of all shipbuilding projects in Russia, ranking it only 80th place in the world. These figures
show the need for cooperation in order to more effective development of this platform.
Moreover, to improve the efficiency and intensity of its production, it is necessary to involve
different research institutes and universities for getting the new technologies and qualified
personnel. Also, in regions it is possible to use their own training centers. For example, in Saint
Petersburg to technology platform activities can be brought Admiral Makarov State University
of Maritime and Inland Shipping and State Marine Technical University of St. Petersburg with
the participation of joint stock corporation Shipbuilding & Ship repair Technology Center.
These measures will allow for the introduction of high-tech and resource-saving technologies
and to create R&D institutions of this platform. In Moscow such educational institutions are
Moscow State Academy of Water Transport and Moscow Power Engineering Institute.
Further, it is efficient to analyze Ukrainian shipbuilding enterprises. This analysis is
based on the data from the sites of enterprises in 2012. The results are shown in Figure 4.
As shown in the diagram (Fig. 4), there are three successful enterprises that can
contribute to cooperation development with the Russian technology platform United
Shipbuilding Corporation. Other enterprises can also participate in the expansion of production
relations, using the technologies of domestic research institutes for efficiency increasing. It is
worth noting that The Kherson Shipyard is a part of the holding company Smart Maritime
Group, furthermore it is possible to connect the State concern Ukroboronprom (the financial
and technology support).

104
 Fig 4. Leaders of the Ukrainian shipbuilding in the production volume in 2012.

Conceptually, the Russian-Ukrainian technology platform can be represented as an

organizational chart (Figure 5):

Fig. 5.The organization chart of the Russian-Ukrainian shipbuilding technology platform

This chart (Fig.5) illustrates the basic organisation concept of the proposed variant of
technology platform and reflects the benefits of this innovation introduction. Another advantage
of this activity organization is mobility and openness to change components of the platform that
allows for quick adaptation to rapidly changing conditions of a modern economy.
Conclusions
The analysis of the world practice experience and statistics of the main macroeconomic
indicators of the European countries show the possibility of the development of the perspective
common production cooperation of Russia and Ukraine. The effectiveness indicators of their
cooperation were calculated by conventional methods. Received high values of the
complementary index and the intra-sector trade weight index indicate the presence of close

105
cooperation of their intra-industry trade relations. Also they show ability of considering countries
to cooperation and to innovation introduction in the priority industrial fields.
The high values of structural changes index indicate possible development of joint
production potential. Also it allows the most perspective field for the introduction of innovative
technologies and for high value added production. This field is mechanical engineering (namely
Russian-Ukrainian shipbuilding). Moreover the necessity of development of measures on
shipbuilding recovery is caused by low world ranking of the biggest Russian shipbuilding
company The United Shipbuilding Corporation (the 80th place) and by need of technical
support of Ukrainian shipbuilding development.
One of concrete innovative forms of this problem solving is technology platforms
introduction. It will allow to unit scientific and technical capital with the investments of the
stakeholders.
The proposed comprehensive approach based on the rate evaluation and confirming the
necessity of partnership will allow a possibility for technology platform creation in the
shipbuilding. This approach will support the creation of new processor chains for getting the
synergy effect. Finally it will be a great incentive for metallurgy development.

References
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N.Yu. Sopilko, N.A. Navrotskaya // Aktualnyie problemyi ekonomiki i prava. 2013. 3 (27). S. 145-152.
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kontekste integratsii / N.A. Navrotskaya, N.Yu. Sopilko // Vestnik RUDN, seriya Ekonomika. 2013. 1. S. 21-30.
3. http://www.rosbalt.ru/business/2013/12/12/1210478.html
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globalnoy konkurentsii // Ekonomika i predprinimatelstvo. 2013. 6 (35)., S. 34-39.
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The Mobility of Manpower for Innovative Business

Samohvalova Anna Aleksandrovna
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: Samohvalovaann@gmail.com

Scientific adviser: Kapustina Larisa Mikhailovna, Doctor of Economics, Professor

E-mail: lakapustina@bk.ru

Absctract
In this article it is spoken about the importance of the mobility of manpower in the
innovative business. In this regard, the concepts of the manpower, the mobility of manpower
have been studied, the method of assessment of the mobility of personnel has been shown with an
example of an innovative enterprise.
Keywords: the manpower, the mobility of manpower, the rotation, the enrichment of
labour, the innovation business.

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 Modern science is closely associated with innovation, because the notion of innovation
primarily characterizes the novelty of the product (or services) and its applicability, and it can
not be achieved without scientific research and development.
In science more than in any other business success depends on individual abilities of
scientific workers and their training. Every innovation affects the internal environment of the
organization and requires fast adaptation of employees to the changes. Most often, employees
perceived changes as processes, improving or deteriorating their position, so the introduction of
innovations is rather painful for the personnel. In this regard, in most organizations it is required
that the staff is ready for rapid adaptation, rotation of personnel, training, i.e. mobile staff.
This article deals with the essence of the concept of mobility of the personnel, suggests
areas of increasing the mobility of employees in the innovation business.
The Deputy Minister of Science and Technology of China Li Syueyun says: "Innovative
enterprise is an enterprise which enjoys its own right to intellectual property and has its well-
known brand, a strong competitiveness in the international market and implements long-term
development based on innovation. The hallmark of innovative enterprises is that innovation
becomes the basis of their functioning. Businesses need to come up with new ideas in all areas of
their business, including internal and external resources, workers and employees, technology,
strategy, production culture, operation, market, etc [5].
The manpower is the able-bodied part of the population, which has physical, intellectual
ability to work, capable of producing material goods or provide services [1, pp. 12].
In the literature one can find a great number of definitions of mobility of the personnel.
Mobility of the personnel is a broad concept, under which involve the movement of
personnel in the territorial aspect and in the certain enterprise.
Mobility of the personnel is characterized by its ability to quickly adapt to changing
marketing environment, to a change of job functions, to a content of work [6].
Another definition of mobility gives the author Bogatyreva. She believes that mobility
of the personnel expresses any employment change; and the essence of this concept is the labor
growth of people [7]. I think that mobility of the personnel includes: quick adaptation of the
workplace; horizontal career; the ability to training and skills development, to the combining of
professions and the expansion of labour functions.
In turn, the horizontal career is carried out in two forms: the rotation and the enrichment
of labour. The rotation is the moving or the permutation worker at the enterprise
This practice allows a person to build confidence in himself and then work more
effectively. Sometimes the worker may "find himself" and start a new vertical career.
The enrichment of work is a qualitative change in the nature of the work, it exists in such
forms as: increased responsibility, giving more rights in the sphere of resource management,
participation in the work of various committees and ad hoc working groups, raising awareness.
The enrichment of labour may also include: the alternation of the type of work performed
at one place; a temporary appointment to a higher position; the provision of opportunity to
engage in scientific work and make a relevant career; participation in providing training,
mentoring, transfer of experience.
Mobility of the personnel can be divided into the following types:
- Professional mobility
- Educational mobility
- The presence of subordinates
- Horizontal mobility
- Inter-firm mobility
The author Fatchutdinov R.A. [3, pp 277-279] suggests making the assessment of the
competitiveness of personnel on the basis of its competitive advantages, which are external to the
personnel and internal. Since this article is devoted to studying the mobility of the personnel,
internal competitive advantages will be considered here.

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 Table 1. The list of qualities of the personnel and their weight

The quality of the personnel The weight of the quality of the personnel by categories
The worker The specialist The manager
1. Professional mobility
1.1 Inside - occupational mobility 0,1 0,15 0,1
(compliance with experience of working with
the received education)
1.2 Inter-occupational mobility (obtaining of 0,13 0,1 0,2
new professional skills)
1.3 Qualification mobility (training) 0,12 0,15 0,1
1.4 Additional specialization 0,1 0,05 0,05
2. Educational mobility
2.1 Higher education 0,08 0,2 0,2
3. Vertical mobility
3.1 The presence of subordinates 0,0 0,08 0,1
3.2 Career mobility (change of position) 0,05 0,05 0,05
4. Horizontal mobility
4.1 The inter-professional mobility 0,1 0,03 0,03
4.2 The integration mobility 0,1 0,03 0,03
5. Inter-firm mobility
5.1 Total work experience on the specialty 0,1 0,1 0,1
5.2 Non-standard employment 0,04 0,06 0,04
The Result 1 1 1

Assessment of competitiveness (mobility) specific categories of staff are encouraged to

implement, according to the formula [3, pp 277-279]:
/ 5n , (1)

Where is the level of competitiveness of a specific category of personnel;

i 1, 2,..., n is the number of experts;
j 1, 2,..., m is the number of estimated qualities of the personnel;
j the weight of j quality of the personnel;
ij is the evaluation of the i-th expert j-quality of the staff on a five-point system;
5n is the maximum number of points which can have estimated the individual, where 1 -
the quality is absent, and 5 is fully present.
We will evaluate the mobility of a small innovative enterprise, founded on the basis of
Nanotechnology Centre (URFU them. B.N. Yeltsin), LLD Labfer. The main activities LLD
Labfer is the development and the production of nonlinear optical elements for wavelength
conversion of laser radiation in a wide range from purple to infrared. The company worker 12
personnel- specialist, who have finished training in URFU them. B.N. Yeltsin on a speciality
Nanotechnology, innovation, Physics, Chemistry.

Table 2. The results of the quality assessment specialists

Expert evaluation of the qualities of the five-point system

Expert 1.1 1.2 1.3 1.4 2.1 3.1 3.2 4.1 4.2 5.1 5.2
1 5 3 4 4 5 4 4 4 4 4 3
2 5 4 4 5 5 3 4 3 5 5 4
3 4 3 4 4 5 3 4 4 5 4 2

The conclusion: the analysis of the mobility of personnel of LLD Labfer () is

above the average (0,758) that is good for the adaptation of employees to the changes, rapid

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retraining of the specialists and their work enrichment. The inter-firm mobility and the horizontal
mobility have the smallest value (0,045 and 0,05), therefore, the management should pay
attention to the horizontal and vertical rotation of personnel.
The recommendations for the head to increase staff mobility: delegation of authority;
trust management; recognition and reward for successful work; compliance with supportive
atmosphere in the team; providing opportunities to do what is interesting employee; diverse
cooperation head of the research team; ability to organize the process of communication with
subordinates and take account of their moral qualities, aptitudes and interests, motives, objective
approach when resolving conflicts; informal relations within reasonable limits.
Thus, we can conclude that training in related occupations, retraining and reorientation of
the workers are normal for innovation activities, above all in connection with the ongoing
changes in technique and technology of production. For developers it is important to be aware of
related professions, as many of the innovations are made on the crossroads of various
scientific branches. The ideal candidate for the innovation sphere can be considered a specialist
with higher technical education, deep knowledge and understanding of the product, and
knowledge of English, stable experience, high level of communication and presentation skills,
readiness to adjust quickly, a fast and keen learner.

References
1. Adamchuk V.V., Romashov SCI., Sorokina M.E. Economics and sociology of labour [Text] // .:
UNITI, 2000 407 p.
2. Muchamedyarov A.M. Innovation management, 2nd ed. [Text] // .: INFRA-, 2008 137 p.
3. Fatchutdinov R.A. Management of competitiveness of the organization, 2nd ed. [Text] // .: AKSMO,
2005 544 p.
4. Potudanskaya V.F., Novikova T.V., Vachovskyi V.V. Labour mobility as an indicator of the
competitiveness of the personnel [Electronic resource]// Russian entrepreneurship. 2013. 15 (237). p.
85-95. Access mode: http://www.creativeconomy.ru/articles/29286/
5. Li Sueun. The journalists. An experiment on the opening of innovative enterprise [Electronic resource] //
Access mode: http://scitech.people.com.cn/GB/41163/4619248.html
6. Balabanova L.V. Managing mobility of employees enterprise [Electronic resource] // Access
mode:http://uchebnikionline.ru/menedgment/upravlinnya_personalom_-
_balabanova_l_v/upravlinnya_mobilnistyu_personalu.htm
7. Bogatireva M.R. The mobility of labour resources of the enterprise [] / M.R. Bogatireva, . N.
Myasyagytova // Young Scientist. 2013. 5. P. 263-265.

Non-economic Methods of Stimulation

of Working Capacity of the Soviet People
(the Historic Experience of the Industrialization
in the USSR)
Simonova Z.G., Kuzmina V.M.
South-West State University
(Kursk, Russia)
E-mail: zhanna-simonova@yandex.ru

Abstract
The article is focused on the non-economic methods as the means of stimulation of
working capacity of the Soviet people in the process of acceleration of the industrial
modernization in the USSR.
Key words: Human resource management, stimulation, working capacity,
industrialization, non-economic methods.

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 Introduction
At the XIVth Congress (December 1925) the Communist Party proclaimed the course for
the economic independence of the USSR on the bases of the industrialization of the country, the
development of domestic engineering industry, leaving the room for economic manoeuvring.
Having noticed the digression from the general line of the Party in the correlation of the
working class and the peasantry the Congress found it dangerous to promote the class diffe-
rentiation in the rural areas. Under these circumstances it was necessary to take measures for the
inflow of funds into the industry and the transition of the personnel from villages to towns [1].
In 1928-29 the tension in the Soviet society including the Centralno-Chernozemnyi
region started rising. Short-term strikes were taking place; luckily the number of people who
were taking part in them was not high. At some plants the workers adopted resolutions
containing the requirements for salary increase, the reconsideration of norms and rates.
Under these circumstances J. Stalin set two goals: to create the obedient elite at the head
of the government preoccupied with the society and to speed up the industrial modernization.
The latter was regarded as a means of the achievement of the first goal and as an original historic
task. The fundamental concept of the program was the development of the heavy industry as the
priority line in the economic growth. All the resources of the country were concentrated on the
heavy industry [2]. As for the industrial modernization, the government planned to catch up the
economic development of the USSR with the West, to achieve economic independence, to
modernize the defense industry, to develop the basic industries (fuel industry, chemical industry
and engineering industry).
In the resolution On the Perspectives of the Industrial Development of the Centralno-
Chernozemnyi region the Presidium of the Supreme Council of the National Economy of the
USSR confirmed that the inner resources of the region had not been taken into account in the
Five-Year Plan. That was why the major problems of the industrial modernization had not been
solved [3]. Under the inner resources the government understood not only human, economic and
natural factors but also ideological ones. Under the listed circumstances it was necessary to brisk
up the work of the Komsomol and the Party organizations, to make the work of the
representatives of the intelligentsia trying to solve the problem of the mobilization of the
population more active.
Goals
The main goal of the work is to study the influence of the art workers on the solution of
the urgent problems of the industrial modernization in the USSR. To achieve the set goals the
authors of the work studied historical papers and archival documents on the work of the creative
intelligentsia with the population which was implicitly directed to the acceleration of the
industrial modernization.
Results
As the regions were agrarian the government had to solve one more problem to
stimulate the transition of the peasantry to the working class, for this purpose it was important to
conduct consistent agitation. In the building socialist society it was necessary to make an
economic spurt, to catch up with the economic growth of the developed European countries and
the Soviet government decided to choose the course of the forced industrialization. To achieve
all the stated objectives the government had to brisk up the work of the intelligentsia with the
population by all the possible means, methods and forms. The members of the Party assigned
that work to the cultural figures.
Primarily, the art workers were to raise the cultural level and the level of education of the
population because the new government needed new staff of workers and peasants. The work of
the intelligentsia in the mentioned direction was urgent and it was recorded at the meeting of the
Arts Sector of the Narkompros (The People's Commissariat for Education) on July 13, 1930. It
is necessary to remove the center of gravity to villages and industrial areas because the public
demand for culture is very high. [4] To be more exact, the efforts of the literary men, artists,

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musicians and actors had been concentrated on the cultural work before the minutes of the
meeting of the Narkompros appeared. The literary men were involved in the educational
activities with the population. The creative intelligentsia founded different clubs, village libraries
and reading-rooms; they organized literary events, musicales, concerts in rural areas, meetings
with actors and politicians. Voronezh writers and poets strove for the reflection of the
innovations imposed by the Soviet government on pages of Voronezh Kommuna and Nasha
Gazeta. The local journalists, writers and poets: M. Lyzlov, M. Kazartsev, P. Zagorovskiy, V.
Korablinov, I. Gilevich, A. Shubin and some others who were the members of the literary
cenacle Chernozem were carrying out the assignment of the government [5].
The new life of the peasantry described by the representatives of different literary
cenacles in their works can be confirmed by the pieces of folk literature of Voronezh, Kursk,
Orel, Lipetsk and other regions [6].
We used to be illiterate,
Uninformed and unenlightened.
But yesterday in our izba
We were reading Gorky.
The class struggle which had worsened in the rural areas during the period of
collectivization was reflected in the Russian chastushki: Do not threaten us, kulaks; we are not
afraid of you, All the kulaks were turned out of the village yesterday. The major part of the
new chastushki was devoted to the building of socialism, to the description of the unremitting
toil of the Soviet people. The previous literary characters were replaced by kolkhozniks, tractor-
drivers, combine-operators, agronomists, team-leaders, Stakhanovites and etc. The policy of the
industrialization found reflection in the folk literature of the peasantry of Kursk, Voronezh and
Tambov regions:
We used to pray to God
For sending rain to us.
Now the irrigation canal
Is being built by us.
Secondly, the art workers took an active part in the propaganda of the achievements of
the industrial modernization of the country. Thus, in literature, theatre, painting, cinema there
was a peculiar genre reflecting ideas, goals, problems and achievements of the industrial
modernization.
Such researches as S.G. Kara-Murza, G.V. Grachev, I.K. Melnik, A.A. Andreev were
studying propaganda as a means of manipulation and persuasion both on the individual level and
on the level of social influence [7]. Foreign scholars: Harold P. Lasswell, Elliot Aronson,
Anthony R. Pratkanis, L. Voytasik, Herbert Marcuse, O. Thompson, W. Lippman, Richard
Harris and some others were studying different social groups as the means of social influence
and government [8].
The oral propaganda was continually gaining in scope. As it was declared at the meeting
of the leadership of the Arts Sector of the Central region of the RSFSR in 1929 The idea of the
enlightment of the peasantry and the working class should run through all the public events
beginning with the public libraries. [9] Various meetings, lectures, reports, discussions,
dialogues, performances were very important in the Centralno-Chernozemnyi region. The central
figures of the Communist Party, commissars, leaders and members of the Party apparatus,
outstanding representatives of science and culture, distinguished writers and journalists who had
obeyed the Soviet government were actively performing before the population. I like the nave
pride and patriotism of the Soviet people, Lion Feuchtwanger wrote in his book. The young
people created something spectacular at the cost of heavy sacrifice; they stand in front of their
creation and do not believe that they managed to do it and they are glad for their achievement.
[10]

111
 Pressmen propagandizing the industrial growth of our country were under the control of
Glavlit (The Main Directorate for Literary and Publishing Affairs) and the Union of Soviet
Writers. This fact is confirmed by the historic data and correspondence with the regional
branches of the Union of Soviet Writers in Voronezh, Kursk, Tambov and Orel. The case with
the delay of the issue of the Voronezh digest Na Novyh Putyah with the articles by O. Kretova
and B. Peskov devoted to the shadow state of the construction of the highway Moscow-Donbass
can serve as an example. The situation was commented on in the following way: Nowadays this
problem is being discussed in the regional committee of the Communist Party of the Soviet
Union (Bolsheviks). All the materials have already been given to I.M. Vareikis (the secretary of
the regional committee of the Communist Party of the Soviet Union (Bolsheviks)) and a decision
will be made in the nearest future. This problem is very urgent and the leaders of the Union of
Soviet Writers are preoccupied with it. It is necessary to mention that the delay of the issue of
the Voronezh digest was not the only solution of the problem - several writers-communists were
sent to Voronezh to examine the situation with the highway in detail [11].
Thirdly, the strategy of forced modernization in the Soviet system was closely allied to
the development of social creativity [12] because in spite of terror and the policy of diktat it
helped to control and to hold back the social tension in the country.
The government supported and the intelligence took an active part in one more campaign
the purpose of which was to direct the energies of the working class not only into the buildings
of the country but also into the development of the amateur performances.
Thus, the intelligence started working with the population. Along with the state
institutions of culture a lot of different cultural clubs and societies were founded. The
government started creating favourable conditions for cultural education and recreation of the
population cultural centers, palaces of culture, the Red Army Houses, etc.
The cultural clubs appeared in Voronezh, Kursk, Tambov, Borisoglebsk, Elets, Oboyan.
Along with the cultural clubs proletarian clubs were founded in different urban areas. Various
kinds of musical and theatre amateur groups, brass bands, folk bands, singing and dancing
circles, living newspapers, for example, the Blue Blouse and other agitprop theatre collectives
were formed [13]. Despite a lot difficulties caused by the lack of money, musical instruments,
notes, qualified stage directors and composers in 1920s multiple small theatre amateur groups
arose in different cities. More and more workers of plants, factories, industry, builders and
transport workers were successfully joining the theatre amateur groups.
On July 7, 1930 exactly these forms of work were mentioned in the report of the First
Year Plan of the development of Amateur Arts. It was resolved to recognize the policy of the
development of the Amateur Arts in rural and urban areas as necessary and important in the
building of socialism and cultural revolution. [14]
The members of the Central Committee in a number of resolutions carried out in the
period of industrial modernization drew the attention of the Party organizations to the necessity
of the development of amateur activities of the working class. At the meetings of the Department
of Propaganda and Agitation of the Regional Committee of the Communist Party of the Soviet
Union (1934-1936) the problem of the training of personnel for urban and rural establishments of
culture was the most vital.
Fourthly, the Soviet government tried to do their best to make the population feel the
involvement in the social processes taking place in the country. The close unity of the
government with the public was considered as a means of the solution of the urgent problems.
The representatives of the creative intelligence were propagandizing the ideas of
socialism among people of different clusters. They were giving performances and holding rallies
for workers; they were giving concerts for insane people in the mental hospital in the village of
Sapogovo.
On August 12, 1921 the theatre troupe Calais (from Tambov) staged a play Ne Vse Kotu
Maslenitsa (Every Dog has his Day) (by . Ostrovskiy). Before the play several speakers

112
delivered their speeches. The problem on the agenda was a severe famine that affected the main
grain growing regions of the Soviet Union including Povolzhye as a result of the droughts in
summer 1921. The spectators were quite satisfied with the performance. They were in sympathy
with the victims of the famine and in spite of the fact that it was a weekday they came to watch
the play. The proceeds from the play (94,000 rubles) were sent to the famine-stricken population
of Povolzhye [15].
From the September 1920 till February 1921 the musical troupe managed to give:
16 public concerts which were free of charge;
115 concerts in different institutions, hospitals and camps;
2 concerts with musical illustrations for children;
3 concerts in orphan asylums[16].
This information is proved by archival documents.
The concerts were free of charge because the main purpose of them was not only to cheer
up people but also to mobilize the workers and peasants to work hard, to help them build a new
life in their new country.
Fifthly, any technical, cultural or social achievement was rated high. March of science,
success in health service, positive results in manufacturing or upbringing of the rising
generations were the source of pride for the Soviet government [17].
The Stakhanovite movement was one of the most popularized movements. The
Stakhanovite movement as a new stage of the socialist competition was described in literature,
shown in cinema, theatre, depicted in painting. Such pictures by A. Deyneka as Donbass,
The Tractor Drivers, The Stakhanovites, and The Space of Building Sites under Moscow
can be the evidence. Sheila Fitzpatrick in her researches focused on the theme of the
Stakhanovite movement and wrote that in the Soviet Union the movement was working perfectly
well [18]. Other researches (Clark K., Leyda J.) share Sh. Fitzpatricks point of view. Heroes
and ordinary people are shown in feature and documentary films, literature and painting [19].
A lot of chastushki appear at this time. The idea of socialist competition and the
achievements of the Stakhanovite movement run through them [20]:
I am a shakhanovka in the kolkhoz
I have got a bonus.
And my darling entered
The Agricultural Academy.
In spite of the wide propaganda in comparison with the socialist competition the
Stakhanovite movement was short-lived.
The propaganda of the Stakhanovite movement was a type of labour mobilization during
the industrial modernization [21]. Thus the high-powered work of the peasants helped them to
occupy the leading positions in their kolkhozes. Such an opportunity was offered both to men
and women. The promotion had the following results: a very high social status, public
recognition that was transmitted by the mass media (photographs and articles in newspapers),
awards, prizes, delegations on various all-USSR events which took place in Moscow.
Thanks to the pieces of literature and cinema the government managed to bring up a
generation of workers who were in unity with the industrialization, who accepted responsibility
for its speed.
The outstanding cultural figures had to get the ideas of the industrial modernization
across to the Soviet people. At the meeting of the film industry workers that took place in the
editorial office of Pravda on November 23, 1935 A. Dovzhenko delivered a report. He said that
the creative intelligence had to solve 2 problems which were the most urgent for the government:
the problem of the kolkhozniks and the Stakhanovites and the problem of the defence [22].
Finally, J.V. Stalin made a special mention of the work of the creative intelligentsia
during the period of the industrial modernization: The Soviet intelligentsia works devotedly to
the task of national defence, continuously improves the armaments of the Red Army. It helps the

113
workers and the kolkhozniks to raise industrial and agricultural productivity, promote the Soviet
culture and science even during the period of war. [23] In 1939 the Soviet government awarded
orders to 172 writers. Poets, writers and other representatives of the creative intelligence had a
real opportunity to influence the minds of the peasantry and the working class. Along with the
intelligentsia other state figures helped to solve the problems of the industrial modernization. By
the end of the 1930s the level of the mobilization of the population had become very high.
Conclusion
The analysis of the archival documents showed that on the one hand the Soviet Party had
used the creative intelligence for the assistance in the pursuing the policy of the industrial
modernization, for the promotion of the industrial achievements in the USSR, for the
development of social activity and creative work of every Soviet man; on the other hand the
creative intelligentsia itself understood the importance of their activities in the industrial
modernization, in the process of remaking people, their minds. All these circumstances made
different talented people create their remarkable pieces of poetry, prose, music and theatre. Their
works were vital in the USSR and they are actual nowadays.

References
1. Gorinov M., Tsakunov S. The 20s: the new economic politics. ., 1991, p. 118.
2. The Modernization in the USSR and in Russia (30s-90s) // http://www.market-pages.ru/modern/8.html
3. The State Archives of the Voronezh Region. F. 842. Note 3. File 18. P. 910.
4. The Russian State Archive of Literature and Art. F.645. Note 1. File 149 (2). P.103. Microphotocopy.
5. www.communa.ru/index.php?ELEMENT_ID=4412
6. S.G. Lazutina Chastushki Chernozemya. Voronezh, 1970, 312 p.
7. Kara-Murza S.G. Mind Manipulations. ., 2004.
8. E. Aronson Age of propaganda: The Everyday Use and Abuse of Persuasion, 2003. L. Voytasik The
Psychology of Political Propaganda, 1981.R. Harris A Cognitive Psychology of Mass Communication, 1999.
9. The Russian State Archive of Literature and Art. F.645. Note 1. File 103 (1). P. 52. Microphotocopy.
10. Lion Feuchtwanger Moscow 1937, 1937 p. 62.
11. The Russian State Archive of Literature and Art. F. 631. Note 5. File 196. P. 6.
12. http://www.zlev.ru/69_64.htm.
13. Lobova N., Permyak E. Living Newspaper. ., 1932.
14. The Russian State Archive of Literature and Art. F.645. Note 1. File 149 (2). P. 127. Microphotocopy.
15. Izvestiya, 1921, 17 August.
16. The state archive of the Kirov region F. R. 309. Note 3. File 282. P. 22.
17. www.volsu.ru/RES_C/VGI/nauchnye/conference/4_conference_2001/ot_scilly_k_kharibde/kolganov-
ru-opyt_4_modernizacii.pdf
18. Sheila Fitzpatrick Everyday Stalinism: Ordinary Life in Extraordinary Times: Soviet Russia in the
1930s. Oxford University Press, 1999, p. 90.
19. Clark K. The Soviet Novel. History as Ritual. Chicago, 1985, p. 136141.
20. S.G. Lazutina Chastushki Chernozemya. Voronezh, 1970, 312 p.
21. Ponomareva D.A Potemkins village: the peasant world of Stalin cinematograph // Patriotic Notes,
2, 2004.
22. The transcript of the meeting of the film-industry workers in the editorial office of the newspaper
Pravda http://www.archives.gov.ua/Sections/Dovzhenko_2/RGASPI/index.php?42
23. J.V. Stalin On the Great Patriotic War of the USSR. ., 1950, p. 118.

114
 Balance of Team Roles Is Success of Modern Companies1
Stepanenko Kseniya Sergeevna, Arkhipova Alexandra Anatolyevna
Omsk State University of F.M. Dostoyevsky
(Omsk, Russia)
E-mail: stepanenko55@gmail.com; voli-jast-merilin@mail.ru

Scientific adviser: S.I. Ultan, PhD in Economics

Abstract
Successful teamwork is - first of all, which is formed a team. It is extremely important for
each employee to understand his role in the team, as it affects the efficiency of the entire
company. The article discusses the factors affecting the performance of the team as well as the
criteria highlighted the success of teams of Russian and foreign authors.
Importance of the balance of team roles is shown in the model well-known specialist in
the field of teambuilding R.M. Belbin. Also, consider the problem of insufficient reliability of the
test Belbin.
The authors conducted their own Belbin study method on students OmSU of F.M.
Dostoevsky and given the appropriate conclusions.
Keywords: team, team roles, Belbin test, balance, team roles, team-creating.

I. Introduction
Modern world economy, the activities of economic subjects are so complex that a single
is not able to compete with teams.
One of the difficult but important task manager - team building. Team - it's not like-
minded employees. Team - this staff complement each other. Employees seeking to command
goals and identify themselves with the team. The team is formed from the group - people adapt
to one another, the distribution of roles.
Team is a small group of people with complementary skills and abilities who seek to
achieve a common goal and a common use for this approach. Teamwork allows different parts of
the organization together to meet consumer needs, making it difficult to achieve a skilled only
one profile. Teams contribute to the spirit of equality, and encourage a positive attitude to work
and generate trust. Commands inherent diversity of skills, abilities and experience often enables
unconventional approach to work, contributes to the emergence of new ideas and creativity [6].
In addition, teams appear much more a sense of responsibility for achieving the goals and
objectives.
Commands allow you to receive a variety of benefits that are not possible if you do the
job alone. Teams can provide quick response to changes in the working environment and the
external environment in a timely manner and make the corresponding changes in the processes
of the company.
Studies have shown that over the past few years, many companies have become widely
known thanks to the success of the teams, and also because they recognize the achievements of
these teams and effectively stimulate the participation in their activities.
Thus, the problem of creating successful teams is very important. In turn, the team's
success depends on a balanced distribution of staff roles within it.

1
Expresses gratitude to our supervisor Ultan Svetlana Ivanovna, PhD. Economic Sciences, Associate
Professor, Department of International Economic Relations, Faculty of International Business, Omsk State
University. FM Dostoevsky for valuable advice during the study.

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 Source base was the work of foreign authors - E. Mayo, K. Levin, R. Likert, MH
Meskon, M. Albert, F. Hedouri, RM Belbin, IK Adizes, R. Schwartz, etc. And also Russian
authors O.S. Vihansky, Kablashova I.V., Tcukanova A.A., Lapigin Y.U., Buymov A.G., etc.
II. Statement of the Problem
Performance assessment teams care managers at all levels and companies, regardless of
size, ownership and country ownership. As noted, the commander of a nuclear submarine of the
U.S. Navy Santa Fe, Capt. David Marche - inspires people not a leader's personality and the
overall goal that allows you to fully unlock the potential of each team member.
We set a goal - to explore and analyze the role of the team, and also to show the
importance of their balance to the company's success.
Methods of research - synthesis, analysis, comparison, deduction. Use for research
purposes Belbin test as the main tool to identify the roles of team members in order to form a
balanced group of employees.
III. Findings
The main task of management, according to E. Mayo, OS Vihansky [3] is to create
conditions conducive to the overall performance of the team, and Lewin's model describing the
force field acting on the team, allowed to introduce a mechanism for increasing the effectiveness
of the teams.
American psychologist R. Likert (60-ies of XX century) found that less successful
managers are focused on work, while focused on the most successful employees. In his view,
effective team has 24 characteristics. Here they are [7]:
1. Group members have the skills performance of all roles and functions in the group (as
leadership and the rank and file) required for group interaction.
2. Group exists long enough, building and developing the peaceful working relationship
of all party members.
3.Attractive group for its members, they are loyal to each other.
4. Relations team members and managers have a high degree of privacy, they trust each
other.
5. Values and goals of the group satisfy the requirements of integration. Group members
help shape those values.
6. As members of the group perform related functions, they are trying to develop
harmoniously interrelated goals and values.
7. What seems more important than the value of the group, the more likely that members
will accept it.
8. The team members are highly motivated by common values. Each team member will
do all that can (will spend time and effort) to help the group achieve its main objectives. All
expect that others will do the same.
9. Any interaction, decision making, etc. occur in a supportive atmosphere. Judgments,
comments, ideas, information, criticism focused on assistance. Demonstrates respect, as in the
assistance and when it is received.
10. Head of each working group has great influence on the tone and atmosphere in the
group, in accordance with its principles and practice, so in high group leader adheres to accepted
principles of management and seeks to create an atmosphere of support and cooperation rather
than competition among group members.
11. Group seeks to help each of its members to develop skills and to use its potential.
12. Each member of the group voluntarily and without disturbance takes the group's goals
and expects that the group will also create favorable conditions for him.
13. Chairman and members of the group believe that everyone can achieve the
"impossible" These expectations are maximally mobilize and enhance personal growth. When
needed, the group lowers expectations so that people did not feel a sense of failure or rejection.

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 14. If necessary, group members assist each other for the successful achievement of
personal goals, mutual characteristic of high-performance teams.
15. Supportive atmosphere of high-performance teams stimulates creativity.
16. Group knows the value of "constructive conformity" (subordination), understands
when to use it and for what purposes.
17. Group members are highly motivated to interact fully and wholeheartedly, sharing
information relevant to the values and activities of the group.
18. Group leverages the communication process to achieve the goals of the group.
19. Group members are also highly motivated to obtain information. Everyone is
genuinely interested in any information relevant to the problem.
20. In high-performance groups there is a high level of motivation of group members
influence each other.
21. Group process in high- groups allows a greater impact on the head.
22. Group members are able to influence each other's work, flexibility and adaptation
group.
23. In high-performance groups people feel when nominating security solutions that seem
to them appropriate because the purpose and philosophy of each activity are clear and provided a
solid basis for decision-making.
24. Head of highly selected group. His leadership skills are so obvious that it manifests
itself as a leader only in unstructured situations.
In-command efficiency, according to the American psychologist K. Argyris, based on the
emotional intelligence of team members and positive norms to which he took the ideas and
feelings of sincerity, openness, experimentation, help others to be honest and open about their
ideas and feelings, helping others to experiment, personality, thinking, interest, internal
commitment.
According to the information portal Psi Factor [4] team role as a factor in the
effectiveness of established M. Belbin, gives an idea of the team, which has artists of all roles
will work effectively to fulfill any task roles in it. Also installed a dependency of the team from
the companys profile on the balance. The group must comply with the job/project for which
performance she created is more than just. However, remember that the person in the team
representative of one type or another, performing some task.
Kablashova IV and AA Tcukanova based on the study of the working teams in quality at
various Russian industrial enterprises are the following social outcomes:
improve the quality and increase the speed of decision-making;
cycle time reduction of development and production;
reducing the number of defects in manufacture and the number of returns of products
from internal and external customer;
improving morality in the workplace and relationships in teams;
decrease in turnover in the enterprise;
productivity growth;
increase satisfaction of internal and external customers;
earnings growth company and each employee.
Considered experience possible to distinguish the following performance criteria
commands:
team must achieve their goals. Targets team formulates SMART technology based on
the vision and mission of the company, as required by the strategic management;
the ability to quickly adapt to changing conditions . This criterion of the team /
company confirm various scholars as one of the gurus of modern management science IK Adizes
pays particular attention to this in their studies;
team must maintain and increase its power as a single unit, the ability of team members
to understand the characteristics and style of each other's work, to adapt to each other and to

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effectively carry out the required actions. And very valuable high confidence of team members
to each other;
balanced participation, each team member must actively participate in, contribute to and
in conjunction with other teams to achieve success;
formulate basic rules of behavior (acceptable and unacceptable behavior);
team must maintain and strengthen its relationship with the rest of the organization.
Team to achieve their goals at the cost of a negative impact on other parts of the organization
undermines the spirit of how the entire organization and teamwork that is celebrated and IK
Adizes. This weakens its ability to operate successfully in the future when it may require
cooperation with other structures of the company;
use a scientific approach: with structured problem solving process team can more easily
find the main reasons that caused it.
In accordance with the model of R. Schwartz, on the effectiveness of the group affected
by three factors: a group process, group structure, organizational environment. It also highlights
the following key performance criteria groups:
age group indicates the stage of development of the group, its objective ability to work
effectively.
formation and maintenance of group procedures (rules, regulations) are needed to meet
the needs of all interested in discussing issues such as: achieving group goals, and maintaining
working relationships and exchange of views.
As you can see, the criteria proposed Kablashovoy IV and Tsukanova AA complement
and deploy criteria for model R. Schwartz, which corresponds to changes in modern business,
both in Russia and abroad.
Thus, there are the following work and procedures, describing the activities of teams [6]:
identification problems (choice of problems or issues that need to be addressed);
problem diagnosis: process of researching their causes and identify possible solutions.
distribution of work within the team. Skilful distribution of work is one of the levers of
performance improvement teams. Each team member has specific skills and abilities, and can be
particularly well to solve the problem, where it is applied skills, and vice versa, is not so
effective in solving other problems. Team need to distribute tasks so that the maximum use of
qualification and creativity of its members.
establish vertical and horizontal communications. Availability of effective
communication is the main characteristic of any team. Team managers must communicate
priorities to staff members of the teams involved in solving problems, communicating with each
other and with internal and external customers. Team, solve problems, can make
recommendations to management. Effective interaction with each other - the key to success.
coordination of team work with other teams and divisions. Teams can not work in
isolation, and therefore one of the criteria for team effectiveness is to maintain close
relationships with the rest of the organization.
organizational support - as a basis for effective teamwork. Managers should contribute
if they want to make the team succeeded. First, managers need to articulate the task of each
team, that is to describe what they expect from each team and what it should not do. Secondly,
the need to create conditions that correspond to address the identified problems, in particular, to
provide the necessary resources.
staff training in order to acquire the relevant skills and knowledge necessary for
decision-making team.
selection criteria and indicators to assess the team and develop an effective system of
motivation. As the research of Russian and foreign scientists, applied in many enterprises and
incentives designed to reward individual effort and achievement of functional goals, and poorly
adapted to assess the results of teamwork and contribution of each participant in solving the
problems of the company. Found that team effort become more powerful if the team members to

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monitor their own work and self- evaluate its results. When the culture of universal responsibility
criterion "quality process" is one of the key indicators by which the effectiveness of the
evaluation carried out of the team.
Thus, the organizational approach to building a successful team helps you streamline
management procedures and the operation of the team, in particular, to improve scheduling,
performing procedures to evaluate effectiveness and motivation of the employees of the
organization.
Must balance the typical behavioral characteristics of team members. As noted, R.
Meredith Belbin [1, p. 8] productive team roles are limited in number, and the team's success
depends on the relationship and the roles of team members. Thus, obtaining information about
the team roles can give an accurate prediction of success or failure of the team in the process.
Belbin test helps determine the overall potential of the team and balance the roles in the
team. R. Meredith Belbin first introduced the concept of preferred group or team roles. He
studied the influence of the structure of commands on their effectiveness. Over several years of
observations RM Belbin formed over hundreds of teams, mainly on six - seven people each. The
team consists of managers with training and refresher training. Efficacy was assessed on the
financial results in business games.
According to the information portal Only Leadership [5] from the set of behaviors of
people in teams allocate 9 characteristic types, or roles that contribute to successful work .
Belbin RM gave them the following names : performer - practical, disciplined worker, Chairman
- calm, confident coordinator of work, able to unite people around a common purpose; shaper -
organizer, courageous, energetic, impatient, fast response ; thinker - generator, creative source of
sound ideas ; scout - seeker, " hunter ideas" outside the group; appraiser - prudent, cautious team
member able to evaluate and consider the possible risks; collectivist - soft, diplomatic, able to
listen, to reconcile, to appease ; closer - finisher organized conscientious, loving bring it started
to end.
Based on these studies, it was concluded that for successful team needs a strong
chairman, a source of ideas and an appraiser, however, only the balance of group roles and
consideration of the specific tasks allow you to create the right atmosphere in the group to
develop the strengths of all its members.
Study RM Belbin devoted to the study of well-managed groups, confirmed that the best
managers are the people who have a good imagination, loving conduct experiments, erudite and
persistent.
But if the working group consists entirely of such managers, activity it is usually
ineffective because these managers do not like to apply the methods of control used by
administrators. People with a strong creative principle (generators of ideas), mainly developed
the ability to think, but they are impractical and often can not make the right decision.
At the same time, an effective group of the most worthwhile ideas put into practice
guides (called RM Belbin Workers - Contractor), whose main advantage is the ability to achieve
goals, achieve results, and they at the same time - and practice, conservatives trust people who
have a high degree of integrity as well as uncontrollable .
Effective group also needs intelligent, insightful and sober -minded person who is able to
give a correct estimate of the ideas emanating from the generator of ideas. This role - the role of
criticism executed Supervisor / Estimator.
To form balanced teams has largely developed by RM Belbin test that helps determine
which roles in the team prefers to perform one or another of its members.
Problem. Experience of using test RM Belbin has led some scholars to doubt its
reliability. Buymov AG [2] notes that repeated surveys of the same people give different results.
Hence the idea to explore the issue of reliability test Belbin position with probability theory.
R. Meredith Belbin test contains seven thematic sections on eight proposals in each. Each
proposal is expressed as a brief description of one of the eight group roles, and the theme section

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sets the angle in which these roles are considered. The subject perceives the test content as a set
of characteristics of his own thoughts and actions as a group member. With some characteristics
it can be fully agree with some agree to a lesser extent, and with some totally disagree. Test task
to quantify the extent of their agreement. To do this, he is given ten points for each section.
Points it should be distributed among eight proposals section.
According Buymov AG, according to a probabilistic model and accumulated statistics (he
investigated 50 students) shows low reliability Belbin test, which is associated with insufficient
sample sizes, which used to calculate probability estimates of role abilities of team members.
Investigation of this website by using a probabilistic model shows that the accuracy of these
estimates can be improved by increasing the number N of test topics. But this can not be done
without substantial transformation test. Another way to increase the accumulation of data
samples - by retesting.
Recommendations Buymova AG: 1). to reliably determine the most preferred role subject
should be tested more than 73 times, 2) identification of the least preferred role requires more
than 27 repetitions. The author also claims that it was easier divided roles, which are located at
opposite ends of the scale of preferences.
The authors of this article Stepanenko KS and AA Arkhipova conducted a survey of
thirty-five people: the third year students of Omsk State University. F.M. Dostoevsky and
schoolchildren (6 pers.) Omsk. The survey was conducted by the scheme test RM Belbin. As a
result, thirty-five were received personal scores role abilities of the test participants.
After the first test, the participants were asked to go through it again, but the next day.
After that we reconciled new answers with the results yesterday. Expectations about the
vulnerability assessment test Belbin advanced studies Buymova AG confirmed.
As a result, only the role of ten participants coincided in two tests, in others not. Thus, the
"collectivist" in one case identified as the most appropriate, in the second case is in the middle of
the list, and becomes the most suitable "appraiser", which according to the results of the first test
was at the end of the list of preferred roles.
Results
The effective operation of any company is largely determined by the results of a
collaborative effort of its employees. Team to function effectively, you need the optimal
combination of all roles, so good selection and training of team members allow you to build a
team of employees with interpersonal skills and abilities to successfully play such roles. Team
members must have the necessary knowledge to solve a specific problem of the company.
Activities team building are the most important work of the organizational development
company whose aim is to improve and increase the efficiency of different teams in the
organization.
Command can be defined as a group of people with high qualifications in a particular
area and the most loyal general objectives of the company, for which they act together, mutually
coordinating their work.
The main task of the team in the first stage of the change process, according to the three-
step model Lewin - defrost - is to realize the need for change. Should be created a climate of
openness, and then the team is open to change. At the stage of reforms - diagnostics is the
current state and an action plan for the transition to the desired state. On stage after freezing
when the plan implemented and evaluated the results, the team begins the process of stabilization
for more efficient operation, job requiring high managerial competence. Forming a team is a
process in its implementation requires not only the presence of well-chosen, highly qualified
professionals, but also people who want to work together, work together as a team.
Factors affecting the efficiency of the team:
1. Number of team members. Number of team members should be determined by the type
and amount of work to be done, can have a huge impact the external environment. Classification
teams quantitative composition: small teams (less than 4 people), medium team (5 to 9 people)

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large teams (over 10 people). Small teams are most vulnerable, reducing their numbers at least
one person leads to increased instability. There is a danger that in small teams, any decisions will
live up until near the performer is relentlessly leader.
2. Distribution of functional and team roles. Team performance is largely determined by
the personal qualities of its members and the relationship between them. Everyone should be
prepared to devote all their skills and knowledge to solve the problem command. Picking up
people in the team selects, based on their existing skills, knowledge and experience. But to
achieve team effectiveness are not only the skills, knowledge and experience, but equally
personal qualities and personal characteristics of team members. When people work as part of a
group or team, each of them performs the role of two types: functional, based on skills and
experience, and team based, which are personality traits. Team role can be regarded as a
characteristic quality of the application of individual skills and experience that constitute the
functional role performed.
One well-known expert in the field of teambuilding R. Meredith Belbin identifies nine
team roles. Studies have shown that each team member plays not one but often two, even three
or four team roles. It should be noted that they can be considered as equally important for the
efficiency of operation command, on condition that they are used in the team at the appropriate
time periods, and the best way. Perfect combination of roles should determined by the goals and
objectives of the team.
3. Clear and agreed objectives formulated by the SMART technology based on the vision
and mission of the company.
With these factors, you can monitor the effectiveness of teams, improving efficiency and
achieving success in making changes in the company's strategic management.
We have also considered the problem of insufficient reliability of the test Belbin,
scientists studied Buymovym AG, which with the help of probability theory proves low
reliability of the test. However, despite all the shortcomings, RM test Belbin is widely used in
western countries, as well as more recently in Russia, when applying for a job, as evidenced by a
survey of Omsk businessmen.
Thus, the balance of team roles in the implementation of teambuilding the success of a
modern company and organizational changes it is necessary for strategic planning and
management of the company.
Certainly our study among students of Omsk State University of FM Dostoevsky can not
be fully considered objective, since we are still learning in the third year and have not mastered
all the competencies specialty. However, we want to acquire knowledge management sciences
that allow us to form their own teams and successfully do business in Russia and abroad.
The authors of this article suggest to conduct research on, as they grow their colleagues,
interesting to see how changes to the acquisition of knowledge of their role, and we want to
reach Omsk and employers to conduct a study on specific enterprises to gain experience and
assist managers Omsk firms.
In addition, in the future authors of this article examine the study test management styles
IK Adizes, a comparison with the test RM Belbin and identifying relevant advantages that may
allow leveling techniques weaknesses Belbin.

References
1. .. . / . . .: HIPPO,
2003, 315 .
2. .. /
. 2, 2005 . : http://dis.ru/library/detail.php?ID=25601
3. .. . .: , 2006. 457
4. -. : http://psyfactor.org
5. Only Leadership. : https://onlyleadership.wordpress.com

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 6. .., ..
. . 2008 .
: http://ria-stk.ru/stq/adetail.php?ID=8796
7. . ? 2010 . :
http://delovoymir.biz/ru/articles/view/?did=9592

The Experience and the Efficiency

of the Event Marketing in Car-Selling Industry in Russia
Tatiana Sysoeva
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: t.l.sysoeva@mail.ru

Absract
This work analyses the event marketing, its efficiency in the Russian car-selling market.
Ten years ago the Russian car market was attractive for many global brands, because it was
growing very rapidly. The situation has been changed, but still the need to promote cars and
services efficient is still on the high demand. This study is about the event marketing; here we
describe its advantages and disadvantages, difficulties in management and estimate the
efficiency. The research covers the experience of Russian car-selling companies. In this paper
we also pay attention to the results of the event marketing usage.
Key words: brand, brand promotion, the event marketing, the efficiency of the event
marketing, Russian car market.

Introduction
The main question for the marketing and advertising departments all over the world is
how to reach the target customer in a proper way, that means at the cheapest cost and in the short
of time. However, the marketing communications allow the different kinds of mixes paper print
advertisement, TV spots, radio spots and so on. The only deal is to decide what tools to choose
and what will be the message for the audience.
As we can see, the annual growth in prices for the main mass communications does not
stop the clients to deal with them; it means that the efficiency of the traditional mass media is
still under discussions, moreover for the companies sometimes it is probably not possible to
refuse using, for example, TV spots or prints in the magazines. But nowadays the problem of
clutter in the traditional mass media is occurred; the companies have to invent something new or
extra in order to reach the attention of the potential customer. We have a lot of examples of print
magazine, where you can see the similar layouts with the similar design and adv. message, so it
reflects to the customer attention and as a result he or she could not decide anything concerning
the particular company, product or service.
In this situation the companies have to make a decision about the communication strategy
of attracting potential client, and its also important to mention that the question about the
communication efficiency has the similar importance. So, studying the various combinations in
using marketing communication tools and following customer behavior we have realized that the
emotions can have a great impact to the running business successfully. Thats why we decided to
pay attention the customer emotions through different marketing tools in order to investigate the
most challenging thing in marketing communication how to reach the customer efficiently.
The target setting
When we were starting the research, there was a lack of information concerning this
study, the main idea was to describe what can do the event marketing for the reaching potential

122
client and how the companies can deal with it, what are the main benefits and disadvantages in
the real life situations.
The event marketing is the complex marketing tool, which can enforce the target
audience to get the brand awareness through different kinds of positive emotions, the main vision
of the event marketing is that customers receive the real experience with the particular brand,
and he or she can have a view to the brand values. Event marketing is a brand values transporter
to the potential client, and this is the leading element for this marketing tool [1].
The orient wisdom says that you can see, and its possible to remember, you can hear, but
sooner it can be forgotten, and when you have a real experience of doing something, probably
you can remember it for the rest of the life. The event marketing is focused on the real
experience of the communication between the potential clients and brand.
The event marketing can involve the audience in the brand values through the emotions,
mostly positive ones, the idea of the event marketing is to manage something special for the
potential clients, where they can receive a new, fresh and outstanding experience concerning the
certain product, service or company. This experience will be some kind of the ground for the
future relations between the customer and the company, and the event marketing should reveal
the positive attitude to the brand.
Its complicated to define the specific form for the event marketing, we can mention such
as: special occasions for clients, for example, road shows, music festival, open days for new
customers, test-drive parties, celebrations of company anniversary or birthday, sometimes you
can use traditional or international holidays for the brand promotions. The sense of the event
marketing is to involve the emotions in the client communications with the brand values [2]. But
emotions are not enough you have to propose a new experience for the customer and do it with
fun, thats why we reveal the three elements of the event marketing.
They are the following:
Fun as the emotions provider.
New experience as the possibility to estimate the brand values.
Learning something new as a self-improvement.
According to these elements you can manage the event marketing for the brand,
moreover its recommended to choose the idea or the theme for the event close to the brand
values. For example, most brands use the different kids of sport to create the events like Adidas
and street ball championship, BMW and golf cups, Volvo and Volvo Ocean Race or Volvo
Fashion Week in Moscow. The creative idea of the event has to be in the balance with the brand
identity and the brand awareness among the customers. There are common and truly productive
ideas, which belong to fashion, leisure time, sports, culture, hobbies, the brand can prefer one
specific theme or it can use various directions.
The results of the research
Having decided to use the event marketing is crucial to find out the idea for the future
event or events, the company should follow this idea in every communication during the
managing the event marketing. Also its necessary to mention that before to decide about the
type of the event marketing, the company can hold the research in order to understand the
customer opinion or demand concerning the exact event. But at the most cases its not available
since of time or budget lacks.
In managing event marketing can be involved sales department and the sales stuff, as
sometimes it is the only way to estimate the efficiency of the event. Still, we have mentioned that
the event marketing is designed to reach the customer through emotions, so in this case the sales
stuff can be the person who can provide this role. People in the company usually share the brand
values, so for them its more convenient to deal with the potential clients as, for example, for the
out-sourcing companies.
About 70 car brands from over the world are represented in Russian car market and it
provides the customers with more then 250 car models. In 2007-2008 the new car market in

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Russia had been growing dramatically, before the global market recession, which starts in the
end of 2009. By saying the dramatically growth we mention the following, for example, the
Ford brand dealership Autoland in Yekaterinburg, Russia in 2007 has been managed to sale
6,580 Ford cars, in 2008 17,985 ones.
The market was rapidly growing so that time the company had very convenient
conditions to receive the potential clients. Its a common situation, that every international car
brand has a over seas head office and local, which is responsible the brand promotion in the
particular area. Usually the local head office provides dealerships with the strict guidelines for
every promotion activity, this means that in case of having several dealerships in the one area or
location, the competition in the field of advertising among the sales companies will be very
strong. And the event marketing can be used in order to reach the target audience.
Traditionally for the head office it is better for dealers to use the mass media
communications, as print layouts in magazines, spots in the radio or banners in the internet, the
main reason for this is that such a strategy allows to control dealers marketing activity without
addition power. But the additional activities in the dealers marketing plan bring the new
approach for the head office in the supervision the brand values. More over in many cases the
head offices of the car brands in Russia realize the importance of emotion tools in marketing
activities and they become a driving force in the event marketing activities for the dealers, the
car market has its own peculiarities in the sales approach to the customer, according to Henry
Ford theory, that says the best way to make sales is to provide the possibility of the driving
experience, thats why most of the companies offer the test-drives for the potential clients. In this
case we have a great possibility to combine the new driving experience with the emotions in the
event marketing activities, and it becomes possibly to attract additional attention of the target
audience since we deal with the values through the emotions.
The customer behavior during the new car choice can be managed by the event
marketing, and actually it is one of the efficient ways to get the customer, since the event
marketing helps to share the brand values. For promotion the car brands different kinds of event
marketing are appreciated, mostly they are the special test-drive occasions, the special holidays
and parties for the clients, the open-days and, for sure, a lot of events for the mass media
representatives.
Also the company has bear in mind that the event marketing can raise the brand value and
brans awareness among the target audience. The idea of the event marketing in car brands
promotion is to present, give a chance of the opportunity to share the new experience.
The customer behavior for sure has a significant impact to the sales result and its also
has a strong power to the brand awareness. In the German car association (ADAC), it is one the
powerful organization in the evaluation the car brands, is describing the positions of the car
brands in Russia. Among the most popular brands are the German car brands, this can be explain
as the existing strong believe in high quality of German cars, sometimes the customers share
their thoughts that its better to have an old German cat, rather then the Chinese one [3].
When we are describing the great growth in the car sales in Russia in 2007-2008, we have
to mention the premium segment enlargement, as it has an individual position, the premium
brands have about 5% share in the total Russian car market, but its growing too fast, more than
45% per year, that is more than 2 times bigger the middle brands. Concerning this addiction to
the premium brands the dealers have to be able to meet the potential customers needs, the
challenge is the following: how to manage the reach the customer in the efficient way.
One of the efficient tools in the event marketing is to organize the workshop; it means
that in the event, the company provides the opportunity for some kind of new experience for the
person and it can be connected not only with the driving. For sure, it can be driving the car
through the forest or in the real airplane road, which can provide the possibility to feel the engine
power. Or you can propose you audience to create the T-shirts, the photo frames and other with
the own design and using some brand design, we discover, that these workshops can develop

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both the positive things, like fun and entertainment and also they allow developing the new
knowledge.
Event marketing is some kind an atmosphere of the brand, of the company, and the
potential clients have an opportunity to decide about the product in very friendly, comfortable
way, more over, this marketing communications are always can be chosen by the person.
Conclusions
In our study we managed to reveal the connection between the sales and the event
marketing, in 24 months the dealership Autoland (the company distribute such brands as Ford,
Mazda, Volvo, Land Rover, Jaguar, Mitsubishi Motors, Hyundai, Honda since 1997 in four
Russian cities) held more than 59 different events for the potential clients and as a result it
become the number 1 company in sales in the region in 2007 and in 2008 according to the local
region overview by the Expert magazine. Also we compare the sales results in the situation when
event marketing does not used and this makes us sure that the event marketing can enforce the
sales due to the positive emotions, due to the better understanding the product, the brand identity
and as a result the event marketing can be possible to enhance the total brand cost.
Dealing with the event marketing involves a lot of activities, which should support the
whole event, for example, providing catering services or dealing the special presents for the
guests. Managing the event is a huge process and it requires the several steps:
1. The revealing the main goals and targets for the event.
2. The decision about the creative idea, which will be reflects the event.
3. The functional managing of the project by the advertising/marketing department or by
project agency.
4. The functional managing of the project by the sales department.
5. The efficiency event analyzing.
These basic steps permit to carry out the whole event marketing in a proper way in order
to reach the target customers. Its better to have the organizing meetings with all the involved
stuff to the event in order to discuss the basic achieves and to do the trouble shutting, and its
also better to have a timetable for every process in the event marketing in order to check the
invitation delivery time, to control the suppliers and so on. As for attendance of the event
marketing activities, the common number is more 30% of the invited guests.
As for the decision about goal its worth bearing in mind than the event marketing is very
close to the customer loyalty, mostly as it can help the brand to discover the new positive
emotions. When we speak about the customer loyalty we make sense of the following sales, but
its not enough for the current situation. The companies and the brand start to care about the
attitude, and in this point of view the customer loyalty includes the possibility to forgive any
troubles in the service or in the product, to prefer the companies products or services for the
presents on various accessions. As a result, the loyal customers are starting to share the brand
with the other groups of people, and the company receives this as an award for the efficient
marketing strategy, the role of the event marketing in customer loyalty is very important. These
conditions make the company to be very careful in organizing the event marketing, to pay
substantial attention to every detail, which will be dealing with the potential customer.
Before the start event marketing, its better to make a list of possible troubles and the
ways out, since the company usually deals with a number of the supplies, its significant vital to
have a possibility to make any changes in the necessary cases. Sometimes the company has to be
able to solve any problems immediately during the event and the target in this case is to do
everything in order to meet the audience requirements. Its obvious things, but in the real life
situation this can damage the whole brand identity. In event marketing management is crucial to
be possible to react any changes quickly.
The event marketing is very close to the emotional and experience of the real customer,
the companies can use this marketing tool as an additional or they can be focused on the creation
a specific or unique strategy for getting their clients. In this paper we also paid attention to the

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results of the event marketing usage, so we demonstrated that it can improve the brand
awareness, enlarge the number of the loyal customers and it can reflect on the company sales.
The event marketing is the emotional tool and through emotions of the target audience it helps
the company to obtain it's business goals. So the event marketing is becoming one the
comprehensive way to reach the target customers.

References
1. Advertising for People Who Don't Like Advertising / Laurence King, 2013 .
2. Haigh D. Brand Valuation: Measuring and Leveraging Your Brand / Brand Finance pic. May 2009
3. Jan Noel Kapferer, Vincent Bastien. The Luxury Strategy: Break the Rules of Marketing to Build Luxury
Brands Kogan Page, 2012 .

Barriers in Automotive World Trade

Mariya Tsybrova
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: marytsyb@gmail.com

The automobile industry is considered as a very complex and vital industry compared to
otherst. The U.S.A. is the most opened automotive market in the world. The automotive industry
has been a part of every major American trade development dating back since World War One
and is composed of three broad industries.
The most known and important form of trade restriction is a tariff, import quotas,
voluntary export restraints, and antidumping actions are also restrictions which are explained in
more detail. In this paper the trade restrictions/barriers that the U.S. imposes on the automobile
industry are analyzed. The paper deals with the current global automotive market, American new
foreign trade policy, the certain restrictions and there effects on different people groups within
the nation.
Introduction
Trade barriers are any of a number of government-placed restrictions on trade between
nations. The most common ones are things like subsidies, tariffs, quotas, duties, and embargoes.
The term free trade refers to the theoretical removal of all trade barriers, allowing for completely
free and unfettered trade. In practice, however, no nation fully embraces free trade, as all nations
utilize some assortment of barriers for their own benefit [6].
Tariffs are a fairly common form of trade barriers, and are essentially taxes on goods as
they cross the borders of a nation. Tariffs nearly always are placed on goods that are brought into
the country, as opposed to goods sold as exports, although in some cases they may go both ways.
Historically, tariffs were a large source of government revenue, as they could easily be collected
as a tax on ships as they landed in the nation.
Tariffs may be imposed for different reasons. Some tariffs are placed simply to earn
money for the government. This might either be a flat fee on an item, or it might be based on the
market value of the item. Other tariffs exist as a form of protectionism, to make imported goods
more expensive than they might otherwise be, in order to protect domestic industries. For
example, if a country has a fairly high wage, and high labor standards, the cost of producing a
single widget might be around ten units. If a nearby country can produce a widget for three units,
then imports of that countrys widgets could easily drive the domestic industry out of business.
So the country might place a restrictive tariff on widget imports, to make sure that domestic
widgets always remained competitively priced, or even to make it unfeasible for widgets to be
imported at all [6].

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 Subsidies are another of the common trade barriers, and are often placed to protect
domestic industries. Subsidies may actually be intended simply to make certain key goods
affordable to citizens of the nation, but the end result can still be to make imports non-
competitive. Many food crops, for example, are heavily subsidized, to ensure the citizenry has a
constant supply of affordable food. Steel is also often subsidized, to ensure a nation always has a
domestic steel supply, which can be crucial during times of war when normal shipping avenues
may be cut off.
An embargo can be seen as the most extreme of the trade barriers. Embargoes basically
prohibit the import or export of anything with another country. This is often done as a form of
punishment, or to try to force the country to undergo radical change internally as a result of a
weakened economic state. Historically, the embargo was used as a war tactic, and so was often
considered a declaration of war. In modern times, however, although the most brutal of barriers,
it is usually not viewed as an act of outright aggression, although a declaration of war is often
accompanied by an embargo.
Key findings
Barriers to entry are designed to keep out potential entrants from entering a profitable
market. The barriers to enter the automotive industry are considered substantial, a new company
must have the startup capital required to establish manufacturing capacity to achieve minimum
efficient scale which is prohibitive. Many automotive established companies are entering new
markets through strategic partnerships or through buying out or merging with other companies.
Previously, the barriers to entry for new markets were low; However once the U.S. invited
Japanese makers who began to offer quality vehicles in lower price markets compared to the
U.S. changed this. Not only has Japan had success, many large automotive companies have
globalized and entered foreign markets with varying degrees of success including, Asia, Africa,
and South America whose barriers to entry are similar.
What effects can these barriers cause? Barriers can cause restriction in competition or
increase prices on consumers. An import quota is a restriction placed on the amount of a
particular good that can be imported. Voluntary Export Restraints (VER) is a type of trade
barrier that is voluntary and is created by the exporting country rather than the importing one.
Also, instead of placing a quota on a number of goods that can be imported, the government can
require a percentage of a good be made domestically. The restriction can be a percentage of the
good itself, or a percentage of the value of the good.
A number of free trade bodies exist in the world to try to curtail the use of trade barriers
by nations. The World Trade Organization is perhaps the widest reaching of these bodies, and it
enforces strict rules against member nations, restricting the acceptable use of things like tariffs.
As a result, some countries have begun using trade barriers that are not tariffs, but have similar
effects. The European Union, for example, does not allow the import of many genetically-
modified organisms, which effectively bans the vast majority of food imports from the United
States. In recent years, groups like the WTO have begun to look at these forms of trade barriers
as well, and to strip them when possible [4].
Russia The implications of the WTO accession on longstanding market access issues.
Russia has concluded the 18 year process towards WTO accession and will formally accede to
the WTO in the course of 2012. Russia will, therefore, have to implement multilateral disciplines
which should help solve several longstanding bilateral market access issues, while helping
prevent the introduction of any new measures running counter to its WTO commitments before
formally becoming a WTO member.
First, accession to the WTO will also settle the Russian trade-related investment measures
in the sector of motor vehicles and their components. According to the agreed terms of
accession, the Russian investment programme will be exempt from WTO rules until 1 July 2018,
by when Russia will be phasing out these measures. At the same time however, a bilateral
agreement between EU and Russia establishes a compensation mechanism which would be

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triggered if EU exports in parts and components of motor vehicles decrease as a result of the
application of the Russian measures [2]. Also China continues to restrict U.S. producers of
autos, steel and beef from gaining access to its markets, and its protection of intellectual-property
rights remains inadequate, the U.S. Trade Representatives office said. While the Asian nation
has made progress opening its markets to foreign competition, some serious problems remain,
such as Chinas refusal to grant trading rights for certain industries, according to the agencys
annual report to Congress on trade barriers, released today. The USTR also released two other
reports covering health and regulatory trade barriers in China and other countries [2].
European automobile manufacturers respect the decision taken last year by the Council
of the European Union to give the Commission a mandate to open trade negotiations with Japan.
Indeed the 15 members of the European Automobile Manufacturers Association (ACEA) are
global players, with factories in all regions of the world. As such, they support multilateral
efforts to liberalise trade in automobiles. We are strongly in favour of FTAs that are balanced
and that provide real opportunities for export, stated Ivan Hodac, ACEAs Secretary General.
However we still have some reservations about an FTA with Japan. We question its potential to
create sufficient opportunities for European exporters to counterbalance the greater access to the
EU which Japanese manufacturers will gain as a result of tariff reductions [2].
Japan currently retains unique national requirements which add to the cost of imports,
without bringing benefits to the consumer. ACEA stresses the need for Japan to accelerate the
harmonisation of its vehicle standards with UN Regulations.Our industry requests that an EU
type-approved vehicle can be sold in Japan without the need for further certification or costly
modification. This is not the case today, explained Mr Hodac. European cars are amongst the
safest and cleanest in the world, so there is no reason why a car that is suitable for EU consumers
should not be suitable for Japanese consumers. ACEA also calls for Japan to revise the fiscal
and other privileges enjoyed by kei-cars (super-mini cars which are a creation of the Japanese
regulatory system), so that European sub-compact cars can compete on an equal footing. ACEA
urges for the real and effective elimination of non-tariff barriers in the car sector. We welcome
the fact that in twelve months the European Commission will assess whether Japans progress in
this regard is fully satisfactory, stated Hodac. If this is not the case, the Commission has
indicated that it will pull the plug on the negotiations. ACEA has suggested to the Commission
to set challenging, but realistic, targets for the first year of the negotiations. It will work
constructively with the Commission and other relevant stakeholders to ensure that Japan fulfils
its commitments to eliminate non-tariff barriers in the automotive sector.
The report examined a variety of trade barriers, including tariffs, export subsidies, buy-
national policies, bribery and corruption. In recent years, the United States has observed a
growing trend among our trading partners to impose localization barriers that favor domestic
industries at the expense of foreign competitors, the USTR said in the report. Preferential
policies for Brazils auto sector and Nigerias oil and gas sector were cited as examples. The
USTR said U.S. negotiators in 2012 were able to remove barriers to American beef in Japan,
kept open Chinas $1.3 billion market for fish and eased U.S. telecommunications exports to
Israel, among other achievements. Representatives Sander Levin of Michigan and Charles
Rangel of New York on March 28 asked the administration to curb Chinas alleged cyber theft of
trade secrets from U.S. companies. The lawmakers, senior Democrats on the House Ways and
Means Committee, want the USTR to designate China as a top violator of intellectual property
rights, which could lead to further trade restrictions [5].
Conclusion
As recently as a few decades ago, improving automotive trade opportunities meant
reducing tariffs and removing explicit bans. It was a relatively straightforward but contentious
process, mainly involving ministers of trade.
While there is still work to be done in this area, enabling trade today requires addressing
a host of less explicit, often unintentional barriers to trade by involving a range of players, many

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of whom might not see themselves as linked to trade issues. Mutual recognition of automotive
standards between the US and EU, for example, would require not only trade ministers, but also
transport, safety and environmental regulators from both sides of the Atlantic to come to the
bargaining table. Not unrelated to the partial success of tariff reduction, the automotive industry
itself has transformed into a more global value chain. The ease of importing goods is a crucial
contributor to success in exports, and efficient border crossings can mean the difference between
winning and missing out on major investments. The industrys global nature is beginning to
translate into a more unified industry voice for streamlining supply chains and reducing trade
frictions. While local workforce demands for protection are still heard, the consensus is growing
to at least debate the issues openly, unencumbered by tangential barriers and restrictions [1].
Many consumers are now looking for vehicles that are equipped with, air-bags, power
steering, antilock brakes, comfort, technology, and automobiles that reduce carbon going into the
atmosphere. Car manufacturing must met safety, environmental, and business standard demand
for international and domestic regulations. According to the future growth in the automotive
industry over the next decade is expected to come from places like India, China, and Eastern
Europe. Major companies are beginning to develop low cost cars, which include, Hyundai,
Toyota, Fiat and others. With the increase worries about environmental issues, Hybrid sales have
increased drastically. The U.S. and Europe are the main introducers of less pollutant and fuel
efficiency standards in vehicles [3].
What are the ramifications of it barriers? Restrictions or trade barriers seem only to limit
world trade, while also decreasing economic efficiency, reducing total production and
employment, raise prices, and even cause retaliation. Some domestic companies benefit at the
expense of foreign companies and workers, and domestic consumers. While subsidies do benefit
domestic companies and workers in exporting industries, tariffs decrease exports and shift
resources and production from more effective to less effective producers.
In conclusion, while Japan continues to force competition on the U.S. It causes damage to
the U.S car industry because of priced car exports. Causing the U.S. to now only represent s less
than of the world Industry and its market share continues to decline. Since 2007 the big
three has been falling drastically. Chrysler is now selling 53 percent fewer vehicles since 2007,
while GM is down 23% from 2007 and Ford 32%. Honda also saw declines along with Toyota
who was down 37 percent, Nissan 31% and Honda 35 percent. All of these drops have caused
oversupply in car lots, motivated dealers, easier financing terms, and long-term industry presence
driving down the price of gas, making now the perfect time to purchase automobiles.

References
1. Enabling Trade: From Valuation to Action- report of World Economic Forum
2. Measuring EconomicEffects of TechnicalBarriers to Trade on U.S. Exp. - report of RAND Science and
Technology
3. www.ukessays.com/essays/economics/automobile-trade-restrictions-economics-essay.php.
4. www.wto.org/english/tratop_e/tbt_e/tbt_info_e.htm.
5. REPORT FROM THE COMMISSION TO THE EUROPEAN COUNCIL. Trade and Investment
barriers Report 2012.
6. www.wisegeek.org/what-are-trade-barriers.htm.

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 The Job Characteristics Model
by Greg R. Oldham and J. Richard Hackman:
Analysis and Modern Implementation
in Human Resources Management of Organization
Alisa Uman
Ural State University of Economics
(Yekaterinburg, Russia)
E-mail: dcma-94@mail.ru; alisa.uman.94@gmail.com

Abstract
The present project is to analyze the Job Characteristics Model of R. Hackman & G.
Oldham and to observe the implementation of the theory in human resources management of
modern organizations so as to determine its importance for modern companies on the basis of
secondary data.
Key words: job characteristics model, motivating potential score, growth need strength,
job diagnostic survey, job crafting.

Introduction
Modern science has played a major role in shaping the modern way of thinking and the
modern world we live in. However, some older theories are still in demand, although often being
transformed and improved by the followers and the authors themselves. This is a vital piece of
information to researchers and businesses in the theory of Job Characteristics Model, as the idea
that satisfaction and job performance are directly related to one another is often cited in the
media and management literature.
Theoretical background
In 1975, Greg R. Oldham and J. Richard Hackman constructed the original version of the
Job Characteristics Theory (JCT). It was a framework for determining how job characteristics
affect personal job outcomes. This theory of work design provides a set of implementing
principles for enriching jobs in organizational settings. The original version of Job
Characteristics Theory proposed a model of five core job characteristics (i.e. skill variety, task
identity, task significance, autonomy, and feedback) that affect five work-related outcomes (i.e.
motivation, satisfaction, performance, and absenteeism and turnover) through three
psychological states (i.e. experienced meaningfulness, experienced responsibility, and
knowledge of results). In this theory the job outcomes are the synthesis of core characteristics
and psychological states.
The Job Characteristics Model is being widely used as a framework to study how
particular job characteristics impact job outcomes, including job satisfaction. Each job has these
characteristics to a different extent. Thus, there is no one combination of characteristics that
makes for the ideal job; rather, it is the purpose of job design to adjust the levels of each
characteristic. This should be very important because the worker brings psychological states to
bear upon the job, which in its turn affect job outcomes when combined with the core
characteristics. Therefore, for the employer the goal should be to design the job in such a way
that the core characteristics supplement to psychological states of the worker and lead to positive
outcomes. The five core job characteristics can be combined to form a Motivating Potential
Score (MPS) for a job, which can be used to determine how likely a job is to affect an
employee's attitudes and behaviors. Hackman and Oldham explained that the MPS is an index of
the degree to which a job has an overall high standing on the five characteristics...and,

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therefore, is likely to prompt favorable personal and work outcomes [2]. In addition, the authors
designed the Growth Need Strength index which is the degree to which a person has higher order
needs, such as personal development and self-realization.
New developments
Over the years since Job Characteristics Theorys introduction into the organizational
literature, there have been many changes to the field and to work itself. Social sources of
motivation are becoming more important due to the changing nature of work. More jobs are
requiring higher levels of client-employee interaction, as well as increasing interdependence
among employees. With this in mind, it would make sense to investigate the impact the social
aspects have on affective and behavioral outcomes.
While Job Characteristics Theory was mainly focused on the organizations responsibility
for manipulating job characteristics to enrich jobs there has been a considerable progress in the
literature regarding job crafting. In job crafting the employee has some control over his/her role
in the organization [1].
Despite of being of great help and significance, the model has its disadvantages, listed
below as criticisms:
no differentiation between objective and perceived task characteristics
employees must be willing to take advantage of the opportunities
the influence of social, technical or situational factors
no extrinsic factors
Practical implications
Job Characteristics Theory is of great importance within the work enrichment literature,
moreover the theory has become one of the most cited in the organizational behavior field. Job
Characteristics Theory has been used in a multitude of professions and organizations. In the
applied domain, Hackman and Oldham have reported that a number of consulting firms have
employed their model or modified it to meet their needs. What is more, some researchers even
reanalyzed the Job Characteristics Model using Relative Weights, etc. Thus, the organizations
have been using the Job Characteristics Model when assessing the influence of the working
conditions on the employees outcomes, which in turn, influence the prosperity of the whole
organization [4]. One of the latest implementations of the theory is the research study held in the
banking sector in Pakistan in 2012. The findings of Hackman and Oldham provided the
researches with the hypotheses proved in the survey.
The methods of collecting the data
The data was collected from the employees of 28 commercial banks of Islamabad
because all the commercial banks operating in Pakistan have their many branches there.
Moreover, the city was also convenient for the researchers who had been visiting personally the
banks for more than two months. The Primary data was collected though the questionnaire
adopted from job diagnostic survey questionnaire (Hackman & Oldham, 1975) for all the
independent as well as dependent variables. This questionnaire also had 12 reverse scoring items
which helped the researcher to determine whether respondents have filled the questionnaire
properly after reading it carefully or not.
As for analysis techniques, Statistical Package for Social Sciences (SPSS) was used to
analyze the Data. First of all, the demographic profiles of the respondents, mean, standard
deviation, and reliability (Cronbachs Alphas) of all the variables used in the study was analyzed.
Then, the relationships among the variables as hypothesized were tested.
Analysis of research results
The mean results provided an overview of existence of job characteristics in the
employees of banking sector with a little variation. Correlation results showed there was a
positive relationship between job characteristics and personal outcomes. The level of reliability
for all variables was recognized acceptable. As the main findings, a positive and significant

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relationship between job characteristics and general satisfaction, growth satisfaction and high
internal work motivation was proved.
Conclusions
This research revealed the existence of job characteristics in the banking sector
employees. Thus, job characteristics model can be very helpful in designing the jobs of banking
sector employees. The Human Resource Managers (HRM) of the banks must design the jobs of
the sector with paying proper consideration to the job characteristics. Moreover, the promptly
determined reduction in the level of the employees satisfaction due to fatigue, boredom from the
work, should contribute redesigning the jobs with the inclusion of these job characteristics to
rebuild the job satisfaction and motivational level of the employees [3].

References
1. Hackman, J. R. & Oldham, G. R. (1975). Development of job diagnostic survey. Journal of Applied
Psychology, 60, 159-170.
2. Hackman, J. R. & Oldham, G. R. (2005). How job characteristics theory happened. The Oxford
handbook of management theory: The process of theory development, 151-170.
3. Kalleberg, A.L. (1977). "Work values and job rewardsTheory of job satisfaction". American
Sociological Review 42: 124143. doi:10.2307/2117735
4. Asian Journal of Business and Management Sciences ISSN: 2047-2528 Vol. 1 No. 4 [206-216]
http://www.ajbms.org/articlepdf/ajbms_2011_1423.pdf.

Image Formation and Design of the City

by Advertising and PR
Yaranceva Daria Dmitrievna
PLC Alfa-Bank, 2 Kuznecova str., (Yekaterinburg, Russia)
E-mail: Yadasha@list.ru

Scientific adviser: Solosichenko Tatiana Zhorzhevna, candidate of economic sciences,

associate professor of marketing and international management department
of the Ural State University of Economics (Yekaterinburg, Russia)

Absctract
The article describes the importance of the city image for its development. The main
image characteristics of the city and the way it is formed by PR-tools are illustrated. There is an
example of image formation in Yekaterinburg by mass communication (communication activities
and tools that demonstrate the openness of territory for contacts).
Keywords: image, PR-tools, communication, mega-events.

Image of the city is a set of peoples beliefs and feelings, which arise according to the
citys features. This subjective view of the city can be formed by first-hand personal experience
(e.g., as a result of accommodation on its territory) or indirectly (for example, according to
eyewitnesses, media materials, etc.). The image of the city is diverse, emotionally colored and
sometimes artificially created. Its often a frivolous city image, which is formed in people's
minds. The most important tool of image formation is the mass media [1].
The main goal of the citys image is strengthening the position of this territory in regional
competitive fight for attracting target groups. We can distinguish the following target directions
of marketing territories:
attractiveness, prestige of the territory and the place generally;
appeal of territorys natural, financial, labor, organizational, social and other resources,,
as well as opportunities for realization and reproduction of such resources.

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 Image of the city is understood as a universal means of motivation and support for
communication processes between external partners, whether commercial or non-commercial
purposes are pursued. Having been formed at the micro level (at the level of the enterprise),
marketing is capable of balancing the interests of a great number of subjects of the market at the
level of the city. It is urged to realize the general direction of economy improvement with its
features and world changes.
Image as a set of emotional and rational concepts is an ambiguous concept. It mostly
depends on the person and the associations arising in relation to the city. However, image is not a
static concept, it varies under the influence of the changes happening in the city both in desirable
and undesirable directions. If the image is perceived as a due and doesn't receive constant
addition, it gradually dies off and turns from advantage into a disadvantage. [3]
The image of the city has positive or negative coloring or doesnt have it at all because of
lack of information at the public. As a rule, the image of the city becomes positive as a result of
purposeful formation. That unlikely could succeed attractive if it develops spontaneously.
Image of the city could have negative coloring due to lack of marketing efforts or
negative publicity from competitors.
In the government of most Western countries there are successfully working
informational and PR-services. Their task is to create a favorable background for the political,
social and commercial activities. Through timely informing government departments about the
possible effects from different actions state efforts can be made more transparent and clear for
the public. Information division of many states performs maintenance of PR-activity, creates and
distributes promotion films, photos, articles, organizes exhibitions, etc.
Nowadays, during the era of information transparency, if the country does not prioritize
respect of fundamental human rights and freedoms, the freedom of political elections and
freedom of the press it is impossible to achieve the image of a "democratic" state in the eyes of
the world.
Image of the city shows its economic strength, power, wealth, level of culture. Image is a
cumulative index of state authority and its success on the international level; it is the assessment
of the foreign public opinion about the country. [2]
The process of creating the international image of the city depends on the success of
foreign policy, internal policy features, the effectiveness of the economy, especially the society
mentality. Mainly the image of a city depends on the strategic development plan or how city
mayors see the image of it.
The promotional tools aimed at positioning and promotion of the city can be regarded as
a tool for forming the image of the city. For this purpose, you can use all the available channels
of mass communication, such as television, internet, radio, press, outdoor advertising, etc.
For the formation of the city's image PR- tools can be used.
The first and the most common tool is the Internet portal of the city. It lists the main
characteristics of the city and its tourist attractions, as well as investment opportunities for
business information services for citizens.
Another popular tool is the promotional material such as brochures, souvenirs and maps.
Foreign tourists but also locals usually purchase such trifles.
A very special tool of PR-communications is product placement in movies and territory
series. Due to this, the awareness about the city increases. [5]
Image of the city and can also be configured to move through the organization of specific
events (exhibitions, festivals), events (international, political) and the construction of information
events on this basis. A successfully organized event, gone beyond the scale of the city, can create
a strong city brand.
In other words, the event flow resonating with the general trends in the development of
events makes the area into a place where the modern history is created, which, in its way,

133
determines its global significance. Accordingly, for this event there must be a symbolic
character, an expression of something more than what is just actually happening.
In Yekaterinburg many strategic development programs have been implemented. Many
of them overlap with the scale of the country programs, such as " Yekaterinburg - Healthy City "
or " Education - Development Framework, the key to success." But most of them have been
aimed at the formation of a unique image within the country. The program "Financial Center of
the Urals ", "Yekaterinburg - a metropolis of culture and art", "Yekaterinburg - Industrial
Innovation Centre are all the examples.
When promoting the program " Yekaterinburg - Industrial Innovation Center " in order to
create a certain image of the city the main tools of mass communication - communication
activities and tools, demonstrating openness territory for contacts have been actively used. This
allowed outside actors to get to know the city, make sure in materiality of its existing
advantages.[4]
SCO Summit (June 2009), the Summit of Russia and the EU (June 2013), the exhibition
INNOPROM, EKSPO2020 became significant events for Yekaterinburg. In 2018 Yekaterinburg
will host the World Cup. Thanks to such international events and mega-events the image of
Yekaterinburg in the eyes of other countries has increased.
Results of such events are as following:
The city has become a hallmark of Russian regions in the face of foreign visitors not
only from the SCO and BRIC, but also from Europe;
The issue of giving Yekaterinburg the status of the subject of Russian Federation has
been raised.
The investment attractiveness of the city has been increased.
Yekaterinburg took the fourth place in the ranking of the most promising Russian cities
in the magazine "Russian Reporter.
Yekaterinburg took the second place in the ranking of "Top 100 best cities in Russia,"
compiled by the magazine "Kommersant. The secret of the company. " In this rating only the
cities with more than 100,000 people participated. To determine the best city experts used 13
criteria, combined into five indexes: financial, human capital index, social infrastructure, capital
construction, production and business.
Yekaterinburg is among ten most popular destinations for summer holidays and
business travel in Russia. The city is also of considerable interest to foreign business and
economic circles. According to studies, over 85% of visitors come for business purposes.
Furthermore, due to historical and economic prerequisites, business tourism becomes the main
area of growth of inbound tourism in Yekaterinburg.
Thus, we think that the image of the city, along with physical assets and human capital,
becomes an instrument of economic development. The opinion about the city, formed in the
minds of investors, residents and tourists, has a significant impact on the income of the
municipal budget, the export volume and dynamics of gross city product. Choosing the right and
effective PR-tools for forming the image of the city is an important point of its strategic
development.

References
1. Protsenko SN Image of the region as a key factor in the investment attractiveness: / / Marketing in Russia
and abroad / / 2007. - 9. - p. 43-50
2. Image of the city and the city's image design / / http://www.eff-com.ru/index.php?id=43
3. Russia's image. City, region, country. / / Proceedings of the conference chair of Russian politics / /
November 1, 2011
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 Problems of Export Competitiveness of Enterprises
in Kazakhstan and Their Solutions
Sairambay Yerkebulan Askaruly
South Kazakhstan State University named after M. Auezov
(Shymkent, Kazakhstan)
E-mail: S.A.Yerkebulan-77@mail.ru

Scientific advisor: D.A. Kulanova, Candidate of Economic Sciences, Senior Lecturer

Kazakhstan began a new stage in the development of market, social and democratic state.
It is based on the obvious and recognized by the international community achievements in
carrying out socially oriented market reforms, the creation of the basic institutions of civil
society and the democratization of the political system.
As stated in the letter of the Head of State N.A. Nazarbayev "Kazakhstan on the way of
accelerated economic, social and political modernization" Kazakhstan must enter the number of
effectively developing countries, creating a higher standard of living for its citizens. And we can
do this, when the nation's economy and become competitive.
Today, the development of entrepreneurial activity occurs in the face of strong
competition, on the one hand, and the obligation to meet the requirements on the other.
Execution of laws and regulations - direct responsibility to the state entrepreneur and the
consumer.
But whether the company will stand in front of the competition, will he find his "niche"
in the market - it largely depends on the correct choice of the mission and market strategy.
Entrepreneurial activity depends on several factors, among them a special place belongs
to the knowledge and understanding of the market. The manufacturer must desire to know the
customer and produce the products or services that will be in demand. At sufficiently saturated
market competitive products must meet the basic requirements - be necessary to enable
consumers, arrange it in quality and price. Find and identify customer requirements can be
through the use of modern methods of marketing analysis.
Competitiveness is determined only by the properties of products which are of significant
interest to the buyer. All other parameters are outside these boundaries are not considered in the
evaluation of its competitiveness as having no relation to it under certain conditions.
Development of a competitive market dictates the level and dynamics of product quality. In this
regard, the manufacturers having the planning and quality management, cost accounting, by
selecting a cost-effective option to achieve a certain level of it.
It must be emphasized that it is goods and services producers are manipulating objects in
the competition. The degree of effectiveness of these manipulations in a market economy
depends on its strong position in the market of goods and services and determines the level of
competitiveness, both products and businesses. After a competitive product is - competitive
enterprise. Competitive products - products that have higher consumer properties compared to
similar available on the market and are a result of this increased demand.
Competitiveness of goods and services, understood as their ability to be profitable to sell
in a particular market, is an essential characteristic of goods and services, which reflects the
difference between them and the corresponding analogues represented competitors. This feature
is integrated and is due to the following factors:
the quality of goods (services);
price;
costs in consumption ( operating costs);
quality of service.

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 These factors influence the formation of consumer preferences among consumers,
evaluating product (service) in the availability and quality of consumer properties in it.
Manufacturer of the goods (services) is interested in knowing the extent of influence of
each of the major factors that they have on the most important characteristic of the goods -
competitiveness. Scientists - economists by studies gave an answer to this concern. They found
that their impact in the sequence obeying the following ratio of 4:3:2:1. This ratio shows the
priority of these factors that must be considered in the formation of producer competitiveness
strategy. It should first be directed attention and resources on product quality (the degree of its
effect on the competitiveness 40%), and then successively on other factors ( the degree of their
effect on the competitiveness is respectively 30%, 20%, 10%). In assessing the use of aggregate
consumer properties of goods used another economic concept useful effect. Useful effect is
formed on the basis of the main factors the most competitive and linked to the quality of goods.
Quality of product (service) provides a potential explanation ability to meet local needs,
while the beneficial effect - this is the actual ability to meet this need explanation.
In practice, the useful effect is from 40 to 70% of the product quality. Than this
percentage is higher, the higher the level of economic feasibility. However, to increase it for the
specified limit unprofitable because there is an increase in production costs and the price of
goods, and hence reducing its competitiveness. Forming a competitive strategy, the manufacturer
must:
take care of the useful effects of their product by examining the needs, interests and
abilities of consumers, development trends of these indicators;
to study the behavior and capabilities of its competitors, the state and development
trends of the relevant goods.
Thus, the competitiveness of the goods - this is the optimal ratio of its quality, cost and
consumer properties. The ability to achieve such a ratio is a valuable quality producer. What is
the quality of the goods, which is a major component of its competitiveness? Encyclopedia
budding entrepreneur offers this definition: "Quality - the ratio value of the goods and the totality
of its consumer properties, sets on the market with free competition producers." R.A.
Fatkhutdinov practicing this concept a little differently: "The quality of the product - a set of
properties and product characteristics that give it the ability to meet the needs arising from or
alleged"
These properties and characteristics are formed in the regulations on the stage of strategic
marketing, specified in the technical documentation at the stage of scientific - research and
development - (R&D), materialized in the production stage, are implemented (used) during the
operational phase. In this chain, the most crucial step is the first - Strategic Marketing. At this
stage, developed standards, specifications or standards for products. This takes into account such
factors as quality: reliability, security, use, ecology, aesthetics, ease of operation and
maintenance, etc.
Due to high quality products and the corresponding price of Japanese, American
companies, firms and some other Western countries have exceptional competitiveness of their
products on the world market. It's common knowledge. They have achieved this by creating
effective quality management systems aimed at improving labor processes, the continuous
introduction of computer and microprocessor technology, new materials, automation systems
design and management. Considerable attention is paid to training personnel, corporate
education of patriotism and competition for quality. State and enterprises attach great importance
to the planning of production in terms of volume and quality indicators, strengthening the social
orientation of its economy.
Consider the following significant factor affecting the competitiveness - the price of
goods and services.
Price is the monetary expression of value of goods. In a market economy, it is set by
bargaining between the seller and the buyer, depending on supply and demand. Bargaining

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begins with what the seller asks for a price higher than that which is hoping to get, and the buyer
offers a price lower than that which expects to pay in the bargaining process mutually
determined price. In the future, it is a landmark in other transactions.
Chief appraiser of the goods is the buyer, so the seller has to provide for his transparency
and evidence of all the competitive advantages of their product, especially in quality and price.
Effective means for this is unobtrusive, intelligent advertising. Communicate the value and
utility of the advertised product must truthfully, with deep respect to potential buyers, and not as
it happens on our radio and television, where advertising has become a nagging "infinite series."
The purpose of advertising for the manufacturer to make potential buyers "their"
instead of antagonizing them.
There are several kinds of strategies that approaches to building competitive strategies
that are presented in Figure 1.
Strategies

growth strategy by hierarchy level by M.Porter

unchanged corporate cost leadership

internal growth business broad diversification

external growth functional optimal costs

reduction operational market niche

access to the
international market

Figure 1. Types of competitive strategies

Manufacturer 's important to know not only how to set a mutually beneficial price, but
what are its component elements to reasonably determine its level. These components are:
1. The total cost of production.
2. Costs of social labor.
3. Function and quality of the goods.
4. Tax deductions.
5. Costs for packaging, transport and storage.
6. Trading margin.
7. Advertising costs.
When developing a pricing strategy should have a defined purpose and strive for it,
achieving optimality these components. This can be achieved creation and implementation of
specific management system competitive goods.
Going into the international market in order to effectively compete rivals domestic
enterprises advisable to try their strength by improving the quality and competitiveness of their
products.
One of the domestic enterprises, firmly occupy the leading position in the market of milk
fat production is JSC "AMW - CMH". Not least its success due to high quality and competitive
products.

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 JSC "AMW - CMH" is a horizontally integrated company, formed on the basis of "
Karaganda margarine factory" and "Almaty margarine factory". Coordinating the work of
enterprises belonging to the association, provides "Almaty margarine factory". AO activities
aimed at developing a common strategic objectives association, reducing costs through
horizontal integration, development of a common strategy of behavior in the market, sell and
promote products and efficient allocation of resources. One of the main conditions of high
quality and individual approach to customers is the availability of domestic production of oil and
fat production, which is considered one of the best in Kazakhstan.
Almaty margarine factory is one of the largest enterprises of the food industry in
Kazakhstan. Popularity production of AMW is primarily due to excellent quality and
reasonable price. All food-manufactured under the trademarks 3 wishes and Masterpiece
manufactured on modern equipment manufacturers in Germany, Sweden, Austria, Switzerland,
which may dream venture oil industry not only in Kazakhstan, but also post-Soviet space . The
plant has a testing laboratory that produces quality control of incoming raw materials, production
process, finished goods receipt. Total AMZ CMH produces 50 kinds of products.
Product quality control at the plant is always done from the receipt of raw materials. The
whole process is closely monitoring the testing laboratory, equipped with modern technology
and participating in the development of prescription formulations.
With regard to raw materials, it comes from the best manufacturers, trusted partners, with
whom AMZ works for many years. The plant has long production linkages with other food
businesses which produce milk, vinegar, egg powder, cardboard and printing factories, oil
refineries, etc.
Availability of certified quality systems was an important condition for the association at
the conclusion of contracts for the supply of products, and most importantly effective means of
ensuring its competitiveness. Quality management activities is one of the priorities of JSC
AMW.
Study of needs and demands, desires and preferences of consumers JSC holds not only
the immediate work with real and potential buyers of their products, but also on the basis of
research intentions, perceived threats from their side. In this case study is conducted to not only
control the level of product quality, but also simultaneously improve its competitiveness on the
basis of the model of five factors that affect competitiveness.
Study M. Porter showed that traditionally existed three main business strategies, allowing
increasing the competitiveness of products.
1. Strive to become a manufacturer, producing products with the lowest cost in the
industry or business.
2. Quickly and better than the competition, to meet the needs and demands of consumers.
3. Focus on key market segments of its products.
JSC "AMW - CMH" adheres to these policies and not without success.
Strengthening its competitive position, the company monitors the quality and
competitiveness of their products to their advantageous position in the domestic market and for
the possible introduction of products to foreign markets. Knowing the opportunities and threats
of these competitors, AO seeks to prevent the crossing of its competitors and the range of
products or to take advantage of distance delivery.
The most famous brand of JSC "AMW" is the trademark "3 wishes", presented oils,
butter, margarine and mayonnaise, is well known in the domestic market and exported abroad.
To analyze the competitiveness of high-calorie mayonnaise was chosen Provence
brand 3 wishes. "Mayonnaise from the series 3 wishes occupies a huge share 69% of the
market mayonnaise Kazakhstan. This product has a high demand among Kazakhstani consumers,
making it a leader. Products of the brand 3 wishes, including mayonnaise and implemented
through their trading subsidiaries and representative offices are in 10 cities of Kazakhstan. Today
these products are exported to Turkmenistan (3%), Kyrgyzstan (6%), as well as in the southern

138
regions of the Russian Federation (9%). Note that the Russian mayonnaise market is the most
attractive, since Russian mayonnaise market is the second largest in the world after the U.S.
market. Market volume of mayonnaise in 2006 amounted to 551 thousand tons, which is 10.4 %
more than in 2005. Mayonnaise consumes 92 % of Russians. Therefore, JSC AMW KMZ
plans to increase its market share. To do this, JSC AMW CMH necessary to compare their
products with the products of the Russian market to more adequately establish the strengths and
weaknesses of mayonnaise 3 wishes. For this purpose, selected Russian mayonnaise brand
Makheev, which occupies a leading position among imported to Kazakhstan mayonnaise. In
addition, the growth rate of sales of the mayonnaise in Russia is impressive. If the growth rate of
the industry mayonnaise in Russia is about 10% per year, the pace of development of the market
for mayonnaise brand "Makheev" is 100% per year. This is despite the fact that mayonnaise
brand Makheev is a relatively new product in the market, and its sales increases since entering
the market. Such high rates of mayonnaise Makheev is due to the high degree of
competitiveness. Therefore, this mayonnaise is perfect for comparison. In analyzing the
parameters of mayonnaise brand 3 wishes will be compared with the parameters of competing
products and the reference parameters (taken as the standard requirements of the normative
document).
As competition between entrepreneurs like the battle of ideas in science, wins or has
advantages in it who this fight is better prepared, so their tactical and strategic objectives of the
JSC "AMW - KMZ" says:
Consolidating and developing competitive advantages listed above.
Diversification of production by expanding the range of products and reduce the life
cycle of each of them, from design to delivery to the customer.
Systematic updating production equipment and modern produce favorable long-term
orders.

References
1. Message from the President of the Republic of Kazakhstan Nursultan Nazarbayev on 28.02.2007.
2. Azoev G.L. Competition: analysis, strategy, practice. Moscow, 1999.
3. Bazarov T.Y., Eremina B.L. HR. Moscow, 2002.
4. Barinov V.A. Sinel'nikov A.V. organizational development in a competitive environment // Management
in Russia and abroad. 2000. 2.
5. Berdnikova T.B. Analysis and diagnosis of the financial and economic activity. Moscow, 2003.

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V Eurasian Youth Economic Forum

Congress of young economists

Management and Marketing Challenges

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Collection of scientific papers
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