FACULTATEA DE ŞTIINŢE ECONOMICE

Universitatea TRANSILVANIA din Braşov

Platforma / Laborator de Analize Statistice şi

Previziune a fenomenelor Economico – sociale şi

Cercetări de marKeTing

Editura Universităţii TRANSILVANIA din Braşov

RReevviissttaa

AASSPPEECCKKTT

Nr. 6

2010

FACULTATEA DE ŞTIINŢE ECONOMICE

Universitatea TRANSILVANIA din Braşov

RReevviissttaa

AASSPPEECCKKTT

Nr. 6

EDITURA UNIVERSITĂŢII TRANSILVANIA DIN BRAŞOV

2010

Revista ASPECKT

Director platforma/laborator de formare şi cercetare interdisciplinară ASPECKT

Prof. univ. dr. Liliana DUGULEANĂ

Comitetul de redacţie

Prof. univ. dr. Nicoleta PETCU - Redactor şef

Prof. univ. dr. Ileana TACHE

Conf. univ. dr. Marius DINCĂ

Lect. univ. dr. Mirela BABA

Lect. univ. dr. Alina TECĂU

Lect. univ. dr. Radu LIXĂNDROIU

Lect. univ. dr. Cristinel CONSTANTIN

Lect. univ. drd. Cristina ANTONOAIE

Comitetul ştiinţific

Prof. univ. dr. Liliana DUGULEANĂ – Editor şef

Prof. univ. dr. Nicoleta PETCU

Prof. univ. dr. Gabriel BRĂTUCU

Prof. univ. dr. Constantin LEFTER

Prof. univ. dr. Ana ISPAS

Conf. univ. dr. Constantin DUGULEANĂ

Conf. univ. dr. Dana BOŞCOR

Revista ASPECKT, ISSN 1844 – 1777

Platforma/laborator de formare şi cercetare interdisciplinară ASPECKT

Facultatea Ştiinţe Economice

Universitatea TRANSILVANIA din Braşov © 2008 – Editura Universităţii TRANSILVANIA din Braşov

Editor: Liliana Duguleană

Revista ASPECKT publică studii din toate domeniile ştiinţelor economice. Studiile trebuie să

conţină cercetări, idei, analize şi sinteze originale, cu caracter interdisciplinar. Studiile în

format electronic pot fi trimise pe adresele: ldugul@unitbv.ro, nicoleta.petcu@unitbv.ro.

CUPRINS

SURPASSING THE GLOBAL FINANCIAL CRISIS IN THE EUROPEAN UNION –

BETWEEN NATIONAL AND EUROPEAN

Ioana BANCIU (Lixăndroiu) …………………………………………...…………………………

5

MULTIPLE REGRESSION MODEL FOR GDP OF THE LARGEST EUROPEAN

SOFTWARE PRODUCER (GERMANY) IN THE 2000 – 2009 PERIOD AND

PREDICTIONS FOR 2010 – 2012 PERIOD

Axenia Bianca BOITOR …………………………………..……………………...……..…………

17

EXPERIMENTAL LEARNING CASE STUDY – “GLOBAL MANAGEMENT

CHALLENGE”

Evelina GRADINARU ………………………..……………...………………….…………………

23

ANALYSIS OF MARKETING MIX ONLINE RESERVATION SERVICIES IN

TOURISM . CASE STUDY : WWW.BOOKING.COM

Roxana Ştefania LUPU …..……..………………………...……………………...………………...

31

IMPLICATIONS OF THE WELFARE STATE INSIDE THE EUROPEAN UNION

Calin MUREA….…………………………..……………...………………….…………………

39

SMALL AND MEDIUM ENTERPRISES - A KEY ELEMENT TO FUTURE

EMPLOYMENT AND PROSPERITY IN EUROPEAN UNION

Carmen NICOLAE...……….……………………………………………………….…...………….

49

ANALYSIS OF MARKETING MIX IN CONSULTANCY SERVICES FROM HUMAN

RESOURCES DOMAIN. CASE STUDY: PROFILES INTERNATIONAL

Alexandra PALADE …………………...………..…………………….………………...………….

55

A MULTIVARIATE ANALYSIS OF THE ROMANIAN CAR HOLDERS’ ATTITUDES

AND BEHAVIOURS

Veronica PÎRVU …………………………………..…………………..…………..…..…………...

63

CORPORATE SOCIAL RESPONSIBILITY- BETWEEN THEORY AND PRACTICAL

APPLICATIONS

Anca POROŞNICU ……………………………………….………………................…………..…

71

ECONOMIC CONVERGENCE ANALYSIS WITHIN THE EUROPEAN UNION USING

ECONOMETRIC MODELS

Liliana Ionela SIMA …………………….……...…….…………………..………………...………

77

ANALYSIS OF THE BEER CONSUMPTION LEVEL IN ROMANIA Alexandra TĂLPĂU ………….…………………………..………………………………………...

89

ATTITUDES AND BEHAVIORS OF BRASOV POPULATION REGARDING THE

POSTAL SERVICES

Luminita TUDOR (Constantin)……………………………………………………………………..

97

5

SURPASSING THE GLOBAL FINANCIAL CRISIS IN THE

EUROPEAN UNION – BETWEEN NATIONAL AND EUROPEAN

Banciu (Lixăndroiu) Ioana

“Transilvania” University of Braşov, Faculty of Economic Sciences and Business

Administration

Abstract: The first part of the paper introduces the causes which have contributed to the

outbreak of the financial crisis, the wrongly implemented measures by some main banks by

periodically injecting funds for solving out financial crises which led to the current financial

crisis. Afterwards, Romania and the European Union’s economic situation, unemployment

rate and inflation level are analyzed. The last part of this project presents the macro-

economic perspectives foreseen by different institutions (the Forecast Committee, IMF, CEB)

for the European Union and Romania until 2016.

Key words: financial crisis, economic growth, economic crisis

Introduction

This project is an analysis of the causes which have triggered the financial crisis in the

European Union of its effects on the member states, as well as the measures of economic and

financial stabilization which these states adopted in this period.

The objective of this paper is of presenting the theoretical aspects and the causes of the

economic and financial crisis in the first part, Romania and the European Union‟s economic

evolution in the second part, prognosis on the BIP growth in the third part, the evolution of

the common ground indices of prices (fourth part), as well as the analysis of the evolution of

the unemployment and inflation rate, whereas, in the last part of the paper, there is a

presentation of the strategies of the monetary policies of the countries from outside the Union,

and some conclusions and recommendations on the measures and steps that must be taken

about the financial, economic and social crisis.

1. Theoretical aspects

The term of financial crisis applies to some situations when institutions or financial

goods lose suddenly a significant share of their value. The current crisis, called the „sub-

prime‟ crisis, is a financial crisis triggered by the abrupt fall of cash in credit global markets

and bank systems, caused by the failure of companies which invested in sub-prime mortgages

(high risk level).

The economic crisis is a stage of the economic cycle when there is a sort of goods

excess in comparison to the limited buying capacity of the population, which leads to

production decrease, bankruptcy, unemployment; it represents a stagnation and a disruption of

the economic life.

Economic growth is the BIP‟s rising evolution for a period longer than three consecutive

semesters.

The global economy entered in 2008 the most significant economic and financial crisis

after the Great Recession in the 30‟s. The crisis had a high degree of synchronicity, as both

developed and emergent countries were affected, proving in this way the significant growth of

6

the degree of interdependency of the world economies. Initially signaled in the United States,

the economic and financial crisis affected the European countries as well, both the EU states

and the other states that have not adhered to the EU yet. The effects of the turbulences on the

financial markets are evident around the world. On November 15th

2008, there was a summit

of the G20 leaders, for the support of the global economy, world economic growth and for the

implementation of the necessary reforms in the global financial systems. On this occasion, the

participants reasserted their commitment of continuing the efforts of sustaining the global

economy and of stabilizing the financial markets in order to set the ground for reforms and

economic growth.

Inside the European Union, each member state reacted differently to the causes of the

economic crisis which had different effects on each country and, as a consequence, the

measures that these states took for putting an end to the crisis are different. The problem, at

the level of the European Union, within the context of the reaction to the crisis, is that, on the

one hand, it failed to coordinate the options and then the solutions for ending the crisis, and

on the other hand, the different impact of the solutions as well as the different characteristics

of economies which triggered different performances in the economies of the member states.

The current crisis has multiple causes and the effects are immediate and long-lasting.

There were warning signals, but the size of the crisis, the impact and the contagious effects

were underestimated. It has been noticed that the structures of economic and financial

governing that existed before the beginning of the international crisis did not have the

coherence and the necessary authority for separating the prudential micro from the macro

supervision, as they relied excessively on the micro-prudential supervision from the basis to

the top of the financial institutions and on the monitoring at the country level of the macro-

economic indices, neglecting thus this aspect at the system level concerning the financial and

and macro-economic evolutions which might ask for the monitoring of the interactions

between the financial institutions and between countries.

Similarly, by the EU Treaties in the 90‟s referring to the free circulations of the money,

there has been an economic increase, but this free circulation of the money has not been

doubled by a harmonization of the economies‟ tax systems, by the settlement and an across-

boundaries European supervision at an adequate level.

The recent summit from Bruxelles (March 24th

2011), has brought together political

leaders from the whole world, having as topics both the financial crisis from the Euro area

and Portugal‟s difficult financial situation, after the resignation of the Portuguese Prime-

Minister, as a consequence of the rejection by the Parliament of a new austerity plan. An

important point on the agenda of the summit is the so-called „pact for the euro‟, the proposals

included in the pact which will be implemented by the member states refer to salary cuts for

the increase of productivity, the decrease of the work taxes, the adjusting of pensioning age to

life expectation, the establishment by legislation of a maximal level for public obligations as

well as a better coordination of the tax policy in the EU.

The monetary policies of the European Union are established by the Central European

Bank, and the Banks of the member countries form SBCE (The Central System of the

European Banks), which establish all by themselves the monetary policies, but according to

the Central European Bank regulations. Similarly, each member state has its own system of

tax policies.

The global disequilibrium, the settlement framework (settlement and supervision) and

the monetary policy as well as the complexity and opacity of the financiar products,

unsuccessful business models, are the main factors that contributed to the current financial

crisis, and the interests conflicts from the financial sector contributed, in some cases, to the

worsening of the crisis. Equally, the financial markets were characterized by a speculative

behaviour, some investors taking on extremely high risks, a phenomenon which gets ever

7

more serious by the oligopoly of the rating agencies (every market economy functions at its

best if it is accompanied by a democratic, transparent and multi-layered settlement correlated

with a healthy ethic and moral which encourage the financial and economic solid systems and

which does not affect the real economy).

It is likely that the monetary authorities to be responsive for this financial crisis; they

caused it by injecting cash and getting the credit cheap in order to cover prior crises, which

stimulated wild crediting till 2007. This behaviour reflected both the pressure that the crises

put on the central banks by the increase of incertitude, as well as the limits of the monetary

policy. Equally, a more important role of the money would allow to strongly emphasize the

importance of an institutional framework by a clear objective, with a high degree of

operational importance and an adequate degree of responsibility. Similarly, a new light would

be shed on the necessity of ensuring the stability of prices for average time periods. That

would reduce the tendencies for too ambitious adjustments and would diminish the reflection

of the market caprices in the decisions concerning the monetary policies.

These, and others, had as consequences the fact that the public deficit increased from

2,3% of the din BIP in 2008 to 7,5% in 2010, in the European Union and from 2% to 6,3% in

the Euro area (according to Eurostat), the rate of the public debt increasing from 61,6% of the

BIP in 2008 to 79,6% in 2010 in the European Union and from 69,4% to 84,7% in the Euro

area, baffling in a period of two years the budgetary strengthening efforts made by some

member states. Simultaneously, the crisis bore consequences on the workforce within the

Union, the rate of the unemployment in the EU, at the end of 2010, being of 11%.

In 1989, Cristina D. Romer and David H. Romer, published „Does Monetary Policy

Matter? A New Test in the Spirit of Friedman and Schwartz‟; Robert J. Shiller: „The

Subprime Solution – How Today‟s Global Financial Crisis Happened, and What to do about

It?‟; Ben Bernanke and Mark Gertler (1995): „Inside the Black Box: The Credit Channel of

Monetary Policy Transmission‟; Carmen M. Reinhart, Kenneth S. Rogoff (2009): „The

Aftermath of Financial Crises‟.

2. The analysis of the economic situation

In 2008, the increase of the BIP in the EU was already very low (0,8%), and in 2009

there was an average decrease of more than 4%. The recession was especially powerful in the

Baltic States, with negative rates between 14% and 18%. It was only Poland that enjoyed

economic growth in 2009 (1,2%). Yet, the forecasts indicate the first signs of economic come

back.

Table no.1 The evolution of the economic increase (BIP%) between 2000-2009, in the EU, the USA,

Japan and Romania.

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

EU 3,87 1,88 0,93 0,79 2,15 1,67 3,03 2,82 0,49 -4,10

Romania 2,1 5,70 5,1 5,19 8,39 4,17 7,9 6 9,42 -8,5

USA 4,17 1,09 1,82 2,50 3,58 3,05 2,67 1,94 -0,00076 -2,63

Japan 2,86 0,18 0,26 1,41 2,74 1,93 2,03 2,36 -1,20 -5,22 Source: Site of the World Bank

8

The evolution of the BIP between 2000/2009

-10

-5

0

5

10

15

20002001

20022003

20042005

20062007

20082009

years

BIP

%

EU Romania USA Japan

Fig. no.1 The evolution of the BIP between 2000-2009, in the EU, the USA, Japan and Romania (percent

change compared to the previous year)

Compared to the other states, Romania‟s BIP had in 2009 a dramatic fall, from 9,42%,

to -8,5%, whereas the European Union had a drop of only 4%.

3. Macro-economic forecasts

Forecasts of the economic increase for the next period were made by some institutions

(IMF, World Bank, National Forecast Committee, CEB), the results of the studies are

presented in the tables below: Table no.2 Forecasts of the economic increase (BIP%) between 2001-2016, worldwide, for the EU and

Romania.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

EU 2,1 0,8 2,2 1,7 3,1 2,9 0,4 -4,1 1,7 1,6 1,8 1,7

Worldwide 4,8 2,9 3,6 4,9 4,6 5,2 5,4 2,9 -0,5 5 4,4 4,5 4,5 4,6 4,7 4,7

Romania 2,9 5,7 5,2 8,5 4,2 7,9 6,3 7,3 -7,1 -1,3 1,5 4,4 4,3 4,2 4,1 4

Source: the site of the IMF

Forecasts of BIP increase %

-8

-6

-4

-2

0

2

4

6

8

10

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

EU Worldwide Romania

Fig.no. 2 Forecasts of the BIP increase until 2016

Table no 3 The evolution of the BIP in Romania, between 2007-2014 (Forecast- Percent changes

compared to the previous year)

Year 2007 2008 2009 2010 2011 2012 2013 2014

BIP% 6 9,3 -8,5 -1,9 1,5 3,9 4,5 4,7 Source: Forecast National Committee

9

The evolution of the BIP between

2007/2014(forecast)

6

9.3

-8.5

-1.9

1.53.9 4.5 4.7

-10

-5

0

5

10

15

2007 2008 2009 2010 2011 2012 2013 2014

Years

BIP

%

Fig. no. 3 The evolution of the BIP in Romania, between 2007-2014 (Forecast- Percent changes

compared to the previous year) Source: Forecast National Committee (November 5th 2010)

In the graphs presented above, the forecasts made by the Forecast National Committee

and by the IMF are favorable, for both Romania and the EU, and from this we can draw the

conclusion that there will be an economic increase for all states, although not significant, the

measures taken by the member states having positive effects.

As far as the economic increase is concerned, in Romania, it is possible that salary cuts

and VAT increase to have contributed to the fall of the demand under expectation, at the level

of households. In the first quarter of 2010, the private consumption decreased in comparison

to the second quarter of the previous year by 0,9%, and an increase of the tax on the salary

will reduce it even more dramatically. Similarly, the external demand for Romanian products

might decrease if the European economy slows down growth. Thus, the Romanian economy

might suffer. A steeper decrease of the economy would be reflected in the decrease of

budgetary income under the programmed level. The VAT income which is influenced by the

fluctuation of the production, increased slightly (due to the change of the VAT, a good

acceptance of payers and fairly high imports in May and June); yet, a slow in the economic

increase in Europe can trigger a decline of imports.

Based on the information available by the 18th

of February, 2011, CEB experts

elaborated forecasts concerning the macro-economic evolutions from the Euro area. As far as

the real BIP is concerned, they have forecast a yearly increase average rhythm between 1,3%

and 2,1% in 2011 and between 0,8% and 2,8% in 2012. It is believed that the rate of the

inflation will situate between 2% and 2,6% in 2011 and between 1% and 2,4% in 2012.

The real BIP in the Euro area increased by 0,3% in the fourth quarter of 2010, a level

equal to the one from the previous quarter. In perspective, it is estimated that the process of

economic recovery will continue, the internal demand becoming gradually the main trigger of

the economic growth by exceeding exports. This re-balancing of the economic activity

reflects the effects of the measures of the monetary policy form the previous period, as well as

the significant efforts made for the rebalancing of the efficient functioning of the financial

system. Despite this, it is estimated that the necessity for the re-sizing of balances in different

activity sectors, as well as the fiscal adjustment efforts with a view to re-establishing trust in

the sustainability of the public finance, included as hypothesis in forecasts, will affect the

perspectives referring to the economic growth in the Euro area. In yearly terms, judging by

the growth rhythm of 1,7% in 2010, the real BIP is forecast to grow by values between 1,3%

and 2,1% in 2011 and between 0,8% and 2,8% in 2012. Keeping in mind the forecasts

concerning the yearly growth rhythm which will be significantly lower compared to the

10

period previous to the crisis, it is anticipated that the BIP deviation will be reduced during the

forecast period.

Comparison to the forecasts of other institutions

Both the international organizations and the institutions from the private sector published a

series of forecasts for the Euro area. Yet, they are not strictly comparable to one another or

with the macro-economic forecasts made by the CEB experts because they were done in

different moments. Moreover, different methods are used (partly, unspecified) for obtaining

the hypotheses concerning the fiscal, financial and external variables, but also for the price of

the raw oil and of other raw materials. Eventually, there are differences between the adjusting

methods for the number of the working days from one forecast to the other.

According to the forecasts currently made available by other organizations and

institutions, the growth rhythm of the real BIP in the Euro area will be situated between 1,5%

and 1,7% in 2011 and between 1,7% and 2% in 2012, levels similar to the variation intervals

foreseen in the forecasts of the CEB experts. As far as the inflation is concerned, the available

forecasts anticipate that the yearly average rate of the inflation IAPC will situate between

1,3% and 2,2% in 2011. The majority of these forecasts are inferior to the interval presented

in the forecasts of the CEB experts, because it is possible that they had not taken into

consideration the recent increases of the prices of raw materials. The forecast referring to the

IAPC inflation for 2012 indicates inflation rates between 1,2% and 1,8%, falling into the

interval projected by the CEB experts.

Table no. 6 Comparison of forecasts referring to the growth of the real BIP and the IAPC inflation in the

Euro area. (average yearly percent variations)

Date of publishing BIP Growth IAPC Inflation

2011 2012 2011 2012

OCDE November 2010 1,7 2 1,3 1,2

European Committee February 2011 1,6 1,8 2,2 1,7

IMF January 2011 1,5 1,7 1,9 1,8

Survey of Professional Forecasters February 2011 1,6 1,7 1,9 1,8

Consensus Economics Forecasts February 2011 1,6 1,7 2 1,8

CEB experts forecasts March 2011 1,3-2,1 0,8-2,8 2-2,6 1-2,4 Source: The partial forecast of the European Committee, February 2011, for the data from 2011 and the forecast of the European

Committee from the fall of 2010, for the data for 2012; IMF Word Economic Outlook, October 2010, for inflation and World Economic Outlook Update, January 2011, for BIP increase; OCDE Economic Outlook, November 2010; the Consensus Economics forecasts and the

CEB poll applied to forecast specialists (ECB‟s Survey of Professional Forecasts).

Note: both the macro-economic forecasts of the CEB experts and the OCDE forecasts present yearly growth rhythms adjusted by the number of working days, whereas the European Committee and the IMF present growth yearly dynamics unadjusted by the number of

working days per year. The other forecasts do not specify if the data is adjusted or not by the number of working days.

4. Harmonized indices of consumption prices (HICP)

In a market economy, the prices of goods and services can change at any time. Some

prices go up, others go down. Inflation is when there a generalized growth of the prices of

goods and services, and not only of some specific items. When calculating the average growth

of prices, a greater weight is allowed to more expensive products (such as electricity), than to

cheaper products (sugar, post stamps). The weight of the groups of products is established

depending on their importance in the average budgets of the population‟s households. For an

indices to maintain its relevance, these weights are updated periodically (they are calculated

on the basis of the results of some polls when the members of households are asked to put

down their expenses). The weights represent national averages, which reflect the spending of

all consumer types (rich, poor, old).

To continue with, we have proposed to analyze the HICP for the Euro area, the recorded

data being presented in the next graph; similarly, we present the weight of the main groups of

products in HICP.

11

Fig.no.4 Weight of the main groups of products in the Harmonized Indices of the Consumption Prices

(HICP): The data refers to the HICP for the Euro area

The weight of the main groups of products in HICP

Household product

7,1

Health

4,2

Transport

15,1

Communications

3,2

Free time and culture

9,7

Education

1

Hotels and restaurants

9,4

Various

8,5

Houses

15,6

Clothing

6,8

Alchoholic drinks and

tabacco

3,7

Food and nonalchoholic

drinks

15,6

Table no.7 The evolution of the HIPC in the EU member states from outside the Euro area and from the Euro

area

(yearly percent variations) 2010 2010 2010 2010

2006 2007 2008 2009 2010 Q1 Q2 Q3 Q4

Bulgaria 7,4 7,6 12 2,5 3 1,9 2,9 3,3 4

Czech Republic 2,1 3 6,3 0,6 1,2 0,4 0,9 1,6 2

Denmark 1,9 1,7 3,6 1,1 2,2 1,9 2 2,3 2,5

Estonia 4,4 6,7 10,6 0,2 2,7 0 2,9 3,1 5

Latvia 6,6 10,1 15,3 3,3 -1,2 -3,9 -2,3 -0,3 1,7

Lithuania 3,8 5,8 11,1 4,2 1,2 -0,4 0,5 1,8 2,9

Hungary 4 7,9 6 4 4,7 5,8 5,2 3,6 4,3

Poland 1,3 2,6 4,2 4 2,7 3,4 2,5 2,1 2,7

Romania 6,6 4,9 7,9 5,6 6,1 4,6 4,3 7,5 7,8

Sweden 1,5 1,7 3,3 1,9 1,9 2,7 1,8 1,3 1,8

The United

Kingdom 2,3 2,3 3,6 2,2 3,3 3,3 3,4 3,1 3,4

Euro area 2,2 2,1 3,3 0,3 1,6 1,1 1,5 1,7 2

Source: Eurostat

The evolution of the HICP in the EU member

states from outside the Euro area and from the

Euro area

-4

-2

0

2

4

6

8

10

12

14

16

18

2006 2007 2008 2009 2010

Years

%

Bulgaria

Republica

CehaDanemarca

Estonia

Letonia

Lituania

Ungaria

Polonia

Suedia

Regatul

UnitZona euro

Romania

Fig. no. 5 HIPC evolution in the EU member states from outside the Euro area and from the Euro area

between 2006-2010

12

By analyzing the data from the above table and graph, we can notice in 2008 a peak of

the inflation rate in all the countries in the analysis, Latvia having the highest value, 15,3%,

and the lowest value of 3,3% inside the Euro area and Sweden. It is to be noticed that in 2010,

the HICP in Latvia is estimated at -1,2%, (stagflation, which means a stagnation of the

economy, of the inflation and of prices), the highest value being in Romania of 6,1%.

5. The analysis of the unemployment level and of the inflation

In December 2009, the unemployment in the EU was 8,9% in comparison to 7%, in

December 2008. Some countries were especially affected by the crisis. The rate of the

unemployment roughly doubled in 2009, in Ireland and Spain and tripled in the Baltic States.

Latvia (22,8%) and Spain (18,8%) had the highest rates by the end of 2009. Table no.4 Evolution of the unemployment rate between 2002-2009 (Percent change in comparison to the

previous year):

2002 2003 2004 2005 2006 2007 2008 2009

EU 8,9 9 9,1 8,9 8,2 7,1 7 8,9

USA 5,8 6 5,5 5,1 4,6 4,6 5,8 9,3

Japan 5,4 5,3 4,7 4,4 4,1 3,9 4 5,1

Romania 8,6 7 8,1 7,2 7,3 6,4 5,8 6,9

0

2

4

6

8

10

Unemployment

rate %

2002 2003 2004 2005 2006 2007 2008 2009

Years

Evolution of the unemployment rate between

2002-2009

UE SUA Japonia Romania

Fig no.4 Evolution of the unemployment rate between 2002-2009, in the UE, the USA, Japan and

Romania (percent change compared to the previous year)

In the next part of the paper we have analyzed the evolution of the rate of inflation

compared to the evolution of the unemployment rate in Romania between 2002-2009, the data

being presented in the next table:

Table no .5 Evolution of the unemployment rate and of the inflation between 2002-2009, in Romania

(percent change compared to the previous year)

2002 2003 2004 2005 2006 2007 2008 2009

Inflation rate 22,5

15,3

11,9

9,1

6,6

4,9

7,9

5,6

Unemployment

rate

8,6

7

8,1

7,2

7,3

6,4

5,8

6,9

13

Evolution of the unemployment rate and the

inflation between 2002/2009 in Romania

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009

Years

%

Inflation Unemployment rate

Fig no.5 Evolution of the unemployment rate and of the inflation between 2002-2009, in Romania

(percent change compared to the previous year)

On analyzing the data in the above table, we notice that in the analyzed period, the rate

of the inflation had a descending trend, from the value 22,5% in 2002, to the value 4,9% in

2007, while the rate of the unemployment is rather stable throughout the entire period

between 6 and 8%.

6. Strategies of monetary policy for bottoming down the inflation

The fundamental objective of the monetary policy in all the states member of the EU

from outside the Euro area is prices stability. The strategies of monetary policy are yet

different from one country to another: Table no. 6 Official monetary policy strategies of the EU member states from outside the Euro area

Monetary policy

strategy

Currency

Characterisitcs

Bulgaria

Currency exchange

objective

Bulgarian leva

Currency exchange objective: monetary council with a

parity of 1,95583 BGL/EUR.

Czech

Republic

Inflation target

Czech Koruna

Inflation target: 3%, with a variation interval of ±1

percent points by the end of 2009; afterwards 2%, with

a variation interval of ±1 percent points. Controlled

fluctuation of the exchange rate.

Denmark

Currency exchange

objective

Danish Krone

It participates in MCS II within a fluctuation range of

±2,25% around a central parity of 7,46038 DKK/EUR.

Estonia

Currency exchange

objective

Estonian Kroon

It participated in MCS II within a fluctuation range of

±15% around a central parity of 15,6466 EEK/EUR, by

maintaining the monetary council in a one-sided

decision. On January 1st 2011, Estonia has adopted

Euro, replacing the Estonian Kroon with a fix and

irrevocable exchange rate of 15,6466 EEK/EUR.

Latvia

Currency exchange

objective

Latvian lats

It participates in MCS II with a fluctuation range of

±15% around a central parity of 0,702804 LVL/EUR.

Latvia maintains a fluctuation range of ±1% by an one-

sided decision.

Lithuania

Currency exchange

objective

Lithuanian litas

It participates in MCS II with a fluctuation range of

±15% around a central parity of 3,45280 LTL/EUR.

Lithuania maintains the monetary council by an one-

sided decision.

Hungary Inflation target Hungarian forint Inflation target: 3% for an average period beginning

14

with 2007. Free fluctuation of the exchange rate.

Poland

Inflation target

Polish zloty

Inflation target: 2,5% ±1 percent points (IPC yearly

variation). Free fluctuation of the exchange rate.

Romania

Inflation target

Romanian leu

Inflation target: 3,5%, within a variation interval of ±1

percent points for the end of 2010, 3,0%, with a

variation interval of ±1 percent points for the end of

2011, and the end of 2012 respectively, and 2,5%, with

an interval of variation of ±1 percent points for the end

of 2013. Controlled fluctuation of the exchange rate.

Sweden

Inflation target

Swedish krona

Inflation target: 2% IPC variation. Free fluctuation of

the exchange rate.

The United

Kingdom

Inflation target

Pound

Inflation rate: 2%, measured by IPC yearly variation. In

case of a variation greater than 1 percent point, it is

expected that the Governor of the Bank of England

address an open letter on behalf of CPM to the Ministry

of Finance. Free fluctuation of the exchange rate.

Source: SEBC. Note: In case of the United Kingdom, IPC is similar to

IAPC.

The Central Banks of Hungary and Romania maintained the highest rate of the monetary

interest in 2010 (5,75%, respectively 6,25%, at the end of the year) which reflects higher

levels of the inflation and of the risk bonuses in comparison to other member states of the EU

from outside the Euro area. In case of Romania, the high level of the monetary policy

interest‟s rate reflected at the same time the objective of the Central Bank for counteracting

the risk of the effects generated by the shocks on the part of the offer: the increase of VAT in

July and the going up of the prices of food and energy.

7. Conclusions

The answers to the financial global turbulences in Europe are not similar in all countries.

The causes can vary and there are different national context – as a consequence, there cannot

be a unique reform. Yet, as an answer to the global financial turbulences and of the direct

consequences on the European banks, the public European authorities made plans for

supporting the financial system, by either supporting or saving the banks.

The monetary policy in Romania proved at times inefficient as a consequence of the

weak reactions of the economy to the adopted measures, due to the absence of the support of

the other components of the stabilization policy. Even if the monetary policies were oriented

towards the support of the internal and external stability of the national currency, the results

proved more often than not destabilizing, by inducing important pressures on the prices in

economy. The inflation seems to be the main cause of unbalances, the disturbing factor of the

economy, in its fight for macro-stabilization. The adoption of the monetary anchor seems to

have been the only viable solution foe ensuring macro-economic stability. The existence of a

low level of inflation leads, in the long run, to economic growth, even if, for a short period,

the first cost of this situation is represented by the existence of a high level of unemployment.

Recommendations about the measures and initiatives that should be taken with

reference to the financial, economic and social crisis:

- an equilibrium should be found between the need of taking measures which should

help to the preservation of financial stability and the need to preserve the capacity of the

banks of offering credits to the economy; it is important that the bank system should be able

to fulfill its tasks in both crisis and normal times;

15

- the banks need to detail in their clearing system in case of a crisis;

- CEB has a strong role in the European Committee for Systemic risks, by bringing an

important contribution to the financial stability in the EU;

- the introduction of new standards for statistic data referring to the financial sector, by

consolidating the capacities of the European Committee for risk monitoring and supervision;

- the encouragement of the financial innovation on condition that it leads to the

development of some transparent instruments which allow the financing of technological

innovation of a useful sort, of long-term investments, of pension funds, of employment;

- for the revitalization and for relieving the crediting process to judicial and physical

persons, it is essential to find some long-term solutions for solving the difficulties related to

the enormous value of the public debt, which presses on both households and factories;

- an increased transparency in the relations between the member states and in their

relationships with the main financial institutions.

In conclusion, for putting an end to the crisis, long term solutions are necessary, but

they should be immediately applicable and with immediate effects, having as objective the

stabilization of the financial system and the stimulation of the economic growth and of the

employment. We consider that economic reestablishment will be difficult for some member

states, especially for those that received communitarian assistance on payment sheets, and

which do not have currently real opportunities for creating plans of national reestablishment,

with elements which allow the stimulation of the growth and of the employment, because

these states do not do anything besides cutting down on the public spending, tax growing and

cutting down on the brute public debt.

References

1. Bernanke, Ben & Gertler, Mark: „Inside the Black Box: The Credit Channel of

Monetary Policy Transmission‟, 1995, New Zork University;

2. Reinhart, Carmen M. & Rogoff, Kenneth S.: „The Aftermath of Financial Crises‟,

2009.

3. Romer, Cristina S. & Romer, David H.: „Does Monetary Policy Matter? A New Test

in the Spirit of Friedman and Schwartz‟, 1989;

4. Shiller, Robert G: „The Subprime Solution – How Today‟s Global Financial Crises

Happened, and What to do about It‟;

***Annual Report of the Euro Area - 2009; The European Committee

***Economic Crises in Europe: Causes, Consequences and Responses; 2009, The

European Committee

***European Economic Statistics – edition 2010; Eurostat (statistical books)

***Global Financial Stability Report – April 2011; IMF

***General report on the activity of the European Union – 2010; The European

Committee

***Global Economic Prospects; 2010 The International Bank for Reconstruction and

Development / The World Bank

***Forecast of main macro-economic indices for 2010 – 2014 (Fall forecast- 5

November 2010) National Forecast Committee

***The Cohesion policy: strategic report for 2010 about applying the programs between

2007-2013;2010, The European Committee

***Convergence Report – May 2010; CEB

***Taxation Trends in the European Union- Data for the EU Member States, Iceland

and Norway; edition 2010; The European Committee, Eurostat

16

***World Economic Outlook- April 2011; IMF

- http://www.ecb.int/stats/html/index.en.html

- http://www.mfinante.ro

- http://www.intrastat.ro

- http://www.stiucum.com/finante/sisteme-fiscale/344/sistemul-fiscal-al-Frantei

- http://www.bundesbank.de/index.en.php&ei

- http://www.ec.europa.eu

- http://www.insse.ro

- http://www.worldbank.com

- http://www.imf.org.com

- http://eurostat.eu

17

MULTIPLE REGRESSION MODEL FOR GDP OF THE LARGEST EUROPEAN

SOFTWARE PRODUCER (GERMANY) IN THE 2000 – 2009 PERIOD AND

PREDICTIONS FOR 2010 – 2012 PERIOD

Drd. Boitor Axenia Bianca

Scientific coordonater : teacher Brǎtucu Gabriel

University Transilvania of Braşov

Abstract: The German economy - the fifth largest economy in the world in PPP terms

and Europe's largest - is a leading exporter of machinery, vehicles, chemicals, and

household equipment and benefits from a highly skilled labor force. As Europe's

largest economy and second most populous nation (after Russia), Germany is a key

member of the continent's economic, political, and defense organizations. The service

sector contributes approximately 71% of the total GDP, industry 28%, and

agriculture 0.9%. The average national unemployment rate in 2010 was about 7.5%.1

Keywords: GDP, multiple regression, prevision, software.

1. INTRODUCTION

This paper has as designation the achievement of a multiple regression model wich

will explain the evolution of the Gross Domestic Product of Germany in the 2009 – 2012

period with an accuracy near to 90% - 100%. Germany is the european contry that has given

to the world more the 40% of the european software produsers. The production of software

influences the GDP and the competitivness of the country. With the help the te multiple

regression model, the paper aims to explain and predict the evolution of the Gross Domestic

Product of Germany.

2. THE METHOD OF THE REGRESSION

The method of the regression analyses the existent relations between the explained

variable and the explanatory variables, based on the observed data for these variables. It can

be determined which of the factors have a significant influence and, knowing the influence of

the factorial variables over the variation of the analyzed phenomenon, previsions of the

variation of the y variable can be made according to the existent values of the x variables.2

So, the multiple regression was realized with the help of the Microsoft Excel program

and it includes the influence of the following macroeconomic indicators: labour productivity,

exports and the occupied population of Germany recorded in the analysed period.

3. ANALYZING THE GERMANY’S GDP

For the analyse of Germany‟s GDP with the help of the multiple regression model, the

following indicatiors were taken in to account: labour productivity, exports and the occupied

population. The next table presents de values of the used indicators for the multiple

regression:

1 https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

2 Duguleană l., Course of Statistics in business, University Transilvania from Braşov, 2008

18

Table 1. Values of the indicators in the 2000 – 2009 period

Year

Real GDP

( mil. of euros)

Labour productivity

(euros./pers.)

Exports

( mil. of euros)

Occupied population

(mil. of pers.)

2000 2062,500 67,87 545,249 39,047

2001 2113,160 67,44 638,269 39,208

2002 2143,180 68,56 651,322 38,991

2003 2163,800 70,22 664,180 38,636

2004 2210,900 71,66 731,544 38,796

2005 2242,200 72,32 786,265 38,757

2006 2326,500 72,56 893,041 39,021

2007 2432,400 74,20 962,326 39,693

Sourse: www.imf.org

After the correlation coefficients between the real GDP and the 3 variables (labour

productivity, exports and occupied population) were calculated, it was observed that between

the real GDP and the labour productivity exists a very strong connection determinated by a

value of the correlation coefficient of 0,954243851. Also, the connection between the real

GDP and the country‟s occupied population is strong (the value of the correlation coefficient

is 0.7658), and the strong connection between the real GDP and the exports is determined by

the value of the correlation coefficient between them of 0.9563.

Next are presented the following charts to establish also the direction of the

connection between the 4 economic indicators.

Following the structure of the cloud of point in the first chart, it can be seen that the

connection between the real GDP and the labour productivity has a strong and positive

intensity.

19

Following the structure of the cloud of point in the second chart, it can be seen that the

connection between the real GDP and the occupied population has a strong and positive

intensity.

Following the structure of the cloud of point in the above chart, it can be seen that the

connection between the real GDP and the country‟s exports has a strong and positive

intensity.

Next, it will be determined the theoretical values of the Germany‟s real GDP in the

2000 – 2009 period. The values will indicate the influence of the 3 economic indicators over

the evolution of the real GDP. Also, with the help of the multiple regression, it can be

determinate the model which will explain best the influence of the variables over the analyzed

factor.

20

Table 2. Calculation of the multiple regression

Regression Statistics

Multiple R 0,997741599

R Square 0,995488299

Adjusted R Square 0,993232449

Standard Error 11,88957587

Observations 10

ANOVA

df SS MS F Significance

F

Regression 3 187145,7016 62381,90052 441,2918195 2,005

Residual 6 848,172086 141,3620143

Total 9 187993,8736

Coefficients Standard

Error t Stat P-value Lower 95% Upper 95%

Lower 95,0%

Upper 95,0%

Intercept -

1912,992536 390,1844715 -

4,902790028 0,002703269 -

2867,739544 -

958,24553 -2867,7395 -

958,24553

X Variable 1 21,00500835 2,88743741 7,274619454 0,00034343 13,93970354 28,070313 13,939704 28,070313

X Variable 2 0,43798303 0,058243267 7,519891186 0,000286368 0,29546689 0,5804992 0,2954669 0,5804992

X Variable 3 59,46709528 10,33856251 5,751969405 0,00120229 34,16954414 84,764646 34,169544 84,764646

After the calculation of the multiple regression model with the help of the Microsoft

Excel program, it came up the next function model for the calculation of the theoretical real

GDP. Because all of the coefficients of the 3 variables and of the constant are not significant

different from 0, all the constants and the variables included in the model will be taken in to

account at the calculation of the theoretical values. For Multiple R we have a value of 0.997

which represents a strong correlation between the dependent variables and the independent

variable. R square is equal with 0.995 meaning that the linear model is valid, and the

independent variables explain in a proportion of 99.5% the variation of Y. The values of P are

very good for all the three variables, being smaller that 5% and the intervals of confidence

don‟t include the value 0, meaning that they do not change their signs from “-“ to “+”. The t-

Student test indicates that all the estimators are significantly different from 0. The theoretical

value for the Student test is 2.52, which is smaller than the computed values in absolute

values.

We have the folowing function:

Y = 1912,992536+21,00500835*X1+0,43798303*X2+59,46709528*X3,

Where:

Y = theoretical real GDP (2006 mil. of euros);

X1 = Labour productivity ( euros/employee);

X2 = Occupied population ( mil. of pers. );

X3 = Exports ( mil. of euros);

Folowing the calculation with the help of the function, we have the next values of the

theoretical real GDP:

Table 3. Values of the theoretical real GDP:

Year Theoretical real GDP ( mil. of euros)

2000 2073,439 2001 2114,722 2002 2131,060

21

2003 2150,449 2004 2219,716 2005 2255,227 2006 2322,733

2007 2427,489 2008 2488,692 2009 2389,413

Next it will be presented the prevision for the next three years of the variables from

the chosen model and the values of the theoretical real GDP calculated with the help of the

model for the years 2010, 2011 and 2012.

Tabel 4. Previsions of the variables from the model

Year Labour productivity

(euros/employee.)

Exports

( mil. of euros)

Occupied population

(mil. of pers.)

Theoretical real GDP

(mil. of euros)

2010 73,62 1000,631 39,817 2439,454

2011 73,99 1043,297 39,928 2472,574

2012 74,37 1085,964 40,038 2505,693

After knowing the previsons of the variables, we calculated the lower and the upper

limits adequated to the previsons of the theoretical real GDP for the 2010 – 2012 period.

Between this values the real GDP of Germany will be found in 2010, 2011 and 2012.

The formula for the interval of confidence is:

]1)([ˆ 122/

1

hthtknhtht XXXXtyICy

After following all the steps for the forcast, we came up whith the next intervals and

values:

Table 5. The lower and the upper limits of the future values of the real GDP

Year Theoretical

real GDP

Variance of the residual

error

Lower limit Upper limit

2010 2439,454 15,33996 2401,918 2476,989

2011 2472,574 16,33955 2432,592 2512,555

2012 2505,693 17,43345 2463,035 2548,352

22

2000,000

2100,000

2200,000

2300,000

2400,000

2500,000

2600,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Mil.

of

eu

ros

Year

Fig. 4 The evolution of the real GDP, the adjustment of the indicator in the 2000 - 2009 period and the previsons for 2010 -

2012 period

Real GDP Theoretical GDP

Because the R square value is 0.9955, the chosen model explains the evolution of the

real GDP very good, in a proportion of 99.5%.

4. CONCLUSIONS

As you can see from the charts, the previsions for the real GDP in Germany for the

period 2010 – 2012 represent a growth that will be found between the two limits of 2401,918

mil. euro and 2476,989 mil. euro for the year 2010, between the two limits of 2432,592 mil.

euro and 2512,555 mil. euro for 2011 and between 2463,035 mil. of euros and 2548,352 mil.

euro for 2012.

Even the previsions calculated with the help of the multiple regression indicates an

economic growth for Germany in the next 3 years, this fact is not certain because of the global

events that will affect Germany‟s economy in the next years to come as it did so far.

Literature:

1. Duguleana L., Curs statisticǎ în afaceri , Universitatea Transilvania, Braşov, 2008

2. Internationl Monetary Fund, World Economic Outlook (October 2010)

3. https://www.cia.gov/library/publications/the-world-factbook/geos/gm.html

23

EXPERIMENTAL LEARNING

CASE STUDY – “GLOBAL MANAGEMENT CHALLENGE”

Evelina GRADINARU, student at Masters of Marketing Policies and Strategies

Transilvania University from Brasov, Faculty of Economic Sciences

Coord. Lect. Dr. Cristinel CONSTANTIN

Abstract: The present paper contains an analysis of marketing mix elements in

management consulting services, focusing on a case study of the largest competition

in the world of strategy and management, Global Management Challenge. It also

provides information on how this business simulator works and the advantages of

using such a method of experimental learning.

Key words: development, management consulting, business simulator.

1. INTRODUCTION

The theme of the present paper is called "experimental learning". The concept of

experimental learning is based on the idea that the best way of learning is by practice and that

you cannot just absorb the knowledge of others, it is also necessary to create your own, as a

result of the experience gained over time.

The case study was conducted on the business simulator Global Management

Challenge.

This product, distributed in Romania by Dima Consulting Group and Profiles

International, was of great interest to me as it is the largest strategic management competition

in the world that addresses both staff and students. The contest, which was attended by over

400,000 people currently relies on an interactive business simulator designed to enable direct

experimental learning of strategic management mechanisms of a business in a competitive

environment.

In this paper I will present some aspects regarding the market of management

consulting services, followed by theoretical concepts found in the dedicated literature. The

main objective is to analyze the marketing mix strategies used by the Global Management

Challenge simulator, which allowed it to achieve first place in management competitions.

2. THE MANAGEMENT CONSULTING SERVICES MARKET

Management consultancy services are inextricably linked to the business services

market in Romania. In statistical terms, the market for business services is a part of marketing

services, representing those services that are subject to sale and purchase on the market,

regardless of the moment of payment, price and type of collection methods.3

3 National Institute of Statistics - Romanian Statistical Yearbook 2009

24

Management consulting has its origins in the United States, from over 100 years ago.

Nowadays, it is present in almost all areas of business. However, the most important areas of

interest in consulting underwent radical changes, especially over the last decades. Interest in

management consultancy has grown considerably in recent decades, given the increasing

volume of trade between business partners in this market, and the impressive size of some of

the actors involved. Literature addressing this area has focused on its evolution, namely the

explosive development in the last decades of the 20th century, but also on the factors

influencing this trend.

The state of knowledge regarding the issue of management consulting services was

synthetically approached by M. Kipping who identified three levels of analysis in the field of

management consultancy services (Table 1).

For each of these three levels, the analysis is focused on the following basic elements:

the system, the basic units in the system, the system structure, interactions between basic units

and the role of knowledge.

Table 1. The three levels of analysis in management consultancy

Elements I level II Level III Level

The system Industry Firm Project

Basic units Firms Employees Project relations

The structure Concentration Organisation Networks

Interactions Competition Collaboration/Competition Trust

The role of

knowledge

Product Processing Transfer/Transformation

Source: Adapted from McKenna, C.D. – The Worlds Newest Profession: Management

Consulting in the Twentieth Century. Cambridge University Press, 2006, pg. 3

At the first level of analysis proposed by McKenna, the basic units of the system,

represented by management consulting, are the consulting firms. Inputs and outputs of these

organizations are vital to the structure of the industry and can be described by different

degrees of concentration. Interaction is characterized by competition and the role of

knowledge is mainly to provide basic units with a certain 'product' within the industry. In

order to analyze management consulting from this perspective it is necessary to conduct

historical studies in different situations.

On the second level, the system is represented by the firm and the base units are the

employees. Inputs and outputs, represented by the recruitment and resigning processes, play

an important role in the system structures, which is represented by the firm's formal and

informal organization. Employees cooperate in different projects, but at the same time,

compete for a certain status or other rewards within the organization.4

The third level of analysis aims to analyze the interaction between consultant and

client, namely the ways in which consultants transfer knowledge to beneficiaries.

At this level, the system consists of individual projects and the basic units are made up

of relationships that are created within the process generated by conducting these projects.

In this area we find large companies, SMEs and independent practitioners who provide

a wide range of services such as identification and recruitment of executive staff,

psychometric testing, project management, trial consulting, coaching and training, etc.

Practical experience in terms of management consultants has shown that expertise,

know-how, skills and experience of service providers, and management consultants

4 Sadler, Ph. – Management Consultancy. A Handbook for Best Practice. Kogan Page, 2001

25

respectively, make up the physical support that form these services, while the management

consultant can assume the role of knowledge transfer as he has accumulated through study

and practical experience considerable information on how to act and managerial procedures

applicable in different situations.

Business success is achieved when the management is developing a strategy and an

organizational form perfectly adapted to the environment in which the organization operates.

In this context, success is seen in the company's ability to provide customers with better goods

and services than its competitors.5 This involves the phenomenon of change and competition

always generates new products and technologies that create added value for consumers. That

is why, for most businesses, success is only a passing phenomenon.

The main challenge brought to companies by the XXI century is to identify the

resources needed to achieve a sustainable long-term competitive position and generate value

and profit to all parties directly involved. At the same time, organizations must constantly

adapt to ever higher standards regarding new services, systems of relationships and business

models, many based on Internet technology.

3. THE MARKETING MIX IN THE MANAGEMENT CONSULTING

SERVICES MARKET

The concept of service poses an issue of great interest nowadays, an important role in

this respect being held by a number of concepts such as "new economy" or "service

economy", which underlines the importance of services in the process of economic

development. One of the first authors that dealt with such concepts is Alvin Toffler6, with his

paper called "Third Wave".

From Ph. Kotler‟s point of view a service is represented by any action that a subject

can perform for another, which is essentially intangible and does not result in transferring

ownership of assets. Its production may or may not be related to that of a commodity.

The marketing mix is the set of marketing tools (product, price, placement and

promotion) that are put together by a company to produce the response that it wants from the

targeted market. With services, however, the concept is extended to the 7Ps, adding to the

initial model: personnel, process, evidence (physical evidence).

The product is anything that can be offered to the market in order to capture interest,

to be acquired, used, or consumed and that can satisfy a desire or need. Price is the only

component that produces income. Distribution is the means by which products or services

reach the consumer and promotion is a sum of activities through which the product/service is

known by customers and that persuades them to buy it.

The Product Policy in a service providing organization is represented by all the

actions through which the company sets its objectives, selects its strategies, schedules and

carries out concrete measures. Defining product policy is based on the contents of the product

and results in the formulation of objectives and strategies aimed at the product as a whole

(global) and its structural components (sub-product mix).

The Pricing policy has on the other hand a more complex character determined by the

specific way in which it reflects the supply and demand, product relations, the role of

promotion, the perception by its customers. Price is a flexible element, being able to quickly

modify and the only variable that generates profit within the marketing mix.

The Distribution policy contains all the activities that occur in the space and time that

separates the provider to the consumer. The characteristics of services, especially their

5 Kipping, M. – Trapped in Their Wave: The Evolution of Management Consultancies. In T. Clark and Fincham (eds), Critical Consulting.

Oxford, Blackwell, 2002 6 Toffler, A. – Third Wave, Politics, Bucharest, 1983

26

inseparability, intangibility and perishability make the distribution structure, objectives and

strategies to differentiate themselves from the situation encountered on a product

market.

Promotion Policy refers to all the actions taken to boost the penetration of services on

both market and consumers, to boost sales.

Staff In the process of delivering services, the staff is a part of what you buy, the contact

between provider and client is very important in deciding to purchase.

Process Services are usually offered in the presence of the customer. Therefore, the process of

delivering the product is part of what the customer pays for. Through processing the provider

is seeking to avoid the appearance of waiting threads caused by applicant congestion at the

delivery points of services and targets a rational labor division according to the oscillating

intensity in service demand.

Physical test Almost all services are materialized in physical elements. A full service hair salon

offers hair care, even an insurance company offers illustrated documentation for the policies

sold.

Given the intensive development of this market, service providing firms are

increasingly forced to improve the productivity of their services. Companies should avoid a

too large increase in productivity, which can be damaging to the quality perceived by the

consumer. Some measures in this regard lead to the standardization of the quality of benefits,

leading to an increased consumer satisfaction, but others cause a deep standardization and

contribute to consumer dissatisfaction. Two essential concepts addressing the quality of the

services provided refer to efficiency and effectiveness. Peter Drucker has pointed out very

well the difference between them: efficiency is doing things right and effectiveness is doing

the right thing.7

4. EXPERIMENTAL LEARNING - GLOBAL MANAGEMENT

CHALLENGE

Following the above mentioned concepts, the world‟s largest strategic management

competition comes to support companies, offering them the opportunity to experience

management decisions in an environment without constraints and without fear of error,

allowing the search for the best solutions, result analysis and the opportunity of immediate

feedback to the company‟s management decisions.

Global Management Challenge is, for 32 years, the world‟s most important strategy

and management competition, addressing both staff and students. The contest, which was

attended by over 400,000 people currently relies on an interactive business simulation

designed to enable direct experimental learning, in a competitive environment, of the strategic

mechanisms of business management.

Global Management Challenge, through the management of a fictitious company, is a

realistic simulation of a business. Based on a simulation model developed and perfected by

the Operational Department of the University of Strathclyde in Scotland, it was improved and

updated constantly, benefiting from the evolution of technology. This simulator is updated

annually, depending on the dynamics of international markets. The computer model simulates

the economic environment, competitive relationships between companies and interactions

7 Peter D., Stern Ph. - Marketing Management and Strategy, Prentice Hall, Fourth Edition, 2006

27

between different departments of the company. Thus, a fictitious market is being generated,

on which a number of companies (equal to the number of teams attending the contest)

compete in a regular business environment to achieve their essential purpose: to obtain the

highest price per share, resulting from the highest profits, thus determining the wining

company in that market and the winning team in the contest.

5. THE MARKETING MIX IN THE GLOBAL BUSINESS MANAGEMENT

CHALLENGE SIMULATOR

As mentioned, the marketing mix comprises the marketing tools (product, price,

placement and promotion) that are used by the company to produce the response it wants

from the targeted market. In the services market, however, the concept is extended to the 7

P‟s, adding to the initial model: personality, process, evidence (physical evidence). These

elements will also be presented in the Global Management Challenge business simulator.

Product Policy

This product is offered on the Romanian market by Dima Consulting Group, a human

resources and management consulting firm, and Profiles International, 2011 being the seventh

year when this simulator was distributed in Romania. The complexity of this product resides

in the fact that the competition requires decisions and arrangements on both strategic and

operational level, including all the areas of business management:

• analysis of financial conditions - a full financial report, monitoring profitability, debt

control, the level of dividends;

• production planning - quantity, range of products, means of production;

• marketing - price, promotion and advertising expenses;

• research and development - product changes, quality control;

• sales – geographic areas, distribution channels;

• logistics – management of supplies, the choice of means of transport;

• human resources management - recruitment, dismissals, training, motivation,

remuneration within the limits of a system of wages and commissions;

• management of crisis situations.

It can be said that, although present since 2004, this product is still in a growth phase,

a phase in which it generates profit, as sales grow faster than costs, through the growing

number of companies that resort to this form of training. Unlike the previous edition, in which

100 teams have signed up, 2011 brought to the GMC business simulator 300 teams from

romanian companies. This success is due to the fact that the simulator is updated annually,

depending on the dynamics of international markets.

Price Policy

The cost of this product is 300 euro for each team registered by the company.

The first step that needs to be done to participate is to purchase the Global Management

Challenge manual which teaches each client how to take decisions.

On the other hand, another segment of consumers who are heading to the simulator, is

represented by students who have the chance to show, without any cost, their managerial

potential to all of the companies participating in the competition and the public across the

country, through the results being published during the actual contest.

28

Thus, it‟s being accomplished one of the main objectives, to facilitate direct contact

between businesses and students with managerial potential.

In terms of price, it is similar, for example, with the Brightbiz simulator - simulation

of business, finances for non-financiers, made by the company Brightway.

Distribution Policy

Distribution and delivery of consulting services are made directly by specialized

personnel from the company. Thus, a direct distribution strategy was chosen. It is done

exclusively via the Internet. Customers receive the product after the online payment, receiving

a username and a password that gives them access to the page in which they will implement

the decisions. They also receive a manual of the simulator, and for the companies having at

least 10 participating teams, a training held by an employee of the company Dima Consulting

Group, specializing in that direction.

Promotion Policy

Selling the simulator requires intense use of direct marketing, assigned employees

contacting, via Internet and phone, companies all over the country. Another method of

promotion, specific to public relations and with an important role in promoting the GMC, is

represented by the annual conference focusing on human resources organized by Profiles

International, strategically placed before the launching of the Global Management Challenge,

with renowned participants from Romania and abroad.

Advertisements for Global Management Challenge are transmitted through the

following media:

• Press - messages were broadcasted in specialized magazines (eg. Saptamana

Financiara, Financiarul)

• Radio - broadcasted on national stations (eg. Magic FM)

• Outdoor advertising - through promotion folders, flyers, brochures, leaflets and other

publicity materials

In 2011 important investments were made to advertise the simulator. Thus, the Global

Management Challenge was promoted on the Magic FM radio station. The newspapers

"Financiarul" and "Saptamana Financiara" are the main co-organizers, and large companies

such as Mercedes Benz Romania, G4S, the Prut SA, are partners of Dima Consulting Group

and Profiles International in promoting this simulator.

For the same purpose of promotion and information, the simulator has its own website.

The website for the Global Management Challenge is:

http://www.gmcromania.ro/home.html .

Promotion in the academic environment is supported by the partners in this sector: The

National Association of Student Organizations from Romania, the Association of Economics

Students in Romania, Babes Bolyai University Students Organization, Business Club,

Managers in Dialogue Association.

Also, the team GMC Romania organizes a series of events in major universities in the

country designed to attract students targeted by companies registered in the competition.

Staff

The staff is a very important element in the Global Management Challenge simulator.

Business consultants are those who come into direct contact with customers, becoming a part

29

of the purchased product. The success is due mainly to the company staff, which is available

to participants throughout the competition. Before being hired, potential consultants go

through an assessment process.

Process

The simulation takes place online. The team decisions are communicated in a special

form called a Decision Table, compiled by each team registered in the simulator. Each

qualified team will receive an access code to complete the Decision Table. Thanks to the

Internet, effective communication throughout the competition is guaranteed, and the

participants from the same team can meet according to a schedule convenient for them,

without overlapping with daily activities.

Physical test

The actual simulation does not require physical contact between service providers and

beneficiaries. Everything is done online.

Following the decision communicated in this way, the participants are being informed

with the current standings of the teams participating at the simulation and a complete

management report that contains a fictitious company balance sheet, the decisions taken

within the company and the availability and use of resources for the next quarter to be

influenced by future decisions.

CONCLUSIONS AND PROPOSALS

Global Management Challenge responds in some degree to the main challenge that the

twenty-first century brings to companies, to get that long-term competitive position and to

generate profit.

Organizations must constantly adapt to ever higher standards regarding the 7Ps of the

marketing mix on the services market, systems of relationships and business models based

mostly on Internet technology.

In order to maintain the currently growing demand for this product it is important to

constantly improve it, to adapt it to ever changing requirements of the management

consultancy market and to assure that it is one step in front of the problems that a company

might face in the real world. The future cannot be predicted, problems cannot be always

anticipated but preparing for the unknown requires experience in dealing with past problems,

and a simulator like this can bring experience to a company without the cost disadvantages

implied by solving them on the actual market. The knowledge and experience brought by this

product can make the difference between being on the market and being outside the market.

REFERENCES

1. Kipping, M. – Trapped in Their Wave: The Evolution of Management Consultancies.

In T. Clark and Fincham (eds), Critical Consulting. Oxford, Blackwell, 2002

2. Kotler Ph. – Marketing Management, Teora, Third Edition, Bucharest, 2003

3. Olteanu, V. Marketing services, Ecomar, Bucharest, 2003

4. Peter D., Stern Ph. - Marketing Management and Strategy, Prentice Hall, Fourth

Edition, 2006

30

5. Sadler, Ph. – Management Consultancy. A Handbook for Best Practice. Kogan Page,

2001

6. Toffler, A. – Third Wave, Politics, Bucharest, 1983

7. National Institute of Statistics - Romanian Statistical Yearbook 2009 8. Romanian Global Management Challenge Guide

9. http://www.gmcromania.ro/competition.html

31

ANALYSIS OF MARKETING MIX ONLINE RESERVATION

SERVICIES IN TOURISM . CASE STUDY : WWW.BOOKING.COM

Roxana Ştefania LUPU, student at Masters of Marketing Policies and Strategies

Transilvania University from Brasov, Faculty of Economic Sciences and Business

Administration

Coord. Lect. dr. Cristinel CONSTANTIN

Abstract : This project attempts to provide an overview of trade electronic.

Information Technology has become the future of tourism. Development processes

within ICT and the Internet, in particular, have revolutionized the entire industry of

tourism, creating new business models.

Key words: e-tourism, booking, Intenet, informaţion, marketing mix

1. INTRODUCTION

This paper aims the analysys of the marketing mix upon online booking systems. The

study case was conducted on online reservation system www.booking.com, system belonging

to S.C. Priceline S.A. The site is the international online leader in the reserved

accommodation services through online. This paper presents aspects of the tourism market

materialized in conceptual literature branch. The main purpose of this paper is to analyze the

components of the marketing mix of www.booking.com , system elements that have led to

international leadership.

2. LITERATURE REVIEW

Tourism has become one of the largest industries in the world and its development

shows a continuous growth every year. Thus, tourism is becoming a highly competitive

economic sector, led by developments in information technology competitiveness, innovation

and communication. University of Surrey is one of the most important research centers

dealing with frequent global tourism.

School of Management has developed the idea that tourism is a new niche, which

stimulates research for the future.1

According to Forrester Research Institute, the e-commerce sales rise in 2003 over 12.2

billion USD at world wide.2

Due to the increasing use of Internet, online environment provides opportunities for

tourism providers to distribute information in a way more quickly and also allow them to

handle more easily customer requirements. IT in general and especially for travel and tourism

show that more and more consumers use the on-line services, presumably for information or

purchases of on-line tourist products.3

32

The Internet has become increasingly popular in the marketing environment,

providing enormous potential. It is therefore ideal for tourism marketing. More and more

consumers inform themselves for their holiday planning through the online medium.4

Tourism marketing can be defined as: “the strategy of the entrepreneurs and providers

of tourism services in the event of the existence of the buyer, the art of discovering new

clients, of penetrating new markets or new market sections, of maintaining and make use of

traditional markets.” 5

Trying to define the concept of tourism marketing, we must first present the steps

needed to achieve the marketing process.

The first stage of the marketing process can be identified with knowledge of the

tourism market, in which the following actions be taken: global analysis of the market,

knowledge of the external environment in which tourism enterprises operate , identify

segments that match the specific needs of consumers, in tourism demand. This knowledge is

not a static process but dynamic as even consumer‟s requirements and market in its whole

evolve from a period of time to another. It is necessary the understanding and knowledge the

future market requirements, evolution while providing global demand and in part of each

segment..

Forecast appears to be a necessity in marketing tourism marketing activity. By all

means the forecast mechanism put into action all the work carried out to determine the

evolution and the final proportion of a tourist phenomenon. 68

We define a second stage of marketing, internal environmental action of tourist

enterprise. This step aims marketing decisions that the company should adopt in the definition

of its offer and meet consumer needs. Combining the best marketing tools in a dosage

deliberately chosen by the decisions taken to achieve a goal, related organization and efficient

tourist action is known in literature as the marketing mix (product, price, distribution and

promotion).

Market success of an enterprise depends on how it defines its marketing mix, often

referred to as the marketing program. Tourism marketing mix variables can be defined as a set

of marketing tools that a company can use a tourist target market in order to achieve its

marketing objectives. „‟ 7

In a simplified formulation, marketing mix includes product, offered at a fixed price,

with a particular promotion to communicate something about a particular product to the

customers and a way the product becomes available the place of consumption

Product policy. Tourism product is ,, the combination of services and facilities which

is materialized in specific natural and artificial attractions environments and tourist facilities

created, which are components of the tourism offer and run a positive force of attraction of

tourists.. ‟‟ 8

,, Like any other product, seen in terms of marketing, tourism product is the physical

expression of firm response to tourism demand " 9, adjusting the PH . Kotler and B. Dubois, is

what the company can offer the market in a form which can be seen, bought and consumed, in

order to meet consumer needs in case the need for travel.9

1 School of Management, University of Surrey, eTourism is the future! ( 8.12.2011 ) 2 Forrester Research Institute 2003 - http://www.forrester.com ( 29.11.2011) 3 http://www.unctad.org/en/docs/c3em25d3_en.pd 4 Humelnicu – Serevin A., Tourism development in the online medium , articol publicat in revista ASPECKT, nr 3

din 2009, pag 75 5 Snack O., Economia şi organizarea turismului, Ed. Sport -Turism, Bucuresti, 1975, pag.10 6 Patriche D. , Ispas A., Marketing turistic, Editura Infomarket, Brasov 1999, pag 8

7 Olteanu V. – ,,Marketingul serviciilor o abordare managerială ‟‟, ed. Ecomar, Bucureşti, 2003, pag.17 8 Snack O.,op.cit , pag. 14

33

Pricing and rates. Decisions relating to the target price set a price that is acceptable

to consumers and at the same time high enough to cover a travel company‟s expenses.

Distribution policy. In terms of policy decisions on the distribution, they aim

selecting means allowing products to be accessible to consumers. These means mention:

evaluation of various intermediaries (organizers of trips, travel agencies, tour - operators),

selection of these intermediaries for the marketing of tourism products, promotion and

fostering of intermediaries, defining a transport between the place of residence and place of

the target population destination, the implementation of a reservation system..

Distribution is one of the few elements of the marketing mix, which may allow more

tourism enterprises to improve their competitiveness and performance.10

Promotion Policy. Regarding the decisions on promotion policy , they are intended to

inform consumers of the existence of product and - induce him to buy this product instead of

a competitor.

In tourism marketing, tourism phenomenon because of the three-dimensional, the four

traditional elements of marketing mix do not appear to be sufficient for effective marketing of

tourism products and services. Therefore, taking into account as an important travel

destination decision analysts A. Morrison and D. Cowell proposed extension of traditional

marketing elements with three elements: personnel, physical evidence ambient environment

and processing services.

Staff play an important role because they are the ones who sell packages, those who

are in direct contact with the client. A travel agent should know what he sell in this that he

can offer customers the best option depending on what he seeks.

The course of action. Services are usually provided in the presence of the consumer.

Therefore the process of delivering product is part of the consumer pays.10

Environment. Is the physical environment in which tourism has been performed. Its

components can be both tangible (the organization of the reception's desk distinct

compartments, with distinct personal problems dealing with different guest) and intangible

(weather). This category includes foreign elements over which management actions are often

indirect and difficult. Regardless of whether they are tangible or intangible environmental

components contribute decisively to the definition of "experience" of travel.11

Combining these elements of marketing mix lead to a successful sale when they are

used properly, the greatest responsibility fell on account of staff.

3. OVERVIEW OF THE ONLINE SYSTEM WWW.BOOKING.COM

9 Kotler Ph., “Managementul marketingului”, Ed. Teora, Bucuresti, 1997, pag. 20 10 Buhalis D. - Senior Lecturer in Tourism University of Westminster , Strategic use of information technologies in the tourism industry,

Londra, 2007, pg. 4

34

Headquartered in Amsterdam, Booking.com is an international leader in the

accommodation reserved through online services. Booking.com is part of the group company

Price-line (NASDAQ). The group is composed of four main brands - Booking.com,

Agoda.com, Priceline.com and Travel Jigsaw.

Established in 1996, Booking.com B.V. guarantees the best prices for any type of

property, ranging from small independent hotels to five-star luxury properties through

Booking.com. The Booking.com website is available in 41 languages and offers over 180,032

hotels in 161 countries.

The company promotes the idea that such a reservation for a hotel room should be

done in a simple manner because the time plays a very important role for the traveler.

Figure 1. Evolution of turnover

Source: Adapted after http://companycheck.co.uk/company/03512889 11

In figure one we you can see an increase in turnover from 2005 until 2008. In 2009 a

slight decrease in turnover, decrease due to the financial crisis. In 2010 the turnover of the

company began to grow considerably.

4. THE ANALYSIS OF MARKETING MIX OF THE ONLINE SYSTEM

WWW.BOOKING.COM

Marketing mix is all controllable and tactical marketing tools (product, price,

placement and promotion) that company makes up to produce the response you want from the

market concerned. 12

12

4.1 Product policy

11 Baltescu C. ., Particularitatile aplicarii marketingului in domeniul turistic , articol publicat in revista ASPECKT, nr 1 din 2008, pag 39 12 Kotler, P., Armstrong G. Principiile marketingului, Ed. Teora, Bucureşti, 2004, pg. 11

35

The product range is given for all travel offers that www.booking.com site offers.

Booking.com has contracts with more than 180,000 hotels worldwide..

Within the reservation can speak of product lines because these groups are

homogeneous products, closely linked, sold to the same categories of customers and

distributed through the same distribution channel.

For example a customer wants to travel to Rome, Italy. He seeks a 5 * hotel, all

inclusive and is willing to spend a certain amount of money for this trip. He enters the site and

begins to seek information. The site enables the client to seek the best offers optimal because

of the search system infiltrated the site.

4.2. Pricing and rates

Booking.com acts as an intermediary between the client and hotels registered in the

database of the company. Prices are set by each hotel and updating of the site is

www.booking.com by trained personnel within each hotel. Booking.com takes no

responsibility in respect to rates shown on the site. What should customers really know is that

payment is made directly to hotels. At the end of each month, the hotels will receive a bill

with the amount of Booking.com‟s commission of that month. So Booking.com works on a

commission basis.

4.3. Distribution policy

Semantic systems are designed to connect incomplete information to reduce the

difficulty in finding and understanding the source of information, thus facilitating access to

"surf" the tourist offers. The semantic systems, knowledge about the meaning and

significance of web resources are stored as data (meta-data) that can be processed by

computer. Services for finding, integrating and linking information are based on semantic

descriptions.

When a hotel decides to enter into a contract with those from www.booking.com,

these hotels offer specialized software that enables customers to seek information about a

product and they also see if there are any places available. So in this case we speak of an

indirect distribution channel (only) because it uses a single intermediate and that the

reservation system www.booking.com. This factor is an advantage in terms of time because

you no longer have to wait for confirmation that the hotel accommodation.

The connection between companies providing tourist services and the final

beneficiaries is done through distribution. Tourists need information before you travel and to

choose between options and also an increase in information needs.

Booking.com acts as a service "find and reserve” and as an advisor for the client,

freeing them from the burden of poor product search options for comment due to client sites

within the site. Customers can read hold opinions of those who stayed in some hotel.

4.4. Promotion Policy

Booking.com is today one of the largest booking sites in the world where you can find

almost any destination imaginable, with photos, reviews and a payment system super -

safe.The greatest method of promotion that the company enjoys is mouth promotion. Many

turn to booking.com site because no fees are charged as do most online booking sites.

Another method of promotion that Booking.com uses is association with Facebook

network (the largest social network in the world).

36

Booking.com allows authentication through Facebook account, Google and Yahoo.

RSS feed. Allows loyal readers to be informed on the update of the page content

from web page using a special software called "aggregator".

Newslleter. Newsletter option is present in the booking.com website where customers

can view special offers.

Booking.com was associated with Apple and it appeared Booking.com for iPhone

which is a very useful application. The application is free and can be downloaded from the

App Store. It searches for hotels and accommodation near the location where you are or any

other destination you want, you can view hotel images you want, you can read customer

reviews, you can make very simple and secure booking, you can save data confirming the

iPhone.

4.5. Staff

As a travel agency staff plays an important role in tourism activity. Once a customer

performed an online reservation, Boooking.com acts as intermediary between client and hotel,

transmitting to the relevant hotel the details of the reservation and send a confirmation e-mail

for and on behalf of the client from the information provided by the hotel.

4.6. The course of action

When a client wishes to book on www.booking.com he must follow a number of

steps. These steps are:

1. Open your browser - search engine

2. In the search engine we are looking for information we need

3. Search engine generates a list of URL‟s -choose www.booking.com

4. The site interface open‟s

5. To make a reservation must to be logged, and if we don‟t own an account we can

make one can

6. In the site is infiltrated a search engine. The client chooses the destination, hotel and

period.

7. Having completed the selection criteria, the customer opens a page with all necessary

information. Also in this phase the client can check room availability in a hotel, can

read the views of those who were accommodated at the hotel selected.

8. If the customer wishes to reserve online and decided a room then it will move to the

next step, to pay the room itself. Payment will be made with an electronic card.

Complete with personal information and money will be withdrawn to the client

electronic card.

9. After the actual payment of the customer will receive an e- mail the reservation was

made. Payment will go directly to the hotel. Bokking.com play‟s the role of

intermediary. At the end of each month, the hotels will receive an invoice from

Booking.com. with commissions quantum from that month.

The system is very easy to use and takes less than 10 minutes to make reservation. Also

there is the possibility of cancellation, which in some cases may be free in some cases don‟t,

depend on each hotel's policy.

37

4.7. Enviorement

Appearance and functionality of booking.com site plays an important role in this

element of the marketing mix, because the place benefit is lacking. Everything is done

through online and this entails the lack of dislocation of the customer at the place benefit. In

this case, time becomes a very important indicator when a customer wants to travel.

CONCLUSIONS

Exchange of information is very important at every stage of sales cycle. Information

must be able to move quickly and securely between clients, intermediaries and each travel

suppliers involved in meeting customer needs. As a result, information technology (IT) - mix

of computers and electronic communication - has become the future of the tourism industry.

Its powers allow information to be used more efficiently and to circulate through the

online almost instantly. As a result, has had and continues to have a major effect on the

tourism industry operating procedures.

One of the most powerful marketing tools - electronic distribution - has developed

rapidly.

Priceline understood the needs of consumers, event which granted them a place

amongst the most profitable companies in the world. Combining the best elements of the

marketing mix have led the system of reservation www.booking.com among one of the most

profitable sites of its kind.

However, known for embracing technology readiness, electronic marketing and

distribution of products have gained rapid acceptance in tourism. As a result, marketers

working in the tourism sector should be aware of its evolution.

REFERENCES

1. Baltescu C.., Particularităţile aplicării marketingului în domeniul turistic , articol

publicat în revista ASPECKT, nr 1 din 2008, pg. 39

2. Buhalis D. - Senior Lecturer in Tourism University of Westminster , Strategic use of

information technologies in the tourism industry, Londra, 2007, pg. 4

3. Humelnicu – Serevin A., Tourism development in the online medium , articol

publicat in revista ASPECKT, nr 3 din 2009, pg. 75

4. Kotler Ph., “Managementul marketingului”, Ed. Teora, Bucureşti, 1997, pg. 20

5. Kotler, Ph., Armstrong G.- Principiile marketingului, Ed. Teora, Bucureşti, 2004, pg.

11

6. Olteanu V. – Marketingul serviciilor o abordare managerială, Ed. Ecomar, Bucureşti,

2003, pg.17

7. Patriche D. , Ispas A., Marketing turistic, Ed. Infomarket, Braşov 1999, pg 8

8. Snack O., Economia şi organizarea turismului, Ed. Sport -Turism, Bucureşti, 1975,

pg.1

9. Forrester Research Institute 2003 - http://www.forrester.com

38

10. School of Management, University of Surrey, eTourism is the future!

http://www.unctad.org/en/docs/c3em25d3_en.pd

11. http://companycheck.co.uk/company/03512889

12. www.booking.com

39

IMPLICATIONS OF THE WELFARE STATE

INSIDE THE EUROPEAN UNION

Murea Calin

Transilvania University from Brasov, Faculty of Economic Sciences

Abstract: The welfare state seems to face serious problems when it comes to its

sustainability, inside the European countries. These manifest under the form of

population ageing, low fertility and an increase in social spending which is grater

then the rhythm in which the finances of every country can handle (an aspect common

to all countries), as well as a high level of unemployment, development differences

between different regions of these countries (in Germany and Italy). Despite this, there

are long term solutions that could solve these problems. These solutions must be found

by every country and applied to the specifics of every nation to ensure the best

development and the highest level of living for all citizens in the future.

1. Introduction

In this paper I will try to analyze what are the problems that welfare states have to face

and to try to identify possible solutions that might solve these problems. I will try to see if the

welfare state can develop on the long term. Also I will try to show the status of some

countries which chose three different types of welfare state. On the other hand it seems that

this system is the path that all countries in the development process take, which is easy to

understand. All citizens want to have the best living conditions from the taxes they are

paying, and all countries want to ensure this for their citizens. It remains to be seen if the

problems which have started to appear can be overcome, or if the welfare state cannot be

anymore a model to be followed by the countries of the European Union, and those in the

entire world. It‟s clear that there isn‟t a single general solution, because every state has

different conditions, mentalities and resources.

2. Theoretical aspects

The welfare state represents a concept in which the state plays an important role in the

protection and promoting of the economic and social welfare of its citizens. It is based on an

equal distribution of wealth, opportunities and a public responsibility for those who cannot

ensure the minimum resources for a decent life. (Britannica, 2010)

By a welfare state we understand a nation in which the state takes various actions and

develops various programs meant to ensure social help for those who need it, like

unemployment compensation, old-age pensions, family allowances, food stamps and aid to

the blind and deaf, etc. After the Second World War changes made place, in the sense that

public assistance should be a right for all citizens, not only for the poor. (Hoyer, 2010)

According to Espring and Anderson there are three models of welfare state. In the case

of the first model bureaucracy plays an important role, because the state must maintain a strict

40

control over those who need social help. In the case of the second model, bureaucracy is

reduced to its minimum. Here the state offers help to those who fulfill certain conditions, like

the number of children, the need for medical assistance, etc. The third model relies on a high

level of taxation, model being used in Scandinavia. (Academic Dictionaries and

Encyclopedias, 2011)

Inside the European Union we can identify four types of welfare state, although each

state has its own particularities. So we have:

- The Nordic model, with Norway, Sweden, Denmark, Finland and Holland.

- The Continental model, with Germany, France, Austria, Belgium and Luxemburg.

- The Anglo-Saxon model, with England and Ireland.

- The Mediterranean model, with Greece, Italy, Spain and Portugal.

(Academic Dictionaries and Encyclopedias, 2011)

According to Espring-Anderson there are three types of welfare models:

- The liberal model, which is aimed at those who have low earnings and

concentrates on benefits based on needs (England)

- The corporatist model, refers to the degree of participation on the labor market,

and intervenes only when family has exhausted all its means to help (Germany,

France, Italy and Austria)

- The social-democrat model, where everyone contributes to the maintain of the

welfare state, and the high level of social services is maintain by o high level of

employment (Sweden, Norway, Finland and Denmark)

(Challenges to the Nordic Welfare State – Comparable indicators, 2009)

3. Empirical Aspects

The members of the European Union are facing a challenge which has to do with their

own social protection programs. These challenges consist in demographic change, population

ageing, a drop in fertility levels and the risk of poverty. These concepts lead to a rethinking of

the welfare state, so it can be sustainable. Three major issues have to be taken in

consideration: the first issue is about investments made in children and in families with

children, because they are the foundation for the future and for this a lot of resources are

needed; the second issue refers to work related life, considering the fact that for the majority

of the people work represents the main source of welfare throughout their life; the third issue

is about finding a sustainable, optimum and equable system for giving pensions. (Espring-

Anderson, Gallie, Hamerjick, Myles, 2010)

As we are about to see, the majority of the European states are facing problems, no

matter what the adopted model is. The ever more growing population ageing process,

unemployment and social services, pensions especially, which need more and more resources

to be financed, represent problems that need practical solutions, which must ensure the

sustainability of the welfare state, as well as maintaining a high level of living for its citizens.

Welfare state in Germany

O pressing problem for the German state is the increasing number of old people out of

the total number of population. This increase, combined with the decrease in the number of

young people that work, are putting great pressure on the nation′s economy.

A great accent is being put on insuring incomes, disregarding other citizenship rights,

which lead to reform application only in the cases that secure these incomes or do not threat

the existing systems. (Cox, 2002)

41

German policies are formed around the principle of aversion towards risk. This is why

all attempts meant to limit unemployment compensations and to promote work policies that

are meant to sustain the welfare are not popular with the general population, because they

reduce the probability of getting an income in the case in which a person can′t work.

Another influential factor regarding this matter is being represented by the grate power

of German work syndicates. German policies rely on high incomes (backed by powerful

syndicates) and high taxes, and in result firm are not willing to make new jobs anymore.

States in which syndicates have grate power are showing high unemployment rates, because

of the demands made by these syndicates, while in countries like Holland and Denmark where

syndicates don′t have that much power the Government has a greater autonomy, the

negotiation process on the labor market is more decentralized, and unemployment is much

lower. In the next table we can see how things are regarding unemployment rates in states that

have adopted different welfare models:

Total Men Women

Nordic

countries

Denmark 3.9 3.3 4.5

Finland 7.4 7.4 8.1

Iceland 2.7 2.7 3.1

Norway 3.6 3.6 3.4

Sweden 6.9 6.9 7.2

Europe, large

countries

Germany 9.8 10.2 9.4

France 9.2 8.4 10.1

UK 5.3 5.7 4.9

Central

Europe, small

The Netherlands 3.9 3.5 4.4

Belgium 8.2 7.4 9.3

Austria 4.7 4.4 5.2

Southern

Europe

Spain 8.5 6.3 11.6

Italy 6.8 5.4 8.8

Greece 8.9 5.6 13.6

Eastern Europe

Hungary 7.5 7.2 7.8

Czech Republic 7.1 5.8 8.8

Poland 13.8 13 14.9

Table 1: Unemployment rates shares of the workforce by gender, Europe, 2006

(Source: Chalenges to the nordic welfare state, Norman, M, Ronning, E. Norgaard, E., 2009)

We can see that out of all countries that have adopted the continental model, Germany

has the highest level of unemployment. Nordic countries have the best numbers as well as the

United Kingdom, while those with similar or high unemployment rate are the Mediterranean

countries and east countries. This is worrying because it shows that Germany must take

urgent measures to promote labor, in order to decrease unemployment.

Unlike Denmark and The Netherlands, where reforms were obvious and made

optimum results, in Germany the well needed reform wasn′t made, because of the large

number of old people that opposed major changes relating social benefits. Programs that came

with downsizes were welcomed with disapproval, and the political parties that came out with

them were sanctioned by vote, which made these parties give up easily. (Hoyer, 2010)

Another major problem regarding Germany consists in a big difference between west

and east. The reunification of Germany let to the transfer of large sums of money from the

42

west to the east, where unemployment is high and the demand for social help is also high. In

the last two decades 1.6 billion euros were transferred. (The Economist, 2010)

Meanwhile Germany continues not to recognize the qualification of immigrants. This

is how half a million immigrants absorb long-term offered social benefits, but cannot occupy

the available jobs that were not occupied by German population.

Welfare state in Italy

Italy has a total different welfare model from Germany or the Nordic states. Like all

Mediterranean countries we have a great degree of fragmentation when it comes to social

benefits and we also have an uneven distribution of those benefits within the general

population. Most of this given help is represented by pensions but, despite this, another

common factor with all Mediterranean countries is the big responsibility that falls on the

family when it comes to taking care of the weak. This is shown in Map 1, which presents the

percentage of GDP that is being given for helping the elderly, in 2006.

Out of the Mediterranean countries Italy and Greece have the lowest spending for

taking care of the old, and Spain and Portugal have numbers only a little bit high. The same

thing is present in France and Belgium. A totally different situation can be seen in the Nordic

countries and United Kingdom, where the state spends a lot of money for taking care of the

old.

When it comes to taking care of old people and those with disabilities family has the

most important role, while the state doesn′t intervene almost at all. In Italian society the

woman takes care of the family and the man is the one who earns money. This is why the

Italian state usually gives help to women for being mothers and wives, not workers.

Map 1: Spending on taking care of the old as a percentage of GDP, 2006

(Source: Eurostat)

43

Like all welfare states Italy is facing the problem of population ageing and high

unemployment rates. The social trends are low economic growth, high unemployment rates, a

low mortality rate and a lower fertility rate, and these trends are making risk factors grow,

which in turn are contributing to the increase of the total cost of maintaining welfare.

There is also a trend for the elderly to live in separate homes from their children. This

is why Italy needs a lot of work force in home assistance. Immigrants are contributing

decisively to social services and also are occupying those jobs that Italians refuse.

(Marlicchio, Pugliese and Spinelli, 2009) Despite the fact that across the European Union

efforts to stop marginalization and exclusion are taken, a third of all jobs are of low quality,

without the possibility of learning new skills and are characterized by bad working conditions.

(Espring-Anderson, Gallie, Hemerjic and Myles, 2001)

Welfare state in the Nordic countries

The Scandinavian welfare model adopted by Norway, Sweden, Denmark, Iceland and

Finland is considered one of the best in the world, considering the high level of development

in each of these countries. Some researchers believe that this is the product of simple

coincidences that will soon lose their effects, while others think that it′s going to be a success

in future like it has been since now.

The fact is that these countries managed to grow because some exceptional conditions,

which were not present in other states, and this is why the Scandinavian model cannot be

applies in other parts of the world in exactly the same form. (Andersen, Holmström,

Honkapohja, Korkman, Söderström and Vartiainen, 2007)

The Scandinavian model is based on three key elements. The first is represented by the

relation between the state and the people. The welfare system is based on a high taxation

made by the state. This would not be possible without o long relationship between the state

and its citizens, in which the state was not an element of oppression, because in the

Scandinavian societies the state with all its institutions and organization, alongside the

Church, fulfilled their role while maintaining a very good communication with the people.

Also all the social services are organized at a local level so this communication gets good

results.

The second fundamental element is universality. The concept of social benefits is

applied to everyone. It′s considered that all citizens should benefit from living conditions as

high as possible, not only the ones that are poor, like we have in the case of the Mediterranean

countries.

The third element is equality. Over time peasants held very good positions, while land

lords lost their power. This means that the difference between social classes began to

decrease. It is also known that in the Nordic countries we have small differences between

incomes, low rates of poverty and small differences between the employment rates of males

and females. (Alestalo, Hort and Kuhnle, 2009) In Table 2 we can see that, unlike

Mediterranean countries, Nordic countries have higher rates of employment for women:

Total Men Women

Nordic

countries

Denmark 77.4 81.2 73.4

Finland 69.3 71.4 67.3

Iceland 84.6 88.1 80.8

Norway 75.4 78.4 72.2

Sweden 73.1 75.5 70.7

44

Europe, large

countries

Germany 67.7 72.8 62.2

France 63.8 69.0 58.8

UK 71.5 77.3 65.8

Central

Europe, small

The Netherlands 74.3 76.1 53.2

Belgium 61.0 70.5 46.3

Austria 70.2 74.6 47.4

Southern

Europe

Spain 64.8 76.1 53.2

Italy 58.4 70.5 46.3

Greece 61.0 74.6 47.4

Eastern Europe

Hungary 57.3 63.8 51.1

Czech Republic 65.5 73.7 56.8

Poland 54.5 60.9 48.2

Table 2: Employment rate, Europe, 2006

(Source: Chalenges to the Nordic welfare state, Norman, M, Ronning, E. Norgaard, E., 2009)

We can see that nordic countries have a higher rate of employment for women than

Belgium, Germany, United Kingdom or France. The fact that substantial benefits are given to

all the citizenz is shown in Map 2. Here the scandinavan countries stand out, with a spending

average much higher than that other states with different welfare models, like the continental

or mediterranean model.

An essential condition for this system to work is a high taxation within these states.

Countries like Norway, Sweden or Denmark are known for their high taxes. In Tabel 3 we can

easily see this.

Another important factor for the succes of the scandinavian states is linked to the

1980′s and 1990′s crises that they went through. These crises were deep, but Denmark,

Norway, Sweden and Finland had their chance to make their economies stronger and to make

them more flexible. If, before these crises their economies were not productive, after the

economies were very developed. This was seen in the last years when the scandinavian

countries managed to get out of the financial crysis rather easily and without many loses.

(Eklund, 2011)

Map 2: Total expenditure on social protection per head of population, Europe, 2006

(Source: Eurostat)

45

Figure 1: Current taxes on wealth, income, etc., %GDP, 2006

(Source: Eurostat)

It is very difficult to summarize the scheme that was put into action in Scandinavia,

and could work in other countries. Especially because all the reforms were made in a different

period of time, crises were of a different nature and specific Nordic elements had their role to

play. One of these is combining individualism, backed by politics that support individual

autonomy and social mobility, with a great sense of subordination of personal interests to

society′s general interests. (Berggren and Tragardh, 2011)

Another proof for the fact that Nordic countries continue to be some of the most

prosper in the world, and their economies some of the strongest, is The Global

Competitiveness Report 2010-2011 made by the World economic Forum, that took place at

Geneva in 2010. It shows the fact that Nordic countries surpass the European Union (EU27)

at all 12 chapters and the USA at 9 out of 12. (Schwab, 2010)

46

Figure 2: Comparison on competitiveness between Nordic countries, EU and USA,

2010-2011

(Source: Nordic capitalism: Lessons learned, Eklund, K., lecture at The World Economic

Forum, Geneva, 2010)

Conclusions

There′s a clear trend for all states to develop and to become welfare states, but in order

to achieve this on a long term, these countries must take into consideration certain facts and to

learn from states with tradition in this matter.

It′s clear that in the case of the Nordic countries, as well as well as those which

adopted the continental or Mediterranean model, a series of problems is starting to occur. In

the case of Germany the biggest issue remains high costs regarding labor. Over time the

decline of low qualified jobs has been compensated by the development of jobs that need a

high qualification, which lead to an improvement of the labor market. Although large German

firms have transformed into multinationals (BMW, Volkswagen, Siemens), there is a serious

concern when it comes to the rate of unemployment. This factor combined with the alarming

increase in the population ageing process is putting great pressure on the German welfare

state. (Streek and Trampusk, 2007)

The Italian welfare state was initially built as a conservative corporatist model, but in

the 1960′s and 1970′s a transformation into a social democrat model has been attempted, a

model characterized by a higher degree of universalism. The costs turned out to be too high

and Italy was soon facing alarming rates of inflation and unemployment. Attempts to handle

this negative economic situation were made, through privatization and decentralization, at

pressures from the European Union. Despite this, the Italian welfare system is threatened by

internal factors, like differences between north and south, high immigration and low rates of

employment by women, and also by factors that all states have to face, like the population

ageing process and low fertility. (Denti, 2007)

47

Scandinavian countries are not facing low employment rates or high costs like

Germany, nor a weak participation on labor market for women and discrepancies between

different parts of the country like Italy, but it′s facing population ageing and low fertility. On

the other hand social benefits tend to overcome the financial resources. A solution would be

income negotiations, in the sense that incomes should be negotiated with each individual.

This would lead to local crisis that could be solved by firms, rather than at a general level.

Andersen, Holmström, Honkapohja, Korkman, Söderström și Vartiainen, 2007) Also there

has been a transformation af the welfare system in denmark in last couple of years. This

transformation materialized in a system based on different layers, especially in the pensions

insurance system, which could loosen the pressures that are being put on the country‟s

finances, considering the fact that the national system is no longer the only option for the

citizens. (Kvist and Greve, 2011)

After all these analyses we can conclude that the welfare state can be applied in all European

countries. But for this to happen, correct decisions have to be made in order to solve all

problems that can appear. There is no such thing as a general solution that can be applied to

all countries, because each state has its own particularities. Negotiating income for each

individual, ways of attracting new workers on the labor market, etc. could be some of the

right solutions.

REFERENCES

1. Andersen, T., M., Holmstrom, B., Honkapohja, S., Korkman, S., Soderstrom, H., T.,

Vartiainen, J., 2007. The Nordic Model. Embracing the glabalization and sharing

riscks, The Research Institute of the finish Economy, Toloustieto Oy

2. Berggren, H., Tragardh, L. , 2011.Social trust and radical individualism, lecture at

The Economic Forum, Geneva

3. Cox, Robert H. April, 2001. The Social Construction of an Imperative: Why Welfare

Reform Happened in Denmark and the Netherlands but Not in Germany, World

Politics 53 (3): 463-498

4. Denti, D., 2007. The Italian Welfare State, Sodernstorns hogskola University College

5. http://www.denti.it/papers/Davide%20Denti%20-

%20The%20Italian%20Welfare%20State.pdf

6. Eklund, K., 2011. Nordic capitalism: Lessons learned, prezentare susținută la World

Economic Forum, Geneva

7. Espring-Andersen, G., Gallie, D., Hemerjick, A., Myles, J., 2001. A new welfare

arhitecture for Europe?, rapot trimis către președenția belgiană a Uniunii Europene

8. Hoyer, A., 2010. German Resistance to Welfare State Reform: Voter Blockades,

Coalitions and Unions, Critique: A worldwide journal of politics

9. Kvist, J., Greve, B., 2011. Has The Nordic Welfare Model Been Transformed?, Social

Policy & Administration, Vol. 45, Nr. 2, pag. 146-160

10. Norman, M., Ronning. E., Norgaar, E., 2009. Challenges to the nordic welfare state.

Comparable indicators, Nordic Social statistical Comittee

11. Schwab, K., 2010. The Global Competitiveness Report 2010-2011, Global Economic

Forum, Geneva

12. Streeck, W., Trampusch, C., 2005, Economy Reform and the Political Economy of the

German Welfare State, German Politics, Vol. 14, Nr. 2, pag. 174-195

48

13. Academic Dictionaries and Encyclopedias, 2011. European welfare state,

14. http://en.academic.ru/dic.nsf/enwiki/6744647

15. Encyclopedia Britanica, 2011. welfare state,

16. http://www.britannica.com/EBchecked/topic/639266/welfare-state

17. Eurostat, 2011. http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home/

49

SMALL AND MEDIUM ENTERPRISES

- A KEY ELEMENT TO FUTURE EMPLOYMENT AND PROSPERITY IN

EUROPEAN UNION

Phd. Student Carmen NICOLAE, Transilvania University from Braşov

Abstract: This paper explores the role of small and medium enterprises in the

European Union. Small and medium-sized enterprises (SMEs) have for some time

been recognised as the backbone of EU economy employing some 70% of its

workforce and generating almost 58% of the business value added. Being the most

dynamic and with highest capacity to innovate and grow theEuropean Union put them

truly to the forefront of European economic policy. SMEs in Europe, however,

consistently underperform compared to their American counterparts and to larger

companies particularly with regards to levels of productivity, growth and innovation.

Explanations include a lack of entrepreneurial culture with 60% of Europeans

claiming never to have considered the idea of setting up of their own business, while

those who have ventured find that regulatory and financial constraints hold their

businesses back. There is a further gap to be filled with a strong need for practical

advice and concrete assistance from both the Member States and the EU on how to

better grow their business and its prospects.

Key words: Small and Medium Enterprises, Small Business Act, the European Union,

Entrepreneur, Value-Added

1. INTRODUCTION

Following the daily news, it is easy to get the impression that the European economy

is dominated by large, multinational enterprises. Their multi-billion Euro takeovers, global

expansion plans or -more recently- risks of mega bankruptcies dominate the headlines.

What usually gets lost is that more than 99% of all European businesses are, in fact,

small and business enterprises (SMEs). They provide two out of three of the private sector

jobs and contribute to more than half of the total value-added created by businesses in the EU.

Moreover, SMEs are the true back-bone of the European economy, being primarily

responsible for wealth and economic growth, next to their key role in innovation and research

& development. What is even more intriguing is that nine out of ten SMEs are actually micro

enterprises with less than 10 employees. Hence, the mainstays of Europe's economy are micro

firms, each providing work for two persons, in average.

Small and medium-sized enterprises (SMEs) play a decisive role in the

competitiveness and dynamic of the European economy. To help them realise their growth

potential, the EU is working towards promoting entrepreneurship and creating a friendlier

business environment for small businesses.

50

2. SMALL AND MEDIUM ENTERPRISE DEFINITION

On 6 May 2003 the European Commission adopted Recommendation 2003/361/EC

regarding the SME definition which replaced Recommendation 96/280/EC as from 1 January

2005. The revision takes account of the economic developments since 1996 and the lessons

drawn from the application of the definition. In particular, it raises the financial ceilings to

take into account price and productivity increases since 1996 and introduces a typology of

enterprises (difference between the three categories: autonomous, partner and linked) and a

calculation method for the thresholds, which gives a realistic picture of their economic

strength. It ensures that enterprises which are part of a larger grouping and could therefore

benefit from a stronger economic backing than genuine SMEs, do not benefit from SME

support schemes.

Table 1. The new SME definition

Enterprise category Headcount Turnover or Balance sheet total

medium-sized < 250 ≤ € 50 million ≤ € 43 million

small < 50 ≤ € 10 million ≤ € 10 million

micro < 10 ≤ € 2 million ≤ € 2 million

Enterprises qualify as micro, small and medium-sized enterprises (SMEs) if they fulfil

the criteria laid down in the Recommendation which are summarized in the table below. In

addition to the staff headcount ceiling, an enterprise qualifies as an SME if it meets either the

turnover ceiling or the balance sheet ceiling, but not necessarily both.

2. “SMALL BUSINESS ACT” FOR EUROPE

Adopted in June 2008, the “Small Business Act” for Europe it is a document which

reflects the European Commission's political will to put into place a comprehensive SME

policy framework for the EU and its Member States.

The national and local environments in which SMEs operate are very different and so is

the nature of SMEs themselves (including crafts, micro-enterprises, family owned or social

economy enterprises). Policies addressing the needs of SMEs therefore need to fully

recognize this diversity and fully respect the principle of subsidiarity.

The mid-term review of the EU‟s Modern SME policy from 2005 to 2007 showed that

both the Member States and the EU have made progress in creating an SME-friendlier

business environment. The European Commission has significantly increased the SME focus

in major EU support programmes for 2007-2013. Member States have substantially improved

the business environment for SMEs, taking inspiration from best practice exchanged in the

context of the European Charter for Small Enterprises endorsed in Feira in 2000 and by

implementing the 2006 Spring European Council conclusions, e.g. by introducing one-stop

shops for company registration and reducing the time and costs required to start a business.

In addition, the EU‟s strategy for better regulation is crucial for SMEs, which will

greatly benefit from the modernisation and simplification of existing EU legislation and from

51

the ambitious programme to reduce administrative burdens arising from EU legislation by

25% by 2012.

Despite this encouraging progress, the EU still needs to take further significant

measures to release the full potential of SMEs5. In general, EU SMEs still have lower

productivity and grow more slowly than their counterparts in the United States. In the US,

surviving firms on average increase their employment by 60% by their seventh year, while

employment gains among surviving firms in Europe are in the order of 10% to 20%. SMEs

still face market failures undermining the conditions in which they operate and compete with

other players in areas like finance (especially venture capital), research, innovation and the

environment. For example, about 21% of SMEs indicate that accessing finance is a problem,

and in many Member States the percentage is much higher for micro-enterprises.

At the heart of the European SBA is the conviction that achieving the best possible

framework conditions for SMEs depends first and foremost on society‟s recognition of

entrepreneurs. The general climate in society should lead individuals to consider the option of

starting their own business as attractive, and acknowledge that SMEs contribute substantially

to employment growth and economic prosperity. As a key contribution to achieving an

SMEfriendly environment, the perception of the role of entrepreneurs and risk-taking in the

EU will therefore have to change: entrepreneurship and the associated willingness to take

risks should be applauded by political leaders and the media, and supported by

administrations. Being SME-friendly should become mainstream policy, based on the

conviction that rules must respect the majority of those who will use them: the ”Think Small

First” principle.

The “Small Business Act” aims to improve the overall policy approach to

entrepreneurship, to irreversibly anchor the “Think Small First” principle in policymaking

from regulation to public service, and to promote SMEs‟ growth by helping them tackle the

remaining problems which hamper their development.

According to Communication from the European Commission to the European

Council, the European Parliament, the European Economic and Social Committee and the

Committee of the Regions (Brussels, 25.06.2008) the European Union and Member States

should create an environment within which entrepreneurs and family businesses can thrive

and entrepreneurship is rewarded.

The 2007 Flash Euro-barometer on entrepreneurial mindsets shows that 45% of

Europeans would prefer to be self-employed, compared to 61% in the US. This has not

changed for many years. People in Europe need to be made more aware that self-employment

is a potentially attractive career option and be provided with the necessary skills to turn their

ambitions into successful ventures.

The education system, and in particular the school curricula, do not focus enough on

entrepreneurship and do not provide the basic skills which entrepreneurs need. Children can

learn to appreciate entrepreneurship from the beginning of their education.

As an estimated 6 million small business owners will retire over the next ten years,

Europe cannot afford to risk losing these businesses due simply to difficulties in business

transfers and to a lack of appreciation of the traditional role of family business. A greater

number of transfers of business would have an immediate positive effect on the European

economy: successful transfer of business preserves more jobs on average than those created

by new start-ups. Transfer of business should therefore be given the same support as setting

up a new business. Recognition of the special role of SMEs and in particular family-based

enterprises, their typically local base, socially responsible attitudes and capacity to combine

52

tradition with innovation, underpins the importance of simplifying the transfer of businesses

and the skills associated with them.

3. IMPLEMENTATION OF THE “SMALL BUSINESS ACT”

Since its launch by the European Commission in October 2007, the idea of a “Small

Business Act” for Europe has raised many expectations. While it is widely supported at

government level, by the European Parliament and by the SME community, it is important to

implement it thoroughly. This requires the full political commitment of both the Commission

and the Member States. Therefore, as a basis for a renewed commitment to SMEs, the

European Commission invites the European Council to welcome and support the “Small

Business Act” for Europe, adopt the 10 principles and commit to the implementation of the

actions proposed. Moreover, the Commission invites the Council and Parliament to swiftly

adopt the related legislative proposals.

On 15 December 2009, the European Commisison adopted a report which highlights

the progress made in implementing the SBA, both at European Union and national level. This

report accentuated the ideea that the financial and economic crisis has determined the need for

far-reaching and comprehensive policy measures in favour of SMEs. It also summarises the

progress achieved in 2009, which has been the first full year of implementation of the SBA,

focussing mainly on the measures contained in the SBA Action Plan and in the European

Economic Recovery Plan.

Both the Commission and the Member States have taken substantial action to

improve SMEs‟ access to finance, to facilitate their access to EU and third country markets

and to improve framework conditions for SMEs in particular by removing unnecessary

administrative burdens.

The Member States have also shown strong political commitment to implement the

SBA, but vary as regards both the approach taken and the results achieved. Several Member

States have 'transposed' the SBA as a whole into their national policy programmes. Belgium

launched its „Plan PME‟ in October 2008, which includes 40 measures covering the main

objectives of the SBA. In Italy, the government created a working group to monitor the

implementation of the SBA, with actions proposed in ten areas. The Irish Government has

adopted a similar approach.

In their 2009 National Progress Reports in the context of the Lisbon Partnership for

growth and jobs, Finland, France, the Netherlands, Romania and the United Kingdom have

explicitly reported on how they are implementing the SBA. France has taken action in the

three priorities of the SBA Action Plan. The United Kingdom has presented in a very detailed

annex the measures taken for each of the ten principles of the SBA. Moreover, some regions,

such as Catalonia (Spain) or North Rhine-Westphalia (Germany), have also adopted the SBA.

However, most frequently, Member States have adopted concrete measures identified as

priorities in the SBA Action Plan.

In order to improve access to finance the European Commission has simplified state

aid rules and has pointed clearly to the need to better take into account SMEs‟ needs at

Member State level. The new General Block Exemption Regulation (GBER) adopted as part

of the SBA consolidates into one text and harmonises the rules reviously set out in five

separate regulations, and enlarges the categories of state aid covered by the exemption. The

GBER introduced new rules on aid intensities for SMEs (i.e. 20% higher aid proportion

allowed for small enterprises and 10% higher for medium-sized enterprises) as well as on

53

incentives for the creation of start-ups and support for women entrepreneurs. Block exempted

aid for SMEs amounted to € 2.8 billion in 2008, an increase of €0.3 billion compared to 2007.

The Commission also adopted a Handbook on State Aid rules which gives a concise overview

of the aid possibilities for SMEs permitted under Community state aid rules.

In addition, the Commission adopted a temporary framework on state aid 2009/2010

providing Member States with increased possibilities to tackle the effects of the credit

squeeze on the real economy. In particular, Member States are able to grant subsidised loans,

loan guarantees at a reduced premium, risk capital for SMEs and direct state aid of up to €

500 000 without notification of individual cases.

The European Investment Bank (EIB) group has played a crucial role in easing

SMEs‟ access to finance in 2009. It has substantially increased its lending activity dedicated

to SMEs from € 8.1 billion in 2008 to around € 11.5 billion in 2009. Besides the continuous

implementation of the SME instruments foreseen under the Competitiveness and Innovation

Framework Programme (€ 1.13 billion earmarked for 2007-2013), € 200 million has been

allocated for mezzanine finance for 2009.

In September 2009, the first investment (of € 1.85 million) was made in the

framework of the JASMINE initiative, launched in 2008 by the European Commission to

promote the development of micro-finance institutions in Europe. Furthermore, the

Commission has stepped up its efforts to provide Member States and other stakeholders with

information on SMEs‟ access to finance through regular surveys.

As a response to the financial and economic crisis, and often using the temporary

framework on state aid, most Member States have also adopted policy measures to enhance

SMEs‟ access to liquidity, especially to bank lending, through the creation and extension of

loan and guarantee schemes for SMEs (Austria, Belgium, the Czech Republic, Denmark,

Estonia, Finland, France, Germany, Greece, Hungary, Italy, Lithuania, Luxembourg, the

Netherlands, Spain and the United Kingdom). The EIB package of € 30 billion for loans to

SMEs also allows some member countries to use a second level guarantee scheme. In

addition, Belgium and France have set up a "credit mediator" acting as a contact point for

SMEs and entrepreneurs that have problems with their bank.

4. CONCLUSIONS

The Small Business Act aims to design rules according to the "Think Small First

Principle". All new legislative and administrative proposals at European and national level

should be subjected to an "SME test" to assess their impact on SMEs. Where this impact is

considered negative, Member States will be able to use measures such as derogations,

transition periods and exemptions in particular from information and reporting requirements.

For example, through the EU Directive on VAT invoices, electronic VAT invoices are put on

an equal footing to paper invoices. Another EU Directive will offer the opportunity to EU

Member States to relieve micro enterprises from the obligation to present their annual

accounts.

Also the SBA Adapt public policy tools to SME needs A new code of best practice for

public procurement will facilitate SMEs' access to public procurement contracts. It offers

solutions to difficulties faced by small companies by improving access to information about

public contracts and how to bid on-line, reducing excessive financial requirements, and

cutting the paperwork. A higher level of state aid will be allowed to smaller companies, and

rules for state aid to SMEs will be made simpler. National governments also do not need to

54

notify this support to the Commission. Overall, these measures increase the possibilities for

state aid to SMEs.

REFERENCES

1. European Commision: Report on the Implementation of “Small Business Act”,

Brussels, 2009.

2. European Commision: The European Economic Recovery Plan, Brussels, 2008.

3. Council of the European Union, 2945th

Council Meeting: Competitiveness (Internal

Market, Industry and Research), Brussels, 28-29 May 2009.

4. http://ec.europa.eu/enterprise/policies/sme/small-business-

act/implementation/index_en.htm

„ACKNOWLEDGEMENT: This paper is supported by the Sectoral Operational Programme

Human Resources Development (SOP HRD), ID76945 financed from the European Social

Fund and by the Romanian Government.

55

ANALYSIS OF MARKETING MIX IN CONSULTANCY SERVICES

FROM HUMAN RESOURCES DOMAIN. CASE STUDY: PROFILES

INTERNATIONAL

Alexandra PALADE, student at Masters of Marketing Policies and Strategies

in Transilvania University from Brasov,

Faculty of Economic Sciences and Business Administration

Coord. Lect. Dr. Cristinel CONSTANTIN

Abstract: The current paperwork contains the analysis of marketing mix in

consultancy services from human resources domain. For this analysis was created a

case study at Profiles International Company, world leader in field of psychological-

aptitude evaluation used by the personnel in various human resources activities.

Key words: consulting, market, marketing mix, evaluation tools.

1. INTRODUCTION

The topic of this paperwork is called “Analysis of marketing mix in consultancy

services from human resources domain”. I have realized the case study at Profiles

International Company. I have chosen this company because it is world leader in human

resources evaluation, having over 70 regional headquarters and over 50.000 clients, juridical

persons, world wide. In this paperwork I want to present a few aspects regarding the market

of consultancy services, followed by the conceptual story of speciality literature. The main

objective of this paperwork is to analyze the strategies of the marketing mix of Profiles

Company, strategies which lead in obtaining the top position in human resources evaluation

on the market.

2. LITERATURE REVIEW

Marketing concept was founded in 1957 by John B. Mc. Kitterick (CEO General

Electric): „marketing concept is the philosophy of consumer orientation, philosophy which

implies integral and coordinated actions and reaching a certain goal” Marketing concept was

founded in 1957 by John B. Mc. Kitterick (CEO of General Electric) which stated: “the

concept of marketing is the philosophy of orientation to consumers, which implies full and

coordinated actions as in achieving a specific purpose.”13

The term “service”, in Philip

Kotler‟s vision, represents any activity or benefit that one party can offer another, which is

generally intangible and whose result does not imply ownership of a material good.14

13

Lefter, C. (coordonator) Marketing, vol. 1, Ed. Universitǎţii, Brașov, 2006, pg. 25 14

Kotler, P. Managmentul marktingului. Editura Teora, Bucuresti, 2007, pg. 570

56

Marketing mix is all controllable and tactical marketing tools (product, price,

placement and promotion) that it makes up company to produce the response you want from

the market concerned.

Marketing, in other words, represents the art and science to sell. The ingredients for a

successful marketing are (by Philip Kotler) the four P: Product, Price, Promotion, Placement

or distribution.15

In services however, the concept is extended to 7 P‟s, being in addition to

the initial model: personnel, process, test (physical proof).

The product is the combination of goods and services which the company offers to the

concerned market.16

The price is the amount of money which the clients must pay to obtain

the product. The placement (distribution) refers to a company‟s activities that make the

product available for targeted clients. The promotion represents the activities that

communicate the merits of the product and persuading the clients to buy.

Product policy. In vision of the author of “Marketing. Explanatory Dictionary”

product policy represents17

a decision adopted by manufacturing or commercial enterprises

regarding size, structure and evolution of the range of goods and services. Product policy is

often compared with “the heart of marketing”18

.

Price policy. Price is a market instrument and an index of economic and social reality.

The price is the only marketing mix variable which leads to profit, all the others are

generating expenses or investments. The price is a very flexible element of the mix which can

be modified very quickly, unlike the product characteristics and the distribution activity.

Distribution policy. The distribution‟s role is to insure the necessary balance in the

market first of all between demand and offer, between producers and consumers. Likewise it

is the role of the distribution to streamline the selling – buying processes.

Promotion policy. The promotion must be seen as a key instrument of the marketing

mix. The way in which they are combined by the company the different promotion

components in order to achieve objectives give birth to promotional mix.

People. All the services depend on the persons that provide it. Often, they are the ones

that have direct contact with the consumer. We can say that the staff is part of the product

which we buy.

Process. The services are usually provided in the presence of the consumer. That is

why the process through which the product is delivered is part of the process the consumer

pays for.

Physical proof. It has an important role in making services tangible. The architecture

of the building, the layout and decorations of interior spaces are essential. These can influence

the behaviour of consumers in at least four ways: they can be attracted by the use of special

architectural designs, which can be perceived to convey a message; colours can also have a

stimulating effect, while the physical environment can influence clients‟ mood.

Ambient factors represent environmental conditions below the immediate level of

consciousness, that attract attention only when they are absent or unpleasant. Design refers to

visual stimuli, of which the probability to be noticed by clients is far greater than that of

ambient factors. These factors can be aesthetic, like architecture, colour, style, and

accessories, or functional: comfort, layout and interiors.

15

Kotler, P., Armstrong G. Principiile marketingului, Ed. Teora, București 2004, pg. 82 16

Olteanu, V. Marketingul serviciilor, Ed.Ecomar, București, 2003, pg.167 17

Florescu C, Pop N. Al. Malcomete „Marketing dicţionar explicativ”, Ed Economică, Bucureşti, 2003, pg 537 18

Lefter C (coord.) - „Marketing”, vol. II, Ed Universităţii Transilvania, Braşov, 2006, pag 375, 405

57

3. GENERAL PRESENTATION OF PROFILES INTERNATIONAL

COMPANY

Profiles International is world wide leader in the evaluation of the human resources,

having over 70 regional headquarters and over 50.000 clients, juridical persons, world wide.

The main headquarter is in Waco – Texas, USA. In Europe, the national representatives are

found in countries like: Germany, France, Great Britain, Italy, Spain, Czech Republic,

Hungary. The representative from Romania was opened in 4th of September 2003 within a

launching at Marriot Hotel in Bucharest, in the presence of over 70 companies and the vice-

president of Profiles International dr. Chuck Wilson. The company promotes the

implementation of psychological- aptitude and professional evaluation system consisting of

performing tests approved by the Association of American Psychologists, validated for world

population. It represents a premier for Romania the fact that such system of evaluation is

available on-line, and the tests and reports generated after the applying are in Romanian.

To pinpoint the company‟s growth, I will show you in the chart 1 the evolution of the

turnover for Profiles International in 2003, the launching year until 2009 and in the table 1 I

will enumerate the value of the turnover for every year.

Chart 1. Evolution of the company’s turnover

267471

1107788

843641

6319516

1580233

9288971199652

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

2003 2005 2007 2009

Turnover (Lei)

From chart 1 can be observed a growth of the turnover from 2003 to 2006 after which

a decline comes. In 2006 was recorded the highest value. In 2006, after having managed

several projects financed through structural funds, Profiles International experienced a surge

in turnover. In 2007, as these projects entered the final phase, Profiles turnover averaged its

previous values, once more. In 2008 turnover started to grow again, this growth own to the

fact that, after the revealing of the economical crisis, the companies realized that consultancy

is necessary, especially in human resources domain, to overcome the crisis moments, to make

bigger economy and maximum efficiency.

The market of consultancy companies, in Romania, is in continuous growth and

diversification. The companies are increasingly turning to this kind of services taking in

consideration the development state of the economy. Another problem is the lack of

experience in resolving the situation to which the companies overcome everyday (personnel

evaluation, market research, trainings, qualifications, market surveys etc). For these problems,

Profiles International offers solutions based on: managers development, employees

motivation, talent management, improving customers services, management diagnosis, team

development tools etc.

58

The company is aimed strictly for the national market, which is a clause in the license

to use the software of the copyright holder. The services sector market in which the company

works is registered among the highest growth rate.

The awards offered to Profiles International, in those 8 years of activity are:

The best debut 2003

Member of “The Honor Society” 2003

Member of “The Executive Comitee” 2004

Member of “The President‟s Council” 2006.19

The founders of Profiles International, Doru Dima with Jim Sirbasku and Bud Haney

received the award “National Director 2006” as recognition of the fact that Romania was the

best representation amongst 120 countries.

4. THE MARKETING MIX OF PROFILES INTERNATIONAL

The marketing mix is all controllable and tactical instruments (product, price,

placement and promotion) that the company makes up to produce the response it wants from

the market concerned 20

.

The marketing mix, in the consultancy services, besides the classic 4P, is completed

by: physical affiliation associated with the image of the consultancy company, the role of

humans and consultancy process (standard methodology).21

Further, I will present the product, price, distribution and promotion policy for Profiles

International but also people, process and physical test.

a) Product policy Profiles International company‟s product portfolio includes 5 product categories,

namely: pre –screening; promotion, recruitment, career guidance; evaluation, training and

management diagnose; personal development and the last category, team development.

Amongst the advantages of using Profiles products includes:

The scale of low distortion (it can be checked the veracity of the information

provided)

The products are being validated (they have been designed to be neutral in

terms of race, national origins, handicaps, sex or age)

Supplies many types of reports

It adapts to the existing positions on the market

Are easy to understand and administrate

Requires a low time to complete and interpret the results.

All Profiles evaluation and development instruments are available in an on-line

integrated system, usable at any computer with internet access. For every client is created this

kind of exclusive system, the entry being secured by an username and password.

All these tests can be performed on-line but also in classic method using paper and

pencil. For those who prefer the classic method (Pencil/Paper) the assessments may be given

to be completed in the booklet version, following that an operator to enter them into the

system.

19

http://www.profilesinternational.ro/about-us/profiles-awards.html 20

Kotler, P., Armstrong G. Principiile marketingului, Ed. Teora, București, 2004, pg. 11 21

Mitrutiu, M., Mixul de marketing în serviciile de consultanţă – teză de doctorat, Universitatea de Vest din Timişoara, Timişoara, 2007,

pg.7

59

Table 1. Profiles International product portfolio

Category Products Application

time

Types of reports

Pree- screening Integrity and work

ethic indicator

20-30

minutes

For interview

Recruitment,

Promotion, Career

Guidance

Profile XT 60-70

minutes Placement

Individual

Coaching

Compatibility with

many jobs

Job analysis

Profile XT Sales 60-70

minutes

Selection

Placement

Promotion

Self improvement

Customer Service

Profile

20-30

minutes

Placement

Individual

Coaching

Sales Indicator 15-20

minutes Management

Individual

Evaluation, Training

and Diagnosis of

Managers

Checkpoint 360 ° 15-20

minutes

Simple

Comparable

Diagnosis of

Organizational

Management

- -

SkillBuilder - -

Personal Development

Performance

Indicator

15-20

minutes Management

Individual

Workforce

Compatibility

60-70

minutes

For Manager and

Subordinate

Team Development Team Analysis 15-20

minutes

Analysis

Source: adapted after http://www.profilesinternational.ro/products.html

In the category of pre-screening is included the integrity and work ethic questionnaire

called Step One Survey. On the side of career recruitment, promotion and guidance are

included 4 assessments of skills and vocational skills. Are included in this category: Profiles

XT (file compatibility with the job) which has the motto: “The right man in the right place.”

This is an evaluation instrument used for selection, coaching, training, promotion. The second

product, from this category is Profiles XT Sales (the right sales man), instrument for the

selection, training and coaching mans in sales. The instrument called Customer Service

Profile (customer service) is used for being assured that all the employees from the company

help serve customers better. Profiles Sales Indicator is used for selection, management and

60

training the sales man for sales force optimization. For managers evaluation, training and

diagnosis it can be chosen one of three instruments: Checkpoint 360° (used both for

individual career development as for success of the organization), Diagnosis of

Organizational Management (synthesis report of the management team development, the

report being a synthesis of collected information from individual Checkpoint assessments of a

whole management team; is created an consistency analysis of each manager and the group

with the vision, mission, strategic objectives of the company) or SkillBuilder (which

represents an individual training for managers; offers managers the opportunity to develop

their skills). For personal development, the company offers 2 instruments which are

Performance Indicator and workforce compatibility. First instrument evaluates 5 essential

factors of personality and their impact over the 7 important aspects of success in work, and

the second one is meant to offer practical suggestions of harmonious and effective

collaboration between manager and subordinate. For team development is necessary to build

a strong team. You can call the instrument named Profiles Team Analysis, which is a team

analysis questionnaire.

Seeing Profiles products results, these evaluation instruments helps companies to

improve productivity, to increase sales, to employ the right people, to increase the efficiency

of the managers, to reduce staff turnover, to motivate the employees.

For recruiting the staff, you must specify that these test results should supply a third of

the selection process, for the rest is recommended the interview, the confirmation of the

personal data, work experience. All these should be used in association with the reports

results.

For the product policy, you must approach an assortment stability strategy. Through

this is maintains the assortment area and intensifies the effort in improving the quality. The

strategy aims to preserve and strengthen the market position and the prestige.

b) Price policy

The system presents low implementation costs. The first step to be made in order to

acquire Profiles human resources management system is the purchase of a license that offers

the right to use the database and the site. Afterwards, every client is thought how to use it.

Every kind of test has a price, so every completed test represents a test unit. The generated

test report is available in the database as son as it is completed and it‟s automatically sent to

the e-mail address. A plus brought by Profiles is the fact that any visualization of any report

for the completed test is free. The training for using Profiles system takes during a day.

The contract is negotiated with every client, and in case of dealerships the prices are

fixed. Each dealer has a monthly target value.

The strategy applied by the company for price policy is differentiated pricing policy

according to customer, depending on the delivery emergency or the volume.

c) Placement policy

The distribution and delivery of consulting services is made directly by specialized

personnel of the company. This way, we choose for direct distribution strategy. Profiles

International brings new instruments on the market, products which operates in human

resources field, in evaluation of abilities and professional skills. It is aimed strictly to national

market. It can be considered, apparently, that market is limited but offers a strong business

development. In year 2010 were registered in Romania 610.000 active companies (according

to Chamber of Commerce and Industry of Romania).22

Assessment results are received through a report, the report can be sent by e-mail

(electronic) or hard copy (printed).

22

http://www.ccir.ro./evenimente/evenimente-organizate-de-ccir/eveniment/view/topul-naTional-al-firmelor-editia-a-xviii-a-2011

61

d) Promotion policy

The publicity made by Profiles International is a publicity realized at national level.

The publicity messages were transmitted by the following media:

o Press – the messages were distributed in specialty magazines (ex: Saptamana

Financiara)

o Radio – broadcasted on national channels (ex: Magic FM)

o Television – main TV channels (Prima, Pro Tv, Antena 1)

o External publicity – by presentation folders, flyers, brochures, leaflets and

other publicity materials.

Also for promotion policy, the company holds an own information website. The

website for Profiles International is the following:

http://www.profilesinternational.ro/home.html. Also on the website, the potential clients have

the possibility to subscribe to a newsletter (periodic electronic newsletter) which can be

received on the e-mail address. This newsletter keeps in touch with developments and trends

in their field of activity.

Profiles International annually organizes International Human Resources Conference,

this year reached its seven edition. In this conference are presented the new trends and it

represents an opportunity to met specialist from human resources domain also from the

country as from abroad. At this conference the National Director participated as speaker, this

being another way of promoting the company.

The proposals regarding the strategies for promotion policy of Profiles International

are: company image expansion strategy, organizing a promotional activity, strategy of

company’s global promotion.

e) People

For Profiles International the staff represents a very important element which is given

proper attention. The company‟s consultants are the ones that come in direct contact with the

customers, so that they are part of the product bought. So, the success of the company owes

especially to the staff. Because in the product portfolio are recruiting tools, before any

employing, the potential employees are evaluated at least by an instrument. Usually they use

Profile XT. Also, all employees have higher education and most of them follows deepening

programs.

f) Process

Services, in case of Profiles International, are provided either in the presence of the

consumer, either on-line. This thing depends on the buyer‟s wish. If he chose the on-line

version, the assessment can be completed on the internet, and the report generated is sent by

e-mail. There is the possibility that the process to be realized in the presence of the consumer,

at the companies headquarters. In this case the process in which the service is delivered is part

of the product which the consumer pays.

g) Physical proof.

Profiles International has its head office in Brasov, at 35 Miraslau St. The building is well-

positioned, easily noticeable and accessible. The position of offices and interior spaces is a

key strength in attracting customers. As company colours are white and blue, all Profiles

advertising campaigns use these colours. These colours can also be found on the company

logo.

Figure 1. Profiles International Logo

62

5. CONCLUSIONS

The consultancy company market, in Romania, is in continuous growth and

diversification. Companies are increasingly turning to such services given the stage of

economic development. Profiles International is the world leader in human resources

assessment. The company aimed strictly for national market.

For product policy, is approached an assortment stability strategy. Through this it

maintains the assortment range and intensifies the effort in order to improve quality. The

strategy aims to preserve and strengthen the market position and the prestige gained.

Regarding price policy the company adopts differential pricing strategy depending on the

client, depending on delivery urgency or volume. Distribution and services delivered by the

consultant are directly made by the company‟s specialized staff. This way it optimizes for

direct distribution strategy. The propositions regarding strategies for promotion policy of

Profiles International are as followed: strategy for extending company‟s image, organizing

promotional activities, strategy for global promotion of the company.

REFERENCES

1. Florescu C, Pop N. Al. Malcomete „Marketing dicţionar explicativ”, Ed Economică,

Bucureşti, 2003 2. Kotler, P. Managmentul marktingului. Editura Teora, Bucuresti, 2007

3. Kotler, P., Armstrong G. Principiile marketingului, Ed. Teora, București, 2004

4. Mitrutiu, M., Mixul de marketing în serviciile de consultanţă – teză de doctorat,

Universitatea de Vest din Timişoara, Timişoara, 2007

5. Olteanu, V. Marketingul serviciilor Ed Ecomar, Bucuresti, 2003

6. http://www.ccir.ro./evenimente/evenimente-organizate-de-ccir/eveniment/view/topul-

naTional-al-firmelor-editia-a-xviii-a-2011

7. http://www.profilesinternational.ro/products.html

8. http://www.marketing-vanzari.edrs.ro/ -Revista Marketing Dinamic si Excelenta in

Vanzari

63

A MULTIVARIATE ANALYSIS OF THE

ROMANIAN CAR HOLDERS’ ATTITUDES AND BEHAVIOURS

Veronica PÎRVU, student at Masters of Marketing Policies and Strategies

Transilvania University of Brasov, Faculty of Economic Sciences

Coord: Cristinel CONSTANTIN, Transilvania University of Brasov, Faculty of Economic

Sciences

Abstract : The paper contains an analysis of different variables that influence the

behaviour of the consumer on the automobile market. It is shown the importance of

the car’s atributes in the consumer mind and their influence for the competitive

advantage.

Key words: discriminant analysis, principal component analysis, homogeneity

analysis

1. INTRODUCTION

The purpose of this paper is a critical analysis of the market strategies used by

automobile companies, but also a local market analysis to determine its evolution in this

period of time.

This paper assumes that the evolution of the car market has a downward trend and it is

therefore very important to know the factors that caused this phenomenon.

The main objective of the paper is to determine the market strategies implemented by

car companies and analysis of this market in terms of sale volume, but also marketed brands.

The paper also tries to identify the purchasing criteria for new cars by Brasov owners,

but also the satisfaction of those who have a Dacia car.

In addition to this analysis will be carried out a quantitative research that uses inquiry-

based survey to find out the purchasing criteria for new cars.

2. LITERATURE REVIEW

The subject of multivariate analysis deals with the statistical analysis of the data

collected on more than one (response) variable. These variables may be correlated with each

other, and their statistical dependence is often taken into account when analyzing such data.

Response variables under consideration are often described as random variables and since

their dependence is one of the things to be accounted for in the analyses, these response

variables are often described by their joint probability distribution.23

There are two main factor analysis methods: common factor analysis, which extracts factors

based on the variance shared by the factors, and principal component analysis, which extracts

factors based on the total variance of the factors. Common factor analysis is used to look for

23 Stevens, J. P.- Applied multivariate statistics for social sciences, Lawrence Erlbaum, Fifth edition, 2001, pg. 10

64

the latent (underlying) factors, where as principal components analysis is used to find the

fewest number of variables that explain the most

variance.24

The principal component analysis (PCA) is the oldest and most versatile method. The

goal of PCA is to decompose a data table with correlated measurements into a new set of

uncorrelated (i.e., orthogonal) variables. These variables are called, depending upon the

context, principal components, factors, eigenvectors, singular vectors, or loadings. Each unit

is also assigned a set of scores which correspond to its projection on the components.

The results of the analysis are often presented with graphs plotting the projections of

the units onto the components, and the loadings of the variables.25

Discriminant function analysis is used to determine which continuous variables

discriminate between two or more naturally occurring groups. For example, a researcher may

want to investigate which variables discriminate between fruits eaten by (1)primates, (2)

birds, or (3) squirrels. For that purpose, the researcher could collect data on numerous fruit

characteristics of those species eaten by each of the animal groups. Most fruits will naturally

fall into one of the three categories. Discriminant analysis could then be used to determine

which variables are the best predictors of whether a fruit will be eaten by birds, primates, or

squirrels.26

Linear Discriminant Analysis easily handles the case where the within-class

frequencies are unequal and their performances have been examined on randomly generated

test data. This method maximizes the ratio of between-class variance to the within-class

variance in any particular data set thereby guaranteeing maximal separability. The use of

Linear

Discriminant Analysis for data classification is applied to classification problem in

speech recognition. The prime difference between LDA and PCA is that PCA does more of

feature classification and LDA does data classification. In PCA, the shape and location of the

original data sets changes when transformed to a different space whereas

LDA doesn‟t change the location but only tries to provide more class separability and draw a

decision region between the given classes.27

Figure 1 A comparison of PCA and LDA

Source: Duda, R. O., Hart, P. E., Stork, D. G.- Pattern Classification (Second Edition), Wiley

Interscience, New York, New York, USA

24 Richarme, M.- Eleven multivariate analysis techniques: key tools in your marketing research survival kit, Decision Analyst, 2002, pg. 3 25 Abdi, H.- Multivariate analysis, Encyclopedia of Social Sciences Research Methods, Sage Publication, 2003, pg. 1 26 Poulsen, J.; French A.- Discriminant function analysis, Sage Publication, 2001, pg. 1 27 Balakrishnama, S.; Ganapathiraju, A.- Linear discriminant analysis- a brief tutorial, Institute for Signal and Information Processing, Department of Electrical and Computer Engineering, Mississippi State University, pg. 1

65

One of the basic techniques for the analysis of categorical data is homogeneity

analysis, also known as multiple correspondence analysis.

The focus of the various derivations and presentations of homogeneity analysis is on a single

group of observations (individuals, objects, etc.). However, in many applications the same

variables are administered to multiple groups of objects. Typical examples include personality

inventories administered to depressed and `normal' individuals, marketing survey

questionnaires distributed to socioeconomic groups and so on.28

3. A MULTIVARIATE ANALYSIS OF THE AUTO MARKET

The paper is based on a market research among the car owners from Brasov. The objective of

the research is to identify the acquisition criteria of a new car.

The members of the sample are car owners from Brasov, are over 18 years and were selected

using the sample in step. They were asked to answer the questions of a questionnaire. The answers

from the 100 respondents were structured in a SPSS sheet and it was applied a multivariate analysis to

fix the links between different characteristics.

The first method is a discriminant analysis that studies the Dacia customers. There are used

the following variables: the degree of satisfaction of the respondents regarding to their Dacia car, their

attitude about the safety and the price-quality ratio of the automobile.

The dependent variable is nominally measured, a dichotomous scale with “Yes” and “No”

answers.

The independent variables are measured with proportional or interval scales.

Using the SPSS system the results can be synthesized in the following tables:

Table 1 Group Statistics

Are you satisfied with the quality of the car that you have? Mean Std. Deviation

Valid N (listwise)

Unweighted Weighted

No Price-quality ratio 3.38 1.188 8 8

Safety 2.38 1.061 8 8

Maintenance cost 1200 968.061 8 8

Yes Price-quality ratio 4.37 .926 27 27

Safety 4.04 .980 27 27

Maintenance cost 734.07 595.013 27 27

Total Price-quality ratio 4.14 1.061 35 35

Safety 3.66 1.211 35 35

Maintenance cost 840.57 709.283 35 35

The average of the independent variables are significant different in the three groups. Those

who are satisfied with the quality of the vehicle have average satisfaction from the quality-price of the

car of 4.37 points on a 5 level scale, 5-very satisfied. In the other case (those who are not satisfied with

the quality of the vehicle), mean is 3.38 points on the same scale.

The average degree of satisfaction with the safety car is higher for those who are satisfied with

the quality car than those who are not.

28 Michailidis, G., Leeuw, J.- Multilevel homogeneity analysis with differential weighting, Computational statistics &Data analysis, 32, 2000, pg. 411-412

66

Table 2 Tests of Equality of Group Means

Wilks' Lambda F df1 df2 Sig.

Price-quality ratio .840 6.272 1 33 .017

Safety .658 17.132 1 33 .000

Maintenance cost .922 2.804 1 33 .103

Values “F” in the table are higher (price-quality ratio and safety) than the theoretical

values obtained from the Fisher distribution table. As a result, the both variables specified

have a significant discriminant power. Variable “safety” has a higher discriminant power

because the coefficient Wilks‟ Lambda is lower and the F value is higher than the “price-

quality” variable.

Table 3 Canonical Discriminant Function Coefficients

Function

1

Price-quality ratio -.149

Safety 1.002

Maintenance cost .000

(Constant) -2.656

Unstandardized coefficients

The table above shows that maintenance costs do not have a significant discrimination

effect. This is why this variable is not listed in the statistically function and it is not included

in the model.

The discriminant function is statistically significant and has the following expression:

Table 4 Classification Results

Are you satisfied with the quality of the car that you have?

Predicted Group Membership

No Yes Total

Original Count No 4 4 8

Yes 2 25 27

% No 50 50 100

Yes 7.4 92.6 100

Cross-validated Count No 3 5 8

Yes 3 24 27

% No 37.5 62.5 100

Yes 11.1 88.9 100

The information structured in table 4 show that from eight respondents who said they

are dissatisfied with the quality of the car, four (50%) would have to be part of the satisfied

group according to the discriminant score. Thus only 50% of respondents are correctly

67

classified. In the other case (people that are satisfied with their cars‟ quality), 92.6% of

respondents are correctly classified according to the discrimination function. In this respect

we can conclude that the obtained function could give quite good results in identifying

satisfied customers according to their attitudes regarding the quality price ratio and car‟s

safety.

The second method used is principal component analysis and it aims to identify the

interdependences between different variables regarding the importance given by respondents

to some attributes of cars: price, safety, durability and fuel consumption.

Table 5 Component Matrix

Component

1 2

Price -.975 -.016

Durability .270 .734

Safety .562 .408

Fuel consumption .567 -.781

The above table shows that the first component is mainly correlated with price and

safety and the second one is correlated with durability and fuel consumption. Therefore the

first component refers to the correlation price-safety and the second one to the engine

characteristics.

Table 6 Descriptive Statistics

Mean Std. Deviation Analysis N

Price 28.48 16.253 100

Durability 20.87 9.915 100

Safety 25.68 10.482 100

Fuel consumption 24.45 13.519 100

The table above contains the averages for the categories of response depending on the

importance given by the sample members, which means that a higher score represents greater

importance.

Price is considered the most important feature that respondents take into account when

purchasing a car (28.48 points). Next in ranking is safety (25.68 points). The last two features

are durability and fuel consumption.

68

Figure 3 The emplacement of the respondents depending on income in the plane of two

factors

-3 0 3

Price-safety

-3

0

3

En

gin

e c

hara

cte

risti

cs

Income

Low-income Middle-income High-income

The emplacement of respondents grouped according to their incomes shows an

agglomeration in the center of the above chart that signifies an equilibrium in the importance

given to the four factors that explain the principal components. In spite of this evidence, we

can notice that people with low and medium incomes tend to appreciate better the price and

durability but also there are people that appreciate the car‟s safety and durability. There are

few people from these income categories that are concerned about fuel consumption. As

regards the respondents with high incomes, they are spread on the entire chart surface, which

means that there is a high heterogeneity at the level of this group. In this respect, there are

people with high incomes that are concerned about durability but almost the same proportion

is concerned about fuel consumption. A similar pattern is recorded for the first component.

The last method used in our multivariate data processing is the homogeneity analysis

and refers to the links between sex, age income and the automotive brand owned.

Correspondence analysis is based on existing distances between categories of variables on the

graphical representation in two dimensions plan

69

Figure 4 Homogeneity analysis between gender, age, income and brand car

-3 -2 -1 0 1 2 3

Dimension 1

-3

-2

-1

0

1

2

3D

ime

ns

ion

2

Dacia

Skoda

Opel

VWPeugeot

Audi

Renault

Low-income

Middle-income

High-incomeFemale

Male

18-29 years

30-39 years

40-49 years

50-59 years

60 and over 60 years

What brand is the car you own?

Income

Gender

Age

In the figure above the categories of analyzed variables were represented by dots. The

dots‟ emplacement shows that the brand Renault, Skoda and VW are owned mainly by males,

people with high incomes (over 2500 RON) and aged between 18 and 29 years, and between

40 and 60 years hold. Brands like Dacia, Opel and Audi are owned mainly by women, people

with medium income (between 1200 and 2500 RON) and aged between 30 and 39 years. The

last brand (Audi) is an anomaly in this correlation between variables because the respondents‟

income does not match the high price of these automobile, but also high maintenance costs.

This one could be explained by the small number of respondents that indicated this brand,

which cannot be considered statistically significant.

Some categories are quite isolated on the chart being low correlated with the other

categories. These ones are Peugeot cars, which recorded a small number of answers and also

other categories like the respondents aged over 60 years and the ones with low income (below

1200 RON).

CONCLUSIONS

The undertaken analysis aims determining the importance given by respondents

according to certain characteristics of owned cars. Thus, the two components considered

important by subjects are price-safety and engine characteristics (durability and fuel

70

consumption). The income distribution of respondents notices a different attitude to the two

components analyzed.

Further analysis is related to the attitude of respondents who hold Dacia against the

quality-price, safety and maintenance costs. For those who are not satisfied with the quality of

Dacia car, 50% would have to fit in the satisfied group. In the other group, 7.4% of the

satisfied respondents should be within the list of those unpleased.

Another conclusion is related to determining the characteristics of respondents

according to owned car. Thus, men, people with high incomes, young people but also aged

between 40 and 60 have a car branded Renault, Skoda or VW. On another hand, women,

medium-income people and those aged between 30 and 39 years have Opel, Dacia or Audi

cars.

REFERENCES

1. Abdi, H.- Multivariate analysis, Encyclopedia of Social Sciences Research Methods,

Sage Publication, 2003. 2. Balakrishnama, S.; Ganapathiraju, A.- Linear discriminant analysis- a brief tutorial, Institute

for Signal and Information Processing, Department of Electrical and Computer Engineering,

Mississippi State University.

3. Constantin, C. – Sistem informatice de marketing, Ed. Infomarket, Brasov, 2006

4. Duda, R. O.; Hart, P. E.; Stork, D. G.- Pattern Classification (Second Edition),Wiley

Interscience, New York, New York, USA.

5. Michailidis, G., Leeuw, J.- Multilevel homogeneity analysis with differential

weighting, Computational statistics &Data analysis, 32, 2000. 6. Poulsen, J.; French A.- Discriminant function analysis, Sage Publication, 2001.

7. Richarme, M.- Eleven multivariate analysis techniques: key tools in your marketing

research survival kit, Decision Analyst, 2002. 8. Stevens, J. P.- Applied multivariate statistics for social sciences, Lawrence Erlbaum, Fifth

edition, 2001.

71

CORPORATE SOCIAL RESPONSIBILITY- BETWEEN THEORY

AND PRACTICAL APPLICATIONS

Anca POROŞNICU, student at Master of Marketing Policies and Strategies

Coord. Lect. univ. dr. Cristinel CONSTANTIN

Transilvania University Brasov, Faculty of Economics and Business Administration

Abstract: This paper contains a theoretical analysis of the the term social

responsibility, making reference to the area to which it belongs, the strategies that

firms involved in social life are using and various arguments, both pro and con as to

promote social responsibility. It also includes some of the campaigns which

Kronospan company has developed.

Key words: social responsibility, concept, role, arguments.

1. INTRODUCTION

Social responsibility takes many forms and knows various definitions. Basically, the

concept of Corporate Social Responsibility (CRS) represents the business involvement in

public life and is applied regularly through voluntary initiatives aimed at employee benefits,

community and environment. Although the concept is still new in Romania, companies have

realized that for the effective exercise they need the community support, which is rarely

offered free of charge.

It may be reduced to the old saying "One hand washes the other". As companies face

the challenges of a changing environment, they become increasingly aware that CSR can

positively influence competitiveness. Although the main purpose of a company is to generate

profit, it can at the same time, contribute to social and environmental goals, solve real

problems in society by integrating social responsibility as a strategic investment in their work.

2. LITERATURE REVIEW

CSR is a fundamental concept - such as freedom or equality - which is continuously

redefined to meet the needs that are also in constant change from one era to another. WBCSD

defines CSR as "the commitment of businesses to contribute to sustainable economic

development, working with employees, their families, local community and society at large to

improve their quality of life.29

" CSR practices are based on ethical values and respect for

employees, community and environment.

Currently, researchers believe that the CSR analysis is in undeveloped stage because

no theoretical concepts or empirical methods are yet substantiated..

29

http://www.wbcsd.org/templates/TemplateWBCSD2/layout.asp?type=p&MenuId=NDEx&doOpen=1&ClickMenu=LeftMenu

72

For CSR to become a strategic component of the enterprise a series of steps are required:

• achieving social and environmental analysis include: working conditions, energy and water

consumption, etc..

• setting targets to improve the collective actions and voluntary activities,

• implementation of action programs in social responsibility30

.

Each company must integrate social responsibility issue in its own business strategy.

In this sense, a company should focus on individuals, putting employees first - valuing them

as the most important assets, establish a system where the activities remain transparent. The

role of social responsibility is clearly defined as responsibilities of the management, the

introduction of codes of conduct, equal treatment of all shareholders, regardless of the share

they hold, transparency and conflict-scale transactions in the General Assembly of

Shareholders.31

The speciality literature summarizes the three approaches to CSR, each including an

approach and going beyond the previous one. We speak in this case of the following:

addressing responsibility as an obligation to shareholders, the approach to all stakeholders

responsibility and liability approach as an obligation to society as a whole. The first approach

corresponds to the firm's business model, one that emphasizes the acquisition of profits,

considering that the only reason for the existence of a business organization is to produce

goods and services more efficient. The other two approaches, cover more modern business

requirements. These two correspond to socio-economic model, one who believes that business

organization should take responsibility above profit maximization.

Recent years show that more and more leaders adopt socio-economic model, for at

least three reasons:

• First, business is driven by corporations, which are creation of society, so this will achieve a

direct social involvement,

•Secondly, there is a competition between businesses in the CSR,

• Third, many business people understand that it is good to promote social action and that

often is not enough to act legally, it‟s also necessary to ensure better public image.

Currently, companies have developed a specific social behavior, going beyond the

strict profit maximization, with advocates of both models of social responsibility. Their

arguments are summarized below.

Arguments for promoting social responsibility:

• companies can not ignore social issues because they are part of society,

• businesses have the financial, technical and management resources they need to solve

complex social problems,

• companies can create a more stable enviroment and can ensure safety on the long term,

• responsible decisions made by companies can prevent increased government intervention,

which would force them to do what is best,

• corporations benefit from society, so they need a society that allows them to exist and

operate.

Arguments against corporate social responsibility:

• managers are responsible primarily to shareholders, so their actions should focus on the

recovery of investments made by them,

• time, money and experience of entrepreneurs must be used to increase profits and not to

solve society's problems,

• social issues are affecting society at large, so companies can not handle them on their own,

• social issues are the responsibility of officials, who were chosen just for this and should be

held accountable for their decisions,

3030 Burlea, A.- Responsabilitatea socială a întreprinderii, ed Universitaria, Craiova, 2007, pag 19 31

Oprea, L. - Responsabilitate socială corporatistă, ed Tritonic, 2005, pag 46

73

• corporate obligations to do good can not be extended indefinitely. This could lead to

companies unable to obtain profits.32

The main challenge for companies operating in Romania currently is the realization

that social responsibility is not only a tool to maximize the image, but a key element driving

the long-term success, directly related to social and environmental performance of the whole

community .33

3. KRONOSPAN ROMÂNIA - CORPORATE SOCIAL RESPONSABILITY

Kronospan Romania, member of the Kronospan International Group Holdings Ltd. is

present on the Romanian market since December. On 3 December 2009, the company

officially opened a plant producing wood panels, a true work of art of the field. It was an

important event for Kronospan who managed to take a significant investment, despite the

global downturn. Investment in Romania covers more than 200 million, costs that included

building the most advanced sections for producing OSB in Eastern Europe and is also one of

its kind in the country.

As a company that depends on natural resources, Kronospan Romania considered as a

primary responsibility conservation and environmental protection. Kronospan strategy is to

preserve nature, with its diversity for future generations and to combine economic,

environmental and social impact for a company respected in the community.

Environmental policy aimes at following directions: continuous improvement,

management by teamwork, leadership through involvement in planning prevention, law

enforcement, rules and standards.

• Continuous improvement: Kronospan Romania constantly evaluate their work

to identify the impact on the safety of workers, community health and natural resources for a

harmonious relationship with the environment

• Management through teamwork: understanding the responsibilities of each individual

working in a colective way is essential to success.

• Leadership through involvement: Kronospan Romania supports the conservation of natural

resources and pollution prevention. The company is always present in the community through

various programs aimed at youth education regarding CSR and environmental protection.

• Prevention through planning: impact analysis is present in every decision taken. Are

considered and implemented strategies to eliminate any factors that may create unacceptable

risks to their employees and the community.

• Compliance with laws, rules and standards in force obeying the law is

imperative . Partnership with the whole community is the ethical responsibility.34

Social responsibility is one of the fundamental values promoted by Kronospan. To this

end, the company is actively involved in the life of the communities in which they operate,

both through direct economic investment and social responsibility programs.

32

http://www.responsabilitatesociala.ro/editoriale/responsabilitatea-corporativa-in-romania-de-unde-si-incotro.html 33

Iamandi, I. - Etică şi responsabilitate socială în afacerile internaţionale, ed Economică, Bucureşti, 2008, pag 280 34

http://www.kronospan.ro/ro/protectia-mediului.html

74

4. SOCIAL RESPINSABILITY PROGRAMS

The company generally promote social responsibility projects in two main directions:

education and supporting young people and environmental protection.

CSR can be divided under several different types. From the perspective of a communicator

the most useful typology is made by Philip Kotler and Nancy Lee in the book "Corporate

Social Responsibility: Doing the Most Good for Your Company and Your Cause." According

to this typology, when it comes to social responsibility, we talk about the following

categories:

• Promoting a cause. In this case the company contribute with money or other resources to

increase public awareness and concern for a cause, or to mobilize the public to donate,

participate or volunteer to support a cause. The main focus is the persuasive communication

in support of one of the objectives above .The resulted funds are usually taken over and

managed by one or more partners (public institutions or NGOs).

In June 2010, Kronospan organized a campaign in which people were invited to bring

all the furniture that is no longer used, whether or not they were good, at one of the collection

centers available to them. Parts that could be used were donated to the needy, and those

already damaged were recycled, being made into new items of furniture components.

•Social Marketing. CSR is a program that the company are using to change negative

behavior or to persuade the public to adopt positive behavior.

Even if the program is using tactics aimed at increasing awareness and education, the main

focus is to change behavior. Typically, the behaviors targeted by a campaign must be linked

to serious problems of society.

For a social marketing campaign to be justified, the problem must affect a significant number

of people. Kronospan Romania participated as a partner in the "I prefer to know in advance",

a project conducted by the global initiative "Susan G. Komen for the Cure". The purpose of

the project - awareness of women in deprived areas of breast cancer, increasing the number of

breast cancers diagnosed in early stages, by organizing sessions based on education-

communication facilitated by volunteers, for the transmission of information on breast self-

knowledge and accessing existing services in the county of Brasov for the diagnosis and

treatment of breast cancer.

•Philanthropy. Under this program the company contributes directly with money or products

to support a cause. Philanthropic activities may take the following forms: cash donations,

grants, scholarships, providing expertise, access to distribution channels, locations and

equipment. At the beginning of the school year, Kronospan Romania decided to surprise

children at School no. 11 " ŞT. O. IOSIF "in Brasov. Kronospan donated boards and

laminated paneling. The company also supported the rehabilitation of the day center

"Diaconia". Help came in the form of cash and material investment reaching 10,000 Euro

Kronospan has partnered with AIESEC Brasov, the Sustainability Education Program.

The first action within this partnership aimed at supporting the Life Center Association,

"Young people and street children." To this day Kronospan Center donated flooring for

common spatial where daily activities take place and students from AIESEC employees

partner with their traditional, BRD Groupe Societe Generale, have installed flooring.

Kronospan is a AIESEC partener since 2009, being together in their projects, such as

Sustainability Education Program (CSR national project), AIESEC Academy Regional

Training Conference and Youth Development Program. They aim to professional and

personal development of young people and providing opportunities for them.

•Volunteer in the community. This type of initiative encourages employees to volunteer in

community support, an NGO or a cause. Among the actions a company can take to stimulate

employee volunteering include: promoting volunteering as a valuable organizational

75

communication recommendation certain cases through internal recruitment and organizing

teams of volunteers, providing paid time off that employees use to volunteer, recognizing

employees who have distinguished themselves in voluntary actions. Kronospan Romania

marked World Environment Day through a partnership with the sanitation company Comprest

and Nature Protection and Tourism Club. The partnership has resulted in an action to green

hill zone Lempes between localities Bod and Harman. Over 70 volunteers, employees and

volunteers from NPTC, Kronospan and Comprest teams participated in this action to clean an

area where traditionally every weekend, people come to forget that grass but must protect.

•Socially responsible business practices. Socially responsible practices are initiatives that a

company takes to improve the operation voluntarily, to contribute to the welfare

of the community and the environment. For an initiative to be considered as part of CSR, its

character must be essentially voluntary. In other words, can not be regarded as a CSR

initiatives companies take as a result of pressure from the authorities, NGOs or consumers.

Kronospan has implemented the latest technology in environmental protection but also

adopted different policies in terms of resources, transport, waste, to ensure that its business is

conducted with the lowest environmental impact. The Kronospan waste arising from other

manufacturing processes is recycled and turned into products or used to generate zero carbon

emissions. If a waste is not recycled by them it can be used in partnership with other

companies. Kronospan constantly monitor their water and energy consumption to identify

opportunities to reduce it.

Kronospan is also FSC, certification that ensures that wood used in the production

process comes from verified forests, well managed, which provides a renewable and

sustainable resource. Kronospan has various programs in terms of transport: the efficiency of

travel plans, investment in vehicles equipped with the latest technology to reduce the amount

of pollutants emitted, encouraging use of public transport and alternative means such as

cycling, reducing unnecessary travel and use of teleconferencing. Another priority is the

resource efficiency is to minimize water consumption and rational use of fuel and paper.

5. CONCLUSIONS

Corporate social responsibility involves a way of doing business in a manner that

exceeds expectations of ethical, legal, commercial and public from the company. In view of

the early companies in promoting socially responsible policies and practices, they are more

than a collection of discrete practices or initiatives motivated by marketing or public relations

reasons.

Often, the term social responsibility is corporate philanthropy confused with mere

compliance with the law. Areas such as environmental protection, employee welfare,

community and civil society in general, are issues of concern for companies. CSR activities of

a company brings benefits at two levels: for the society and the company. The easy to guess

the benefits related to the good society and the public interest.

Knowing these benefits and their pursuit, including general business strategy, are

essential to ensure a greater involvement of romanian companies. Kronospan Romania

focuses on customer needs, on their desires and especially on how it can meet expectations on

a particular product within the company. The company's policy and its staff are customer and

environment oriented and pays great attention to these actors in the decisions they take.

76

REFERENCES

1. Burlea, A. - Responsabilitatea socială a întreprinderii, ed Universitaria, Craiova, 2007,

pag 19

2. Iamandi, I. -Etică şi responsabilitate socială în afacerile internaţionale, ed Economică,

Bucureşti, 2008, pag 280

3. Oprea, L. - Responsabilitate socială corporatistă, ed Tritonic, 2005, pag 46

4. http://www.kronospan.ro/ro/protectia-mediului.html

5. http://www.responsabilitatesociala.ro/editoriale/responsabilitatea-corporativa-in-

romania-de-unde-si-incotro.html

6. http://www.wbcsd.org/templates/TemplateWBCSD2/layout.asp?type=p&MenuId=ND

Ex&doOpen=1&ClickMenu=LeftMenu

77

ECONOMIC CONVERGENCE ANALYSIS WITHIN THE

EUROPEAN UNION USING ECONOMETRIC MODELS

Sima Liliana Ionela

“Transilvania” University of Braşov, Faculty of Economic Sciences and Business

Administration

Abstract:Achieving all nominal convergence criteria has been the main concern of

states that aspire at adopting the European currency, but this does not always

illustrate complete long-term economic performance. Within the strategy for adopting the

European currency, a real economic convergence should always be indirectly influenced

because it exhaustively reflects macroeconomic results and the current status of economic

convergence within the European Union. Consequently, the main objective of this study is

scientific substantiation of EU-states economic convergence models, as well as

highlighting the indicators which determine economic disparities reduction within the

community. In this study, I approached European countries economic convergence by

eliminating inter-countries disparities based on adequate econometric models for

economic growth evaluation and estimating the interstates convergence period,

assessing the feasibility of Romania’s real convergence with the EU, estimating beta

convergence and the issue of real convergence.

Key words: neoclassical model, unconditional convergence, conditional convergence,

economic growth

1. Introduction

The topic of real economy convergence is not new. Almost all great economists that

dealt with long-term economic growth took into account in their analysis the issue of real

convergence. The detailed and systematic research in the real convergence field started

together with the econometric applications of these models. Data regarding the indicators

used for analyzing real convergence growth, comparable with the data of other countries,

were calculated and published, numerous indicators for measuring convergence, their aspects

and factors being invented and used.35

There are several theoretical models which try to explain the process of convergence.

The neoclassical theory on growth, having as fundament Solow‟s model (1956), according to

which poor countries should progress faster than richer countries when they find themselves

in relative points to equilibrated growth methods and when structural differences between the

countries and the endogenous theory dealing with technological change as an endogenous

variable that responds to market signals are taken into consideration.

The main focus of convergence literature has been the convergence rate, also known as

β-convergence. This type of convergence was studied in depth both in developing countries,

35

Iancu, A., Convergenţa economică, “Academia Română” Publishing House, Bucharest 2008, p. 4

78

industrialized countries and in countries within the European Community and the European

Union.

Since currently real convergence has been the subject of a great number of approaches

and researches, as well as the existence of numerous calculation methodologies, the second

section presents approaches related to the previous studies, general appreciations as well as

conclusions on eliminating disparities between countries, in other words, on economic

catching-up.

In the third section, studies of convergence indicators and model, having as example

the economy of countries from the European Union (27 countries), as well as evaluations

regarding eliminating existent disparities in these countries. The analysis takes into account

convergence rate calculation, the time frame necessary for removing disparities between the

countries, having economic growth as landmark.

Section four details the case of Romania by the possibility of achieving real

convergence with the European Union, whereas the fifth section presents the conclusions for

this study.

2. Theoretical considerations and previous empirical results of convergence

studies

The theory of neoclassical economic growth has been the fundament of real

convergence studies.

This theory is based on Solow‟s neoclassical model according to which the level of

income per capita is influenced by certain production factors as capital, labour, saving,

population, etc.

Figure. 1 Solow‟s neoclassical model of growth

Source: Solow, R., A Contribution to the Theory of Economic Growth, Quarterly

Journal of Economics 70 (1): 65–94.

The illustrated model regards conditional convergence based on which countries

having a different initial level of capital would have the same savings and population growth

rates, or, on the contrary, poor countries points of equilibrium 36

would be different than for

rich countries and convergence will not be possible.

Using this model, Robert Joseph Barro and Xavier Sala-i-Martin discovered significant

economic convergence evidence by means of the analysis conducted within 48 states, in the

United States of America and in more than 73 European regions. Furthermore, another

36

Iancu, A., Convergenţa economică, Academia Română Publishing House, Bucharest 2008, p. 8

n= population

growth rate

d=depreciation

k=capital

y= income/worker

L= labour force

s= savings

rate

79

convergence study conducted by the same authors within the 20 OECD members during

1960-1985 showed that countries‟ growth rates are correlated to their initial status. This

happens because the countries studied are members of a more homogenous group, as for the

EU member states.

Brada and Kutan (2001, 2002), De Grauwe and Schnabl (2004) have also analyzed real

convergence in Europe and in the EU, including in Romania and Bulgaria, but not as EU

member states.37

Although neoclassical economics theory promoted convergence, empirical evidence

was subject for debate. The conclusions drawn by Barro and Sala-i-Martin were overlapped to

detailed reviews and examinations conducted by analysts. More specifically, Mauro and

Podrecca (1994) examined the hypothesis of convergence in the case of Italian regions, using

Barro and Sala-i-Martin‟s analysis model. Their conclusions argued those of Barro and Sala-i-

Martin (1991) for the same case of convergence, claiming that the analyzed regions reject the

convergence hypothesis. 38

Furthermore, Bernand and Durlauf (1995) suggested a new methodology using the

technique of time series for testing convergence hypothesis. In their analysis, empirical

convergence tests were applied to 15 OCDE member states economies and the results

obtained suggested the rejection of the convergence hypothesis39

.

In response, Barro and Sala-i-Martin (1995) showed in further studies that including

proximal variables for disparities between equilibrated countries would determine a major

difference in the cross-section results for a great number of countries. Hence, when these

additional variables have a constant value, the relation between the GDP growth rate and

GDP initial value per capita becomes significantly negative according to the neoclassical

model.

Absolute convergence is valid for empirical studies related to OCDE and EU member

states, but it is not valid for non-homogenous countries. In this case, the conditional

convergence model must be applied with the purpose to determine if the growth behaviour of

heterogeneous countries can or cannot be explained.

As a consequence, the most often used models in nowadays literature are those

mentioned by Barro and Sala-i-Martin, based on the regression equation on GDP per capita

growth according to the initial GDP level and Mankiw, Romer and Weil model, pursuant to a

similar equation from Solow-Swan‟s model.

3. Real convergence analysis withhin the European Union using econometric

models

3.1. Convergence and regression analysis. Β-convergence

Although argued by some economists (Friedman, 1992; Quah, 1993) as irrelevant for

the true process of economic growth convergence40

, the concept related to β-convergence was

37

Răileanu Szeleş, M., Romania and the EU economic convergence : A Study Based on the β-Convergence

Theory, Procedings at International Conference on Applied Business and Economics, Greece, 2009, p. 134 38

Sala-i-Martin, X., 15 Years of New Growth Economics:What Have We Learnt? Columbia University, New

York, 2002, p. 4 39

Asteriou, D., Testing the convergence hypothesis using time series techniques, Article - The Journal of

Applied Research, Vol. 18, No. 2, p.126 40

Friedman emphasizes that, according to the definition, the beta-convergence indicator might rather be replaced

with the variation coefficient of IGP/capita distribution between countries/regions that takes into account inter-

temporal changes of IGP/capita between the countries.

80

still imposed in economics related literature. It has even become irreplaceable as calculation,

econometric analysis and process description instrument, when it is taken either in its simple

incipient form (absolute beta-convergence), either in its developed form (conditional beta-

convergence).

If, as I have noticed, according to the neoclassical theory on decreasing capital output,

the idea that poor economies tend to grow faster than rich ones is to be accepted, this would

mean, on the one hand, a gradual reduction of the dispersion coefficient of GDP/capita, and

on the other hand, the existence of a reverse relation between the economic growth rhythm for

GDP/capita in a time frame and the initial level of GDP/capita .41

We will consider a dependent relation between the growth rate (in a given time frame)

and the level of development for that region (country). This dependency can be observed in a

group of regions (countries) found, at a benchmark point in time (t = 0) and at a certain

development level42

. From the perspective of convergence analysis, the process of

approaching development levels between countries is assumed, in the sense that the

presumption regarding higher growth rhythms registered in under-developed countries is

based on statistics, but also on the economic theory that comprises key-hypotheses according

to which production factors, especially capital related factors, are important for decreasing

differences between economies.

The purpose of the regression analysis is to decide on this issue, on quantifying the

effect (GDP per capita) marginal reaction in case of cause modification (rather the condition

expressed by the relatively low level of development in the initial stage.

The suggested regression model is the following linear type:43

(3.1)

where : ys = development level (GDP, for instance) in the basic period;

yiT = development level after T units of time;

β = convergence speed in the equilibrium state;

By arranging the equation terms (1) we obtain the following equation:

= (3.2)

Equation (2) can also be written in the following way:

= (3.3)

Equation (3) allows estimating the regression equation:

41

Iancu, A., Convergenţa economică şi rolul cunoaşterii în integrarea UE, Study conducted within CEEX

Program – Project no. 220, Bucharest, 2006 , p. 23 42

Pecican, Ş, Study conducted within CEEX Program – Project Economic convergence and the role of

knowledge for EU integration, Bucharest, no. 220/2006. 43

Răileanu Szeleş, M., Romania and the EU economic convergence : A Study Based on the β-Convergence

Theory, Procedings at International Conference on Applied Business and Economics, Greece, 2009, p. 134

81

= (3.4)

Where the first equation term (4) is the annual income growth rate per capita in the i

economy, between 0 and t time frame, y (0) being the level of income per capita in the time

frame 0. The error terms are identical, interdependent and normally distributed. The

convergence rate is obtained by the following relation:

Convergence rate = (3.5)

- where k is the number of years in the analyzed period.

A negative relation between the GDP growth rate per capita and the initial GDP level

per capita determined a significant negative β coefficient, this being the sign of a convergence

process.

The estimated β value also indicates the rate to which regions reach their equilibrated

state and, consequently, convergence speed. Based on this value, we can calculate the

necessary time frame for the current disparities to be halved according to the equation :

Halving time = (3.6)

3.2. β-convergence and GDP evolution in the European Union countries

For measuring convergence and the equilibrium rate for the European Union countries

on GDP per capita, the correlation between the initial level of this indicator and the growth

rate must have a significant negative value. The smaller the β-coefficient, the longer it would

last for a country to reach the equilibrium state, whereas a higher β-coefficient means a faster

transition to equilibrium.

Moreover, according to Fig. 3.1, the GDP per capita of poor economies grows faster

that the GDP per capita in case of rich economies, which would suggest the analysis of

economic convergence.

82

Figure 2 GDP per capita convergence level in EU-27 Source: author’s calculation based on the European Statistics Institute

Latvia, Lithuania and Estonia form together a small group that does not observe norms,

due to the fact that they have high GDP per capita growth rates, but the analysis shows that

Romania and Bulgaria follow the European convergence process on per capita income value.

3.3 Unconditional β-convergence

In the first stage of the analysis, we estimate a convergence rate for EU-27 in the

absence and in the presence of explanatory variables in order to see if conditional or

unconditional β-convergence is applied.

In view of applying model (4), the following are taken into account:

– the reference year was considered to be 2000;

–y(t)i/y(t)0 rapport refers to the final year 2009 and to the level of GDP per capita

growth rate of that particular year for all the 27 countries, as well as to the GDP per capita for

these countries in the reference year.

According to the results obtained by applying relation (4) illustrated in Table 3.1, for

EU-27, unconditional β-convergence can be applied. The regression model explains GDP per capita

growth rate, as compared to the initial level of per capita GDP, corresponding to the empirical works on

economic growth ( Barro and Sala-i-Martin, 2003)

By estimating parameters we obtained a negative and significant correlation between

GDP growth rate and the initial level of this indicator, indicating that EU economies are under

recovery, namely, they are convergent.

GDP per capita - 2000

GD

P p

er c

ap

ita g

row

th r

ate

, 2000

-2009

83

Table 3.1

Unconditional β-convergence testing in the EU-27, 2000-2009

Explanatory

variables

Esti

mated β

Standa

rd error

Constant 10.5

35***

1.650

GDP per

capita

-

1.770***

0.374

Convergence

rate

2.90%

R2

0.473

Obs :***All coefficients are significant at 1% level

The level of incomes and growth rates are based on real GDP per capita, expressed in PPS

Source : author’s calculations based on Eurostat data (Appendix 1)

The rate for achieving regions equilibrium, namely the average annual average rate, is

2.90% meaning that the estimated time for reducing the difference between GDP per capita

levels for EU-27 economies being 19 years.

Figure 3 Unconditional β-convergence in EU-27, 1996-2008

Source: Bower, U., EU accession: A road to fast-track convergence?,page 25

The results obtained are pursuant to the last 14 years study, demonstrated based on

Fig.3.3., the average annual GDP per capita growth rate in underdeveloped countries being

higher than for developed countries, this being emphasized by highlight on the upper left

quadrant of these poorer countries, including the Baltic countries, although countries like

Slovenia and the Czech Republic are closer to Portugal or Greece.

3.4 Conditional β-convergence

According to the neoclassical model, the most important determiners of state stability

are the savings rate, population growth rate and technology. A higher savings rate or

population growth rate is expected to accelerate the convergence process. Furthermore,

84

variables are meant to describe the impact of technology on GDP, as developing human

capital or the opening towards commerce.

In order to better explain the equilibrium state and GDP growth rate for the group of 27

countries, a model containing a set of explanatory variables was introduced.

Parameter estimation in case of β-convergence is based on the model:

= (3.7)

Competitiveness is evaluated based on a set of criteria considered to be relevant,

comprising economic performance indicators, government efficiency or business efficiency.

The human development indicator (HDI) classified countries on three fundamental

dimensions of human development: a long and healthy life, knowledge and decent living

conditions.

When additional explanatory variables are introduced, β value increases in absolute

terms suggesting that, in the presence of structural reforms and if population number increase

has a negative value, convergence speed shall increase, according to the results obtained and

highlighted in Table 3.2.

Table 3.2

Explanatory variable set impact on GDP per capita growth rate EU-27, 2000-2009

Explanatory variables Estimate

d β

Standard

error

Constant -1.326 6.556

GDP/capita -

0.414***

1.132

Imports/Exports (% GDP) 0.39*** 0.015

HDI 3.23** 1.49

Budget deficit (% GDP) 0.138* 0.09

Savings rate (%) -0.03 0.030

Ginni coefficient 0.071 0.058

HPI-2 0.023 0.042

Population average growth rate

(%)

0.606 0.470

Inflation rate (%) 0.020 0.102

Unemployment average rate

(%)

0.096 0.081

Competitiveness44

-0.11 0.11

Convergence rate 5.93 %

R2

0.78

Obs :***All coefficients are significant at the 1% level

** All coefficients are significant at the 5% level

* All coefficients are significant at the 10% level

44

Competitiveness is evaluated based on the data from the World Competitiveness Yearbook which classify the

countries according to 327 criteria.

85

Source : author’s calculation on European Statistics Institute

According to the results we can observe as average value of imports and exports as a

GDP percentage has a positive but significant influence on GDP growth rate, the human

development index and budget deficit determine a positive but more reduced correlation.

In comparison to the unconditional β-convergence model, in case of conditional β-

convergence, when other variables are introduced, the increase in convergence rate is

significant. Moreover, these variables better explain the dependant variables and improve the

model.

The negative correlation between the initial GDP level and this indicator‟s growth rate

demonstrate the applicability of conditional β-convergence, for a 5.93% convergence rate and

a 15 years disparities elimination interval, being reduced with 4 years as compared to

unconditional -convergence.

4. Perspectives on achieving real convergence in Romania with the European

Union

Romania real economy convergence analysis with the European Union assumes in a

first stage the determination of the necessary time for eliminating differences and equalizing

the GDP per capital level of Romania with that of the EU (25 countries).

The equalization can take place in a reasonable period of time, only if Romania shall

accomplish average annual growth rhythms that are higher than those of EU-25 countries.

In order to determine the convergence period, we start from simple relations regarding

GDP/capita growth in the case of Romania and EU-25, with different initial levels and

average annual rates: 45

Romania = Romania (1+ Romania)t (4.1)

EU-25 = EU-25 (1+ EU-25)t (4.2)

Convergence can be accomplished when the values of the above-mentioned relations

are equal, according to the relation :

Romania = Romania (1+ Romania)t = EU-25 = EU-25 (1+ EU-25)

t (4.3)

After the logarithmic calculation and terms rearrangement, the time period (t) is

determined for obtaining Romania‟s convergence (equalization) with EU-27 on GDP/capita

level:

t=

(4.4)

45

Iancu, A., Convergenţa economică, Academia Română publishing House, Bucharest 2008, p. 16

86

The results obtained, according to Table 4, represent the number of years necessary for

achieving EU-25 and EU-15 convergence, with estimated average annual economic growth

rates for Romania, ( r1= 5%; r2 = 6%; r3 = 7%), similar in size to the ones of 2000–2009.

Table 4

The necessary time frame (years) for achieving Romania‟s convergence to EU-25 and

EU-15 regarding GDP/capita

Initial GDP/capita

level r (the year 2000)

(PPS - euro)

Annual average

growth rates for EU-

25, EU-15

2000-2009

Number of years(t) for achieving

convergence on annual average growth

rate variants in Romania

EU countries R

omania 5% 6% 7%

EU-25 =105 2

6 2.7% 61 44 34

EU-15=115 2

6 1.9% 49 37 30

Source : author’s calculations based on the European Statistics Institute data

Pursuant to the data illustrated in the table, at an 5% annual average growth rate,

Romania would need 61 years to reach EU-25 level and 58 years to reach a more limited

group level, in this case EU-15. Moreover, at a 7% annual average growth rate, the number of

years is significantly reduced, being necessary 34 years for equalizing Romania‟s income to

those of EU-25.

In other words, we consider that on a long term basis, a series of politics that support

economic growth and limit vulnerabilities should be adopted, as well as supporting the

monetary policy by a fiscal-budgetary politics which would assure external equilibrium and

an income policy that would not have excessive pressure on demand.

Conclusions

This paper focused mainly on the quantifiable aspects of achieving convergence for

EU countries and the necessary time frame for eliminating differences between EU countries.

It was approached by various statistic and econometric methods in view of obtaining

indicators that are useful for describing the process development and alto its analysis.

According to the estimates, most EU economies are in recovery when GDP per capita

is analyzed as benchmark indicator.

What is important to know is that initial differences between countries refer not only to

the GDP/capita level mentioned previously but also to the scientific and technologic, as well

as the institutional and cultural background.

In addition, as expected, parameter estimates in case of unconditional β-convergence

have shown that the 27 countries of the European Union are convergent and tend to be

equilibrated, having an estimated annual average convergence rate of 2.90% and an estimated

period for reducing differences between the GDP/capita levels of 19 years.

Luxembourg and Ireland, as well as the Baltic countries, form together a small group

that has slightly different norms, due to the fact that they have high GDP/capita rates, but the

87

analysis shows that Romania and Bulgaria comply with the European convergence process

regarding income value per capita.

Compared with previous studies on the same topic, in this case, convergence rates are

much lower, this being partially due to the current economic situation.

This statement is also supported by the European Commission, which in the

Convergence Rapport 2010 specified that countries derogated from adhesion to the euro area,

based on the world financial crisis, were affected by convergence perspectives.

From this point of view, EU supports the countries, using an explicit policy for

achieving real economic convergence, by means of cohesion funds destined for member and

candidate states found at a lower development level and by using structural funds to remove

disparities between the EU regions. 46

Convergence can also be analyzed with other indicators as the human development

indicator, the unemployment rate, the inflation rate and the population or competitiveness

growth rate. The power of the obtained connections was determined with conditional β-

convergence.

By analyzing the results obtained we can state that the average value of imports and

exports, the human development indicator and population growth rate have the strongest

influence on GDP growth rate and the convergence rate of 5.93% determines a difference

removing interval of 15 years for EU economies.

Romania must register within the following years higher and higher growth rates in

order to catch up with the gap between our economy and the EU countries economy. An ideal

growth rate would be 7 because it determined a recovery time of approximately 30 years if

EU countries improve with the average rate registered in the last years. The IMF forecasts a

1.5% growth for Romania in 2011 and 4.4% for 2012 which would determine widening this

interval.

By taking into account this large difference that separates underdeveloped countries

from EU developed countries, as well as its complexity, real convergence must be studied in

depth. Furthermore, I must emphasize the fact that, according to the previous theoretical

research, real convergence is a central aspect of economic growth and helps the researcher to

set objectives, resources and mechanisms that could lead to achieving convergence and

determine the transfer of the peripheral (poor) group countries to the central (rich) one.

References

1. Asteriou, D., Testing the convergence hypothesis using time series techniques, Article

- The Journal of the Applied Research, Vol. 18, No. 2

2. Barro, R., Sala-i-Martin, X. (1995). Economic growth , McGraw-Hill, New York,

1995

3. Bower, U., Turrin, A., EU accession: A road to fast-track convergence?, Publications

for the European Communities, 2009

4. Brada, J., Real and monetary convergence within the European Union and between

the European Union and candidate countries: A rolling cointegration approach, ZEI -

Center for European Integration Studies, University of Bonn, No B 05-2002

5. Bernard, A., Durlauf, S., Convergence in International Output, Journal of Applied

Econometrics, John Wiley & Sons, Ltd., vol 10(2), pages 97-108, 1995

6. De Grauwe, P., Schnabl G., EMU Entry Strategies for the New Member States,

Intereconomics, 39 (5), September/October, 2004

46

Iancu, A., Convergenţa economică, Academia Română Publishing House, Bucharest, 2008, p. 39

88

7. Friedman, M., Do old fallacies ever die? Journal of Economic Literature, 30, 2129–

32, 1992.

8. Iancu, A., Convergenţa economică, Academia Română Publishing House, Bucharest

2008, p. 8

9. Kutan, A., Integration of the Baltic states into the EU and institutions of fiscal

convergence: A critical evaluation of key issues and empirical evidence, ZEI Working

Papers, University of Bonn, No B 10-2001

10. Mankiw G., Roamer, D., Weil, D., A Contribution to the Empirics of Economic

Growth, Quartely Journal of Economics, vol.107 , 1992

11. Mauro, L., Podrecca B., Human Capital and the Regional Italian Development: Does

Unemployment matter?, Department of Economics and Statistics (Di.S.E.S.),

University of Trieste,1994

12. Panaite, N., Convergenţa economică şi rolul cunoaşterii în condiţiile integrării în UE,

Universitatea Alexandru Ioan Cuza Publishing House, Iaşi 2008

13. Pecican, Ş, Study conducted within CEEX Program – Project Economic convergence

and the role of knowledge for EU integration, Bucharest, no. 220/2006.

14. Quah, D. T., Galton’s Fallacy and Tests of the Convergence Hypothesis, Scandinavian

Journal of Economics, 95, 427–43, 1993

15. Răileanu Szeleş, M., Romania and the EU economic convergence : A Study Based on

the β-Convergence Theory, Procedings at International Conference on Applied

Business and Economics, Greece, 2009

16. Sala-i-Martin, X., 15 Years of New Growth Economics:What Have We Learnt?

Columbia University, New York, 2002

17. Solow, Robert M. (1956). A Contribution to the Theory of Economic Growth.

Quarterly Journal of Economics (The MIT Press) 70 65–94

18. Solow, Robert M. (1957) Technical Change and the Aggregate Production Function.

Review of Economics and Statistics (The MIT Press) 3 (3): 312–320

19. The Maastricht Treaty (art. 121), Treaty establishing the European Community (art.

III 198) and The PROTOCOL on the convergence criteria referred to in Article 109j

of the Treaty establishing the European Community

20. http://hdr.undp.org/en/media/HDR_2010.pdf

21. https://www.worldcompetitiveness.com

22. http://www.eurostat.com

23. http:// www.europa.eu

89

ANALYSIS OF THE BEER CONSUMPTION LEVEL IN ROMANIA

Drd. Alexandra Tălpău Transilvania University of Braşov

Abstract: The project presents the way beer consumption is impacted by the plastic

bottle packaging (PET), average gross salary (GS) and dwellings (D). The model

takes into consideration 15 observations, meaning 15 periods of time were taken into

consideration and 3 independent variables that influence the level of beer

consumption in Romania. All the data used in this report was gathered from several

statistical sources, the most important being: the National Institute of Statistics, the

site of Breweries Association and other annual reports.

Key words: multiple regression, beer consumption, forecast, econometric model

1. Introduction

The conceptualization and use of the consumer and the consumer concepts, from a

practical, social and economical perspective are closely related to the early classical

political economy.

This project aims to analyze an econometric model to investigate to what extent and

under what specific conditions the variable chosen - beer consumption (BC) - is influenced by

explanatory variables: the average price of beer, the plastic bottle packaging (PET), the

population of males, the average gross salary, the housing stock, the green surface, the

amount of water supplies distributed to consumers, the number of students, the volume of

advertising and the number of tourists. In other words, I will analyze the influence these

explanatory variables have on the level of beer consumption: PB - average price of beer, PET

- PET packaging, M - number of males, GS - Average gross salary, D – Dwellings, G - green

area, QW - the quantity of water supplied to consumers, S - number of students, MK - the

amount of advertising done to promote beer, T - number of tourists visiting Romania on BC

explained variable, representing consumption of beer in Romania.

The analysis of the dynamic, quantitative, qualitative and structural consumption is

distinct in different moments of time. These mutations happening from one year to another

are explained by various factors of all kinds of natures: economic, geographic, demographic,

economic, technical, social, political, organizational, psychological etc. These factors impact

directly or indirectly the average price, the tastes, preferences and requirements of consumers

etc. Each of these factors has an impact and influences in a different proportion the BC. The

90

effect of their action reveals some general trends and correlations between variables: the

greater share of total active population a nation has, the wealthier that population is; as the

cost-revenue balance allows an increase in living standards, share of food expenditure tends to

decrease, due to the increase GS47

.

The effects of economic, social and institutional transformation carried out within ten

years are strongly reflected in the level of consumption of goods and services, which perceive

the current market wealth. Representing the side of human behaviour, consumer behaviour

can be defined as a set of reactions by which an individual responds to external specific

factors48

.

As part of people's economic behaviour, consumer behaviour has experienced over

time several approaches, most theories considering consumer behaviour as a function of

factors which is determined by the socio-cultural and the personal characteristics.49

Beer has a history of more than 10,000 years. This drink was consumed in ancient

Babylon and Mesopotamia, while in Ancient Egypt there were many kinds of beer. In

Romania, even if sources show that the Dacians consumed a drink made of barley, the first

reference to the beer itself dates from 1366, when a brewer attended a rebellion. The oldest

Romanian brewery was built in Timisoara around 1718. The strongest beer in the world is

Eisbock, is produced in Germany and has 14% ethanol content.

According to the Breweries Association, worldwide there are over 20,000 types of

beer made by 180 methods, all based on four basic ingredients.

For the last ten years the internal beer industry had a positive development in terms of

quality, diversity of brands and total quantity produced. This was possible through ambitious

policies of foreign investors which increased the competition on the domestic market. Beer

market is a large market and grows stronger from year to year.

In Europe, the largest consumers of beer are Czechs, with 163 litres per person.

Although those who have initially brought this drink in Europe are the Germans, they are far

behind the Czechs with 117 litres per person. Beer is one of the products with a consumption

that increased steadily in Romania after 1989. By 2003, the total consumption was about 12

million hectolitres, an increase of 12% compared to 1989, and each Romanian drinking about

60 litres of beer annually.

The Romanian Breweries Association‟s statistical reports show that beer production

has seen a descending trend during 1993-1997 (in 1997 reaching the minimum level of 7651

thousand hl). Since 1997, when foreign Breweries entered the Romanian market, the

production of beer took an ascending trend.

2. Primary data

The project presents the way beer consumption is impacted by the plastic bottle

packaging (PET), average gross salary (GS) and dwellings (D). The model takes into

consideration 15 observations, meaning 15 periods of time were taken into consideration and

3 independent variables that influence the level of beer consumption in Romania.

X1 = plastic bottle packaging (PET), expressed in mil. hl.

X2 = average gross salary (GS), expressed in RON)

X3 = dwellings (D), expressed in thousands of properties

47

Blythe J. – ,,Consumer Behaviour’’, Teora Press, Bucharest, 1998 48

Stanciu, M. - Consumption patterns in modern Romania Modern structures of European consumption, Genicod Press, Bucharest, 2001 49

http://www.svedu.ro/curs/marketing/c4.html, page 2 and 4 of 10

91

All the data used in this report was gathered from several statistical sources, the most

important being: the National Institute of Statistics, the site of Breweries Association and

other annual reports.

Table 2.1. The statistics underlying the econometrical model

Years beer

consumption

plastic

bottle

packaging

average

gross salary dwellings

litri mil. hl RON thousands

y X2 X4 X5

T1 42.1 0 0.9207 7659

T2 45.8 0 2.5322 7683

T3 45.9 0 7.6452 7710

T4 41.7 0 18.4719 7749

T5 39.2 0 27.5825 7782

T6 35.8 0 42.6038 7811

T7 34 0 84.3316 7837

T8 44.2 0 131.8605 7860

T9 49.6 0 192.1754 7885

T10 55 0 284.0449 7908

T11 54.4 0 422.0357 8107

T12 56 0.82 532.0559 8129

T13 60.6 2.37 663.7868 8152

T14 71.1 3.54 818.3317 8176

T15 70 4.77 968 8182

3. Econometrical analysis

The data presented above will be further processed in Microsoft Excel as a multiple

regression. This prediction method is used for explaining a certain variable (in this case the

beer consumption), using the values of other explainable variables. The analysis will use the

set of explainable variables, representing the scores to varied used tests, and the above

mentione explained variable, for which I plan to estimate for the next two periods of time

(T16 and T17) based on its connections with the other three explainable variables (the plastic

bottle packaging, average gross salary and dwellings).

I will further calculate the correlation coefficients, which are most easily calculated

with the a statistical calculator. The correlation coefficient may take on any value between

plus and minus one. The sign of the correlation coefficient (+, -) defines the direction of the

relationship, either positive or negative. A positive correlation coefficient means that as the

value of one variable increases, the value of the other variable increases as well; as one

decreases the other decreases. A negative correlation coefficient indicates that as one variable

increases, the other decreases, and vice-versa. A strong correlation exists when the

coefficient of r exceeds 0.50.

92

3.1. The correlation between variable

Correlation between plastc bottle packaging and beer consumption

0

10

20

30

40

50

60

70

80

0 1 2 3 4 5 6

Plastic bottle packaging

Beer

co

nsu

mp

tio

n

Correlation between plastc bottle packaging and beer consumption

Figure 3.1. Correlation between plastic bottle packaging and beer consumption

Starting with the year T12 the plastic bottle packaging was introduced on the

Romanian beer market. The correlation between plastc bottle packaging and beer

consumption is positive and strong, meaning that the quantity of beer consumption was

influenced by corking beer into bigger and cheaper packages. This type of packaging also

helped diminuishing the cost and therefore the final price.

Correlation between average gross salary and beer consumption

0

10

20

30

40

50

60

70

80

0 200 400 600 800 1000 1200

Average gross salary

Beer

co

nsu

mp

tio

n

Correlation between average gross salary and beer consumption

Figure 3.2. Correlation between average gross salary and beer consumption

93

Between the level of gross salary and the beer consumption there is a strong positive

correlation. If the salary is high than people can afford to but more alcoholic goods, such as

beer. The shape of this correlation can be regarded as linear.

Correlation between dwellings and beer consumption

0

10

20

30

40

50

60

70

80

7600 7700 7800 7900 8000 8100 8200 8300

Dwellings

Beer

co

nsu

mp

tio

n

Correlation between dwellings and beer consumption

Figure 3.3. Correlation between dwellings and beer consumption

The last analyzed correlation indicates a weak positive correlation between the

dwelling and the beer consumption, meaning that the whether or not people own their own

accommodation has a small influence on the Romanian beer consumption.

These correlations between the variables can be computed also in Excel with the

function Correl. We have correlation of order 0. Take into account, if the value of the

correlation is negative, we speak about an inverse (negative correlation), and if the value of

the correlation is positive, we speak about a positive correlation.

Another statistical indicator that can show whether or not there is a strong correlation

between beer consumption and the other three analyzed variables is the CORREL function

from Microsoft Excell. For the model presented we have the following correlations:

Table 3.1. The Correl coefficient for the explanatory variables

beer

consumption plastic bottle

packaging average

gross salary dwellings

y X2 X4 X5

CORREL COEFFICIENT 0.836329254 0.929812648 0.831049193

3.2. Econometric model

In order to establish the econometric model I used the table of regression function

from Microsoft Excel. The econometric model has the following general structure:

tttttt xaxaxaxaxaay 55443322110ˆˆˆˆˆˆˆ

94

Table 3.2. The regression model

The Multiple R (the determinative factor) is very close to 1, having a value of 0.966;

this means a strong correlation between the dependent variable and the independent variable.

R square is equal with 0.934 meaning that the linear model is valid. The Fisher test, which

value is close to 0 indicates a globally significant regression. The values of P are very good

for all the three examined variables, being smaller that 5% and the confidence interval does

not include the value 0, meaning that they do not change their signs from “-“ to “+”. The t-

Student test indicates that all the estimators are significantly different from 0. The theoretical

value for the Student test is smaller than the computed values in absolute values: -2.93, 4.78, -

3.44.

The final economic model is:

y th =688.645+(-6.947)*X1+0.023*X2+(-084)*x3

3.3. Forecasting the beer consumption for the next two years

This process allows us to establish two possible values for the level of beer

consumption for the next two years (T16 and T17) taking into consideration only the 3 factors

included in the model (plastic bottle packaging, average gross salary and dwellings). The two

values I will further calculate are theoretical values and each has a certain interval of

confidence in which it can take values. In statistical terms, a confidence interval (CI) is a kind

of interval estimate of a population parameter. Instead of estimating the parameter by a single

value, we will estimate an interval that is highly possible to include the parameter taken into

consideration. Thus, confidence intervals are used to indicate the reliability of an estimate. In

order to find out how likely the interval is to contain the parameter I will determine the

confidence level or confidence coefficient. Increasing the desired confidence level will widen

the confidence interval.

A confidence interval is always qualified by a particular confidence level, usually

expressed in terms of a percentage; that is why it is said "95% confidence interval". The two

end points of the confidence interval are referred to as confidence limits.

The formula for the interval of confidence is:

]1)([ˆ 122/

1

hthtknhtht XXXXtyICy

Table 3.3. The matrix X used to determine the value of the interval of confidence

95

1.00 0.00 0.92 7659.00

1.00 0.00 2.53 7683.00

1.00 0.00 7.65 7710.00

1.00 0.00 18.47 7749.00

1.00 0.00 27.58 7782.00

1.00 0.00 42.60 7811.00

1.00 0.00 84.33 7837.00

1.00 0.00 131.86 7860.00

1.00 0.00 192.18 7885.00

1.00 0.00 284.04 7908.00

1.00 0.00 422.04 8107.00

1.00 0.82 532.06 8129.00

1.00 2.37 663.79 8152.00

1.00 3.54 818.33 8176.00

1.00 4.77 968.00 8182.00

The interval was determined following these steps:

1. x'x

2. (x'x)^(-1) 3. xt+h,(x21)

4. xt+h,(x22) 5. x21' *[(x' *x)^(-1)] 6. [x21' *(x' *x)^(-1)]* x21 7. x22' * [(x'x)^(-1)] 8. [x22' * (x'x)^(-1)]*x22

Using these formulas we have calculated the estimated interval in which the level of

beer consumption is included for the forecasted years: T16 and T17.

Table 3.3. The upper limit and lower limit for beer consumption in T16 and T17

Years y theo Low lim. Up lim.

T16 69.320 58.895 79.744

T17 64.897 60.524 69.270

4. Conclusions

Beer is certainly the most consumed alcoholic beverage. Analysing the factors

influencing the consumption of beer, we conclude that the beer industry in the last 15

years was a positive development in terms of quality, diversity of brands and production.

Beer is one of the products whose consumption has increased steadily in Romania

after 1989. Using the econometrical model, we also demonstrated that with the help of plastic

bottle packages, beer consumption has increased significantly due to ease of use

and usefulness of this type of packaging.

Acknowledgement

This paper is supported by the Sector Operational Programme Human Resources

Development (SOP HRD), ID76945 financed from the European Social Fund and by the

Romanian Government.

96

REFERENCES

1. Duguleană, C., Duguleană, L., Economie aplicată, Editura Universităţii

“Transilvania” din Braşov, 1998

2. Duguleană, C., Duguleană, L., Oprei, A., Economical Forecast-Quattro Pro,

Reprografia Universităţii Transilvania, Braşov, 1995

3. Pecican, Ş., Macroeconometrics, Editura Economica, Bucureşti,1996

4. Stanciu, M., Consumption patterns in modern Romania -

Modern structures of European consumption, Genicod Press, Bucharest, 2001

5. www.bloobiz.ro

6. www.compari.ro

7. www.ccir.ro

8. www.hotnews.ro

9. www.infotravelromania.ro

10. www.insse.ro

11. www.mturism.ro

12. www.zf.ro

13. www.wall-street.ro

97

ATTITUDES AND BEHAVIORS OF BRASOV POPULATION

REGARDING THE POSTAL SERVICES

Luminita TUDOR (Constantin), student at Marketing Policies and Strategies Master

Program at Transilvania University of Brasov

Coordinator: Cristinel CONSTANTIN, Transilvania University of Brasov

Abstract: This paper aims to find the perceptions of Brasov’s population regarding

the postal services starting from their experience in using the services provided by

various operators that deal on this market. The main research purpose is to find how

people perceive the position of national company Posta Romana, especially on the

rapid mail market which is fully liberalized in Romania. The research is based on a

survey conducted on a sample of 120 respondents. The main outcomes reveal a quite

good position of this company but the satisfaction level of its own customer should be

improved. In this respect some relationship marketing strategies should be put in

practice for the next period of time.

Key words: postal services, survey, principal component analysis, homogeneity

analysis, relationship marketing

1. INTRODUCTION

Postal services have a great importance for the people‟s daily life but also for

companies that need to communicate each other, to send or receive some documents or

money and other specific services (bills payment, insurance, other financial services etc.).

Even if some services like the usual correspondence have been replaced to a large extent by

electronic mail, the number of other services has been multiplied in the last years. One

example is the parcels that are sent between individuals but also between companies or

between companies and individuals. The electronic commerce has a significant contribution

to the development of these services.

Taking into account the above mentioned we conducted a survey from the perspective

of the main postal service provider from our country, the National Company Posta Romana,

starting from a problem discovered in its activity, which is related to a poor level of customer

satisfaction. Such a problem was discovered from several observation and formal discussions

with some customers, part of them preferring to use the services provided by the main

competitors like Fan Courier, Cargus and others. The main objectives of our research were to

find the Brasov population attitudes regarding the main postal service providers that deal on

98

the local market and to measure the level of customer satisfaction in relation with the

company Posta Romana.

The results revealed that Posta Romana is the most popular service provider, the

majority of researched population using its rapid mail services in spite of a lower level of

satisfaction in comparison with the main competitors. We also found that the overall level of

customer satisfaction is related to the front office personnel so that some relationship

marketing strategies should be put in practice. In this respect several recommendations have

been issued in the final part of the paper.

2. LITERATURE REVIEW

Postal services are included in the general category of services, which have some

peculiarities in comparison with the physical goods. Service companies rely on a set of

resources (employees, physical resources, technology and systems) which are made available

for the customers in order to supply the service. Thus, the purchase of services is more

complex, with different risks for buyers. Services are less tangible, making the evaluation

difficult to measure because there is no inspection of deliveries as in the case of material

goods50

. This intangibility leads to the impossibility to separate the act of service providing by

the effective consuming of the named service. Taking into consideration all these

characteristics, in service activity it is very important to establish a direct relationship between

provider and consumer51

.

One of the most common issues regarding the postal services in a liberalized market is

about the Universal Service Obligations (USOs), which guarantee that all consumers have

access to a basic package of services at affordable uniform prices and that the services have a

minimum level of quality52

. In this context it is considered that a full market liberalization can

lead to an incomplete geographically coverage of the entire country territory because the

operators are likely to engage in cream-skimming activities in order to capture the most

profitable areas53

. For this reason certain regulation systems consider that the USOs should be

transferred to a national operator, which are to be protected against competition for several

basic postal services. Some authors proposed other systems to guarantee the USOs. One of

these systems, proposed by J. Calzada, is to leave the freedom for operators to deliver all

postal services but the regulation authorities have to impose minimum coverage and quality

requirements on the services provided by these companies54

.

In our country, The National Company Posta Romana has been appointed as

universal service provider in the field of postal services until the end of year 2012. In this

respect, Posta Romana has the obligation to collect, sort and deliver domestic and

international mail items, parcels and other printed papers on the entire Romanian territory.

Additionally the company is granted the exclusive right to provide postal services covering

mail items, whether their delivery is accelerated or not, whose weight is less than 50 g,

against a price inferior to 2 lei55

.

50 Constantin, C., Services improvement on business-to-business market, In “The International Conference on Business Excellence, ICBE -

2006” Proceedings, October 2006. 51 Grönroos, Ch., Services Management and marketing, Ed. Lexington Books, Toronto, 1990 52 Calzada, J., Universal service obligations in the postal sector: The relationship between quality and coverage, in Information Economics

and Policy, 2009, No. 21, pp. 10-20 53 Eckert, S., Postal reform around the globe: Comparing the Asian and European experience, in Policy and Society, 2009, No. 27, pp. 261–272 54

Calzada, J., Universal service obligations in the postal sector: The relationship between quality and coverage, in Information Economics

and Policy, 2009, No. 21, pp. 10-20 55 Posta Romana, Annual Report 2009, http://www.posta-romana.ro

99

In the same time, the Romanian postal market has been liberalized so that the

competition became very high in the field of rapid expedition, which is very attractive for

private operators. As the national company deal in a fierce competitive market, putting in

practice proper marketing strategies is very important for the future development of this one.

Some of these strategies have to be oriented towards the relationship marketing, which is

related to building, maintaining and developing strong relationships with customers and other

stakeholders in order to obtain a high profitability56

. Putting in practice these strategies need

some information about the customers‟ behaviors and attitudes, which can be provided by

marketing research. In this respect, we conducted a survey among Brasov‟s citizens in order

to evaluate the present positions of different postal service providers on the local market.

3. RESEARCH METHODOLOGY

Our survey is based on a questionnaire used to collect data regarding different

behaviors and attitudes of Brasov citizens regarding the postal services irrespective their

providers. Thus, we have measured the respondents‟ satisfaction regarding the services

provided by different companies and also the importance given to some criteria in choosing

the service provider.

The survey was conducted on a sample that counted 120 individuals randomly

selected, having a structure quite closed to the population‟ one. In this respect, the majority of

the respondents were female (56%), with a median age of between 27 and 40 years old. Most

of the respondents have a medium income (39%). The main weakness of our sample is its

quite low dimension, which cannot assure a reasonable error in the statistical inference.

The data were analyzed using SPSS system and both univariate and multivariate

statistics were computed. As multivariate analysis we used Principal Component Analysis

(PCA) and Homogeneity analysis (HOMALS) in order to benefit from their advantages that

consist in the possibility to analyze simultaneous relationships between a high number of

variables57

.

PCA uses a large set of interrelated variables that is reduced to a low number of

variables (factors), while retaining as much as possible of the variation present in the data set.

The resulted factors are uncorrelated, in comparison with the initial variables. The resulted

factors are ordered according to their contribution to the total variance of the original

variables58

.

Homogeneity Analysis (HOMALS), also known as Multiple Correspondence

Analysis, is a method which makes complicated multivariate data accessible by displaying

their main regularities in pictures such as scatter plots59

. It provides an easily interpreted

perceptual map that jointly shows the relationship between the categorical variables, which is

not available through the traditional method of using Chi-Squares on a bi-variate level of

analysis60

.

4. RESEARCH OUTCOMES

The main purpose of our research was to identify the most used postal services and the

position of the main service providers according to the customers‟ satisfaction level. A large

56 Hunt, S., Arnet, D., Madhavaram, S. , The explanatory foundations of relationship marketing theory, in Journal of Business & Industrial

Marketing , 2006, vol. 21, No.2, pp. 72-87. 57 Constantin, C., Sisteme Informatice de Marketing, Ed. Infomarket, Brasov, 2006. 58 Jolliffe, I.T., Principal Component Analysis, 2nd edition, Ed. Springer, 2002. 59 Michailidis, G., de Leeuw, J., The Gifi System of Descriptive Multivariate Analysis, in Statistical Science, Vol. 13 (4), 1998, pp. 307–336 60 Schimmel, K., Nicholls, J., Segmentation Based On Media Consumption: A Better Way To Plan Integrated Marketing Communications Media, The Journal of Applied Business Research, Vol. 21 (2), 2005, pp. 23-36.

100

part of the analysis has taken into account the rapid expeditions, a market with a high

competition on the local market. The evaluation was made both from the senders and

receivers points of view.

In the first part of questionnaire our objectives were focused on the rapid mail

services. In this respect, the main criteria used in choosing a company for sending rapid mails

were ordered according to the importance given by the customers (see table 1).

Table 1. The order of criteria used to choose rapid mail services

Purchasing criteria Mean Score

Delivery speed 1,30

Price of service 1,86

Behavior of contact personnel 2,45

Company notoriety 2,87

A ranking scale according to a certain criterion was used, the most important aspect

taken into consideration in the purchasing process receiving rank 1 and so on. The criteria

were ordered based on a computed a mean score. The speed of delivery has been placed on

the first place, followed by the price of service. Speaking about rapid services the speed of

delivery is naturally the most important, but we can notice that the price is also very

important. Therefore, at a comparable speed of delivery a person will choose the service with

a lower price. Such a decisional process could be the explanation of the respondents‟

behaviors, which use the services offered by Posta Romana to a great extent (see figure 1).

Figure 1. Companies used by respondents for sending rapid deliveries

81%

55%

13%

13%

2%

0% 20% 40% 60% 80% 100%

Poşta Română

Fan Courier

Cargus

Urgent Curier

Other

In figure 1 we can see that the majority of respondents that send rapid deliveries work

with Posta Romana (81%). Fan Courier also recorded a high number of responses as far as the

services offered by the rest of competitors have been mentioned by a lower number of

respondents. As the used question has multiple responses, the total percentage exceeds 100%,

the answers being divided by the number of valid cases.

Trying to measure the level of customer satisfaction regarding the services provided

by the main companies, we have found that the mean attitudes are quite closed, Fan Courier

101

being on the first place and Posta Romana on the last place (see figure 2). Even if Posta

Romana recorded the worst mean of satisfaction, most of respondents prefer this company,

one possible explanation being the price of services. If the satisfaction levels do not differ in a

great extent, the prices used by Posta Romana are perceived as being significantly lower than

the ones of other companies.

Figure 2. Mean attitudes regarding service process and price on a 5 levels scale (5= very

high)

3.54

2.81

3.87

3.45

3.81

3.23

3.75

3.33

0.00

1.00

2.00

3.00

4.00

Mean

Posta Romana Fan Courier Cargus Urgent Curier

Satisfaction regarding the service process Price level

The most important competitor of the national company on the local market, Fan

Courier, benefits from the highest satisfaction level regarding the service process but also its

prices are perceived as being the highest ones. As a large number of people use the services of

this company, we can conclude that these ones accept to pay more for a high level of quality.

The next step in our investigation was to evaluate the level of customer satisfaction

regarding some features of services provided by Posta Romana. These ones are related to

employees‟ competence and behaviors, as well as to physical evidence like: offices‟

ambience, display units and facilities. The means of attitudes towards these aspects are

presented in Table 2. The attitudes were evaluated on a numerical scale with 5 levels equally

distanced (5 = very satisfied). The results show that the issues related to front office personnel

recorded the highest scores, being situated in the positive side of scale near the level 4 –

satisfied. The issues regarding the physical evidence recorded lower scores, some of them

being in the negative side of scale (offices‟ ambience and facilities inside offices).

Table 2. Means of customer satisfaction on a 5 levels scale (5= very high)

Service features Mean

Employees' competences 3,75

Employees' behavior 3,56

Display units for information 3,04

Offices' ambience 2,82

Facilities inside offices 2,71

102

Trying to find common patterns of the analyzed service features we used Principal

Component Analysis as a multivariate method, which has the advantage to reduce a high

number of usually correlated variables to a low number of principal components, which are

not correlated. Applying this method on the above variables we obtained two components that

explain 83% of the total variance. We validated the statistical significance of the correlations

and adequacy of factors using specific statistical tests such as Barlet test of sphericity and

Kaiser-Meyer-Olkin measure of sampling adequacy61. Both tests revealed a good adequacy of

the obtained components.

Figure 3. The correlations between variables and the principal components

-1,0 -0,5 0,0 0,5 1,0

Component 1

-1,0

-0,5

0,0

0,5

1,0

Co

mp

on

en

t 2

Employees_competence

Employees_behavior

Office_ambience

Display_units

Office_facilities

The first component is correlated with variables regarding the physical evidence that

characterize the local offices of Posta Romana as far as the second component is related to the

front office employees. Therefore the two components were labeled as follows: Component 1-

Satisfaction with physical evidences and Component 2- Satisfaction with contact personnel.

Trying to find whether the two components are correlated with the overall satisfaction

level regarding the services provided by Posta Romana, we transformed this last variable from

a 5-levels scale to a 3-levels one, keeping the same the middle level (neutral) and grouping

the extreme levels in two categories (dissatisfied and satisfied). The respondents, grouped

according to these three levels, were scattered in the plane of the two principal components.

The charts‟ axes were labeled with the name of these principal components (see figure 4).

61 Malhotra, K. Maresh, Marketing Research, International Edition, 4th edition, PEARSON Prentice Hall, 2004.

103

Figure 4. The respondents’ emplacement according to their overall satisfaction in the

plane of two components

-4 -2 0 2 4

Satisfaction with physical evidences

-4

-2

0

2

4

Sa

tis

fac

tio

n w

ith

co

nta

ct

pe

rso

nn

el

Overall satisfaction

Dissatisfied Neutral Satisfied

In figure 4 we can see that a great part of respondents that are dissatisfied in the

relation with Posta Romana or have a neutral attitude are placed in the bottom part of the

chart, which means that they are dissatisfied by the contact personnel. In the same time part of

them are satisfied by physical evidences and other part are dissatisfied, but the points are quite

closed to the chart‟s origin on OX axis. In conclusion, customer dissatisfaction is highly

correlated with personnel issues and a in a low measure with physical evidence issues. On

another hand, the respondents with a high level of overall satisfaction in their relationship

with Posta Romana are satisfied by contact personnel too. In this case we can find a high

number of respondents that are satisfied both by contact personnel and physical evidences, but

there are some people that are not satisfied by physical evidence, being satisfied only by the

contact personnel.

The results of Principal Component Analysis correlated with the overall level of

satisfaction revealed that the contact personnel play an import role in the relationship with

customer and their satisfaction. In this respect, an orientation towards relationship marketing

with the involvement of contact persons could be a good strategy for the National Company

Posta Romana.

Another objective of our research was to find a profile of the customers that use to

benefit from the services provided by Posta Romana. In order to achieve this objective we

used another multivariate analysis method, known as Multiple Correspondence Analysis or

Homogeneity Analysis (HOMALS). This method is applied to nominal variables, the

categories of every variable being displayed in a bi-dimensional plane. The associations

104

between certain categories are higher when they are displayed closed each other. For our

analysis we used three characteristics of the respondents (gender, income and age) and the

variable that identify the customers that used in the last year the services provided by Posta

Romana (responses Yes or No).

Figure 5. Homogeneity analysis between customers’ characteristics

-3 -2 -1 0 1 2 3

Dimension 1

-3

-2

-1

0

1

2

3

Dim

en

sio

n 2

Yes

No

Low

Medium

High

Male

Female

18-26 years

27-55 years

over 55 years

Customer of Posta Romana

Income

Gender

Age

The chart above shows a high homogeneity of the analyzed variables as almost all

their categories are grouped in the central part of chart. An exception is the age category over

55 years that is displayed far from the group. In spite of the mentioned homogeneity we can

observe that the Posta Romana‟s customers (responses Yes) are placed at distance from the

one that haven‟t used these company‟s services in the last year (responses No) and there are

some local associations between categories. The most evident associations are with the age

categories but also with the income ones. In this respect, the consumers of services provided

by Posta Romana are mainly people between 27-55 years old, with medium or high incomes

as far as the non-consumers are young people (18-26 years old) and people with low incomes.

As regards gender, males and females are almost equally distanced by both “yes” and “no”

categories, so there is no evident association between gender and using the services provided

by Posta Romana.

5. CONCLUSIONS

105

Postal services involve a large number of activities and many people, which lead to

high costs for the process of mail delivery. Such activities consist in picking-up the mails

from senders in special offices or from their home; an impressive logistic system meant to

sort the deliveries on destinations and to transport these ones around the country; mail

distribution to the receivers‟ home or in the provider‟s offices. In order to cover these costs a

postal company has to deliver a significant number of letters and parcels that can assure

enough incomes. In spite of reducing the number of letters in the last years as result of the e-

mail expansion, the competition on postal service market has intensified especially in the field

of rapid deliveries (documents, parcels) which cannot be substituted by the electronic mail.

In this context, for every postal company it is very important to know its image in the

consumers‟ mind. Our research is connected to such initiatives, having as main purpose to

identify the image of the National Company Posta Romana in comparison with its

competitors and to evaluate the customer satisfaction in relation with this company. The

outcomes show a worse customer satisfaction regarding the rapid deliveries of Posta Romana

in comparison with its main competitors but these differences are relative low in mean values.

In the same time, the prices practiced by Posta Romana are perceived as being significantly

lower, which can explain a higher number of consumers that use the services provided by this

company.

Using some multivariate techniques, we found that the overall satisfaction level is

highly correlated with the satisfaction in relation with the front office personnel and the main

customers of Posta Romana are especially people with medium and high incomes, both male

and female with medium age.

Taking into consideration the above results and the correlation between the

satisfaction level and the behavior of the contact persons, we recommend some relationship

strategies that could be put in practice by the top management of Posta Romana. First of all,

the training of front office employees is crucial for achieving the needed professional

competences that can contribute to a high quality of services. On another hand, a good

relationship with the customers could be established by assuring the service readiness. In this

respect the company has to find solutions to reduce the time that an individual spends for

purchasing a postal service, which need to involve more employees that can serve the clients

in the most crowded period. In the same time the delivering process has to be improved by

establishing a strong relationship with the deliveries‟ receivers. In this respect the courier

have to contact the receiver and to establish all the details regarding the best way in which the

mail could arrive to the destination. All the above mentioned strategies should be completed

with a proper relationship between the management and company‟s employees meant to

assure a high level of employee satisfaction as prerequisite of a high level of customer

satisfaction.

REFERENCES

1. Calzada, J., Universal service obligations in the postal sector: The relationship between

quality and coverage, in Information Economics and Policy, 2009, No. 21, pp. 10-20

2. Constantin, C., Services improvement on business-to-business market, In “The International

Conference on Business Excellence, ICBE - 2006” Proceedings, October 2006.

3. Constantin, C., Sisteme Informatice de Marketing, Ed. Infomarket, Brasov, 2006.

4. Eckert, S., Postal reform around the globe: Comparing the Asian and European experience,

in Policy and Society, 2009, No. 27, pp. 261–272

106

5. Grönroos, Ch., Services Management and marketing, Ed. Lexington Books, Toronto, 1990

6. Hunt, S., Arnet, D., Madhavaram, S. , The explanatory foundations of relationship marketing

theory, in Journal of Business & Industrial Marketing , 2006, vol. 21, No.2, pp. 72-87

7. Jolliffe, I.T., Principal Component Analysis, 2nd

edition, Ed. Springer, 2002.

8. Malhotra, K. Maresh, Marketing Research, International Edition, 4th edition, PEARSON

Prentice Hall, 2004.

9. Michailidis, G., de Leeuw, J., The Gifi System of Descriptive Multivariate Analysis, in

Statistical Science, Vol. 13 (4), 1998, pp. 307–336

10. Schimmel, K., Nicholls, J., Segmentation Based On Media Consumption: A Better Way To

Plan Integrated Marketing Communications Media, in The Journal of Applied

Business Research, Vol. 21 (2), 2005, pp. 23-36.

11. Posta Romana, Annual Report 2009, http://www.posta-romana.ro,