Book of Proceedings
9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY “ECONOMIC POLICY AND EU INTEGRATION” Durrës, Albania, 3 & 4 May, 2019 Book of Proceedings
9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY “ECONOMIC POLICY AND EU INTEGRATION”
Durrës, Albania, 3 & 4 May, 2019 ECONOMIC POLICY AND EU INTEGRATION
9th International Conference
“ECONOMIC POLICY AND EU INTEGRATION”
Organized by Faculty of Business University “Aleksandër Moisiu” Durrës
ISBN 978-9928-267-19-1
May 3-4, 2019 Durrës, ALBANIA
Shtëpi Botuese, Studio Grafike, Shtypshkronjë Adresa: Lagjia nr.1, Rruga Taulantia pranë Universitetit “Aleksander Moisiu” Durrës Email: [email protected] www.luisprint.com EDITORS: Dr. Mirela Tase, Dr. Denada Lica, Prof.Assoc.Dr. Eda Bezhani, PhD Candidade Ariola Harizi
Conference Proceedings include papers that reflect results of theoretical and practical research of university faculty, staff of academic organizations and institutions. The proceedings have not been amended or proofread and editors are not responsible for the language used in paper.
SCIENTIFFIC COMMITTEE
SOTIROFSKI Kseanela, Rector of University “Aleksandër Moisiu” Durrës, Albania TARTARAJ Azeta, Dean of Business Faculty, University “Aleksandër Moisiu” Durrës, Albania CANIA Luftim,Vice Dean of Business Faculty, University “Aleksandër Moisiu” Durrës, Albania PRENDI Llambi, Vice Dean of Business Faculty, University “Aleksandër Moisiu” Durrës, Albania GOLEMI Ela, Dean of FASTIP, University “Aleksandër Moisiu” Durrës, Albania ALBAGLI Claude, President of CEDIMES Institute, France BEZHANI Eda, Senate member, University “Aleksandër Moisiu” Durrës, Albania CEROVIĆ Bozidar, President of ASECU University of Belgrade, Serbia CUCLLARI Frederik, Dean of Economic Faculty, University “Fan S.Noli” Korcë, Albania DRAGUSHA Blerta, Dean of Economic Faculty, University “Luigj Gurakuqi” Shkodër, Albania DEDAJ But, Dean of Economic Faculty, University of Prishtina, Kosovo FORTUZI Shkëlqim, University “Aleksandër Moisiu” Durrës, Albania HOTI Afrim, University “Aleksandër Moisiu” Durrës, Albania HORSKA Elena, Slovak University of Agriculture, Nitra, Slovakia KOÇI Ervin, Executive General Director, Financial Supervisory Authority, Albania KUME Kristaq, University “Aleksandër Moisiu” Durrës, Albania KULE Dhori, Dean of Economic Faculty, University of Tirana, Albania LATIFI Juliana, Chair of The competition Commission, Competition Authority, Albania MEMA Mit’hat, University “Aleksandër Moisiu” Durrës, Albania NOTI Elton, University “Aleksandër Moisiu” Durrës, Albania OSMANI Elez, Institute for Research and Development, Montenegro QARRI Albert, Dean of Economic Faculty, University “Ismail Qemali” Vlorë, Albania RUSPI Ermonela, Dean of Economic Faculty, University “Eqrem Çabej” Gjirokastër, Albania ECONOMIC POLICY AND EU INTEGRATION
SEJDINI Imelda, Dean of Economic Faculty, University “Aleksandër Xhuvani” Elbasan, Albania SCALERA Francesco, University of Bari “Aldo Moro”, Italy SOKOLI Lekë, University “Aleksandër Moisiu” Durrës, Albania TSEKOURAS Yannis, Honorary President of ASECU University of Macedonia, Greece TOMA Ernesto, University of Bari “Aldo Moro”, Italy ZAROTIADIS Grigorios, Vice Dean of ASECU, Greece
ZEQO Eris, University “Aleksandër Moisiu” Durrës, Albania
ORGANIZATIONAL COMMITTEE
Executive Committee TARTARAJ Azeta, Dean Faculty of Business, University “Aleksandër Moisiu”, Albania CANIA Luftim, Vice Dean for Scientific Research, Faculty of Business PRENDI Llambi, Vice Dean for Education, Faculty of Business ALIAJ Ada, Head of Dept. of Finance MUKA Majlinda, Head of Dept. of Tourism MERKO Flora, Head of Dept. of Economics MYFTARAJ Ervin, Head of Dept. of Marketing NEXHIPI Olta, Head of Dept. of Management
Local Arrangements LIKA Daniela DUCI Ejona ISTREFI Enida GASHI Jonida
Conference Secretariat XHERAJ Dorina OSMANI Juliana TROPLINI Rovena BALLA Eldian HALLUNOVI Arjeta
Press and Communication SHOSHA Bitila MEHMETI Valbona MYSHKETA Redi Programme Committee SULA Oliana TASE Mirela HARIZI Ariola BEZHANI Eda
Coordinators LICA Denada PRENDI Llambi
TABLE OF CONTENTS
Role of Psychological and personality traits in the food market Ariola Harizi, Myfarete Malasi...... 10
Challenges in Marketing Management - Case of Kosovo Afrore Mazreku……………………………………………………………….……………….18
Analysis of financial statements for SIGAL companies UNIQA Group Austria Armanda Xhani………………………….…………………………………………………….28
Valorizations of tourist centers along Via Egnatias in Albanian territory Alush Kuci, Afrim Hoti………………………….……………………………………………35
E-Banking adoption and use in Albania: A comparative analyses with Western Balkans countries. Arvena Golemi, Përparim Dervishi…………………………………………………………...39
Sustainable Development by Means of Community Centered Business Practices: The Tourism Industry in Context Babu George, Blendi Shima…………………………………………………………………...65
Cryptocurrency, Bitcoin market coin analysis Bora Myrto, Eris Zeqo, Alsa Kaziu……………………………………………………………77
A panorama on Corporate Social Responsibility in Albania Blerim Kola……………………………………………………………………………………82
ICT and CO2 emissions: Perspectives for the reduction of environmental pollution in Africa Diego Mazzitelli, Francesca Aura……………………………………………………………..88
Estimating Okun’s Law for Albania (1992 – 2017) Esmeraldo Xhakolli, Veton Kurtsmajlaj……………………………………………………..104
Operations Management. Case: "Me-2008-Import-Export" Engjellushe Hodo…………………………………………………………………………….114
Priority for investments in the transport sector: approaches to evaluation processes Elisabetta Venezia, Fabio Pizzutilo………………………………………………………….123
The alternative holiday in a sustainable way: l’albergo diffuso Francesca Aura, Caterina Aura, Franco Rubino…………………………………………….134 ECONOMIC POLICY AND EU INTEGRATION
Increasing Inequality-The real Problem Nowadays Gaqo Tanku, Piro Tanku…………………………………………………………………...147
E-Learning, Analyzing and Comparing Two E-Learning Platforms, Moodle and Ilias Gerild Qordja, Dolantina Hyka…………………………………………………………….159
Global Marketing Management Challenges in Albania Gerti Dajci………………………………………………………………………………….176
Consumers’ preferences towards meat products in Albania Irini Goga, Eda Deçi……………………………………………………………………….189
Social entrepreneurship - Accounting and tax consideration for social enterprise development and growth Ivana Tomasevic, Sandra Djurovic………………………………………………………..198
Social entrepreneurship vs. Traditional entrepreneurship: A qualitative approach to understanding social entrepreneurship as a social value. Juliana Laze………………………………………………………………………………..208
Institutional impact on reforming the role of management and leadership in higher education in Albania Jani Sota, Novruz Ahmeti…………………………………………………………………222
Decision-making and regret: Do women managers feel more regret than men? Juliana Osmani, Sanie Doda, Bislim Ahmetaj……………………………………………237
Insurance Industry Challenges Kiti Shabanaj……………………………………………………………………………...249
Crisis as a legal and state in a market society Lavdosh Ahmetaj……………………………………………………………..…………..264
Convergence in the Information and Communication Technology Industry (ICT-Industry) Matthias Paletta…………………………………………………………………………..280
Aspetti stocastici nella gestione del credito Mauro Bisceglia………………………………………………………………………….312 Aspects of reforming the role of management in pre-university education in Albania
Novruz Ahmeti, Jani Sota………………………………………………………………324
The new era of TV industry Raffaella Girone………………………………………………………………………..337
An overall view of risk identification in Albanian’s Companies Rovena Troplini………………………………………………………………...……...363
Voluntary Turnover & Job Satisfaction in Employee Tenure Sonila Cvilo, Përparim Dervishi……………………………………………………….373
Management of intellectual property as an instrument for business development Sabrina Spallini, Karola Shehu………………………………………………………..415
Cooperation as an internationalization strategy for Italian Universities Sabrina Spallini, Domenico Viola, Paolo Lattanzio…………………………………...... 440
Municipal asset management and problems after last Administrative- Territorial Reform in Albania" Tatjana Elezi…………………………………………………………………...……..454
The Social Responsibility and Innovation Activities at the Decreasing of Food Losses with Special Focus on the Sustainable Use of the Natural Resources Zuzana Kapsdorferová, Petronela Tarinová, Mária Kadlečíková, Pavol Grman…
Internal Control System at Public Institutions Zamir Kurushi, Albana Jupe………………………………………………………....483 ECONOMIC POLICY AND EU INTEGRATION
Role of Psychological and Personality Traits in the Food Market Ariola Harizi1 Myfarete Malasi2
Abstract
The main objective of this paper is to analyze the role of Consumer Emotional Behavior on food market performance. In particular, we will analyze general consumer behavior attitude. The methodology through in order to verify the impact that psychological and Personality traits has on performance of buying and choosing food products, in trade is through questionnaires that will be address at Albanian costumers Also, we will collect data from Albanian Statistical Institute and National Authority of Food, to compare our results. The expected results from these analyses will contribute not only for expand the literature review focus on these topics but even for the same companies object of this study in order to understand how to implement better the marketing functions.
Keywords: consumer, behavior, food, marketing functions, Albania
JEL classification: M31, Q13, L29
1. Introduction
Many studies have been conducted in the last years that have demonstrated on how consumer behavior has influenced marketing factors, the situation, personal and psychological factors, family they can reach the people most likely to buy in the most cost influence a consumer behavior with the things they can control such as pricing, product, advertising. In particular, the benefits that the last has brought in how buyers behave on the food market, the link between people’s personalities and their buying behavior, the needs of food is recurring. Need for clothing, some different points in time are theorized by Maslow self-actualization, by how people fulfil their basic needs, for food, water and higher level needs.
The objective of this paper is to analyze how consumer behavior influence the performance of companies considering the flow of communication and expansion of its network that determine the continuity of these companies and their success. This study refers to food market in Albania.
1PhD Student, Slovak University of Agriculture in Nitra, Faculty of Economics and Management, Marketing Department, A. Hlinku 2 949 76 Nitra, Slovakia. [email protected], 2 Msc, Statistic Specialist, Municipality of Durres, Department of Tax and Fees, Sheshi Iliria 1, Durres, Albania, [email protected]
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With the diffusion of marketing strategy, some companies find themselves in difficulty in order to better implement the managerial functions. Perception is how you interpret the world around you and make sense of it your different senses- sight, hearing, touch, smell and taste, however when blindfolds came off an watery” tasting (Ries, 2009).
Consumer Behavior Christopher (1989) studied the shopping habits of consumers to form an idea of whether or not the store concepts, product ranges and strategies of the companies are appropriate towards consumer requirements. He believed that consumer behaviors are unpredictable and changing continuously changing; while trying to under try to understand how individual or group make their decision to spend their available resources on consumption-related items. These are factors that influence the consumer before, during, and after a purchase (Schiffiman and Kanuk, 1997), for example, feedback, from other customers, packing, advertising, product appearance, and price (Peter & Olsonetc, 2005).
The essence of this approach is critical for organizational success, so that they can have a better understanding of their customer behaviors (Solomon et al., 2006). The physical action or behavior of consumer and their buying decision every day can be measured directly by marketers (Papanastassiu and Rouhani, 2006). For that reason many organizations these days are spending lot of their resources to research how consumer makes their buying decision, what they buy, how much they buy, when they buy, and where they buy (Kotler, Amstrong, 2001). To get a well coherent result, organizations normally looked at these behavior base their analysis on difference conceptions; whether customers buying behavior were measured from different perspectives, such as product quality and better service, lower price structured etc (Papanastassiu and Rouhani, 2006)
Different theories and researchers have claimed that when organization fully meet all aspects of its customer needs, the result enhances their profitability (Chaudhuri, 2006), and also enable them to develop a better tackling strategies for consumer (Asseal, 1998). Possibly, the most challenging concept in marketing deals with the understanding why buyers do what they do and what method or philosophy are they using to evaluate the product after the transactions and what might be the effect on future transaction (Schiffman, 2004). The reason why marketer chooses to learning about consumers” buying behavior is, from a business perspective; to be able to be more effectively reach consumers and increase the chances for success (Sargeant & West, 2001). Therefore the field of consumer behavior has take a tremendous turn in the commercial world and became the fundamental concepts of achieving company goal (Schiffman and Kanuk, 2007).
More recently, different researchers and author have given their definition and meaning of consumer behavior. For Michael R. Solomon (2001) consumer behaviors typically analyze the processes of group selected or individual purchases/dispose of product, service, concept or experiences to satisfy their need and desires. Additionally, Kotler (1996) suggested that consumer behaviors have a huge impact in a firm marketing decision making process every year. There is a risk that what a consumer does will inflict on his or her behavior and generate consequences. (Snoj, Pisnik Koda & Mumel, 2004). The user and the purchaser can be different person, in some cases; another person may be an influencer providing recommendations for or against certain products without actually buying or using them (Solomon 1999; Solomon et al. 1999).
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In this case, most of the large consumer electronics retailers tend to gathered more information about customers motivating factors and what influences their buying behaviors Solomon & Stuart (2000).
To get in-depth understanding consumer behavior concepts will gives us an idea on how its plays significance role in our life and in the whole trend of business profit to various firms which will allow the researcher to get the analysis and determine product positioning, develop the message and targeting strategy in order to reach to the market (Holskins J, 2002).
Methodology In this study we have the collection of data from the Institute of Statistics in Albania and a questionnaire is created in order to understand the consumer behavior in the food market by understanding the demographics factors and perception of consumers. Average Monthly Expenses for Household Consumption According to the Institute of Data and Statistics for Durres is 73.400 lekë. Table 1. Household Budget Structure By The 12 Main Groups Of Consumption
Year Main Groups Of Consumption 2017 2016 2015 2014 2009 2007
Food and non-alcoholic beverages 44.1 45.2 48.7 44.3 49.4 47.6
Alcoholic beverages,tobacco 3.5 3.4 3.5 3.6 4.2 4.3
Clothing and footwear 4.3 4.8 4.9 5.1 5.4 6.2
Housing, water, electricity, gas and other fuels 10.9 10.2 10.3 10.2 9.0 7.4 Furnishing, household equipment and routine maintenance of the dwelling 4.8 5.0 4.8 5.4 4.9 5.9
Health 3.9 3.4 3.6 4.8 2.7 4.1
Transport 7.2 6.3 6.8 6.8 5.7 6.2
Communication 3.4 3.3 3.0 3.3 3.5 2.9
Recreation and culture 3.0 3.0 2.9 3.1 2.3 3.1
Education 3.9 4.4 2.1 4.2 2.0 1.7
Restaurants and hotels 5.0 4.4 3.6 3.2 5.0 5.0
Miscellaneous goods and services 6.1 6.5 5.8 6.0 5.8 5.5
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Institute of Statystical Albania October 2018 * Household Budget Survey In 2011, the average monthly consumption expenditure for households, consisting of an average of 3.7 persons, was 73,400 leke. Total consumer spending is 56.5 billion ALL per month for 769.494 families. The average consumer spending of an individual value is 19,660 HUF per
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month, of which: 8,664 for food consumption and 10,996 for consumer-food consumption. Higher than in 2016. The growth of consumer prices in the year 2017 compared to the year of 2016 is 2.0%. The largest expense for monthly consumption in 2017 was marked by the "Clothing and Footwear" group with 11 , 4%, compared to 2016, while the largest growth was recorded in the "Transport" group, with 14.9. (Institute of Statistics Albania, 2018) The sample of questionnaire consists of 150 adults (aged 25 – 60) from Durrës, Albania, they are selected from job position in institutions and private business.
Table 2. Respondents according to gender and income
Income Durres, Albania less than more than Total 500-1000€/month 500€/month 1000€/month Male 6 29 10 45 Female 12 55 38 105 Total 18 67 65 150
From the results, Males income are mostly with 29%, 500-1000€/month, and Females reviews 55 % of them have 500-1000€/month. Females, in this survey are in two times more in respondent scale. So, this is the reason why they show more results. In Albania, the mentality when males bring more money than women is going in an different culture. Mostly in big Cities as Durres is.
Fig.1 In which trades you addressed your buying?
3%
Supermarkets 21% 41% Small retails
open trades
35% other
Source: authorsʹ elaboration Important groups in society, especially small farmers and the owners of traditional, small scale food wholesale and retail facilities. But consumer issues are also important, including "internalizing" the full environmental costs of production and marketing, and helping supermarkets be part of the solution to the health problems generated by an "affluent" diet and lifestyle.(Timmer 2009). So, in a whole world of products, consumers mostly are using supermarkets because, they spend their time, by buying every product needed in a store. They do not waste time and they have a lot of choices, compared with the others alternatives of food stores.
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Pearson Correlation Coefficient between two samples, quality affects the selection of food products and quality is the key factor in product selection. The value of R is: 0.0949.
Result Details & Calculation
X Values ∑ = 595 Mean = 3.967 2 ∑(X - Mx) = SSx = 282.833
Y Values ∑ = 595 Mean = 3.967 2 ∑(Y - My) = SSy = 282.833
X and Y Combined N = 150 ∑(X - Mx)(Y - My) = 26.833
R Calculation r = ∑((X - My)(Y - Mx)) / √((SSx)(SSy))
r = 26.833 / √((282.833)(282.833)) = 0.0949
Meta Numerics (cross-check) r = 0.0949
Key
X: X Values Y: Y Values Mx: Mean of X Values My: Mean of Y Values X - Mx & Y - My: Deviation scores 2 2 (X - Mx) & (Y - My) : Deviation Squared (X - Mx)(Y - My): Product of Deviation Scores The value of R is 0.0949. Technically a positive correlation, the relationship between variables is weak.
Fig.2 Pearson Correlation Coefficient
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Source: authorsʹ elaboration
Fig.3 Which origin of products you prefer?
both
local products origin of products
Import
0 10 20 30 40 50
Source: authorsʹ elaboration Table 3. Associations that consumers have with “what products you buy mostly in supermarkets” and “what products you buy mostly in open trades”
Association with supermarkets Association with open trades detergents, dairy products, sugar, sweet Fruits, vegetables, bio fruits, bio products, Durrës products, ice cream, snack, packaged farms products. Meat, bread food,
Source: authorsʹ elaboration
Starting from history, Albania has a very slow development in the production of its products, Made in Albania label. Considering that, due to the closed system for 50 years, Albania was unable to develop its standards of production and technology. After the 90s, Albania had a boom in demand and needs to import from foreign countries. Starting from this culture, Albanian consumers use mostly, Local products for dairy foods and vegetables and they use in a high percentage import products as food packed.
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Conclusions We can assume that associations that consumers have with have with “what products you buy mostly in supermarkets” and “what products you buy mostly in open trades”, is very important to understand in which business should present and to trade their products.
Pearson Correlation Coefficient between two samples, quality affects the selection of food products and quality shows ta low weak feeling, because they key factor of choosing products firstly is the price, for the consumers.
It is important to explore potential variations in attitudes, motivation and behaviour as a function of age and gender. Both demographic factors are easily distinguished within society and a future intervention study which targets either, or both, of these would likely be both feasible and cost- effective for policy makers.(Chambers et al. 2008)
The implementation of new technologies in the production of food and their marketing for the products Made in Albania, to promote farming products, dairy products, fruits and vegetables, in which our country has strong potential.
References
Chambers, Stephanie, Alexandra Lobb, Laurie T. Butler, and W. Bruce Traill. 2008. “The Influence of Age and Gender on Food Choice: A Focus Group Exploration.” International Journal of Consumer Studies. https://doi.org/10.1111/j.1470-6431.2007.00642.x.
Timmer, C. Peter. 2009. “Do Supermarkets Change the Food Policy Agenda?” World Development. https://doi.org/10.1016/j.worlddev.2008.08.022.
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Fullerton, R.A., (1988), “Modern Ëestern Marketing as a Historical Phenomenon: Theory and Illustration”, in Neëett, T. and Fullerton, R.A. (eds), Historical Perspectives in Marketing, Lexington Books, pp. 73 - 89. Gilfillan, S.C. (1935), The Sociology of Invention, London, Follett.
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Gordon, R. (2000), “Does the NeW Economy match up to the great inventions of the past?” Journal of Economic Perspectives, Vol 3, No 2, pp. 16 - 23.
Gulati, R. (1999), "Netëork Location and Learning: The Influence of Netëork Resources and Firm Capabilities on Alliance Formation", Strategic Management Journal, pp. 293-317.
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Challenges in Marketing Management - Case of Kosovo Afrore Mazreku 3
Abstract The paper is focused on discussing the challenges in marketing management in Kosovo and providing findings on the most appropriate strategies for adapting the challenges that marketing management - the case to Kosovo. This research is based on a questionnaire that will be distributed online and interviews that will be conducted with participants in the process of challenging challenges during marketing management. To evaluate the model, data from companies to be taken as case studies in Kosovo are also used. During this paper we will discuss detailed implementation techniques and overcome these challenges and see how difficult the enterprise has been to overcome these challenges. More specifically, the study aims at determining what the most used social media outlets are, what viewpoints do representatives of various companies have on the credibility of social media as a marketing channel and whether they measure the effectiveness of their social media campaigns. Key words: Challenge, management, marketing, enterprise JEL classification: M30, M31,M38
1.Introduction Is a marketing system that maximizes individual choice and stresses individual satisfaction anachronistic in a world with growing awareness of its limited environmental resources? The author believes marketing is about to undergo a profound change by shifting its emphasis to nonmaterial consumption and societal considerations. Several ways are suggested in which marketing might adapt to the changed circumstances brought about by environmental pressures. Kosovo social institutions are currently experiencing a time of unrest. "Business" and "social responsibility," formerly thought by many to be anathema, are increasingly being linked together, while universities are marked by the search for relevancy. In spite of the unsettling atmosphere, this self-examination and soul-searching by business and academic communities may be regarded as a healthy prelude to change. For in a dynamic environment, social institutions must either
3 Corresponding author: Marketing, Universiteti sv.Klement Orhidski-Bitola , Department Economic, Fidanishte quarter, tower G3 no.15 Peja , [email protected].
18 9 th International Conference of FB ECONOMIC POLICY AND EU INTEGRATION change or disappear as they become inappropriate to meet new conditions. The marketing system is one such social institution. There have recently been several indications that it is about to undergo a profound change in response to environmental pressure. On the one hand, the marketing system is asked to provide, and is capable of delivering, goods which make the life of the individual consumer more comfortable and convenient. On the other hand, there are those who decry the adverse societal effects of both the production and consumption of many goods which play an important role in consumption. This presents a fundamental dilemma for the marketing system and a major challenge for those who use or depend on it However, it is not yet clear whether those having the most at stake in business and academia have recognized the basic questions that this problem raises with respect to the future of marketing. The reaction of businessmen has been diverse. Some, of course, have ignored the problem; others have directed their attention to an isolated aspect of it, for example, the development of disposable packaging, or have cynically exploited the issues for their own ends. An example of the latter is the exhortation of a cigarette manufacturer to "stop smogging" by switching to his brand. 2.Marketing and Consumer Choice In essence, the role of the marketing system is to move goods from producer to consumer. Presumably, in this country the decisions regarding which members of society receive which goods are made through the impersonal force of the "market mechanism" that allocates scarce resources on the basis of price. In theory, at least, the market mechanism determines the goods to be produced and allocates them on the basis of demand reflected in buyers' willingness to pay. The result is a marketing system which not only moves goods from producer to consumer, but also functions relatively efficiently consistent with market needs. 2.1 Marketing and the Desire for Choice One basic market need is the desire for choice. The consumer's desire for choice may be latent under conditions of scarcity. However, experience in the Kosovo and other nations suggests that this desire manifests itself when the marketing system develops the capacity to generate abundance and to provide a wide variety of goods and services. As this point is reached, producers and resellers make concerted efforts to discover and satisfy the specific consumer needs which are potentially profitable, and an operating philosophy typified by the term "marketing concept" begins to emerge. Many products become available in numerous variations, new types of resellers
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appear, and existing institutions modify their offerings in terms of merchandise, location, and business hours. The net effect is the emergence of a sophisticated marketing system which promotes endless opportunities for choice.4 The monetary, or direct, cost of providing the consumer with a wide range of choice, is of necessity, relatively high and is reflected in the price of the products. Both in the Kosovo and abroad, increasingly affluent consumers are rejecting the relatively lower costs of standardization and utility and are willing to pay higher prices for greater variety and luxury. 2.2 The Systems Implications of Choice Until very recently, there was no apparent reason to be dissatisfied with this mutually advantageous state of affairs, which resulted in satisfaction for many consumers and in growth and profits for the components of the marketing system. Now, however, there are signs that the marketing system's ability to promote consumption and to provide consumers with a growing range of choice is increasingly inconsistent with the needs of the larger society. One reason for this is that marketing decisions have been made which expanded the range of consumer product choice but disregarded their environmental impact. There has been a failure to recognize that these products, which are marketing outputs designed for individual satisfaction, are simultaneously inputs to a larger environmental system and as such may affect the well-being of society.5 Almost all products have some impact on the environmental system, if not at the point of production, as with food or electric power, then at the point of consumption or disposal. In some cases, these products possess an intrinsic utility that justifies their use regardless of environmental cost. In other instances, the substitution of one product for another reduces adverse environmental effects. For example, the substitution of oil for coal in home heating resulted in the virtual elimination of solid waste disposal in the form of ash. A problem arises, however, when the individual choice fostered by the marketing system leads to undesirable and unjustifiable societal consequences. For instance, one manifestation of the successful efforts of utilities and appliance manufacturers to promote new uses for electricity has been a major expansion in the sales of residential air conditioners. Between 1964 and 1970, annual sales of window units increased from
4 Leslie M. Dawson,"The HumanConcept:New Philosophy for Business," Business Horizons, Vol. XII (December,1969), pp. 29-38. 5 Leslie M. Dawson, "The Human Concept: New Philosophy for Business," Business Horizons, Vol. XII (December, 1969), pp. 29-38.
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2.75 to 5 million, and the household electric bill almost tripled.Yet in fostering this choice for cooling homes over that of natural ventilation or fans, electric utilities and appliance manufacturers have helped to create a situation that poses the broad societal threat of environmental pollution and energy shortage. An additional effect has been the depletion of the nation's reserves of natural gas which currently account for one-sixth of electric power generation. At the present usage rate it is estimated that these reserves will be exhausted in less than ten years.4 Other product choices with adverse societal consequences include purchases of detergents versus natural soap products; large cars rather than smaller ones, or public transportation; and the replacement or augmentation of permanent-use products with a plethora of paper and plastic convenience items. The latter items, in particular, are manifestations of a growing trend to product disposability and are contributing to an increase in annual per capita household solid waste generation of approximately 2%. While their consumption is a function of individual purchase choices, the problem of their production and disposal after use is a societal one with direct impact on environmental and material resources. Furthermore, there is no evidence that producers of kitchen garbage disposers have considered their impact on municipal sewage treatment plants, or that producers of power lawn mowers, chain saws, or snow-mobiles have taken account of the cumulative environmental effect of their high level of operating noise. The net effect of the high level of material consumption of all types engendered by the marketing system is what has been called a "mass-and-energy nimbus" that, even with fewer people, would threaten the environment Defining Marketing's Responsibility Under these circumstances, society's situation is analogous to that of a person who buys a beautiful house on a cliff overlooking the sea. Both the view of the sea and the sound of the waves enhance the owner's enjoyment of his property, but each lapping of the waves against the shore subtly undermines the foundations on which the house stands and threatens its ultimate ruin. In this analogy, marketing's role is that of the seller. As long as the seller is unaware of the future threat to the house and believes that the buyer is receiving what he wants, the seller is morally blameless for subsequent events. But, a heavy moral burden falls upon the seller who knows that the value of what he sells is being systematically undermined. As this knowledge becomes available, marketing must assume the moral burden. Failure to do so erodes marketing's long-run usefulness to society and implicitly threatens the well-being of individual consumers. Furthermore, the failure to recognize and respond to its responsibility implies that the marketing system will fail to make the adaptation necessary for its healthy survival.
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3.Marketing's Pursuit of Inappropriate Objectives 3.1 Emphasis on Material Consumption There is no evidence that the marketing system has adjusted its objectives to acknowledge this situation. Those engaged in marketing activities continue to place their primary reliance on the promotion of material consumption. In this regard, their behavior has been consistent with two fundamental values of western society. The first is the belief that progress is inevitable. In the history of western civilized man, this idea is relatively new and has only appeared in the last two to three hundred years. Nowhere has the belief that conditions will improve with the passage of time been more strongly held than in the Kosovo.De Toqueville wrote in 1835: America is a land of wonders in which everything is in constant motion and every change seems an improvement. The idea of novelty is there indissolubly connected with the idea of amelioration. No natural boundary seems to be set to the efforts of man; and in his eyes what is not yet done is only what he has not yet attempted to do.A second fundamental western value is that prog ress can be measured by the growth in material consumption. As Vickers states: "Whatever else progress may have come to mean, it still means for nearly all of us that collectively at least we should go on consuming progressively more and more . . ." This value is reflected in the official concern with the growth in Gross National Product. From the consumer's viewpoint, growth in material consumption is defined as an improvement in the standard of living. Marketing people have tended to regard this growth as inevitable, and a failure to grow is regarded as a regression rather than as a maintenance of the status quo. Consequently, growth in consumption is perceived to be in complete accord with the prevailing value system, and therefore its appropriateness is not questioned. However, the current concern with the environment suggests that a value system which regards progress in these terms is no longer compatible with the prevailing conditions in western society, and particularly in the United States. The present Kosovo living standard owes much to the nation's resource inventory and the capacity of the environment to assimilate abuse. As the limits of these two factors are reached, society becomes increasingly concerned about the environmentally disadvantageous allocation of resources. Therefore, it should be determined whether the market, or some other method of allocation, should be used to make a rational choice between the acceptance of consumption that results in pollution and the unwillingness to tolerate its effects.The crux of the problem is that
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increased material consumption poses a general threat to an environment which may be unable to withstand it even at its present levels. In this sense De Toqueville's "natural boundary" may have been reached. Through its promotion of this consumption, the present marketing system places an undue strain on both resource inventory and environmental capacity. This is true whether that growth occurs in present markets via increased demand, or in markets created by the development of new products.6 3.2 The Neglect of Societal Satisfaction Marketing has also stressed the individual and social satisfactions arising from the purchase and ignored the potential role of societal satisfaction as a purchase incentive. Social satisfaction results from the approval of "immediate others," such as family and friends. The source of societal satisfaction is the buyer's knowledge that the purchase benefits the larger society.7 Using societal satisfaction as a purchasing criterion, for example, a consumer might derive satisfaction from selecting a laundry detergent which minimizes the water pollution arising from its use. Or a car buyer might not consider those models which are the greatest contributors to the problem of air pollution. With rare exceptions, the assumption by marketers has been that even if information relating to the societal importance of the purchase is made available the consumer will ignore it. It has been taken for granted that where the opportunities for individual and/or social satisfactions are in conflict with societal considerations, the first two will prevail. Thus, it is assumed that a car buyer will buy a car because he likes it personally (individual satisfaction), 8or because it will impress his friends (social satisfaction), and that if either or both of these circumstances prevail they will outweigh societal considerations because the benefits of the latter are more remote. While this may be true, it is essentially a selffulfilling prophecy. One major reason why societal considerations are not more salient in the purchasing decision is, with minor exceptions, marketer's failure to promote them. In summary, marketing emphasizes material consumption and ignores considerations of societal benefit when circumstances suggest that this course is no longer suitable. In that sense, the present marketing system is an anachronism.9 3.3 Marketing and Government Influence
6 "Electric Power DemandsClash with Environmental Needs," Congressional Quarterly Weekly Report, Vol. 28 (May 1, 1970), pp. 1175-1178,at p. 1175 7 Same reference as footnote 3, p. 1176 8 Blair T. Bower, et al., Waste Management (New York: Regional Plan Association, 1968), p. 46. 9Max Ways, "Howto ThinkAboutthe Environment," Fortune, Vol. LXXXI (February, 1970), pp. 98-101 ff., at p. 101
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As the societal considerations of consumption become more intense, it is reasonable to expect a major increase in the influence of government on marketing decision making. Thus, it becomes necessary for marketers to explicitly recognize the fact that: We have become for the first time a national society . . . in which crucial decisions affecting all parts of the society simultaneously are made by the government rather than through the market; in addition, we have became a communal society, in which many more groups now seek to establish their social rights ... through the political order. And with our increasing "future orientation," we necessarily have to do more planning. In the national society, more and more projects must be undertaken through group or communal instruments. In a tightly interwoven society, more decisions have to be made through planning . . . (which) provides a specific locus of decision as against the more impersonal and dispersed role of the market .. . Therefore, government, rather than the market will increasingly determine both the products to be consumed and the circumstances of their consumption.10 3.4 Government Product Licensing It is precisely because of the innate inability of companies to take unilateral action with respect to societal benefit considerations that government will play a larger role in areas that affect marketing than it has done in the past. In addition to the establishment of broad environmental standards, it is conceivable that considerations of societal benefit will eventually provide the rationale for such extreme developments as governmental licensing of the production of many goods. This would require a firm wishing to introduce a new product to study its potential impact on society with respect to its production, consumption, and disposal. One approach might be to submit the results of the study to a panel of experts who would judge the product's societal consequences and would then determine whether a production license should be granted.11 This procedure would be similar to the one required by the Food and Drug Administration for the certification of new drugs. Although there would be many administrative problems with this type of approach, it would ensure that the societal benefit criterion receives explicit consideration in the design of new products. In addition, the procedure would tend to reward rather than penalize those firms which utilized resources for the greatest long-run societal benefit.12
10 Sir Geoffrey Vickers, Value Systems and Social Processes (Toronto, Canada: Tavistock Publications, 1968), p. 6. 11 Alexis de Toqueville, Democracy in America, Part I(New York: Alfred A. Knopf, Inc., 1945), Chapter 18. 12 n Act to Amend the Clean Air Act, 91st Congress, 2d Sess., H.R. 17255.
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It would not produce a strong, centralized agency which dictates what may be produced; instead, emphasis would be placed on the rejection of societally disadvantageous products. Thus, the market mechanism would still be free to operate within these limitations.13 Future Alternatives for Marketing The foregoing suggests that marketing decisions will be increasingly shaped by diminishing or limited resources and government intervention. There are several possible responses to this situation. One is to ignore it entirely and to hope that it will disappear with the passage of time. If this approach is taken, most of the decisions fundamental to marketing will be made by the government, possibly in a way which threatens its future as a vital element in society. A second strategy is to resist any such changes, perhaps through mounting an intensive lobbying effort against legislation that threatens existing marketing practices. This course of action has been followed successfully in the past, especially by large and powerful industry groups. But "business has not really won or had its way in connection with even a single piece of proposed regulatory or social legislation in the last three quarters of a century ... Sometimes it has taken time to lose, so that at any given time business may have confidently felt itself the victor. .. "16 In the long run, however, the effect is merely a postponement of the inevitable. Change does take place, and while the lobbying industry is sometimes successful in staving off harsh or eccentric provisions in the legislation, the process of resistance can engender public ill-will. A third approach is acquiescence. Here the companies or industries most affected by impending change are aware of it and are willing to accept it. Thus, unlike the first instance, they are not surprised by legislative action, but passively adjust to the new requirements. The fourth, and most effective, strategy requires the explicit recognition of the fact that conditions of environmental and material resource stringency inevitably lead to increased government intervention. 4. Conclusions Is a marketing system that maximizes individual choice and stresses individual satisfaction anachronistic in a world with growing awareness of its limited environmental resources? The author believes marketing is about to undergo a profound change by shifting its emphasis to nonmaterial consumption and societal considerations. Several ways are suggested in which marketing might adapt to the changed circumstances brought about by environmental pressures. In essence, the role of the marketing system is to move goods from producer to consumer. Presumably, in this country the decisions regarding which members of society receive which goods
13 Harry Golden, Jr., "Phosphates Ban Voted by Council," Chicago Sun Times (October 15, 1970), p. 4.
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are made through the impersonal force of the "market mechanism" that allocates scarce resources on the basis of price One basic market need is the desire for choice. The consumer's desire for choice may be latent under conditions of scarcity. However, experience in the Kosovo and other nations suggests that this desire manifests itself when the marketing system develops the capacity to generate abundance and to provide a wide variety of goods and services. Until very recently, there was no apparent reason to be dissatisfied with this mutually advantageous state of affairs, which resulted in satisfaction for many consumers and in growth and profits for the components of the marketing system. Now, however, there are signs that the marketing system's ability to promote consumption and to provide consumers with a growing range of choice is increasingly inconsistent with the needs of the larger society. There is no evidence that the marketing system has adjusted its objectives to acknowledge this situation. Those engaged in marketing activities continue to place their primary reliance on the promotion of material consumption. In this regard, their behavior has been consistent with two fundamental values of western society. Marketing has also stressed the individual and social satisfactions arising from the purchase and ignored the potential role of societal satisfaction as a purchase incentive. Social satisfaction results from the approval of "immediate others," such as family and friends. The source of societal satisfaction is the buyer's knowledge that the purchase benefits the larger society. As the societal considerations of consumption become more intense, it is reasonable to expect a major increase in the influence of government on marketing decision making.
References 1. An Act to Amend the Clean Air Act, 91st Congress, 2d Sess., H.R. 17255.
2. Harry Golden, Jr., "Phosphates Ban Voted by Council," Chicago Sun Times (October 15, 1970), p. 4.
3. "Bowie Bans the Bottle," Time, Vol. 96 (August 24, 1970), p. 34.
4. "The Trade-offs for a Better Environment," Business Week (April 11, 1970), pp. 62-63, at p. 63.
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5. Theodore Levitt, "Why Business Always Loses," Harvard Business Review, Vol. 46 (March- April, 1968), pp. 81-99, at p. 82.
6. Same reference as footnote 7, p. 15
7. Robert U. Ayres and Allen V. Kneese, "Production, Consumption and Externalities," American Economic Review, Vol. LIX (June, 1969), pp. 282-297, at p. 293
8. Daniel Bell, "The Post-industrialSociety: A Speculative View," in Scientific Progress and Human Values, Edward and Elizabeth Hutchings, eds. (New York: AmericanElsevier PublishingCo.,Inc., 1967), pp. 154-170, at p. 169.
9. "Electric Power DemandsClash with Environmenta Needs," Congressional Quarterly Weekly Report, Vol. 28 (May 1, 1970), pp. 1175-1178,at p. 1175.
10. Same reference as footnote 3, p. 1176.
11. Blair T. Bower, et al., Waste Management (New York: Regional Plan Association, 1968), p. 46
12. Max Ways, "Howto ThinkAboutthe Environment," Fortune, Vol. LXXXI (February, 1970), pp. 98-101 ff., at p. 101.
13. Sir Geoffrey Vickers, Value Systems and Social Processes (Toronto, Canada: Tavistock Publications, 1968), p. 6.
14. Alexis de Toqueville, Democracy in America, Part I (New York: Alfred A. Knopf, Inc., 1945), Chapter 18.
15. Leslie M. Dawson,"The HumanConcept:New Philosophy for Business," Business Horizons, Vol. XII (December,1969), pp. 29
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"ANALYSIS OF FINANCIAL STATEMENTS FOR SIGAL COMPANIES UNIQA GROUP AUSTRIA"
Msc. Armanda Xhani Baça Universiteti “Aleksander Moisiu” [email protected]
Abstract This topic is based on the lattes techniques utilized in the Financial Analysis science. Applied techniques to perform a complete and exact financial analysis can never be separated from the Financial Tables and financial information on which they are based on. We can say that the quality of analysis depends deeply on the quality of information provided for this reason. On the other side, the quality of performed analyses will always depends to a very large scale on the capability, proficiency and especially on the gifts of the financial analyzed who does it. The topic focuses in treating the main types of analysis and its main focus is on Standard Accounts, ways of calculating them, what these indicators represent and some of the critical issues related to them. The topic presents an overview of the theoretical concepts of the survey based on findings of one of the most important markets in our country; Insurances market. The analyses is based only on the most important (Axis) Financial Reports and is done for a period of 4 years activity (2012- 2015). Any theoretical aspect, tendency of analyses, structure analysis and interrelations analysis is treated first theoretically and then based on the financial information taken from the company.
Key words: Financial Statements, Balance Sheet, Long-term assets, Short-term assets, Earnings, Leverage
Introduction
As we know, users of financial statements are different and are interested in different aspects of financial information. A company investor is interested in the income from the investment made and the risk associated with his investment by making comparisons with other companies operating in the same market. Another user may be the government who is interested in the performance of the company in order to demand from it the exact amount of the obligations. Suppliers are those who are interested in the ability of the company to settle their obligations to the purchases made. These users are interested in different ways not only for the past but also for the future of the company, even focusing on different aspects of the activity future and the emphasis and interpretation of different than this information. Foreign users use information published by the company to make their predictions about the future performance of the company, whether it's near
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or distant. This is because it is very important to make this prediction, while access to these information is limited. During the interpretation and analysis of financial accounts there are many factors that complicate the work of an analyst, among which two are the most prominent; First: each company has its own specifics due to the different activities they perform, which makes it difficult to interpret the information. Second, the activity of the company is directly dependent on the will of those who have property interests and for this reason their relationship with the executives must be taken into account as we may reach the wrong conclusion. In most cases, the literature deals with what is called a variables analysis, which consists in calculating a report for a given period, and then we compare it with the same indicator of the previous year. Analyzing a certain number of reports can determine the company's position as well as its performance. One-way analysis has long been the main method, which brought about the development of techniques for calculating standard reports. Later it was born and developed what is called multivariate analysis which has to do with the calculation of many reports at the same time, their combinations provide us with important information about the company's performance. Both types of analysis use the information obtained from the financial statements.
Purpose The purpose of this study is to discuss the main types of analysis and focus on the main types of standard reports, the ways of calculating and what these indicators present, as well as the problems they exhibit. To be able to determine the dynamics of each indicator and the performance of the company. The study focuses on the performance of key indicators based on consolidated financial pacts. By means of these statements present the activity of the company.
Objectives Achieve knowledge for a thorough analysis of financial performance and performance. Ability to understand company performance by focusing on liquidity indicators. Ability to understand company performance by focusing on return indicators.
1) Main Types Of Analysis Analysis Of The Draft
The science of analysis uses some kind of techniques to reach an accurate view of the company's performance. The technique that compares financial information information over the years is called trend analysis or can be found with the term horizontal analysis, trend analysis, or time series analysis. This analysis is carried out by setting the company's financial statements for successive years, seeing changes that are subject to separate items from year to year. This kind of analysis can be done in two ways: calculating the change in absolute value and percentage. By comparing the years of different voices, we come to discover the trends that these indicators show by looking at the direction, speed, and extent of these trends. If this analysis is carried out for a short period of time we may be able to determine the dynamics of each indicator and the pace of activity performance. But if the comparison is done for a long period of time, we need to determine a year that we will consider as the base year and then compare the data with the base year.
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One problem that this approach is presenting is that stable accounting policies need to be applied and, in the event of a change in a given period, appropriate adjustments should be made in order to become comparable. Another problem is the value of fixed assets and their amortization, the values presented at historical cost, which tend to become more and more inadequate. Problems also appear in inflationary and deflationary situations, the value of the monetary unit undergoes changes. These two issues can be avoided if we use current asset accounting in the construction of financial statements. Problems can also arise when the conditions under which business develops change. It may happen that certain situations may be considered acceptable under certain conditions, but may not be the same after several years under other conditions. The technique of comparing results with the results of similar companies or with the industry average is called cross-sectoral analysis. If we compare the results of our company with the market leader in the market where we operate (this is called "Benchmarking") we would have the opportunity to compare our performance over a year with what we would in some ways consider as the achievable ideal. It is difficult, first of all, to define a company that we can refer to as a "leader". The problem may be that despite the fact that companies can produce the same product, the assets used may be purchased or leased, or produce or buy the final product component component.This change may bring some difficulties in the comparison process, even though it is about two companies that produce the same product. Another problem with this analysis technique is the choice of accounting principles applied by companies. Companies find many opportunities for choice to reflect their financial reality. On this subject, the company chosen to be studied is the company Sigal Uniqa, which operates in the Albanian insurance market. In the case of studying this company, it is clear that the most convenient method to use would be the trend analysis. Reasons for the impossibility of applying cross-sectoral analysis are numerous, but the main thing is that Sigal company is in the leading position in the Albanian market, so it is difficult to find a company with which we can compare computed indicators. Even if we applied cross-sectoral analysis by comparing SIGAL with a company similar to operating in another country, the changes will not allow us to compare because of the particular development that the market exists in which the company operates and the comparison could only be appropriate for some indicators. The study focuses on the performance of key indicators over the last 4 years based on the consolidated financial statements. These statements represent the consolidated activity of the company of all its affiliates in the region, summarizing both the life and non-life market. By disposition of this information we make sure that the accounting policies have been stable. SIGAL Uniqa has compiled financial statements based on International Financial Reporting Standards (IFRS) and this policy has been applied for all years under review.
STRUCTURE ANALYSIS It is called the analysis of the statements of the same size (common-size statements). This technique studies the structure or composition of asset items, the liability to the total balance sheet. If we examine the income statement as the same size , net sales are served. This type of analysis expresses the data in percentage to the total balance or net sales. By carrying out this analysis we will see how the sources of funding and the composition of the investments are distributed.
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It is important for us to appreciate liquidity and this is seen in the weight of the cash assets in the total short-term assets. In addition to liquidity, very important for an insurance company, we care about the weight of investments in total assets. Financial investments account for nearly 70% of assets, which indicates that the company is well managing its finances by being cautious with these two asset items. Also, we see that Total Liquid or Short-Term Assets account for a significant share of the total, make the company safe in the matter of liquidity. If we look at the obligations, we note that they account for 65% of the total, but we must point out that the company's liabilities consist of provisions that the company creates to cope with potential future damages. Regarding the revenue structure, we can say that the costs of paying damages, administrative costs and subscription costs are among the highest expenditure. Observing the weight gained, we see that its weight in relation to the premium has decreased over the last few years, indicating that the company has not managed to properly manage the spending by concluding with a reduction in profit.
ANALYSIS THROUGH REPORTS All of the abovementioned problems that have the techniques discussed above have made use of another technique, the standard reporting technique as a benchmark for the performance of the company. This technique has problems that may be even more serious than the two techniques dealt with but which is most used by financial analysts. The use of standard reports was born and ran parallel to the science of analysis. This technique assumed the gathering of a large number of company accounts operating in a particular industry and calculating the averages that were assumed to be the proportions of each company in the market. The use of this technique has never shown that it really represents a norm to be achieved. Most companies that have practiced this technique simply published their results without clarifying where they were based to spur these results and most have accepted it as a valid doctrine without really considering their validity. Since the financial statements are a combination of fact and personal judgment of the company's financiers, the average standard ratios are also such. This reduces the reliability of these averages.Certain companies may face unsatisfactory financial situations and their outcomes can not be taken for the norm to be achieved without any hesitation. There are some analysts who support this theory by arguing that these reports tell the companies what the values they need to reach to catch the industry average at least. In addition to all these difficulties and problems that arise there are a number of norms that must be fulfilled before we start making comparisons: 1. Clustering of companies in an industry 2. Unifomity of their data 3. Reliability of averages It is quite normal that since we talk about average industries, all the companies we are considering should belong to the same industry. Otherwise, it would be difficult to calculate an average when the fluctuations would be large. The second rate to be achieved is the uniformity of the data. A problem addressed before. It is important for companies involved in the calculation process to use the same accounting policies so that their published statements are comparable to each other and these policies will be stable over the years.
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The third rate is credibility. The question that lies is: Are these reports relentless? Of course, while being represented by an average we have to say that they are statistically acceptable, but that does not mean that the average is representative as we may face figures that have large fluctuations against this average. Which means that even statistics, although it helps us, is not perfect. Though if these problems are not overcome, the value of these reports is lessened, we will outline the two ways of calculating these reports. 1) Comprehensive industrial reporting 2) Average of industry reports According to the first method, standard reports are calculated by compiling a financial statement made up of the totals of the statements of all the companies operating in the industry, so we will form an aggregate overview for the entire industry. Based on these mirrors are prepared standard reports that will serve as a benchmark. This approach addresses the construction of the statements under the consolidation statement construction procedure only as it does not provide for the elimination of the transactions that the companies make between each other. Looking at this viewpoint, these mirrors can not be considered comparable in the conditions of a market economy, as the changes can be profound and hence it is impossible to build aggregate mirrors. If we would agree to do so, we would accept silently that the financial structure of these companies is similar, which is not possible. The second method consists of calculating specific standards reports for each company and then calculating the average for these standard reports. The first problem that arises is that the inequality of companies in the specific weights of each market is eliminated. The other problem is the one mentioned above, is it credible an average calculated in this way? Whatever method we choose, we must not forget the main problem that the use of standard reports is, which in the best case will be just an industry average and not the ideal report to achieve. Referring to averaging, a company may be above the average and nevertheless it has a performance that is considered normal. All this analysis of the report technique was made to show what problems this represents as a technique and that all the reports that will be given below will be evaluated taking into account everything discussed above. In the following we will discuss some of the standard reports that are specific to the industry where our company operates. The most important report is the one that faces net premiums with gross premiums. Given that premiums are the basis of income for an insurance company, we see from the chart below that this ratio is every year higher than 80%, which is considered as normal for developing countries as our country. The report shows that the performance over the years has fluctuated but the last year although it is at a minimum level makes us believe that this ratio will continue to be on these levels in the coming years. This report explains how much of the gross premium is translated into net (net income).
Chart 1 Prim Net Report to Gross Debt
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If we look at the other report, we notice that the costs of damages that the company pays against net premiums fluctuate at the level of 42% that makes this company at a high risk. However, this level continues to decrease by improving the company's situation by bringing it more space to operate at other costs and allowing it to have a steadily increasing profit.
Chart 2 Costs for damage to net premiums
Graph 3 Report pp. For Damage to Reserves The other report that we are discussing shows how well the company is facing is unforeseen losses.As we know, the company creates reserves that serve to hedge against potential risks, thus maintaining a solvency. Although we have increased spending in recent years, the report shows that their level has reached a maximum of 42%, while in other years this level has been below 40%. This shows that the company creates enough reserves for twice the anticipated costs that may occur. Conclusions Based on the data studied by the analysis of the trend, cash and other short-term liquid assets have increased considerably. This is a data very positive since we are dealing with an insurance company, where day-to-day business is the first. Even the total assets have an increase that indicates that the company is healthy. On the other hand, we see that the liabilities have had a continuous increase of all liabilities, but we should not worry because the company is at the same level of growth. It should also be mentioned that this increase of short-term liabilities is borne by the provisions that are kept to ensure the payment of default payments, since we have increased the premiums and the provisions have to go parallel with this increase. As we can see above let's say that the trend analysis shows that the tendency that appears is positive, all the voices tend to grow steadily due to the growth of the company. In the structure analysis, which expresses the data on a percentage to total balance or net sales, it is important for us to evaluate liquidity and investment. In the balance sheet we see that liquid assets account for 86% of total assets by responding Obligations which have a high percentage of 65%. We also see that the share capital consists of 22% but it should be noted that in the Total Liabilities a good part of these liabilities is included in the provision shown as reserves in the event of an unforeseen loss, know that our company is not funded at any one time with external debt so we have no interest in interest. In conclusion, we say that the balance structure is stable and good. It appears that the weight gained in relation to the premium is worrying because it represents a very low profit ratio, which indicates that the company has failed to manage the expenditure incurred by increasing the share of total expenditure as a result of a very high profit percentage lowest.
Analysis through standard reports is used as a benchmark for performance of the company. This technique assumed the gathering of a large number of company accounts operating in a particular
33 ECONOMIC POLICY AND EU INTEGRATION industry and calculating the averages that were assumed to be the proportions of each company in the market. Also this technique had its problems though it was most used by analysts. In addition to the difficulties that exist and a set of norms to be met before making comparisons. 1. Clustering of companies in an industry 2. Uniformity of their data 3. Reliability of averages. The two ways of calculating these reports are: 1) Composite Industries Reporting - Where standard ratios are calculated by building compendium of the totals of the statements of all the companies operating in the industry, thus forming an aggregate overview for the entire industry. Based on these statements, reports will be prepared that will serve as a benchmark.
2) Industry Report Average - This report consists of calculating the standard reports for each company and then calculating the average for these standard reports
As we said above, the importance of liquidity is big enough for the company, enough to remember the consequences of the inability to pay off the obligations. This makes the analysts use static reports, thus comparing the balance sheet items, and the dynamic ratios, which compare the cash flows with the liabilities.
According to reports that we report to the company that we are studying closely that liquidity ratios, for example Current Report in the analysis, appears to be down from 181%, which is the optimum it goes up to 127% in 2015, this is accepted as a satisfactory report but care should be taken to observe such paces but to improve, we also present other liquid ratios such as the ratio of liquid and liquid to liquid with tendencies slim but accepted given that it should not be allowed to fall at a slower rate. As with other reports, these reports also have their own problems, as the liquidity rate of the assets is different. The problems that these reports have are: 1) Since they are static ratios they provide liquidity at a certain date. 2) Companies always try to produce good results, so we try to change the balance values. One of the company's most important liquidity indicators is working capital, which is the difference between short-term assets with short-term liabilities. When the liabilities are higher than the assets we have a capital shortage and we have a surplus when the assets are higher than the liabilities. The working capital expresses to what extent the company has used long-term financing in short-term investments. Where in this case working capital appears to be positive and growing year on year but it should be noted that growth at very slow rates compared to total assets makes the capital adequacy ratio fall from year to year annually for this reason the company needs to revise policies to improve the efficiency of working capital.
REFERENCES: 1. "ANALYSIS OF FINANCIAL STATEMENTS" I. Shuli, R.Perri 2. "FINANCIAL MANAGEMENT" B.Ciceri, H.Xhafa 3. "FINANCIAL STATEMENTS" SIGAL Uniqa Gropu Austria sh.a.
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VALORIZATIONS OF TOURIST CENTERS ALONG VIA EGNATIAS IN ALBANIAN TERRITORY.
Alush KUCI14 Afrim HOTI15
Abstract Along the current automotive line Durrës – Qafë Thanë that, where more and less, it follows theancient artery of Via Egnatias, you will face a series of monuments and archaeological remains. To re-emerge these values of cultural heritage, little known, it is required that in some locations in this ancient route and near some monuments to create new museum micro-environments, titled with the names: a) The gates and the startpoints of Via Egnatias. b) Antique lanterns (Durrës), c) Ad Quintum (Bradashesh), d) (Scampin), Elbasan etc. Alongside them a special attention should be paid to the launch of tour guides for the Via Egnatias monuments in the cities of Durrës, Kavajë ,Peqin (Clodiana or Pajova), Bradashesh (Ad-Quintum), Selca e Poshtëme,Lin, etc.
Keywords: tourist centers, cultural heritage, archaeological, monuments, museum JEL Classification: L83, R53, Z32,
Introduction Besides its historical and archaeological values, Durrës - Qafë Thana road carries many other resources of the natural landscape. Studies show that this important road transport artery follows the ancient track, the Via Egnatia. Recent studies have proved that near the antique trails are several ruins of monuments and archaeological values.( Anamali 1974 ;Ceka 1971;Ceka 1972; Hammond 1974; Shtylla 2002; Karaiskaj-Bace 1975 ;Weber 1976). Valorizations of tourist centers along Via Egnatias In some locations of this ancient track and especially near several monuments, these cultural heritage treasures have become frequent and are often called by the names: 1. Gates and startingpoints of the Via Egnatias (the former Sandzak building in Durrës, former Cultural Center of Children),( Gutteridge et al., 2001;Gutteridge & Hoti, 2003; Hoti 2016). 2. Ancient lantern (ex URT-Durres),( Santoro et.al., 2009 ).3. Klodiana (ancient city, Peqin or Pajova),( Ceka 1971), 4. The ancient road station (near the rail tunnel, Rrogozhinë), 5 .Ad Quintum (Antique Road Station, Bradashesh, Elbasan),( Ceka 1971). 6.Scampin (Elbasan); Black Stones (village Dardhë, Librazhd), 7. Selca e Poshtëme (Pogradec), (Ceka 1971,1972). 8. the Basilica of Lin (Pogradec), ( Anamali 1974 ), etc.
14 PhD, Lecturer, University “Aleksander Moisiu” Durres, Albania, [email protected] 15 Prof.Dr, Lecturer, University “Aleksander Moisiu” Durres, Albania, [email protected]
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(Fig.1 ) The starting point of the Via Egnatia is considered the location at the two entrances of the southeastern bastion. In one of its environments can be placed a photogallery of the results of the archaeological excavations over the years (2006-2007).( Gutteridge et.al., 2001 ,Gutteridge - Hoti, 2003). In a different panel, a number of discoveries along the Durres-Elbasan-Qafë-Thanë road can be illustrated in a map, which will serve as trajectory of the pathway of the Via Egnatia.(Fig.1) Likewise, under the foundations of the "Alexander Moisiu" Theater, you can visit and touch the construction structures of the Via Egnatias. In this archaeological area, a chronological map set between Roman terms and Byzantine Macellum would shed light on historical continuity and other aspects of the economic and cultural character of ancient Dyrrachium. Organizing the panairs in the shops of Macellum antique and offering handicraft products would enliven visitors' interest in this monument.(Hoti et.al., 2008). Showcases with antique inscriptions images can also be found near the ancient Darius Lighthouse (former URT) ( Santoro et.al., 2009) , the Rock of Kavaja (where the battle between Caesar and Pompey took place) and so on. (Sassi 2017). Such small museum facilities can also be found in some of the monuments that are located near the Via Egnatia, such as: Rrogozhina, Peqin (Klodiana), Ad Quintum, Elbasan (the bridge over the Shkumbin river), Dardhë village, etc. which will attract the attention of tourists and passengers of Durrës-Qafë Thanë motorway.( Ceka 1971,Ceka 1972) . The presence of a rich context of archeological objects offers an opportunity for creating archaeological landscapes. There are all the conditions to plan a complex program, above all, to get to know and read some important sites of cultural heritage (Rrogozhinë, Peqin, Bradashesh) and the ancient center Selca e Poshtëme, Lin, etc. in the attractive tourist center. (Anamali 1974 ,Ceka 1971,Ceka 1972). (Fig .2). The Durres-Elbasan-Qafë Thanë roand should not be considered simply as passengers’transport, but also an attractive landscape program. Due to this, in the recent years, from Durres to Qafë Thana the tourism offer has been continuosly increasing. Such a phenomenon has been noted especially after the improvement of the road infrastructure towards Pogradec and the Korca. Every weekend there is an increasing tendency of movement flows towards these cities as favorite tourist
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destination. The growth of this demand is explained by the landscape diversity, the agro-business environments and the microclimate effects that characterize this area. In these circumstances, selecting this program as a weekend destination shows the potential that it carries this path. The ever-growing flow to these cities has removed a considerable part of its previous destinations to visit neighboring countries. The districts of Librazhd and Prrenjas represent interest in the development of tourism in this area. They are represented with the Shebenik-Jabllanicë National Park (about 400 km2) that extends past the border of the Republic of North Macedonia. Regarding its natural landscape the Shebenik- Jabllanicë Park offers the same resources as the Mavrovo Park in the Republic of North Macedonia.
Fig.2
Fig.2 Conclusions
Projects for the Via Egnatian are a precious opportunity for the museumalisation of the landscape in this part of the Albanian territory. Landscapes on the Via Egnatia can be studied not only by traditional sciences: historical, geographic, archaeological etc, but also by environmental, urban and architectural interest groups. When it comes to regional tourism development, all these groups of interests converge on a common line, considering this territory as a common good.
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Along the path of the Via Egnatia a new life can be born, where today is harmonized with antiquity. Undertaking such a program is closely related to the promotion of cultural heritage. All this effort will encourage citizens to regain an image of their forgotten cultural heritage. Publication of tourist guides for the monuments of the Via Egnatias, for cities and residences: Durres, Peqin (Klodiana), Bradashesh (Ad-Quintum), Elbasan ,Librazhd, Selca e Poshtëme, Lin etc. will have a positive impact on the recognition of these treasures of our national culture. The expand of the archaeological sight of the Via Egnatias across its territory, combined with the natural landscape, would mark the Durres-Qafë Thana program in the focus of the contemporary cultural tourism requirements. Various tourist companies and firms, by recognizing the value and the historical archaeological potential that the Via Egnatia carries, will be able to involve their businesses in the process of restoring cultural heritage. Just so the Via Egnatia can be transformed into an artery of contemporary landscapes, influencing the growth of attractive tourism in the region.
References 1. Anamali, S. (1974). Mozaikët e bazilikës paleokristiane të Linit (Pogradec). In: Iliria, vol. 3, 1974. pp. 329-342; 2. Ceka,N. (1971).Rruga në luginën e Shkumbinit në kohën antike,”Monumentet” I, 43- 59, 3. Ceka,N.( 1972). Qyteti ilir në Selcën e Poshtëme. In: Iliria, vol. 2, Qyteti Ilir. «Kuvendi I Studimeve Ilire» Tiranë 15-21 .IX. 1972. II. pp. 151-194; 4. Gutteridge,A.,Hoti,A.,&Hurst,H.,(2001).The walled town of Dyrrhachium (Durrës): settlement and dynamics, Journal of Roman Archaeology , 14,pp.391-410. 5. Gutteridge,A. & Hoti,A.,(2003 ).The walled town of Dyrrachium (Durrës): new light on the early defences, Journal of Roman Archaeology , 16,pp.367-37. 6. Hammond ,N.G.L.(1974).The western part of the via egnatia The Journal of Roman Studies,Vol.64,pp. 185-194. 7. Hoti,A, Wilkes.J, Metalla.E.,& Shkodra,B.(2008).The early byzantine circular forum in Dyrrachium (Durres, Albania) ,in 2002 and 2004-2005: recent recording and excavation the Annual of the British School at Athens,no.103,pp.367-397. 8. Hoti, A.(2016).Recent archaeological discoveries in the town of Durrës, Tiranë ,”Network for Post Graduate Masters in Cultural Heritage and Tourism Management in Balkan Countries (CHTMBAL).Guide .pp.3-23. 9. Santoro,S.,Hoti,A.,&Sassi,B.(2009).Un probabile faro nel porto antico di Durazzo(ALBANIA), BRIGANTIUM ,volume 20,A Coruna ,pp 69-83. 10. Sassi, B.( 2017).Dyrrhachium III,Storia e archeologia di una città portuale tra oriente e ocidente, Bari .pp.3-213. 11. Shtylla,V.(2002).Kalldrëme dhe ndërtime mbrojtëse në rrugët e hershme në Shqipëri «Monumentet» 42-43. “Monumentet”, 9, pp.5-33. 13. Weber, E.(1976). Tabula Peutingeriana. Codex Vindebonensis 324, Graz, segmentum ,VI.
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E-Banking adoption and use in Albania: A comparative analyses with Western Balkans countries. Arvena Kastrati, 16 Përparim Dervishi17
Abstract The rapid changes and development in information and technology have urged the global business environment and in particular the banking sector to think and work more digitally. Banks need to adapt to the new technologies in order to be able to reach the customer demand and improve the customer experience in a digital area. Although Electronic Banking services have been provided in Albania, by almost all banks, for more than a decade, nowadays it is still common to see lines of people waiting in queue at bank’s branches, or even worse, many people waiting in line to pay an invoice for utility’s services, such as electricity or water consumption. The main purpose of this study is to present the current situation in Albania regarding the use of e-Banking services and compare it with Western Balkan countries. On the other hand the research aims to investigate the main factors influencing the adoption and use of such services in Albania. The need to study e-Banking services adoption and use in Albania, is very important, not only for the banks which offers these services, but also for other decision-making and regulatory institutions, such as the Bank of Albania, government’s agencies, experts of the field, researchers and customers (individual or business). Key words: Electronic Banking (e-Banking), Internet Banking, Mobile Banking, Adoption, e- Banking usage, Albania, Western Balkan countries. JEL classification: G21, L86, O33
1. Introduction Nowadays, there are many financial institutions acting as competitors to banks in providing several financial services, by facilitating the customer experience to make payments online from anywhere
16 MBA, Database Administrator at SICPA Security Solutions Albania shpk 17 Dr., Chair of Business Administration Department, University of New York Tirana, Albania, e-mail: [email protected]
39 ECONOMIC POLICY AND EU INTEGRATION they are located. Other hi-tech companies such as Google, Amazon, Apple and Alibaba are largely investing to get market share in payments and financial services. Their competitive advantage is the fact they have already a massive customer relationship, threatening the position of banks and financial institutions in the near future. Banks need to restructure their products and services to guarantee the customers they can use bank services from anywhere in anytime, otherwise competitors will do it first. In order to fulfill these goals, banks should improve their digital strategy, aiming to transform themselves into organizations that provide the best services to their customers through different distribution channels. Around the world, banks are using different means and instruments to reach their customers. Almost all services of the Bank can be used by electronic channels (e-channels) specifically ATMs/POS, Internet Banking, Mobile Banking, Phone banking, etc. Each of these channels have its own characteristics, time needed for processing the transaction, costs, operations, etc. The benefits of E-banking are well defined in many studies. From the bank perspective, E-banking profits include: reduce of operational and human resource cost for the transactions, increase the speed of operations, 24/7 availability of service, reduce of human process errors, etc. The transaction cost for a single non-cash transaction at a branch is probably going to cost a bank around 11 times more than a similar transaction through the E-channels (Jayawardhena & Foley, 2000). From the client perspective, E-banking improve the customer’s experience by providing the opportunity to deal with their financial transactions anytime from everywhere, leading in saving time and reducing transportation cost (Tan & Teo, 2000); (Almazari & Siam, 2008). Despite all the benefits recognized in term of customer and bank perspectives, still customers refuse to use them massively due to security risk of losing money through (Kuisma, Laukkanen, & Hiltunen, 2007); (Littler & Melanthiou, 2006). Without finding what motivates customers to adopt electronic banking services, banks experience issues to take particular activities to expand the utilization of these services. Several researches have tried to distinguish which are the factors that impact customers to adopt of E-banking services (Akinci, Aksoy, & Atilgan, 2004); (Laforet & Li, 2005); (Hernandez & Mazzon, 2007). E-channel, also referred as online banking (Daniel, 1999), or alternative distribution channel, is the methods of delivering financial products and services through the electronic media, for example, PC, phone, and the internet. E-banking includes different types of distribution channels, such as: Internet Banking, Mobile Banking, Telephone Banking, PC Banking, SMS Banking. More
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particularly, ATMs and POS are the most utilized electronic distribution channel that empowers bank clients to perform different transactions 24-hours a day. Basically, all banks in Albania offer these types of services. In the next chapter will be described briefly the main channels currently in use by commercial banks in Albania. E-banking technology is not anymore a new term in Albania. Since 2002, when Internet Banking was introduced for the first time in Albania, banks have invested a lot in technology and have offered to their customer’s different types of E-banking such as: ATM/POS, Internet Banking, Mobile Banking, SMS Banking, Phone Banking, etc. In general, we can say that E-banking platforms offered by banks in Albania are contemporary and comparable in functionality and accessibility with those offered by banks in developed countries. On the other hand, the community still resists adopting these services massively and prefers to use the traditional system to conduct banking transactions. Figures indicate that E-banking penetration in Albania is around 11%, almost the lowest value in the region countries and Europe. This depends on many factors, among which we will mention: the tradition, the cash mythology which has taught people to trust their "financial secrets" only to bank employees, the low level of financial literacy and financial inclusion index and the high rate of economic informality in the country (based on the Global Findex database 2017, less than 40% of adults in Albania have an account at a financial institution). Due to the fact that Albania is ranked the last country in the region regarding the use of E-banking services, it’s obvious that banks should have strategic plans in order to increase E-banking usage among their customers. Hence, it is important to identify the factors which influence the adoption and use of E-banking services in Albania. Very few studies have been conducted for Albania context, thus the aim of this research is to help banks identifying the factors affecting E-banking adoption and use in the future. 2. Literature Review 2.1 History of Electronic Banking Rapid changes in information technology have also affected banking industry. The history of electronic banking started with installation of the first ATM in 1970s, by Barclays Bank in UK (Du, 2011). Online banking systems became familiar in 1980’s, giving bank customers the possibility to access their accounts using a telephone line, a computer monitor and a keyboard (Sarreal, 2018). At that time, customers were not ready to accept this type of Online Banking.
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There are many reasons why customers weren't ready in testing this new way of doing business; the most important might have been security and trust. Some people found it difficult to use while others were not eager to invest time in those innovative systems. Internet Banking reached its popularity through the customer in the late of 1990s, when banks invested lots of money in the technology with the purpose of reducing costs, improving services and products, being competitive in the market. According to (Sarreal, 2018), e-commerce became more familiar by 2000, when 8% of banks in America where offering internet banking services. According to DeYoung, Lang, and Nolle (2007), California-based Wells Fargo in 1995 was the first bank to introduce online transactions and established the first 4 virtual branchless banks. A decade later, banks from the US and Western Europe began to offer Internet banking services (DeYoung at el., 2007; Hernando and Nieto, 2007). The decision to provide online banking is currently perceived as vital for customer retention and maintaining competitive advantage in the banking industry (DeYoung and Duffy, 2002). Banking sector embraced a new model in distributing products and services through different channels, such as ATM/POS, Internet Banking, Mobile Banking, telephone banking. All these alternative channels had positive impact on bank daily operations, reducing cost, increasing efficiency and being more effective. There are several banks which are not using anymore the traditional bank branches, but they operate only through the internet. E-Banking can be defined in many ways. In a simple way, it consists in the use of banking services electronically, through computers, telephones, ATMs and POS terminals. In such way, e-banking creates an electronic connection between the bank and the client, preparing, managing and controlling financial transactions. Often, the term 'E-Banking' is synonymous with online banking because it includes services such as access to accounts, money transfers, purchase of financial products or other online services (Sathye, 1999). 2.2 Advantages of E-Banking E-banking has many advantages compared to traditional banking. E-banking provides benefit for both the bank and the customer. Some of the advantages are listed below: • Convenience: Is, perhaps, one of the most important benefits of using 'e-Banking'. E-Banking enables user to direct gather information and complete all routine transactions on their account; account transfer, balance inquire, stop payment request, bill payment, etc., without having to be present in a bank agency, but directly from home or office (Smith, 2006). It is accessible all
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the time, 24x7 from everywhere at any time, no matter if bank branches are closed at night or during holidays. Above all, it is not necessary to waste time waiting in queues, as banks are now just a 'click' away. • Global Connectivity: E-Banking is a bank service which provides global connectivity and can be accessed universally from a personal computer connected to the internet. No time limitation, no physical or geographical limitation (Thulani, 2009; Rotchanakitumnuai S. & M., 2003). • Real Time Update of Customers’ data: Information inputted on internet banking is updated in real time to the bank core system and vise verse. A transaction done through internet banking is saved as a template and can be reused automatically to make other transaction in the future (Smith, 2006). • Efficiency: You can enter and manage all your accounts, including deposits, securities, loans, overdrafts and all of this from a single internet site. • Effectiveness: Several banks offer on their websites, sophisticated instruments, credit calculator, investment analysis tools, and management programs to help you manage all your assets more effectively. • Low-cost Delivery Services: Internet banking is a low-cost service compared to a branch agency or ATM services. These transaction services are less expensive as the employer work is supplanted by machines, which is low in cost and accessible every minute of every day. Due to low cost nature of internet banking, it fundamentally affects traditional bank service (Smith, 2006). E-banking is a less expensive and high-quality service, so banks can be focused on other goals such as increase number of customer, increase profitability and enhance competitive advantages (Yang & Ahmed, 2009).
2.3 Factors Influencing E-Banking Adoption Previous studies show various factors which can impact the adoption of E-Banking services. These factors are as follows: • Accessibility and Convenience The American Heritage Dictionary (1992) defines convenience as the quality of being appropriate to one‘s comfort, purposes, or needs and as something that expands comfort or saves work. Convenient has been characterized as easy to reach; accessible and suited or favorable to one‘s comfort, purpose, or needs. Three major advantages of Internet Banking compared to traditional
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bank service, are: convenience (Anguelov, 2004), accessibility (Miranda, 2006) and quick service delivery (Centeno, 2004). The basis of e-banking service is to provide customers, transaction with high degree of convenience and speed, which can be accessible any time in every place. • Security, Privacy and Trust Security or privacy refers to threads where a hacker may access unauthorized sensitive data from a user account, such as username and password, credit card details, etc. Customers have concerns related to security of online banking services; they fear loss in term of monetary, access of unauthorized data which can be shared with other parties, etc. (Davis F. , 1993). Studies show that trust is related to security and privacy and is a major critical factor which impacts the success of internet banking because uncertainties surround banking transaction over the internet (Gerrard & Cunningham, 2003). • Web Site Simplicity Studies shows that customer resistance to e-banking is more noted on customer not familiar to internet network, that’s because of the complexity of the website, technical issues such as design, content of the site (Laukkanen, Sinkonnen, & Laukkanen, 2008). A website to be attractive and easy to use, should be designed to offer the maximum advantages. • Reliability Reliability refers to how much a client can depend on the e-banking services so they can feel fulfilled it. • Demographic Characteristics (Age, Gender, Education, Income) Demographic characteristics such as age, gender, marital status, employment status and annual income have been found to influence the behaviors of e-channels customers (Sakkthivel, 2006; Polasik & Wisniewski, 2009). Research reveals that consumers with low income would be less likely to have internet network in their home and have a personal computer. Other researches disclose that education level is a factor which impacts the adoption of e-banking (Polatoglu & Ekin, 2001; Laforet & Li, 2005).
2.4 The research model Based on literature review, a research model was developed representing the adoption of E- Banking services (Figure 1). The model proposed for this study consists in five factors, which have an effect on the adoption and use of Electronic Banking in Albania.
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Perceived Ease of Use (PEOU) (Davis F. , 1989) defined perceived ease of use as “the degree to which a person believes that using a particular system would be free of effort”. According to TAM Theory, perceived ease of use is an important factor, affecting information system adoption. Therefore, the ease to use an application, the more acceptable by users it is. Perceived usefulness (PU) (Davis F. , 1989) defined perceived usefulness as “the degree to which a person believes that using a particular system would enhance his or her job performance”. This factor has been proved by many researches, to have a positive and significant effect on E-banking adoption. Perceived Security and Risk Perceived Security and Risk is an important factor affecting the adoption of new innovative systems (Daniel, 1999). In many studies, security and risk were found to have an important and negative affect on E-banking services adoption. Even in developed countries, users of E-banking services worry about the security of financial transactions over the internet. In the context of this study, security and risk refers to the financial security of the transaction and the risk associated with the usage of E-Banking services. Perceived Trust There are many definitions and descriptions of trust in the literature. In general trust is considered as a willingness to count on others in which one has confidence. It is defined as “reliance on the integrity, strength, ability, surety, etc., of a person or thing; confidence.” (WorldReference, 2018) Amount of Information It refers to the amount of information banks provide to their customers on E-Banking services and products. It was found that low information provided by banks, influence negatively the adoption of E-Banking. The use of E-banking services is a new concept not only in developing countries, thus low awareness on these products, cause customers not to adopt electronic banking. Demographics Demographic characteristics are present almost in every research. Many researchers study the effects of gender, age, education and occupation on customer adoption of E-Banking services. In some studies it was found that demographics have a significant effect on customer adoption of E- Banking, while other concludes that some demographics have insignificant influence.
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Figure 1: The Proposed Research Model Source: (Author, 2018)
3. Electronic Banking services in Albania The biggest advantage of countries such as Albania where banking activity is relatively new is the lack of outdated system costs. The implementation of technological innovations in terms of the existence of an inherited, but still functional, infrastructure in most cases is not only complicated but also costly. In many developed countries around the world, the existence of a broad network of financial institutions branches has pushed banks to see the Internet more as a threat rather than as an opportunity to exploit. Global developments in the banking sector and the trends of technological innovation development have given their effects on the strategies of Albanian banks to provide banking services in same steps with those of developed countries. Encouraged by increased competition, customers demand for new services and the large penetration of the Internet in Albania, Albanian banks have launched their services through the Internet since 2002. The first bank offering these alternative services was American Bank of Albania (now Intesa San Paolo Bank), introducing ABAflex in 2002 (Bank of Albania, 2007). Year 2018 found the banking system composed of 16 banks operating in Albania. According to Bank of Albania (BOA), during 2017 the network of banks expanded with only two new branches, meanwhile banks have been reporting reductions in the number of branches / agencies internally (through closing, merging). By the end of 2017, banks practice their activity through 473
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branches/agencies, from 494 branches/agencies resulting in the end of 2016. According to AAB18, 14 out of 16 banks are licensed as card issuers and only 9 of them also have the card acceptor function. In terms of E-Banking services, there are 12 banks offering Internet Banking in the Albanian market, 8 banks offering Mobile Banking/SMS Banking services, one bank offering Phone Banking and two banks offering mobile payments with third party operators19. In this context, it is worth mentioning that for the first time in 2011 banks has received the approval for issuing prepaid cards (electronic money), opening a new area for e-money institutions operating in Albania. The number and value of E-Banking transactions in Albania is growing steadily, although it is still lower compared to bank compared to the number of bank accounts and to the same parameter in other countries in the region. The upward trend of e-banking users can be justified by the increased commitment of all financial institutions to reduce cash payments through their information campaigns on the efficiency, security and other advantages provided by this service. According to the latest BOA statistics, since 2008 there has been a satisfactory increase in the number of E- Banking accounts in Albania, it is worth noting that the increase is significantly higher in the last year (Figure 2).
Figure 2: Number of Bank Accounts and E-Banking Accounts in Albania 2008-2017
Source: Bank of Albania (Payment systems statistics / Number of customer accounts)
18 Albanian Association of Banks (AAB), Annual Report 2017. 19 AAB Chairman’s speech on the 3rd National Committee of Payment System
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According to these data, in 2017 the total number of E-Banking accounts was 322,438 recording an annual growth of 54.2% compared to the previous year. The growth trend of E-Banking accounts in Albania has also influenced the increase in the number and value of transactions through the Internet. The number of payments or transactions carried out through the Online Banking service amounted to 2.2 million transactions in 2017, up from 26.3% compared to the previous year, while their value reached 550,096 million ALL, an annual growth of 60.1%. In 2014, compared to 2013, the number of Online Banking transactions increased beyond the market development by 286%, while their value increased by about 62.8%, this increase reflect the revision of the reporting methodology done in January 2014 (Figure 3).
Figure 3: Number and Value of E-Banking transaction in years (2005-2017) Source: (Bank of Albania, BoA) As shown in Figure 4, the highest percentage of Online Banking transactions involves Internet Banking transaction (67%), followed by Mobile Banking and PC Banking (8%).
Figure 4: Number and volume of E-Banking transaction by channel, 2017
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Source: (Bank of Albania, BoA)
3.1 Card services
By the end of year 2017, there were 16 banks operating in Albania, of which 14 banks are licensed as cards issuers (offering cash withdrawal service from the ATMs). Only 9 banks out of those are also licensed to accept cards (providing card payment services via POS located in stores and shopping centers).
To understand the usage of debit and credit cards in Albanian banking system it’s very important to mention the infrastructure built where these cards can be used, such as the installation of POS/EFTSPOS and ATM’s. By end of September 2018 there were 777 ATMs and 8,608 points of sale (POS) installed in Albania. According to Figure 5, the number of POS has been constantly increasing during the last few years. In more concrete terms, the number of ATM-s and POS at the end of 2004 was showing 93 ATMs and 155 POS respectively. The increase in the number of ATMs and POS’s in the last decade has been due mainly to the expansion of banks’ branch networks in provincial areas and to off-site ATMs in places with high business potential centers.
Figure 5: The developments of ATM and POS in Albania, over the years. Source: (Bank of Albania, BoA)
Furthermore, it should be stressed that the infrastructure, in terms of ATMs and POSs, in Albania appears to be highly concentrated in the urban areas and mainly in the region of Tirana. In relation to the cards in circulation, at the end of September 2018 they count to 1,091,109 from 34,094 at the end of 2004 showing a significant increase in less than 14 years. On the other hand,
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the classification of cards by functions has shown a domination of debit cards by 84.9% in comparison with 9.3% of credit cards and 5.8% in electronic money cards figures as of September 2018 (Figure 6).
Figure 6: Number of issued and active cards in years in Albania (2004 - 2018-T3) Source: (Bank of Albania, BoA)
The significant increase in the number of debit cards and the widespread use of cards for cash withdrawal, among other reasons, started as a result of the fact that the payroll of the public administration and that of the business sector was changed by law to go through the banking sector.
On the other hand, credit cards are instruments which are seen connected with the concept of a loan. In this perspective the process of owning a credit card is conditioned on one hand from the paying force of individuals and their familiarization with the banking products and on the other hand by the lending policies of the banks. This fact explains also the lower weight that credit cards take compare to total number of cards in Albania. However, to be mentioned here is the fact that in Albania credit cards have been showing an increase in number in the last years.
3.2 Comparison with countries of the region Considering the fact that electronic banking services in Albania are having a significant development in the recent years, allows us to believe that in the near future Albania will be close to the average of the countries of the region in terms of electronic banking instruments use. However, the challenges are huge; despite the growing trend the number of e-Banking users in Albania continues to be small. The level of e-Banking usage in Albania is the lowest in the region.
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In order for the comparison to be accurate, due to differences in the number of residents of the respective states then the number of e-Banking accounts is determined in proportion to 1 million inhabitants (Figure 7).
Figure 7: Number of E-banking Accounts (per 1 mil. inhabitants) in Balkan Countries
Source: (Respective Central Banks)
Although there is a rapid growth reported in number of ATM and POS in Albania, from a regional perspective the number of POS-s and ATM-s per capita in Albania appears to be the lowest relatively to the other countries of the region. It's worth to evidence that the number of POS per 1,000,000 inhabitants results in 2,507, which represents the lowest level compared to other countries in the region, followed by Kosovo with a level of 6,425 POS for 1,000,000 inhabitants.
Figure 8: Number of ATMs (left) and POS (right) in Balkan countries, 2017. Source: (Respective Central Banks)
As shown in the graphs below, the relative number of debit cards issued in Albania is quite low compared to the ones in the region; the same for credit cards which are in number at a lower level
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than the region, except for Croatia. This is due to the fact that credit cards are payment instruments connected with the concept of a loan. In this viewpoint the process of owning a credit card is conditioned on one hand from the paying force of individuals and their familiarization with the banking products and on the other hand by the lending policies of the banks. This fact explains also the lower weight that credit cards take compare to total number of cards in Albania. However, to be mentioned here is the fact that in Albania credit cards have been showing an increase in number in the last years. In this respect, a deep analysis of the macroeconomic environment should be evaluated as crucial for launching strategic solutions in the Albanian card market.
Figure 9: Number of Cards (debit and credit) regional comparison for 2017 Source: (Respective Central Banks)
4. Methodology and Data Analysis To identify the research purpose and methodology used, at the beginning was done the literature review, the collection of statistics from Central Bank of Albania and the review of other sources collected from the annual reports of commercial banks in Albania. All of these contributed to define the research objectives, hypotheses, and to identify the variables of the model used. As a primary source for data retrieval, a survey was used to determine the factors affecting the adoption and use of E-Banking services. The survey was conducted through a written questionnaire structured in three sections: the first section collects the demographic data of respondents such as: gender, age, education and occupation; the second section contains six questions regarding the use of E-Banking services and the third section contains several statements to evaluate the factors influencing E-banking use. This questionnaire was distributed to individual respondents, within a two-week timeframe.
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Survey data, along with interviews and secondary resources, resulted in the definition of a field of study that consists in identifying the use of E-Banking services, its impact on banks and consumers, as well as factors influencing the use of E-Banking services in Albania. The sampling technique used in this research is convenience sampling, which is a non-probability sampling technique. Convenience sampling also called accidental or haphazard, is a technique of collecting data from a specific sample population which are convenient (available, accessible) for the research. This is one of the most used techniques by the researchers, as it is faster, easier and requires less cost to complete. The objective of the research is to define the factors influencing the use of E-banking services in Albania. So, the targeted populations are bank customers who own at least one bank account. The questionnaire was distributed mainly by social media (Linkedin, Facebook) or email, and a small part by hand, consequently the sample is not random. The questionnaire was distributed to 300 individuals, from both sources; online and those given by hand. I managed to collect 230 responses, however, only 214 responses were valid and used for further analyses. The data is summarized and analyzed statistically using Statistical Package for the Social Sciences (SPSS) software and Microsoft Excel. SPSS is more suitable for analyzing the data with quantitative approach. It provides several statistics formulas in order to achieve the research purpose in the proper way.
4.1 Demographic and Descriptive Statistics Respondents of the questionnaire have different personal information. These characteristics are essential for interpreting research findings in terms of gender, age range, education and occupation of respondents. In addition to these differences they present different responses toward E-Banking usage, and the factors that influence E-Banking adoption in Albania. The questionnaire was distributed to 300 individuals from whom 214 answered the questionnaire, indicating a response rate 71.3%. The demographic profiles of participants are shown in the following table.
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Variable Characteristic of the Variable Frequency Percentage Male 51 23,80% Gender Female 163 76,20% Total 214 100,00% 18-24 years 18 8,40% 25-34 years 105 49,10% 35-44 years 62 29,00% Age range 45-54 years 26 12,10% 55 years and above 3 1,40% Total 214 100,00% Primary Education 1 0,50% High School 5 2,30% Educational Status University 77 36,00% Master/PhD 131 61,20% Total 214 100,00% Student 5 2,30% Worker in public sector 40 18,70% Worker in private sector 160 74,80% Occupation Owner of business 7 3,30% Unemployed 1 0,50% Retiree 1 0,50% Total 214 100,00% Table 1: Demographic profile of participants Source: (Author, 2018)
As shown in Table 1, research sample includes 163 females who form around 76.2% of the participants, and 51 men who form around 23.8% of the participants. Age was divided into five ranges; table shows the details of age distribution of the participant. Most of the participants fall into the age group of 25-34 years (49.1%), followed by age group35- 44 years (29.0%), age group 45-54 years (12.1%), age group 18-24 years (8.4%), and 55 years and above with only (1.4%). Table shows the details of educational levels divided in four intervals. As shown in the table, the major part of participants (61.2%), owns a master/PhD diploma. For the research purpose occupation was divided into six categories. Most of the participants work in the private sector (74.8%) followed by workers in public sector (18.7%).
4.2 Electronic Banking Usage The second section of the questionnaire contains questions regarding the E-Banking usage, type of services they use, frequency of usage, reasons for using and not using E-Banking services. As we can see in the Figure 10, almost all the respondents use E-Banking services (94.9%). This high rate result is not in line with statistics on E-Banking usage in Albania; however it can be
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explained by the fact that this question includes ATM service, which is one of the most used service for cash withdrawals and almost everyone holding an account use ATM. The following question will display types of E-Banking used.
Figure 10: Responses on question: Do you use E-banking services (ATM, POS, Internet Banking, Mobile Banking, etc.)?
As shown in Figure 11, the most used E-Banking service is ATM, cash withdrawals/ deposits on account. 85% of respondents use this type of service while 15% of the respondents do not use ATM. Internet Banking is the nest most used E-Banking service (77,1%), followed by Electronic Cards (debit/Credit) (74,8%) and the less used one is Mobile Banking (51,4%).
Figure 11: Responses on question: If yes, which services do you use mostly?
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Figure 12, indicates the frequency on how often participants use E-Banking services. The majority 92 respondents (45,3%) indicate that they are using E-Banking services once a week followed by 54 respondents (26,6 %) indicate that they are using E-Banking services monthly while 35 respondents (17,2%) indicate that they are using E-Banking services on daily basis and 3 respondent (1,5%) indicate they are using E-Banking services yearly.
Figure 121: Responses on question: How often do you use E-banking services?
Figure 13, represents the responses of question: “What are your reasons for choosing E-banking service”. The purpose of this question was to find out which are some of the reasons that encourage respondents to use E-Banking services. This was a multiple choice question as sometimes it may be difficult to choose only one reason why someone uses E-Banking services. Three main reasons for using E-Banking services are “Time saving”, “24 hour access to accounts” and “Ease to use and flexibility”. 80.3% of E-Banking users selected “Time saving” options, 73.4% for “24 hour access to accounts” and 63.1% selected “Ease to use and flexibility”.
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Figure 13: Responses on question: What are your reasons for choosing E-banking service?
4.3 Factors influencing Electronic Banking Usage Table 2, shows descriptive statistics, such as minimum, maximum, mean and standard deviation value, for each of the statements related to the factors influencing E-Banking usage. As we can see from the table below, “Perceived Usefulness” is the highly concerning factor among E-Banking users. The mean value in total for all four statements related to this factor is about 4.14, which is placed between agreed to strongly agree but is closer to the agreed level of scale. The standard deviation related to the E-Banking usefulness is .638, therefore dispersion lies in between 3.502 - 4.778, which also indicate that the E-Banking users highly agreed about usefulness of E-Banking services. Research findings revealed that “Perceived ease of use” is also a highly concerning factor, with a mean value of 4.08 and standard deviation value of .692, which can be interpreted as closer to the agreed level. The standard deviation related to the E-Banking PEOU is .692, therefore dispersion lies in between 3.388 - 4.772, which indicate that the E-Banking users agreed about ease of use of E-Banking services. E-Banking users mostly agreed they have received enough information about E-Banking services and their benefit (mean value = 3.83, standard deviation = .891). Trust is an important factor influencing E-Banking adoption and use. Table 2, shows that respondents overall agreed that E-Banking services can be trust (mean value= 3.77, standard deviation =.681). The last factor which has the lowest mean value 3.58 and standard deviation .801 is “Perceived Security Risk”. E-Banking users are somehow divided equally between those who agreed that E-
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Banking services are secure and those who are indifferent, nor agree nor disagree, about the fact that E-Banking services are secure.
Std, Questions N Min. Max. Mean Deviation Perceived Ease of Use 1 Learning to use E-Banking service is easy for me 214 2 5 4,26 0,742 2 I find my interaction with theE-Bankingservices clear and understandable 214 2 5 4,07 0,801 3 E-Banking transaction procedures are simple and straightforward. 214 1 5 3,88 0,858 4 Overall, I find E-Banking services easy to use. 214 1 5 4,09 0,782 Total 4,08 0,692 Perceived Usefulness 5 Using the E-Banking would enable me to accomplish my tasks more quickly 214 2 5 4,32 0,681 6 Using the E-Banking would make it easier for me to carry out my banking tasks 214 1 5 4,21 0,741 7 Using an online bank for my banking services increases my productivity 214 1 5 3,91 0,817 8 Overall, I find the E-Banking useful for me to utilize banking services 214 1 5 4,11 0,803 Total 4,14 0,638 Perceived Security and Risk 9 Using E-Banking is financially secure 214 1 5 3,73 0,884 10 Using E-Banking is as safe as using other modes of banking 214 1 5 3,53 0,967 11 There is no risk associated with E-Banking transactions 214 1 5 3,46 0,957 12 Overall, E-Banking is highly secure 214 1 5 3,61 0,89 Total 3,58 0,801 Perceived Trust 13 I trust in the technology an E-Banking is using 214 1 5 3,79 0,772 14 I trust in the safety of online money transfer 214 1 5 3,75 0,787 15 I trust the bank to handle my personal information confidentiality 214 1 5 3,71 0,93 16 Overall, I trust E-Banking 214 1 5 3,82 0,731 Total 3,77 0,681 Amount of information 17 I have generally received enough information about E-Banking 214 1 5 3,8 0,914 18 I have received enough information about the benefits of using E-Banking 214 1 5 3,86 0,939 Total 3,83 0,891 Table 2: Descriptive statistics of factor influencing E-banking use Source: (Author, 2018)
Multiple regression analysis was conducted to reveal how different factors affect the use of Internet Banking. The research revealed that the most influencing factors regarding E-Banking use are: “Perceived Usefulness” (t= 2.563, p < 0.05) and “Amount of Information” (t=2.274, p <0.05). Both variables are statistically significant. Meanwhile, other factors “Perceived Ease of Use”,
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“Perceived Security and Risk” and “Perceived Trust” do not statistically affect the use of Internet Banking.
5. Conclusions During the last decade, Albania has made important progress in establishing a modern banking and payments infrastructure. In general, the main payment instruments offered by banks are safe. The most important challenge yet, despite the availability of modern payment instruments, is the fact that cash is still the dominant means of payment for the majority of population, including customers that already hold bank accounts. According to a study conducted by World Bank20 on the cost of retail payments in Albania, 96% of the payments initiated by the customers are in cash meanwhile those received in cash are 90%. Almost the same situation is for businesses, they receive 99.2% of all payments in cash, while payments initiated in cash are around 66%. Albanian citizens have continued to see the bank simply as an institution to deposit and withdraw their money not too many years ago. The situation has changed somehow during the last years, but still the progress is quite slow and mostly focused in Tirana and some other city centers. Customer access to banks has changed as a result of transitional developments, socio-political changes and time requirements. The main purpose of this study was to investigate the main factors affecting the use of E-Banking services in Albania, more specifically in payment services. In conclusion, the study and the analysis revealed that the main factors that are significantly affecting Internet Banking usage in Albania are “Perceived Usefulness” and “Amount of Information”. On the other side, “Perceived Ease of Use”, “Perceived Security and Risk” and “Perceived Trust” were not found to have a significant effect on Internet Banking usage in Albania. In overall, demographic characteristics were found to be insignificant in relation to Internet Banking usage. It was found that gender affects more significantly the Internet Banking usage than the other factors such as age, education and occupation, showing that males might be more inclined to use Internet Banking. However, there is need for more customized studies to address the relevance of demographic characteristics. The number of researches about the factors influencing E-Banking adoption and use in Albania is relatively low. There are some reports by Bank of Albania or Commercial Banks and some journal
20 The Retail Payment Costs and Savings in Albania, June 2018
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articles regarding the use of E-Banking services in Albania. However, none of them provides a detailed overview of Albanians’ availability to adopt this services and factors affecting acceptance or rejection of them. Recently, World Bank has published a report on financial inclusion21 in Albania, but this work is more focused on measuring the actual conditions in the banking and financial system, aiming to address some recommendations on how to improve further financial inclusion within the country. In this context, E-Banking services and payments instruments deserve more attention than just a “master thesis” or “Annual report”. Special attention is needed by banks, financial institutions, government agencies and researchers because this topic offers a great potential from the viewpoint of banks, businesses and individual customers. The need to identify and address the main factors influencing the adoption and usage of E-Banking services in Albania, seems to be very important for banks, which offers these services, with the aim to provide superior customer experience to achieve a sustainable competitive advantage in the future. But not only. It is important as well to improve the decision-making process from government and financial institutions. From the practical perspective, decision-makers and all the layers in the banking and financial sector rely on such information to better understand why, how and when their customers act and react to new products. Information about the level of adoption and use of the products helps managers to better understand customer behaviors and expectations by building a stronger relationship with them. The struggle for attracting customers has never been tougher than today, therefore, by meeting their demands and expectations, organizations gain their competitive advantage. From the information gathered through the questionnaire, it is observed among customers that the main reasons for using E-Banking services are “Time saving”, “24 hour access to accounts” and “Ease to use and flexibility”. On the other side, the main reason for not using E-Banking services seems to be the lack of knowledge about these services. Based on these findings, it is obvious that banks should review their communication strategy to better address this concern from the customer’s perspective. Based on the statistical analysis on the use of E-Banking in Albania, the findings of the study conclude that:
21 ACHIEVING EFFECTIVE FINANCIAL INCLUSION IN ALBANIA: A PAYMENTS PERSPECTIVE
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Despite the positive growth of E-Banking use in Albania, the highest-use instrument in Albania is credit transfers in paper form, implying a basic use of payment services in Albania. In another way, the dominant way of making payments in Albania is through bank branches. There are 16 commercial banks operating in Albania in 2017, of which 14 banks were licensed as card issuers and 9 of them also have the card acceptor function. In terms of E-Banking services there are 12 banks offering Internet Banking, 8 banks offering Mobile Banking/SMS Banking services, two banks offering Mobile Payments with third party operators and only one bank offering Phone Banking. The growing trend of E-Banking use in the last years is relatively high; however, the level of eligibility and use remains low. According to the recent BOA statistics, since 2008 there has been a satisfactory increase in the number of accounts accessed through E-Banking services in Albania. In 2017 the total number of E-Banking accounts was 322,438 recording an annual growth of 54.2% compared to the previous year. Despite the growing trend, the number of E-Banking accounts in Albania is the lowest in the region comparable with Montenegro. The growth trend of E-Banking accounts in Albania has also influenced the increase in the number and value of transactions through the Internet. The number of payments carried out through the Online Banking service amounted to 2.2 million transactions in 2017, up from 26.3% compared to the previous year, while their value reached 550,096 million ALL, an annual growth of 60.1%. The highest percentage of Online Banking transactions involves Internet Banking transaction (67%), followed by Mobile Banking (8%) and PC Banking (8%). By end of September 2018 there were 777 ATMs and 8,608 points of sale (POS) installed in Albania. Although there is rapid growth registered in number of ATM and POS in Albania, from the regional viewpoint the number of POS-s and ATM-s per capita appears to be the lowest in the region, followed by Kosovo. By the end of September 2018 the number of cards in circulation counts to 1,091,109 of which 84.9% are debit cards, 9.3% credit cards and 5.8% are electronic money cards. Despite the significant growth of the number of cards over the last years, Albania is generally out of the bottom for number of credit and debit cards compared to region countries.
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References Akinci, S., Aksoy, S., & Atilgan, E. (2004). Adoption of Internet banking among sophisticated consumer segments in an advanced developing country. International Journal of Bank Marketing, 22, 212– 232. Albanian Association of Banks (AAB). (2018, July). Annual Report 2017. Retrieved from http://www.aab.al/documents/rp/AABAnnualReport2017.pdf Almazari, A. A., & Siam, A. Z. (2008). E-Banking: An Empirical Study on the Jordanian Commercial Banks. Journal of King Abdul-Aziz University, 22. Anguelov, C. H. (2004). U.S. Consumers and Electronic Banking, 1995–2003. Federal Reserve Bulletin [e-journal]. Annual Report. (2017). Retrieved from Bank Of Albania: https://www.bankofalbania.org/Publications/Periodic/Annual_Report/ Bank of Albania. (2007, June 25). Bankat në epokën e internetit. Retrieved from https://www.bankofalbania.org/web/Bankat_ne_epoken_e_internetit_3242_1.php Bank of Albania, Annual Report. (2005-2015). Payment System Developpments over the years. Retrieved from https://www.bankofalbania.org/web/instrumente_59_1.php Centeno, C. (2004). Adoption of Internet services in the Acceding and Candidate Countries, lessons from the Internet banking case. Telematics and Informatics [e-journal] 21. Central Bank of Montenegro. (n.d.). Retrieved from http://www.cb-cg.org Central Bank of Republic of Kosovo. (n.d.). Retrieved from https://bqk-kos.org/ CROATIAN NATIONAL BANK. (n.d.). Retrieved from https://www.hnb.hr Daniel, E. (1999). Provision of electronic banking in the UK and the Republic of Ireland. International Journal of Bank Marketing, 17, 72-82. Davis, F. (1989). Perceived Usefulness, Perceived Ease of Use, and User Acceptance of Information Technology. MIS Quarterly, 13(3). 319-340. Davis, F. (1993). User acceptance of information technology: system characteristics, user perceptions and behavioral impacts. International Journal of Man – Machine Studies, 475-487. DeYoung, R., & Duffy, D. (2002). The challenges facing community banks: in their own words. Economic Perspectives, Federal Reserve Bank of Chicago, issue Q IV, 2-17. DeYoung, R., Lang, W. W., & Nolle, D. E. (2007). How the Internet Affects Output and Performance at Community Banks (2007). Journal of Banking & Finance, Vol. 31, 1033-1060. Du, J. (2011). An Empirical Analysis of Internet Banking Adoption in New Zealand. Master Thesis Lincoln University. Canterbury, New Zealand. Gerrard, P., & Cunningham, J. (2003). The diffusion of internet banking among Singapore consumers. International Journal of Bank Marketing, 21, 16-28. Global Findex, T. W. (2017). The Global Findex Database 2017. Retrieved November 1, 2018, from https://globalfindex.worldbank.org/
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Hernandez, J. M., & Mazzon, J. A. (2007). Adoption of internet banking: proposition and implementation of an integrated methodology approach. International Journal of Bank Marketing, 25, 72–88. Hernando, I., & Nieto, M. J. (2007). Is the Internet delivery channel changing banks’ performance? The case of Spanish banks. Journal of Banking & Finance, Volume 31, Issue 4, 1083-1099. Internet Stats and Facebook Usage in Europe. (2017). Retrieved Novemeber 2018, from Internet World Stats: https://www.internetworldstats.com/stats4.htm Jayawardhena, C., & Foley, P. (2000). Changes in the banking sector – the case of Internet banking in the UK. Internet Research, 10, 19 - 31. Kuisma, T., Laukkanen, T., & Hiltunen, M. (2007). Mapping the reasons for resistance to Internet banking: A means-end approach. International Journal of Information Management, 27, 75-85. Laforet, S., & Li, X. (2005). Consumers’ attitudes towards online and mobile banking in China. International Journal of Bank Marketing, 23, 362–380. Laukkanen, P., Sinkonnen, S., & Laukkanen, T. (2008). Consumer resistance to internet banking: postponers, opponents and rejecters. . International journal of Bank Marketing, 26, 440-455. Littler, D., & Melanthiou, D. (2006). Consumer perceptions of risk and uncertainty and the implications for behavior towards innovative retail services: The case of Internet Banking. Journal of Retailing and Consumer Services, 13, 431-443. Miranda, F. C. (2006). Quantitative Evaluation of e-Banking Web Sites: an Empirical Study of Spanish Banks. The Electronic Journal Information Systems Evaluation [e-journal]. MKOKA, I. J. (2014). THE FACTORS AFFECTING THE ADOPTION OF E-BANKING IN TANZANIA BANKING INDUSTRY : THE CASE OF BANKS IN DAR ES SALAAM REGION. National Bank of Serbia. (n.d.). Retrieved from https://www.nbs.rs National Bank of the Republic of Macedonia. (n.d.). Retrieved from http://www.nbrm.mk/ Polasik, M., & Wisniewski, T. (2009). Empirical analysis of internet banking adoption in Poland, . The International Journal of Bank Marketing, 27 , 32-52. Polatoglu, V., & Ekin, S. (2001). An empirical investigation of the Turkish consumers’ acceptance on internet banking services. International Journal of Bank Marketing, 19, 156-165. Rotchanakitumnuai S., & M., S. (2003). Barriers to Internet adoption: a qualitative study among corporate customers in Thailand. International Journal of Bank Marketing, Vol. 17. No 7, 324-334 . Sakkthivel, A. M. (2006). Impact of Demographics On The Consumption Of Different Services Online India. . Journal of Internet Banking and Commerce. 11. Sarreal, R. (2018, October 4). History of Online Banking: How Internet Banking Went Mainstream. Retrieved June 30, 2018, from GOBankingRates: https://www.gobankingrates.com/banking/banks/history-online-banking/#disqus_thread Sathye, M. (1999). Adoption of Internet banking by Australian consumers: an empirical investigation. International Journal of Bank Marketing, Vol. 17 Issue: 7, 324-334. Smith, A. (2006). Exploring security and comfort issues associated with online banking. International Journal of Electronic Finance, 18-48.
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Tan, M., & Teo, T. S. (2000). Factors influencing the adoption of Internet banking. Journal of the Association for Information Systems, 1, 1–42. The Bank of Slovenia. (n.d.). Retrieved from https://www.bsi.si The World Bank. (2016). Retrieved December 2018, from Individuals using the Internet (% of population): https://data.worldbank.org/indicator/IT.NET.USER.ZS?end=2016&locations=AL- HR-XK-ME-BA-MK-RS-SI&start=2016&view=bar&year_high_desc=true The World Bank. (2018, June). The Retail Payment Costs and Savings in Albania. Thulani, e. a. (2009). Adoption and Use of Internet Banking in Zimbabwe: An Exploratory Study. Journal of Internet Banking and Commerce, vol. 14. Yang, J., & Ahmed, K. (2009). Recent trends and developments in e-banking in an underdeveloped nation – an empirical study. International Journal of Electronic Finance. Yang, Y.-J. (1997). The Security of Electronic Banking. University of Maryland, USA.
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Sustainable Development by Means of Community Centered Business Practices: The Tourism Industry in Context
Babu George22, Blendi Shima23
Abstract
Sustainable tourism is an adaptive paradigm of meta-theories. This has led to the development of various kinds of sustainable tourism practices, each of which could be legitimized by picking and choosing elements of practice. Those with power does this, in ways that legitimize their roles and efforts. Tourism destination communities that are often at the very bottom in the power hierarchy rarely have a role in determining the kind of sustainable development that they will be subjected to. Even when these communities are brought in to the decision table, only those who invest heavily in the trade, say, as owners of tourism properties or as operators of tours, are given any consideration and the fringe elements in the communities are entirely sidelined. Also, the model of Inclusive Sustainable Tourism (IST) that we propose embraces the concerns of several other stakeholders that are also marginalized in the development debates. Keywords: Sustainable development, tourism, social capital, inclusiveness, networks, public policy.
JEL classification: M14, O20, I31
1. Introduction
Sustainable tourism by its staple definition insists only upon the bare minimum requirement that it should sustain. What it should sustain is open to interpretation. Not every form of sustainable tourism is inclusive in the true sense of the term. In practice, sustainable tourism takes care of the need for only a very limited number of stakeholder constituencies to be included. Community based tourism (CBT) is proposed as a solution for inclusivity of the most important stakeholder group, the tourism destination community. Even as this highlights the inclusion of the destination locals, the CBT model is criticized for its over-romanticized lopsided vision that local communities are everything. Moreover, CBT agenda often boils down to the economic developmental concerns of those members in a destination community powerful enough to have a controlling stake in the tourism business – like owners and operators of tourism products.
Community-based development has now been widely recognized as a strategy used by tourism planners to mobilize communities into action to participate in broadening the scope of offerings in the industry (Ruiz-Ballesteros & Cáceres-Feria, 2016). The goal is socio-economic empowerment and a value-added experience for local and foreign visitors. This process opens new niches for
22 Corresponding Author. PhD and DBA. Associate Professor of Management, Fort Hays State University, USA. Email: [email protected] 23 PhD. Lecturer in Business, Canadian Institute of Technology, Tirana, Albania. Email: [email protected]
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destinations, most notably for the nature, culture, and adventure travelers. What this achieves is a policy objective of creating a culture of inclusion in the industry, whereby communities participate and share in the wealth of the industry, dispelling a long-held perception of tourism as an exploiter of wealth where only the rich can benefit. Community-based development empowers people to be more aware of the value of their community assets - their culture, heritage, cuisine and lifestyle. It mobilizes them to convert these into income generating projects while offering a more diverse and worthwhile experience to visitors (Ngo, Lohmann, & Hales, 2018). Every citizen is a potential business partner to be trained in small business management, environmental awareness, product development and marketing. This type of ‘people-centered’ tourism promotes a sense of ‘ownership’ which augurs well for the industry’s sustainability. Inclusive Sustainable Tourism (IST) takes these efforts to their next logical stage.
By definition, inclusive sustainable development is a pro-poor approach aimed at a balanced and equitably distributed economic growth coupled with preserving natural and cultural resources (Lawson, 2010). Our proposal for IST is informed by a balanced set of concerns for nature, society, and the economy. Inclusivity stresses poverty alleviation by means of transparent and accountable interventions as a goal of economic development (Rauniyar & Kanbur, 2010) whereas sustainable development theory is often blamed for downplaying economic growth for environmental concerns (Gupta, Pouw, & Ros-Tonen, 2015). The proposed IST model also embraces the ideals of accessible tourism – both for tourists needing special assistance and for tourism entrepreneurs and job seekers with disabilities. Inclusivity as per IST implies harmonious coexistence of all actors and not just the locally rooted tourism business interests.
Inclusive Sustainable Tourism takes environmental, social, economic, and cultural sustainability into account. It is managed and owned by the community, without displacing fringe elements in the community, for the community, with the purpose of enabling visitors to increase their awareness and learn about community and local ways of life. Existing terms like heritage tourism, eco-tourism, agri-tourism, cultural tourism, etc., can all be forms of the IST product, within the constraint that these are to be promoted with the spirit of community centeredness, inclusiveness, and sustenance.
2. Inclusive Sustainable Tourism: Key Characteristics
Sustainable community-based tourism should encompass a range of activities that collectively contribute to balanced conservation and development. Some of the most noteworthy characteristics of such projects are listed below (adapted from TPDCO, 2005):
It does not exclude anyone or any group among the stakeholders that has a legitimate view or concern regarding tourism development It is a profitable and sustainable activity that enhances the environment while adding value to the experience of both locals and visitors. It directly involves the community – providing both social and economic benefits. Its ultimate goal is to satisfy consumer expectations without harming the community’s collective interests. It should give room for reflexive practice based on the outcomes of debates that happen within it in a grounded and bottom up manner.
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It is market driven yet has to meet high standards of inclusiveness in order to be sustainable. Private entrepreneurs, community groups, and or organizations may own it. It should aim to educate, train develop, encourage, and utilize any skills and human potential within the community, towards the delivery of professional service. It should be operated within a business structure that adheres to government regulations, financial obligations, good labor relations and sound management systems. All business plans must be scrutinized to ensure owners/organizations understand the opportunities, pitfalls and risks and to show the long-term viability of the Project. Environmental awareness and sustainability should be top priority. It is the responsibility of every stakeholder to maintain clean healthy surroundings. Inclusiveness is not just in sharing the benefits but also in equitably distributing the effort. Members of the stakeholder gorups are expected to exhibit friendliness, honesty and professionalism amongst themselves as well as in their dealings with the visitor to ensure the integrity of the project.
The IST product developers must ask the following questions from the very first stage of idea generation for the same:
• Will the project enhance environment while adding value to the visitor’s experience? • Will the project be developed, operated and protected by the community? • Will the project provide social and economic benefits to the stakeholders/shareholders? • Will the project be operated with sound ethical business practices including adherence to regulations and standards set by government, agencies, stakeholders, shareholders and consumers? • Will the project offer professional services and value to the visitor and be competitive in the global marketplace?
The International Centre for Responsible Tourism (ICRT) at the University of Greenwich, UK, has prepared a list of causes for the failures of such projects:
♦ Few projects understand the need for commercial activities: local people must sell crafts, food, accommodation and wildlife or cultural experiences to tourists. This is the only way to ensure a sustainable supply of local income or conservation funds. ♦ Successful projects must engage with the private sector, including travel agents, tour operators and hoteliers. The earlier this engagement takes place and the closer the partnership, the more likely it is to succeed. ♦ Location is critical: for poor people to benefit, tourists must stay in or near to these communities. Very few communities have tourism assets which are sufficiently strong to attract tourists - they rely on selling complementary goods and services. Tourists need to be close by for this to happen. ♦ Projects do not always provide appropriate tourism facilities for generating income. For example, too many initiatives rely on building lodges, which are capital intensive and need considerable maintenance, or walking trails from which it can be difficult to secure revenue. ♦ Protected areas increasingly rely on money from tourists to pay for conservation initiatives. Local communities often have to compete with conservation projects for revenues.
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3. Leveraging Social Capital for Inclusive Development
The term social capital was first used in the 1980s by Bourdieu and Coleman (Bourdieu and Coleman, 1991). Social capital is the raw material of civil society (Coleman, 1988). It is created from the myriad of everyday interactions between people. It is not located within the individual person or within the social structure, but in the space between people (Lochner, Kawachi and Kennedy, 1999). It is not the property of the organization, the market or the state, though all can engage in its production. Social capital is a ‘bottom-up’ phenomenon. It originates with people forming social connections and networks based on principles of trust, mutual reciprocity, and norms of action. Grootaert (1998) suggests that social capital is an important influence upon economic policies and outcome. For some researchers it means the social groups and networks that create positive outcomes, while for other researchers it means the outcomes themselves (Foley & Edwards, 1997).
Social capital bonds, bridges, and links individuals and institutions in the society (OECD, 2001). To possess social capital is to relate with others in the society in an inclusive manner. Portes (1998) suggests the four motivations of bounded solidarity, reciprocity exchange, value introjection, and enforceable trust as fundamental to the development of social capital. Bounded solidarity refers to the mechanism whereby people in a common situation learn to identify with each other and support each other’s initiatives. Reciprocity exchange is the accumulation of obligations from others according to the norms of reciprocity. Value introjection means an obligation that an individual has got to behave in a certain manner. In the case of enforceable trust, the expectation of repayment is not based on the knowledge of the recipient, but on the presence of both individuals in a social structure (Portes and Landolt, 1996). Gold (1995) provides evidence to the fact that it is social capital that helps minority communities to maintain their integrity. Another noteworthy study (Heller, 1996) on social capital has the state of Kerala in India as its region of study. The Kerala model of development is unusual in that despite mediocre economic performance, the state’s social indicators are at par with the best of the world.
The present author (George, 2007) provides valuable evidence that social capital can significantly aid in disaster recovery efforts. Greater social capital means greater community support resiliency of the community in the aftermath of calamities. Post-disaster response in terms of assistance to recovery by the local community is conditioned more by pre-disaster factors than by immediate disaster impacts. If the local community’s collective spirit worked against recovery in a particular place, it was due to the difference in the goals of recovery as perceived by the locals and those responsible for the recovery programs (governmental and non-governmental funding agencies). It could be treated as an adaptive response to a unique opportunity to teach the antagonistic enemy a lesson. Social capital shall bond the community together in such an instance.
Inclusive development depends upon pre-existing social capital; but, as time progresses, it creates more social capital that could be leveraged for further development (Dubos, 2017). Destinations that practice IST thus gains additional resources – the interest of the principal that the initial social capital provided - that they could put to better use in the future. The manner the initial social capital is deployed for tourism development is also important (Crowley & Green, 2016) – just like the way you invest your money determines the interest earned.
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4. Policy Framework for Inclusive Sustainable Tourism
Today, the imperatives for an inclusive model for sustainable tourism are greater than ever. Towards this, what could governmental and intergovernmental agencies do? The essential question is: “will our existing governance framework permit a new, dynamic, and unique policy aimed at the development of small and medium tourism networks and alliances rooted in the inclusiveness philosophy and if so how might that look like?”
The following are some of the recommendations, which may be developed into a policy framework after due dialogue with the representatives of the concerned groups.
1. Improve knowledge and communication of existing and emerging best practice concerning tourism cooperative alliances and similar institutions. This means, recognizing the wealth of creativity, innovation, and leading-edge developments to be found in all parts of the world, establish a means to identify, assess and make accessible to them in a format designed with them in mind, best practice developments in: • Information and communication technology • Developments in sustainable tourism • Marketing and research • Financial support for users and suppliers • Benchmarking and research practice • Education and training • The effectiveness of cooperative support systems - especially those provided by tourist boards
2. Encourage and support sustainable development, in general This begins with reflections upon an overall growing consumer demand for more sustainable products provided by authentic, small-scale, locally rooted enterprises. Then, the following actions could follow: • Support the development of educational programs to build greater awareness and market demand for more sustainable products. • Support eco-labeling systems in tourism • Incorporate a rationally sound but ethically sensitive inclusiveness criteria into product quality grading schemes. • Promote the inclusive sustainable development agenda by means of entrepreneurial and business incentive schemes.
3. Review and improve business support systems This means to recognize that there are many systems supporting inclusive tourism development already in place. • Develop and communicate criteria for assistance from such systems so that the cooperative networks can comply better with the expectations of the grant agencies • Co-finance new practical (rather than purely advisory) support systems for inclusive tourism development
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• Review the future role of national, regional, and local tourist boards in providing services for cooperative alliances and at the same time competing with them for revenue.
4 Develop advice and support to promote the adoption of information and communications technology: This means to recognize the speed of global developments and the opportunities that these provide for networks of small-scale businesses to compete in communication and market access with larger organizations for the first time in history and: • Identify and communicate best practice in networking procedures, systems and hardware, including support. • Develop a globally funded dedicated portal designed to be accessible to all tourism cooperative alliances (probably managed by an internationally representative body). • Specify and encourage training in information and communication technology applications in all enabling and training programs, especially for the employees of rural, remote, small scale cooperatives.
5. Develop support systems for better marketing of quality products This means to recognize the unique customer concerns over the quality of experiences provided by the cooperatives; the growing gap in market information available to large organizations vs their smaller counterparts; and: • Provide better market information also install technologies for collecting and using relevant information. • Establish a jointly funded resource pool of expertise for inclusive tourism enterprises. • Develop a quality assurance/recognition/accreditation system for product quality within an overall but flexible framework, making full use of self-regulatory systems.
6. Review existing financial support mechanisms for cooperative alliances This means to recognize that the shortage of available financial instruments is less a problem than a major gap in knowledge on the part of both users and providers and: • Raise awareness of existing schemes and how to get the best out of them. • On the supply side, raise awareness through better dialogue with the financial community about the particular needs of cooperative SMEs in tourism, adapting their standardized funding criteria to meet those tourism needs, as appropriate. • Review and clarify the range of different criteria for support currently operated in the • disbursement of different funding programmes with a view to harmonization. o Speed up the process of decision making in receiving and deciding on applications for funds and reduce the time it takes for agreed funding to reach applicants.
7. Work toward a level playing field in fiscal and regulatory instruments Given that community regulation often tends to standardize products at the expense of character and individuality that are intrinsic to the cooperative SME sector: • Harmonize taxation, especially the rates and thresholds at which VAT applies.
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o Scrutinize regulation in dialogue with representative bodies to provide maximum flexibility for interpreting regulations in ways that reflect and enhance - not penalize local diversity.
8. Establish constructive dialogue and partnership with large organizations in tourism Recognizing that now and more so in the future the profit growth, employment opportunities and sustainable practice of a few hundred large organizations are heavily influenced by the quality of operations in millions of SMEs, including those in the cooperative sector: • Seek a more proactive stance from large enterprises to support small businesses, in order to foster their own long run commercial and sustainable interests in tourism. • Develop support for the enabling programs for SMEs through the creation of constructive dialogue and co-operation between representatives of small enterprises, chambers of commerce and industry and large organizations in order to reflect and lobby for joint industry interests in tourism policy and strategy for the next millennium. • Review and where possible improve existing SME networks so that they contribute effectively to this recommendation.
9. Develop education and training for SMEs Reflecting the need to develop the human resources and management skills of cooperatives and networks of SMEs at a time of rapid change, recognizing that they are in increasing competition for employees with larger organizations but can also serve as a springboard for future entrepreneurial talent: • Review training provision to determine suitable areas of common approach that could lead to models for future provision that permit subsidiary and adaptation and applications to meet local needs. • Consider and evaluate possible Community wide benchmarking standards for training provision. • Devise qualifications that are better organized to meet the severe time constraints facing most SME cooperatives.
10. Improve research and statistics Recognizing that research is the only means of establishing the size and characteristics of the sector and monitoring change and progress in it and the existing research base for SME cooperatives in tourism is deeply flawed in its methodology and incapable of tracing and effectively communicating trends within the sector and of supporting an informed policy dialogue: • Review the definition of SME cooperatives from a tourism standpoint to reflect the exclusive nuances and realities of the sector - retaining existing comparability with other existing data but adding research especially to cover the huge volume of micro operators too small to be measured currently in the official economic statistics. • Undertake separate research into micro-operators recognizing that micro is not a scaled down macro. • Communicate improved data to the enterprises and their representative bodies.
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5. The Marketing Advantage of Tourism Networks for IST Development
While small locally owned businesses are advocated, the problematic issue of whether small enterprises can survive in an increasingly competitive and globalized environment is answered in the affirmative by citing the idea of alliances (Gartner, 1999; Shaw, 2014). Experts have expressed serious doubts over the professed role of governments as altruistic and pro-people (van der Zee & Vanneste, 2015). On an average, nine out of 10 of the popular movements at the grassroots level were deemed illegal and suppressed by governments, observed Fox & Brown (1998). Tourism SMEs have joined hands and formed networks to harness power against the powers that be. The effect of such networking is evident, at least to some extent, in governments and DMOs becoming more inclusive in their marketing campaigns. Technology has become a great enabler of voice of the un-voiced and is now central to network marketing of enterprise clusters that are driven by the vision of the inclusive development paradigm, observe (Foster & Heeks, 2013).
Touristic products, especially eco-cultural ones, are more living systems than machines. No doubt, tourism products like theme parks may be better experienced through domination and control; however, the means of understanding more nature-based products in which the essential characteristics include cooperative relationships, is through participation in the collective-sense- making process (Weidenfeld, 2013). A typical intermediary whose philosophy, mission, vision, and action are in dissonance with this might well adulterate the authentic experience sought after by the travelers (George & George, 2005; Strobl & Peters, 2013). Thus, disintermediation of such intermediaries, and substituting them with locally rooted cooperatives of an inclusive group of small business owners and other stakeholders could ultimately be useful in preserving the authentic spirit of touristic experience. If destinations have preserved the authentic in their Unique Selling Proposition (USP) statements or marketing campaigns in general, the influence of the collective bargaining power of the ‘third way forces’ has worked in its backdrop (Henthorne, T. L., George, B. P., & Miller, 2016).
6. Cooperatives as the Governance Framework for IST
In typical capitalistic settings, the centralized power of financial capital creates formal business structures that are fundamentally exploitative in nature (Foucault, 1982). Participation for inclusive development, on the other hand, depends on the existence of the relationship gravity of the society, called the social capital. There are numerous documented cases of communities with rich social capital striving for inclusive sustainable development (Schulman & Anderson, 1999; Tregear & Cooper, 2016; Woodhouse, 2006). Cooperatives provide the operative structure for such developments. Earlier studies concentrated how cooperativs helped with financial inclusion, but it is becoming increasingly evident that cooperatives also provide social and cultural inclusion (Lakshmi & Visalakshmi, 2013).
Cooperative networks and other grassroots level movements that can be fitted broadly into the banner of the third way of development have extensively been studied in the tourism context (Aref & Gill, 2009; George, 2007a; George, 2007b; McGehee & Meares, 1998). Especially in small rural communities, cooperative networks formed by the community members have caused what may be described as a tourism renaissance. The tourism developmental vision of such networks is an emergent phenomenon formed out of a negotiated process involving various interest groups. This
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process is embedded in the milieu provided by the social capital binding these interest groups together. The cooperative form of organization of tourism businesses could be seen as a resistance to various neo-liberal approaches of sustainable development that merely greenwashed the underlying exploitation practiced in capitalistic societies.
There exists a wide variety of networking arrangements (Lemmetyinen & Go, 2009; March & Wilkinson, 2009). The difference among these arrangements can be explained in terms of four characteristics; coverage, form, mode, and motive (Terpstra & Simonin, 1993). Coverage refers to the extensiveness of an alliance in terms of functional competencies and geographical coverage. The form ranges from non-equity agreements to the opposite where alliance members buy equity stakes in other alliance members. The third characteristic, the mode, describes the intrinsic vs extrinsic nature of the relationship among the members. Motives refer to the underlying reason for the creation of an alliance. Irrespective of the nature of these arrangements, inclusiveness of stakeholders’ voice could be made a key requirement for their formation (Khumalo, 2014).
It is not that cooperative business structures are impossible in low social capital settings. Actually, in tourism, it is known that cooperative networks are formed by capitalistic interests as a criticism dampening adaptancy platform. The conciliatory aura of the networked model may help the exploitative businesses to hide their unsustainable practices. The downside of improper leveraging of social capital by better connected members of a network is another issue that might thwart truly inclusive development. Study by Levien (2015) in India highlights how ‘more equal among the equals’ in a community of farmers capture profits at the expense of fellow villagers. It is important to build checks and balances to ensure that the prevailing inequality in a society does not masquerade itself as social capital.
7. Conclusion
Inclusive development is crucial to social innovations that benefits the disenfranchised ones and promotes communities’ overall wellbeing (Heeks, Foster & Nugroho, 2014). The key benefits of IST are: support by everyone for development; economic democracy; poverty reduction; less impact on an area's culture and environment than that exerted by mass tourism; community capacity building and pride; bridging the divide between the core and peripheral members of a community; basic minimum livelihood security; and revenue for maintaining or upgrading the community's cultural assets. Forming pro-inclusive-development epistemic communities (e.g. tourism cooperative networks) is an important first step in inclusive development. If there are underlying inequalities in the existing social relations, social capital will be permeated with the same. It is important to correct aberrations before leveraging social capital – or, benefits of growth will be appropriated by those who are privileged in the network of social relationships. The governance mechanisms of the State should support the process of community cooperative network building by offering suitable facilitating conditions (Menon, Edward, & George, (2017). Information and communication technologies available to us, especially social media technologies, permit enablement of traditionally marginalized members of such communities by means of interactive governance opportunities. Investing in technologies, thus, has a lasting impact (Mansell & Wehn, 1998).
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This paper largely focused on the positive side of the issue, even though the attempt was not to conclude inclusive cooperative networks would resolve all the problems in tourism development. While admitting our own bias, the myopic attitude of the tourism research community, a kind of institutionalized inertia, towards anything other than the traditionalized forms of sustainable tourism development has made research scarce in the realm of inclusive tourism cooperatives and various other alternatives. We are still far from being able to offer a sufficiently precise and comprehensive framework for the design, development, and management of diverse forms of alliances and networks attuned for inclusive development (George, McGahan, & Prabhu, 2012; Kireyev & Chen, 2017). More research is needed to better understand the nuanced context bound ground realities of sustainable tourism development and construct guidelines for good practice.
References Aref, F., & Gill, S. S. (2009). Rural tourism development through rural cooperatives. Nature and Science, 7(10), 68-73. Crowley, M., & Green, L. C. (2016). The economics of social capital: Considering the fiscal value of social networks. In Social Capital and Community Well-Being (pp. 101-118). Springer, Cham. Dubos, R. (2017). Social capital: Theory and research. Routledge. Foster, C., & Heeks, R. (2013). Conceptualising inclusive innovation: Modifying systems of innovation frameworks to understand diffusion of new technology to low-income consumers. The European Journal of Development Research, 25(3), 333-355. Foucault, M. (1982). The subject and power. Critical inquiry, 8(4), 777-795. Fox, J. A. & Brown, L. D. (1998). The struggle for accountability: The World Bank, NGOs, and grassroots movements. MIT press. Gartner, W. C. (1996). Tourism development, principles, processes and policies. New York, NY: Van Norstrand Reinhold. George, B. P. (2007a). Alleppey tourism development cooperative: The case of network advantage. The Public Sector Innovation Journal, 12(2), 1-10. George, B. P. (2007b). Local community's support for post-tsunami recovery efforts in an agrarian village and a tourist destination: a comparative analysis. Community Development Journal, 43(4), 444-458. George, B. P. (2015). What Could Tourism Do to a Small Fishing Village: A Case Study of the City of Weihai, China. Revista Turismo: estudos e práticas, 4, 85-97.
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George, G., McGahan, A. M., & Prabhu, J. (2012). Innovation for inclusive growth: Towards a theoretical framework and a research agenda. Journal of management studies, 49(4), 661- 683. Gupta, J., Pouw, N. R., & Ros-Tonen, M. A. (2015). Towards an elaborated theory of inclusive development. The European Journal of Development Research, 27(4), 541-559. Heeks, R., Foster, C., & Nugroho, Y. (2014). New models of inclusive innovation for development, Innovation and Development, 4(2), 175-185. Henthorne, T. L., George, B. P., & Miller, M. M. (2016). Unique selling propositions and destination branding: A longitudinal perspective on the Caribbean tourism in transition. Turizam: međunarodni znanstveno-stručni časopis, 64(3), 261-275. Khumalo, P. (2014). Improving the contribution of cooperatives as vehicles for local economic development in South Africa. African Studies Quarterly, 14(4), 61-62. Kireyev, M. A. P., & Chen, J. (2017). Inclusive Growth Framework. International Monetary Fund. Lakshmi, P., & Visalakshmi, S. (2013). Impact of cooperatives in financial inclusion & comprehensive development. Journal of Finance and Economics, 1(3), 49-53. Lawson, V. (2010). Reshaping economic geography? Producing spaces of inclusive development. Economic Geography, 86(4), 351-360. Lemmetyinen, A., & Go, F. M. (2009). The key capabilities required for managing tourism business networks. Tourism Management, 30(1), 31-40. Levien, M. (2015). Social capital as obstacle to development: brokering land, norms, and trust in rural India. World Development, 74, 77-92. Mansell, R., & Wehn, U. (1998). Knowledge societies: Information technology for sustainable development. United Nations Publications. March, R., & Wilkinson, I. (2009). Conceptual tools for evaluating tourism partnerships. Tourism management, 30(3), 455-462. McGehee, N. G., & Meares, A. C. (1998). A case study of three tourism-related craft marketing cooperatives in Appalachia: Contributions to community. Journal of Sustainable Tourism, 6(1), 4-25. Menon, S., Edward, M., & George, B. P. (2017). Inter-stakeholder collaboration in event management: a case study of Kerala Travel Mart. International Journal of Leisure and Tourism Marketing, 5(4), 370-386.
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Ngo, T., Lohmann, G., & Hales, R. (2018). Collaborative marketing for the sustainable development of community-based tourism enterprises: voices from the field. Journal of Sustainable Tourism, 1-19. Rauniyar, G., & Kanbur, R. (2010). Inclusive development: Two papers on conceptualization, application, and the ADB perspective. Manila: Asian Development Bank. Ruiz-Ballesteros, E., & Cáceres-Feria, R. (2016). Community-building and amenity migration in community-based tourism development. An approach from southwest Spain. Tourism Management, 54, 513-523. Schulman, M. D., & Anderson, C. (1999). The dark side of the force: A case study of restructuring and social capital. Rural Sociology, 64(3), 351-372. Shaw, G. (2014). Tourism networks, knowledge dynamics and co-creation. Knowledge Networks and Tourism, 45, 27-31. Strobl, A., & Peters, M. (2013). Entrepreneurial reputation in destination networks. Annals of Tourism Research, 40(January), 59-82. Terpstra, V., & Simonin, B. L. (1993). Strategic alliances in the triad: an exploratory study. Journal of International Marketing, 4-25. Tregear, A., & Cooper, S. (2016). Embeddedness, social capital and learning in rural areas: The case of producer cooperatives. Journal of rural studies, 44, 101-110. van der Zee, E., & Vanneste, D. (2015). Tourism networks unraveled; A review of the literature on networks in tourism management studies. Tourism Management Perspectives, 15(July), 46-56. Weidenfeld, A. (2013). Tourism and cross border regional innovation systems. Annals of Tourism Research, 42(July), 191-213. Woodhouse, A. (2006). Social capital and economic development in regional Australia: A case study. Journal of rural studies, 22(1), 83-94.
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Cryptocurrency, Bitcoin market coin analysis
Bora MYRTO1, PhD. Eris Zeqo2, Alsa KAZIU3
1,2,3 Faculty of Information Technology, “Aleksandër Moisiu” University of Durrës, Albania
Abstract In the recent years, cryptocurrency has become the main topic of the world economy. Considerable attention has been directed toward the statistical methods on studying this market, which will not only describe real economy, but also contribute to the explaining and understanding crucial concepts of today's economy. Many webpages have been built for forecasting the market coin. The objective of this paper is to study if there is a connection between Bitcoin and other different electronic currencies. Correlation is used for the explanation of these study results, which is a statistical procedure that studies if there is a connection between different variables. Real data will be taken from the official page of cryptocurrency market coin. This paper will also study the correlation of Bitcoin with the Dollar and Euro price index, using again the correlation method. The conclusions of the paper will show some indexes in which we may base to make investments in Bitcoin, Dollar, Euro and other currencies. Key words: Cryptocurrency, Correlation, SPSS, Pearson Correlation, R JEL classification: C1, C2, C3, C4
1. Introduction - Block chain technology Block chain technology is already beginning to have an effect on the financial industry nowadays. With established cryptocurrencies like Bitcoin, we may get a secure store of value, trustless peer- to-peer payments and complete monetary control. Establishing a definition of cryptocurrencies is not an easy task. Much like block chain, cryptocurrencies has become a “buzzword” to refer to a wide array of technological developments that utilizes a technique better known as cryptography. In simple terms, cryptography is the technique of protecting information by transforming it (i.e. encrypting it) into an unreadable format that can only be deciphered (or decrypted) by someone who possesses a secret key.48 Cryptocurrencies such as Bitcoin, are secured via this technique using an ingenious system of public and private digital keys. Here in after we try to give a suitable
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definition of cryptocurrencies on the basis of a critical analysis of the definitions already developed by various concerned policy makers at European and international level. The index of currency used for the analysis and trade of the main European currency EUR against the rest the market, USD, JPY, AUD, CHF, and CAD used as a market systemic indicator. This procedure is followed and for the USD Dollar. 1.2. Connection between different coins You may have noticed that when the price of Bitcoin goes up or goes down, that a large majority of the market seems to follow? Or even if when the price of one cryptocurrency rises, another falls almost in lockstep? This is highly apparent in the cryptocurrency world, as many of the currencies on the market are completely coupled with the movement of Bitcoin. Certain coins will move incredibly close to Bitcoin, or act as a hedge against falling prices. This is what the paper will study, the Correlation between Bitcoin and other coins.Bitcoin has shared many levels of correlation with different assets, including the stock market and the U.S. dollar. In 2017, it was highly correlated with the stock market since both were viewed by investors as "viable places to store excess capital left over from the central bank expansion," Greenspan says. 1.3. Proposed method Correlation is a statistical technique that can show whether and how strongly pairs of variables are related. Like all statistical techniques, correlation is only appropriate for certain kinds of data. Correlation works for quantifiable data in which numbers are meaningful, usually quantities of some sort. It cannot be used for purely categorical data, such as gender, brands purchased, or favorite color. A correlation coefficient is a way to put a value to the relationship. Correlation coefficients have a value of between -1 and 1. A “0” means there is no relationship between the variables at all, while -1 or 1 means that there is a perfect negative or positive correlation. The Pearson product-moment correlation coefficient, better known as the correlation coefficient, or as r, is the most widely used correlation coefficient. Values of r for pairs of variables are commonly reported in research reports and journals as a means of summarizing the extent of the relationship between two variables. Pearson’s r summarizes the relationship between two variables that have a straight line or linear relationship with each other. If the two variables have a straight-line relationship in the positive direction, then r will be positive and considerably above zero. If the linear relationship is in the negative direction, so that increases in one variable, are associated with decreases in the other, then r < 0. The possible values of r range from -1 to +1, with values close
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to 0 signifying little relationship between the two variables. Exactly how different from 0 the value of r must be before providing evidence of a relationship can be determined on the basis of a hypothesis test. The Pearson correlation coefficient r can be defined as follows. Suppose that there are two variables X and Y , each having n values X1, X2, . . . , Xn and Y1, Y2, . . . , Yn respectively. Let the mean of X be and the mean of Y be . Pearson’s r is: ( )( ) 𝑋𝑋� = 𝑌𝑌� ( ) ( ) ∑ 𝑥𝑥𝑖𝑖 − 𝑥𝑥̅ 𝑦𝑦𝑖𝑖 − 𝑦𝑦� 𝑟𝑟 2 2 Where the summation proceeds across� all∑ n𝑥𝑥 𝑖𝑖possible− 𝑥𝑥̅ ∑ values𝑦𝑦𝑖𝑖 − 𝑦𝑦� of X and Y. Following this, there is some discussion of the meaning and interpretation of the correlation coefficient.
1.4. Results and discussion To archive results real data have been taken from official sites about BITCOIN, DOLLAR, EURO, SKYCOIN, TRON COIN , RIPPLE COIN, MONERO, LITECOIN, ETHERIUM and BITCOIN_CASH. Table.1. Correlation table
CORRELATION BITCOIN DOLLAR EURO
BITCOIN 1
DOLLAR -0.6971183 1 EURO 0.80224142 -0.759015 1
In the first table is shown the correlation table between BITCOIN, DOLLAR and EURO. ( )( ) = ( ) ( ) ∑ 𝑥𝑥𝑖𝑖 − 𝑥𝑥̅ 𝑦𝑦𝑖𝑖 − 𝑦𝑦� 𝑟𝑟 2 2 The correlation coefficient is calculated� ∑using𝑥𝑥𝑖𝑖 − the 𝑥𝑥̅ Pearson∑ 𝑦𝑦𝑖𝑖 − formula 𝑦𝑦� as shown above. The r-value may be positive or negative. As we see from the table there are presented negative and positive
values. A negative correlation exist between Dollar price index and Bitcoin, also between Euro
and Dollar. The negative value of r shows that when the price index of Dollar rises the Bitcoin
price goes down. Bitcoin prices have long been correlated with a variety of factors. However,
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US dollar have increasingly become apparent as the correlation level shows.
Table.2. Correlation table As we see from the table 2 there are presented only positive values. Bitcoin prices have long been correlated with a variety of factors. However, lately, as Bitcoin has made its way to the mainstream, correlations between Bitcoin price and other cryptocurrencies apparent as the correlation level shows. There is strong correlation between Bitcoin and Monero, Litecoin, Bitcoin Cash, Riple, Etherium and Tron Coin. Those indexes shown in the two tables helps investors in crypto coin market to make right decisions. As we see at the table of correlations, the results can be split into two: 1. If the correlation value is [0;0.3[ the variables in the matrix are not correlated which mean that they do not effect in each other values. 2. If the correlation value are in the interval of [0.3;0.5[ there is a weak uphill lineal relationship 3. If the correlation value are in the interval of [0.5;0.7[ there is a moderate uphill lineal relationship 4. If the correlation value are in the interval of [0.7;1[ there is a strong uphill lineal relationship 5. If the correlation value is equal to 1 there is a perfect uphill lineal relationship
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Conclusions For the first time of the human mankind a relatively new technology of block chain appears in the financial market. This technology has many hudge effects in financial and monetary market. As we sow from our study, the main coin, which has a strong effect in other e-coins and price index of Euro, Dollar, is Bitcoin. It now owns a big part of the market. The indicators shows in the study helps a lot the business and the investors to understand the impact of e-coins like Bitcoin in the market. • As the tables shows Bitcoin has a positive correlation with Monero, Litecoin, Bitcoin Cash, Riple, Etherium and Tron Coin and price index of Euro, which shows that the indexes of those coins has the same trend as Bitcoin price. • With Dollar, Bitcoin has a negative correlation, showing that when the price index of Dollar rises the Bitcoin price goes down. Bitcoin prices have long been correlated with a variety of factors. However, lately, as Bitcoin has made its way to the mainstream, correlations between Bitcoin price and the US dollar have increasingly become apparent as the correlation level shows.
References
Prof. Dr. Robby HOUBEN, Alexander SNYERS Directorate-General for Internal Policies PE 619.024 July 2018. Cryptocurrencies and Block chain. Policy Department for Economic, Scientific and Quality of Life Policies As Bitcoin Goes, So Do Other Cryptocurrencies retrieved from https://money.usnews.com/investing/cryptocurrency/articles/2018-09-24/as-bitcoin-goes-so-do- other-cryptocurrencies Autocorrelation retrieved from http://gauss.stat.su.se/gu/e/slides/Lectures%208- 13/Autocorrelation.pdf Investing.com Euro Index (inveur) retrieved from https://www.investing.com/indices/investing.com-eur-index-historical-data US Dollar Index Futures - Jun 19 (DX) retrieved from https://www.investing.com/quotes/us- dollar-index-historical-data Association between Variables retrieved from http://uregina.ca/~gingrich/corr.pdf
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A panorama on Corporate Social Responsibility in Albania
Prof. Asoc. Dr. BLERIM KOLA University “A. Moisiu”, Durres E-mail: [email protected] Prof. Asoc. Dr. BRUNELA TREBICKA University “A. Moisiu”, Durres E-mail: [email protected]
Abstract Corporate Social Responsibility is a relatively new concept with a very important impact on the management of relations between the business world and the environmental and human world. Producing, selling or trading products or services is just one side of the medallion. The other side is taking care of those factors that are used to carry out business missions. In this context and line of reasoning, this scientific article addresses this issue of great importance in the business world. The paper attempts to analyze all aspects of this concept in the integrated world today, ranging from the definition to the advantages and criticisms. Also part of the paper is a survey of the recognition of this notion or its application in the Albanian business. From the analysis we can say that this notion in the developed and globalized world has been adapted and injected very well, in our country it seems that it will take a long time to become aware of the taking of genuine business responsibilities by the business community. The concept is conceptually recognized and accepted, but concretely nothing is done about the management of environmental or social damage. The reasons we think directly affect this situation are numerous, starting from the lack of a proper regulatory framework, the lack of functioning oversight mechanisms and the lack of a culture of environmental protection or the lack of knowledge on the serious environmental impacts or society of irresponsible actions in harm to the environment.
Key words: Social Responsibility, Businesses, Albania
Introduction The last twenty years have witnessed a fundamental shift in business relations between the state and civil society. Engines of this change have been the transition to a market economy, the process of globalization, increasing the size and influence of companies, governments and building repositioning at a strategically important relations with stakeholders's, knowledge and brand reputation. Recently we have a realignment and redefinition of roles and responsibilities of business in society. The result of these developments is the corporate social responsibility, which includes the legal responsibility, ethical, social, and environmental impacts to stakeholders. The pressures of government and civil society to environmental pollution, abuse of human rights and the exploitation of workers have pressured companies to become more responsible towards society and the environment. They have already understood the strategic value that BHP. It is important to note that CSR supports and does not hinder the development of SMEs in countries in transition. For places of this type SMEs are the way of escape from poverty. If CSRs
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requirements are extremely protectionist, culturally inappropriate and bureaucratic, the net effect would not be at all desirable. Improvements to society and the environment can go hand in hand with improvements in management and quality. Until recently the developments around CSR have been focused on industries that carry a high risk and environmental health. Finally, the focus shifted from bribery and corruption to social issues such as labor standards and human rights. CSR should be supported by a strong theory that links social and environmental responsibility with financial success. The business benefits in this case are: minimizing operational costs through efficient environmental measures; improved reputation through immediate positive responses to the concerns of stakeholders; greater capacity to recruit and keep professional staff; risk management and improved capacity to learn and to be innovative.
Literature riview "You Can not talk about CSR unless you love your people and your country" The literature on this phenomenon is infinite and not exhaustive. In this section we have summarized some of the key concepts of social responsibility. CSR is defined as: "The continuous commitment of business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families at the same time the community of the society as a whole". - (World Business Council for Sustainable Development) "Having social responsibility means not only to fulfill the legal provisions, but also go beyond, investing in human capital, environment and relations with third parties." - (The European Commission) "Running a business in order to meet or exceed expectations ethical, legal, commercial and public that a society has for business." - (Business for Social Responsibility) Corporate social responsibility can be better understood through changing relationships between business and society. Many people believe it is not very reliable for a company to say that the only concern for them is to increase the benefits of their shareholders, as they have taken over operations that may affect fundamentally the way of life of different communities throughout world. Globalization has opened new routes and has brought new challenges and concerns. One of the most urgent and important to BHP is that companies need to build and maintain their reputation and manage risk through a set of countries, cultures and socio-political situations. Thus the circle of stakeholders-s is expanding more and more which means that BHP should balance the interests of a broader group. Recently it is widely accepted fact that the economic benefits of the principles and values can go hand in hand. A coherent social responsibility strategy based on integrity and value financial offers clear benefits for companies and a major contribution to the wellbeing of society.
Advantages Benefits from CSR may be listed as follows: • Increase the reputation, image and values of the company " • Increased desire for products or services in the context of a particular cause " • Increased reliability, commitment and morale of employees " • Improve the reliability of customers and increase their numbers. " • Improvement of the organization's culture
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• Minimize operational costs, investment in costly equipment for environmental protection as for example reduction of impurities and efficient energy consumption often produces UP through minimizing costs, more profitable rate of return comparable to other commercial investments • Reputation enhanced, high performance of the company in relation to ongoing social problems may give it a very good name. This applies in particular to those companies with a high market value of their brand and are constantly under the focus of the media and the general public. • Ability greater to recruit, develop and maintain staff: This can be achieved using voluntary programs to develop skills or impacting indirectly on improving moral values and integrity of the company so that its employees feel proud that they are part of it. • Better relations with the government: Because companies tend to expand their business and operate in an environment of politically unstable their efforts insistent to be close to social concerns and environmental would come from a position cooperating with government departments . • Better Risk Management with a better ability to observe is the key stakeholders-at the success of a company. • Learning & Innovation: This is not only true for companies operating in more dynamic sectors of varying industries. Even states that still unexplored areas of potential gains lie precisely in the partnership's border between businesses and local communities. They understand this dynamic and flexible relationship between the company and its stakeholders-at the core of the innovation.
Levels of CRS CRS operates at three levels: 1. Firstly, it implies compliance with legal responsibilities (taxes, safety & health, workers' rights, consumer rights, environmental regulations, etc.) and industry standards. 2. Secondly, it has to do with minimizing to the elimination of the negative effects of business in society (eg, abuse of human rights & environmental pollution). 3. Thirdly, has to do with increasing the positive effects of business and creating value through innovation, investment and partnership-it (creation of new jobs, conflict resolution, social and economic development). Critics think that no matter how sincere feeling and be the commitment of executives at CRS in anyway will be the market that will dictate the way. Corporations are not allowed to be "very good" because they are obliged to operate in conformity with the interests of their shareholders. Despite the strong efforts made by these corporations are to sacrifice their profits in favor of the protection of human rights and the environment has been the inevitable reduction of their share prices.
Development of CRS in Europe The poll conducted after 2000 showed that people were more interested in social responsibility in Australia, Canada, USA and the UK, and less interested in China, Nigeria, and Kazakhistan. Somewhere between these two groups were countries such as Germany, Japan, Indonesia and South Africa. According to the survey in North America and Oceania are more likely to practice ethical consumerism. The company's activity and the public interest are the two most important elements of CRS and most developed in North America, Australia and Northern Europe, it is precisely these countries starting point for many companies and global brands. Anglo-American model of CRS, which focuses on transparency, the system measures and corporate citizenship as a competitive element, all this in contrast to the pattern of institutionalized European social partnershpit. However a significant number of European companies are adopting the Anglo- American system of CRS in foreign markets where they operate and maintain their traditional
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model in their countries of origin. International campaigns and media attention usually focuses on companies that have an identity strong local and meaningful, for example, the European Campaign of clean clothes focused on companies like C & A, Hennes & Mauritz and Otto Versand, and campaigns of American undergraduates focused in American sports brands like Nike and Reebok.
CRS in developing countries Numerous evidences for implementation of CRS practices are from Latin America, Africa, South Asia (mostly from India) and from the Far East (like the Philippines). Most of the multilateral donors to come from developed countries have focused their attention on CRS as a very useful tool to alleviate poverty in these countries. For example in Latin America organizations such as Ethos Institute in Brazil acting as a promoter of CRS practices, as well as in South Africa where South African Breweries and Land Bank are two institutions that assist in the development of social processes. Since emerging markets are integrating rapidly into the global economy, it is helping to create new ideas and tools for CRS us. There is a disturbing trend in terms of examples of CSR in developing countries, since it seems to be more focused on the most advanced countries of the South than in countries where poverty is more evident. The purpose of the activities of businesses successful of these countries will have a positive impact on poverty by increasing numbers of employees, adding employee benefits as CSR example by providing medical assistance for them and their families, as well as supplying products and services that meet their needs.
CRS in Albania Social responsibility is already one of the directions of the important software development business in Western developed countries, where companies are taking more and more responsibility in relation to the economic impacts, social and environmental practices wherever they operate in local, national or international . The sense of social responsibility of companies today is being turned into an instrument of long- term competitiveness. Preached theory and practice has demonstrated that short-term benefits of social irresponsibility edge compromise perspective and long term business competitiveness in terms of an open world economy and interdependent. Companies most successful and long-term competitive also have characteristic shared social responsibility. Albania's development strategies and ultimately oriented towards European integration and global, should inter alia consider the components of social responsibility. Long-term benefits of corporate social responsibility of companies significantly exceed the short-term costs. Such a philosophy is becoming dominant in the Albanian businesses competitive now or in the path towards competitiveness. In addition to awareness and familiarity with the above philosophy is important to ensure the partnership-among the community, private sector, business associations, and non-governmental organizations associated with: • approximations innovation and technological developments as a rule tend to be sensitive to social responsibility. • ensure alignment of acceptable international standards to issues of safety, health, environment and social equality. Businesses consider the obligation of responsible behavior towards the society in which they operate.
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This will help the government to develop sustainable strategies for economic development by balancing towards natural or human resources to generate employment and economic development, quality of life of individuals today and even more so for generations to come. I see social responsibility as a business contribution to sustainable development. There are endless definitions for this but all converge in that it takes into account economic impacts, social and environmental optimization of the cost-benefit balance in the short term, medium term and long term. Despite the results achieved, it seems that the efforts of our companies to adopt the philosophy of being responsible. In addition to numerous surveys that have been part of my research during operation of the article, this confirms the recently initiatives undertaken by Albanian Network of CSR, in cooperation with the Ministry of Economic Development, Tourism, Commerce and Enterprise, as and UNDP Albania, which held for the second consecutive year awarding prizes for the best companies in the field of social responsibility in July 2015. The winners were announced on the price category of Best Practice for large companies, Vodafone Albania; for the category of best practice for SMEs, the company Intracom Telecom Albania; and the third category the jury selected International Commercial Bank, which was awarded the best initiatives. If we stopped to analyze these results, we would notice that winning companies are those considered economically powerful. This is a significant and valid indicator to conclude that social responsibility is a combination of short-term costs and long-term results. In this line of reasoning it can be said that in Albania mainly economic factors, but not least, legal and policy they do not favor adopting this philosophy in our businesses.
Conclusions and recommendations for Albania • Albanian companies are still far from European standards of social responsibility in several important ways. • There is room for more information and education in the field of social responsibility, especially using the companies own resources. • It should be taken more action by the government coordination for best instrumental actions in the field of social responsibility. • It should be taken more into account issues of social responsibility in building sustainable strategies for economic development. • Need to build indexes and parameters of evaluation of monitoring social responsibility policies in Albania and compare them with the European standards. • University should review its curriculas in social responsibility issues.
References • Centre for Social Markets First World Report on Corporate Social • Corporate Watch What's Wrong With Corporations?, Corporate Watch • Responsibility. Brussels, Commission of the European Communities. • Fleis, B. (1999) Corporate Codes of Conduct: an inventory. OECD, Working Party of the Trade Committee, May 1999. • Friedman, M (1962) Capitalism and Freedom. Chicago: University of Chicago. • Global Reporting Initiative (2000) Sustainability Reporting Guidelines on Economic • UNIDO (1999) Supporting Private Industry. Vienna, UNIDO, Private Sector Development Branch.
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• UNIDO (2001), Integrating SMEs in Global Value Chains. Towards Partnerships for Development. • UNIDO (2002) UNIDO Partnership With Private Business. Rationale, benefits, risks and approaches. Proceedings of an Expert Group Meeting held at the Vienna • UNIDO (2005), Business Partnerships for Industrial Development. • www.vodafon.al • www.wikipedia.com
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ICT and CO2 emissions: Perspectives for the reduction of environmental pollution in Africa
Diego Mazzitelli24, Francesca Aura25
Abstract
The level of CO2 emissions is under constant examination by many scholars. This is because the level of growth of the world population, of the ICT sector and therefore the ever-increasing economic development of the planet contribute significantly to increase CO2 emissions and energy consumption. Despite the fact that technological advances and nations all over the world expect solutions capable of making cities, means of transport, intelligent electrical systems and industrial processes and anti-pollution measures with stringent regulations capable of generating an ever lower environmental impact, the level of global pollution emissions continues to grow. The purpose of this study is examine how the level of CO2 emissions grows with population growth and whether this can be related to the level of industrialization of a country. This will be done taking into account the investments in the ICT sector and other variables implemented in the study. To achieve this goal, after choosing South Africa for the completeness of the information being analyzed, we use a data set containing all the information on the variables analyzed for South Africa and distributed over a period of 42 years. The results of the empirical study confirm the relationship between CO2 emissions and demographic growth, but above all the level of energy use, showing that developing countries over a period of 50 years will have significant increases in pollution.
Key words: CO2 emissions, ICT, Developing economies, Developed economies.
JEL classification: Q01, Q10, Q55
24Corresponding author: PhD, University of Calabria, DISCAG, Rende (CS) Italy, [email protected], Via P. Bucci 87036 Rende (CS) Italy 25PhD, University of Calabria, DISCAG, Rende (CS) Italy, [email protected], Via P. Bucci 87036 Rende (CS) Italy
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1. Introduzione
Innovazione e progresso tecnologico sono continuamente oggetto di analisi di molti studiosi. Questo perché il livello di crescita nel settore dell'Information and Communication Technology (ICT) contribuisce in maniera significativa ad aumentare i livelli di emissioni di CO2 e i consumi di energia sul pianeta. (Boden, T.A., G. Marland, and R.J. Andres. 2015) Sebbene dal progresso tecnologico e le nazioni di tutto il mondo si aspettino delle soluzioni capaci di rendere città, mezzi di trasporto, sistemi elettrici e processi industriali intelligenti e misure antinquinamento con normative stringenti capaci di generare un sempre minore impatto ambientale, il livello di emissioni CO2 continua a crescere. Infatti, la numerosa letteratura a disposizione consente di verificare che, oltre alla relazione dovuta alla crescita demografica di un paese, esiste un rapporto tra le emissioni di CO2 di alcune nazioni in crescita come quelle presenti in Africa e l'energia utilizzata. Il processo di innovazione tecnologica, quindi oltre ad avere un impatto positivo sulla crescita economica e sociale di un paese, produce allo stesso tempo degli effetti negativi (Roula Inglesi- Lotz, Eyup Dogan 2018). Questi riguardano prevalentemente il tasso di inquinamento che costantemente aumenta. Nonostante le misure e gli impegni presi dagli stati con accordi come la United Nations Framework Convention on Climate Change (UNFCCC), principale accordo internazionale sull'azione per il clima, per cercare di ridurre i livelli di inquinamento, il tasso di crescita delle emissioni di CO2 continua ad aumentare con effetti devastanti sul clima (Boden, T.A., G. Marland, and R.J. Andres. 2015). Ad oggi, le misure anti-inquinamento globali sono state ratificate e portate avanti da ben 195 Paesi. Inizialmente, rappresentavano un mezzo per favorire i rapporti di collaborazione tra i Paesi, ma oggi sono diventate delle vere e proprie misure stringenti necessarie per garantire la salubrità del pianeta per l'avvenire. Tra le tante, si possono annoverare l'emendamento di Doha al protocollo di Kyoto, riguardante gli impegni relativi al periodo dal 2013 al 2020, e l'accordo di Parigi, un nuovo accordo globale sui cambiamenti climatici esteso a tutti i paesi dell'UNFCCC. Nel tempo questi si sono dimostrate essere fondamentali per tamponare e ridurre l'aumento delle emissioni CO2 (Wenhui Chen, Yalin Lei 2018). Se analizziamo lo status della letteratura, si evidenziano delle analisi precise sulle influenze cliniche relative all'inquinamento dell'aria in Africa ed Europa. Nello specifico prendendo come punto di partenza l'anno 2013 si può notare che l' European Economic Area (EEA) fa capire come siano circa 500.000 i decessi prematuri nel continente africano, un dato molto allarmante.
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In Africa l’inquinamento dell’aria provoca più morti premature di problemi cronici e ben più sotto i riflettori, come la contaminazione dell’acqua e la malnutrizione infantile. Un fenomeno di proporzioni notevolissime, che potrebbe ingrandirsi ulteriormente e generare una crisi sanitaria e climatica senza precedenti per il continente. Questi sono i dati ed il risultato prodotto da uno studio prodotto dall’Organizzazione per la cooperazione e lo sviluppo economico (OCSE) che ha provato a stimare i costi i costi economici e sociali generati dall'incremento dei livelli di inquinamento della qualità dell'aria.
Secondo quanto emerge da un report dell'OCSE (Roy, R. 2016), i decessi prematuri causati dall’inquinamento dell’aria sarebbero 712mila ogni anno. Cifre altissime, come rivela la comparazione con i dati relativi alle morti dovute ad acqua contaminata (circa 550mila) e denutrizione (275mila). Per far fronte al problema si stima che siano necessari almeno 214 miliardi di dollari l’anno. In particolare, per come specificato nel report citato, sono in forte e continuo aumento il tasso di inquinamento generato dal traffico, dalla centrali elettriche e dalla crescita del settore industriale nonché dalla combustione di rifiuti. Le nazioni che soffrono di più il fenomeno per quel che riguarda il continente africano sono Egitto, Sud Africa, Etiopia e Nigeria. Da come si evince dai risultati generati dall'indagine empirica, queste sono nazioni con una forte propensione alla crescita, anche se caratterizzata da forme e livelli differenti. Se, in letteratura, il problema della qualità dell’aria nel continente africano è stato associato agli ambienti interni (riscaldamenti, turbine elettriche, termovalorizzatori, ecc), oggi a destare moltissima preoccupazione è l'inquinamento degli spazi aperti. Inoltre, la mortalità causata dall'aumento delle polveri sottili in Africa è cresciuta dal 36 % tra il 1900 e il 2013 e di pari passo sono aumentati anche i decessi per inquinamento indoor. In altri termini, traffico e fumi delle industrie galoppano a velocità doppia. Secondo quanto scritto dall' OCSE (Roy, R. 2016), conta circa 712.000 decessi nel continente africano. Tale stima, di contro, è in costante aumento: il livello attuale del tasso di morti è di circa 1/4 più elevata rispetto a quelle degli anni 90'. Per poter comprendere realmente la reale dimensione dei dati citati, bisogna suddividere per campioni le morti oggetto di studio. Soltanto una parte delle morti avventate è collegato con l'elevato tasso di inquinamento nelle aree chiuse, dalle abitazioni che utilizzano apparecchi antiquati per la produzione di energia elettrica, dove vengono inoltre utilizzate le rudimentali
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tecniche di cottura, che durante il processo di combustione danneggiano in via principale le condizioni di salute di donne e bambini. In letteratura, se si osserva la crescita dell'impatto ambientale, si può notare come per quanto attiene agli spazi aperti vi sia una crescita di circa il 36 % della mortalità, mentre i decessi all'interno delle abitazioni risultano maggiori del 18 % rispetto agli anni 90'. L'atmosfera dei centri urbani più grandi è fortemente inquinata a causa dell'elevato numero di mezzi di trasporto, dai generatori a gasolio utilizzati per le numerose emergenze di black-out, dalle imprese e dalla combustione di rifiuti. Un contesto che vede un peggioramento generale della situazione con l'incremento della popolazione nelle aree urbane più che triplicato nell'ultimo trentennio. Entro il 2050 le stime prevedono che nel continente africano la popolazione raddoppierà nel numero medio. E' ragionevole pensare che il rischio di una crescita dei livelli di inquinamento sarà inequivocabile. Di seguito in maniera approfondita vengono analizzati tre dei settori responsabili di elevati e nocivi effetti clinici con l'obiettivo di verificare la relazione che c'è tra il livello di emissioni di CO2 e la crescita demografica, l'investimento in tecnologia, consumi di energia , utilizzo di mezzi di trasporto aerei, il Pil pro capite, il livello di esportazioni, e delle importazioni.
2. Discussione delle Ipotesi e analisi della letteratura
Erogazione del servizio di trasporto pubblico
A causare una forte crescita del livello di inquinamento in questo comparto, tra le prime cause riscontriamo l'utilizzo di veicoli usati e obsoleti provenienti dall'Europa e dall'Asia Orientale. Come vedremo nell'analisi empirica eseguita successivamente, anche se ancora non si raggiungono i livelli di inquinamento registrati nelle metropoli mondiali asiatiche, si può notare che in alcune nazioni i livelli di inquinamento hanno già superato le città asiatiche. Purtroppo i monitoring systems attualmente a disposizione nelle nazioni del continente africano sono veramente esigui, ma laddove c'è la possibilità di ottenere i dati, questi sono significativamente preoccupanti. In un ranking di recente redazione da parte dell'OMS, quattro delle maggiori città con il più alto livello di inquinamento sono nigeriane. La soluzione, di semplice intuito, potrebbe essere quella di sanzionare l'importazione di autovetture fatiscenti e profondamente inquinanti e scegliere fermamente delle soluzioni elettriche
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di nuova generazione costruita prendendo in considerazione i modelli di Smart City (Dorina Pojani, Dominic Stead 2015).
Generatori di elettricità
Sono ancora moltissimi i paesi dove l'energia elettrica è quasi assente o assente. Infatti il dato attuale relativo alle famiglie africane che ancora sono sprovviste di energia elettrica è di circa 400 milioni. Rapportando il contesto africano a quello mondiale, vediamo che questo rappresenta solamente il 3,5 % dell'energia elettrica mondiale. In africa le grandi aziende attive risultano essere poche. Le linee di collegamento principali sono limitate e soprattutto concentrate nei grandi centri urbani. Inoltre il costo dell'elettricità è tra i più alti al mondo. Questo potrebbe sembrare strano viste le risorse di cui l'africa dispone. Al fine di evitare i continui furti nelle abitazioni gli abitanti sono costretti ad installare dei generatori di corrente. Ad oggi in fatti in paesi come la Nigeria si stimano all'incirca dodici mln di apparecchi con una spesa per l'acquisto stimata 10 miliardi di dollari nel periodo che va dal 2009 al 2012. Le risorse energetiche attualmente disponibili in Nigeria di circa 7000 MW risultano insufficienti e quindi atteggiamenti simili da parte della popolazione bisognosa di elettricità sono naturali. Naturalmente, l’impatto che gli agenti inquinanti emessi hanno sulla salute partendo dal CO e dal particolato, è significativamente importante. L'inadeguata ventilazione delle abitazioni causa gravi conseguenze e questo a causa dei generatori presenti nelle abitazioni. Quindi proprio questo sistema obsoleto favorisce uno sviluppo progressivo verso fonti di energia rinnovabile . Guardando al contesto europeo, la rapida discesa dei prezzi di fonti alternative quali il fotovoltaico o di batterie per l'alimentazione di led, potrà favorire nel lungo periodo la distribuzione di innovative soluzioni da alternare ai generatori alimentati a gasolio o a benzina. Il progresso tecnologico infatti dovrebbe iniziare ad indurre le piccole comunità ancora isolate ad alla creazione di piccole reti elettriche (Wenhui Chen, Yalin Lei 2018). Alimentazione e patologie legate alla preparazione dei cibi Un'altro settore su cui concentrarsi è quello relativo alle tecniche di cucina rudimentale che utilizza come sistema di cottura il fuoco generato dalla classica carbonella, foglie, rami, prodotti di scarto essiccati.
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Queste pratiche, utilizzate da circa settecento mln di africani, comporta gravi problemi alla salute dei cittadini, notevoli danni ambientali nonché dispendio di tempo nella raccolta del materiale da utilizzare per la combustione. Purtroppo in ben ventitre paesi del continente, circa il 90 % delle persone non possiede una valida e funzionale alternativa. In aggiunta, visto l'aumentare della popolazione molti africani saranno sempre più costretti ad utilizzare tecniche primitive e altamente dannose per la cottura degli alimenti per salirà a 900 milioni. Gli effetti di menzionate tecniche è abbastanza evidente CO, gas ed emissioni causano infatti gravi ed irreparabili danni al sistema respiratorio, polmonare nonché agli embrioni materni. Secondo l'OMS sono circa 4,3 milioni i deceduti per tali motivazioni che si contano ogni anno. Circa la metà sono bambini di età inferiore ai 5 anni. Tra le principali causa abbiamo delle patologie polmonari. Uno studio in che afferma inoltre che la percentuale di soggetti esposti alle emissioni è maggiore nel sesso femminile. Questa giunge quasi fino a quattro volte di più rispetto agli uomini (Megan Sheahan, Christopher B. Barrett 2017).
Gli effetti sull'ambiente
Gli effetti sull'ambiente non sono da trascurare. La FAO afferma da studi effettuati che una famiglia su sei utilizza 8 kg di legna per cucinare. Nell'africa Sub-sahariana si utilizzano circa 300 mln di tonnellate di legna ogni anno con effetti sul territorio devastanti. La desertificazione e la deforestazione essendo spropositate non permettono il recupero della vegetazione. Crescita del PIL in Africa
Tutti questi numeri sulle emissioni CO2 e il tasso di inquinamento, sono inequivocabilmente collegati all'aumento della produttività del continente africano. Recenti studi dimostrano come, in proporzione alla sua grandezza la ricchezza dell'Africa sia notevole. Naturalmente l'incapacità di sfruttare le risorse in ogni settore è la maggiore causa di immigrazione non solo verso l'Europa ma anche verso il Sud Africa (Roula Inglesi-Lotz, Eyup Dogan 2018). Tra i primi dieci Paesi in fase di sviluppo per il tasso di investimenti in economia sostenibile ben 5 sono africani. Negli ultimi decenni il Pil del continente è aumentato del 30 %, e la popolazione per l'85% vive in Paesi stabili dal punto di vista socioeconomico.
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Nel periodo che intercorre tra il 2012 e il 2017, la maggior parte dell'Africa sub-Sahariana è cresciuta addirittura del 6% con picchi in Angola del 6,5%, Etiopia del 6,3% e nella Zambia (6,2%). I principali indici economici fanno pensare all'Africa come una terra di investimenti. Entro il 2030, circa la metà della popolazione si stabilirà nei maggiori centri urbani e entro il 2040 almeno sei Paesi avranno un PIL pro capite che oltrepasserà i 10 miliardi di dollari. (Kenneth Creamer, Robert Tregathen Botha 2016). Inquinamento e prodotti ad obsolescenza programmata: Un problema di dimensioni mondiali Nel 2017 sono stati venduti 229 milioni di apparecchi TV, una cifra destinata a crescere fino a 259 nei prossimi 5 anni, anche grazie ai paesi emergenti. Solo nell'ultimo trimestre del 2017 sono stati venduti 70,6 milioni di PC e circa 2 miliardi di smartphone. Naturalmente una delle principali conseguenze a questi dati relativi all'aumento del consumo di prodotti ad alta tecnologia è la crescita esponenziale degli e-waste. Secondo stime dell’ONU, ogni anno si producono tra i 20 e i 50 milioni di tonnellate di e-waste i numeri sono destinati a crescere visto l'aumento degli investimenti in tecnologia che i grandi colossi come Apple, Samsung, Huawei e tanti altri sono costretti a fare per poter rimanere competitivi sul mercato. Ogni dispositivo tecnologico venduto nella UE include nel prezzo una “tassa di riciclaggio”, da impiegare per il regolare smaltimento del dispositivo, una volta finalizzata la sua vita utile. Tuttavia, nonostante con questa imposta si raccolgano annualmente 5 miliardi di euro, si calcola che almeno 2/3 dei rifiuti tecnologici non raggiunga mai un impianto di smaltimento omologato, perché è molto più conveniente mandarlo in Africa. Per riciclare un computer in Germania, infatti, ci vogliono 3,5 euro, mentre smaltire un monitor in Francia ce ne vogliono 5. Inviare un qualsiasi apparato in un container in Ghana non costa più di 1,5 euro. Uno dei problemi che alimenta questo processo di inquinamento è sicuramente la velocità con cui i prodotti sul mercato cambiano in base alle più innovative caratteristiche tecnologiche e di pari passo la velocità con cui un consumatore cambia smartphone, laptop o tv. Per capire meglio analizziamo il concetto di obsolescenza programmata Con ciò si fa riferimento alla alla prassi secondo cui un prodotto ad alta tecnologia viene studiato e progettato dai produttori per poter resistere ad un tempo determinato di vita e costringere l'utente
94 9 th International Conference of FB ECONOMIC POLICY AND EU INTEGRATION o il cliente alla sostituzione con uno nuovo. L'obiettivo principale di tale prassi è sicuramente un aumento dei profitti d'impresa. Un tempo una lavatrice o un televisore erano fondamentali tanto che al primo problema si pensava ad una soluzione che potesse riparare e rimettere a nuovo l'attrezzo. Oggi iniziano a dare i primi problemi, funzionando a singhiozzo, già nel terzo anno di età al posto della riparazione si sceglie il cambio. Purtroppo ad incentivare la crescita di rifiuti e-waste ci sono tante componenti nella stragrande maggioranza dei casi studiati come strategie aziendali per l'aumento dei profitti come anche premesso precedentemente. I prodotti in commercio attualmente godono di una garanzia che non va oltre i due anni, i pezzi di ricambio sono spesso irreperibili e quindi impongono la sostituzione del bene, il continuo processo di innovazione tecnologica con i numerosi spot aggressivi e persuasivi in cui vengono proposte al consumatore medio soluzioni innovative e migliorative del prodotto precedentemente acquistato, queste tra le principali cause del fenomeno in questione. Intuizioni grazie alla letteratura consultata Il lavoro ci consente di individuare, attraverso la consultazione dei papers e delle fonti citate (Roula Inglesi-Lotz, Eyup Dogan 2018), la presenza di una effettiva relazione tra il livello di crescita economica e demografica per i paesi dell'Africa e il tasso di inquinamento degli stessi. Nella tabella A troviamo 36 paesi dell'Africa suddivisi per aree geografiche.
Tabella A: 36 paesi dell'Africa suddivisi per aree geografiche
Table A Sampled countries (2002–2011) North Central South West East Algeria Cameron Angola Benin Comoros Egypt Gabon Botswana Capo verde Ethiopia Lybia Sao Tomé and Principe Lesotho Costa d'avorio Kenya Tunisia Congo Mozambique Gambia Mauritius Morocco Namibia Ghana Seychelles South Africa Guinea-Bissau Sudan Swaziland Nigeria Tanzania Zambia Senegal Zimbabwe Togo
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Il Sudafrica è sicuramente il leader delle emissioni CO2 nel continente africano (Roula Inglesi- Lotz, Eyup Dogan 2018). I suoi 499,016 Kiloton sono più del doppio di quelli dell'Egitto (216,136 kiloton). Entrambi impallidiscono rispetto alla terra che distrugge la produzione della Cina (7,7 milioni) e degli Stati Uniti (5,3 milioni). I numeri a prima vista potrebbero ingannare in quanto gli USA hanno per ben dieci volte la popolazione del Kenya.
Source Sahel and West African Club Quindi, come vanno a crearsi questi numeri quando si tiene conto della popolazione. Ecco una breve ripartizione: Kenya 3.2 Kiloton per 10.000 persone Nigeria 4.6 Kiloton per 10.000 persone Cina 53.6 Kiloton per 10.000 persone Sudafrica 101.84 Kiloton per 10.000 persone US 173.8 Kiloton per 10.000 persone Di recente l'Organizzazione delle Nazioni Unite (ONU) ha supportato l'International Panel on Climate Change, e avvertito di quanto siano notevoli i costi associati alla crescita senza sosta delle emissioni globali di carbonio e dell'inquinamento prodotto dalla mancanza di misure stringenti nel settore dello smaltimento dei rifiuti nonché quanto siano necessarie misure urgenti per la riduzione delle emissioni.
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3. Methodology L’obiettivo di questo studio empirico, attraverso la raccolta e l'analisi delle informazioni relative al fenomeno studiato, consiste nell’individuazione dei fattori che influenzano i livelli di emissioni di CO2 in Africa. Nello specifico, alla luce di quanto su esposto, essendo uno tra gli stati più inquinati , per completezza dei dati raccolti nonché potendo valutare le variabili elencate nella tabella A2 su un arco temporale di 42 anni, è stato scelto lo stato del Sud Africa. Le variabili considerate per condurre l’analisi sono le seguenti:
Tabella A2
Caratteristiche delle variabili utilizzate e Variabili Definizione riferimenti Totale delle emissioni di TCO2 Variabile dipendente Co2 espresse in Kt Numero della POP popolazione per lo stato Variabile indipendente del Sud Africa GDP GDP-USD Variabile indipendente Livello di esportazione di EXP Variabile indipendente beni e servizi calcolati al
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valore del dollaro americano US$
Quota percentuale sul totale dei consumi di EPC Variabile indipendente energia da fonti carbon fossili Energia utilizzata EU espressa in consumi di Variabile indipendente petrolio (Kg) pro capite Numero di passeggeri che AT hanno utilizzato mezzi di Variabile indipendente trasporto aerei Livello di importazioni di beni e servizi al valore IG Variabile indipendente attuale del dollaro americano US$ Quota percentuale di investimento sulle ICT Variabile indipendente importazioni di servizi, BoP, etc
Il campione costituito da 42 osservazioni per il Sud Africa per le 8 differenti variabili. I dati relativi agli indici di Emissione di CO2 sono stati tratti dalle bancche dati della World Bank e World Resources Institute. L’arco temporale considerato è stato quello che va dal 1971 al 2012 cosi da avere un quadro storico sull’andamento delle variabili. Con riferimento a ciascuna delle variabili si riporta una breve descrizione delle principali statistiche.
Tabbella 2 TCO2 POP GDP EXP EP EU AT IG ICT C Min. 16856 2348281 216 4,74E+1 8 3 2,03E+1 4,33E+1 2 191 1659500 2 0,6770833 3 2 3 3 1st Qu. 26321 3073228 355 1,75E+1 4 0 8,23E+1 2,12E+1 3 227 3986650 3 19.10 3 3 3 Median 33501 3889904 408 2,61E+1 2 0 1,23E+1 3,08E+1 9 246 5473200 3 0,9402777 : 4 3 3 8
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Mean 33111 3869448 389 3,73E+1 8 3 1,43E+1 3,96E+1 0 242 6804378 3 22.28 4 3 1 3rd Qu. 38426 4686588 449 3,45E+1 5 1 1,55E+1 3,70E+1 2 261 8039684 3 24.20.00 4 3 9 Max. 50311 5299821 477 1,24E+1 2 3 4,17E+1 1,27E+1 7 291 1757156 4 31.63 4 4 3 5
Il modello di regressione utilizzato per spiegare la relazione esistente tra la variabile dipendente (Total CO2 Emissions), e le variabili indipendenti (Population, LogGDP-USD, LogExp, LogElectric power consumption, LogEnergy use, Log Air transport, LogImport gen, LogICT) è spiegato dal seguente modello di regressione multipla:
2 = 0 + + + + + +
𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿� 𝐵𝐵�+ 𝐵𝐵� 1𝑃𝑃𝑃𝑃𝑃𝑃 +𝐵𝐵�2 𝐺𝐺𝐺𝐺 𝐺𝐺 𝐵𝐵�+3 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝐿𝐿𝐿𝐿 𝐵𝐵�4 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝐵𝐵�5 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 𝐵𝐵�6 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 Utilizziamo il logaritmo𝐵𝐵�7 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 delle𝐿𝐿 variabili𝐵𝐵�8 𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿𝐿 per semplificare𝑢𝑢� il calcolo dei parametri di regressione. La prima parte di tale espressione rappresenta la variabile risposta (Total Co2 Emissions) spiegata dai predittori (Pop, LogGDP, LogExp, LogEpc, LogEus, Log At, LogIg, LogICT). Quest’ultimo da ricondurre a fattori che non sono osservabili e più in generale a cause diverse non prese in considerazione nel modello regressivo. Nel presente modello è stato preso in considerazione il parametro POP relativo alla popolazione come variabile di interesse al fine di verificarne la relazione con il tasso di emissioni di Co2 in Sud Africa, considerando le variabili LogGDP, LogExp, LogEPC, LogEnergy use, Log AT, LogIG, LogICT come variabili di controllo. Al fine di ottenere una prima valutazione della relazione esistente tra le due variabili viene presentato il seguente plot.
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Dal grafico si evince che i dati maggiormente significativi sono quelli relativi alla relazione con l a variabile popolazione e gdp. Tuttavia è necessario, per verificarne la validità di tale asserzione, lanciare un modello di regressione lineare multipla. Pertanto si considera il modello di regression e multipla tramite il comando (1) > modage1<-lm(TCO2~POP+GDP+EXP+EPC+EU+AT+IG+ICT, data = south_africa) e se ne riportano di seguito i dati principali tramite il comando > summary(modage1)
Call: lm(formula = TCO2 ~ POP + GDP + EXP + EPC + EU + AT + IG + ICT, data = south_africa)
Residuals: Min 1Q Median 3Q Max -19785 -6142 -1174 6277 16034
Coefficients: Estimate Std. Error t value Pr(>|t|) (Intercept) -3.219e+05 3.226e+04 -9.978 1.71e-11 *** POP 7.876e-03 1.040e-03 7.572 1.03e-08 *** GDP 5.852e-08 1.047e-07 0.559 0.5801 EXP -1.125e-06 6.728e-07 -1.672 0.1040 EPC -7.973e+00 8.915e+00 -0.894 0.3776 EU 1.581e+02 1.701e+01 9.295 9.78e-11 *** AT -2.597e-03 3.520e-03 -0.738 0.4658 IG 1.166e-06 5.676e-07 2.055 0.0479 *
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ICT 3.033e+02 6.107e+02 0.497 0.6227 --- Signif. codes: 0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1
Residual standard error: 9794 on 33 degrees of freedom Multiple R-squared: 0.992, Adjusted R-squared: 0.9901 F-statistic: 514.3 on 8 and 33 DF, p-value: < 2.2e-16
Le variabili ''Population'' e ''Energy Use'' risultano essere altamente significative con un intervallo pari al 99% la variabile ''Import gen''. Infatti all'aumenta di queste variabili abbiamo un incremento di emissioni di Co2. Le altre variabili come GDP-USD, Exp, Electric power consumption, Air transport e ICT non risultano essere statisticamente significativi. Invece se osserviamo la significatività degli altri coefficienti della regressione si evince che le esportazioni, i consumi di energia elettrica, l'utilizzo degli aerei come mezzi di trasporto, il pil pro capite e l'utilizzo di risorse tecnologiche risultano avere sempre un impatto negativo sulle emissioni di CO2, ciò significherebbe che all'aumentare delle variabili menzionate diminuisce il tasso di emissioni. L’R2 risulta essere 0.99 ciò vuol dire che le nostre variabili di riferimento riescono a spiegare molto bene il modello considerato. Per completare l’analisi, nel grafico sottostante viene presentato il plot tra i valori residui e i valori stimati:
Si può osservare come l’andamento dei residui sia piuttosto erratico.
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Per validare l’ipotesi di normalità alla base del modello si procede con la creazione di un Normal Q-Q plot. > plot(fitted(modage2),rstandard(modage2), main = "residui vs fitted") > > qqnorm(rstandard(modage2)) > qqline(rstandard(modage2))
Il passaggio da un modello all'altro non comportato significative variazioni in merito all' R-quadr o.
Una volta definito il modello di regressione multipla è stato effettuato il test di Breush Pagan (BP ). Il test in questione ha come ipotesi nulla l’esistenza dell’omoschedasticità e come ipotesi alter nativa quella di eteroschedasticità. Si andrà a rifiutare l’ipotesi nulla nel caso in cui si otterrà un P -value piccolo (es Pv < 0,05). È stato necessario in tal caso lanciare le seguenti librerie: > library(sandwich) > library(lmtest).
Tramite il comando > bptest(modage2) si ottengono i seguenti risultati:
> bptest(modage2)
studentized Breusch-Pagan test
102 9 th International Conference of FB ECONOMIC POLICY AND EU INTEGRATION data: modage2 BP = 4.6305, df = 6, p-value = 0.592
Osservando il valore del P-value ottenuto, si evince che non risulta possibile rifiutare l’ipotesi nulla di omoschedasticità. Il modello costituito è robusto all’eteroschedasticità.
Per avere ulteriore conferma si effettua un ulteriore test: il White Test di regressione dei quadrati dei residui (poiché gli errori non sono osservabili) sulle esplicative. La statistica utilizzata è N*R 2 di questa regressione si distribuisce sotto l’ipotesi nulla come una Chi-quadrato con gradi di lib ertà = numero di regressori nell’equazione ausiliaria (omettendo la costante):
> u2 <- modage2$residuals^2 > y <- fitted(modage2) > Ru2<-summary(modage2$residuals^2) > LM <- nrow(south_africa)*Ru2 > p.value <- 1-pchisq(LM,3)
Lm= 4.9422 Ru2= 0.1176
Il valore del p-value ottenuto è pari a 0.592. L’ipotesi nulla di omoschedasticità viene rifiutata quando il P-value risulta piccolo. Pertanto considerato un livello di significatività di 0,05 non si rifiuta l’ipotesi nulla.
Pertanto i risultati sono da considerarsi abbastanza affidabili e verificati.
4. Conclusioni Concludendo, si può affermare che sicuramente i livelli di innalzamento dei consumi di energia da fonti petrolifere, l'aumento dell'importazione di beni ma soprattutto la crescita della popolazione generano un aumento significativo del tasso di inquinamento e delle emissioni di CO2. In parallelo l'utilizzo di risorse pulite come energia elettrica ma soprattutto tecnologiche posso ridurre significativamente il tasso di emissioni. Si evidenzia la necessità di reperire dati certi sul tasso di inquinamento causato in maniera specifica dall'utilizzo di prodotti obsoleti, ad obsolescenza programmata ma soprattutto quello legato al progresso tecnologico (ICT). Proprio in riferimento a questi ultimi si evince un aumento esponenziale su scala mondiale per come abbondantemente menzionato.
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Si aggiunge, in linea con la maggioranza degli studi in questione, che gli accordi internazionali sottoscritti da centinaia di nazioni e potenze mondiali, sebbene da almeno tre decenni si parli con sicurezza di cambiamenti climatici legati all’industrializzazione e ci siano disegni di legge bloccati da anni in fase di stesura, continua ad esserci la necessità di attuare misure stringenti finalizzate alla riduzione delle emissioni di CO2, allo smaltimento di rifiuti altamente inquinanti e il discorso delle rinnovabili è ancora in via di strutturazione soprattutto in continenti come quello africano. Il progresso tecnologico dovrebbe condurre in maniera indiretta alla realizzazione di Smart City, fabbriche innovative, agricoltura con moderne tecniche di coltivazione tali da consentire l'eliminazione dei pesticidi sviluppando delle soluzioni ecosostenibili. In aggiunta al fine di ridurre l'inquinamento da prodotti ad obsolescenza programmata bisognerebbe attuare misure di estensione della garanzia legale di un bene dagli attuali 2 a 5 anni per tutti i prodotti e a 10 per i casi in cui sia ragionevole presumere una durata particolarmente lunga. Obbligare i produttori ad assicurare la disponibilità delle parti di ricambio per tutto il tempo in cui il bene è immesso in circolazione nel mercato e comunque con un costo sempre proporzionato al prezzo di vendita del bene. Attuare misure dissuasive come sanzioni e ammende nel tentativo di dissuadere le aziende dal ricorrere a pratiche di smaltimento illegali e scorrette.
Bibliography Boden, T.A., G. Marland, and R.J. Andres. 2015. Global, Regional, and National Fossil-Fuel CO2 Emissions. Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., U.S.A. doi 10.3334/CDIAC/00001_V2015 Available online at:http://cdiac.ornl.gov/trends/emis/overview_2011.html Food and Agriculture Organization of the United Nations (FAO). 2014. FAOSTAT Emissions Database. Rome, Italy: FAO. Available at: http://faostat3.fao.org/download/G1/*/E The role of renewable versus non-renewable energy to the level of CO2 emissions a panel analysis of sub- Saharan Africa’s Вig 10 electricity generators (Roula Inglesi-Lotz, Eyup Dogan 2018)
The impacts of renewable energy and technological innovation on environment-energy-growth nexus: New evidence from a panel quantile regression, (Wenhui Chen, Yalin Lei 2018).
Sustainable Urban Transport in the Developing World: Beyond Megacities (Dorina Pojani and Dominic Stead 2015).
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International Energy Agency (IEA). 2014. CO2 Emissions from Fuel Combustion (2014 edition). Paris, France: OECD/IEA. Available onlineat:http://data.iea.org/ieastore/statslisting.asp. © OECD/IEA, [2014]. Roy, R. (2016), "The cost of air pollution in Africa", OECD Development Centre Working Papers, No. 333, OECD Publishing, Paris, https://doi.org/10.1787/5jlqzq77x6f8-en. World Bank. 2014. World Development Indicators 2014. Washington, DC. Available at: http://data.worldbank.org/ Last Accessed May 18th, 2015 U.S. Energy Information Administration (EIA). 2014. International Energy Statistics Washington, DC: U.S. Department of Energy. Available onlineat:http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=90&pid=44&aid=8 U.S. Environmental Protection Agency (EPA). 2012. “Global Non-CO2 GHG Emissions: 1990- 2030.” Washington, DC: EPA. Available at: http://www.epa.gov/climatechange/EPAactivities/economics/nonco2projections.ht ml. WRI, CAIT Climate Data Explorer. 2015. Washington, DC: World Resources Institute. Available online at: http://cait.wri.org Sitografia http://documenti.camera.it/leg17/dossier/pdf/Am0272.pdf https://www.arpae.it/cms3/documenti/_cerca_doc/ecoscienza/ecoscienza2013_1/violettiescobar_es1_13.p df https://eur-lex.europa.eu/content/paris-agreement/paris-agreement.html?locale=it http://www.rinnovabili.it/econormativa/qualita-dell-aria-strasburgo-limiti-666/ https://www.oecd-ilibrary.org/development/the-cost-of-air-pollution-in-africa_5jlqzq77x6f8-en http://www.rinnovabili.it/ambiente/riscaldamento-globale-raccolti-a-rischio-222/ http://www.rinnovabili.it/econormativa/qualita-dell-aria-strasburgo-limiti-666/ https://www.qualenergia.it/articoli/20170203-il-crescente-inquinamento-aria-africa-impatti-sanitari- ambientali-e-soluzioni/ https://www.researchgate.net/publication/312120096_ICT_and_Environmental_Sustainability_A_Global _Perspective http://www.expo2015.org/magazine/it/economia/figueres---se-il-cibo-sprecato-fosse-un-paese-sarebbe-il- terzo-maggior-responsabile-di-gas-serra-al-mondo-.html http://cleancookstoves.org/impact-areas/health/ https://www.qualenergia.it/articoli/20170203-il-crescente-inquinamento-aria-africa-impatti-sanitari- ambientali-e-soluzioni/ http://www.quotidianosanita.it/studi-e-analisi/articolo.php?articolo_id=61315 https://www.qualenergia.it/articoli/20170203-il-crescente-inquinamento-aria-africa-impatti-sanitari- ambientali-e-soluzioni-Osservatorio di Politica Internazionale - L’Africa e le trasformazioni in corso tra persistenza dei problemi strutturali e nuove opportunità. http://www.reportafrica.it/articoli.php?categoriacod=ATT&idarticolo=80
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Estimating Okun’s Law for Albania (1993 – 2017) Xhakolli Esmeraldo26 Kurtsmajlaj Veton 27
Abstract
The main objective of this study is to test the validity of Okun’s law during the period right after the fall of communism in 1993 up to the most recent period in 2017 in Albania. Using data from the World Bank Series this study gives a clear picture of the significant impact economic growth has on emerging economies like Albania by looking at how growth impacts unemployment in general and for groups at particular risk of like females and the young. Results indicate that the relationship between economic growth and unemployment doesn’t hold during periods of turmoil and uncertainty like those during the 90’ but it is relatively strong afterwards. Furthermore, subgroups at higher risk of unemployment like females and the young tend to benefit more in terms of employment from economic growth.
Keywords: Okun’s Law, Unemployment Rate, GDP Growth, Okun’s coefficient, Economic fluctuations
JEL classification: B41, E24, F43, J64
1. Introduction In 1962, Arthur Okun used US data to document the empirical negative relationship between cyclical unemployment and output commonly known as Okun’s law. Several authors have explored the extent to which the law holds in numerous individual country cases and country groups of generally advanced economies. Based on their results, it is commonly accepted that this short-term relationship functions as a law in most advanced economies, however the coefficients vary across country and some of the contributors of this literature have found that the behavior of the law is different in crisis and normal times. Results indicate that Okun’s law in the case of Albania doesn’t seem to hold in times of great turmoil and variation in production such as during the 1990s. After that the law is very much present and the effect of economic growth on employment seems to be more and more important especially for groups such as the young. This paper is divided into the following chapters: Literature Review, Theoretical Framework, Methodology & Data, Overview of Albania, Results, Discussion & Recommendations.
2. Literature Review Typically, growth slowdowns coincide with rising unemployment. This negative correlation between GDP growth and unemployment has been named “Okun’s law,” after the economist Arthur Okun, who first documented it in the early 1960s. Part of the enduring appeal of Okun’s law is its simplicity, since it involves two important macroeconomic variables. Okun’s law has been a widely studied subject in advanced economies. Ball, Leigh, and Loungani (2016) show that Okun’s law has held up well for a set of 20 advanced economies. And in a follow up paper, included in this volume, Ball et.al. (2016) find that the fit of the law in developing
26Msc. Economics, University Aleksander Moisiu Durres, Department of Economic Science, [email protected] 27Msc. Economics, [email protected]
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economies is half as good as for advanced economies. When it comes to studying the economy, growth and jobs are two primary factors economists must consider. There is a clear relationship between the two, and many economists have framed the discussion by trying to study the relationship between economic growth and unemployment levels. Economist Arthur Okun first started tackling the discussion in the 1960s, and his research on the subject has since become known as Okun's law. Below is a more detailed overview of Okun's law, why it is important and how it stood the test of time since first being published. Hugh Courtney’s investigates both the Beveridge Curve and Okun’s Law. Courtney is one of the first to suggest an asymmetric response in the unemployment / output relationship. Building on work by Summers and Delong that recognized nonlinearity in the business cycle, Courtney suggests that Okun’s Law is best described as a discontinuous, nonlinear relationship. Courtney states that the nonlinearity in Okun’s Law may be caused by factor substitution and fluctuation in productivity growth throughout the business cycle. (Courtney, 1991) Martin Prachowny, writing in 1993, suggests that Arthur Okun should have taken a first principles approach to modeling the relationship between output and unemployment. Prachowny, in his first principles approach, specifies the estimating equation with additional variables derived from a production function approach. The result of the paper was, for a 1.5% decrease in unemployment, a 1% increase in output is implied. This in contrast to Okun’s gap results where a 1% increase in output implies a 0.37% decrease in unemployment. Prachowny feels that the results show that capacity utilization and hours worked have influence on output. From this he suggests that the Okun coefficient is a complicated weighted sum of all other effects. (Prachowny, 1993) Dornbusch et.al (2001) also supported Okun’s view. They argue that forgone output is the major cost of unemployment, and if the loss is very high it could lead to recession. An empirical study by Watts and Mitchell (1991) also supported Okun’s law. According to their study, the long-term relationship between unemployment and capacity utilization is not stable. Factors such as increasing labour resource utilization weaken the estimations of Okun’s law. Prachowny (1993) found that changes in output will result in changes in efficiency of production. Other important determinants of output include the amount of time worked and exploitation of facility space. For him, Okun’s law gives only a partial measure of the relationship between unemployment and GDP. Several studies have highlighted the limitations of Okun’s law. Such study includes those by Altig, et al (1997), Blinder (1997) and Lee (2000). These studies concluded that Okun’s framework does not take into consideration factors that are also important in influencing changes in output and unemployment, such as labour force participation, productivity and production functions. In recent times there have been also some attempts to point out a relationship between unemployment and output growth within the framework of endogenous growth models. Although such a relationship is meant to be a long run one and is therefore not in the spirit of Okun's original contribution these attempts are nonetheless interesting. Aghion and Howitt (1994) analyze the e ects on long run unemployment in a search model. Within their work they derive two competing e ects such as that (i) higher growth due to higher technical progress leads to more structural problems (e.g. automation, depletion of skills, bankruptcies) resulting in a higher job-turnover. (ii) On the other hand, growth reduces the duration of a job match (higher exit rate), caused by an increase in labor demand. In Schaik and Groot (1998) the effect of different degrees of competition on the unemployment GDP relationship is investigated. Zagler (1999) considers a monopolistically competitive economy with effiency wages. A fall in the internal efficiency of firms gives rise to higher eciency wages, which causes a decrease in employment within the research and
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development sector. This results in less economic growth and a negative correlation between growth and unemployment.
3. Theoretical framework In literature review several methods can be encountered when it comes to addressing the quantitative side of Okun’s Law. Among the most used approaches used are the First Difference Model, the Gap Model and the Dynamic Model. Each approach can be argued to have its strong points and limitations. In his original paper Okun (1962) uses the first difference and gap versions. In this paper the gap model is used as it seems to have the most advantages when it comes to assumptions. As argued by Ball et al (2012) the first difference model assumes a long run growth rate and a natural unemployment rate which is constant. The gap version avoids the various assumptions one has to take in account when working with macroeconomic times series as the ones involved in estimating Okun’s Law (Knotek, 2007).
3.1. Gap version Essentially the gap version of Okun’s Law models departures from the natural rate of unemployment as being dependent on deviations of actual real GDP from its potential level. As such this method takes its name from the fact that deviations or gaps in unemployment are explained by deviations or gaps in production. This relationship is laid out as follows:
Unemployment gap = β * (Output Gap) (1)
The coefficient β represents the average change in unemployment which comes from changes in GDP. It is implied by the above equation that if the economy is at full employment i.e. if all resources are being used optimally and the actual GDP is at its optimal level then the actual unemployment level should be at its natural rate. Okun’s coefficient can be calculated from the β coefficient by simply inverting it: Okun’s Coefficient = 1 / β (2)
4. Methodology & Data 4.1. Data The data used in this paper consists of several yearly time series regarding both GDP and unemployment in Albania with a span of 25 years from 1993 up to the most recent available data in 2017. Time series on unemployment are ILO measurements and contain the level of unemployment expressed as percentages of labor force for total, male, female and youth (15 – 24 years old). The series on real GDP represents the countries’ GDP for each year measured at constant US dollars. All of these series are retrieved from the World Bank’s online open data on the country of Albania28 (World Bank, 2019).
4.2. Estimation
28 https://data.worldbank.org/country/albania
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As argued above the gap version of Okun’s Law is used in order to estimate the relationship between unemployment and GDP. Model (1) shown in the theoretical framework can be expressed in equation form as follows: (U U ) = ( ) + (3) ∗ ∗ t t 𝑡𝑡 𝑡𝑡 t Where− U and Yβ ∗represent𝑌𝑌 − 𝑌𝑌 the actualε level of unemployment and production respectively while U* and Y* represent their respective natural and optimal level with GDP being transformed with natural logarithm. As presented in the form above equation 3 will calculate the impact of under- production on unemployment. If actual GDP would be 1% below its potential level than unemployment would increase by on average, so in this case β is expected to be positive rather than negative. Estimations are carried out using OLS regressions and are done separately for each measurement of unemployment, beβ% that total, male, female and youth unemployment. The main problem with the gap version as laid out in equation 3 above is that the actual values of natural unemployment and potential production can’t be measured. They represent the level of unemployment and the level of production under the hypothetical scenario where all available resources are used optimally. On the other hand, both measurements can be estimated using various smoothing techniques which essentially split the cyclic component of a series from its trend. One of the most widely used techniques in evaluating optimal GDP is the Hodrick–Prescott (HP) filter (Knotek, 2007). In most papers as it is customary with Okun’s (1962) original paper quarterly data is used while in this paper data is on yearly bases. Data format is important to the HP filter as the smoothing parameter is determined by it. Literature review suggests a smoothing parameter of λ = 100 with yearly data and a (rather) standard level of λ = 1600 for quarterly data (Backus & Kehoe, 1992). All statistical procedures including data preparation, estimation of cyclical and trend components, calculation of statistics, model estimation and data visualization are carried out by means of Stata 13.0.
5. Overview of Albania The CIA’s World Factbook (2019) on its summary page on Albania describes it as a fast- developing country, especially after the fall of communism, but which is characterized by a multitude of problems such as high unemployment, corruption, criminal networks, lack of infrastructure etc. Most of the working force at around 40% is reported to be employed in agriculture which is a poorly developed sector and unemployment is still at double digits levels being 13.8% as of 2017. Although the country is in a perpetual economic growth it has slowed especially after the 2008 financial crisis which among other has drained the country of remittances which played a significant role in the Albanian economy.
5.1. GDP and Unemployment
Fig.1. GDP growth rate and change in unemployment (1994 – 2017)
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Fig.2. Male, Female and Youth Unemployment (1993 – 2017)
Excluding the tragic year of 1997, Albania has experienced a strong double – digit growth rate throughout the 90s after the fall of communism, and the steady growth continued well into 2008 at a level of around 5%. After the financial crisis growth clearly seems to slow down falling to as low as 1% in 2013 but since then it recuperates and 2017 saw a growth rate of 3.8%. Despite strong fluctuations in growth rates seen during the 90s unemployment levels seem to have remained rather steady up until 2001. After that a normal response of unemployment to GDP growth is seen and as growth rates accelerate unemployment start falling correspondently. Furthermore a rise in unemployment is evident after the economy slows down in 2008. Despite great improvements and a halving of unemployment rates since the 90s it still remains rather high at 13% to 15%. Meanwhile gender differences with respect to unemployment have greatly improved in recent years and a sharp decline in female unemployment is seen after 2000 pointing to a convergence with male unemployment rates. One major problem still remains the disproportionately high unemployment rate among the young (15 to 24 years) with rates constantly being well into the 30% mark. It appears that the formulation of Okun’s law in Albania only takes effect after the economy stabilizes, as large fluctuations in production do not seem to affect unemployment. In fact a simple Pearson’s correlation between GDP growth and unemployment change rates before 2001 results in r29 = -.07 while in the period after the correlation is r* = -.5. This kind of asymmetric response of unemployment to growth is also explored in various papers. Courtney (1991) argues for 3 possible reasons why Okun’s coefficient may vary including labor force participation, productivity fluctuations and growth distribution among sectors. Other authors, also present evidence against Okun’s law stability especially with respect to business cycles (Knotek 2007), (Harris & Silverstone 2001), (Lee 2000).
6. Results
Evaluation of equation 3 is done for each measurement of unemployment separately and in each case 3 different periods are used. As seen in section 5 there are strong reasons to think that Okun’s law didn’t take effect in Albania prior to 2001. Based on this 3 regressions are evaluated one with data from 1993 to 2000, one from 2001 to 2017 and the last including the whole period 1993 to
29 *p – value < 0.05
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2017. Lastly a rolling regression estimation is used to evaluate the variation of Okun’s law throughout this period in Albania. Regression results confirm findings from the graphical inspection in section 5 and in neither case changes in GDP affect unemployment rates prior to year 2001. After that point the scenario changes dramatically and a very significant effect is seen in all cases. In the period after 2000 if actual GDP would fall short of its potential by 1% than this would on average reflect itself in a .482 percentage point increase in national unemployment, .481 percentage point increase in unemployment among males, .478 percentage point increase in unemployment among females and a .896 percentage point increase in unemployment among the young cohort. Female and male rates and responses to economic fluctuations are very similar as unemployment rates for the two tend to be similar after 2000. The greatest impact is in fact seen in the most vulnerable group being the young which are characterized by the highest unemployment rates. Economic growth can be extremely beneficial to this group and otherwise an economic slowdown extremely damaging. From the estimated effect one can derive the Okun’s coefficient for Albania to be 2.07% meaning that an increase of 1 percentage point in unemployment beyond its natural level would result in a production shortfall of 2.07%. For the young cohort this coefficient is 1.12%. Figures 3 and 4 below show the variation of the estimated effect of GDP fluctuations on total and youth unemployment using 4 – year windows from 1993 up to 2017. Results show clear variation of Okun’s law throughout the period and especially between 2005 and 2012. These years were market by some major developments in Albania including the 2008 international crisis, construction of major infrastructural projects including the “Nation’s Highway” and NATO membership. A rapid increase in importance of GDP fluctuations is evident after these starting from 2012. This is especially true for the young cohort where the effect goes as high as 8 points. These results indicate a strong and increasing dependence of employment on economic performance of the country. As seen earlier in both cases the effect is close to zero in the 1990s.
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National 0.0215 0.482*** 0.111 (0.0402) (0.155) (0.0700) Observations 8 17 25 R-squared 0.039 0.375 0.095
Male 0.00797 0.481*** 0.0999 (0.0365) (0.154) (0.0696) Observations 8 17 25 R-squared 0.007 0.379 0.079
Female 0.0451 0.478* 0.129 (0.0854) (0.245) (0.104) Observations 8 17 25 R-squared 0.038 0.192 0.061
Youth -0.130 0.896** 0.0696 (0.177) (0.360) (0.176) Observations 8 17 25 R-squared 0.071 0.279 0.006 Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1 Table 1. OLS Estimation Results
Fig.3. Rolling regression: Total Unemployment
Fig.4. Rolling regression: Youth Unemployment
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7. Discussion & Recommendations
Results from this paper indicate some important implications with regard to the question of addressing unemployment in Albania. As a country in development and in transit for the past 25 years it continues to suffer from various problems including high rates of unemployment. Seemingly Okun’s law can be a very easy and straightforward way of addressing the issue of unemployment and simply put policymakers just need ensure economic growth in order to fight unemployment. Unfortunately, things are never so easy in practice and it was shown that the applicability of Okun’s law in Albania is not always possible or valid. This seems to be the case especially in times of great turmoil and variation in production when inputs are still being relocated. On the other hand, after the economy stabilizes Okun’s law seems to take ground and indeed becomes very relevant. Data shows that this has been the fact especially in recent times as economic growth has become a main factor in determining unemployment.
References Leopold Sögner and Alfred Stiassny (2000). A Cross-Contry study on Okun’s Law . Working Paper No. 13. David William Jaberg (2015). Okun’s Law: A Non-linear Threshold Modeling Approach University of Illinois at Chicago. Hassan Alamro, Qusay Al-dala’ien* (2016). Validity of Okun’s Law: Empirical Evidence from Jordan. Dirasat, Administrative Sciences, Volume 43, No. 1, 2016. Hutengs, Oliver; Stadtmann, Georg (2012). Age effects in the Okun's law within the eurozone DIW Discussion Papers, German Institute for Economic Research (2012) Karlyn Mitchell & Douglas K. Pearce (2009). Karlyn Mitchell & Douglas K. Pearce. Business Media, LLC 2009 Hassan Alamro, Qusay Al-dala’ien* (2016). Validity of Okun’s Law: Empirical Evidence from Jordan. Dirasat, Administrative Sciences, Volume 43, No. 1, 2016. Zaleha Mohd Noora & Norashidah Mohamed & Andjudhiana Abdul HGhanic (2016). The Relationship between Output and Unemployment in Malaysia: Does Okun’s Law exist? Department of Economics, Faculty of Economics and Management, Universiti Putra Malaysia (2016) Watts, M and Mitchell.W. (1991). Alleged Instability of the Okun’s Law Relationship in Australia: An Empirical Analysis. Applied Economics, 23, 1829-1938. Knotek, E. S. 2007. ‘How useful is Okun’s Law?’. Economic Review – Federal Reserve Bank of Kansas 92:4:73-103. Okun, A. M. (1962). Potential GNP & Its Measurement and Significance, American Statistical Association, Proceedings of the Business and Economics Statistics Section, 98-104 David Backus, Patrick Kehoe and Finn Kydland, International Real Business Cycles. Journal of Political Economy, 1992, vol. 100, issue 4, 745-75 Harris & Silverstone (2001) ''A Vector Correction Model of Economic Growth and Unemployment in Major European Countries and an Analysis of Okun's Law . Article in Applied Econometrics and International Development (2008) Jim Lee (2000), ''The Robustness of Okun's Law: Evidence from OECD Countries''. Journal of Macroeconomics, 2000, vol. 22, issue 2, 331-356 Anton B. T. M. Van Schaik Henri and L. F. De Groot. ''Unemployment and Endogenous Growth ''. https://doi.org/10.1111/1467-9914.00065
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Operations Management Case: "Me-2008-Import-Export"
Engjellushe Hodo30
Abstract
The aim of this study is to reflect the importance of managing operations in each organization and awareness of organizations from the benefits they receive from proper management of operations, concretely in the shoe production sector. This study analyzes the mode of operations management by the shoe manufacturing industry and mainly on Me-2008-Import-Export shoe manufacturing firm to identify how it manages operations to produce products based on customer requirements. Findings indicate that operations management is important because can improve productivity, which improves an organization’s financial health and can help organizations meet customers’ competitive priorities. Key words: operation management, supply chain, logistic, performance, quality, shoe bussines JEL classification: M11, L23, L67
1. Introduction In the words of Mr. E.L. Brech: “Production and Operation Management is the process of effective planning and regulating the operations of that section of an enterprise which is responsible for the actual transformation of materials into finished products”. This definition limits the scope of operation and production management to those activities of an enterprise which is associated with the transformation process of inputs into outputs. The definition does not include the human factors involved in production process. It lays stress on materialistic features only. Common trust among people was the belief that management of operations is important only in the manufacturing industry, but in fact the management of operations is important in every industry. Whenever a company offers a product or service, that company must ensure that the needs and requirements of customers are met at all times. This is a very important process and so the marketing team plays a vital role in understanding what customers want and how they can accomplish it. The marketing group collects customer details and uses it as a contribution to designing products and services (Gupta & Boyd, 2008).
Management of operations includes similar management tasks, regardless of the industry where it operates. It includes planning, personnel, control, direction, motivation, and organization. Regardless of business, operations management varies from organization to strategic and tactical operations (Voss et al., 2002). Operations management is the activity of resource management that is dedicated to the production and distribution of products and services. The operation function is part of the
30 MSc, University “Aleksander Moisiu” Durres, Albania, [email protected]
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organization that is responsible for this activity. Each organization has a function of operations because each organization produces a kind of product and / or service.
The importance of operations management Operations management along with all its activities uses resources to produce goods and services in a way to satisfy its customers. In order to contribute greatly to the success of any organization, operations management must be creative, innovative and must give priority to business by being effective in reducing cost of production of products and services by delivering high quality products which will increase revenues due to increased customer satisfaction. Operations management can "create or break" any business. Not only because the operation function is large and for most businesses it represents most of the assets and most people but because it makes the business competitive by offering the ability to respond to customers and developing the skills they will keep it ahead of its competitors in the future.
The manufacturing industry in Albania Albania has a strong and diverse sector of manufacturing industry, which is led by very successful entrepreneurs in the textile, clothing and footwear industry. This success has been achieved as a result of close relationships with the Italian brand leader in the sector over the last 20 years. The Fason firms extend their activity mainly to the textile and shoe industry. The raw material that comes from outside is processed (cutting, sewing) and the product is again destined for foreign markets, mainly Italy, Greece and Germany. The textile and shoe sector is an important part of the manufacturing industry in Albania. It plays a crucial role in the economy and social welfare in some regions of the country. This sector is one of the sectors with the largest share in exports. It represents about 30% of the total exports (2015) and 45% of the labor force in the manufacturing industry.
2. Methodology and Instruments Used For the realization of this paper, research has been conducted in the fason industry mainly in the company Me-2008-Import-Export through an interview with the administrator and through 50 questionnaires that have been made to the employees in this business. The main purpose is to do a detailed description of the operations of this firm, how the operations are managed, how the firm works, how to manage the operations by producing quality products and the problems it faces during the management and production process. 3. Results Business History of Me-2008-Import-Export The company Me-2008-Import-Export started its activity in 2008 with the advent of an Italian customer who was involved in shoe sewing for well-known Italian brands and not only. With boldness and great initiative was accepted the proposal made by the Italian firm Elmark s.r.l. Thanks to this proposal, the activity started in 2008 as a subcontractor of Elmark s.r.l, which produces shoes for well-known Italian companies. Me-2008-Import-Export company makes a part of the production process, only cutting and sewing, while Elmark s.r.l makes shoe assembly. The firm started its activity with a modest number of 20 employees and with a financial resources structure of 50% its own capital and 50% of its debt. The firm continues to operate as a subcontractor of the Italian firm Elmark s.r.l producing
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the upper part of shoe for well-known brands such as Lamica, Minelli, Bocage, Otre, Econika, Etaloni, Ogetti, Nak, Lami, Vivaldi. Today, Me-2008-Import-Export firm has a capacity of 100 employees, where 90% of them are women, and 10% are men. The location is in Shen-Vlash, Durrës. The main products that produce are: sandals, shoes, and boots. The firm operates with the customer's materials. The monthly production capacity is 9000-10000 pairs. In the production cycle, the firm carries out cutting, sewing and packing of the upper part of shoes and the end of the process is done by the Italian Elmark firm. Equipment and Human Resources Employees in this firm have certain qualifications. About 40% of the employees are manual workers who perform hand processes in shoe production without the use of machinery. This category includes those workers who sign the parts of a shoe to show the places where they will be sewn, workers who control their shoes if they have been properly carried out in accordance with the model. About 60% of workers perform in shoe production with the use of machinery so are workers who cut shoe parts through special machines called leather cutting machine and workers who sew shoe parts through sewing machine. Designing the shoe Product development is the main function of any manufacturing company. It's the basic tool to attract customers and eventually to create a business contract. Initially, a designer translates his idea, concept, perception, and experience into a product by considering a target group of customers. The shoe production activities starts with market research by the research and development department, observing the latest shoe trends, what more consumers prefer, the ideas that come from their customers, staff, competitors. After studing the requirements of their clients assess whether they have the necessary capacity, financial resources and the qualities to produce the shoes that have conceived. Preliminary design determines which components will be the shoes, the materials that will be used for their creation, materials that are quality and special to the customers. Designing involves drawing shoe models. The resulting templates are crucial to the shoe production process. The first step in making the model is to create a shape that is a plan of size, shape and height of the toe. The shape transforms the shape of the 3-dimensional shoe into a 2-dimensional paper piece. Once the pieces of the model are cut, a piece of leather test is expected to create a test shoe. The test shows if the model pieces match the shape correctly. This test shoe is then used to determine if the model fits into the foot of the customers. The shape gives the right shoe shape. Above it, the designer takes a sketch and creates a model that will become the ultimate product. Shoe production begins with the preparation of a detailed shoe type drawing. This drawing is made by hand or computer and describes the shoe model. Shoe designers are well aware of current fashion trends. In order to come up with a special shoe, the designer sometimes works alone and sometimes works with a small team for commercial concepts and ideas. Some things the shoe designer takes into consideration for the emergence of a new shoe design include esthetics, comfort, support, safety, practice and durability. Evaluation and improvement of the design is made to ensure that the shoe design meets the customer's needs if they are comfortable and designed as the client wanted. The last stage is the production of the model and the final project in order to be tested on the market. After the model has been manufactured and tested and when well-known shoe brands have agreed to produce the shoes according to the model, the work process begins which starts with the
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ordering of all the materials needed for shoe making to the provision of consumers. Sometimes the buyer suggests some changes in the model prepared both in terms of technique and material. This process continues until the model is finally approved and then the materials needed are ordered to the suppliers.
Supply Chain in Me-2008-Import-Export Receiving orders and processing Once models are proposed to clients, clients give their orders specifying the desired material or type of leather, the colors according to their references. In the order of the client is written the name of the article, a code which is unique and is given only once which is called the code that identifies a certain order, also on the order sheet is written the total of the pairs for each order along with all the materials that should be used for shoe production. Failure to fully understand the customer's message would greatly affect the firm, leading to customer loss and at very high costs for the firm. Ordering materials to suppliers After the customer's orders are processed, the ordering of the materials is done. Suppliers receive the order and prepare the materials and transport them through trucks to the manufacturing firm which after receiving the materials sends all the materials it needs to Me-2008-Import- Export firm to make the semi-ready production, to make only the upper part of the shoe while the materials that are needed to assembling are kept and stored in its warehouse.
Storage of materials After coming the necessary materials from the ordering department, the storage of the materials that will assist in the production is done in the warehouse of the Albanian firm where the materials are placed according to the same characteristics. The leather is placed on the respective shelves where the same leather is arranged and placed in the same place, while the materials used for the inside of the shoe are placed on the other shelves. The leather is checked according to the model (color, shade, thickness, quality, etc.) If it does not match, it returns. The leather is selected in three different grades based on quality, avoiding defects. Class A - first quality 90 - 100% which is considered very good leather Class B - second quality 80 - 89% which is considered good leather Class C - third quality 70-79%, which is considered to be a bad, but bad grade of poor quality The leather must be checked to avoid problems during the cutting process. If it is not good does not enter the cutting process but returns to the supplier. If it is good, it passes in the cutting process.
Production process One of the most important processes that needs to be paid special attention is the production process. The production process starts immediately based on the shoe sample modeled by the designer. The sample is the production base where everything is produced equally as model and if this is accomplished the output goes as it should according to the requirements of the customer. Cutting The cutting consists of cutting all shoe parts with the leather, so with the appropriate materials given on the order sheet with the leather cutting machine.
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The objectives to be met during cutting are: • Cutting of the component material according to the plan, style and size of the quantity within the specified time. • Provide better use of the material. • Ensure the right quality of components in the most efficient way. Signature of the leather After cutting the leather, the cut pieces of the shoe are signed according to the carton of the signs that come from the Italian designer. Through the signs the other process is done, which is sewing. Sewing Before crossing the cut parts of shoes in the production process, should be check whether the parts are of any quality without any defects. If there are some parts with a defect, are filled by being cut from the beginning. Sewing is done by joining all of the cut pieces of shoe to produce the upper part of shoe. During sewing, the guidelines of the Italian firm are taken into account as how the parts of a shoe will be sewn. Sewing shoes requires great skill and precision due to the variety of materials and the complexity of the shoe. Depending on the design of the shoe, there are about 30 to 40 integral parts that need to be joined together. After sewing the upper parts of shoe pass in control. Through the control ensure that each shoe is manufactured within the appropriate quality standards. Assembling and Providing shoe to customers The assembly is done at the Italian firm that assembles the upper part of shoe with rubber to produce the final shoe product that is ready to offer to customers. If there are shoes that are badly assembled during the control, the shoes do not go out to be packaged and ready to be delivered to the customer, but are replaced by producing other shoes in order to get to the consummator without problems. The price of the shoe The prices of shoe manufacturers that are produced are made through the pairs, therefore through the company Me-2008-Import-Export and the Italian customer Elmark s.r.l Usually, the bases on which prices are based are: the difficulties encountered during the production process, the difficulty with the shoe model being produced, depending on how many sewing processes are passing and how much commitment is required from employees. Transportation Transportation of materials is done through a transport company from Italy to Albania and from Albania to Italy. In this way, the shipping company guarantees an organized, secure, punctual and reliable transport at any cost and for any domestic or international destination, transforming its experience and professionalism into a qualified customer service. Transport is carried out through trucks where each truck is equipped with satellite location systems capable of ensuring the traceability of the goods and maximizing their safety. The form of transport used is land and sea transport. The materials needed for production are transported in pallets or in carton form. Usually the pallets are used when the ordering firm sends a lot of material to avoid losing any material. Also this way is used because paletized products can be relocated faster, less risk of damage to the material, more relocated and stored more efficiently in the warehouse. Pallets are usually easier to handle with materials handling equipment.
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Exporting shoe uppers from Albania to Italy is done by placing the shoe uppers in cardboard boxes. In each carton is placed a certain number of uppers and from outside the carton boxes in each box is placed a sheet indicating where the box should go, what article is inside the box, article code, numbering, and pairs. After the work has been prepared for transport, cartons are placed in the truck and accompanied by the relevant transport document which contains information about the quantity of the pairs and the number of cartons being transported to the Italian firm. Also when the half-finished products are launched, the goods are also accompanied by a sales invoice for the Italian firm.
Transport problems Achieving customer satisfaction is the primary objective of any company. The firm has to deal with some transport problems which result in: - Delay in delivery of goods. - Insufficient handling of materials resulting in damage to the goods. - Lack of qualified personnel. - Inadequate transport system in the organization. - Insufficient maintenance of the transportation system causing damage that leads to delayed delivery. All these transport problems, although rarely occurring, are problems that occur and the firm should pay special attention as transport problems can lead to customer discontent and to the loss of it. Quality Product quality or performance problems may affect the business. Different consumers have different preferences, so quality depends on the customer. When it comes to quality, we should consider design, manufacture and service. At the peak of the effort, it starts with careful assessment of what consumers want, then translating this information into technical specifications in which goods or services need to be in accordance. The specifications guide product design and services, process design, product manufacture and service delivery and after-sale service or delivery. Also supply chain management directly affects product quality and overall profitability of a company. For these reasons, quality control in the supply chain is critical to maintaining a competitive edge in the market and reducing operating costs. The quality control at Me-2008 import-export firm begins with the purchase of raw materials where the Italian firm is constantly monitoring whether all the materials needed for shoe and boot production are within the appropriate quality standards. Quality problems Quality defects for shoes are generally sorted into one of the following three categories: 1. Defects that fail to meet mandatory regulations or pose a hazard to the user are typically classified as “critical defects”. 2. Defects that render the footwear unacceptable by affecting appearance, durability and salability are called “major defects”. A major defect found on a shoe is likely to result in a customer returning the pair. 3. Defects that are lower than the desired quality standard but are not likely to result in customer dissatisfaction, product return or complaints are called “minor defects”. Most shoes can be divided into two zones, “Zone 1” and “Zone 2”.
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Zone 1 is generally the most important area in terms of visual appeal because it’s the area most apparent to the customer or wearer. Zone 2 is less important because it includes areas of the shoe that are less obvious to the customer or wearer. Any defect found in Zone 1 that isn’t critical is more noticeable and more likely to be considered a major defect. The same defect found in Zone 2 is more likely to be classified as a minor defect. Shoddy quality of raw material. If the raw materials are defective, it can disrupt the entire production line and increase the defects in shoe and boot production. Not combining colors for each pair of shoes. This come from the negligence of the workers or from multicolor leather. Cutting of inappropriate material. Each customer gives his order according to his specific requirements, but in the cutting of materials, the responsible person confuses materials and does not cut the proper material because there are many different order so the responsible person that cut the leather must pay attention very large in order to make the customer's order as the customer demands. Excess glue. Excess glue are among the most common quality defects found in shoes. These types of residue are especially common because most shoe production facilities use adhesives and other chemicals during production and factory workers are less likely to protect against or remedy issues like excess glue when rushing to complete an order, which is often the case for most factories. Glue can often be cleaned off without difficulty. But if this defect is evident in the finished product, it can be very unsightly to customers and possibly render a shoe unsellable. Asymmetry Asymmetry can be an issue where different components of shoes do not line up as they should. Asymmetry in shoes is often related to issues with the cutting or fitting of the components. Some examples of asymmetry commonly found on a shoe or pair of shoes are: where the sole of the shoe does not line up with the body from a front, rear or side view, where certain parts of the shoe aren’t straight, where part of one shoe is higher or lower than the same part of its counterpart in a pair.
Conclusion Operations are one of the central functions of all organizations. Operations management is becoming very important for organizations. Organizations are choosing to grow and be successful by giving special attention to operations management. Operations management functions change depending on the organization's purpose. In a production environment such as Me-2008-Import-Export firm, management of operations involves the design of efficient processes to produce the product, timely purchase of raw materials, provision of an adequate number of properly trained workers and maintenance of proper equipment. While operations management is focused on producing goods and / or services in an organization, its importance to the overall organization can not be underestimated. When an organization's operations are properly managed, the functions of all other departments are quiet and when an organization's operations are improperly managed, all other departments suffer. Me-2008-Import-Export company manages operations with the introduction of raw materials and sorting materials according to specific characteristics, and continues with the production and then with shoe packaging and transportation to the ordering firm. All of these activities are realized
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through operations, where their interaction leads to the creation of products that will meet customer requirements. The study show that Me-2008-Import-Export firm manages to make effective management of operations by providing several advantages that are: • Reduces the production cost of products • Increases quality • Increases customer satisfaction • Increases sales • Increases income • Increases human resources knowledge for operations inside and outside the business Quality and transportation problems are the main problems faced by the firm and are constantly trying to eliminate these problems by paying special attention and attention to any process in which shoe production passes. An important role in the organization is also the supply chain that is an integral part of most businesses and is essential for the company's success and customer satisfaction. Supply chain management is a chain that connects every element of the production process and supply from raw materials to the consumer. The strategic role of business operations management is to play a role in ensuring the achievement of the goals of the organization.
References Slack N, Chambers S, Johnston R, 2010: Operation Management pp.1-19, pp.38-53 Slack N: Qulaity Managment In: Operations management, 2010 pp. 32-54 Slack N, Chambers S and Johnston R 2007: Operations Management Flynn, Barbara B., Roger G. Schroeder, and Sadao Sakakibara. "The impact of quality management practices on performance and competitive advantage." Decision sciences 26.5 (1995): 659-691. Ahire, Sanjay L., Robert Landeros, and Damodar Y. Golhar. "Total quality management: a literature review and an agenda for future research." Production and Operations Management 4.3 (1995): 277-306. Sousa, Rui, and Christopher A. Voss. "Contingency research in operations management practices." Journal of Operations Management 26.6 (2008): 697-713. International Journal of Advance Industrial Engineering: Application of Key Performance Indicators in a Leather and Shoe Industry Khanna, R. B. Production and operations management. PHI Learning Pvt. Ltd., 2015. Barr, Richard S. "Production and operations management." (1996). Kouvelis, Panos, Chester Chambers, and Haiyan Wang. "Supply chain management research and production and operations management: Review, trends, and opportunities." Production and Operations Management 15.3 (2006): 449-469. Chase, Richard B., Nicholas J. Aquilano, and F. Robert Jacobs. Production and operations management. Irwin/McGraw-Hill,, 1998. PR Kleindorfer, K Singhal: management, 2005 - Wiley Online Library N Slack - 2015 - Wiley Online Library
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JA Fitzsimmons, MJ Fitzsimmons, S Bordoloi - 2008 - pdfs.semanticscholar.org D Otley - Management accounting research, 1999 – Elsevier Bowen, Frances E., et al. "The role of supply management capabilities in green supply." Production and operations management 10.2 (2001): 174-189. JR Evans, WM Lindsay - 2002 - tocs.ulb.tu-darmstadt.de K Langfield-Smith - Accounting, organizations and society, 1997 – Elsevier DM Lambert, MC Cooper… - … of logistics management, 1998 - emeraldinsight.com Anderse, O. 1993. “On the internationalization Process of Firms: A critical Analyss”, Journal of International Business Study, fq. 209-231 Aida_fason (2014) Fason industry. Albania, Tirana: Albanian Investment Development Agency.
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Priority for investments in the transport sector: approaches to evaluation processes Elisabetta Venezia, 31 Fabio Pizzutilo32
Abstract This paper focuses on a model to prioritise transport projects for investment while maximizing the objectives and meeting the budget limit for capital investment. The paper is organised as follows. In the first part a review of the literature on the topic is presented by analyzing drawbacks and limitations of different approaches. Mainly this part gives emphasis to goal-programming and linear programming models and to the use of multicriteria analysis. In the second part an application of a goal-programming model is illustrated with reference to transport projects identified by a local administration. Finally, conclusions and recommendations are presented. Key words: Project prioritisation, Transport investments, Evaluation. JEL classification: R42, R48, C61
1. Introduction How to formulate priorities for government’s policy? Sometime there is not a proper coincidence between government’s priorities and the final users of those investments (i.e. the demand side of the market and operators who have to use infrastructures). This is normally due to the fact that the project cycle is not properly structured in the sense that social needs are not investigated in a preliminary phase of the investment procedure analysis. In fact, normally, there are sectorial or general analyses based on macrodata which simply supply a context framework. This missing element brings policy-makers to have a “their-own-list” of projects to submit to an assessment procedure, although they do not correspond to the priorities of population. This is leading to a potential inappropriate use of public funds which may cause an inefficient resource allocation as well as a waste of time and money due to the late assessment of the key elements which are the base for successful investment projects.
31 Corresponding author: PhD in Economics, University of Bari Aldo Moro, Department of Economics and Finance, Largo Abbazia di Santa Scolastica, [email protected] 32 PhD in Corporate Finance, University of Bari Aldo Moro, Department of Economics, Management and Business Law, Largo Abbazia di Santa Scolastica, [email protected]
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The problem is that much of the decision-making about infrastructural investments, including the prioritization of projects – and their implementation – still occur a correct procedure in order to reduce the risk of failure or inappropriate resource allocation. This is because public investment planning is highly politicized and it generally results in “wish lists” which fits budgets parameters and, for Europe for example, tends to obtain the maximum amount of resources from European funds. So there is a wide degree of political discretion or of other non-economic factors (Tsamboulas, 2007, Flyvbjerg, 2007, Flyvbjerg et al., 2004).
2. Project appraisal The basic idea is that project appraisal is weak, not for methodologies but for the lack of a proper assessment cycle. Good public investment planning and evaluation processes are key elements to ensuring successful infrastructures investments. The suggestion, therefore, is to analyze the market by acquiring information and then drawing a “plan of needs”. Only then investments can be selected on the basis of priorities which can increase the economic welfare into two different ways: directly by affecting those who will use those investments, and indirectly by generating positive externalities to other social groups. It is like to have a transport investment needs assessment (TINA), a process which attempted to define certain priority infrastructures (Short-Kopp, 2005), but, in this case, based on real needs of population. Each project will then go through a normal procedure of assessment, respecting budget limitations. Currently it seems that the main problem is simply to spend money available somewhere, already allocated by someone, and consultants – under the indication of policy-makers who have already selected by themselves projects – are looking for those investments that pass cost-benefits analyses. This is not a correct procedure and the process has to be inverted. Countries/regions/municipalities must have a robust idea of society’s needs on the basis of which they decide which investments can be selected to fit those needs, and that fit also budget constraints and pass cost-benefit analyses. 3. Linear programming and goal programming
Literature on how prioritize investments sheds some lights on some poor results of cost-benefit analyses and on the interference of policy-makers on the investment selection and evaluation process, but do not illustrate a proper procedure to overcome those problems, apart from keeping
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separated policy-makers and consultants on one side, and to improve the evaluation elements considered in the analyses, on the other side. Of course, evaluation problems can still remain as far as subjective elements will be introduced in the analyses, but at least results in terms of demand forecasts should be closer to the real world and the ex- ante selection of projects will be depurated by “political bias”. Optimization models are often used to select projects within a range of alternatives already identified. These models are considerably different depending on the degree of objectivity and reliability of the data provided to obtain robust results. Generally, linear programming (LP) and goal programming (GP) are contrasted. The limits of the LP are represented by the possibility to optimize only one objective at a time without soft / flexible constraint (Lee 1972). Further, the LP uses only rigid constraint (so if the production must be higher than a given value then even a small negative deviation from that value is not allowed). On the other side, the GP exceeds the limits of the LP and uses both soft and rigid constrains (Ignazio 1985, Romero 1991). Alternative methods have been identified by Hannan (1985) and Young (2002), who suggest Euclidean normalization technique and Cole (1998) which proposes a kind of social cost-benefit analysis. In addition, the multi-criteria analysis defined by Young (1997) as a broad-spectrum optimization technique remains valid. In this context, the goal achievement matrix (GAM) is useful to compare alternative plans in terms of benefits and costs. A last quote deserves the weighted integer goal-programming (WIGP) which allows to take into account the budget financial constraints while maximizing the objectives (Ahern-Anandarajah, 2007).
4. Infrastructural transport planning at local level Here it follows an application to a concrete case for which an administration has already fixed its “wish list”. It is shown whether or not those transport infrastructures (at that time already selected, but not implemented) do correspond to operators and population needs through a survey on real needs – regardless budget constraints and political wish lists - and other objective elements, such as structural socio-economic indicators. These needs are compared with those indicated as current transport demand and supply in the cost-benefits analyses already developed and, in case of divergences, those analyses show the gain or the loss of undertaking or of avoiding those investments not included in the “wish list”.
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In Table 1 twelve projects, included in the DGR 13 May 2008, n. 744, have been listed as they have been considered as priorities for the transport sector in the Apulian region by the regional administration. Financial resources allocated by using public funds are included in the second column of the table. The purpose of the regional Government’s investment is to improve passenger and freight transport, by renewing some infrastructures and removing some obstacles with the aim of improving quality, reliability and safety.
Project Local financial resources €
1) Conservative rehabilitation and 7.100.000,00 adaptation to the station's safety regulations 2) Construction of a vehicular and 7.500.000,00 pedestrian underpass for the elimination of level crossings
3) Construction of a vehicular and 8.000.000,00 pedestrian underpass for the elimination of level crossings
4) Construction of the pedestrian and 4.000.000,00 vehicular underpass for the elimination of the level crossing
5) Completion of the railway 13.608.679,76 connection
6) Extension of the railway connection 6.038.151,36
7) Landfill railway line 24.361.000,00
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8) Completion of local railway 29.900.000,00
9) Construction of a railway network 1.100.000,00 between docks
Construction of a railway network between docks
10) Interport: Industrial Area 40.000.000,00 connection axis
11) Interport: Support and take-over 25.000.000,00 bundle
12) Interport: Intermodal platform set 20.000.000,00 up
Table 1 – Selection of transport priority – Apulia Region In our exercise we have considered benefits, deriving from the realization of those investments, which are both qualitative and quantitative. They are perfectly in line with EU guidelines applied to the transport sector. Of course costs have been also included. These are fundamental to verify the actual priorities. Quantitative benefits: Benefits for users Environmental benefits Savings in terms of cost linked to the reduced use of cars Revenue generated directly from projects. The benefits derive from the sum of the aforementioned items, discounted with the 3.5% discount rate. Costs:
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Investment costs Costs generated by the realization of the investment, including the expropriations Operating costs related to the investment.
Qualitative benefits q1 provide a useful service for users q2 encourage land use for social purposes q3 improve environmental quality. Given these elements we have applied a multicriteria analysis (MCA). The form of the MCA technique used is known as a GAM method (Goal Achievement Method). The primary focuses of this method are linked to a selection of socio-economic objectives. The reason is to identify a single most preferred option and to rank options in a short list of a limited number of projects. Attributes considered in the MCA are presented in Table 2.
Goals 1- To explore the strength of the investment to provide a high quality public transport and/or haulage services 2- To support land use social and economic policy at regional and local level 3- To improve environmental quality 4- To promote sound project selection Table 2 – Attributes for the MCA analysis
If we consider the qualitative benefits, the results are the following based on the typology of the investment (Table 3).
Project Multicriteria analysis results (0 = negative impact; 1 = positive impacts that are difficult to reach; 2) few positive impacts; 3) possible positive impacts, 4) fully positive impact)
q1 q2 q3 total
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1) Conservative rehabilitation 1 1 1 3 and adaptation to the station's safety regulations 2) Construction of a vehicular 3 4 3 10 and pedestrian underpass for the elimination of level crossings 3) Construction of a vehicular 3 4 3 10 and pedestrian underpass for the elimination of level crossings 4) Construction of the 3 4 3 10 pedestrian and vehicular underpass for the elimination of the level crossing 5) Completion of the railway 4 0 2 6 connection 6) Extension of the railway 4 0 2 6 connection 7) Landfill railway line 1 4 3 8 8) Completion of local railway 4 1 4 9 9) Construction of a railway 4 0 1 5 network between docks 10) Interport: Industrial Area 4 0 2 6 connection axis 11) Interport: Support and take- 3 0 0 3 over bundle 12) Interport: Intermodal 4 0 0 4 platform set up Table 3 - Application of the multi-criteria analysis to the 12 investments
If we go further and apply the Weighted Integer Goal-programming (WIGP) results are those included in Table 5. In this case the goal deviation must be minimized in the sense that the objective function must be as close as possible to the "target value" or "aspiration level". Rigid budget constraint is the totally determined public contribution which must be below the total amount available. As for soft constraints for the different "goals" we consider all the qualitative and quantitative benefits. Finally weights are those which have been assigned to individual benefits. Anandarajah et al. (2004) estimated weights to be assigned to goal attributes, which are the ones we have used for our exercise (Table 4).
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Attributes Weights Users benefits 0.131 Safety and accident benefits 0.128 Environmental benefits 0.111 Car resource cost savings 0.105 Revenue 0.095 Quality goal 1 0.114 Quality goal 2 0.117 Quality goal 3 0.888 Table 4 – User assigned weight to the goal attributes
The WEIGP model allow us to determinate the economic benefits, inflows, total qualitative goal/score and total weighted benefits. In Table 5 the presence of economic benefits and of inflows are simply considered in term of presence. From there, it is evident that project which have mainly social impacts (those from 1 to 9) do not have revenues, and in contrast, the last projects (from 10 to 12) are those which generate positive inflows but are socially undesirable.
Projects Results of the WEIGP
Economic Inflows Benefits 1) Conservative rehabilitation and + adaptation to the station's safety regulations 2) Construction of a vehicular and + pedestrian underpass for the elimination of level crossings 3) Construction of a vehicular and + pedestrian underpass for the elimination of level crossings 4) Construction of the pedestrian + and vehicular underpass for the elimination of the level crossing 5) Completion of the railway + connection 6) Extension of the railway + connection
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7) Landfill railway line + 8) Completion of local railway + 9) Construction of a railway + network between docks 10) Interport: Industrial Area + connection axis 11) Interport: Support and take- + over bundle 12) Interport: Intermodal platform + set up Table 5 - Application of the Weighted Integer Goal-programming (WIGP) to the 12 investments.
If we combine the MCA results with the WEIPG model results the choice should be among the following projects (3, 4 and 5) in Table 6 which register the highest MCA results and the contemporarily presence of economic benefits.
MCA results WEIPG results – Economic benefits 3) Construction of a 10 + vehicular and pedestrian underpass for the elimination of level crossings 4) Construction of a 10 + vehicular and pedestrian underpass for the elimination of level crossings 5) Construction of the 10 + pedestrian and vehicular underpass for the elimination of the level crossing Table 6 – Combination of results, social sustainable projects
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On the other side, Table 7 shows a combination of results of MCA outputs and WEIPG results in terms of inflows. This indication can be considered relevant for private investors rather than for public bodies. Among the investments 10, 11 and 12 the first one should be chosen as it obtained the highest value from the MCA.
MCA results WEIPG results – Inflows 10) Interport: Industrial 6 + Area connection axis 11) Interport: Support and 3 + take-over bundle 12)Interport: Intermodal 4 + platform set up Table 7 – Combination of results, private sustainable projects
So, how to choose? It depends on the considerations we make about the factors which are decisional and on the relevant objective and context impacted. Of course when public funds are used by public authorities for projects, investments with the highest economic benefits have to be implemented without giving prominence to financial inflows or returns (Rokicki et al., 2018). Conclusions. In conclusion this paper has identified some issues related to transport infrastructure investment planning, where research and politics can and should work better together. First of all policy and research need clear ideas on goals and targets based on good information. Project data are often not collected or made available, while where the data that do exist allow some global and reliable analyses of investments. Investment planning methods have a number of defects. The most serious is a lack of transparency and not the fact that appraisal methods differ. We need better analysis and understanding of where planning might apply and how it could work effectively. In particular, for public authorities, it is always possible to set rational decisions for reaching social and sustainable effects by using combined methods which enforce the results quality. This can guarantee a better allocation of resources and ensure social desired results.
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References Ahern, A.-Anandarajah, G. (2007), “Railway projects prioritization for investment: application of goal programming”, Transport policy, no. 14, pp. 70-80. Anandarajah, G.-Ahern, A.-Tapley, N. (2004), “Intercity rail transportation quality and suggested improvements to increase the modal share of rail in Ireland, European Transport Conference Proceedings. Banister, D.-Thurstain-Goodwin, M. (2011), “Quantification of the non-transport benefits resulting from rail investment”, Journal of Transport Geography, no. 11, pp 212-223. Beuthe, M.-Eeckhoudt, L.- Scannella, G. (2000), “A practical multicriteria methodology for assessing risky public investments”, Socio-economic planning Sciences, vol. 34, pp. 121-139. Blauwens, G.-De Baere, P.-Van de Voorde, E. (2012), Transport Economics, De Boeck, Antwerpen. European Commission for Europe (2003), A set of guidelines for socio-economic cost-benefit analysis of transport infrastructure project appraisal, United Nations, New York and Geneva. Flyvbjerg, B. (2007), “Policy and planning for large-infrastructure projects: problems, causes, cures”, Environment and Planning B: Planning and Design, vol. 34, pp. 578-597. Flyvbjerg, B.-Holm, M.K.S.-Buhl, S.L. (2004), “What Causes Cost Overrun in Transport Infrastructure Projects”, Transport Reviews, vol. 24. No.1, pp. 3-18. Kiel, J.-Smith, R.-Ubbels, B. (2014), The Impact of Transport Investments on Competitiveness, Transportation Research Procedia, Vol. 1, Issue 1, pp. 77-88. Laursen, T.-Myers, B. (2009), Public Investment Management in the New EU Member States, The World Bank, World Bank Working Paper, no. 161. Tsamboulas, D.A. (2007), “A tool for prioritizing multinational transport infrastructure investments”, Transport Policy, no. 14, pp. 11-26. Rokicki, B.-Stępniak, M. (2018), Major transport infrastructure investment and regional economic development – An accessibility-based approach, Journal of Transport Geography, vol. 72, pp. 36- 49. Romero, C. (1991), Handbook of critical issues in goal programming, Pergamon press, Oxford, England; Short, J.-Kopp, A. (2005), “ Transport infrastructure: investment and planning. Policy and research aspects”, Transport policy, no. 12, pp. 360-367. Van de Voorde, E.-Vanelslander, T. (eds.) (2010), Applied Transport Economics, De Boeck, Antwerpen; Venezia, E. (2011), “Transport investments: are they crucial for the economic system?”, Int. J. Engineering Management and Economics, Vol. 2, no. 4, pp. 351-368.
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The alternative holiday in a sustainable way: l’Albergo Diffuso
Francesca Aura33, Caterina Aura34, Franco Rubino35
The idea of this Research work arises from a growing need in our society that is manifesting itself and that can be summarized in the following statement: “we must think of a new model of tourism, hospitality and hospitality, capable of generating cultural and economic wealth, with zero environmental impact, making it become in the panorama of the accommodation offer, the sustainable model par excellence”, which has been given little consideration for a long time. The model that reflects these characteristics is that of widespread hotel, trying to approve it on the basis of the values and culture of sustainability and enhancing its characteristics, so that restaurateurs and the environment parameters of sustainable tourism, focused on the recovery, protection and enhancement of territory, its traditions and peculiarities. Unfortunately, in many Italian locations this model appears to be poorly developed and widespread due to regulatory uncertainty. The aim of the paper is to investigate the issue of the common hotel, identifying its weak and feasible strengths. Key words: environmental, sustainable tourism, recovery, sustainability.
JEL calssification: Q01, Q10, Q55
1. Introduzione
L’idea di questo lavoro nasce dalla constatazione, che in alcuni contesti la crescita del turismo è accompagnata da forti criticità e confusione, soprattutto quando affrontiamo tematiche come quelle della sostenibilità, tanto da divenire argomento di discussione in ambito sociale ed accademico. Poiché gli scenari socio economici italiani stanno mutando verso pratiche o modelli di buona sostenibilità, di conseguenza anche il settore del turismo sta risentendo di questi cambiamenti. Il risultato di questa evoluzione produce delle ripercussioni evidenti sulla proposta
33Corresponding author: PhD, University of Calabria, DISCAG, Rende (CS) Italy, [email protected], Via P. Bucci 87036 Rende (CS) Italy 34PhD, University of Calabria, DISCAG, Rende (CS) Italy, [email protected], Via P. Bucci 87036 Rende (CS) Italy 35Professor, University of Calabria, DISCAG, Rende (CS) Italy, [email protected], Via P. Bucci 87036 Rende (CS) Italy
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dei servizi, da parte delle imprese turistiche, tant’è che questi ultimi stanno conformandosi, verso modelli sempre più innovativi, fondati su buone pratiche di sostenibilità, enfatizzando i temi della sistematicità della responsabilità sociale d’impresa e della tutela dell’ambiente, come l’albergo diffuso. Comprendiamo bene che oggetto del presente lavoro sarà lo studio dell’Albergo Diffuso, come nuovo ed autentico modello di “alternative holiday”. Obiettivo del lavoro, è quello di analizzare quanto l’Albergo Diffuso si rispecchi in pratiche di buona sostenibilità, inteso come vacanza alternativa a quelle esistenti nei tradizionali schemi delle offerte turistico-alberghiere. Inoltre capire perché questa tipologia di ospitalità originale, che si distingue dalle altre, in Italia sia diffusa e concentrata prevalentemente al centro-sud del paese, mentre restano meno prevalenti le realtà attive nelle regioni del nord, Toscana a parte36.Il turista, più esigente richiede un servizio caratterizzato da un elevato livello di qualità, (Orlandini et al 2012)37, e un uso efficiente e sostenibile delle risorse. Nonostante sia da pochi anni oggetto di studio, sia dagli aziendalisti, dai sociologi, da decision maker,e nonostante il fenomeno sia ancora in costante evoluzione, vi è ancora un gap nella letteratura riguardo alla sua validità, come esempio di valorizzazione del territorio in cui sorge, mostrando i suoi effetti dal punto di vista della sostenibilità. Inoltre dagli studi presenti in letteratura emergono molte carenze informative, dettate dalla mancanza o dalla scarsa omogeneità dei dati presenti nel tessuto territoriale italiano, dovute in parte alle differenze di territorio che non accomunano le regioni ed alla mancanza di una legislazione ad hoc.
2. L’Albergo Diffuso: sostenibilità e turismo alternativo I primi approcci sull’idea di Albergo Diffuso (AD), risalgono alla fine degli anni 70,e mostrano che lo stesso aveva come obiettivo, quello di sfruttare antichi ruderi e case vuote38.Il primo documento che tratta del termine Albergo Diffuso è il progettodi Comeglians (Borgo Maranzanis) del 1982, firmato dall’architettoCarlo Toson e nato da un’idea di Leonardo Zanier, poeta e scrittore.
36albergodiffuso.com 37Orlandini et al. (2012) Sustainability and Innovation in Tourism Services: The AlbergoDiffuso Case Study. 38libro
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La prima idea di Albergo Diffuso era semplicemente quella di utilizzare a fini turistici delle case vuote, appena ristrutturate grazie ai fondi del post terremoto del Friuli del 197639. L’Albergo diffuso nello specifico, indica un modello d sviluppo sostenibile, orientato allo sfruttamento e all’utilizzo di quelle che vengono definite tecnicamente risorse locali, che possono essere sia tangibili (piccole imprese, patrimonio culturale, agricoltura e artigianato), che intangibili (know-how, tradizioni, cultura, legami sociali). Negli ultimi anni nel modello della Strategia Europea, tra le priorità contenute si trova quella di valorizzare il turismo in chiave di sostenibilità, ed è proprio il modello dell’albergo diffuso che sodisfa pienamente come mezzo di strategia di sviluppo sostenibile questo obiettivo imposto dalla Commissione Europea in quanto, esso punta al raggiungimento di alcuni risultati. In particolare, favorisce lo sviluppo economico in quanto rivitalizza e valorizza contemporaneamente quelle attività già esistenti in natura ma che devono essere recuperate; inoltre diventa modello di equità e coesione sociale, migliorando la qualità della vita dei tessuti locali abbassando i livelli di inquinamento l’imbarbarimento e il deterioramento dell’ambiente dando la possibilità ai turisti di vivere esperienze qualitativamente migliori. Questa forma ricettiva, tra le altre cose permette di offrire un servizio alberghiero completo, creare e sviluppare nuovi posti di lavoro, diventando volano di rilancio per l’economia reale dei paesi. L’albergo Diffuso, può prevenire lo spopolamento e l’abbandono di luoghi ricchi di storia e arte, lo sviluppo economico delle piccole città e mira ad aumentare l’occupazione locale, senza incidere negativamente sull’ambiente o contaminare la cultura o l’identità locale, (Pellizzoni e Osti, 2003). L’Albergo Diffuso può essere definito come un albergo orizzontale, situato in un borgo o in un centro storico, con camere e servizi dislocati in edifici diversi, seppure vicini tra di loro. L’Albergo Diffuso è una struttura ricettiva unitaria, gestita in forma imprenditoriale, che si rivolge ad una domanda interessata a soggiornare in un contesto urbano di pregio, autentico, a contatto con i residenti, usufruendo dei normali servizi alberghieri. L’ AlbergoDiffuso è una tipologia di recente diffusione in Italia ed Europa, nata dall’idea di utilizzo a fini turistici delle case vuote ristrutturate coi fondi del post terremoto del Friuli (1976). Il modello di ospitalità “Albergo Diffuso” è stato messo a punto da Giancarlo Dall’Ara, docente
39D’Allara, (2015) Il manuale dell’albergo diffuso. L’idea, la gestione, il marketing dell’ospitalità diffusa. Franco Angeli.
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di marketing turistico ed è stato riconosciuto in modo formale per la prima volta in Sardegna con una normativa specifica che risale al 199840. Tale formula si è rivelata particolarmente adatta per borghi e paesi caratterizzati da centri storici di interesse artistico ed architettonico, che in tal modo possono recuperare e valorizzare vecchi edifici chiusi e non utilizzati, ed al tempo stesso possono evitare di risolvere i problemi della ricettività turistica con nuove costruzioni.L’albergo Diffuso è in primo luogo un albergo, e non va confuso con altre forme di ospitalità diffusa; in altre parole non tutte le forme di ospitalità diffusa sono “Alberghi Diffusi”. L’Albergo Diffuso è la grande occasione per il sistema di offerta italiano, di sperimentare e proporre ai mercati della domanda stili di ospitalità originali, nei quali proporre il proprio approccio ospitale, la propria cultura dell’accoglienza, senza prendere in prestito procedure e modalità gestionali standard41. L’idea era sicuramente fondata su strategie di marketing orientate allo sviluppo territorialeche non tenevano conto della parte più importanteil cliente. In effetti l’attenzione di una parte di parte della domanda dei turisti, clienti/fruitori dell’albergo diffuso ricade sui contenuti di sostenibilità e rispetto dell’ambiente. È come se i clienti fruitori del servizio vivessero in un paese albergo, in cui spiccano piccoli borghi e centri storici o nuclei di antica formazione.
3. L’AD nel quadro di riferimento Europeo Sevolessimo definire un framework teorico di riferimento per il modello di AD dovremmo accostarci ai contenuti della strategia europea, fornitaci dalla Commissione Europea. Dal punto di vista normativo a seguito dell’entrata in vigore del Trattato di Lisbona nel Dicembre 2019,il turismo entra a far parte degli obiettivi dell’UE, che potrà agire a sostegno delle iniziative degli stati membri senza sostituirsi alle loro competenze, proprio nel settore del turismo. In particolare l’Unione Europea può sostenere gli Stati membri per la promozione della competitività delle imprese che lavorano in questo ambito. Contemporaneiste l’Unione Europea acquisisce una competenza supplementare per la promozione del turismo mediante l’individuazione di obiettivi tra cui la creazione di un ambiente favorevole per lo sviluppo delle imprese del turismo e la promozione della “cooperazione tra gli Stati membri”, in particolare nello scambio delle migliori
40www.alberghidiffusi.it 41https://www.albergodiffuso.com/l_idea.html
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pratiche42. In particolare lo sviluppo di questa tipologia di impresa viene coadiuvato e favorito da diversi programmi europei di finanziamenti contenuti nell’ultima programmazione europea 2014- 2020. Periodicamente la Commissione Europea provvede ad aggiornare annualmente la guida ai fondi per lo sviluppo sostenibile.
4. Le caratteristiche dell’Albergo Diffuso Se consideriamo il turismo in termini sociologici possiamo definire l’Albergo Diffuso, come un fenomeno sociale che non può mai essere statico, in quanto si evolve con dinamicità contemporaneamente all’educazione e ai cambiamenti della società alle sue tradizioni e costumi ai suoi valori e nella sua entità. Infatti negli anni le esigenze degli avventori, sono cambiatesi è passati da un turismo del dopoguerra, dove il turista era poco esigente e l’unica cosa che contava era andare in vacanza indipendentemente da luogo e dal mezzo di trasporto, ad una nuova generazione di turisti, dove il turista definito “aumentato” possiede gli strumenti e la passione per scegliere la meta ideale verificarne le informazioni controllarle, confrontarle, e paragonarle in tempo reale43. Nel 1976 un forte terremoto distrusse molti edifici in Friuli Venezia Giulia, da qui nascono i primi rudimenti verso il concetto di Albergo Diffuso. Bisogna aspettare il 1982 per poter usare il termine “Albergo Diffuso”, in riferimento ad un progetto di valorizzazione turistica del borgo di Comeglians (UD), il “Progetto Pilota “Comeglians”, la cui direzione e coordinazione fu affidata al consulente esperto di turismo e di ospitalità alberghiera Giancarlo Dall’Ara.Con l’ambizione di creare «un sistema per gestire il territorio, appoggiarlo, animarlo, pianificare e coordinare varie attività nel settore turistico, ambientale e artigianale in modo da valorizzare il comprensorio locale» (Droli Marangon e Troiano 2013). Il nome “Albergo Diffuso” indica una sintesi descrittiva del modello, formato da una serie di edifici, appartamenti o case, che sorgono in un determinato territorio, adoperate a scopi turistici ed assimilate dalla fornitura di servizi ed attività turistiche, da queste considerazioni nasce il nome “l’Albergo Diffuso”. Si tratta sostanzialmente di una struttura ricettiva alberghiera sviluppata in
42unioncamere.net 43Dall’Ara G. (2015). Il Manuale dell’albergo diffuso, Franco Angeli
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senso orizzontale, allargata al territorio rurale che si intende valorizzare ed integrata con la realtà socioculturale e naturalistica del luogo (Paniccia, 2012). Un modello di albergo volto a rappresentare un ‘motore’ per lo sviluppo territoriale, culturale valorizzando le specificità della realtà italiana, (Dall’Ara, Esposito, 2005). Legge Regionale della Sardegna L.R.S. n. 9/1998.3 è la prima norma che regolamenta l’AD. Si tratta di un modello alberghiero “esportabile” in numerose realtà europee, che nasce come attrattore di sviluppo in rete, genera filiere e potrebbe risolvere l’ormai comune problema dello spopolamento dei borghi antichi, contribuendo alla valorizzazione di beni pubblici quali, storia, cultura, risorse naturali, infrastrutture. (Villani Dall’ara 2015). Attualmente l’Albergo Diffuso (AD) è previsto (e disciplinato) da tutte le Regioni italiane e gli esempi realizzati sono numerosi44, (Villani Dall’ara 2015). Se volessimo fare una semplice distinzione tra un tradizionale modello di albergo e un AD, dovremmo anzitutto pensare ad un tipo di ospitalità orizzontale. Dobbiamo immaginare che al posto di un unico edificio in cui sono ubicati i vari servizi nella struttura alberghiera, si trovano più unità abitative diffuse sul territorio, perfettamente integrate nella cultura e nel tessuto della comunità locale. Per essere più precisi nel definire la sua struttura e le sue peculiarità, definiamo brevemente i suoi requisiti. Affinché esista un albergo diffuso devono esserci le seguenti caratteristiche che gli attribuiscono la qualità di identità riconoscibile per ogni unità: - Vivere quotidianamente con terze persone in un certo luogo e condividere gli stessi spazi e luoghi di altri utenti che vivono in quello stesso luogo; in altri termini servizi alberghieri e ambienti comuni, questo significa che gli edifici non devono essere molto distanti tra loro, per consentire la condivisione degli spazi comuni. Questo determina la creazione di una comunità locale viva e attiva - Forte legame con il territorio in cui è ubicato, con la sua cultura, le sue tradizioni e costumi. - Gestione unitaria tipica del tradizionale hotel, con metodo professionale e contemporaneamente amichevole e famigliare. - Ambiente originale ed attrattivo anche dal punto di vista estetico
44 Villani Dall’Ara (2015),L’Albergo Diffuso come modello di ospitalità originale e di sviluppo sostenibile dei borghi.
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Il coesistere di tutte questi elementi determina il fulcro o nucleo centrale dei servizi offerti.
5. Le tre dimensioni dell’Albergo Diffuso Il mondo del turismo sostenibile è in continua evoluzione e le novità sono tante; una di queste è rappresentata dall’albergo diffuso. Sostenibilità e turismo sono due elementi essenziali e complementari tra di loro quando parliamo di Albergo Diffuso, sostenibilità e turismo sono due concetti che devono essere interconnessi per ottenere un’organizzazione territoriale efficiente che copra i bisogni dei turisti della comunità esistente di professionistiindividui in genere, in un approccio di generazioni, (Vallone et al., 2013). Nella formula dell’ospitalità diffusa che funge da volano e sviluppo sociale di un intero territorio non bisogna trascurare quelle che sono le tre dimensioni sociali della sostenibilità. Quindi non solo attenzione all’ambiente che costituisce una delle tre dimensioni della sostenibilità insieme a quella economica e sociale. In effetti nel settore del turismo e nel nostro caso dell’AD lo studio della sostenibilità richiede un’attenta analisi basata sul “triple bottom approach”: dimensione economica sociale e ambientale. Dalla letteratura esistente emerge nel lavoro di (Vallone C. Veglio V. 2014)che l’approccio sostenibile ci consente di contenere gli impatti negativi massimizzando quelli positivi. Un turismo non orientato alla sostenibilità economica può causare impatti negativi perché destabilizzerebbe l’economia locale a causa della stagionalità dei flussi turistici. Potrebbe causare inflazione a causa della presenza di turisti che potrebbero alterare gli indicatori economici ecc. Al contrario un turismo oriento alla sostenibilità economica favorirebbe lo sviluppo dell’occupazione nei settori legatoi direttamente o indirettamente al turismo, avendo effetti e ripercussioni positive su tutto l’economia locale, migliorando anche i servizi e le infrastrutture che a loro volta migliorerebbero la mobilità interna. Gli effetti sulla sostenibilità sociale del turismo potrebbero essere la perdita di autenticità delle tradizioni locali nelle attività commerciali, il degrado artistico e culturale nell’uso improprio delle risorse e i potenziali conflitti tra turisti e residenti, nell’utilizzo delle strutture e dei servizi nei periodi di maggiore concentrazione del turismo. Al contrario se il turismo guardasse alla dimensione sociale con occhio positivo, si avrebbe il recupero delle tradizioni locali, rispettando
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tradizioni e valori, conservazione del patrimonio locale, miglioramento di servizi e infrastrutture pubbliche al fine di assicurare una maggiore apertura e scambio di culture diverse. Molto importante è la terza ed ultima dimensione, quella legata all’ambiente; se l’industria del turismo non usasse un approccio sostenibile nella dimensione ambientale, il patrimonio ambientale quale principale attrazione di una località turistica ne uscirebbe minacciato e danneggiato avendo effetti negativi: degrado ambientale, difficoltà nello smaltimento dei rifiuti, uso eccessivi di risorse limitate come l’acqua l’energia ecc. Al contrario se il turismo guardasse all’ambiente, in termini di sostenibilità con un approccio positivo avremmo sicuramente un impatto positivo; si assisterebbe ad un migliore utilizzo delle risorse naturali, conservazione di siti storici e naturali. E protezione dell’identità dei luoghi.
6. Vantaggi dell’Albergo Diffuso e condizioni necessarie alla sua creazione Dall’albergo Diffuso si genera una cascata di effetti positivi, esso viene decritto come un prodotto turistico di alta qualità, che permette la conservazione dell’espressione artistica di aree locali e territori senza generare impatti ambientali negativi, nessun impatto ambientale dovuto a nuove costruzione ma solo la valorizzazione delle case esistenti. Con l’Albergo Diffuso si contribuisce a: • sviluppare e pubblicizzare l’offerta turistica locale di borghi piccoli e poco conosciuti ma interessanti e preziosi sotto il profilo artistico e culturale; • aumentare e sviluppare il turismo sostenibile nelle aree interne, nei villaggi e frazioni e nei centri storici; • Contribuire a fermare l'abbandono dei centri storici. Rientrano tra le condizioni necessarie per creare un AD: • Servizi di base: struttura presente in un luogo con particolari caratteristiche rilevanti per cultura e arte; • Programma per la rivalutazione del territorio: servizi e infrastrutture favorevoli, eventi con temi diversi, itinerari (su storia, cultura, ambiente); • attività aggiuntive ai servizi della tradizionale forma di hotel, quali: trekking, baby-sitting ecc.; • specifiche risorse uniche nel territorio: che consentano le relazioni interpersonali, disponibilità di edifici disabitati; • necessaria presenza dei servizi di base quali, ufficio postale, negozi, bar, rete di comunicazione;
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• · volontà degli attori locali alla collaborazione ad esempio attraverso una struttura unica che servirà per la ricezione e altri servizi che dovrebbero essere presi in considerazione da chiunque. Ormai in Italia e nel mondo il fenomeno dell’Albergo Diffuso è molto sviluppato, si contano circa 120 strutture italiane, ciò è dovuto alla forte presenza di arte e cultura che offre il nostro territorio, nell’immagine che seguirà è possibile capire quali numeri faccia l’Italia e come il fenomeno sia distribuito. La realtà che appare dai dati circa la diffusione dell’Albergo Diffuso però mostra un numero molto elevato di richieste per la realizzazione dell’albergo diffuso circa 500, ma solo 120 realizzati; il tutto è legato probabilmente alla burocrazia ed alle normative che non semplificano le cose.
Fig. 1presenza di alberghi diffusi in tutta Italia: Fonte: (Paniccia P. Leoni L. 2015)
REGIONE N. REGIONE N. REGIONE N.
Sicilia 7 Lombardia 5 Emilia Romagna 5
Calabria 5 Piemonte 5 FriuliVenezia 6 Giulia
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Basilicata 5 Liguria 3 Trentino Alto 3 Adige Puglia 7 Toscana 17 Valle D’Aosta 0
Molise 9 Umbria 12
Abbruzzo 2 Lazio 11
Marche 11 Campania 9 Veneto 6 Sardegna 8
Tabella n.1. Distribuzione dell’Albergo diffuso in Italia 7. Materiali e metodi a) Perché gli AD si concentrano di più al Centro Sud e non al Nord. Per rispondere a questo tipo di ipotesi, abbiamo analizzato i diversi tipi di albergo diffuso esistenti in tutte le Regioni italiane, i territori in cui sono ubicati e la loro morfologia: - se montani, collinari, - se posti vicino a laghi e fiumi, se collocati in prossimità di località di mare, - se vicino a zone periferiche o vicini a centri culturali o storici di paesi, o cittadine di modesta o grossa dimensione, - se immersi direttamente nella natura o a pochi passi da boschi o zone impervie e rocciose, - se il luogo in cui sorgono è stato soggetto a terremoti o calamità naturali, - se facilmente raggiungili su strada o con mezzi pubblici, se vicino ad aeroporti o porti. b) Il contesto legislativo agevola e favorisce il sorgere di nuove realtà di AD A parte qualche eccezione le regioni italiane sembrano aver accolta l’idea dell’albergo diffuso controvoglia emanando normative incomplete e finendo per complicare la vita di molte imprese45. Uno degli esempi più palesi è quello della regione friulana in cui la legge autorizza reti di case lontanissime tra loro a fregiarsi del titolo di albergo. E questo è uno dei tanti problemi delle normative collegate all’Albergo Diffuso. Ecco perché secondo gli ultimi dati forniti da alberghidiffusi.it emerge che a fronte di quasi 500 progetti di albergo diffuso, siano stati realizzati solo 120. È evidente che normative, e leggi sono state fino ad oggi l’ostacolo più grande.
45www.albergodiffuso.com
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8. Risultati Quello che dallo studio della morfologia regionale italiana di ogni singolo “Albergo Diffuso” è emerso è veramente sorprendente. Alla luce degli studi effettuati e della letteratura esistente, le ragioni che giustificano la maggiore presenza di AD in territori del centro sud Italia è spesso dimostrata dal fatto che: - in molti casi in queste aree, specie del sud, molto più arretrate e con un potenziale di sviluppo economico abbastanza mediocre, dove ci sono poche opportunità e sbocchi lavorativi per i giovani, la possibilità di inventarsi un lavoro e creare e fare impresa, (in questo caso impresa turistica), può essere un’ottima opportunità. L’AD diventa quindi volano per rilanciare il tessuto socio- economico del territorio, un modo per creare posti di lavoro e opportunità di sviluppo nel territorio coinvolto. Questo si può fare con più facilità grazie ai diversi finanziamenti presenti in materia. - altra giustificazione che prova la maggiore concentrazione di AD al centro Sud, specie nell’ultimo decennio, è attribuibile al fatto che la maggior parte di calamità naturali come i terremoti, si è manifestata in territori del centro sud, (si veda ad esempio il caso della citta di Aquila, afflitta dal terremoto nel 2009, o quello di Amatrice, messa in ginocchio dal terremoto del 2016, o ancora in Irpinia colpita dal terremoto negli anni ’80). - Negli ultimi decenni, molte delle persone che vivevano al sud (nei tempi del dopoguerra, specie nel periodo delle grosse ondate migratorie), hanno lasciato le loro città e i loro vecchi borghi, partendo per trovare fortuna e lavoro in grossi centri urbani del nord o addirittura in paesi come gli Stati Uniti, Canada, ecc.Negli ultimi anni sono ritornati per ricostruire le loro vecchie case abbandonate da tempo, trasformandole in AD. Grande attenzione è dedicata a preservare la tradizione delle caratteristiche case, vecchi e nuovi edifici; preservare con il bigottismo la loro tradizione costruttiva di secoli fa. In merito al contesto legislativo che regolamenta la nascita e la gestione di queste strutture invece possiamo dire che di strada ne è stata fatta ma ancora bisogna perfezionare.
9. Conclusioni Dopo aver effettuato un’attenta analisi della letteratura sullo stato dell’arte del fenomeno dell’AD si constata la forte carenza di indagini empiriche su questo particolare fenomeno, nonché difficoltà di un suo inquadramento dal punto di vista pratico e teorico, capace di comprenderne tutti i possibili aspetti e realmente applicabile in campo pratico (P. Paniccia, 2012).
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I risultati emersi dall’analisi della letteratura e dalla ricerca, indicano che dal punto di vista delle politiche territoriali i risultati conseguiti evidenziano, che il ruolo di supporto delle istituzioni sia pubbliche che private non si dimostra ancora abbastanza, pur a fronte di uno scenario nazionale e internazionale molto più completo rispetto al passato. Giunti alla fine di questo lavoro, ci rendiamo conto ancora oggi, a distanza di decenni da quando ha fatto comparsa il primo prototipo di AD (1976), che in molti ignorino cosa sia un albergo diffuso. Come giustifica G. Dall’Ara, nel luglio 2017, in uno dei suoi tanti articoli sull’argomento, non è uno svantaggio, “visto che siamo ancora pochi non abbiamo bisogno di milioni di turisti, e spiegare cosa è un AD, ad una persona che non lo conosce, è un vantaggio perché fa percepire la proposta sempre come qualcosa di nuovo. E spiegare cosa davvero è un AD, è una esperienza esaltante! Ogni gestore di AD sperimenta tutto questo da anni. Tale è il fascino che il modello interamente italiano di un albergo che non si costruisce, che offre tutti i servizi alberghieri, che mette in rete il territorio e che si basa sulla passione del gestore..., esercita sugli interlocutori e sui turisti”.
10. Bibliografia Dall’Ara G., (2011), Manuale dell’Albergo Diffuso, Franco Angeli Editore. Dall’Ara G., Marongiu P. (2003), “Report sul fenomeno dell'albergo diffuso in Italia” Rapporto sul Turismo italiano, Mercury Firenze, novembre. Dall’Ara G., Esposto M. (2005), “Il fenomeno degli alberghi diffusi in Italia”Palladino Editore, Campobasso. Dall’Ara G. (2009) “Un modello originale di sviluppo turistico dei Borghi: l'Albergo Diffuso”, in“Come progettare un piano di sviluppo turistico territoriale” a cura di Dall'Ara G. Halley Editore, Matelica. Dall’Ara G. (2006) Come progettare un piano di sviluppo turistico territoriale, Halley. Dall’Ara G. (2009).Le nuove frontiere del marketing turistico, Franco Angeli, Milano. Dall'Ara G.(2009) Come progettare un piano di sviluppo turistico territoriale, Halley. Dall’Ara, Villano. (2015), L’Albergo Diffuso come modello di ospitalità originale e di sviluppo sostenibile dei borghi, Ricerca E Sperimentazione Droli M., (2007) “Tuscia romana, area Ausoni: l’individuazione delle località più adatte ai fini della creazione di un Albergo Diffuso”, in: “Albergo Diffuso come strumento innovativo per la valorizzazione del potenziale turistico Quaderno BIC Lazio, n.4, pg.49-72, dicembre, Roma. Droli M., Dall’Ara G. (2012) “Ripartire dalla Bellezza. Gestione e marketing delle opportunità di innovazione nell'Albergo Diffuso, nei centri storici e nelle aree rurali”, Collana Scienze Economiche, Edizioni universitarie CLEUP, Padova. Ejarque, J. (2003), La destinazione turistica di successo. Marketing e management, Hoepli Paniccia et. Al (2017), Co-evolution in tourism: the case of Albergo Diffuso, Current Issues in Tourism.
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Paniccia P. (2012), Nuovi fermenti di sviluppo sostenibile nel turismo: l’esempio dell’ “albergo diffuso”, Impresa Progetto Tomer J.F. (1987), Organizational capital: The path to higher productivity and well-being, Praeger, New York. Touring Club Italiano (2011), Albergo Diffuso. Un po casa e un po albergo. Suggerimenti e propose selezionate per un turismo sostenibile, Touring Editore, Milano. Orlandini et al. (2012) Sustainability and Innovation in Tourism Services: The AlbergoDiffuso Case Study. Vallone C. Veglio V. (2014), La valorizzazione del patrimonio artistico come driver per lo sviluppo del territorio: il caso dell'albergo diffuso Franco Angeli Villani Dall’Ara (2015), L’Albergo Diffuso come modello di ospitalità originale e di sviluppo sostenibile dei borghi Weick K.E. (1979), The Social Psychology of Organizing (2nd edn), McGraw-Hill, New York. WernerfeltB. (1984), “A resource-based view of the firm”, Strategic Management Journal, n. 5, pp. 171-180. WernerfeltB. (2011), “The use of resources in resource acquisition”, Journal of Management,
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Increasing Inequality-The real Problem Nowadays in Albania. Gaqo Tanku46 Piro Tanku47
Abstract Income and wealth inequality has been a problem that has always existed. Recently it has become and is becoming a subject not only of media but also a lot of publications and research studies all over the world from the economic and social studies point of view. Debates about deepening inequality in general and inequality in income and wealth in particular are becoming increasingly acute. It is intended to shed light on the negative effects of the deepening of inequality, the causes of this deepening, convergence and diverging forces against inequalities, and the appropriate measures that might be worth taking to counter extreme polarization. At the core of the paper are the concepts that “Equality means that individuals equally enjoy the benefits, opportunities, resources and social privileges that opportunities and chances are equal.” Equal to a society in general and to a particular enterprise, we will understand the institutionalized equality of what the laws and legal acts that support such equality.
Keywords: Inequality, Equality, Media, Assets, Entrepreneurship, Laws, Legal Acts.
Introduction Concepts of Equality Equality means that individuals enjoy the benefits, opportunities, resources and social privileges equally, so in short, chances and posibilities to be equal for everyone. (OECD, 1998). Equality presupposes a human security, where the primary goal is to provide the conditions for all people in order to exploit and expand their opportunities, solutions and skills, being free from insecurity. Equality in a society in general and particular to an enterprise, we will understand the institutionalized equality according to laws that support this equality. (Ulrich, D, 1997). The principle that all human beings have equal rights and should be treated equally is the basis of human rights, which is based on the equal human dignity of each individual. In this context, equality must be among the highest priorities in the human security agenda. Here is the
46 University "Aleksander Moisiu" Durrës 47 University "Aleksander Moisiu" Durrës
147 ECONOMIC POLICY AND EU INTEGRATION fondamental base for equal treatment of each individual, as individuals are different in terms of intellectual, educational, professional knowledge. By this point of view equality between individuals in a society, is equality that presupposes inequality. The point of analysis is to determine what kind of individuals’ income redistribution can avoid inequality, what policies should be applied to improve education, training, salaries and measures to prevent discrimination, strengthen unions and establish payroll system (Th.Pikkety). Among employees the feeling of inequality affects their attitudes and behaviors. It can lead to job shortages, lack of motivation, lack of interest to produce gooods of heigh standarts or to offer good service, lack of engagement at work, etc. Every manager should motivate employees equally, not distinguish them, because the behavior leaves employees to understand what tasks they should perform and how to perform them. Motivation is an internal drive to satisfy an unhappy need. (Higgins, 1994). The common motives of all employees are: to increase personal income based on their work, theirs interest in work and to theirs further progress. The laws of Labor and Human Rights Laws, as well as wage and pension adjustments, reflect government efforts to ensure fair treatment of employees. Today there are laws that protect the firing of employee from work. The theory of human capital is used to explain pay inequality as a result of the phenomenon of globalization. How could a small amount of output of manufactured goods and services, be responsible for a huge increase in pay inequality? Inequality of Human Capital is the primary cause of pay inequality. So the more investing in human career and studies, the deeper is the difference with the lowest level in this human capital. So the investment the each individual has made or the length of their studies shows this difference in payroll systems compared to ordinary workers. For example, a doctor has made a long investment in studies and the work load is paid 10 times more than ordinary workers. The level of education can only be explained by one word; inequality in pay. (Th. Pikkety). According to media reports on economy (TV Klan), 3.7% of depositors in Albanian banks have more than half of the money. By the end of 2017, this inequality was further increased, based on the report submitted to the Assembly by the Deposit Insurance Agency. This number of individuals having money in banks owns a fortune at $ 5.3 billion, at the time that savings in banks have grown at a low rate, just 0.8% compared to the previous year. The average perennial of deposits in banks is 6.3%. In total there are 92 thousand individuals who have more than half of the wealth, while
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the rest of the nearly 2 million and 300 thousand depositors share the $ 3.9 billion cake. In total, the value of deposits in the Albania Banking System is to 9.2 billion dollars. In 2016, 4% of households accounted for 45% of total deposits, the value of which amounted to $ 5 billion. While a Bank of Albania study found that the largest growth rate of savings had business accounts, while the top 10 depositors accounted for 6.1% of total accounts. Global Impacts. Globalization has increased overall wealth and has enabled developing countries to achieve unprecedented economic success. The proliferation of investment, trade and communications networks has increased interdependence and it’s potentially peacemaking effects and has helped non-democratic states to open. At the same time, globalization and the digital economy, from which it depends, are the main source of the crisis. De-industrialization and business transfer, global trade and the collapse of fiscal equilibrium, excess capital and credit and real estate crises - are consequences of globalization that are causing hardships and insecurities unrefined for entire generations. For the overwhelming majority of the population over the last two decades, middle-class incomes in the world's major democracies have been in stagnation and economic inequality has risen sharply, while globalization has rewarded the winners well, but has left behind many of his losers. According to Daniel Alpert and Robert Hockett, in their study "The Way Forward", wages in stagnation and rising of inequalities are the result of the integration of billions of low-wage workers in the global economy and increased productivity stemming from implementation of IT technology in the manufacturing sector. Over the past two decades, middle class income in most of the major European economies has been declining and inequality is growing. Shrinkage figures for the middle class reach 13%. Europe's massive population has emigrated an economic need (The clash of Ideas, 2011, p. 358). Income and wealth inequality has been a problem that always has existed, but recently it has become and is becoming increasingly subject to not just media but also publications and studies anywhere in the world and why not in our country. And there is no way to do it when on media we are listening news: Eighty richest people in the world check for $ 1.9 trillion, which is actually the amount that 3.5 billion people have on the other side of the spectrum. It's unbelievable that 80 people have 3.5 billion people's wealth. Another media would write “Scary what's going to happen to the wealthy within a few years”. One percent of the richest of the world will look around 2/3 of
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all the Globe's assets by 2030. This was the essence of a report drafted by the Library of the House of Representatives, the body of scientific research at the British House of Commons. The global elite already controls about 50 percent of the wealth around the world, but this will increase dramatically, according to a study published and commissioned by the British Labor Party. But this is not just sensational media issues. A noteworthy impetus has been the publication of Thomas Piketty's “CAPITAL, IN THE TWENTY-FIRST CENTURY”. This study itself is a product of the fact that at the end of the last century and the beginning of this century, inequalities have increased considerably in rich countries and former socialist countries. The highest tax on the rich, reducing the gap of inequality, became one of the main leitmotifs of political parties during the election campaigns in many countries around the world, including our country. Meanwhile, people are unequal in their skills and the products and values that they create and produce, even at the same start. Income and wealth inequality in this respect is how natural it is and why not as such, as the counterpart of equalization. If in the former socialist economies, the accumulation of a part of the social product or national income was centralized in cooperatives, enterprises and above all in the government, to be used for expanded reproduction, capital investments, development of the country, now in market economy conditions are carried out by individuals, who, in order to enable these investments other than income, should provide adequate income and capital to make investments in the country's economic and social development. As such, with the transition from the socialist to the market economy, the deepening of inequality was not only and is not in heresy. When it comes to inequality in income and wealth, the synthetic indicator is the Gross Domestic Product per capita. Based on this indicator, the World Bank classifies the countries into three main groups: a) High-income countries with a level of GDP per capita higher than $ 12,000 a year b) Middle-income countries with a per capita GDP of over $ 1000 to $ 12,000 a year. c) Low-income countries with GDP per capita up to $ 1,000 a year or up to $ 3 per day. If the world's population is over 7 billion people, 1 billion are in the first group or with an average annual income of over $ 12,000, 5 billion middle-income and 1 billion low-income or under $ 1,000 year. Meanwhile, the second group is divided into two subgroups, including peoples with revenues ranging from $ 1,000 to $ 4,000 and from $ 4,000 to $ 12,000, divided by almost half a half or 2.5 billion each in each subgroup. Even within the low income group (the group of poor countries), there are differences where countries are not only poor but also like illness, education
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level, etc. are at very bad situations. Their population is vulnerable to droughts, conflicts, violence etc. The Difference between Urban and Rural Population. One of the main differences in inequality in income and wealth is the difference between the Urban and the Rural Population. When it comes to economic development and the nature of inequality, it is important to see how much of population is on rural area, where income comes mainly from agriculture and how much it lives in the urban area. In general, rural residents are poorer and this has its effects on the inequality of income/wealth. The experience of developed countries proves that with the economic development, the percentage of the population living in urban areas increases and decreasing the percentage of employees employed in agriculture, and increasing the percentage of those in the industry or other branches of economy. The urbanization process is a co-founder of economic development. In any case, before any measures are taken to narrow the inequality, the nature, the essence, the causes and its consequences must be recognized. When we talked about inequality of income, the link and difference of poverty must take into considerations. Poverty and the poor people have to do with that subgroup of people below a certain level of income, that are not able to provide the most vital things of living, while inequality in turn describes the gap between the poor and the rich. The standard attitude is that the population, households, individuals, and income are divided into 5, and 10 or 100 subdivisions, indicating that each one owns one of these groups, in the distribution of total income. So in the U.S. where for years there are statistics by using the subdivision into five groups, it turns out that in 1975, the first group representing one fifth of the lower-income households had 5.6% of income, another fifth had 11.9 %, the other one 17.7%, another part 24.2%, and the last 40.7% of incomes. In 2000, these indicators were respectively 4.3%, 9.7%, 15.4% 22.7% and 47.7%. It is interesting to see at the same time the burden of paying taxes (income tax, social insurance contribution, corporations tax), which were respectively 1.1%, 4.8%, 9.8% 17.4% and 66.7% in 2000 (the latter in the year 1980 paid 56.3%), so wealth has become larger, while the poorest groups narrower in the distribution of income. The fact is that 5% of households owning 14.9% of their income in 1975, while in 2000 they accounted for 21.1% of their income, so more than 40 percent of the first and second family groupings mentioned above. They paid in 2000, 41.4% of the federal tax from 28.7% in 1980. The above shows that inequality has been deepened even in terms of progressive tax enforcement or increased tax burden that the richest pay. Therefore it is required that this issue
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should not be simplified or politicized, but to shed light on the consequences and effects of deepening inequality, their causes and their nature. This is not done in general, but there are choices in every place and within different time periods. The researchers talk about the actions of factors such as structural changes in the economy that relate to the role of information technology and the internet, changes in the labor market and the role of trade unions, changes in international trade, and the increase of single parent households psychological factors in the attitude towards inequality. Bearing in mind the factors and causes that have influenced and affect the deepening of inequality or narrowing them, sheds light on the measures that can be taken in the future.
Developments and their Effect on Income Inequality. Average income performance, but also the possibility of narrowing inequality, depends on the performance of GDP, a connection that is more complex than it seems in the first appearance. In the absence of official direct publications, we have referred to two available sources, INSTAT and the Bank of Albania. INSTAT has provided the annual growth rate of real GDP from 1996 to 2016, every year. Whereas from the publication of the Bank of Albania (Annual Report 1998 p. 14), is taken the performance of this indicator for the period 1990-1998. According to this report in 1998, GDP at constant prices, source taken from the Ministry of Finance, was 16,857 million ALL from 16,813 million ALL in 1990, i.e. almost the same. So the level of GDP in 1998 is that of the 1990 level, and can be taken as a base year to calculate the chain index and beyond the average rate of GDP growth in our country. Meanwhile, current prices have increased from 16,813 million ALL in 1990 to 456,766 million ALL in 1998, or 27.2 times more. Based on the INSTAT data, the growth rate of GDP growth is 2.28, from 1996 to 2016, taking the year 1998 as the base year for the performance of the real growth rates of GDP. This level is almost the same as the growth index in 2016 against the base year 1990, when the process of transition from the centralized economy to the market economy began. Consequently, it is possible to calculate the average growth rate of GDP from 1990 to 2016, which is 3.3% on average every year. This level was achieved not only in terms of floating remittances during this period but also in terms of public debt growth at the level of over 70% of GDP but also a low level of FDI.
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Table.Nr.1
The average rate of growth of GDP during 1990-2016
7 6.5
6
5 4.7 3.9 4 3.24 3 2.5
2
1 0 0 1990-2016 1998-2016 1990-1998 1998-2005 2005-2013 2013-2016 Ritmi mesatar i rritjes gjatw periudhave nw vitet 1990-2016
Based on the impact of GDP growth on widening income inequalities or the possibility of narrowing these disparities depending on the magnitude of the growth rate and the nature of the overall factors that have determined the performance of GDP in the period 1990-2016, we divided into 4 stages of 1990-1998; 1998-2005; 2005-2013 and 2013-2016. These periods were entirely different political periods, and are therefore characterized by different economic policies. For this reason, we referred back to 1998 and not to 1997 when the change of political conditions really took place.
The first period 1990-1998 was characterized by the sharp decline in gross domestic product in 1991-1992 and 1997, and the beginning of economic recovery in other years as a result of large foreign aid, public debt and remittances from immigrants. This period is characterized by a high degree of informality that would continue at that rate in consequent years, creating other major imbalances, especially that of the double-digit budget deficit. Enough to say that in 1998, when an equal level of GDP was achieved in 1990, public debt had reached 52.3% of GDP,while debt spending costs 35.9 billion ALL, or 35% of budget revenues, or 8.8% of GDP (of which 35.2 billion ALL were domestic interests and only 0.7 billion ALL foreign debt interests). The level of domestic debt interests was very high, at around 23.5%. In the same year, budget revenues reached 25.1% of GDP as a result of significant measures to consolidate public finances in the area of income - the tax rate (the level that only decreased by + -1.8% until 2013), in coming years it was necessary to pay special attention to fiscal consolidation in the expenditure span. This is also due to the fact that the transition to the market economy was accompanied by a high degree of informality. Indicator is the number of social security contributors, which in 1990 was 1,433,000 persons, dropped steadily from one year to another until 1997, and despite the beginning of growth in 1998, it was only at the level of 328,518 people. This was accompanied by the decline in the
153 ECONOMIC POLICY AND EU INTEGRATION average real pension level, which in 1998 was only 60% of that of 1998, hence the increase in the poverty rate. The same thing happened in terms of salaries, but they have grown at a percentage more than higher than pensions. The social security scheme deficit was deepening; however it was far from budget deficit, accounting for only 18.6% of it. Unemployment was large, of more than 235,000 registered unemployed, regardless of large emigration. Thus inequality in income deepened deepened in terms of the increase in the number of the poor, unemployed, despite taking measures for their relief, by setting up a system of unemployment, minimum wage or economic aid that did not exist in the conditions of the planned economy.
Meanwhile, in terms of double-digit rates of nominal interest rate on deposits from 1993 to 1998, they have increased significantly from this factor, besides their addition from other sources (deposits). It is enough to say that within 6 years, (1993-1998), the percentage of deposit rates have been 19.4 % per year, they have grown only by themselves (interest rate 2.89 times). Referring to the direct sources, it results that time deposits in lek, taking into account this factor and the addition of new net deposits, increased from 11.7 billion leke in 1993 to 115.5 billion leke in 1998, enabling total deposits thst were 171. 2 billion ALL or about 42% of GDP. This means that during this wealthy period have become richer, enriched more, while the poorest poor, in terms of GDP stagnation. This proves that in the conditions when the income market comes not only from work but also from wealth and capital either physical or monetary, the gap between the poor and the rich has a natural tendency to expand.
The 2005-2013 periods is characterized primarily by the relatively high growth rates of GDP and their decline, especially after the global financial crisis, falling at the end of the period at a 1% growth rate. Consequently, GDP growth during 8 years results 36% (on average 4% per year). If, by 2008, remittances were the strongest source of economic growth, they fell in the coming years as a result of the financial crisis, especially in the neighboring countries where the highest level of immigrants (Greece and Italy).
However, they remained significant at the relatively high interest rate holdings and consequently deposits, making the banking sector attractive to remittances .1) With a relatively high level even in recent years, even afterwards their decline in 2008, remittances remain a powerful factor in reducing poverty, boosting consumption growth and economic growth, but also narrowing income inequality by reducing poverty.
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Graph. Nr.1
The development of GDP IN 2005-2013 periods is based on:
1. From the first-tier growth of private sector credit, a factor which would fade later when the decline in its pace would be accompanied by the growth of bad credit;
2. Large public debt growth, used for the development of road infrastructure in both absolute and relative terms, which continued even after the growth of budget revenues, was stopped. In addition to hidden debt, public debt amounted to 61.7% of GDP, where the domestic debt interest rate remained almost the same as in 2005, which is much higher than that of the GDP growth rate. Under the conditions when the specific weight of external debt grew during this period, the public debt service, which in 2013 reached 56.1 billion ALL, was significantly increased when budget revenues were only 327.2 billion ALL or 17.1% of GDP. As such, the dual nature of public debt, both stimulant and deterrent, was evident.
3. The rise of remittances till September 2008 and the fall of their level after this time compared with this period, but still remaining a significant source for the increase of deposits during this this time;
4. FDI growth (Foreign Direct Investment).
5. This has happened under the condition when, budget revenues have increased at relatively high rates in 2005-2008, but stoped and remained at the same level for the years 2011-2013.
In the period (2005-2013), happend a relatively high growth rate of wages (including the minimum wage) and pensions in general and the lowest in particular. So there is a reduction in the poverty of these strata, supported not only in the corresponding growth at the high rates of Gross Domestic Product of budget revenues, but also in the deepening of the public debt, which is supported by it in the conditions of a low level of core interest, and interest on deposits. Under these circumstances, the social security deficit in 2013 reached 44.5 billion ALL, from 19.7 billion ALL
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in 2005, private debt grew to the private sector, the GDP growth rates significantly was going down and the economy was collapsing.
The year 2013 and on is a period characterized by the beginning of recovery of economic growth rates from one year to another, reaching 2016 at an annual GDP growth rate of 3.4%, from 1% in 2013, or over three 2014-2016, was on average 2.5%. This recovery has been the basis:
A.Supporting the state budget with international aid, which was significantly increased compared to a few years ago, support from international organizations with loans with mitigating interests (which enabled the repayment of unpaid debt stock).
B. Facilitating and reducing of debt interests, as a result of monetary policy,
c) Continuing growth of public debt, not small increase in the first two years although at lower rates in 2016-2017 when growth stopped in relative terms, increasing in absolute terms.
d) Structuring reforms and measures are taken to fight fiscal evasion and informality, especially in the payment of social security contributions,
Graph. Nr.2
Remittances and IHD 1000 Remitancat 900 IHD 800 700 600 500 400
Value in milions euro 300 200 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Year
Source: Bank of Albania ODA It is to be noted that starting from 2016, the budget deficit is lower than that of social security, whose growth has almost stopped and has fallen, especially the last two years. The support of retirees and poorer strata is limited to these circumstances, mainly in indexing inflation or increasing different tariffs. Meanwhile, it can not be seen that for the 9-month period of 2018 there is a noticeable increase in public debt (buying a Eurobond of 500 millions euros) under the conditions of a realistic low rate of budget revenues, which for the six month period the first were only 2.2%. Such a situation which does not create the necessary space for a narrowing of
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inequality, and should therefore be considered important for reducing poverty, is worth carefully monitoring.
Conclusions. This general picture sheds light on the ratios between the growth and rhythm of increase rates and the redistribution of incomes, their enlargement or narrowing. It confirms that in the long time period the growth of Gross Domestic Product is the most important factor in the growth of living standard and the narrowing of inequality itself, rather than overestimating the redistribution from the poor to the poor. Also it important to take into consideration the growth rate generated by factors that must be restored(public debt), as in the case of high interest rates, but also the high level of public debt service under the conditions of a not too high level of interest, direct foreign investment etc.) or remittances from emigrants. Enabling growth at high rates in the long time period (by increasing productivity), which enables their continuity and sustainability, while also providing for social consolidation, a satisfactory redistribution in view of the narrowing of inequality not only for today but also for the future, including the narrowing of inequality and convergence between countries, rather than a bigger distribution in the conditions of galopant debt expansion, thus even breaking off the development of the economy. Growth rates do not necessarily mean that the country becomes more inequality or less inequality or equal. It depends on the path of development such as the Scandinavian-Europeanway to become richer with greater social equity, or Chinese way. The Chinese way in the first stage of transition to the market economy, gives priority to increas effectiveness and efficiency, ensuring the highest rates of development, enabling for several decades an increase of GDP of 10% per year, but accepts the increase in inequality and above all as a result of the increase of the rich people, turning its eyes to an appropriate moment in the advantage of inclusive growth, working to reduce inequality in income, and outgrowing more than 700 millions of people. Recommendations.
To enable the realization of the narrowing of inequality through redistribution, it is necessary to enable relatively high growth rates of Gross Domestic Product, which will allow poverty reduction, narrowing inequality, without compromising sustained growth and convergence with other countries.
This does not exclude, but it also takes into consideration reduction of poverty even on the road where the poor can become more productive and become able to do so through sustainable, inclusive growth.
It is imperative to use contemporary methods of measuring inequality and to become the subject of teaching and research at University level.
Also it is important to enable the reduction of inequality by reducing poverty and maintaining social cohesion, bearing in mind the accomplishment of the UN's objectives of having a world without extreme poverty in 2030 even from our country.
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A higher level of education in general and in particular for universities to meet these objectives, income convergence with EU countries, in the context of high international competition and demographic imbalances in the area of pensions.
Literature 1.Piketty, T. 2014. Capital in the twentyfirst century, New York, Belknap Press 2.Ulrich, D, 1997. Measuring Human Resources: An Overview of Practice and a Prescription for Results. 3.Gideon, R and Jonathan, T, “The Clash of Ideas”,2012, 4. Timothy, T. Updating Americas Social Contract, 5. Treguesit Analitik Fiskal Dhjetor 2017, f.25-26, burimi qe sherben per treguesit e tjere fiskal. 6.INSTAT, Llogarite Kombetare Vjetore GDP per vitet 1996-2016 dhe Shqiperia ne Shifra 1997. 7. Revista Monitor, 9 Tetor 2018. 8.Pikety, Th, Saez. E (2011). Top Incomes in the Long Run of History. Journal of Economic Literature. 9.INSTAT, (2016), “Anketa e Buxhetit të Familjes, 2015”, www.instat.gov.al 1 Timothy Taylor Ecomocs 1 Shih Revista Monitor 9 Tetor 2018
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E-Learning, Analysis and Comparison of Two E-Learning Platforms, Moodle and Ilias
48Gerild Qordja 49Dolantina Hyka 50Katerina Zela
Abstract:
Elearning is a new modern tool of the current learning system; it is becoming imYESrtant in the university's learning process. The core of e-Learning solutions is LMS and CMS, which help universities automate the management of learning events. Some of the LMSs are paid, while others are LMS Open-Source free. Universities give more attention to OS-LMS, which are becoming very attractive by eLearning, and is even competing with other software enrolled to date. In fact, studying and analyzing LMS is not easy; this is because serious studies that evaluate systems and compare LMS are not enough, especially LMS Open-Source, which did not get a good twist on those studies. So i emphasize the necessity of more analysis and study of LMS which includes OS-LMS. For this reason in this treatment i will discuss the benefits and disadvantages that a person or institution of education may have while using one of the eLearning platforms. Also in this treatment I will study and compare two OS-LMS platforms Moodle and Ilias. To achieve this I will compare and evaluate each packet from its appearance, features, and weaknesses. In the end, I will conclude which of the LMS studied is better for use, and what should improve these systems to have a broad usability
Key words: Learning Management Systems (LMS), Course Management System (CMS), Moodle, Ilias, Elearn Concept and designation of E-learning
The Internet has become one of the most vital ways to make available information available to everyone.
48Msc in Information Technology and Communication, Mediterranean University of Albania, Faculty of Economic Sciences, Department of Informatics and Scientific Education. [email protected]
49Dr in Cryptography, Mediterranean University of Albania, Faculty of Economic Sciences, Department of Informatics and Scientific Education. [email protected]
50Msc in Mathematical, Mediterranean University of Albania, Faculty of Economic Sciences, Department of Informatics and Scientific Education. Katerina.Zela @umsh.edu.al
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E-learning-based technologies include the use of internet and other relevant technologies to produce learning materials, learn students, and also tailor courses to an organization. There have been numerous debates about a common definition of the term e-learning. There are some definitions under Dublin (2003) that tend to reveal the interest of researchers. E-learning as a concept covers a range of applications, methods and learning processes (Rossi, 2009). It is therefore difficult to find a single e-Learning definition, according to Oblinger and Hawkins (2005) and Dublin (2003). Below we will look at some of the definitions of the term e-learning provided by different scholars and institutions. The European Commission (2001) describes e-Learning as the use of multimedia technologies and the internet to enhance the quality of learning by using access to facilities and services. E-learning refers to the use of information and communication technologies to enable access to the online learning process. In the broadest sense, Abbas et al (2009), defines eLearning as any electronically-adapted information. According to Maltz et al (2005), the term "e-learning" is applied in different perspectives, including learning scattered online learning, distance learning, and hybrid learning (mixed origin).
E-learning
E-learning is useful for education, corYESrations and all types of pupils. It is affordable, time- consuming and produces measurable results. E-learning is more cost effective than traditional learning methods because it is spent less time and money for travel. E-learning can be developed in all geographic locations and does not require travel costs, this type of learning is far less expensive than learning in a traditional institute. Flexibility is a great benefit of e-learning. Students can access a class every hour. Education is available when and where needed. E-learning mund të bëhet në zyrë, në shtëpi, në rrugë, 24 orë në ditë, shtatë ditë në javë.E-learning gjithashtu ka vlerësime të matshme të cilat mund të kriNohen në mënyrë që instruktorët do të dinë se çfarë nxënësit kanë mësuar, kur ata kanë përfunduar kurset, dhe c’fare performance kane pasur studentet. Students like e-learning because it accommodates different types of learning styles. Students have the advantage of learning at their own pace. They can access e-learning at their own free time. If a student needs to learn at night, then this option is available in e-learning. E-learning encourages students to read information using hyperlinks and web pages around the world. Pupils are able to find information according to their situation and interest. E-learning enables students to choose teaching materials that complement their level of knowledge, interest, and what they need to know to carry out the learning process more efficiently. E-learning is flexible and can be tailored to meet the individual needs of students. E-learning helps students develop knowledge from the internet.
E-learning disadvantages
A disadvantage of E-learning is that students must have access to a computer as well as the Internet. They should also have computer skills with programs such as word processing, web browsers, and email. Without these skills and software it is not YESssible for students to have access to e- learning. Low-speed Internet connections or old computers can make the use of difficult e- learning. This can lead to learning disabilities and hand wiping. Another disadvantage of e-learning is computer data management and online e-learning programs. For beginner-level students, the online learning process is difficult. Another disadvantage of e-learning is that students can feel isolated.
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Instructors are not always available to help the student, so students need to have the discipline to work independently without the help of the instructor.
Moodle Moodle was created by Martin Dougiamas. Currently, Moodle is available for free on the Web site (http: //ww.moodle.org) so everyone can download and install it. Moodle (Modular Object- Oriented Dynamic Learning Environment is a Learning Management Systems (LMS) ) or a CMS (Course Management System) for the production of Internet-based courses Web sites Designed to supYESrt pedagogical methods based on constructive theory. It is Open Source, supYESrts some MySql databases and can be installed on operating systems UNIX, Linix, Windows.
Features of this Moodle
Moodle is an active product that evolves over time. Below we list some of the features it contains, promotes social constructist pedagogy (collaboration, activities, critical reflection). • Simple, easy, efficient. • Simple to install on all platforms that supYESrt PHP, it only requires a database. • The course list displays each course on the server including the approaches to the guests. • Courses can be categorized and controlled. • Provides high security. • Most of the text input fields can be edited using a WYSIWYG HTML editor. • Moodle offers you three course formats. • Moodle is PHP and MySQL based. • Easy to upload courses, or links to other websites, and makes it easy to share. • Suitable for 100% of online classes.
Usability views
The current user community is very broad, there are about 30,000 sites in 195 cities, which means that those organizations are actively participating in making improvements to it, as well as moodle having a high YESpularity because it is translated into 70 languages of the world (one version for each language). About 300,000 people are registered as moodle users. User: Moodle is easy to use. We have tested it as a teacher and as a student. To be used effectively, there is a need for a small training. Programmers and Developers: It is interesting for them because since it is open source re- programming, its modification is YESssible. It is programmed in PHP and supYESrts Apache and MySql. Organization and Administration: It is an OSS, the meaning of this is that organizations can tailor it according to their needs. It can be developed at no cost and there is no need for a license. Since there are three different user-user categories, we will clarify some of the key functionalities for each category in the section. Student (Students) Teacher (Professors) Administrator
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Moodle Interview as Student
When you first visit the moodle site you can see the following picture. At this moment, moodle gives you the ability to login to the site. Also at this stage you can see all the courses that are available. Since the number of languages is very large, at the first moment a language appears in a random way, in the case of this view the language is English. After that, the user can choose the language that interests him. In the first page there is a calendar which holds the current date. The administrator can add other languages if necessary to the user. Moodle also supYESrts a standard called UTF-8, which allows the appearance of Latin, Chinese, or Arabic letters.
Creating an Account and Authentication Once you have clicked on the login button, a window will open as follows. This is the normal form of authentication when you have a Username and a Password.
If it is the first time you are logging in, you must create an account by clicking on the Create new acount button. Once you click on this button you can create your own moodle account by filling in the relevant fields. to log in normally in moodle.
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Edit your profile Of course, after you are registered in moodle, you have the opYESrtunity to change your data. Each user can manage his profile. The figure below shows a table that shows that a user can edit his profile, can change the password, and manage YESlicies in terms of communicating with other users, etc.
The first appearance of a course As seen on the first page of the course, a student can have access to the lectures set by the respective pedagogues.
The student is also given the opYESrtunity to speak through chat with other users. Another activity that the online student can do is different. The student administration panel is also given the opYESrtunity to see the grades he has received in each of the subjects that is Active.Sic looks at the student showing active courses and other courses that are available. If the student wants to have access to the other courses he must first be given access by the Teacher or the Administrator. These functionalities will look at the following.
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Ilias
Ilias has been developed as part of the Vertus project at the University of Cologne and has been licensed by Sal with the GNU General Public License. Ilias is a Web based LMS, which it is a tool for learning online. Ilias's lawyers can create all courses for all groups of students or for specific groups. Of course, students are also given the opYESrtunity to create workgroups to acquire and provide data between one of the other. Elias follows users, edits them, and publishes certain course courses for users through Web Brosers. Elias is a developed OSS in PHP, MySQl and Apache, which works mainly under Unix and Linux. Below I'm presenting a Ilias look at the case when we are registered as a student.
We give some key features of this software. In the following section we will explain each of these features. • Personal Desktop for each user. • Learning environment with the ability to keep personal notes, tests, vocabulary, and search opYESrtunities. • Communication Characteristics as is the form of discussion. • Organized group of members and resources. • YESwer system for teachers and students. • System management interface. Users can have certain roles like administrator, author, tutor, and student. The administrator system can manage all of these users, from group creation, assignment of rights, privileges, resources needed: message box, forums , discussion groups, etc
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Usability perspective
Ilias is installed 115 times in 18 countries. It also has a huge YESpularity because it is translated into 16 languages. The development, Ilias growth can be viewed from a few YESints of view. ILIAS is a YESwerful, flexible tool for the process of learning and collaborating online. It serves as a platform for knowledge. ILIAS is not limited to any particular didactic model but supYESrts a variety of methods.
Concepts for Ilias Ilias' concept is to provide a flexible working environment with integrated work tools. ILIAS can be seen more as a library, for securing the learning process and working materials. ILIAS is not a closed information deYESsit, but an open platform - content can be made available for unregistered users as well.
Features and Ilias
Ilias is a YESwerful open source management system for the development and implementation of e-learning based on the web. The software is developed to reduce costs by using new media in education to ensure maximum levels of user impact. Ilias is published with a public license and free of charge. This is the personal work space for every ILIAS user.
In the main page of the Nob are displayed all news items, Mails, Notes and Bookmarks. The list of active users indicates that other colleagues, course members, or group participants are online at a certain YESint in time. From a personal desktop, a user has access to the personal profile and also has access to see personal progress.
Management features Ilias offers several opYESrtunities to manage the user learning process. A lesson can be made accessible by a student when he has passed a lesson in advance, eg. a user must meet one or more preconditions before gaining access to a new lesson. It is also YESssible to create learning ways based on each student's assessment of knowledge.
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• Time control and handover from tests of a certain course. • Learning objectives are diverted to teaching materials • Summary and monitoring of personal progress on course level for course members and tutors (test results, forum articles, etc.). Tests and Evaluation ILIAS provides an integrated environment for the creation and implementation of tests and evaluations. This can be used to monitor the learning progress of users as well as professors. Tests & Estimates rely on these types of questions: • More choices • With a choice of options • Developing questions, etc Questions are deYESsited in the application and reused. All question types can be combined in test placement. Also, configuration estimates are available through integrated tools. Communication For communication purYESses ILIAS provides a newer internal system, discussion forums and a chat combining PHP and Java. In Ilias you can use internal email addresses or other external addresses to communicate with each other. Discussions can also be carried out through forums.
System clusters
Ilias can build student groups that will use Ilias to learn, workgroups or groups for specific fields of interest. Administrators can create groups that are open to all members or are specifically set up by access restrictions . Other users can be called or accessed through a password. All of these tools necessary for the management of group members and resources are part of the Ilias system.
System Administration and Terms of Use
The new organization makes it easy for Ilias to install and configure clients on a single server. After installation the management system can be done by the ILIAS manager interface. This system contains the creation of roles for certain user groupings or client management.
Ilias Open Source Security
Since 2000 ILIAS is open source software. He has been an initiator in the education industry. The license ensures that users have access to the code and the opYESrtunity to engage in software development. This guarantees the sustainability of this software and independence from other paid software. Ilias has received an international security certificate from NATO in 2008. Content and data on an ILIAS installation are protected against unauthorized access.
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Community and SupYESrt
ILIAS users help each other! Many users are organized in regional or national working groups. They collaborate, exchange information, and share their experiences. These work groups develop new features. Ilias users make meetings every year as the International Conference to introduce the new features developed. You can find information about the conferences at the address of ours.ilias-conference.org. Every two years, Ilias developers are holding a conference for development. Comparing and Evaluating Open Source E-Learning Platforms In this part we will compare these two platforms through: 1. A list of criteria 2. Usability forms
Tabela 1 Name of Application Database System Programming Server Arab the server operation Language Web Language platform Moodle PHP MYSQL, Të gjitha PHP 4.3+ Të gjitha YES ORACLE, YESSTGRES
Ilias APACHE MYSQL LINUX, PHP4.4+ APACHE No UNIX, SOLARIS
Tabela 2 Characteristics Moodle Ilias AUDIT TRAIL YES YES
EMAIL VERIFICATION YES YES
GRANULAR PRIVILEGES YES YES
LOGIN HISTORY YES YES
SOME AUTHENTICATION YES YES
PROBLEM NOTIFICATION YES YES
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SANDBOX YES YES
SESSION COMMAND MANAGEMENT YES YES
VERSIONING YES YES
Tabela 3 Characteristics Moodle Ilias DATABASE REPLICATION YES YES
LOAD BALANCING YES No
PAGE CACHING YES YES
STATIC CONTENT EXYESRT No No
Tabela 4
Characteristics Moodle Ilias CODE SKELETON YES YES
MANUAL/SUPP/TRAINING YES YES
DEVELOP COMMUNITY YES YES
ONLINE HELP YES YES
PLUGGABLE API YES YES
PUBLIC FORUM YES YES
PUBLIC MAILING LIST YES YES
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USERS CONFERENCE YES YES
Tabela 5
Characteristics Moodle Ilias CONTENTSYNDIC.RSS YES YES
FTP SUPYESRT YES YES
ICAL CALENDAR YES No
WAI COMPLIANT YES YES
WEBDAV SUPYESRT YES YES
XHTML COMPLIANT YES YES
INSTRSTANDARD COMPLIANT YES YES
Tabela 6
Characteristics Moodle Ilias CGI-MODE SUPYESRT YES YES
CONTENT REUSE YES YES
EXTENS.USER PROFILES YES YES
METADATA SUPYESRT YES YES
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MULTI-LINGUAL CONTENT YES YES
Table 8 MULTI-SITE DEPLOYEMENT YES No Characteristics Moodle Ilias ADVERTISING MANAG. No No
ASSET MANAGEMENT YES YES
CLIPBOARD BUTTON LOCATED AT YES YES
CONTENT SCHEDULING No YES
INLINE ADMINISTRATION YES YES
ONLINE ADMINISTRATION YES YES
PACKAGE DEPLOYMENT YES YES
THEMES (SKINS ) YES No
TRASH No YES
WEB STATISTICS YES YES
WEBSTYLE/TEMPLATE YES YES
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Tabela 7
Characteristics Moodle Ilias ROXIO™ DRAG&DROP CONTENT YES No
EMAIL TO DISCUSSION GROUPS YES YES
IMAGE RESIZING YES YES
MACRO LANGUAGE No No
MASS UPLOAD YES YES
SERVER PAGE LANG. No YES
SITE SETUP WIZARD No YES
SPELL CHECKER No YES
STYLE WIZARD YES YES
SUBSCRIPTIONS YES YES
TEMPLATE LANGUAGE No YES
UI THROTTLING YES YES
UNDO YES YES
WYSIWYG EDITOR YES YES
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ZIP ARCHIVES YES YES
Tabela 8
Characteristics Moodle Ilias BLOG YES No
CHAT YES YES
DISCUSSION GROUPS YES YES
(FORUM )
MAIL FORM YES YES
MYPAGE (DASHBOARD YES YES
FILE DISTRIBUTION YES YES
GROUPWARE YES YES
Tabela 9
Characteristics Moodle Ilias CONTACT MANAGEMENT YES YES
DATA ENTRY YES YES
DATABASE REYESRT YES YES
HELPDESK ORGANIZES BUG REYESRT YES YES
HTTP PROXY No No
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GUEST BOOK YES YES
IN/OUT BOARD YES YES
Tabela 10
Characteristics Moodle Ilias DOCUMENT MANAGEMENT YES No
EVENTS YES No
EVENTS MANAGEMENT YES YES
FAQ MANAGEMENT YES YES
NEWSLETTER YES YES
PRODUCT MANAGEMENT YES YES
PROJECT TRACKING YES No
SEARCH ENGINE YES YES
TESTS / QUIZZES YES YES
TIME TRACKING YES YES
USER CONTRIBUTIONS YES YES
LINK MANAGEMENT YES YES
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Tabela 11 Characteristics Moodle Ilias GRAPHS AND CHARTS YES No
NOB YESSTINGS YES No
PHOTO GALLERY YES YES
SEARCH ENGINE No YES
SITE MAP No YES
SYNDIC.CONTENT RSS YES YES
Conclusions
In this paper are compared about 97 functionalities that should be present when it comes to E- learning applications. These 97 functionalities are part of 10 categories of electronic systems. Note that Moodle contains 88 of 97 functionalities, while Ilias Permban 82 out of 97 functionalities. Adding here also the other 6 features of the system where, the PHP application server in the last years has higher usability than Apache.Moodle supYESrts to all operating systems while Ilias only 3 of them. Modle is supYESrted by all Web servers while Ilias only in 1, adding the Arabic language to Moodle.
As mentioned above, we can say in this study of these functionalities that were compared Moodle gains more YES ints from the Ilias System.
References:
[1] Categories and Purposes of (e-Learning) Standards:The Need for Harmonization of Interoperability and Quality Development by Christian M. Stracke (2010). [2International Journal of Soft Computing and Engineering (IJSCE) ISSN: 2231-2307, Volume- 3, Issue-3, July 2013,Comparing and Evaluating Open Source E-learning Platforms, Fakhreldeen Abbas Saeed. [3]The role of e-learning, the advantages and disadvantages of its adoption in Higher Education. Corresponding Author, Name: Valentina Arkorful
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Institution: College of Distance Education, University of Cape Coast, Ghana E-mail Address: [email protected] Contact no: +233207986099 Name: Nelly Abaidoo Institution: College of Distance Education, University of Cape Coast, Ghana E-mail Address: [email protected] Contact no: +233209746926. [4] A Comparison and evaluation of open source learning managment systems. [5] E-Learning on the Cloud ,Mohammed Al-Zoube ,Princess Sumaya University for Technology, Jordan International Arab Journal of e-Technology, Vol. 1, No. 2, June 2009.
[6] Moodle ,E-Learning Course Development ,A complete guide to successful learning using Moodle, William H. Rice IV
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Global Marketing Management Challenges in Albania
Gerti DAJÇI, Ph. D.
Tirana Business University College
Tirana, Albania
Abstract
As a Multinational Company, it is very important to understand the rules and business laws in another country. Multinational Company leaders, before making an investment in a host country, need to understand first the rules, business and political laws, and then decide to invest. Multinational Company leaders need to avoid any unexpected cost that jeopardizes the success of the organization. This paper discusses some of the marketing strategies that a company will follow in Albania, along with the other marketing components, the analysis, the impacts that national culture and sub-culture have on Multinational Companies in Albania, and competitive environment. This paper evaluates the steps that relate to the global marketing issues, as well the steps that leaders need to take before making a decision to invest in Albania. Along with these steps, this research discusses some of the areas that need further recommendation.
Introduction The transportation, the Internet, and other technological advances in telecommunication helps many firms enter foreign markets, which contributes to the globalization of business. Globalization makes us aware that companies are having more diverse employees. Organizations often are not in direct competition, but they have similar products or services that are directed toward the same target audience (Kotelnikov, 2010)51.
51 Kotelnikov, V. (2010). Strategic Alliances: Why And How To Build Them? Retrieved online from http://www.1000ventures.com/business_guide/strategic_alliances_main.html
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Globalization is increasing the opportunities for many organizations to expand their investments and their profits. Organizations are preparing to expand, but what are more important to this development of globalization are the marketing components, customer satisfaction and their expectations, along with the competitive environment. These components apply as challenges to many CEOs. How aware are the CEO’s to these global challenges? How to avoid these challenges? In to date, CEO’s need to be more aware and concerned on the global challenges, like political, economical, cultural and sub-cultural risks, and more important to be able to make the right decisions, especially in marketing the product or the service in Albania. There are some recommendations for MNCs and areas of further discussion that need a special attention prior to enter in Albanian market. Marketing Analysis in Albania 1. Multinational Marketing and Customer needs in Albania The increase of the MNCs and globalization process creates a change in the customers’ preference and behavior, which can be helpful to marketing managers in their decisions, where global market research must be conducted taken into consideration the culture of the people (Kumar, 2000)52. When buying products, particularly new, customers follow a decision-making process, which are listed in the Table 1 below from authors Lamb, Hair, McDaniel, (2011)53.
Table 1. Customer Decision-Making Process
Need recognition
Information search
Cultural, Social, Evaluation of Individual, and alternatives psychological factors affect all Purchase steps
Post-purchase behavior
52 Kumar, K. (2000). International marketing research. Upper Saddle River, New Jersey: Prentice Hall 53 Lamb, C.W., Hair, J.F., McDaniel, C. (2011). MKTG 4. 2010-2011 ed. South-Western Educational Publishing.
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The steps described in this table are very important for the marketing managers to identify the contribution and involvement of the customers in their marketing strategy. An example of the customer behavior stated in the table above is the culture, which plays a dominant role in the customer satisfaction as well. Customer relationship management is helpful to organizations to optimize profitability, revenue, and customer satisfaction by focusing on particular customer group, along with the customer’s interactions with the organization (Lamb, Hair, McDaniel, 2011). CRM can help build customer loyalty by promoting ethical values system-wide and earning a reputation for best practices in all areas of their business (Kantor & Wells, 2004)54. CRM has many measuring ways of customer satisfaction by identifying the wants and needs of customers (Lamb, Hair, McDaniel, 2011). In order to have a basic idea of customer needs in Albania, marketing managers need to create customer surveys. In a customer survey, marketers should ask what type of product they wish to buy during specific period of time (Pride and Ferrell, 2011)55.
2. Marketing Components and Competitive Environment Bhagwati (2004)56 states that: “Globalization is an inevitable process today, and this globalization process takes many forms such as economic globalization, cultural globalization and the globalization of communications, among others”. The diversity's increasing connection between countries, and the globalization of many companies, does not mean that cultural differences are disappearing or vanishing. On the contrary, as economic borders come down, cultural barriers could go up, thus preventing new challenges and opportunities. As a marketing manager, it is important to create a marketing plan and strategy that involves organization’s activities which relates to the marketing objectives and the changing marketing environment (Lamb, Hair, McDaniel, 2011). Marketing plan may be very complex, especially if it applies in a large scale. Therefore, this researcher recommends for the marketing managers to create and analyze the market situation. Authors Lamb, Hair, and McDaniel (2011) state: “Marketers must understand the current and
54 Kantor, R., & Wells, R. (2004). Book: "Innovation: Breakthrough thinking at 3M (etc.)."Retrieved online from http://www.amazon.com/exec/obidos/ASIN/088730771X/thegreatideafind 55 Pride, W.M., Ferrell, O.C. (2011). Marketing Express. 2nd ed. South-Western Educational Publishing 56 Bhagwati, J. 2004. In Defense of Globalization. New York: Oxford University Press
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potential environment that the product or service will be marketed in”. This situation often may be referred as the SWOT analysis, where “Strength” identifies the internal situation of an organization and its competitive advantage in market and “Weakness” identifies the areas that an organization needs to focus in order to be more competitive in the market. As the other part of SWOT analysis, Opportunities are an examination of the external environment, where organizations identify, collect, and interpret information about forces, events, and relationships that may affect the future of the organization or the implementation of the marketing plan (Lamb, Hair, McDaniel, 2011). Marketing managers need to perform SWOT analysis all the time, which would allow them to have a better idea of the market and identify the organization’s competitive advantage. In order to be successful, a MNC needs to have great marketing components in the host country, along with the competitive environment. Being a part of so many organizations, Albania has become a great attraction to many multinational companies. Albanian government gives many incentives to those companies foreign or domestic that introduces new technologies, create many jobs, where their projects create economical growth in specific areas. The late 2015 law on strategic investment offered investors simplified and accelerated procedures for strategic investment in energy, mining, transport, telecommunication, infrastructure, urban waste, tourism, agriculture and fishing and special economic zones (www.tiranatimes.com; 2018)57. The success of the tourism it has created a positive business environment for many companies to come and invest in Albania. The investment thresholds in tourism, agriculture, special economic zones, and special priority zones range from €1 million to €5 million for the assisted procedure status. Investors can also gain a special status for investments of more than €100 million in projects not envisaged by the strategic investment law (www.tiranatimes.com; 2018). As for retailing companies, mainly clothing industry, multinational fashion companies see Albania as a profitable venture based on the low taxes and labor.
3. Role of Culture When it comes to conduct business in Albania, culture plays a huge role in the success of an organization. According to the GLOBE project, it has been found that Albania is a collectivistic
57 Tirana Times. 2018. Albania extends incentives, considers new investment law tohandle expected FDI slowdown. Retrieved online from http://www.tiranatimes.com/?p=138364
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society (House et al., 2004. p. 471)58. Albania is a collectivistic society where time was invested in creating a relationship or trust over coffee or lunch (House et al., 2004, p. 471). The table 2 below shows the scores of GLOBE (Global Leadership & Organizational Behavior Effectiveness) project over Albania for practices and values in Albania. Table 2. Culture Visualization
Retrieved online from: https://globeproject.com/results/countries/ALB?menu=list59
Companies that focus and follow Hofstede’s cultural dimensions have a great possibility to create great market share in Albania, where marketing components are very important. According to the article by focusing in the Hofstede’s (1984)60 cultural dimensions, Albania is ascribed the following traits: medium power distance, moderately collectivist, high level of uncertainty avoidance, and nearly equal masculine and feminine scales. 4. Economical Analysis
58 House, J. R., Hanges, J. P., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, leadership, and organizations. The GLOBE study of 62 societies. p. 471. Thousand Oaks, CA: Sage. 59 https://globeproject.com/results/countries/ALB?menu=list 60 Hofstede, G. (1984). The cultural relativity of the quality of life concept. Academy of Management Review, 9(3), 389-398
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MNCs, in order to avoid any marketing pitfalls, more often are creating joint ventures as a new form of being successful in the perspective hosting country. Albania has a great potential attraction for many multinational companies61. Its business environment applies with many of the rules and regulation stated by the biggest economical institutions, like the World Trade Organization (WTO), World Bank Group, the International Monetary Fund (IMF), the Multilateral Investment Guarantee Agency (MIGA), etc. In order to accelerate the pace of equitable growth, Albania needs to implement structural reforms that will raise productivity and competitiveness in the economy, create more jobs, and improve governance and public service delivery. Enhanced regional connectivity and access to regional and global markets, coupled with export and market diversification, can also help to promote faster growth.62 5. Social Analysis In order to create a great competitive environment and image in Albania, it is important to understand their culture and their needs. Albanian people believe in the strong friendship and their responsibilities toward each other, which to many Western Europeans or American business leaders does not apply that much. In a personal point of view, being from Albania in Balkan Peninsula, where the Albanian culture has a strong influence, this researcher understands very well the Albanian culture where often business agreements or transactions are discussed over a lunch or coffee. In order to have a successful international marketing strategy and build customer relationship, Erickson (2007)63 states that Leaders should focus on global challenges like political turmoil, cultural diversity, gender, religion, economic and educational status. Priorities of the Albanian market and the evaluation of the objectives and advantages are important for those companies that are willing to do business in Albania. The table 3 below shows the scores of GLOBE project over Albania for Leaders Visualization.
61 The World Bank in Albania, 2018. Retrieved online from http://www.worldbank.org/en/country/albania/overview#3 62 The World Bank in Albania, 2018 http://www.worldbank.org/en/country/albania/overview#3
63 Erickson, T. (2007). Now I Know Why You Drive Me Crazy! The Benefits of Managing
Diversity. Harvard Business. http://www.businessweek.com/careers/content/aug2007/ca2007087_436408.htm
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Table 3. Leadership Visualization
Retrieved online from: https://globeproject.com/results/countries/ALB?menu=list64
Companies market their products base on the culture and the customers taste. Language is considered a barrier for many companies when they market a product, which can bring many misunderstandings and lead to control risks. It is the time that global leaders need to install a variety of global policies and agreements that oblige employees to collaborate with respect and fairness toward each other to avoid the different risks.
6. Political Risk Analysis in Albania
In order to be successful, organizations need to develop individuals who can lead in this global economy, which it would give them a competitive advantage. More often U.S. managers, in order to be successful in international arena, develop visions to recognize and react to different international marketing opportunities, by using effective global marketing strategies in all markets possible along with the global marketing standardization, which presumes that the markets throughout the world are becoming more alike (Lamb, Hair, McDaniel, 2011).
64 GLOBE, 2018. https://globeproject.com/results/countries/ALB?menu=list
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A recommendation is to find the right partner in similar conditions and make sure that these conditions have been analyzed prior to alliance with local Albanian companies, which is extremely important because of the large family owned businesses. The joint ventures with these family owned businesses will reduce or minimize many challenges, which may be political, cultural, or better yet an increase of the local markets. The business climate that Albania has in different areas appears to be positive for many MNCs to invest in Albania. However, there are problems that many leaders need to focus prior to invest in Albania, like unfair competition, legal and political concerns, or high taxes. Another recommendation to a successful venture in Albania is the negotiation process. Albanian people like to negotiate in the agreements and prices, as well debating and arguing. The negotiation process in these particular situations reaches an agreement with the written contract, along by a firm handshake which to Albanian people it is considered rude if avoided. Entry Market Strategy in Albania 1. The methods of market entry strategy in Albania The key element for a successful organization after the penetration and expansion has to do with internal marketing; that is, to gain the support of the stakeholders and the visionary leaders who support the need to implement it. Implementing thoughtful remedies to put in place to overcome these stakeholder barriers and resistance are the opposite forces facing their resistance. Key leaders must empower their stakeholders and generating consensus. To accomplish the penetration process, leaders embracing their core basic values and beliefs of honesty, reliability, fairness, self-discipline, and develop responsible management practices to meet reasonable stakeholder expectations. Sustainable competitive strategy requires that organizations adopt a broad business view. It requires that organizations continuously pursue growth opportunities and innovative ways to improve existing products and services. Porter (2008)65 discussed the importance of successful organization adopting a mixed generic strategy of cost leadership, product differentiation and a focus strategy. Organizations successfully adopting and implementing a mixed generic strategy have the advantage to gain and maintain competitive advantage as competitors may be unable to duplicate approaches and strategies.
65 Porter, M., E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1), pages78- 93
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Market expansion is another important strategy to enter into Albania. Advertising, as a tool of the market expansion, is also used to create new segments of the market. By promoting new uses of the product, MNCs expand their customer base. This means that MNCs need to educate their customers on the product and make specific modifications to that product, like branding preference of a product. This type of advertising will create a brand image, and informs the customer of the product comparison to other products. There are two levels (formal and informal) approachable to the global marketplace and the specific entry strategy process appropriate to that particular country, which in this case is Albania. When it comes to the success of a MNC in global arena, informal process is better because of the long-term relationship of the organizations. Business leaders need to understand the rules and business laws in another country, and then decide to invest. In order to become more successful and competitive in global arena, companies have to understand the cultural differences and respect these differences. The best advice to managers is to research cultural traditions in that particular area where conducting business and adapt to them, if necessary. Leadership needs to look at other decision making methods as an opportunity for expending in global arena, along with detailed analysis of the other competitors. These decisions should follow with the identification of strength and weaknesses of the company, the position of the company in that particular marketplace, and identify the goals and strategies that are related to the interest of the company. Sometimes the company needs to offer a different approach to that country in order to be competitive and profitable. 2. Elements of Marketing Strategy In order to be successful, organizations need to develop individuals who can lead in this global economy, which it would give them a competitive advantage. More often U.S. managers, in order to be successful in international arena, develop visions to recognize and react to different international marketing opportunities, by using effective global marketing strategies in all markets possible along with the global marketing standardization, which presumes that the markets throughout the world are becoming more alike (Lamb, Hair, McDaniel, 2011). Many organizations should follow a marketing strategic plan that defines their success. Authors Lamb, Hair, McDaniel, (2011) state a set of steps that organizations should follow: 1. Select a market and study that market. Organizations have to define the overall market or by studying that market.
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2. Choose bases for segmenting the market. This step requires market knowledge and creativity for marketing managers. 3. Select segmentation descriptors. Marketing managers must be able to identify the specific variables to use. For example, if a company selects demographics as a basis of segmentation, they have to focus on the age, occupation, and income as descriptors. 4. Select target markets. What is your target market? This is a question that all the organizations should be able to identify before making a decision. 5. Analyze the market segments. With this step, organizations should be able to identify and include segment factors, like the expected growth, brand loyalty, long-term sales, and other factors that indicate the success of that particular market. 6. Implement the appropriate marketing mix. Organizations need to implement the Four P’s (product, place, promotion, and pricing) as the ultimate tool to the success of the marketing mix. With this step, many organizations should identify the relationship between the satisfying customers and the organization. The steps mentioned above will not be successful if there is a lack of effective leadership. That effective leadership varies, not only with the person or group that is being influenced, but it will also depend on the task, job or function that needs to be accomplished (Hersey & Blanchard, 1977)66. The ability to build local and international relationships, enable the gathering of current data from all levels of the organization, and remain current with external social and environmental changes significantly add to developing and steering strategy implementation. A recommendation is to find the right partner in similar conditions and make sure that these conditions have been analyzed prior to alliance with local Albanian companies. The joint ventures with these Albanian businesses will reduce or minimize many challenges, which may be political, cultural, or better yet an increase of the local markets. When it comes to establishing joint ventures, it is best that the strategies are discussed up-front in order to avoid any conflicts. Another recommendation to MNCs penetration process is to study the other companies that are successful in Albania, which it will give these MNCs a clear view of their success.
66 Hersey, P. and Blanchard, K. H. (1977). Management of Organizational Behavior: Utilizing Human Resources (3rd ed.) New Jersey/Prentice Hall
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Recommendations for MNCs in Albania The following seven global compact models by De Saeger (2007)67 apply to many MNCs that wish to invest in Albania: • Vision is a statement helps to provide a focus for the mission of the company toward the future. The success of an organization depends on the clarity of the leaders or managers vision, which makes it extremely important for the rest of stakeholders’ interest. Companies should have a clear vision for the future of the company, and make them competitive in market • Leadership defines the culture of an organization. For years, leading American businesses irresponsibly focused on short-term profits while turning a blind eye to the destructive human, environmental, and economic impacts of their corporate greed. We are seeing the fallout today, with the U.S. mired in an economic recession. • Empowerment, Resources, and Policies Strategy -Empowerment involves training staff to take on responsibility and to develop a wider set of organization-determined competencies (Hewer, 1999)68. Resources are efficient capabilities of an organization, which include training, skills, production, intellectual property or technology. Policies and Strategy are the elements that control the resources of a company, which defines the success and prosperity of a company. All the MNCs should place a high value in its people. • Processes and Innovation. It is the improvement of a particular method and adaption of innovative procedures in order to increase the production efficiency of existing product (De Saeger, 2007). • Impact on People, Society, and Value Chain. These elements describe and measure the impact that a particular product or service has on people and society. What are the values that companies offer with the customers? • Reporting. The reports will give a better idea of the performance of the company and its financial report.
67 De Saeger, I. (2007). What is process innovation about? Retrieved online from http://processinnovation.blogspot.com/2007/08/what-is-process-innovation-about.html 68 Hewer, 1999 Hewer, S. (1999). What is Empowerment? School Library Bulletin, 5(5), Department of Education Library and Information Centre, Tasmania
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• Stakeholders Dialog. MNCs need to have a valuable communication process with the stakeholders where clearly states the responsibilities to society and listens to further recommendations. Conclusion This paper examined characteristics that are important for the multinational companies in Albania and competitive environment in this country. The literature review stated some of the ways of the entering marketing strategy in Albania, along with the other marketing components, competitive environment, and role of culture, economic, social, and political analysis. One of the good advices to the marketing managers is to focus in cultural traditions in Albania and adapt to their business practices. Therefore, it is extremely important as a leader to make the right decisions in the right time by following all the marketing tools, in order to stay competitive in the market. Areas for further Discussion An area that needs further discussion, which remains a big challenge for many MNCs and their leaders, is the enforcement of law. The recent economical reforms in Albania need a long time to have its effect; therefore, there are possibilities for corruption in government officials. The government of Albania has created privatization policies that will increase the possibility of foreign investment in Albania. According to U.S. Department of State (2018)69, there is a large series of privatizations, the stability fostered by the start of Albania's EU accession negotiations, strong and stable growth, and structural changes in the banking, retail, and telecommunications sectors contributed to the 2008 rise in foreign investment. Albania has taken steps to improve its investment climate through administrative streamlining, an end to foreign investment screening, and strengthened intellectual property legislation. However, a number of disputes involving foreign investors in Albania and certain policies, such as continuing gaps in the intellectual property regime and inhibit investment. The recommendations above are guidance to MNCs and their leaders prior to invest in Albania. Companies that wish to enter and invest in Albania need to understand the importance of reaching to all customers like the rest of competitors.
Bibliography Bhagwati, J. 2004. In Defense of Globalization. New York: Oxford University Press.
69 U.S. Department of State (2018). Retrieved online from https://www.state.gov/r/pa/ei/bgn/3235.htm
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Hersey, P. and Blanchard, K. H. (1977). Management of Organizational Behavior: Utilizing Human Resources (3rd ed.) New Jersey/Prentice Hall Hewer, S. (1999). What is Empowerment? School Library Bulletin, 5(5), Department of Education Library and Information Centre, Tasmania. Hofstede, G. (1984). The cultural relativity of the quality of life concept. Academy of Management Review, 9(3), 389-398. House, J. R., Hanges, J. P., Javidan, M., Dorfman, P. W., & Gupta, V. (2004). Culture, leadership, and organizations. The GLOBE study of 62 societies. Thousand Oaks, CA: Sage. Kumar, K. (2000). International marketing research. Upper Saddle River, New Jersey: Prentice Hall. Lamb, C.W., Hair, J.F., McDaniel, C. (2011). MKTG 4. 2010-2011 ed. South-Western Educational Publishing. Pride, W.M., Ferrell, O.C. (2011). Marketing Express. 2nd ed. South-Western Educational Publishing. Porter, M., E. (2008). The five competitive forces that shape strategy. Harvard Business Review, 86(1), 78-93
References De Saeger, I. (2007). What is process innovation about? Retrieved online from http://processinnovation.blogspot.com/2007/08/what-is-process-innovation- about.html Erickson, T. (2007). Now I Know Why You Drive Me Crazy! The Benefits of Managing Diversity. Harvard Business. Retrieved online from http://www.businessweek.com/careers/content/aug2007/ca2007087_436408.htm Globe (2019). Results: Albania GLOBE Project. Retrieved online from https://globeproject.com/results/countries/ALB?menu=list Kantor, R., & Wells, R. (2004). Book: "Innovation: Breakthrough thinking at 3M (etc.)." Retrieved online from http://www.amazon.com/exec/obidos/ASIN/088730771X/thegreatideafind Kotelnikov, V. (2010). Strategic Alliances: Why And How To Build Them? Retrieved online from http://www.1000ventures.com/business_guide/strategic_alliances_main.html United States Department of State. (2018). Bureau of European and Eurasian Affairs. Fact Sheet April 13, 2018. Background note: Albania. Retrieved online from https://www.state.gov/r/pa/ei/bgn/3235.htm Tirana Times. (2018). "Albania extends incentives, considers new investment law to handle expected FDI slowdown" Retrieved online from http://www.tiranatimes.com/?p=138364
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Consumers’ preferences towards meat products in Albania Authors: Msc.Irini Goga70, Prof.Asoc. Eda Luga71
Abstract
The development of Albania, in the latest years, is based on a vital economic growth. The agriculture sector plays a significant role in the GDP growth which slightly but steadily is increased. Meat production sector is one of the sectors which has an important contribution on the GDP grew. It is essential that in a competitive market environment, the farmers and meat products chain should effort more to bring good quality and safety products in the market. Many agriculture programs aim to support and lead meat producers through the EU marketing standards. The goal of these marketing rules is to encourage the producers to improve their meat products using new and efficient technology and applying new innovation. By the other side, the consumers would prefer to know what kind of meat they are buying. In this case, the producers should provide a product information regarding the origin of the products, conservation manners etc. In order to identify the consumers’ preferences, we use a questionnaire completed by different consumers from Tirana and Durres regions. The questions were conduct to discover information on person status, family, age, sex, education, income, origin environment. The sample on which the research was performed was consisted of individuals. This study, aimed to identify the consumers preferences for meat products, especially for poultry meat products. As well, this study may help and facility the poultry meat producers to be oriented by the consumers ‘preferences well defined. Keywords: behavior, consumer, meat, preferences, poultry meat JEL Classification: M0; M31;M310; M11.
70 Msc. Irini Goga, Training Coordinator,Human Resources Departement; Societe Generale Albania Bank,Blv. Deshmoret e Kombit, Twin Towers, Tower 1, e-mail: [email protected] 71 Prof.Asoc. Eda Luga, Lecturer, Faculty of Economy and Agribusiness, Agriculture University of Tirana, Koder Kamez , Tirane, e-mail: [email protected]
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1. Introduction
In the last decade, the global poultry meat market has undergone an unpredicted and complex changes. The development of the poultry meat industry is steady growing and is one of the most competitive sector in the European market. In 2018, the production of the poultry meat in EU countries is increased with 4.2% (EU Market Situation for Poultry Committee for the Common Organization of the Agricultural Markets 24 January 2019). EU Policies in meat market intended to boost a safe, nutrition, fresh meat products towards the needs of consumers. Meanwhile the agriculture sector in Albania as well is fronted with market changes and very competitive environment. Although Albanian economy has figure out a stable growth. Based on the indicators of economy, the GDP in 2016 was increased with 3.35% compared with one year before. The Agriculture, Forestry and Fishing provides 19.9% of the total GDP, and is increased with 3.35% (Instat 2018) and the total of livestock production is 18.6% . Albania as a Mediterranean country situated in southeastern Europe with a suitable clime and geography characteristic is more adapted for livestock production. In 2012, the livestock sector accounted for 44 % of the total production value and crop production for 56 % (Instat 2018) . The Albanians ‘incomes are based mostly in the trade, services, and agriculture industries. In a glance, the impact of different sectors in the total GDP figure out that Trade, Accommodation, Construction and Food Services has an impact of 0.83% in GDP, the Administrative Services and Professional activities with 0.39%. and for sure, it is important the contribution of the Agriculture, Forestry, and Fishing sector which provides 0.33 % in the total GDP. (Instat,2019) Being an important source of employment for the economy is another factor to rank the agriculture sector as one of the most important sector of economy A considerable of the population is living in rural area and are employed in agriculture. During 2017, the Service sector and the Agriculture sector have the biggest number of employees, respectively with 42.4% and 38.2 % of the total employment rate. Meat sector producer faced difficulties in a competitive market and they should find innovative technology in order to offer good quality of meat products. Albanian Agriculture statistics figure out the livestock production is 44% of the total agriculture output. In 2016, the number of cattle, sheep, goats and poultry have increase (table below). Meanwhile, in 2017, the number of livestock
190 9 th International Conference of FB ECONOMIC POLICY AND EU INTEGRATION have slightly decrease compared with 2016. So, cattle from 492 head in 2016 decrease in 475 heads in 2017; sheep from 1972 heads drop down to 1926, poultry also has a decrease: from 8326 heads in 2016 drop down to 7835 heads. Althought, the lifestock production is 161 000 tones, and is increased with 0.9% (Instat, 2018) Table 1: Animals in Albania Number of livestock, Description 2012 2013 2014 2015 2016 2017 Cattle 498 498 500 504 492 475 cows 358 356 358 357 355 349 Sheep/Goats 2,619 2,723 2,804 2,850 2,911 2,859 sheep 1,809 1,856 1,896 1,918 1,972 1,926 Milked sheep 1,390 1,413 1,419 1,417 1,428 1,407 goats 810 867 904 932 941 933 Milked goats 614 656 695 700 716 717 Pigs 159 152 172 171 181 180 Sow 12 12 12 11 13 12 Equidae 97 93 91 91 94 89 Horses 34 35 32 31 32 32 Poultry 9,494 8,928 9,493 8,558 8,326 7,835 Beehives 239 246 261 271 303 290 Source of information: Ministry of Agriculture and Rural Development
Recently (2014-2017) it is noticed a positive trend the agriculture production. The increase of agriculture production has a significant impact in the Albanian economy development, reducing unemployment rate, decreasing the products prices and influence in the import rate.
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1.2 Difficulties of Agriculture sector
The farms in Albania are still facing several problems. Most of the Albanian farms are at subsistence level and mainly the farms’ production are dedicated to fulfill the family needs. The size of the farms are very small varied to 1.20 ha. The idea to gather and collaborate with each –other for the farmers is still unacceptable. Only few farmer took the initiative to co-operate with each - other. Having the courage to join other farmers in collective action can promote the adoption of new, more productive, technologies in order to cultivate larger areas. Based on the figures of MACFP (2011), 24% of the land area are agricultural land and 54% is covered pasture forests, etc,, the rest is used for other purposes The size of the agricultural area per inhabitant in Albania is low (only 0.370 ha/inhabitant)(FAOSTAT). The rural households owned the majority of agriculture land (80 % ) and the state owned the rest (134 000 ha) (MAFCP 2011) The average of the farmer’s age is getting older every year due to emigration or migration. So, the number of young farmers above 25 years old has decreased and 33% of the farmers are 65 years old and more. (MBZHRAU, 2012). Only 1/3 of the rural population has the respective education on agriculture field. Most of the young people of the rural area don’t follow the studies due to several conditions. Only 3% of the farmers has the college education. So 37% have followed the high school education, The implementation of legislation and agriculture policies should be improve in order to reach European standards of production. Environment standards, animal welfare, and food safety are important indicators which needs to be improved. The financial institutions in Albania, doesn’t support as much as they could the agriculture sector. The agriculture loans are only 5% of the total loan portfolio. So, all this factor and a lack of the structure market and distribution of the products are the obstacles of this sector that should be resolve as soon as possible.
1.3 Poultry meat consumers preferences
This approach, is going to present a descriptive consumer preferences for poultry meat based on its attributes.
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Nowadays, living healthy is the focus of the consumers. Poultry meat is a quality source of the protein on the consumer’s diet. Their interest on the origin, freshness, taste, are the cues for the poultry meat producers. Due to the important position on a competitive market, the poultry meat producers have to supply innovative technology, processes and products The exportation of inexpensive breast meat form countries such China, Brazil and Thailand, leaded the meat market sector to faced threats in recent Based on different studies, the consumers’ attitudes are influenced by extrinsic cues as well by intrinsic cues for quality selection. So “country of origin” and “place of purchase” are some of the main key indicators. The experience quality indicators cues like flavor or smell, are hard to measure but they play an important role on the assessment of the quality of fresh meat. In response to assess the safety of meat, “country of origin” may consider as an extrinsic attribute cue. As well, place of purchase, color, portion of the meat and, fresh or frozen meat credence quality attribute cue are also very important. In order to asses eating quality as well to indicate safety of meat products, consumers often refers to the “Country of origin” attribute. This holds for all four types of meat: beef and veal, pig meat, poultry meat, and goat meat. Although, others meat attributes, which have been taking account by buyers preferences such as price, incomes, migration of the population, age, education etc. are not less important. The impact of the lower price of poultry meat than other types of meat, is a factor which may conduct the consumer to prefer the poultry meat consumption. (FENAVI, 2007; Galvis, 2000; Lanfranco & Rava, 2014). Nowadays, the consummator is more careful on the selection of the products that they consume every day. They pay attention on the selection of safety and fresh products. The change of the lifestyle orientation based on healthy diet has also impacted on the increase of the buyers ‘demand for meat products, especially for poultry meat products as they are a big source of proteins. Culturally, meat is associated with wealth and consumption is viewed as a reflection of favorable economic conditions (Nestle, 1999). Some diseases have influence in the production of the red meat. This phenomenon, has reflected in a more efficient production of other protein products such as poultry and fish. (Fernandez-Armesto, 2001). As a result, poultry meat as part of the high protein products has the tendency to have be one of the most purchased meat products. In this regards, poultry per capita consumption has reportedly increased from 20.2 to 28.1 kg per head over the last decade (Poultry World, 2000). Red meat consumption is currently estimated at 14.1 kg per head (FSA, 2002b) reflecting a complete reversal in the traditional market dominance of beef over chicken (Mannion et al., 2000).
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2. Methodology
In order to be able to conduct this study, is constructed a survey wich includes questions which will figure out the socio –economy situation of the interviewers, their desire to consume the meat products especially poultry meat, how much they want to spend for meat, how often they buy meat products. The selection of the poultry meat attributes was made based on what other studies investigated and what different author has said regarding the products attributes. This survey will conduct a survey in the Tirana and Durres area, with around 120 interviewers. A conjoint choice method which is very often used in the marketing researches will be used to analyze the results of the surveys. Within this method, is easy to provide a reliable information, and easy to understand experience for the respondent. In this regard, as poultry meat attributes we can mention: country of origin, price, age, gender, color, place of purchase, fresh or frozen. An analysis socio demographic of meat consumers in Tirana-Durres area. Combination of these indicators will give the necessary information helped to identify buyer’s behavior towards the attributes of the poultry meat.
The decision to buy a product is based usually in its attributes and in the socio – economic conditions of the buyers. The perception of products, including perception of its attributes means the starting point for the consumer decision
3. Results
The behavior of consumers is impacted by different factors: cultural, social, individuals and psychological, which create a market with different characteristics and desire.
A combination of the attributes of poultry meat will conduct us in an analysis of buyers’ preferences for poultry meat.
Income vs Meat preferences
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97 101105109113117121
P6 Te ardhurat(1..6) P13 Konsumi I mishit ne familje(totali)
Graph.1
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The incomes are one of the most important indicator that influence the buyer decision. The analyses of data survey lead us on the conclusion that buyers decisions depends on their incomes. There is straight correlation between two indicators: when the incomes increase the meat consumption increases
The healthy lifestyle now a days is a trend of both female and male consummator. Gender differences are very important influences on buyer decision. Women are more influenced by health and ethical motives then the men and they are also more willing to reduce meat consumption (Tobler, Visschers, & Siegrist, 2011).
As well, the table below figure out that both female and men consume meat products in their diet. Regarding, the consumption of products, in the Albanian family the woman is still the decision makers. Despite on this we can observed that the trend of the meat consumption especially for poultry meat is almost the same. Our analyses indicate that female consume 37% poultry meat of their total meat consumption. By the other side, male consume 26.9% poultry meat by the total meat consumption.
Gender and Meat Consuption
367 272
160 135
FEMALE MALE
Poultry Meat
Graph.2 The analyses of our survey show up a relation between age and meat consumption. So, the table below, figure out that the group age 36 – 46 consume less meat than the group age 29-34. We can observe that the meat product is in important product for both group ages.
Meanwhile, we can see that group age 36-46 consume 27% poultry meat of the total meat consumption and the group age 29-35 consume less of the poultry meat product, respectively 35% of the total meat consumption. It is obvious that meat consumption is slightly declines with the age.
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Meat consuption vs Age
335 304
165 130
MEAT POULTRY
36-46 29-35
Graph.3
4. Conclusions Culturally, meat is associated with wealth and consumption is viewed as a reflection of favorable economic conditions (Nestle, 1999). Based on the study of Aaslyng (2012:14), irrespective of purchasing ability, each consumer wants to have the best eating experience for his/her money. It is investigated that the lower-income consumers eat meat for nutritional value, while the buyers with higher incomes consume meat for the eating experience itself. Aaslyng also states that, as consumers become wealthier, their meat consumption increases. Based on the results of our study, producers should evaluate the incomes of their consumers, more buyers’ incomes means higher poultry meat products will be consumed. All this information can be an added value for the product which can give a chance to the producers to define a better price for their products. However, the demographic factors such as gender, age and marital status, impact at the type and amount of meat consumed.
The female buyer’s behavior is more oriented on a healthy diet and on calories than the male. The female consumers pay more attention in what they want and especially in what they will select from varieties of meats products. Even on our study, it is show that women consume higher poultry meat products than men. Meanwhile, men are mostly oriented to taste all kind of foods This phenomenon, has reflected in a more efficient production of other protein products such as poultry and fish. (Fernandez-Armesto, 2001). Another important factor which influence on the consumption of the meat, is as well and the age. The relation of group ages and consumption of meat products, impact the buyer’s decisions. This factor is an indicator to distinguish the market segmentation for poultry meat based on consumers ‘age. Our research reflected that older age consume less poultry meat.
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To summarize and bring out conclusions, we can say that the attributes of meat consumption especially for poultry meat consumption are very important indicators to distinguish the market segmentation for the consumers of poultry meat, as a key of marketing strategy which will lead to an efficient meat market. The results of this study attempt to be a good orientation for the poultry meat producers to fulfill and lead the buyer’s demands. References Kennedy, O. B., Stewart Knox, B. J., Mitchell, P. C., & Thurnham, D. I. (in press). Consumer perceptions of poultry meat: A qualitative analysis. Nutrition and Food Science Barbutt, S. (2001). Acceptance of fresh chicken meat presented under three light sources. Poultry Science, 80, 101–104 Atkins, L., & Vicars, M. (2016). Feminine men and masculine women: in/exclusion in the academy. Education + Training, Vol. 58 Iss 3 , 252 - 262. Tobler, C., Visschers, V. H., & Siegrist, M. (2011). Eating green. Consumers’ willingness to adopt ecological food consumption. Appetite 57, 674-682. E Committee for the Common Organization of the Agricultural Markets 24 January 2019; Market Situation for Poultry José Saturnino Mora Flores* Miguel Ángel Martínez Damián* Fecha de recepción: marzo de 2016; Characterization of consumer chicken meat in the metropolitan area of valley of Mexico Ricardo Tellez Delgado* Karen Enciso , Stefan Burkart, International Center for Tropical Agriculture;Preferencias del consumadores y segmentacion del Mercado para una carne diferenciada con menor impacto ambiental.Pg. 8 – 10 ; 12 – 15; Consumer perceptions of poultry meat: A qualitative analysis Article in Nutrition & Food Science June 2004 https://www.researchgate.net/publication/235270288_Consumer_perceptions_of_poultry_meat_ A_qualitative_analysis Kristina Jovanovic and Donata Navickiene; Bachelor Thesis, International Business and Marketing Spring 2016; Green Consumer Behavior: Gender Differences In Willingness To Eat Less Meat; Studies in Agricultural Economics 120 (2018) 126-133 https://doi.org/10.7896/j.1802; Rungsaran WONGPRAWMAS*, Maurizio CANAVARI*, Drini IMAMI**‡ , Mujë GJONBALAJ*** and Ekrem GJOKAJ*** Attitudes and preferences of Kosovar consumers towards quality and origin of meatMACFP 2 MBZHRAU, 2012 Instituti I statistikave 2018;Instat 2019; http://www.instat.gov.al/
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Social entrepreneurship - Accounting and tax consideration for social enterprise development and growth
Ivana Tomasevic72, Sandra Djurovic73
Abstract
The paper discusses social entrepreneurship as a process through which social problems are solved in innovative way and by using business approach. In global economy, innovative solutions for social issues like: unemployment, youth employment, social inclusion, culture, environment, education etc, are developed with social entrepreneurship. Those solutions in many cases change the system and motivate whole society to move into new direction. There is need for researching social entrepreneurship in Western Balkan countries. In this paper we will discuss only social entrepreneurship initiatives that are established with a goal of long-term duration - if form of social venture. In entering social entrepreneurship, entrepreneurs need to register social enterprise. Deciding about the registration form will impact their growth possibilities. The aim of the paper is to identify the main issues that social entrepreneurs need to consider before registering their social business like: existence of Law on Social enterprises, Business and Accounting Law that supervises social enterprise, employment needs, Accounting and tax reporting needs, Income generation. The paper will also present solutions proposed in Law on social enterprises where it exists and in other laws that impact social entrepreneurship – with particular attention to tax and accounting needs.
Key words: Entrepreneurship, Accounting, Social Entrepreneurship, Social Enterprise, Social Innovation, Tax Accounting for Business,
JEL classification: M41, M48, G32, L31, O35
72 Faculty of Business Studies, University Adriatic, Bar, Montenegro, PhD Economy Sciences, Topolica III, [email protected], 85000 Bar 73Faculty of Business Economics, University Adriatic, Bar, Montenegro, PhD Economy Sciences, Topolica III, [email protected], 85000 Bar
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1. About social entrepreneurship
Under social entrepreneurship in this paper we mean a process through which social problems are solved in an innovative way. In other words, in social entrepreneurship there are innovative solutions for social problems that change the system and motivate the entire society to move in a new direction (Hervieux, C., & Voltan, A.2018). There are various definitions of Social entrepreneurship but most common knowledge is that it “is the use of start-up companies and other entrepreneurs to develop, fund and implement solutions to social, cultural, or environmental issues.” This concept may be applied to a variety of organizations with different sizes, aims, and beliefs. (Dees, 1998). At one side we have for-profit entrepreneurs that typically measure performance using business metrics like profit, revenues and increases in stock prices. While at the other side social entrepreneurs are non-profits with goal of generating a positive "return to society" and therefore must use different metrics. Social entrepreneurship typically attempts to further broad social, cultural, and environmental goals often associated with the voluntary sector[3] in areas such as poverty alleviation, health care and community development. Thompson, J.L. (2002). In other words, in social entrepreneurship success is measured by positive return to society by achieving various social-economics goals and environmental goals. Interest in social entrepreneurship grows when the state and enterprises face challenges such as growing inequalities in society and social exclusion. This approach then provides innovative solutions for employment, poverty reduction and inclusion of vulnerable groups. Today, many activities in the field of local community development, as well as in the field of achieving higher goals of society, can be classified as social entrepreneurship. Social entrepreneurship is seen as differing from other forms of entrepreneurship in the relatively higher priority given to promoting social value and development versus capturing economic value. (Mair, J., & Marti, I. 2006). However we need to emphasize that social entrepreneurship as a process that catalyzes social change and addresses important social needs in a way that is not dominated by direct financial benefits for the entrepreneurs (but financial benefits can be also achieved, they are not excluded).
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2. Difference between social and commercial economy
Commercial entrepreneurship bases its principles on making profits, and making efficient use of resources. The company should achieve the best possible results, with as few employees as possible, and with as little investment in them. When earning profits at the end of the year, it is split between the owner. By contrast, the principles of social economy rest on civil society, that is, citizens. This means that a social enterprise operates in order to not profit, but to achieve or to fight for a particular social goal. Such a company is established with the aim of environmental protection, and it directs its business towards achieving this goal. Similarly, the business of these companies can be directed at opening rand places, that is, reducing unemployment, fighting poverty, and more. Lately, social entrepreneurship has gained considerable popularity and it is considered that a new generation of consumers requires and values social entrepreneurship. The popularization of this concept has also contributed to the well-known big companies such as Coca- Cola, Proctor and Gamble, Ben & Jerry, Dannone, T-com and others. which, in order to improve their image, have introduced various social programs of the Company in recent times (at the will of the management or due to the pressure of the state and legal regulations) are beginning to behave more responsibly towards the social community and to introduce various changes in their business as to contribute, for example, better attitude towards the environment, inclusion of vulnerable groups or improvement of life in the local community and society. Due to the acceptance of the concept of social entrepreneurship, we observe trends such as: the use of solar energy and bio- degradable packaging in the process of production, consumer education to recycle, the employment of people with disabilities, and through the popularization and expansion of social entrepreneurship, new forms of companies have emerged that put economic focus in the focus of their business development and social benefits such as: incubators, accelerators, high technology investment companies. Social entrepreneurship is an emerging area of investigation within the entrepreneurship and not- for-profit marketing literatures. A review of the literature emerging from a number of domains reveals that it is fragmented and that there is no coherent theoretical framework. Therefore, unique characteristics of social entrepreneurs and the context within which they must be analyzed (Weerawardena, J., & Mort, G. S. 2006). In their research Shapero and Sokol propose looking into social entrepreneurship as the event created by groupings of various of social variables (such as
200 9 th International Conference of FB ECONOMIC POLICY AND EU INTEGRATION ethnic groups) and the social and cultural environment. The entrepreneurial event is denoted by initiative-taking, consolidation of resources, management, relative autonomy, and risk-taking. The proposed paradigm attempts to include all versions of the entrepreneurial event and all variables (situational, social, and individual) identified with the event. Shapero, A., & Sokol, L. (1982).
3. Third sector and social entreprises
A social enterprise is a business that operates in a different way, ie, striving to achieve a social purpose. By this we mean that like any other company and it is focused on the realization of revenues, but that its particularity stems from the way in which it benefits. Namely, the social enterprise uses profit by investing in programs and activities that positively influence: society, local community and the natural environment. The social enterprise achieves its social mission through: • Reinvesting profits • Employment of those who are striving comes to work or are left out of the labor market • Provide social, medical and education services to vulnerable individuals or groups who do not have them at their disposal • Investments or changes in business to protect the environment • Contributing or developing cultural activities in the community Although social enterprises resemble humanitarian organizations, they are not for business activity. Social enterprises by selling their products and services on the market try to earn money and profit, after which they invest in money to do something good in society. Humanitarian organizations, unlike them, do not engage in economic activity. This specific has impact on social enterprise registration, accounting and tax issues. We also differentiate social enterprises from socially responsible companies (commercial entities) such as Coca Cola or another large company that carries out socially responsible programs. In contrast, social enterprises do not distribute profits and in their mission have a clearly defined social purpose for which they are founded. Any business can be socially responsible but not established for this purpose unlike a social enterprise. It is believed that the emergence of social enterprises is related to the development of society (changes in science and technology, innovation, electronic literacy, new legislation, etc.) as well as for deepening social problems (rural development, inclusion of persons with disabilities,
201 ECONOMIC POLICY AND EU INTEGRATION equality. the creation and development of social enterprises whose business deals with all three sectors. The roles of social workers and entrepreneurs are intertwined and emerging by new social entrepreneurs that have characteristics both of one and the other.
Goal of this entities is creation of social impact Rawhouser, H., Cummings, M., & Newbert, S. L. (2019) in their research try to define social impact in order to be able to correctly measure it. This is necessary for financial, registration and accounting purposes. It is important to understand this term in order to be able to answer questions like: how do we represent revenue and is it coming from commercial activity or not? Is social impact measurable and how? In their work social impact is an important piece of the phenomenon of social entrepreneurship (Dacin, Dacin, & Matear, 2010; Lumpkin, Moss, Gras, Kato, & Amezcua, 2011). While social impact might be considered to be the relevant performance-based dependent variable related to social entrepreneurship, insights regarding social impact have struggled to cohere given a proliferation in terminology and a diversity of contexts. For example, social impact has been conceptualized in the literature using terms such as social value (Moss, Short, Payne, & Lumpkin, 2011; Santos, 2012), social performance (Husted et al., 2006; Mair & Marti, 2006; Nicholls, 2008), social returns (Emerson, 2003), social return on investment (SROI) (Hall, Millo, & Barman, 2015), and social accounting (Nicholls, 2009), which, although similar, represent distinct constructs. Moreover, social impact has been studied in domains such as education, health care, environmental sustainability, and poverty, which can be difficult to compare (Izzo, 2013). Analysis based on value generation, value capture and value sharing provides important insights into the specificity of SE research and can facilitate future theorizing Hlady‐ Rispal, M., & Servantie, V. (2018). 4. Legal, Tax and Accounting considerations of social entreprises
The operation of social enterprises is organized in many ways, depending on the goal that is to be achieved. In 2011, the initiative of social entrepreneurship at the European Union level was launched, so the European Commission creates opportunities for the emergence and development of these enterprises, by adapting to the social, financial, administrative and legal sphere. Different types of business that can be reduced under the definition of social entrepreneurship are: a. Companies whose commercial business is focused on achieving a social goal, most often social innovations; b. Enterprises that invest part of their profits in achieving social goals,
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c. Those companies that are guided by social and democratic principles, that is, those that seek to achieve social justice. The form of organizing social enterprises cannot be reduced to one category because some companies act in the form of social cooperatives, some as private companies common while others are organized in the form of non-governmental organizations (NGO, associations, volunteer organizations, charities, foundations). Finding the right legal form is as important as the other stages in business development because it will directly affect our success. When choosing a legal form, we must take into account: the type of activity we will be dealing with; whether we want to make profit or not; whether we start a business alone or in a partnership, etc. In Montenegro, there are two options most common options that social entrepreneurs choose when choosing a registration, which is whether we will register as a company or as an association of citizens (NGO). At this stage, it is necessary to get acquainted with legal normative frameworks establishment, business and development of the social enterprise described in the following laws: • Company Law • Law on Non-Governmental Organizations • Law on Vocational Rehabilitation and Employment of Persons with Disabilities • Law on Volunteer Work In Montenegro there is no low on Social enterprises however some laws dealing with social issues or environmental issues cover some areas. Like Law on professional rehabilitation of persons with disabilities identifies some form of special companies and their way of organization. However, it is necessary to emphasize that legal form of registration is still defined in Company Law and in the Law on NGO. As the primary task of social enterprises is to achieve a certain social goal, it is necessary to look at the ways of financing such enterprises. The form of financing will influence bookkeeping and recording revenue. The legal form of establishment in Montenegro conditions the financing area too. Social enterprises registered as NGO can not generate commercial revenues more than 4000 euro per year. In order to generate revenue from some of commercial activities, which they will later reinvest for obtaining social goals, social enterprises need to be registered in Commercial court. Depending on the size of the company, market and goals the most beneficial registration is
203 ECONOMIC POLICY AND EU INTEGRATION as limited liabilities entity while in the Statute of the company companies need to state their social purpose and that the profit will not be shared but reinvested for achieving social goals. It should be emphasized that, social enterprises can be large, sustainable and strive to enter the international markets – this is why at the registration they are considered as commercial organization. On the other hand, small social enterprises encounter barriers to the internal market because they are insufficiently (financially) strong to choose for the desired or optimal conditions with banks, participating in public tenders, applying for the provision of structural funds and other benefits that market-strengthened companies have. What is common in small and large social enterprises concerns finding funds for financing, investing, because depending on the reasons for their formation, their needs are different. (Young 2010). The first opportunity for the business of social enterprises can be obtained from state or European funds, or by investing directly in the company by a third party. However, there are other sources of financing for social enterprises is based on: a) Donor funds of members of the company or founder, b) Funds paid or donated as gifts c) Funds paid or credited by the State, d) Resources available to public funding sources, and e) Own financing. In deciding the form and model of registration companies need to see which sources of financing they will use more. This decision will influence on how they will record revenue: coming from regular or coming from other activities. When most of funding comes from commercial activity (selling products, providing services or renting to the market) that it is necessary and obligatory to record revenues as own under 202 field in Income statement – Income from sales. In case of NGOs the revenue is recorded at 206 Other sources of funding. It is obligatory to state where other sources of funding are coming from and to separately record those coming from Donor funding or coming from supporting social action of enterprise. When it comes to recording expenses and associating expenses to revenue there are strict procedures to be followed. However, for NGOs and SMEs in Montenegro due to the size of accounting and general practice of outsourcing of accounting service accounting procedures are not always followed. This needs to be further researched.
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Funding processes, their sources and purposes need to be distinguished in relation to whether they relate to the social economy in general or to social enterprises. However, this area needs to be further researches. Developing a social model is a complex and demanding task behind whose actions the decisions are made at high state levels, ie at the community level. Social entrepreneurship, on the other hand, focuses on a certain social aspect, while the tools for achieving the goal remain the same, and they represent more operative activities in relation to activities for the development of the social economy. Financing the social economy system implies the disposal of funds from the Structural Funds at the level of the Member States of the European Union in order to improve certain areas and equate them with the conditions in the territory of the Member States of the Union. These funds may be used by interested parties whether it is a private or public sector, since they have a common goal of developing a strategy for assessing and designing a social economy model.
5. Conclusions
Research on social entrepreneurship in the function of creating new jobs can be viewed from a social and scientific point of view. When it comes to scientific theory there is lack of attention to the defining of social problems in SE has implications for the domain for problems do not exist unless they are recognized and defined, and those that define problems have influence on how these will eventually be addressed (Hervieux, C., & Voltan, A. 2018). Analysis of Framing social problems in social entrepreneurship reveals that social actors are concerned with creating an ecosystem to support social entrepreneurs. Scientific theory therefore suggests that social entrepreneurs are and should be the agents of change. When it comes to social point of view launching of social entrepreneurship directly influences the creation of jobs, the development of local self-government, the creation, strengthening and spreading of awareness of environmental protection, social innovation, health care, education and other segments that affect the quality of life. Social entrepreneurship is a relatively new form of business, and the introduction of such a system invokes the economic system of the state as a whole, and the factors of economic development change. It is necessary for the state to undertake all necessary activities in order to achieve partnership with such enterprises, and thus act together to fight the problems of civil society.
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6. Literature 1. Al-Habees, M., Abu Rumman, M., The relationship Between Unemployment and Economic Growth in Jordan and Some Arab Countries, World Applied Sciences Journal 18: 762-769, 2012.g., 2. Alavi, M., Leidner, D., Knowledge Management and Knowledge Management Systems: Conceptual Foundations and Research Issues, Management Information Systems Research Center, University of Minnesota, 2001.g.; 3. Amin, A., The Social Economy: Alternative Ways of Thinking about Capitalism and Welfare, 2009.g., 4. Arvey, R., Renz, G., Fairness in the selection of employees, Journal of Business Ethics, Volume 11, Issue 5, May 1992; 5. Enterprising Ideas, What is a Social Entrepreneur, PBS Foundation
6. Dees, J. Gregory, 1998, rev 2001 "The Meaning of Social Entrepreneurship," "The Meaning of Social Entrepreneurship". caseatduke.org. Retrieved 2013-05-03. 7. Thompson, J.L. (2002). "The World of the Social Entrepreneur". The International Journal of Public Sector Management. 15 (4/5): 8. Chou, D. C. (2018). Applying design thinking method to social entrepreneurship project. Computer Standards & Interfaces, 55, 73-79. 9. Communication on the 'European Platform against Poverty and Social Exclusion: a European framework for social and territorial cohesion', COM, 2010.g.; 10. Goyal., K., Joshi., V., A Study of Social and Ethical Issues in banking industry, 2011.g. 11. Hlady‐Rispal, M., & Servantie, V. (2018). Deconstructing the way in which value is created in the context of social entrepreneurship. International Journal of Management Reviews, 20(1), 62-80. 12. Hervieux, C., & Voltan, A. (2018). Framing social problems in social entrepreneurship. Journal of Business Ethics, 151(2), 279-293 13. Kelly, M., Off Balance: Getting Beyond the Work-Life Balance Myth to Personal and Professional Satisfaction, NY, 2011.g; 14. Mair, J., & Marti, I. (2006). Social entrepreneurship research: A source of explanation, prediction, and delight. Journal of world business, 41(1), 36-44.
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15. Moulaert, F., The international handbook on social innovation : collective action, social learning and transdisciplinary research, Edward Elgar, 2013.g 16. Wright, P., Gardner, T., Moynihan, L., The impact of HR practices on the performance of business units, Human Resource Management Journal, 2003.; 17. Rawhouser, H., Cummings, M., & Newbert, S. L. (2019). Social impact measurement: Current approaches and future directions for social entrepreneurship research. Entrepreneurship Theory and Practice, 43(1), 82-115. 18. Shapero, A., & Sokol, L. (1982). The social dimensions of entrepreneurship. Encyclopedia of entrepreneurship, 72-90. 19. Salomon, Lester M., The Rise of the Nonprofit Sector, Foreign Affairs, 1994.g., 20. Weerawardena, J., & Mort, G. S. (2006). Investigating social entrepreneurship: A multidimensional model. Journal of world business, 41(1), 21-35.
21. Young, D., Financing Nonprofits and Other Social Enterprises: A Benefits Approach, London, 2010.g.,
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Social entrepreneurship vs. Traditional entrepreneurship: A qualitative approach to understanding social entrepreneurship as a social value. Dr. Juljana Laze74
Abstract
Entrepreneurs are generally understood to be closely related to their business to make profits and seem unlikely to be related to social interests. But this is not all true. Social entrepreneurship has got a special attention to the developed countries by researchers from different fields. In our country, this concept is relatively new and consequently there are no much studies of socio- economic character. Social entrepreneurship can directly improve any social, economic, racial, sexual or gender-based challenge. Social entrepreneurs use innovation and creativity to bring about social change in education, health and environment and have a positive impact on the community. This study aims: a) to analyze the essence of what social entrepreneurship vs. traditional ones is; b) to emphasize the role of social entrepreneurs as change agents in the social sector, by adopting a mission to create and sustain social value; c) to examine the concept of social entrepreneurship and reviews a number of definitions in order to highlight common features. Also, it contributes to the answer to the call for more quantitative and qualitative research and at the same time argues the need for more in-depth studies suggesting a variety of challenges to practice, policy and research in this area to Albania context. With this important observation in mind, our findings indicate a shortage of new social organizations or initiatives that rely heavily on government funding, while their relationship with the community in the context of gained goods is limited. Moreover, it seems that social entrepreneurs show less ambition in terms of growth and progress in the most mature stages of the entrepreneurial process compared to commercial entrepreneurs.
74 Dr. Juljana LAZE, University “Aleksandër Moisiu”, Faculty of Education, Department of Sociology, Durrës, Albania; e-mail:[email protected]
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Key words: Social entrepreneurship, Traditional entrepreneurship, Challenges, Social values, Disadvantages group. JEL Classification: A12, D6, L26, L31
Social entrepreneurship vs. Traditional entrepreneurship: A qualitative approach to understanding social entrepreneurship as a social value.
1. Introduction Social entrepreneurship has become a fashionable construct in recent years. In Albania is nearly absent in academic research until the end of the 1990s, because of the context of the country. Even now days entrepreneurship and enterprise have become an important research area, but social entrepreneurship it is still absent in academic research. At international level, studies in this field are very rich where special issues of several journals have focused on social entrepreneurship and have been created especially to deal with this and closely related issues. Although there is no widely accepted definition of social entrepreneurship, it can be understood as an intercessor that combines social purpose with the spirit of the entrepreneur. Often evidenced by success stories across the world in diverse fields (health, education, finance, culture, etc.), the concept has become increasingly evident in commercial markets, academic discourses and policy making. The latter field were social entrepreneurship, is regularly been cited is microfinance, since the Nobel Peace Prize was awarded to the Grameen Bank and its founder Mohammad Yunus. (Benjamin H., Alex N., 2012) In Albania, the development of social enterprises is still in the early stages of its development. The first social enterprises have developed their activity before 2000, and have mainly had a non-profit status. Over the years, two main forms have been known in our country: i) Traditional enterprises that are business organizations / entities that produce / sell a product / service in order to maximize personal benefits (“shareholder value”) and (ii) development organizations / organizations (non-profit organizations, charities) that aim to maximize social benefits (“social value”) through their social problem solving activities, mainly by donated funds (donations, grants).
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Taking into account the importance of Social Entrepreneurship, the impact not only in the economic but also in the social field as well as the challenges faced in their activity, interchange an approach to recognize and evaluate their development in our society.
2. Methodology and propose of the study This study aims to highlight the importance of the need to understand the nature of social enterprises. It also highlights the issues faced by social enterprises in our country, as well as to identify and to address the challenges of social entrepreneurs as agents of changes. The information used for this study is based on a variety of sources, considering the nature of it. To the purpose of this research is used a qualitative research, as the focus of the study was the description and exploration of the model, situation and challenges of social enterprise in our country. In order to achieve the purpose of the study, data were used by direct observation, analysis of various articles in the written media; as well as the use of relevant literature resources. A literature research was conducted such as: research of the legal framework; studies of organization reports operating locally, regionally and internationally; theory and research studies of authors that have contributed to this field, as well as analyzing the needs of target groups and documents affecting issues that focus on social enterprises. The limitation of this study was the lack of official public data regarding the impact of social enterprise in the country. So, the study contributes to the answer to the call for more quantitative and qualitative research and at the same time argues the need for more in-depth studies suggesting a variety of challenges to practice, policy and research in this area to Albania context.
3. Social entrepreneurship vs. Traditional entrepreneurship Although no single definition exists, it is commonly agreed that the entrepreneur is an agent of change, especially in a growing world of free enterprise and capitalism. In this sense, the traditional entrepreneur is the greatest risk-taker but ultimately claims the greatest rewards. Entrepreneurship is the process of designing, launching and running a new business, which is often initially a small business. The people who create these businesses are called entrepreneur. Entrepreneurship has been described as the "capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit (Business Dictionary). Entrepreneurship –the entrepreneurial function- can be conceptualized as the
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discovery of opportunities and the subsequent creation of new economic activity, often via the creation of a new organization (Reynolds, 2005; 359-364). Therefore, according to the research studies there are three basic ideas that explain the appearance of entrepreneurial activity (Álvaro C.,, Domingo R., , Salvador R.,2008:3). The first, focuses on the individual, in other words, entrepreneurial action is conceived as a human attribute, such as the willingness to face uncertainty (Kihlstrom and Laffont, 1979), accepting risks, the need for achievement (McClelland, 1961), which differentiate entrepreneurs from the rest of society. The second fundamental idea emphasizes economic, environmental factors that motivate and enable entrepreneurial activity, such as the dimension of markets, the dynamic of technological changes (Tushman and Anderson, 1986), the structure of the market –normative and demographic. (Acs and Audretsch, 1990) or merely the industrial dynamic. The third factor is linked to the functioning of institutions, culture and societal values. These approaches are not exclusive (Eckhardt and Shane, 2003:2), given that entrepreneurial activity is also a human activity and does not spontaneously occur solely due to the economic environment or technological, normative or demographic changes. Entrepreneurship is often discussed under the title of the entrepreneurial factor, entrepreneurial initiative, and entrepreneurial behaviour and is even referred to as the entrepreneurial “spirit”. The entrepreneurial factor is understood as an entrepreneurial function refers to the discovery and exploitation of opportunities or to the creation of enterprise. Entrepreneurial behaviour is seen as behaviour that manages to combine innovation, risk-taking and proactiveness (Miller, 1983: 770-791). In other words, it combines the classic theories of Schumpeter’s innovative entrepreneur (1934, 1942, and 1976), the risk-taking entrepreneur that occupies a position of uncertainty and the entrepreneur with initiative and imagination who creates new opportunities. Entrepreneurial initiative covers the concepts of creation, risk-taking, renewal or innovation inside or outside an existing organization. Meanwhile, the entrepreneurial spirit emphasizes exploration, search and innovation, as opposed to the exploitation of business opportunities pertaining to managers. In the 20th century, the understanding of entrepreneurship owes much to the work of Joseph Schumpeter. According to Schumpeter, an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship employs what Schumpeter called "the gale of creative destruction" to replace in whole or in part inferior innovations across markets and industries, simultaneously creating new products including new
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business models (Schumpeter, J. A., 1976). In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. The supposition that entrepreneurship leads to economic growth is an interpretation of the residual in endogenous growth theory and as such is hotly debated in academic economics. In the 21st century, entrepreneurship has been extended from its origins in for-profit businesses to include social entrepreneurship, in which business goals are sought alongside social, environmental or humanitarian goals and even the concept of the political entrepreneur. Entrepreneurship within an existing firm or large organization has been referred to as intrapreneurship and may include corporate ventures where large entities "spin-off" subsidiary organizations (Shane, Scott Andrew, 2000). Also, the definition of social entrepreneurship varies from a narrow definition to a wide one. Under the narrow definition, social entrepreneurship is basically the action of applying innovative means and business skills in the non-profit sector. The wider definition on the other hand, refers social entrepreneurship as “innovative activity with a social objective in either the for-profit sector, or in corporate social entrepreneurship, or in the non-profit sector, or across sectors, such as hybrid structural forms which mix for-profit and non- profit approaches” (Austin, Stevenson and Wei-Skillern, 2006) . Establishing an agreed definition of social entrepreneurship has not proved to be an easy task . This is unusual in the field of entrepreneurship, but less so in areas of the social sciences more concerned with societal issues. Despite continued debates, one of the most commonly used definitions was provided by Dees (1998,) revised 2001, “Social entrepreneurs play the role of change agents in the social sector”, by: – Adopting a mission to create and sustain social value (not just private value), – Recognizing and relentlessly pursuing new opportunities to serve that mission, – Engaging in a process of continuous innovation, adaptation, and learning, – Acting boldly without being limited by resources currently in hand, and – Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created” (2001:4) As a consequence, there is a lack of knowledge regarding the factors that distinguish social enterprises from their commercial counterparts. So what are the main dimensions of social entrepreneurship? First dimension, “sociality”, refers to the social and environmental focus of social entrepreneurship. Such a focus may be
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identified through the creation of public goods and positive externalities. Six fields or domains are natural settings for social entrepreneurship initiatives: (1) welfare and health services (2) education and training (3) economic development (4) disaster relief and international; (5) social justice and political change, including race and gender empowerment;(6) and environmental planning and management . b) Second dimension “innovation”, that has much in common with models found in commercial entrepreneurship (e.g. Schumpeter’s idea); c) Third dimension is market orientation that is manifest in a variety of ways in social entrepreneurship, most obviously in the for-profit social enterprise form (Nicholls and Cho, 2006). Based on how social enterprises integrate these building blocks, different typologies of social entrepreneurship have been proposed. So in Albanian context, social enterprises are seen as hybrids at the end of their non- profitable and profitable goals, and the social value they create depends on the motive of entrepreneurs. Social entrepreneurship is positioned between these two forms and lends out the best elements of both: from a traditional enterprise it lends "financial sustainability approach" (self-generating the necessary income through an economic / trade activity), and by developing organisms lends itself to the primary goal of "maximizing social / social benefits" (by taking on contributing to solving one or more social problems). Of course, both traditional entrepreneurship and development organisms have a huge impact and importance for society. The fact that in our country is trying to promote social entrepreneurship does not shadow their importance at all and do not try to replace them, rather they are complementary and fill a gap that exists between the two” ( Sh. Marku, Yunus Managing Director for the Balkans). We found that social entrepreneurship or initiatives are predominantly younger than their traditional entrepreneurship and are mainly represented in the pre-start-up or infancy stage of the entrepreneurial process, which at first sight could be attributed to the relative newness of the phenomenon in our country.
4. The size and scope of the field of social entrepreneurship Social entrepreneurship is not characterized by a single legal form. Specific legal forms do exist for social entrepreneurship. The concept of social enterprises has appeared for the first time in Italy in the early 1990s, in the form of co-operatives. Specific legal forms do exist for social entrepreneurship, such as the Social Purpose Company in Belgium or the Community Interest Company (CIC) form in the United Kingdom. So there are three different models can be identified
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according to the various organizational forms that social enterprise can take: the “co-operative”, the “company” and the “open form” (OECD, 2013:3). The field, however, also includes a variety of other legal forms (cooperatives, nonprofits, businesses, etc.), some of which are combined in the context of hybrid structures. As a consequence, it has proved to be a significant challenge to derive consistent data on the size and scope of social entrepreneurship across countries. There are two lines of thinking about social entrepreneurship: the European one which conceives them as a hybrid enterprise and the American one that sees social enterprises as non- profitable, which generate their own income. Between discussions on what social enterprises are more recently, the European Commission has defined a social enterprise as being “an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders. It operates by providing goods and services for the market in an entrepreneurial and innovative fashion and uses its profits primarily to achieve social objectives. It is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities” (Communication from the Commission, 2011/682 final). In Europe, social enterprises are active in a wide spectrum of activities and in many different fields, including social services, education, housing, the environment, culture and the arts, and tourism, through new activities such as renewable energies, fair trade and transport. Meanwhile, we emphasize that the sector of enterprises or social enterprise in Albania and in all the Balkan countries is still at its beginnings. The number of social enterprises in these countries is still quite small. For many reasons, often and contradictory, such as the economic level, the bitter experience of "social", the "wild capitalism" and the order after the rapid enrichment, the low level of responsibility towards society, the way understanding of the role / contribution of the individual in society, overestimating the role of the state and expecting that everything that belongs to society is a duty or a duty only of the government, etc. (Sh. Mark: 2016). Although the current law mentions the possibility of developing support schemes, but apart from some initiatives of private projects or organizations, there is no strong public support scheme for social enterprises. Social enterprises in Albania that exercise their economic activity with inclusion and service of disadvantaged categories face with many additional difficulties compared to traditional enterprises, such as:
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- need more support including technical, financial, fiscal, promotional support, etc. - more clarity on public sector policies and simplified procedures. Many of these initiatives are being undertaken individually by private entrepreneurs who wish to contribute to a particular social issue or sometimes from a non-profit organization within the scope of their mission / mission objectives. - meeting more conditions to exercise their activity as a social enterprise for what their counterparts or other non-profit organizations or private businesses offer similar products / services (see law no.65/2016). - the existence of many problems in the current law itself, despite an apparent government commitment to being present in this sector. - the law provides for unnecessary over-regulation. “Without get into the details of the law, i am convinced that any over-regulation of this new sector of the economy can in many cases be discouraging in the emergence of new social enterprises or hampering the exercise of the activity of those who choose to enroll such as” ( Sh., Marku: 2018). - the perceived shortcomings of public and private models of public and private models, whereby strong leadership is led by a certain set of socially responsible social responsibility and the social enterprise's accountability. But, the list of difficulties faced by social intercourse is by no means exhaustive, especially in the Albanian context. Also, a study by partners in Albania, in cooperation with other organizations during the period May 2013- January 2014, some of the factors of the strengthening of social stability interdependence which are closely related to its values are: i) Reinvest the benefits - the tendency to invest most of the benefits again within the business; ii) Motivate workforce - the priority of social objectives in motivating the employees; iii) Loyal customers- due to the added value of the benefits and social services that they offer for these categories, increasing their sense of loyalty and lowering their perfection; iv) Increased resources - Increasing feelings of volunteering, as they offer certain social objectives. Thus communities and agencies can be affected by offering free- of-charge facilities or donations to different devices, why not and raise funds for social enterprises; v) Supporting networks and cooperation - as they contribute to solving wider issues than simply employment, and operate in a less competitive environment, increasing levels of collaboration and networking. (Partner Albania, 2016:19).
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In fact, the focus of social enterprise development in our country has been the creation of jobs paid to those people who are usually unable to hire or undertake an income-generating activity. Nevertheless, attempts have been made to give a snapshot of the field in different contexts. At the international level, the Global Entrepreneurship Monitor (GEM) survey is a valuable source of information. The GEM 2010 survey took, for the first time, a worldwide perspective on social entrepreneurship (https://www.gemconsortium.org/report). It estimated that an average of 1.9% of the population directly engaged with social entrepreneurship, with important differences depending on the region concerned and its level of economic development. While in the GEM reports (2016-2019), it is clear that the focus of development of social intercourse should include: i) recognition of factors that promote or impede entrepreneurial activity, especially related to social measures, individual attributes and conditions of entrepreneurial framework; ii) providing a platform to assess the extent to which entrepreneurial activity influences socioeconomic development (including economic and inclusive growth) within individual economies (Gender Age Motivation); iii) identify policy implications in order to increase the capacity entrepreneurial and resulting in an economy (Business growth, Innovation, Internationalization). So, social intercourse takes value for other social groups (youth, gender, education, education, family health, social work, and education, etc), but our country were not part of these reports, or other reports at European level and there are no specific data for Albania. so it was impossible to provide an approach around these issues. In another study is argued that the national context plays an important role in shaping the characteristics of social enterprises in terms of sector specialization, funding and employment, for example enterprises operate predominantly in the health and social work, and education sectors, (Romania and Hungary) whereas in the other countries (Spain, Sweden and the United Kingdom) the sector specialization was less pronounced (OECD, 2013:6-7). So, some steps to develop social enterprises by referring to the OECD study entitled "Policy Brief on Social Entrepreneurship" may be: i) Promoting positive attitudes towards social entrepreneurship can be a preliminary step towards social enterprise creation. This can be a key element in broader strategies for promoting social entrepreneurship amongst young people; ii) Build enabling legal, regulatory and fiscal frameworks. The development of appropriate legal, regulatory and fiscal frameworks must therefore emerge from the national and local environments in which social enterprises operate; iii)
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Provide sustainable finance. Governments can for instance foster public-private community partnerships between civil society, government and financial institutions, of which examples already exist (Australia, Belgium, and Poland); iv) Offer business development services and support structures. This step may increase the understanding of social enterprise within the traditional sector; v) Support access to markets, s through making public procurement more open to the social enterprise sector; vi) Support further research in the field of social entrepreneurship by governments and public research institutes (OECD, 2013:13-15). These contribute to the identification of specific needs of both social enterprises and the communities, in which they are based. These would help in the pursuit of a strong relationship between researchers, policymakers and practitioners, which may have a very positive impact on social enterprise and its development. It can also contribute to the identification of specific needs of both social enterprises and the communities in which they are based.
5. Challenges of development of social enterprises in Albania The development of social enterprise in Albania is still in its early stages. Today, more companies operate with non-profitable more than profitable status. Albania has a legal framework, such as Law No. 65/2016, "On social enterprises in the Republic of Albania", which specifically regulates their performance and functioning. Also, instruction no. 602/2018 regulates the procedures and documentation for obtaining the status of the social enterprise. The study of the nature of the law requires a notice with it. The current law mentions the possibility of developing support schemes (Sh, Marku: 2018), but for the time being, apart from some initiatives of private projects or organizations, there is no public support scheme for social enterprises until the necessary sublegal acts are prepared and adopted. The social enterprise profile in Albania is focused on four dimensions: the general identity; the nature of the social mission; ownership structure and governance and financial structure. Some social enterprises operate in the country and are registered with different legal status. Most have been registered as: NGOs, Physical Persons, the Credit Saving Company and the Society of Reciprocal Co-operation. Findings (Partner Albania, 2010, 2016, and 2017) show a low level of capacity and sustainability as far as the financial capacity and labor force of ours are concerned, but with an increasing tendency. Based on our research, it results that social enterprises have
217 ECONOMIC POLICY AND EU INTEGRATION developed their activity about 20 years ago in the form of non-profit organizations, supported by donors and foreign partners. The main areas of their development have been education, employment, economic development, childcare and social care. Most of the so-called social enterprises serve disadvantaged women and girls, children, young people, as well as persons with special needs ect. (see the law document) The social enterprise aims to solve social problems in a financially viable way and certainly bring added value to society. But the social enterprise sector is still quite young and the definitions are still relatively unspecified. The law could be a very good incentive to develop the area of social intercourse, but since often such incentives do not agree with interest groups and has not become part of the wider public debate, it seems that it has brought and a widespread lack of implementation. Also, their development is not only related to legislation but to the lack of knowledge of how they function, are realized and organized. Albanian context is very little known by the central and local government institutions, other social actors and the community in general (partner Albania; 2013: 85). The EU is developing specific policies, instruments and programs for technical and financial support the development of this sector. The promotion of their role is necessary in order to recognize and increase their public confidence. Current initiatives of social enterprises, though so far, need more support including technical, financial, fiscal, promotional support. "From my 5-year experience in this sector, I can say freely that the number of those who want to set up businesses / social businesses in these countries is still very small for many reasons, often contradictory, such as: economic level, experience the bitter of the "social" of the former system, the "wild capitalism" and the order after the rapid enrichment "(Sh., Marku, 2018). The concept of social enterprise today is still ambiguous and debatable in Albania, though some attempts to develop the concept and support its development and why it is fraught. As a conclusion, the synthesis of opinions emerged from the meetings held by civil society organizations in the country for social enterprise: As in any other field, the development of social entrepreneurship is needed to encourage and develop partnerships between public institutions at central and local level, civil society organizations, business organizations, universities and educational institutions, and other stakeholders in order to strengthen the capacity, identify and develop innovative policies that enable the development and empowerment of social enterprises in Albania.
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Challenges for the development of social enterprise remain: i) lack of legal framework; ii) investment in capacity and consultancy; iii) lack of understanding of values; iv) lack of training and capacity building; v) lack of funds to foster their development; vi) lack of knowledge of positive practices in the region and international level. Conclusion: The concept of social enterprise today is still ambiguous and debatable, as consequence the development of social enterprises is still in the early stages of its development. Social entrepreneurship or social initiatives are predominantly younger than their traditional entrepreneurship and are mainly represented in the pre-start-up or infancy stage of the entrepreneurial process. There is a lack of knowledge regarding the factors that distinguish social enterprises from their commercial counterparts. Development of social enterprise is not only related to legislation but to the lack of knowledge of how they function, are realized and organized. The need to promote a wider public debate on the development of social entrepreneurship, the encouragement and development of partnership between public institutions at central and local level, civil society organizations, business organizations, universities and educational institutions, and other stakeholders interested in order to strengthen capacities, identify and develop innovative policies. Need to foster a wider public debate to understand social affiliation and the legal framework for a sustainable development of social enterprises in the country. Social entrepreneurship is not a discrete sector; it is not a synonym of social business; it is not a new form of corporate social responsibility; and it is not the only model of social innovation. Indeed, despite growing attention and recognition of the social entrepreneurship phenomenon, the related research field is still in its infancy, characterized by a modest base for theory building and testing purposes and a limited number of empirical studies, mostly designed as case studies. Social enterprises contribute to helping keep those people at risk of social exclusion. They address the social needs of groups which government agencies find hard to reach. More quantitative and qualitative research is required to carry out in-depth studies suggesting a range of challenges for practice, policy and research in this area in the context of Albania.
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References
Álvaro C., Domingo & R., Salvador R., (2005). Entrepreneurship: Concepts, Theory and Perspective. Universidad Complutense de Madrid & Universitat de València. p, 3. Reitreve from https://www.uv.es/bcjauveg/docs/LibroCuervoRibeiroRoigIntroduction.pdf [1.2.2019] Austin, J.; Stevenson, H.; & Wei-S., J. (2006) Social and Commercial Entrepreneurship: Same, Different, or Both? Baylor University. Retrieve from: https://www.ukessays.com/essays/business/difference- between-social-entrepreneurship-and-traditional-business.php[2.2.2019] Benjamin H.& Alex N. Social entrepreneurship: definitions, drivers and challenges Centre for Social Economy, HEC Management School, University of Liege; Skoll Centre for Social Entrepreneurship, Saïd Business School, University of Oxford , 1-3. Boschee, J. (2006). Social Entrepreneurship: The Promise and the Perils”, in A. Nicholls (Ed.), Social Entrepreneurship. New Models of Sustainable Social Change, Oxford University Press, Oxford, 356-390. Business dictionary: Retrieve from http://www.businessdictionary.com/definition/entrepreneurship.html#ixzz3xv9ci0nt [31.1.2019] Communication from the Commission to the European Parliament, The Council, The European Economic and Social Committee and The Committee of the Regions (2011), Social Business Initiative Creating a favorable climate for social enterprises, key stakeholders in the social economy and innovation Brussels, 25.10.2011 COM(2011) 682 final [12.2.2019] Dees, G. (1998). The Meaning of Social Entrepreneurship. Graduate School of Business, Stanford University. Kihlstrom, R. E. & Laffont, J.J. (1979). General equilibrium entrepreneurial theory of firm formation based on risk aversion. Journal of Political Economy, 87, 719-748. Light, P. (2008). The Search For Social Entrepreneurship, The Brookings Institution, Washington, D.C. Law No. 65/2016: On social enterprises in the Republic of Albania 2016. Legal Package: On social enterprises in the Republic of Albania: Vendim Nr. 716/2017; Udhezim nr. 602/2018: Për procedurat dhe dokumentacionin e nevojshëm për marrjen e Statusit të ndërmarrjes sociale; VKM nr. 16/2018; Vendim per krijimin e fondit ne mbeshtetje te ndermarrjeve sociale; VKM nr. 56/2018: Për përcaktimin e kategorive konkrete të grupeve të pafavorizuara Retreive from: https://partnersalbania.org/News/paketa-ligjore-mbi-ndermarrjet-sociale-ne- shqiperi [2.2.2019] McClelland, D.C. (1961). The achieving society. Princeton, NJ: Van Nostrand.
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Miller, D. (1983). The correlates of entrepreneurship in three types of firms. Management Science, 29, 770- 791. Nicholls, A. & Cho, A. H. (2006), “Social Entrepreneurship: The Structuration of a Field”, in A. Nicholls (Ed.), Social Entrepreneurship. New Models of Sustainable Change, Oxford University Press, Oxford, 99- 118. Nicholls, A. (2006a), “Introduction”, in A. Nicholls (Ed.), Social Entrepreneurship. New Models of Sustainable Social Change, Oxford University Press, Oxford, 1-35. Nicholls, A. (Ed.) (2006b), Social Entrepreneurship. New Models of Sustainable Social Change. Oxford University Press, Oxford 2006. OECD (2013). Policy Brief on Social Entrepreneurship Entrepreneurial Activities in Europe, Luxembourg: Publications Office of the European Union, 2013. Retrieve from: https://www.oecd.org/cfe/leed/Social%20entrepreneurship%20policy%20brief%20EN_FINAL.pdf [2.2.2019] Partnerët për Shqipëri & Qendra për ndryshim dhe menaxhim konflikti (2014): Zvillimi i nderrmarrjeve sociale- potencial për krijimin e vendeve të punës për grupet e disavatazhuara, media print- 2014. Retrive from: http://partnersalbania.org/wp-content/uploads/2016/01/zhvillimi_ndermarrjeve_sociale.pdf [31.1.2019] Reynolds, P.D. (2005). Understanding business creation: Serendipity and scope in two decades of business creation studies. Small Business Economics, 24, 359-364. Schumpeter, J.A. (1934). The theory of economic development. Cambridge: Harvard University Press. Schumpeter, J.A. (1942). Capitalism, socialism and democracy. New York: Harper Schumpeter, Joseph Alois (1976). Capitalism, Socialism and Democracy. Routledge. ISBN 978-0-415- 10762-4. Shane, Scott Andrew (2000). A General Theory of Entrepreneurship: The Individual-opportunity Nexus. Edward Elgar Publishing. ISBN 978-1-78100-799-0. Retrieve from https://en.wikipedia.org/wiki/Entrepreneurship#cite_note-33[1.2.2019] Shkëlzen Marku (2018). Retrieve from: https://ekonomix.al/sipermarrja-sociale-e-pazhvilluar-shkelzen- marku-arsyeja-kapitalizmi-i-eger-dhe-deshira-per-tu-pasuruar-shpejte/ [1.2.2019] Tushman, M.L. & Anderson, P. (1986). Technological discontinuities and organizational environments. Administrative Science Quarterly, 31, 439-465. Acs, Z.J. & Audretsch, D.B. (1990). Innovation and Small Firms. Cambridge, MA: MIT Press.
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INSTITUTIONAL IMPACT ON REFORMING THE ROLE OF MANAGEMENT AND LEADERSHIP IN HIGHER EDUCATION IN ALBANIA
JANI SOTA, Prof. Assoc. Ph.D. "Aleksandër Moisiu" University, Durrës [email protected]
NOVRUZ AHMETI, Msc Ministry of Education, Sports and Youth [email protected]
Abstract
The impact of social thinking is shaped and legalized through state institutions in accordance with international standards. Educational developments are closely related to the political developments of the time and their demands, depending on the economic, cultural, scientific intentions. This paper identifies several key aspects of the reform process that have not met the required and expected standards in the higher education system in Albania. The focus of this research are the policies of the Albanian state for reforming the role of management and leadership in higher education dictated by the conditions that are creating new changes for reforming the administrative structure, the dimensions of human and financial resources in the education institutions. Depending on the particular policies and circumstances, various legal initiatives have been undertaken since the 1990s to enhance the academic and financial independence of the Albanian higher education institutions, which give us the general picture of education reform in Albania.
Key Words: Higher education institutions, legislation, management, decision making, academic freedom, financial autonomy.
Introduction
The transformation of higher education began when our country was undergoing the transition period. At that time the reproductive capacity and innovation of the Albanian society depended on its achievements in the field of scientific research and technology, while the implementation of these achievements in practice would depend on the quality of human resources available to the society. Higher education has a primary role in building human capacity able to face current challenges, so it is not a coincidence that the department of education was and it continues to be the main focus of radical reform, both in transition countries, also in the developed countries.
"After the political changes during the years 1990-1991, were easily noticed fundamental transformations in Albania’s economy structure, which resulted in drastic decline of industrial production from 40% of the total national production in 1990 to less than 12% by
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2013; the development of the private sector from almost 0% in 1990 to 80% in 2013; major changes in the structure of economical branches, in which the agricultural economy is the main branch, followed by the construction sector, service and light industry sector"75.
Anyway, the higher education system needs to be developed in a certain way that it serves to the new order socially, respond to national needs and also to new realities and opportunities. With all the problems and willingness to make changes, it has become clear that there no easy and fast solutions for the development of higher education system in Albania. Therefore, the Albanian government policy insisted in changing systematically the educational system, including in this process the most important economic, political and social factors, which led to transformation of Albanian high school.
During the first phase, from 1992 until 2003 were established the foundations of democratic higher education. I would mention here some of the great achievements of democratic governance in the years 1992-2003 that relate: by implementing a legal framework of international standards that laid the foundation for the development and consolidation of a democratic and European education; with the expansion of the network of higher education institutions nationwide; as well as the tendency towards the opening of some Higher Education Institutions (HEIs) in other districts of the country76.
The beginning of 2004 seemed to mark another important moment in the process of transition from the stage of laying the groundwork of the high democratic school to that of massification. Developments in quantitative aspect prepared for deepening the process and have undoubtedly contributed to the reduction of staffing requirements. Going forward to university was a necessity, which cannot be doubted77. This passage, "which was in the interest of the state and the population, was favored from some factors that led in the expansion and consolidation of higher education"78. Meanwhile, during this period, higher education in Albania experienced developments in expanding the network of private wash education institutions.
Bringing light on this process, breakdown of lines and key factors defined and modeled the policies pursued in this area and their implications on the entire Albanian society of the times, is also the main goal of this paper.
75 Dhimitër Doka, Zhvillime socio-ekonomik dhe rajonale të Shqipërisë pas vitit 1990, botim Institutit të Gjeografisë dhe Gjeoekologjike të Universitetit të Potsdamit, Potsdam: "Shtëpia Botuese e Universiteti të Potsdamit", Gjermani, 2005, f. 17-18. [Dhimitër Doka, Socio-economic and Regional Developments of Albania after 1990, edition of the Institute of Geography and Geo-ecology of Potsdam University, Potsdam: "Publishing House of the University of Potsdam", Germany, 2005, pg. 17-18.] 76 Jani Sota, High Education in Post-Communist Albania 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini (hereinafter: High Education in Post-Communist Albania ...), Berlin: ''LAP LAMBERT Academic Publishing'', 2019, pg. 74. 77 Ibid, pg. 76. 78 Ibid, pg. 77.
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1. The legal framework of the new university system
From a legislative point of view, there is no general legal act on education in Albania, but each level of education is regulated by specific laws. The fundamental principles upon which the higher education is based in the republic of Albania, after the collapse of the old totalitarian system, were initially determined by the Law on Main Constitutional Provisions No. 7491 of 29.4.199179. This law, which in fact represents the new Constitution (repealed the Constitution of the 1973), in Article 2 defines "the dignity of man, his rights and freedoms, the free development of his personality and constitutional order, equality before the law, social justice and social support and pluralism are the basis of this state, which has the duty to respect and protect them"80.
But the recognition and respect of this important principle is confirmed by the whole spirit of the Constitution of the Republic of Albania, adopted in 1998, (as amended by Law No. 9675, dated 13 January 2007, Law No. 9904, dated 21.4.2008 ), by virtually all of its provisions, particularly in the provisions dealing with economic, social and cultural freedoms and rights, and other constitutional mechanisms. Directly on this principle is referred to Article 57 of the Constitution, which states explicitly that "secondary and higher education may only be conditioned by skill criteria. [...] pupils and students may also be educated in non-public schools of all levels, which are created and operate according to the law"81.
It should be noted that beside the Constituion, that comprises the highest act and the main pillar of the democratic state, a certain number of laws, sub-legal acts and other important documents of the Parliament, the Council of Ministers, the Ministry of Education and Sports were approved. The spirit on the basis of which the very legal framework of higher education has been built is precisely the spirit of protection of human rights and fundamental freedoms and those of national minorities.
"Existing legislation proclaims education in Albania, a national priority. Education has the mission of spiritual emancipation, material progress and social development of the individual. Support education in the traditions and the most valuable achievements of our national school and ratified international treaties by the Republic of Albania, is another functional principle. [...] Respecting the rights of children and adults is another powerful democratic principle. Citizens of the Republic of Albania enjoy equal rights to be educated in all levels of education, regardless of social status, nationality, language, sex, religion, race,
79 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 2, nëntor 1992, botim i Kuvendit Popullor, Tiranë, f. 9, Ligjin për Dispozitat Kryesore Kushtetuese Nr. 7491, datë 29.4.1991. Neni 2. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 2, November 1992, publication of the Center for Official Publications, Tirana: "Grafon", pg. 9. Law on Main Constitutional Provisions No. 7491, dated 29.4.1991. Article 2. Published material web site: www.qpz.gov.al] 80 Po aty. [Ibid.] 81 Kushtetuta e Republikës së Shqipërisë, botim i Qendrës së Publikimeve Zyrtare, Tiranë: "Shtypshkronja e Qendrës së Publikimeve Zyrtare", Maj 2009, f. 24. Kreu IV: Liritë dhe të drejtat ekonomike, sociale dhe kulturore, Neni 57, pika 4 dhe 6. [Constitution of the Republic of Albania, publication of the Center for Official Publications, Tirana: "Printing House of the Official Publications Center", May 2009, pg. 24. Chapter IV: Freedom, Economic, Social and Cultural Rights, Article 57, point 4 and 6.]
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political beliefs, health status and economic level. [..] Creating opportunities for national minorities to develop native language and culture, at the same time to integrate and participate in the life of the country is another basic principle expressed in the law"82. The institutional architecture of the new democratic state that emerged from the package of constitutional laws approved at that time foresaw the classical state institutions: the Parliament of Albania is the legislature, which issues laws and amendments. The Government, the Council of Ministers (CM) and the Ministry of Education, Sports and Youth (MESY) issue sub-legal acts, such as: normative provisions, regulations, orders and instructions, etc., in implementation of the laws.
The package that enabled the completion of the legal framework for the development of higher education after 1992, is presented as follows:
1. Laws regulating education are: Law No. 7810, dated 6.04.1994 "On Higher Education in the Republic of Albania"83 - adopted; Law No. 7964, dated 19.07.1995 "On some addenda and amendments to Law No. 7810, dated 6.4.1994 "On Higher Education in the Republic of Albania"84; Law No. 7967, dated 20.07.1995 "On some amendments to the Law No. 7810, dated 6.4.1994 "On Higher Education in the Republic of Albania"85; Law No. 8461, dated 25.02.1999 "On Higher Education in the Republic of Albania"86; Law No. 8834 dated 22.11.2001 "On the ratification of the Convention on the Recognition of Higher Education Qualifications in Europe (Lisbone, 1997)"87; Law No. 9120, dated
82 Xhezair Zaganjori, Aurela Anastasi dhe Eralda (Methasani) Çani, Shteti i së drejtës në Kushtetutën e Republikës së Shqipërisë, botim Fondacionit "Konrad Adenauer", Tiranë: "Adelprint", 2011, f. 19. Shih: Arsim Bajrami, Historia e konstitucionalizmit shqiptar 1912-2012, Botime të veçanta CXXXIX, Libri 48, botim i Seksionit të Shkencave Shoqërore në Akademinë e Shkencave dhe e Arteve të Kosovës, Shkup: "Focus Print", 2014, f. 136-137. [Xhezair Zaganjori, Aurela Anastasi and Eralda (Methasani) Çani, State of Law in the Constitution of the Republic of Albania, publication "Konrad Adenauer" Foundation, Tirana: "Adelprint", 2011, pg. 19. See: Arsim Bajrami, The History of Albanian Constitutionalism 1912-2012, Special Editions CXXXIX, Book 48, publication of the Section of Social Sciences at the Academy of Sciences and Arts of Kosovo, Shkup: "Focus Print", 2014, pg. 136-137]. 83 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 5, 31 maj 1994, botimi Qendrës së Botimeve Zyrtare, Tiranë, f. 249-260. 46 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 5, 31 May 1994, publication of the Center for Official Publications, Tirana, pg. 249-260. Articles 46. Published material web site: www.qpz.gov.al] 84 Fletorja Zyrtare e Republikës së Shqipërisë, Nr, 17, 14 gusht 1995, Tiranë, f. 727-728. 3 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 17, 14 August 1995, publication of the Center for Official Publications, Tirana, pg. 727-728. Articles 3. Published material web site: www.qpz.gov.al] 85 Po aty, f. 734-736. 2 nene. [Ibid, pg. 734-736. Article 2.] 86 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 9, 16 mars 1999, botimi Qendrës së Botimeve Zyrtare, Tiranë, f. 273-286. 46 nene. Shfuqizohet Ligji Nr. 7810, datë 6.4.1994 "Për arsimin e lartë në Republikën e Shqipërisë", me ndryshimet e tij, si dhe dispozitat e tjera ligjore dhe aktet nënligjore, që lidhen me arsimin e lartë e që janë në kundërshtim me këtë ligj. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 9, March 1999, publication of the Center for Official Publications, Tirana, pg. 273-286. Articles 46. Law No. 7810, dated 6.4.1994 "On Higher Education in the Republic of Albania", with its amendments, as well as other legal provisions and bylaws related to higher education that are contrary to this Law. Published material web site: www.qpz.gov.al] 87 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 56, Dhjetor 2001, botimi Qendrës së Botimeve Zyrtare, Tiranë: "Shtypshkronja e Qendrës së Publikimeve Zyrtare", f. 1772-1784. 2 nene.
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28.7.2003 "On Higher Education in the Republic of Albania"88; Law No. 9741, dated 21.5.2007 "On higher education in the Republic of Albania - amended (Law No. 323, dated 12.11.2007, Constitutional Court Decision No. 6, dated 19.3.2008, Law No. 1037, dated 22.7.2010)"89; Law No. 9832, dated 12.11.2007 "On Amendments to Law No. 9741, dated 21.5.2007" On Higher Education in the Republic of Albania"90; Law No. 10137, dated 11.5.2009 "On some amendments to the legislation in force on licenses, authorizations and permits in the Republic of Albania"91; Law No. 10307, dated 22.7.2010 "On some amendments and additions to Law No. 9741, dated 21.5.2007" On Higher Education in the Republic of Albania"92; Law No. 10493, dated 15.12.2011 "On Amendments and Amendments to Law No. 9741, dated 21.5.2007" On Amendments and Amendments to Law no. 9741, dated 21.5.2007 "On higher education in the Republic of Albania"93.
2. Labour Code of The Republic of Albania
3. Decisions of The Council of Ministers of The Republic of Albania:
4. Instructions: Organizing studies in public higher education institutions; Determining the criteria, documentation and procedures for opening, reorganizing and closing study programs from higher education institutions (issued every year by MESY); On the
[Official Journal of the Republic of Albania, No. 56, December 2001, publication of the Center for Official Publications, Tirana: "The Center for Official Publications Printing", pg. 1917-1962. Articles 2. Published material web site: www.qpz.gov.al] 88 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 75, Shtator 2003, botimi Qendrës së Botimeve Zyrtare, Tiranë: "Shtypshkronja e Qendrës së Publikimeve Zyrtare", f. 3428-3431. 11 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 75, September 2003, publication of the Center for Official Publications, Tirana: "The Center for Official Publications Printing", pg. 3428-3431. Articles112. Published material web site: www.qpz.gov.al] 89 Fletore Zyrtare e Republikës së Shqipërisë, Nr. 68, 16 qershor 2007, botimi Qendrës së Botimeve Zyrtare, Tiranë: "Grafon", f. 1917-1962. 101 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 68, 16 June 2007, publication of the Center for Official Publications, Tirana: "Grafon", pg. 1917-1962. Articles 101. Published material web site: www.qpz.gov.al] 90 Fletore Zyrtare e Republikës së Shqipërisë, Nr. 153, 16 nëntor 2007, botimi Qendrës së Botimeve Zyrtare, Tirana: "Nënë Tereza", f. 4489-1490. 6 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 153, 16 November 2007, publication of the Center for Official Publications, Tirana: "Grafon", pg. 4489-1490. Articles 6. Published material web site: www.qpz.gov.al] 91 Fletore Zyrtare e Republikës së Shqipërisë, Nr. 86, 12 qershor 2009, botimi Qendrës së Botimeve Zyrtare, Tiranë: "Nënë Tereza", f. 3775-3791. 64 nene. Seksioni i nëntë: Fusha e arsimit dhe shkencës. Neni 52, 53. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 86, 12 June 2009, publication of the Center for Official Publications, Tirana: "Mother Teresa", pg. 3775-3791. Articles 64. Published material web site: www.qpz.gov.al] 92 Fletore Zyrtare e Republikës së Shqipërisë, Nr. 111, 19 gusht 2010, botimi Qendrës së Botimeve Zyrtare, Tiranë: "Nënë Tereza", f. 5474-5485. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 111, 19 August 2010, publication of the Center for Official Publications, Tirana: "Mother Teresa", pg. 5474-5485. Articles 3. Published material web site: www.qpz.gov.al] 93 Fletore Zyrtare e Republikës së Shqipërisë, Nr. 166, 27 dhjetor 2011, botimi Qendrës së Botimeve Zyrtare, Tirana, "Nënë Tereza", f. 8414-8415. 3 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 166, 27 December 2011, publication of the Center for Official Publications, Tiranë: "Mother Teresa", pg. 8414-8415. Articles 3. Published material web site: www.qpz.gov.al]
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activity and teaching load of academic staff in higher education institutions (issued every year by MESY); For the beginning of the new academic year in higher education institutions (issued every year by MESY); Different.
5. Important documents: Political Documents: The European Higher Education Area; The Greater Charter of Universities / Magna Charta Universitatum (Bologna, 18 September 1988); The Sorbonne Joint Statement on "Harmonizing the Architecture of the High Educational System" (Paris, Sorbonne, 25 May 1998; Convention on the Recognition of Qualifications Related to Higher Education in the European Region (Lisbon, 11 April 1999); Bologna Declaration - Joint Declaration by European Ministers of Education (Bologna, 19 June 1999); Student Declaration (Gothenburg, Sweden, March 25, 2001); Towards the European Higher Education Area - Press Release on the meeting of European Ministers in charge of Higher Education (Prague, 19 May 2001); Bologna Process and Higher Education Area - Salamanza Conception 2001 (Salamanca, 2001); etc.
6. University Documents: University statute; Univeristy regulation; Faculty regulation; Regulation of programs for all cycles of study offered by the faculty; Regulation "On the organization of first elections for the authorities and governing bodies in the public institutions of higher education in the Republic of Albania"; Academic, scientific research and economical-financial annual report of the University / Faculty; Self-evaluation report of the institution for the respective academic year; Annual budget plan for the respective academic year (Grand + Income); Academic calendar for the respective academic year; Database of students enrolled in relevant branches according to the study cycles that the faculties provide for the respective academic year, with individual data; etc.
For the foregoing, it is important that the applicable legislation establishes the "mandatory" character to be responsible, adapt and anticipate changes in the labor market and the development of the country. The purpose of this reform is to create the premise for a high education quality, responding to the labor market needs and the strategic development directions of the country, clearly reflected in Article 2 of the Law "On Higher Education in the Republic of Albania"94, adopted on 6 April 1994, which stipulated that: "the mission of a high civil education is to: a) create, develop, defend and transmit knowledge through teaching and research, develop and advance arts, physical education and sports; b) to form high-level specialists; c) prepare young scientists"95.
To better reflect the requirements of the time, the Ministry of Education would require more "prudence" in the functioning of the governing bodies of higher schools after having provided
94 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 5, 31 maj 1994, botimi Qendrës së Botimeve Zyrtare, Tiranë, f. 249-260. Ligji Nr. 7810, datë 6.4.1994 "Për arsimin e lartë në Republikën e Shqipërisë". 46 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 5, 31 May 1994, publication of the Center for Official Publications, Tirana, pg. 249-260. Law No. 7810, dated 6.4.1994 "On Higher Education in the Republic of Albania. Articles 46. Published material web site: www.qpz.gov.al] 95 Po aty. Neni 2. [Ibid. Article 2]
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modern teaching and laboratory facilities, sufficient staff and number of students.
The years 1999-2007 marked the years of system re-design, adaptation of institutions and curricula under the Bologna Process∗, and the opening of the first non-public higher education institutions. In 2001, Albania signed the Lisbon Agreement for the recognition of diplomas and the introduction of a foreign recognition system in the country according to the European criteria and standards set out in the Bologna Process. In this year, the Ministry of Education and Science commands the implementation of the European Credit Transfer System (ECTS) system in all HEI curricula in Albania.
It has often been pointed out by education experts that, "in these years, there was no complete, up-to-date legal framework and full standards for the licensing process of non-public institutions∗, however, the process was somewhat responsive and careful and consequently gradual. Institutions opened during this time were mainly directed by academic figures"96.
"During the years 2000-2005 there were only 5 non-public HEIs, while in 2005-2009 were opened 34 new non-public institutions and a public institution, while in the period 2009- 2013, two public HEIs and 10 non-public"97.
This period concerns the adoption of the first National Strategy for Higher Education (NSHE) 2008-201398, approved by the Decision of the Council of Ministers (DCM), No. 538, dated 12.08.2004. A wide range of Albanian and "foreign experts from the field of higher education were involved in its design. They also engaged representatives of various interest groups
∗ During 2003, Albania officially entered the Bologna Process. This year marks the beginning of the revised and adapting of higher education curricula according to this system, the concept of ECTS and their implementation. [Author's note]. ∗ They were opened in the framework of well-rounded quality agreements and in complementary and professional areas that were most difficult to cover by state institutions. These non-public HEIs were opened as complementary to public HEIs. The process was well controlled by MES, while the Accreditation System was still in the first steps of creation and operacion. [Marrë nga: John I. Thomas, Education for Communism: School and State in the People's Republic of Albania, published by Hoover Institution Press, U. S., December 1969, pg. 126.] 96 Komisioni për Arsimin e Lartë dhe Kërkimin Shkencor (KALKSH), Raporti përfundimtar për reformimin e arsimit të lartë dhe kërkimit shkencor (më tej: Raporti përfundimtar ...), Tiranë, Korrik 2014, f. 15 [Final Report on Reforming Higher Education and Scientific Research (hereinafter: Final Report ...), Commission for Higher Education and Scientific Research (CHESR), Tirana, July 2014, pg. 15.] 97 Ministria e Arsimit dhe Shkencës (MASH), Raporti vjetor statistikor i arsimit 2004-2005, botim i Drejtorisë e Teknologjisë së Informacionit dhe Statistikave (DTIS) në MASH, Tiranë, 2006, f. 46-85. Arsimi i lartë. [Ministry of Education and Science (MoES), Statistical Yearbook of Education 2004-2005, Publication of Directorate of Information and Statistics Technology (DIST) at MES, Tirana, 2006, pg. 46-85. Higher Education.] 98 Ministria e Arsimit dhe Sportit (MAS), Strategjia Kombëtare për Arsimin e Lartë (SKALA) 2008-2013 (më tej: Strategjia Kombëtare për Arsimin e Lartë ...), Tiranë, 2008, f. 7. [Ministry of Education and Sports (MoAS), National Strategy for Higher Education (NSHE) 2008-2013 (hereinafter: National Strategy for Higher Education ...), Tirana, 2008, pg. 7.]
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as parents, education associations inside and outside the country, and cooperated with other institutions of interest"99.
On the basis of these achievements, new policies were developed to address the key problems in the field of higher education, which left profound traces and made the irreversible process until the new law of 17 August 2015100.
2. Albanian state and strengthening of policy-making capacities at national and international level
Given the shift of power of direction and development from the state to other levels of leadership, education will be centralized. In this context, educational institutions in Albania, whether these private or state, operate under the jurisdiction of the Council of Ministers and the Ministry of Sports and Youth101. The education system functions at the national, regional and school level102.
At the national level, the Assembly approves the government program, the annual budget and specific laws103, including those that have an impact on the education sector. The Parliamentary Committee on Education and Media examines the draft laws before they are approved by the Assembly. The Council of Ministers approves national and sectoral development strategies, medium-term spending framework, and annual state budget draft; it also issues decisions and guidelines for law enforcement104.
A fundamental role in national education policies has been played by the Ministry of Education and Science (now the Ministry of Education, Sports and Youth), which collects and interprets administrative and professional indicators, projects changes and drives their
99 Jani Sota, Pre-University Education in Post-Comunist 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini (hereinafter: High Education in Post-Communist Albania ...), Berlin: ''LAP LAMBERT Academic Publishing'', 2018, pg. 106-107. 100 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 164, 21 shtator 2015, botimi Qendrës së Botimeve Zyrtare, Tiranë, f. 11449-11490. Ligji Nr. 80, datë 22.7.2015 "Për arsimin e lartë në Republikën e Shqipërisë". 143 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 164, 21 Shtator 2015, publication of the Center for Official Publications, Tirana, pg. 249-260. Law No. 80, dated 27.7.2015 "On Higher Education in the Republic of Albania. Articles 143. Published material web site: www.qpz.gov.al] 101 J. Sota, Education in Post-Communist …, pg. 84. 102 Ibid. 103 Kushtetuta e Republikës së Shqipërisë (Ndryshuar me Ligjin Nr. 9675, datë 13.1.2007; Ligjin Nr. 9904, datë 21.4.2008), botim i Qendrës së Publikimeve Zyrtare, Tiranë: "Shtypshkronja e Qendrës së Publikimeve Zyrtare", Maj 2009, f. 34. Pjesa e tretë: Kuvendi, Kreu III: Organizimi dhe funksionimi, Neni 81, pika 1, 2 a, b, c, ç, d, dh, e , ë, f. Material i botuar në faqen web site: www.qpz.gov.al [Constitution of the Republic of Albania (Published by the Law No. 9675, dated 13.1.2007, Law No. 9904, dated 21.4.2008), Publication of the Official Publication Center, Tirana: "Printing Office of the Official Publications Center", May 2009, f. 34. Part Three: Assembly, Chapter III: Organization and Functioning, Article 81, paragraph 1, 2 a, b, c, ç, d, dh, e, ë, p. Published material web site: www.qpz.gov.al] 104 Po aty, f. 42. Pjesa e pestë: Këshilli i Ministrave, Neni 100, pika 1, 2, 3, 4, 5. [Ibid, pg. 42. Part Five: Council of Ministers, Article 100, paragraph 1, 2, 3, 4, 5.]
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development in education. It was and continues to be part of the decentralized power up to the administrative units, located at the regional and local level.
"The Ministry of Education and Science has been and continues to be the main governmental institution responsible for implementing the education policy. MES is certainly the central hub for the implementation of policies and strategies for the whole Albanian education system. For a long period of time this department has operated as administrative body with limited analytical and executive capacity. Rapoe aims to increase the analytical capacity of MES so that it can continually develop the main national education policies, discuss and argue the Government with the necessary funding levels AL and in particular, to provide analytical support to MES, for carrying out its functions as an independent advisory body"105.
2. About the structure of the new system of higher education and its special links
As an integral part of the entire education system these higher education institutions (HEIs) were developed as a new school with a democratic orientation. Pursuant to the Constitution of the Republic of Albania (1998) all citizens have the right to higher education106. The Law regarding "Higher Education in the Republic of Albania" of April 1994107 stipulated that university and non- university higher education schools were the institutions that made possible "the training of senior specialists and the preparation of young scientists"108 for the main departments of economy and culture. Through teaching and scientific research, "they were capable of acquiring professional education and scientific formation in all areas"109.
In accordance with the applicable legal framework "higher education consists on faculties, faculties consist on departments and departments consist on sections"110. Faculty "is a scientific- teaching unit of the higher education that covers areas with a common core. The Department is the
105 MAS, Strategjia Kombëtare për Arsimin e Lartë ..., f. 29. [MoAS, National Strategy for Higher Education ..., pg. 29.] 106 Kushtetuta e Republikës së Shqipërisë, botim i Qendrës së Publikimeve Zyrtare, Tiranë: "Shtypshkronja e Qendrës së Publikimeve Zyrtare", Maj 2009, f. 24. Kreu IV: Liritë dhe të drejtat ekonomike, sociale dhe kulturore, Neni 57, pika 1. [Constitution of the Republic of Albania, publication of the Center for Official Publications, Tirana: "The Center for Official Publications Printing", pg. 24. Chapter IV: Freedom and Economic, Social and Cultural Rights, Article 57, paragraph 1. Material published on the web site: www.qpz.gov.al] 107 Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 5, 31 maj 1994, botim i Qendrës së Publikimeve Zyrtare, Tiranë, 1994, f. 249-260. Ligji Nr. 7810, datë 6.4.1994 "Për arsimin e lartë në Republikën e Shqipërisë". 46 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Gazette of the Republic of Albania, No. 5, 31 May 1994, botim i Qendrës së Publikimeve Zyrtare, Tirana, f. 249-260. Law No. 7810, dated 6.4.1994 "On Higher Education in the Republic of Albania". Articles 46. Published material web site: www.qpz.gov.al] 108 Po aty, f. 249. Kapitulli I: Dispozita të përgjithshme, Neni 1. [Ibid, pg. 249. Chapter I: General Provisions, Article 1.] 109 Po aty. Neni 4, pika 1, a, b. [Ibid. Article 4, paragraph 1, a, b.] 110 Po aty. Neni 4, pika 1, a, b. [Ibid. Article 9, paragraph 1.]
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scientific-teaching basic unit of the higher education. It consists of several sections. The object of teaching and scientific research, of the department, includes several disciplines of a science"111.
The establishment of the new structures near the units of these institutions as "institutes, centers and research sectors, laboratories and workshops, clinics, studios, libraries, sports centers, museums, etc., which functioned according to internal regulations, became possible through the process of expansion and better organization of HEIs"112.
It was possible to open and close faculties and research institutes that were included in the university structure "upon decision of the Council of Ministers and based on the proposal of the Higher Education National Council"113. While for smaller departments and units, or scientific- teaching structures, "it was upon the decision of the Ministry of Education, based on the proposal of the University Senate or the Higher Education Senate"114.
In this context, the Senate and the Council of Higher Education, which are "elected collegial bodies that decide on the most important problems of higher education in matters of education, scientific research and financial-administrative, are created to examine the main problems of educational and scientific activity in each school"115.
"Senates, as the highest authority in the Higher Education, are constantly pursuing all its problems. The faculty elects its faculty council while the Department elects its department council. It's the statute of the Higher Education that establishes the structure, tasks, and functioning of the university senates and their counselling units"116.
Under the law the higher Education was headed by: "The Rector and his deputies for Universities, the Principal non-university schools, Dean for the faculty, Head of department for the department"117, who were the highest authorities.
"It is a must that Rectors and Deputy Rectors, as well as University Deans, should have the title "Professor", but in no case lower than “Assistant Professor”. While chancellors and department heads, of both levels, should have the title "Professor" or "Assistant Professor", but in no case should they be without the "Doctor of Science" degree. And finally, only employees with scientific degrees can be elected as Senate members"118.
111 Po aty, pika 2. [Ibid, paragraph 1.] 112 Po aty. Neni 10. [Ibid. Article 10.] 113 Po aty. Neni 11, pika 1. [Ibid. Article 11, paragraph 1.] 114 Po aty, pika 2. [Ibid, paragraph 2.] 115 Po aty, f. 254. Kapitulli II: Organizimi dhe drejtimi i shkollave të larta, Neni 16. [Ibid, pg. 254. Chapter II: Organization and Management of Higher Schools, Article 16.] 116 Po aty, pika 2, 3. [Ibid, paragraph 2, 3.] 117 Po aty. Neni 17, pika 1, a. [Ibid, Article 17, paragraph 1, a.] 118 Po aty. Neni 20, pika 1, 2.
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The Rector or the Principal, within the context of the respective management structures (senates, councils of higher education, etc.), were also chairman of the senate, the Dean was chairman of the faculty council, and the department head was chairman of the department council119.
"The Head of Department, the Rector and Deputy Rector or the Dean are elected every three years. They cannot be elected for more than two terms. The Senate and the Council of the Higher Education are elected every 3 years by majority vote"120.
The education policy of the Albanian state, reflected in the legislation prepared after 1999, would outline the future outlook of the higher education system. The vision of this system, firstly formalized, in the Bologna Declaration signed by Albania and further in Law No. 9741, dated 21.5.2007 "On Higher Education in the Republic of Albania" and the sub-legal acts, would take the fullest view and physiognomy towards the institutional freedom of the universities (academic freedom and financial autonomy) in the years 2007-2015.
With the adoption of the May 2007 Law on Higher Education, it was intended to give opportunities to university freedom, scientific research and the possibility for financial autonomy. Also, "the law favored at least two factors: First, from the point of view of the development of institutional freedom, the universities in Albania were free to choose the field of teaching and scientific research. Secondly, from the point of view of freedom and financial autonomy, the universities were to have their own budget and income management carried out according to the legislation. Consequently, universities should be given "autonomy status" on the basis of approved plans, prepared by each university - that will need to meet predetermined criteria according to legal regulation"121.
The practice followed at this time in the financial management system would be the same for all the Albanian universities. They are treated alike as other public HEIs regarding the issue of state budget and the use of other revenues provided by secondary activities, admission quotas, study fees, and scientific research.
In the framework of budget classifications, with the approval of the state budget by the People's Assembly of the Republic of Albania in the annual budget law 122, the respective structures of the Ministry of Education and Science organize the allocation of the amount by public universities based on an accepted and previously defined scheme. The amount of the state budget
[Ibid. Article 20, paragraph 1, 2.] 119 Po aty. Neni 18. [Ibid. Article 18.] 120 Po aty. Neni 19. [Ibid. Article 19.] 121 J. Sota, High Education in Post-Communist Albania ..., pg. 208. 122 Institutit për Bashkëpunim dhe Zhvillim (IBZH), "Çfarë është buxheti i shtetit?", në: ShtetiWeb, platformë interaktive dedikuar politikave publike në Shqipëri, Tiranë, 2016, f. 1. Material i botuar në faqen web site: https://shtetiweb.org/category/financatpublike/https://shtetiweb.org/category/financat-publike/ [Institute for Co- Operation and Development (ICOD), "What is the state budget?" in: State Web, Interactive platform dedicated to public policy in Albania, Tirana, 2016. Published material web site: https://shtetiweb.org/category/financat-publike/]
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depends on the level of tax collections and payment, as well as the requirements of university budget drafts. Regarding the grant that is distributed within the university, they follow the same criteria with the budgeting of universities (depending on the needs of their universities), where the main role is played by the MoES and the collegial decision-making bodies of the university"123.
Conclusions
At the end of this study, higher education is also one of the areas that not only leads society, but is also strongly influenced by it and by the social changes. The fact that education systems are constantly changing does not indicate instability, rather, they serve to a better adjustment toward a changing society.
Furthermore this complex process that has involved every area of life and activity of Albanian society, the university education has already realized a legal framework of international standards that is laying the foundations for the development and consolidation of a high democratic and decentralized education. This becomes a necessity in contemporary democratic development, in the advance of science and the introduction of new technologies. In the post-communist Albania, the new generations would experience another type of society essentially different from the one in which they were born and, consequently, they had to prepare for it. The high school that historically represents the most important institution in the preparation of human resources had to be completely transformed to be able to cope with an even more competitive social and economic environment that, beyond the imperfection it could have exposed, pushed Albanian students toward the knowledge to be successful. This was and is the advantage of today's system in comparison to the past, since as long as there was no depoliticized and competitive education; it could not be of any quality.
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• MALAJ, Arben; MEMA, Fatmir and Hida, SYBI - "Albania, Financial Management in the Education System: Higher Education", in: EconStor (Make Your Publications Visible), BERG Working paper series on government and growth, No. 54, Bamberg University, Bamberg, December 2005, pg. 2-19. Material i botuar në faqen web site: https://www.econstor.eu/bitstream/10419/38764/1/507517857.pdf
• Ministria e Arsimit dhe Shkencës (MASH), Raporti vjetor statistikor i arsimit 2004-2005, botim i Drejtorisë e Teknologjisë së Informacionit dhe Statistikave (DTIS) në MASH, Tiranë, 2006[Ministry of Education and Science (MoES), Statistical Yearbook of Education 2004-2005, Publication of Directorate of Information and Statistics Technology (DIST) at MES, Tirana, 2006]
• Ministria e Arsimit dhe Sportit (MAS), Strategjia Kombëtare për Arsimin e Lartë (SKALA) 2008- 2013, Tiranë, 2008[Ministry of Education and Sports (MoAS), National Strategy for Higher Education (NSHE) 2008-2013, Tirana, 2008]
• SOTA, Jani - High Education in Post-Communist Albania 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini, Berlin: ''LAP LAMBERT Academic Publishing'', 2019
• SOTA, Jani - Pre-University Education in Post-Comunist 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini, Berlin: ''LAP LAMBERT Academic Publishing'', 2018
• THOMAS, I. John - Education for Communism: School and State in the People's Republic of Albania, published by Hoover Institution Press, U. S., December 1969
• ZAGANJORI, Xhezair; ANASTASI, Aurela dhe ÇANI (METHASANI), Eralda - Shteti i së drejtës në Kushtetutën e Republikës së Shqipërisë, botim Fondacionit "Konrad Adenauer", Tiranë: "Adelprint", 2011[ZAGANJORI, Xhezair; ANASTASI, Aurela and ÇANI (METHASANI), Eralda - State of Law in the Constitution of the Republic of Albania, publication "Konrad Adenauer" Foundation, Tirana: "Adelprint", 2011]
236 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY Decision-Making And Regret: Do Women Managers Feel More Regret Than Men?
Ph.D Juliana Osmani University “Aleksandër Moisiu”, Durrës, Albania [email protected]
Prof. Assoc. Dr. Sanie Doda University “Aleksandër Moisiu”, Durrës, Albania [email protected]
Abstract Regret is an emotion that influences the decision-making in an important way. It is very important because is not only related to the chosen option, but often influences the entire process, orienting the decision maker towards the alternative that he believes can avoid this feeling. Regret determines the future behaviors of the decision maker and can lead to serious negative psychological situations. Thus, because of the regret, the decision-making may become a stressful task, which makes the individual feel guilty. The main goal of the current research is to understand if women managers feel more regret than men. The intention is to identify variables and elements and to discover possible relationships between them, so as to be able to define some general reflections about the gender impact on regret. On the basis of an intuitive discussion, we hypothesized that there is an important positive correlation between regret and gender. A total of 282 managers have participated in the current investigation, 116 men and 166 women. From the results obtained it can be concluded that the feeling of regret is independent of gender. The regret phenomenon is largely studied both in management and psychology. However, we think that the correlation between regret and gender is scarcely studied and requires still contributions.
Keywords: decision-making, regret, gender, women, men JEL Classification: D91, M10
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1. Introduction Regret influences the decision-making in an important way. It is an emotion that emerges after a decision has been made, but its effects and consequences may be even longer-lasting as it may also affect decisions in the future. Thus, regret may appear at the implementation stage or even in the stage of control and evaluation of the results. The consequences may vary, but they mainly concern the psychological conditions of the individual. Connolly and Reb (2005) identify three major types of regret: - Regret related to the consequences of the chosen alternative; - Regret related to the chosen option; - Regret associated with the process, that is, how the decision is made. Not all decision makers experience regret. For this to happen, the individual should think about the decision made and analyze it. Thus, he should not only analyze the possible consequences of the decision, but should also consider what the benefits and other costs would be if another alternative was chosen. Empirical research has shown that regret is an emotion often manifested in the post-decision making phase. It has also been concluded that for some types of decisions, regret will always be present. So, if you are investing a certain amount of money on the stock exchange and then the value of the purchased shares falls, you will feel regret that you have not bought the shares of another organization. But if the shares you buy are a good investment, you will still feel the regret that you have not bought more. Of course, this is not true for all of the choices we make, otherwise regret would be a feeling that would accompany us consistently. But the opposite may also happen, as there are some types of decisions that are not associated with the feeling of regret. So, if you buy a product and is given the option that if you are not satisfied you can return the product and get the money back, then the regret will not arise. But when we talk about organizational decision-making we know that such decisions are rare or practically impossible. From the discussion above, it is not difficult to understand that regret is an emotion that have important implications for the decision-making. Taking into analysis the Albanian managers the current research tries to establish whether there is a relationship between regret and gender. The interest on the differences in the decision-making process due to gender is a consequence of the greater participation of women in the work force and the greater awareness that gender- related stereotypes often lead to discrimination (Sanz de Acedo Lizárraga et al., 2007).
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2. Aim Of The Study And Research Question The current study tries to understand and formulate some explanation regarding the impact of gender on regret. The main reason for choosing this topic is the influence of regret on the decision-making process and its effectiveness, and also the desire to identify how women differ from men regarding the decision-making. For the decision-making the regret is very important because it is not only related to the chosen option, but often influences the entire process, orienting the decision maker towards the alternative that he believes can avoid this feeling. Such a feeling is important because determines the future behaviors of an individual and can lead to serious negative psychological situations. Thus, because of the regret, the decision-making may become a stressful task, which makes the individual feel guilty. The main goal of the current research is to understand if women managers feel more regret than men. The intention is to identify variables and elements and to discover possible relationships between them, so as to be able to define some general reflections about the gender impact on regret. To support the main purpose, the research question is as follows: 1. What is the gender impact on the regret? In consistency with the main goal and the research question, the hypothesis to be tested is formulated as below: H1: Women managers feel more regret than men.
3. RESEARCH METHODOLOGY 3.1 Methods and tools For the current study was adopted the quantitative research and for the data collection was used the questionnaire, which was designed to investigate the relationship between the regret after a decision is made and gender. The model used is the Regret Scale of Schwartz et al. (2002). This scale was designed to assess how individuals face different situations after a decision has been made and in particular the extent to which they experience the feeling of regret. The questionnaire includes 5 statements, which are the same of the original model of Schwartz et al. (2002), with the difference that is not used the Likert scale 1-7, but the scale from 1 to 5. The data processing is done through SPSS. To test the hypothesis of the research is first used the Pearson correlation coefficient and after is calculated the correlation coefficient of Spearman. The analysis is made on equal-interval scales, reporting the results for each statement.
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3.2 Participants The target population refers to the managers of the organizations operating in Albania in the private sector. Regarding the selected population was considered appropriate to take into analysis, the medium organizations and the first-line managers because the decision-making is concentrated at the individual level. Another important sampling criterion is the geographical one. Thus, the research is focused on the organizations dislocated in Tirana and Durrës. A total of 420 questionnaires were distributed and 282 collected, with a response rate of 67.14%, and have participated in the current research 116 men and 166 women.
4. LITERATURE REVIEW Regret is an important emotion that influences decision-making in different ways. Firstly, if for a given situation the decision maker think that regret will be present, this can lead him to decision avoidance. The purpose of this behavior is precisely to avoid a wrong decision. In other cases, the decision maker may not avoid making a choice, but may postpone it in order to gather more information and increase the possibility of making a good decision (Zeelenberg and Pieters, 2007). Secondly, regret may affect the feedback required after the decision is made. Thus, searching to avoid regret, the decision maker avoid also or realize superficially the control and evaluation stage of the decision-making process (Zeelenberg et al., 1996). Furthermore, he will be less inclined to search information about other alternatives and compare them with the chosen option. Thirdly, the regret associated with a given situation can affect the choice for the same or a similar situation in the future (Ratner and Herbst, 2005). Zeelenberg (1999) calls for the distinction between functional and dysfunctional regret. If the regret associated with a not chosen alternative that would bring better results would make us choose this alternative for a similar situation in the future, then we would have to do with functional regret. But for unique or rare situations, often the decision maker is not able to fix wrong decisions. This is a dysfunctional regret, because it will make the decision maker only feel bad. Both the expectation of regret and its experiencing influence decision-making. If the individual predicts that regret over the decision taken on a situation/problem will be inevitable, this emotion will affect the current situation/problem. When regret was not expected it will affect future decisions that are the same or similar to the situation that led to the birth of this emotion. Empirical evidences have shown that if the second scenario happens, regret is bigger and stronger. After a general discussion on the consequences of regret on the decision-making, let us now focus on the research object of the current study. We have to highlight that there is no previous research to our knowledge that assesses the relationship
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between gender and the presence or absence of regret after a decision has been made. However, based on empirical evidence that reveals the differences between women and men in making decisions, in an intrinsic way we can formulate hypotheses about the impact of the gender on regret. The link between gender and risk is one of the most studied aspects in trying to highlight the differences between men and women. Byrnes, Miller and Schafer (1999) in a meta-analysis of 150 studies on this topic concluded that men are more risk-prone than women. Booth and Nolen (2012) concluded that the risk aversion that accompanies women is a consequence of the environment in which they operate more than a natural feature. Recalling Tversky and Kahneman (1991), decisions and attitude towards risk are more influenced by possible losses and negative consequences than possible gains and positive consequences. Thus, the fact that women are more risk-averse leads to think that they are more influenced by the effect of possible losses. Niederle and Vesterlund (2007), in an attempt to offer explanations, have concluded that men love the risk because they believe more in their abilities and are more overconfident. In these conditions, we may said that women being more risk-averse then men are more careful in the decision-making process, making choices that differ not too much from previous choices, but that reduce the regret. Also Croson and Gneezy (2009) in a review of the studies on the differences regarding the risk assumption have found that women are much more risk averse than men. However, Croson and Gneezy (2009) believe that the main explanation for gender-related differences regarding the risk are the emotions. The authors state that women experience emotions more strongly than men. Thus, in an attempt to avoid negative emotions (such as regret) they take less risk. Risk increases the potential regret. For this reason, regret avoidance is closely linked to risk aversion. Positivity heuristic also influences regret. There is empirical evidence that women have a pessimistic view of problems and situations. In this context the results of Isen (2001) are interesting. The author believes that people affected by positivity are more flexible and innovative. Furthermore, they are less confused by a large number of alternatives and decide more quickly. Schwarz and Clore (2007) found that people under the effect of positivity are more creative about problem solving. In these context, women will experience the regret more than men. The information available to make decisions affect the quality of the decision. There are evidences which report that women seek less information. This can lead to less good decisions, accordingly the feeling of regret will be greater for women. However, it is not clear whether searching for more information about the possible alternatives is a good thing, considering that too much information makes it difficult to distinguish between relevant and irrelevant information (Payne, Bettman and Schkade, 1999). D’Zurilla, Maydeu-Olivares and Kant (1998) found
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that men are more impulsive than women in the decision-making. This result leads us to think that women reason more before making a decision, whereas men have pre-established preferences. In this case, the regret may be more reduced for women.
5. EMPIRICAL APPROACH As noted earlier, the relationship gender-regret is complex. Starting from the results of empirical evidences we cannot formulate definitive conclusions. Some findings induce to think about a positive correlation between the two variables, others to a negative correlation. Underlining again that there are no previous studies to our knowledge that assess directly the relationship between gender and the presence or absence of regret after a decision has been made, we formulated Table 1: Spearman correlation coefficient for gender-regret (Statement 1) 1. Whenever I make a choice, I’m curious about what would have happened if I had chosen Gender differently. Spearman's rho Gender Correlation 1.000 -.080 Coefficient Sig. (2-tailed) . .212 N 282 282 1. Whenever I make a Correlation -.080 1.000 choice, I’m curious Coefficient about what would have happened if I had Sig. (2-tailed) .212 . chosen differently. N 282 282 the hypothesis to be tested as follows:
H1: Women managers feel more regret than men
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As shows the Table 1, there is not a correlation statistically important between gender and the first statement of the questionnaire (Sig.= p = 0.212 > 0.05). The correlation coefficient of Spearman is negative, but statistically very weak (rs = - 0.08). So, when a choice is made, the curiosity about what would have happened if another choice was made, doesn’t differ women from man.
Table 2: Spearman correlation coefficient for gender-regret (Statement 2) 2. Whenever I make a choice, I try to get information about how the other alternatives Gender turned out. Spearman's rho Gender Correlation 1.000 -.041 Coefficient Sig. (2-tailed) . .520 N 282 282 2. Whenever I make a Correlation -.041 1.000 choice, I try to get Coefficient information about how the other alternatives Sig. (2-tailed) .520 . turned out. N 282 282
Table 2 indicates that there is not a relationship statistically important between gender and the tendency to search information about how the other alternatives turned out after a decision is made (Sig.= p = 0.520 > 0.05). Referring to Spearman’s coefficient, this correlation is negative, but statistically very weak (rs = -0.041).
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Table 3: Spearman correlation coefficient for gender-regret (Statement 3) 3. If I make a choice and it turns out well, I still feel like something of a failure if I find out that another choice have turned Gender out better. Spearman's rho Gender Correlation 1.000 -.064 Coefficient Sig. (2-tailed) . .319 N 282 282 3. If I make a choice and Correlation -.064 1.000 it turns out well, I still Coefficient feel like something of a failure if I find out that Sig. (2-tailed) .319 . another choice have N 282 282 turned out better.
As in the Table 3 above, the results obtained, indicate an impact statistically insignificant of the gender on the third statement of the questionnaire (Sig.= p = 0.319 > 0.05). The coefficient of Spearman indicates this relationship as negative, but the correlation is once again very weak (rs = -0.064).
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Table 4: Spearman correlation coefficient for gender-regret (Statement 4) 4. When I think about how I’m doing in life, I often assess opportunities I have passed Gender up. Spearman's rho Gender Correlation 1.000 -.086 Coefficient Sig. (2-tailed) . .179 N 282 282 4. When I think about Correlation -.086 1.000 how I’m doing in life, I Coefficient often assess opportunities I have Sig. (2-tailed) .179 . passed up. N 282 282
As shows Table 4, the correlation coefficient of Spearman is negative, but the correlation very weak. There are no differences between men and women in the tendency to assess opportunities they have passed up, when they think about how they are doing in life (Sig.= p = 0.179 > 0.05, rs = -0.086).
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Table 5: Spearman correlation coefficient for gender-regret (Statement 5) 5. Once I make a decision, I don’t look Gender back. Spearman's rho Gender Correlation 1.000 -.036 Coefficient Sig. (2-tailed) . .569 N 282 282 5. Once I make a Correlation -.036 1.000 decision, I don’t look Coefficient back. Sig. (2-tailed) .569 . N 282 282
Referring to Table 5 we note a statistically irrelevant correlation between gender and the tendency to look back, once a decision is made. The correlation coefficient of Spearman is negative, but shows that between the two variables there is no correlation (Sig = p = 0.569 > 0.05; rs = -0.036).
6. CONCLUSIONS
The current research was focused on the regret, which is considered an important factor that influences the decision effectiveness. More specifically, through this investigation we tried to understand if the presence of regret is impacted by gender. The basic idea of the study is that a certain level of regret will always be present, but if it is exaggerated then the consequences on the decision-making process are negative. We must not forget that regret causes stress and affect in particular the behavior of the decision maker in the future. On the basis of an intuitive discussion, we hypothesized that there is an important positive correlation between regret and gender. From the results obtained it can be concluded that the feeling of regret is independent of gender. The regret phenomenon is largely studied both in management and psychology. However, we think that the correlation between regret and gender is scarcely studied and requires still contributions.
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7. REFERENCES
Booth A.L., Nolen P. (2012), Gender differences in risk behavior: Does nurture matter, The Economic Journal, Vol. 122, No. 558, pp. 56-78 Byrnes J.P., Miller D.C., Schafer W.D. (1999), Gender differences in risk taking: A meta-analysis, Psychological Bulletin, Vol. 125, No. 3, pp. 367-383 Connolly T., Reb, J. (2005), Regret in cancer-related decisions, Health Psychology, 24, S29- S34 Croson R., Gneezy U. (2009), Gender differences in preferences, Journal of Economic Literature, Vol. 47, No. 2, pp. 1-27 D’Zurilla T.J., Maydeu-Olivares A., Kant G.L. (1998), Age and gender differences in social problem solving ability, Personality and Individual Differences, Vol. 25, pp. 241-252 Isen A.M. (2001), An influence of positive affect on decision making in complex situations: Theoretical issues with practical implications, Journal of Consumer Psychology, Vol. 11, No. 2, pp. 75-58 Niederle M., Vesterlund L. (2007), Do women shy away from competition? Do men compete too much?, Quarterly Journal of Economics, Vol. 122, No. 3, pp. 1067-1101 Payne J.W., Bettman J.R., Schkade D.A. (1999), Measuring constructed preferences: Towards a building code, Journal of Risk and Uncertainty, Vol. 19, pp. 243-270 Ratner R.K., Herbst K.C. (2005), When good decisions have bad outcomes: The impact of affect on switching behavior, Organizational Behavior and Human Decision Processes, Vol. 96, pp. 23-37 Sanz de Acedo Lizárraga M.L., Sanz de Acedo Baquedano M.T., Cardelle-Elawar M. (2007), Factors that affect decision making: gender and age differences, International Journal of Psychology and Psychological Therapy, Vol. 7, No. 3, pp. 381-391 Schwartz B., Ward A., Monterosso J., Lyubomirsky S., White K., Lehman D.R. (2002), Maximizing versus satisficing: Happiness is a matter of choice, Journal of Personality and Social Psychology, Vol. 83, No. 5, pp. 1178-1197 Schwarz N., Clore G.L. (2007), Feelings and phenomenal experiences. In Kruglanski A., Higgins E.T. (Eds.), (2007), Social psychology: Handbook of basic principles, New York: Guilford. Tversky A., Kahneman D. (1991), Loss aversion in riskless choice: a reference- dependent model, Quarterly Journal of Economics, Vol. 106, No. 4, pp. 1039-1061
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Zeelenberg M. (1999), The use of crying over spilled milk: A note on the rationality and functionality of regret, Philosophical Psychology, Vol. 12, pp. 325- 340 Zeelenberg M., Beattie J., van der Pligt J., De Vries N.K. (1996), Consequences of regret aversion: Effects of expected feedback on risky decision making, Organizational Behavior and Human Decision Processes, Vol. 65, No. 2, pp. 148- 158 Zeelenberg M., Pieters R. (2007), A theory of regret regulation, Journal of Consumer Psychology, Vol. 17, No. 1, pp. 3-18
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Insurance Industry Challenges Kiti Shabanaj1
Abstract
As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the simplest terms, insurance of any type is all about managing risk. A well- performing insurance industry benefits consumers, producers and insurance firm stockholders alike. Unfavorable market conditions stress the need for insurers to perform well in order to remain solvent. Insurance sector plays an important role in the financial sector of a country. The marketing strategy should be laid out in such a manner that includes the requirement from the launching policy till the final stage when it reaches in the hand of customer, means the service provided to the policy holders or the end users. This paper is a collection of definitions and implications for a better understanding of the insurance industry and identifies the strategies, challenges, obstacles, problems and implement strategies in insurances offered.
Key words: Insurance Industry, globalization, consumer, challenges
JEL classification: G10, G20, G22, J65
1. Introduction
Insurance firms are summarily viewed as establishments meant to cancel or minimize the adverse consequences of unforeseen misfortunes. Indeed, insurance companies are risk outcomes underwriters. Because we leave in very unpredictable societies that have an extensive variety of risk trajectories, it is commonly expected that a person at a particular point in time will run into unfriendly situations that will endanger his or her life and property regardless of status, caliber, education level, and class. Industrialized and matured societies
1 Scientific Civil Law, University of Tirana, Civil Departament, Street “Tish Daija”, [email protected], Tiranë
249 ECONOMIC POLICY AND EU INTEGRATION depend on insurance. This is an explanation why many companies and industries in developed nations do not liquidate or “go under” in such societies.
Ordinarily, against this contextual, most people expect that insurance firms will be viable and popular in societies. However, this is not the case since many insurance businesses face difficult challenges that seriously threaten their survivals and existences. This is common in less developed societies where political and socio-economic systems are yet to crystallize. Social, economic, and political systems in such countries present terrible problems to insurance companies.
For sure, if an individual has just started the business of selling insurance, then he or she must understand that having thick skin is an important thing for him or her to survive in the industry. Today, each business changes in some ways and the changes can either be negative or positive. In any industry, there are various problems to be faced. Here are the biggest challenges for insurance companies.
Dramatic changes are reshaping the insurance industry, and forward-looking insurers aren’t just watching it happen. They are taking action and making investments that will help them become more customer-centric, improve their pricing and create operational efficiencies. But with so much changing and so much at stake, where are the right areas to focus? Our global insurance team has identified five key issues and trends that should be on the radar for insurance company leaders. Consumers have more complex needs and are more knowledgeable about their choices than ever before. They want personalized offerings and tailored communications – that’s why insurers must digitize services and optimize all interactions.
Running a successful insurance company is never without its own unique challenges. Just like every other field of business out there, brokers have lots of issues they battle with. Challenges facing insurance industry are so enormous. Obviously, a single article won’t be enough to articulate all that the insurance companies pass through, especially as a highly competitive niche it is. However, lets see how we can bring all of that in.
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2. Challenges Insurance Industry
2.1 Cyber Security
The insurance sector will probably be one of the hardest hit sector by cyber security in the insurance company or agent don’t do anything to protect vital data of insurers.
In fact, one successful attempt to hack the database of an insurance company is enough to make the insurance industry lose billions of dollars in a day. And at the long run, they will lose the trust of their insurers.
For any insurance broker or agent to get more leads that will soon turn out to become loyal clients, you must assure them that strategies are already in place to prevent cyberattack and that the personal information they shared with your company is safe. What Can an Insurance Company Do to Overcome Cyber Security Problems?
- Hire an experienced data - Use the best of web host - Make it easy for customers to report any form of attack they noticed.
2.2 Regulations
The insurance industry is bound with so many regulations by different regulatory bodies. Why this is so good to avoid some companies becoming tyrannical, it may also turn out to become a huge challenge. But in some areas too, the regulatory bodies are not as effective as it should – though it’s often rare.
First on our list of regulations that has turned out to become a great challenge to the insurance sector is the government regulation. While we know that this is good, it has invariably increased the cost of providing insurance through its restriction of underwriting practices and the encouragement of a third-party payer system.
o Lack of Standardization and ability to compare company offerings. There needs to be some standardization in order to adequately compare company offerings for consumers.
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2.3 Customer Relationship Management
Getting customers is easier, managing them beyond the transactional level into the relational level where they become loyal customers and mouthpiece of your insurance company is harder.
Insurers will have nothing to do with you anymore and are more likely to give your company a negative review if your customer service approach is zero.
With the rising number of insurance companies , it’s important that you think of more effective ways to attract new insurers, retain old ones and grow your relationship with them. Think of customer relationship management tools you can use to grow your business.
2.4 Competition
Today, there are many insurance firms on the market and therefore there is an intensive challenge for insurers. Each company looks for the best way of selling their insurance products in the best possible way and targets a particular group of individuals. Most insurance businesses, especially the new ones are the most doubted companies. In fact, most people trust some of the existing insurance firms compared to the new businesses since the new enterprises are operated on a thin line between failure and success-and no one will want to take such risks with the little among of money that they have.
2.5 Mismanagement
As the owner of the insurance business, one is solely responsible for all issues that his or her clients may have regarding the management of the insurance business. All insurance firms that are mismanaged can`t hide their faults for a longer time without the clients noticing. As time move, there will be a constant increase in the number of clients` complaints, and if his or her insurance firm is not transparent, then he or she will lose more customers. Also, incompetent management may cost the company a lot, particularly if they have poor communication with their clients.
In case an individual`s premiums are high, he or she should not advertise. They should look for a market for that policy instead of lying to the general public or
252 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY even form strategies whereby the clients cut on expenses like providing no-exam life insurance quotes.
2.6 Economic instability
When the country`s economy is down, all insurance companies will be affected. At such situations, the rates can be affected such that the insurance companies might be forced to increase their rates, just like interest rates on credit facilities provided by financial institutions.
Of course, no client will appreciate this, even if it is stated clearly in the contract that the insurance rates might change from time to time. Therefore, such situations might create a bad image for a company since costumers can spread the information about a service or product they were not happy with very fast.
2.7 Excessive politicization of the insurance industry Without a doubt, politics play a significant role in insurance companies` operations depending on the power play & calculations that are dominant in the operating domains of the insurance firms. The premiums to pay, the outcomes of risk investigations, and the damages and benefits to pay depend on political conspiracy sometimes.
2.8 Technology and big data
Turning the promise of new technology and big data into commercial successes. This includes capitalizing on the opportunities in mobile and web-based services, using big data and predictive analytics effectively, and overcoming the problems associated with legacy technologies.
- Distribution Channel: Archaic way of purchasing insurance today is another big challenge; there is a lot happening on auto side to purchase insurance online but insurance companies have to go a long way to sell all their products through various different channels and be omni channel
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2.9 Slow Growth
A consistent growth in the insurance business is maybe not possible but it depends on policy agreements too and the services deliver by insurance companies. The organic growth in the insurance is “new client” hence there is much practices need to attain as this is the competitive industry.
3. Insurance Industry Trends That Will Transform the Business
The competition in the insurance industry is intensifying as markets evolve, existing players strive to innovate, and new ones enter the market, including ones that distribute only online or through non-traditional channels.
As a result, cost optimization and customer retention are becoming critical. In addition, consumers are becoming more discerning, expecting an insurance customer experience on par with the consumer experience from leading online companies such as Amazon, Netflix, and Airbnb.
3.1 The insurance industry and the evolution of automobiles
There are a few key emerging insurance industry trends driving major changes in automobile insurance, which is the top consumer product for most retail insurance companies.
Ridesharing (fewer people owning cars), semi-autonomous cars in the short term/autonomous cars in the long term, are transforming the whole landscape for the insurance industry, eroding premiums and in some cases reducing the size of the market.
Ridesharing Revolution
One of the biggest insurance industry trends is the recently emerged ride-sharing service. Companies, which employ a gig economy, have exploded in the last few years or so would be an understatement.
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The results from a recent study show that only about 20% of them are insured, however more than half of the interviewed drivers have stated that they plan on getting additional coverage at some point in time.
Getting the insurance however is not as easy for the drivers as it may sound. Since rideshare drivers are considered independent contractors. Their vehicles are used both for personal driving and for business.
That makes insuring them in a somewhat of a gray area since personal insurance offers no protection for the driver if he uses his vehicle for business, and a commercial insurance plan is only for vehicles used strictly for business.
The conclusion for insurance companies is that ridesharing is a new, previously unexplored market. Insurance agents should research rideshare policies, so they can bridge the gaps in their policies and adjust SAID policies since insurance varies from country to country.
3.2 Machine learning and automation
In the context of a fast-changing competitive landscape, insurance companies like Colonnade are focusing on marketing, distributing and issuing policies more efficiently. They also need to provide high-quality multi-channel customer service at maximally optimized cost.
Insurers are exploring and investing in machine learning and automation during the whole product lifecycle: from marketing, through underwriting and customer service to claims processing, fraud management, and reimbursement.
While automation and machine learning have been present in the insurance industry for years, only simple processes that require low decision-making skills such as data entry, compliance checks, standard customer communications, and managing rule-based decisions, used to be a subject of automation.
Thanks to the capabilities of the intelligent systems, the insurance industry is beginning to explore the automation perspectives of much more complex
255 ECONOMIC POLICY AND EU INTEGRATION processes such as property assessment, receiving customer insights, personalized customer interactions, fraud detection, and claims verification and processing.
Some insurers have even started employing drones for automated property and claims assessment.
3.3 Blockchain
The blockchain is one of the most powerful technology trends to revolutionize the insurance industry in the next couple of years.
Even if Bitcoin, Ethereum and Ripple don’t become the standard currencies of the future, the groundbreaking technology behind them is what the focus is on for the insurance companies. They have already started employing blockchain in their existing workflow to avoid huge losses because of false claims and scams that happen daily in the industry.
The first area in the insurance industry, which the blockchain technology could have a lasting effect on, is underwriting. Since this is the department responsible for whether a claim is trustworthy or not and how much of it can be covered, it could use a trust worthy repository of data. Exactly that central repository of truth is what blockchain offers to be. By using it, data from external sources can be sourced by the underwriters to automate some aspects of their jobs.
Another aspect of the insurance industry that can be positively affected by blockchain technology is the processing of claims. Considering the number of data points that need to be verified and the manual effort required, it’s no surprise that the users find the process too long and tedious.
By using blockchain all the necessary information needed for claims verification can quickly be processed. Insurers can track the usage of an asset by using the data available in the blockchain without tampering any information.
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It doesn’t matter if it regards the insurance industry or not, they expect to be treated as individuals with their own needs and to be communicated to accordingly.
3.4 Automated, self-service and quick to pay customer experience in insurance claims settlement
When handling an insurance claim, a large amount of the customer’s premium is spent on the process itself.
This is due to many reasons such as everything being manual, the carrier wanting to double-check the claim and customers not always telling the truth. The solution is to have the customer manage the claims process. While taking a self-service approach may sound counter-intuitive, the customer provides video and images at First Notice of Loss (FNOL) and is in control of the claims process.
When a good portion of the minor cases are handled and reviewed autonomously instant payouts can easily be achieved and only in a matter of hours the customer can have his money. By cutting the time needed for a reply, customer satisfaction should also rise. Only after someone fails an autonomous review would human interference be needed.
3.5 The All-in-One insurance policy is here for customer’s sake
The All-In-One form of insurance is steadily turning itself in an emerging trend. From a customer’s point of view, it makes perfect sense and provides great convenience to something that is usually a hassle.
By using such policies, consumers have one relationship with their insurer and let them cover “everything” at once.
When insurers have all details about their customers (cars, home, health, travel, pets, and possessions, they are able to provide a single overarching policy, a fair price and a flexible adjustment of the cover as needed.
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By employing a membership model, the platform can provide safeguards and advise. Since for the most part, this is AI territory it would be fairly easy to be automated.
3.6 Automation to dethrone human effort across the insurance industry’s value chain
While the emerging trend of automation is not unique to the insurance industry, it will certainly have lasting effects on it, because much of it still operates via pre- Internet methods, which are wildly outdated in today’s world.
Another reason is the fact that many personal lines are being automated. Small parcels of insurance protection cannot be packaged and sold using only human effort and remain cost-effective.
The customer demand for automated solutions is a considerable factor in favor of the decision. They want a purely digital experience that does not require human contact for the sake of effectiveness and simplicity.
4. Insurance Challenges (and the industry's response)
4.1 Driverless Cars
Who is responsible for collisions involving automated vehicles?
The majority of “autonomous” cars on the road today are not fully automated, as they’re still partially under driver control. To date, most collision cases have assigned error-responsibility to the human drivers. However, as cars continue to evolve into complete independence (known as level five autonomy), insurance policies will likely shift more of the liability towards the manufacturer, perhaps with some shared-cost component distributed among the riders.
4.2 Gig Economy
Should personal liability plans cover Uber, Airbnb, Rover, etc.?
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The gig economy encompasses a wide range of “on demand” services-for-hire, such as personal shopping, graphic design, and house-sitting, just to name a few. A subcategory of the gig economy, the sharing economy — also known as peer- to-peer, or P2P based activity — refers to services arranged through organized groups of independent contractors. In P2P arrangements, individual service providers (or freelancers) are selected and hired through various online platforms, including Lyft, Fiverr, and Upwork.
The underlying principle of the gig/peer-to-peer/sharing economy is that an individual can provide or procure a paid personal service while operating outside of conventional business regulations and employment law. This has posed a challenge for the insurance sector, since the service agreements don’t fall exclusively into either of the personal or commercial silos.
4.3 Blockchain & Cryptocurrency
What is blockchain, and how does it relate to the insurance industry?
Blockchain is often described as a “distributed ledger.” The data is split and stored across a wide network, so no one entity obtains a complete record. By decentralizing information, the data is nearly impossible to hack, hence blockchain’s notoriety as a top method for data security. This is also why cryptocurrencies – primarily created to bypass governmental regulation and deter cyber theft – have been built upon the blockchain model.
While some companies are eager to take advantage of the disruptive potential of this new technology, it has yet to gain significant traction in the insurance industry. The cost of upgrading core systems for blockchain compatibility, a lack of standardization, and insufficient response times are among the many limits preventing the wide-spread use of blockchain so far.
4.4 Big Data
What kind of data should insurance companies gather, and what can be done with it?
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Big data encompasses the massive amount of stored information on anybody who has ever had a digital connection. Big data includes both structured (that which is entered into defined fields and tables) and unstructured (social media posts, multimedia, written reports). While unstructured data makes up most available data, it is also the most controversial when it comes to collection and usage.
Typically, insurers use consumer information — structured data — to gain key insights for calculating risk, identifying product sales opportunities, and fraud investigation. But the potential use cases are much further reaching.
4.5 GDPR & Similar Laws
Who owns the rights to personal data?
You can’t have the big data conversation without also mentioning the new digital privacy laws. The General Data Protection Regulation restricts how companies can collect, store, and use data for any business that operates in, or communicates with residents of, the European Union (EU). California recently enacted a similar law that gives consumers more control over their own personal data.
Even if your state does not currently have privacy laws in place, it’s a good idea to organize your data management system with the flexibility to adhere to new guidelines as they evolve.
4.6 IoT
How does the Internet of Things factor into insurance policies?
While cybersecurity has been an issue for decades, the Internet of Things (IoT) has introduced a whole new opportunity for both consumer protection and risk. On the positive side, policyholders can use their interconnected gadgets to improve home security (live surveillance footage), become healthier (wearable fitness devices), and drive safer (predictive maintenance features). Conversely, hyper- connectivity also increases the risk of equipment malfunction, identity theft, and malicious hackers.
Some insurance companies are taking advantage of the potential benefits, offering discounts to customers who link their smart-devices to their insurance policies. To mitigate some of the IoT-related risks, you can educate your policyholders on
260 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY issues such as network security, warning signs of a possible breach, and what to do in the case of device-failure.
4.7 Commoditization
How can older companies compete with online aggregator sites?
Online aggregator sites have made it easier than ever for consumers to compare prices and immediately switch from one insurance company to another. Companies that are unable to compete on price alone are investing their resources in other distinguishing features to attract and retain policyholders. By providing an exceptional customer experience, offering a range of relevant products, and keeping costs (and therefore, prices) as low as possible through proactive planning, insurers can be viable market contenders even if they are not the cheapest option.
4.8 Amazon Insurance
How can established insurance companies compete with Amazon?
Amazon has caused a stir after recent reports that the online behemoth has been engaged in mysterious discussions with insurance executives in the UK. Until they become a direct competitor in the insurance space, we can only speculate the affect it will have on the industry. However, we do know that a positive customer experience inspires loyalty, so by listening and responding to your policyholders’ needs and wants, you should be in the optimal position to retain your customer base, even in the face of a competition from ecommerce.
4.9 Insurtech
Bogged down by legacy systems, how can established companies compete with industry disrupters and their modern tech?
Day-to-day operations and processes are heavily tied to your core systems. And if those systems are a more than a decade old, chances are high that they were not built to accommodate modern business practices.
Often, due to budgetary constraints and other practical considerations, a complete system overhaul simply isn’t an option. To compete on the same level as the high-
261 ECONOMIC POLICY AND EU INTEGRATION tech market newcomers, established insurance companies must take advantage of options that can integrate modern technology into their legacy systems. By focusing on what you can upgrade, you’ll be able to offer your policyholders the kind of experiences they prefer (digital, engaging, efficient) without the cost, time, and logistical nightmare of replacing your entire system.
4.10 Artificial Intelligence
Will traditional insurance roles be replaced by machines?
Artificial Intelligence (AI) refers to any technology designed to “learn” from experiences and adapt to new information through algorithmic processing and prediction. The insurance industry is already taking advantage of some AI capabilities, such web chatbots for online customer communications, image analysis for claims investigations, and risk analysis for underwriting.
Whereas sci fi stories have instilled us with a healthy sense of caution, history has shown that technological progress ultimately benefits both industry and society. The key is to stay on top of the advancements in real time, so you can take advantage of the benefits and anticipate and adapt to potential challenges ahead.
5. Conclusion
Forward-thinking agents will look at sector challenges as an opportunity to differentiate themselves.
Modern technology lets them take a customer-led approach to front and back- office operations, leading to better customer satisfaction ratings, more referrals, higher revenue per customer and lower churn.
On the one hand, you have trends such as automation and blockchain, that drive your company towards higher efficiency, and on the other hand, you have trends such as the demand for more personalized premiums and cybersecurity policies, which can lead to the loss of both current and potential clients.
They need to constantly assess how they are performing, but also look at large transformation programmes, which will position insurers better from a customer, operations and technology perspective.
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6. Reference
WNS Perspective, (2018). Top 5 trends in the Insurance Industry. Sain, Z & Selimovic, J (2015). Challenges in Insurance Industry. Matouschek, G., (2017). Impact of InsurTech on the insurance industry. Crawford, Sh., Russignan, L., & Kumar, N. (2018). Global insurance trends analysis 2018. EY.com. Five tech trends that will define the future of insurance. Moore, P. (2019). Insurance Industry: 12 Trends for 2019 Dwyer, K. (2019). 3 trends that will disrupt the insurance industry in the next decade. OECD.org. (2018). Global insurance market trends. Guenov, I. (2018). 9 Emerging Insurance Industry Trends That Will Transform the Business (2018-2020). Pwc, (2019). Top Insurance Industry Issues in 2019. Industry transformation: from threat to opportunity. Agababa, R. (2018). Five key challenges facing the insurance industry. Gupta, N (2017). What are some major challenges in the insurance industry? Mercer Global (2018). Business and workforce challenges in the global insurance industry. Anne, I. (2016). 6 biggest challenges for insurance companies. Top insurance blog, (2017). Top 3 Challenges Facing Insurance Industry and How to Overcome Them
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ECONOMIC CRISIS AND STATE ELASTICITY Prof. Ass. Dr Lavdosh Ahmetaj
Abstract The spirit of this article is based on the political opinion of Montesquieu and Hobbes about the state, which should express the interests of the citizen so that he is able to withstand the fierceness of the market, in addition to the transition phase. While, on the other hand, the legal requirement for the response of the institutions, so that they do not allow deviations from the naturalness of the state, which must harmonize its internal constitution. Thus, in the conditions of the ruthless tendencies of the global market, the freedom of information is of particular importance through state institutions, which have the function of promoting the entrepreneurship of the citizen so that the latter does not fall prey to the market's unsatisfactory tendencies , who does not recognize mercy in the face of the interests of the citizen. While, referring to the doctrines of the state, their focus is on increasing the personality of the individual in relation to the state, at the same time showing the means to be used: so Russo and Montesquieu have a common concern about the sovereignty of the individual in the face of a possessive society . What Hobbes calls: lupo di lupo. In the service of this article that has the deep and shaky crises of a state in the center, the notion of Rossevelt comprehensively summarizes how the crisis is being treated in a powerful state. Through the ideology and the high minds of that period, the crisis was conceived through the creation of the Trust of the Brain, which revived the entire state building what was rooted. State intervention in the economy is always necessary, especially in cases where resumption is impossible. Marx was the one who created the capillary state, where the state intervened everywhere in the economy. This intervention made it possible to cure the country's crises and extract the institutional system from economic decline. This way of governing the state and the entire state system made it possible for the economic situation to be under immediate surveillance in the event of a crisis, resulting in the immediate cure of any critical situation. Keywords: market, competition, state, institution, society, individual, crisis.
The crises reflected in the world economy and their association with national crises have constantly drawn the scientific opinion of genius state2, politics and why not economics3, and have become a subject of study, often serving as turning points and referable with an impact on the history of the state and on economic
2 - View, Hobbs, Leviathan, Tirane 2000 "Foreword" 3 - Marks, Capital, Tirane 1978
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thought and debate about state and non-state policies in the area of economic crises. While the causes of crises are often controversial, the consequences are always tangible and disastrous for the economy and society4. But what do we concretely call the term crisis? The crisis implies a situation where the economy faces a sudden decline as a result of a financial crisis. Such an economy experiences a decline in GDP, liquidity shortages and price instability as a result of inflation or deflation. The crisis may take the form of a recession or depression, which generates moral mischief, until the fall of the human person so valuable, for the city, which is sensitive to the feeling of morality and its social and political being because, referring to Plato's Republic focuses attention on the "citizen" man, but sees it with an interesting terminology, calling it "political animal". This political being, which can not escape this natural attribute, begins in the crisis and emits the sovereignty or the attributes of the citizen because of the social and economic survival and avoids the natural, so his public existence begins is perverted, due to the creation of a land in the transition society. Here in this context, as politically as economically, it is impossible for the crisis to be overlooked or to become as if it has nothing to do with the personality of the citizen5. The crises that have emerged on the horizon of the political as well as the economic world before the 20th century were predominantly local, while in the course of time they took on a global character, that is to say, what Marx has foreseen at "Capital"6, which draw the attention of the public to the fact that private-owned and liberal-based companies are destined for a permanent crisis and the society or the individual, in order to cope with life, is obliged to behave with the cruelty of the fraternity of the natural state7. Meanwhile, the mechanisms created in recent decades by the world's political and organizational community to prevent global crises, such as the creation of international financial institutions, which serve to monitor key macroeconomic indicators8. History as a school of politics9 naturally reflects through its philosophy and has shown rationalistly that collapse or local economic crisis in the world is
4 - Zbigniev Brzhezhinski: Outside Control, Tirana 1996, p. 184, the "giant of world inequality". 5 - View, Myslym Pasha, Does Albania have the economic gap exited in Otranto's narrow street, "Panorama", Thursday, 6 December 2018, p. 20 6 - Marks-Engels, Selected Works, Volume I, Tirane 1958, p. 34-37 7 - View, Hobbs, Leviathan, Tirane 2000 "Foreword" 8 - Gerge Fridman, Preliminary for XXI Century, Tirana 2005, "author's note" 9 - View, Machiavel, Prince, Tirana 2001
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difficult to predict, even more difficult, to avoid10. While referring to Hegel, there appears to be an intellectual solution if one sees the phenomenon of the crisis with the rationality laws "For what sees the world from above rationally. The world, in turn, represents a rational11 aspect "consequently the relationship itself as a lawyer" is mutually12 " While, a retrospective and rationalized Hegelianist look on some of the most fierce and significant strikes that have undergone and reflect the world economy system in time and space, in various political and economic political systems13 highlight their features and create opportunities for a more effective and legitimate reflection on crisis prevention as a phenomenon14, which has its sibiosis in the allegory of good governance and bad governance, and precisely in it, primarily the nature of good governance and what is bad is foreseen. WILLSONIAN PROGRAM ON CRISIS SOLUTION Bankruptcy of a major London bank in 1866 brought about a critical change in the role of central banks in managing financial crises. At that time, the Bank of England (Bank of England) was at the center of the global financial system. Overend & Gurney was a bank providing finance for commercial banks and retailers in London. When she announced the bankruptcy act in May 1866, many other smaller banks were unable to secure funds and fell one after the other, though still capable of liquidity. As a result, reformers such as Çalter Bagehot evoked a new role for the Bank of England as a "top-ranking lender" to provide liquidity to the financial system during the crisis in order to prevent the bank's failure across all others (system failure). The new doctrine came into effect during the Barons' 1890 crisis when the losses of one of the largest banks in England, Barings, were covered by the Bank of England to avoid a drop in the entire English banking system. The secret negotiations between the bank and London's financial community led to the creation of a $ 18 million rescue fund in November 1890 before the Baringstick losses were publicly announced. At the beginning of the 20th century, the world economy plunged into crisis as a result of the First World War15. The main cause was massive sales of financial titles by US, UK, UK, France and Germany, to fund the conflict16. The crisis began
10 - Hegel, Plato, Tirane 2004, f. 184 "Escurus relations between people and political conditionality in general 11 - View, Hegel, Plato, Tirane 2000, p. 186 "The Ethics and Subjectivity of the" Republic " 12 - Hegel, Political Writings, Tirana 2000 "Preface" 13 - Quentin Skinner, Machiavel, Tirana 2007, "Introduction" 14 - David Miller, Political Philosophy, Tirana 2007, p.63 15 - Fan Noli: Uncovered Pages, Tirana 2002, America and Germany. 16 - Newspaper Albania: The Bitter War Events, Boston 1919, p.
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in different places around the world almost at once as soon as the warring parties began to liquidate foreign assets. The result was a collapse both in the commodity markets and the financial markets. Banking panic in the United States, Great Britain and some other countries was administered thanks to the rapid intervention of central banks. In 1917, the US played an important role in the rapid completion of the crisis (World War I) and in determining the consequences of the war. Politically, the US government stated that the war was not against the German people, but against the way of autocratic government. In December 1918, President Wilson presented to the US Congress a 14- point program, which had the primary function of establishing peace17. The Wilsonian program called for: to renounce international covert agreements, to ensure freedom of navigation and trade, to minimize weapons production programs; while resolving colonial issues would take into account the interests of the peoples through securing their self-government; the removal of any obstacles in the path of free economic development of European and world countries18. In the summer of 1918, after many losses on the front of the war, the German government asked President Wilson to conduct talks based on the American program. This proposal was accepted by Antanta19, and as a result the ceasefire came to an end on November 11, 1918, ending the crisis that had been damaged since World War I, which had caused the worst demographic trauma in the global. At the Versailles Conference in 1919, the winning states submitted their requests. President Wilson came up against the allies' demands for major territorial changes to the detriment of Germany, which would turn him into a second-class state20. In the Peace Treaty, the demands of the European and Japanese allies, which prevailed at the main bodies of the Conference, such as the Council of the Tenths and the Fourth Council, took far more into account. This indicated an institutionalization of global relations and the possibility for a new policy. Moreover, Paris was at this time the center of world politics and, at the same time, the capital, parliament and world appeal, because it was the time of great change. Thus, the global politics were changing and, consequently, the policies of the national states, coupled with changes in the way of governance, which meant state forms were approaching modernity. To understand this qualitative change in state policy, it is enough to point out that European states have so far been guided by colonial policies, so in Europe, military units from all over the world were
17 - L. Ahmetaj, Albania at the Peace Conference in Paris, Tirane 2012 18 - Henri Kisinger: Diplomacy, Tirana 1999, p. 57. 19 - There again, p. 60 20 - Henri Kissinger: there again, Tirana 1999, p. 79.
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serving in the special European countries, such as Great Britain, Germany, France etc. But what were the political and economic consequences of World War I?
INSTRUMENT FOR EXITING FROM THE GREAT DEPRESSION THE "NEW COURSE" OF ROSSEVELT
Following an extraordinary speculative growth in the late 1920s, partly driven by the rise of new industries, such as radio and car industry, US stock prices fell by 13% on Thursday, October 24, 1929, marking the beginning of an unprecedented crisis in the world economy. As soon as the market hit the lowest point in 1932, 90% of the stock value had evaporated. It took 25 years for Indicte Jones21 to reach the level of 1929. The effects on the real economy were severe. The broad stock of stockholders implied that many middle class customers would feel the losses. They reduced significant purchases, such as cars and homes, while businesses pushed their investment plans and shut down factories. In 1932, the US domestic product was halved and one- third of the workforce was unemployed. Many economists have criticized the authorities' response to the crisis as inadequate. The Central Bank actually increased interest rates to protect the value of the dollar and maintain the gold standard, while the government raised tariffs and obtained a budget surplus. Depth of the Great Depression and its extension have turned it into a typical example of the devastating effects of crises22. It served as a catalyst for a theoretical debate that continued for decades and fundamentally changed attitudes to economic policies of government, in addition to the role of monetary authorities. While referring to US policy efforts in such dramatic years, it is enough to recall the operations undertaken by President Roosevelt: he introduced a program called the "New Course" or the new way of solving major problems of the country. In March 1933, Roosevelt expressed the crisis that "the only thing we should fear is the fear itself23." And for this he worked with extraordinary energy. Roosevelt's first important decision was to create a "Trust of the Brain", a team of highly qualified specialists and scholars working with the president. The team drafted projects or advised the president on all measures that should be taken by the central administration. To foster the state of affairs in the industry, a central agency, the NIRA (Industry Recovery Administration), was formed, consisting of representatives of
21 - stock exchange reflecting stock market (Dow Jones). 22 - Terli Mings: Economic Survey, Tirana 1999, p. 161-162, The Evolution of Modern Corporations. 23 - Henri Kissinger: book. cit., Tirana 1999, p. 45.
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banks, industrial firms and outstanding economists. The agency discussed the relationship between production and consumption. In order to neutralize the situation in the conditions of competition, codes were also drafted, whose function was to determine wages, production, prices etc. for each sector and enterprise. In this way, the administration began to play an important role in economic affairs, as it did in France, Germany and Scandinavia. To change the situation in agriculture, the administration for agriculture regulation, A.A.A. Farm economies were given loans and proportions for agricultural produce and their prices were set. The state subsidized those agricultural economies that produced in line with the market economy, avoiding excessive production. The first achievements were noticeable. In 1936, revenues from agricultural products were increased by 50% and the price difference between agricultural and industrial products was limited. At the same time, international measures were taken to increase the export of US agricultural products to Europe, Canada and Latin America. Significant measures were taken in banking policy, especially in the area of lending, using state funds in the service of the rebuilding of the competitive mechanism, because a very interesting phenomenon had appeared: uncompromising competition had created the legal possibility of increasing the monopolies, who had swallowed most of the profits, and consequently the bankruptcy of many small and medium-sized enterprises that had no chance of competitive reproduction in the market; as a result, supermonopolies were created, which also posed risks to politics (the state), which in the legal language meant capturing the state. Seeing this as a concern, President Roosevelt managed to form the "Brain Trust" as an advisory and acting institution in economic policy operations. In this regard, the following measures were taken: First: In particular, small and medium enterprises owners were assisted by credit. Why? This financial policy sought to shrink the authority in the market of supermonopolies, which had created severe problems with not only economic but political consequences, which politically mean the state was able to catch up from the monopolies that had swallowed many other enterprises, already bankrupt. Consequently, encouragement and motivation through the state-controlled lending policy of these enterprises enabled growth of competition between enterprises. Thus, the state understood the promotion of competition by introducing its political and financial authority. Secondly: In this regard, the Financial Restructuring Corporation, created during the presidency of President Huver, played a primary role. So the federal reserve bank system played an important role. This state-run system defended the
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financial system and placed the balance on the US economy. So, basically, this system was the state's intervention in the economy. Thirdly, the reform of the social field was an integral part of the new course. The Roosevelt Government spent hundreds of millions of dollars in helping the unemployed, building public facilities, improving the road network, and protecting the country's natural resources; these spending curtailed unemployment, improved living standards and at the same time boosted output growth in particular US industry sectors. Fourthly: In 1935, an administration for job improvements was established. At this time, $ 11.5 billion was spent, which provided work for about eight million workers, who worked mostly on infrastructure. Fifthly: In 1935 the government adopted the act Vagner. According to him, the freedom of union organization, the right to strike and collective bargaining was extended; in addition to the FAP (American Labor Organization), the Congress of Trade Unions, which united the workers who had not joined the trade union until that time, was created. In the function of the workers was the law of 1935, for work insurance, according to which workers had the right to receive old age pension at the age of 65. The successful implementation of the anti-crisis program assured Roosevelt the victory in the presidential elections of 1936 and 1940; this new course made it possible to pass the crisis and at the same time prepare a new and more qualitative stage for the American economy.
JAPANEZE MODEL OF EXITING FROM CRISIS
During the late twentieth century many of the Southeast Asian economies passed a severe financial and economic crisis. This had major implications for the global financial markets, which over the years had increasingly increased exposure to the opportunities that Asia seemed to offer. The crisis ruined the wealth of economic agents on a massive scale and dramatically increased poverty24. In the banking system of the countries involved, an amount of corporate loans almost half of the annual GDP returned to bad credit. The real cause of the crisis remains a controversial issue. Amongst the most probable sources, dollar-fixed exchange rates can be identified, and the reduction of capital control in previous years. In the years to come, many of the affected countries undertook reforms to increase transparency and improve the health of the banking system. But it must be acknowledged that the soundness of the banking system is rooted in the political and economic system pursued by national states; so, referring to the experience of the Japanese state after the Second World War, on April 11, 1945, a visiting professor from the "East Asian Ministry" visited a university professor at Tokyo
24 - there again, p.89
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University25. They held a long private conversation about Japan's war and its post- war prospects. Both were of the opinion that the war was lost, but it did not mean that everything was lost; rather, the conversation was directed towards the idea that Japan taught a great lesson from its tragic experience, namely Japan with poor natural resources, to model the future by developing precision engineering26. In his notes, the professor cited the visitor as the bearer of a historic metaphor in the service of his basic message27. That was exactly what happened to the state of Japan, which would not allow it to be rearmed; Moreover, Japan did not have the opportunity to be a first- class state power, but that would not mean that it was not or shined as a second- class power. So the Japanese economic and political opinion was excited that the uniformed soldier was not the only kind of army, "the scientific technology and the martial spirit under the armor of work would be the invisible army of the Japanese state. This Japanese-American war could not be considered as such, where khaki uniforms were losing their job uniforms28. " This analysis has been dealt with since 1945, but we are already at the beginning of the 21st century, where it is proved that America's military uniform is lost in the Japanese workwear uniform, which means that there are some indicators of the Japanese system which made possible the Japanese recovery driven by these motives: 1. Japanese national feeling for a single identity. 2. The cohesion of its national community. 3. The special ability of its society with the persistence of strategic goals of a broad spectrum. Here we find the pushes that have raised the Japanese state to the ranks of the world's economic power. But arguing would be the direct reference of Mr Hrzhezhinsky regarding Japan's economic dynamism, which predicts that Japan, even if its economic growth is likely to decline, the least likely to suffer is that it will strengthen its position its prominent national economy number two of the world and with the tendency to align itself with America. Consequently, American rivalry and insecurity has emerged as world economic leadership. In this competition, the arguments derive from the quality and the particular impetus of Japanese society: Japanese society has an advantage over America in the following directions: - in the field of competition, especially for the fact that Japan's social advantages include one's commitment: first, his signature, secondly, the homeland,
25 - Brzezhinski: Out of control, Tirana 1999, p. 123 26 - there again, p.123 27 - Brzezhinski: Out of control, Tirana 1999, p. 123 28 - All of this paragraph is published in autobiography: The years of Japanese challenge, meditation on my life, articles by Saburo Okita, prominent Japanese planning economist and, in the late 1970s, a former foreign minister, a man who managed to embodied the positive Japanese influence on world affairs (Brzezhinski: The Shaking of the World, Tirana 1996, 125).
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the third, the family, and ultimately himself. So, compared with the values of American society, they are quite the opposite, but what is even more qualitative, the relatively low burden of protection and the spirit of social saving have allowed Japanese to maintain an internal savings rate on PKT29 , which in recent years has spent more than twice that of the US, ie. saving, planning and investment. This has been a sphere where American society is far behind Japan. So, referring to world trends, we seek to show the risks inherent in the global phenomenon, but especially in the current Albanian conditions, where there is a precedent to be out of control of this phenomenon, because it reflects a variety of economic phenomena that do not respond to the global crisis, and it seems that the Albanian society has responded to globalization only through free movement and employment outside the Albanian lands. This is just one issue, because it needs to be harmonized with a number of other elements that have their strength. Thus, domestic political harmonization can not be overlooked, which creates a state power and increases state sovereignty as a factor in European relations. This should not be confused with the concept of political sovereignty and state sovereignty, which are very close to one another, but must also be characterized by each other, because the opportunity is to move to humility and, consequently, to the loss of political sovereignty; to forget what we call political compromise between the national political forces, which create international factorization.
LOSS OF FINANCIAL SOFISM
Many analysts associate the current crisis with the easternmartgage business, in which US banks lend clients with negative borrowing history, taking on a high risk. These and other instruments are collected and converted into portfolios - collateralized debt instruments - and sold to investors around the world. The fall in house prices and the rise in interest rates meant that many individuals were not able to repay the loans received. Investors faced loss by hesitating to buy other collateralized instruments. Loan markets froze, while banks refused to give credit to each other without any information as to how bad credit each had in the portfolio. The crisis effect spread quickly beyond the US borders; losses were felt by investment banks to Australia. The Fed and the European Central Bank sought to revitalize the monetary markets by injecting funds with more favorable terms. Interest rates also lowered to encourage lending. But short-term aid did not solve the liquidity problem because banks continued to hesitate to lend to each other. In search of a long-term solution, the US government approved a $ 700 billion grant to buy bad loans in exchange for bank shares. While the latter's prices have fallen
29 - Brzezhinski: Out of control, Tirana 1996, p. 125.
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to the ground, economic activity has been hit globally, as consumer confidence has been shaken by falling housing prices and job insecurity. According to the International Monetary Fund, the pace of economic shocks around the world has been growing. Some of the key conclusions that can be drawn from the past crises are: - Globalization has increased the frequency and extent of financial crises, but not necessarily their negative effects.30 - Early intervention by central banks is more effective in limiting their extent compared to later interventions. - It is difficult to predict when the financial crisis will bring wider consequences to the economy. - Regulatory institutions often fail to follow the pace of financial innovation that may be the source of such a crisis. Martin Çolf, in his book Fixing Global Finance, begins his analysis of the economic crisis with the idea that sophisticated finance brings benefits: It allows the creation of large enterprises through the combined capital of millions of people at modest cost; gives business starters the ability to raise their companies by challenging the dominance of existing ones; allows people to balance their spending during their lives; facilitates risk delivery and insurance. Empirical studies show that these advantages are real. Countries with financial sectors developed in the 1960s grew faster over the next three decades compared with other countries. But financial sophistication is dangerous. Emerging markets have experienced a series of crises since the early 1980s. The economies developed from Japan to Sweden have experienced a costly banking crisis. While it is difficult to say whether crisis costs outweigh the benefits of modern finance, some more practical issues can be discussed. What should the national states do to reduce the risk associated with the crises? And just as important, what did they actually do? The economies of developing countries,after the crises of the late twentieth century, decided to immunize themselves, reflecting more intelligently31, through refusing to finance priority states. The national states held exchange rates at low levels to generate a current account surplus and to create foreign currency reserves. Thus, if their banks were to experience problems and foreign finances would leave the country, they would have a dollar reserve aside to pay foreign liabilities and avoid falling exchange rates32.
30 - Adrian Civici: Globalism, Tirana 2007, f. 78 31 - View. Hegel, Plato, Tirane 2000 32 - Terli Mingos: Economic Studies, Tirana, 1991.
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This decision to create reserves has proved successful: Brazil, Russia and South Korea have relied heavily on their reserves during the current crisis. But a preventative measure that is understandable from the point of view of a country can be detrimental to the global system as a whole. If everyone tries to generate a current account deficit, the responsible deficit should definitely appear somewhere. And so it happened to America. Capital from emerging economies ran over to WaltStreet, supporting the boom of mortgage instruments. What is worrying is that the process can be repeated. After current experience with the global crisis, developing countries can reconfirm their confidence in capital exports and a new boom may occur in the future. This gives the first issue an urgent need: how should finance become safer without using destabilizing capital 'dumping' policy? The answer would begin with the distinction between different types of capital flows. Investments of foreign states can not be drawn immediately "during a possible panic", so they should be welcomed but gradual and supported by the national economy. Portfolio flows are also stable. But credit flows are very volatile, especially if these are denominated in foreign currency. Developing Countries States should encourage citizens to give up free dollar borrowing if their incomes are in local currency. If aliens want to lend, they can do it in local currency. If such currency discrepancies are kept to a minimum, the exchange rate crisis shrinking would be reduced. Developing countries would then be able to absorb capital from abroad. They would no longer feel the need to create current account surpluses, and the US would spare the next boom.
LIMITING NATIONAL SOVEREIGNITY TO FREE MARKET CONDITIONS
Global crisis trends are driving increasingly into the responsibilities of domestic economic development; which means that global crises should be considered as non-incidental, but with striking effects on national economies (states). In this regard, it seems that the national states are becoming aware and at the same time make constant preparations to cope with this phenomenon. Referring to the political history of the Albanian monarchic state 1928-1939, it seems that the world crisis had captured the poor Albanian state, but at the same time it was seen that there was a tendency for the economic crisis in the poor countries to pass beyond the borders of the developed countries, which means that the same tendency may be reflected in modern Albania. This seems to be true for two reasons: the first I think is theoretical, in the views that, referring to Machiavelli, who had carefully noticed the world politics, came to the conclusion
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that History is the school of politics; while the second, considering this theoretical context, I think that Albania can not be ruled out of this "law" either because the crisis analysis has not deepened through the approach of "brain trust", an institution that remembers the solution of the crisis by US President Roosevelt. But what will the sovereignty of the national states take33? Looking at the state in relation to world economic developments, it takes on a more moderate form, in terms of consulting international institutions, who have the experience to assist and assist in not only coping with the crisis but also the technical 34. This is necessary because, referring to the history of the Albanian state, it is wrong when it was thought that there was no need for the international factor. Looking at this plan, the Albanian state in its history has the pattern. Thus, in December 1920, the Albanian state was admitted to the League of Nations35, and this factor served for international respect precisely in the most difficult moments of state history. I think that this is also the time that international politics is called for because it was possible to break the isolationist concept into Albanian political thought, from the global point of view a new philosophy was created in the Albanian state, when Albanian state politics had begun to articulate the idea of "State of Albanians36", meaning that a new political vision had taken extra-national dimensions and the issue had become global. Consequently, the chauvinistic policies of neighboring states had begun to crunch because they relied on political doctrines37 that had caused ethnic superiority and national conflicts that had the tendency of denying national statehood. Consequently, the multiethnic state had economic advantages by ethnic influences, a trend that was in conflict with the economic and political integration of smaller ethnicities. Looking at this context, it is necessary to refer to the critical article "Does Albania have the exclusive economic space in the Otranto Straits", to understand the context of the factorization crisis of the Albanian state, is the issue of the location of the Economic Space Excavation in Otranto among the three states: Italy, Albania and Greece. This is an interesting issue from the point of view of the state's right, because during these years, who have been with a very politically charged for the right of renegotiation by the Albanian side, there is no talk at all, to differentiate the expression "Circumstances
33 - Myslym Pasha, Does Albania have the exclusive economic space in Otranto's narrow street, Panorama, and the same, December 6, 2018, p. 20 34 - Newspaper Shqip, IMF, Tirana 2011, p. 1 35 - (Noli Speech at the League of Nations, History of Albania 1912-2000, Tirana 2007, 439). 36 - Valentina Duka: History of Albania, The Founding Statute of the Albanian Kingdom, Tirana 2007, p. 37 - Kosovo, Old Serbia (Stara Serbia), Ethnographic and Statistical Studies, in response of Prof. Cvijic (Serbian), (Hilti Mosi, Kristo Floqi, Karl Gurakuqi): Summary Articles, Research, Tirana 2001. Lavdosh Ahmetaj (Mihal Gramenoja, Democratic Publicist, Publication of the Institute of Linguistics and Literature, Thanas Gjika, Tirana, 1980.
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of specific "clause of Article 15 of the Convention and the" Equality Principles ", it is rightly emphasized that through the notion of" special circumstances "and in this case the aim is to avoid the come as a result of the mechanical application of the Middle Line Method (Equidae). So basically, if such special circumstances are ascertained even in the delimitation of the Territorial Sea, it is necessary to apply the principle of Ekite. This is also confirmed by the international practice and jurisprudence38. While, on the other hand, Albania has the Exclusive Economic Space in Otranto and under the Montego Bayy Convention, so looking at the phenomenon we are dealing with through international acts and institutions "will not let it be threatened and unduly invaded. " While in most of the modern era the role of the catalyst nation was played by France, the French Revolution succeeded in moving and exemplified the nation-state concept, which spread over the next two centuries. But Napoleon, the ending of the revolutionary stage within France itself, became a propagator of new political concepts on the European continent, merging into one and the different ways and depending on the environments, the components of idealism, nationalism and the process of secularization. Thus, the state of France, as a driving force of history and changing others with the force of ideas it had set in motion, was made to become the first nation-state catalyst39. Not only that, but also the European peripheries managed to become sensitive to its radiant influence, an influence that prompted the pace and adaptation of rhetoric and French political and legal institutions. Thus, this new national (national) organization, which was based on the individual who officially used a single national language, became the compassion of the nation: Here in this context, I think that the national state was giving two golden principles in the service of a modern state: a. the sovereignty of the nation, which meant that it was only the nation that made decisions that would apply to everyone. b. the sovereignty of the law, was an expression of general will, based on Rousse's ideas40. So the new ideas formed a state of modern state, which means that the state had the possibility of an opposition, which came through independent intellectual politics and thinking. This phenomenon seems rational in the state of Germany, at the time of Bismarck's government, which tried to create an authoritarian state, drawing attention to the production of heavy industry. But this tendency contradicted the new ideas of intellectuals who warned of a serious danger: "Careful, gentlemen, beware that this country so far the homeland of arms and
38 - Arben Puto, On the Annals of English Diplomacy, Tirana 1978 39 - Arben Puto, Political Albania, Tirane 2008 40 - J. J. Russo: Social Contract, Tirana 2007, p. 67.
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mind, not to become the only homeland of the arms in the future41." See the Mind of the Monarchic State Forces, which managed to construct the Euroregion of the Armed Forces among the countries of Old Europe42. The example is clear. If we look at the point of view of doctrines, priority should be given to institutional relations, so that the natural state of the state is not diverted, which is about harmonizing the internal organization. So, in the context of ruthless global tendencies, freedom of information is given particular importance through functional institutions that "cement the state43" or make it possible to lift the right of manipulation and increase the individual's awareness. Crisis information means individual and controlling consciousness in decision-making; in essence, this has a meaning of interest, because organized freedom places society on the state and the state itself in the service of society. Referring to the political doctrines, their attention is focused on increasing the personality of the individual in relation to the state, at the same time indicating the means to be used: so Ruso and Montesky have a contradiction between them in the explanation of sovereignty, which are divided between them in explaining whether sovereignty should be delegated or not. So Ruso defends the view that sovereignty is not delegated and, in the service of this view, brings the example of English society, which he thinks is happy, but when the members of that society delegate sovereignty have lost their freedom and have become to slaves. But why did I set up Rusoin as an example? The reason is simple, because being in the state of a state in the face of global crises, special gravitation takes the emancipated individual and his relations with the state, as well as the global phenomena, which seem to create the image of ignoring the individual, but at a time when society has overlooked the functioning of public and private law, it restores its sovereignty and faces seemingly harsh phenomena, they begin and become more humane. This phenomenon becomes even more tangible in the Hobbes44 state's references: Leviathan, who focuses on natural law and hence analyzes the dispute and the solution of the contradictions between man and woman, which is resolved through the mechanism of natural law, which , according to him, suggests that there is no significant intellectual difference between them, and the solution seeks for the struggle between them, in which modern conditions interferes with the state of
41 - Karl Grimberg: World History, Tirana 2005, p. 145. 42 - Europe of the Year, The Balance of Forces. 43 - P. Kabo: Transitional Authoriarism, Tirana 2006, p. 408, "The change, State and Open Society". 44 - Hobbes, Leviathan, Tirane 2000 "Parathenie"
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Leviathan45, which according to Hobs gives rise to the right to intervene in problems economic, especially in crisis conditions46. So this is nothing more than a natural state47, which should preserve the functioning of the institutions and the relationships between them, because the growth of a non-natural institution would be catastrophic to the functioning of the state, disguising its physiognomy , but above all, would create misconceptions about forms of governance and society information would be problematic and would lose political and social integrity. This phenomenon indicates the conditions of competition in which the Albanian state and society are with European states and societies; In this view, I think that the risks should be considered sufficient for Albanian conditions, reflecting the emergence of a non- natural political system, devious, which has failed to realize the education in competitive methods through crises and challenges48. So on a socio-political plot that changes the system in which Albania operates, the transition is painful and tragic, because the social cost is high and weighs upon the soul and conscience of a man who has been taught with a system where everything was dictated and controlled and where the individual was enough to be persuasive and enter the state mechanisms and his personality was absorbed through state institutions. This creates a deficit for the elective individual who fails to understand what the force does politics for which he has voted. This is accompanied by the other: the reforms undertaken seem ineffective, they do not find the encouragement of the citizen because of the fact that they are numerous in numbers, sometimes they exclude each other because political forces do not take into account the reforms the other, going to exemptions, creating insecurity and inefficiency in political and social citizenship, in the fierce terrain of the global economy coupled with the psychological crisis of the national country, which has been put under competitive difficulties.
Bibliography
1. Roger E. Backhouse: History of Economic Theories: Albanian World, Tirana 2002.
45 - Hobbs: Leviathan, Tiranë 2000, p. 56 46 - Hobbes, wrote Leviathan in the conditions of a deep political, economic and moral crunch of English society. (L.A) 47 - Aristotle: Policy, Tirana 2003, p. 9. 48 - Rozenberg - Beldzell: How the West Was Rich, Tirana 1996.
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2. Terli Mings: Economics Study, University Book, Tirana, 1993. 3. Socio-economic development of Albanian territories and their regional and world integration, Union of Albanian Economists, Tirana 2000. 4. Ahmet Mançellari: International Trade. Theory and Politics, Publishing House, Tirana 2004. 5. Naucni Bilten (Scientific Bulletin), Centra Ekonomska Istrazivanja Ulcinj (Center for Economic Research, Ulcinj), February 2009. 6. Muço Ahmetaj: Market Fundamentalism or Human Face Business, Conflict Resolution Foundation, Tirana 2001. 7. VebiVelija: Between economy and politics, Aferdita, Tirana 2001. 8. Kristofor Ghan: Foreign Trade, Albinform, Tirana 1995. 9. Finance Institute - Kosovo: International Conference, Soros, Pristina 2009. 10. Ilia Kristo: International Bussines, Pegi, Tirana 2004. 11. Rudiger Dornbusch, Stanley Fischer: Macroeconomics, Dituria, Tirana 2000. 12. Lester A. Digman: Strategic Management, University of Nebraska 1995. 13. T.J.Fik: The Geography of Economic Development, University of Florida 1997. 14. University of Tirana, Faculty of Economics: International Conference (Economic and Social), Albanian Social-Economic Forum, Tirana 2008. Volume (I, II, III, IV). 15. Linda Smith and William Repair: Introduction to Ideas, Knowledge, Tirana, 1999. 16. Edward J. Elton, Martin J. Gruber, Stephen J. Broen, William N. Goetzmann: Modern Portfolio Theory And Investiment Analysis, John Willy, University of New York 2003.
279 ECONOMIC POLICY AND EU INTEGRATION Convergence in the Information and Communication Technology Industry (ICT-Industry) Matthias Paletta 49
Abstract This paper discusses the phenomenon of convergence and its implications particularly in the Information and Communication Technology Industry (ICT- industry) from a practical point of view. Although not limited to the ICT- industry, convergence is particularly relevant in this industry due to its the very dynamic development and environment. Digitalization (as major part of convergence) in general is affecting not only the ICT-industry, but effectively all industries with enormous impact on traditional business models, ways of working, international collaboration, processes, organizational structures etc. Convergence in the ICT-industry is not only driven by technological developments, such as the possibility to consume applications from the Internet due to immensely increased bandwidth (e.g. SaaS-models) or to connect all kinds of devices (e.g IoT). Even more it is driven by changes of business models demanding a certain technological development. Convergence scenarios have shown drastic disruptive “potential” in the past to turn complete traditional industry structures and the competitive landscape “upside down” and they will continue to do so. Research approach of this article is a summary of the theoretical foundation of convergence. In a second part practical examples of leading international ICT-companies are elaborated as case studies with a specific focus on their disruptive impact to the market.
49 Industrial Engineer/Dipl.-Wirtsch.-Ing. and PhD-student at Slovak University of Agriculture in Nitra – Faculty of Economics and Management, matthias.paletta,@gmx.de.
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Key words: Convergence, Information and Communication Technology Market, Information Technology (IT) Market, Disruptive Business Models, Software as a Service (SaaS), Cloud Computing, Telecommunication Industry, Triple Play, Quadruple Play
JEL classification: F62, O33
281 ECONOMIC POLICY AND EU INTEGRATION 1 Introduction
Convergence is a widely spread phenomenon especially in the ICT-industry. Reasons for this are very high market dynamics. Driving forces traditionally change very quickly in this industry due to especially rapid technological development, high degree of internationalization and high level of competition. This is becoming even more evident in the age of digitization. Also nowadays, digitization is affecting almost every industry, public institutions and public and private life in general. So, findings regarding convergence in the ICT-industry are most probably very interesting for all of theses areas, too. For the relevance of ICT and certain aspects of convergence in for example agriculture see Paletta, 2017.
Major goal of this article is to show the practical relevance of convergence in the ICT- industry, its appearance, dissemination process and impact alongside practical and specific real-life cases/examples. The first one being Triple/Quadruple Play in telecommunication, the second being Software as a Service (SaaS) as part of Cloud Computing in information technology. It will become obvious that both areas are strongly interlinked.
In a first part of this article terminological foundations will be outlined as well as some basic insights into the ICT-industry and the academic background of convergence. After having specified the research methodology it will be continued by describing and analysing the practical convergence examples Triple/Quadruple and Software as a Service (SaaS) as part of Cloud Computing. Finally, main findings will be summarized at the end.
282 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY 2 Background 2.1 The Information and Communication Technology (ICT) Industry
There is no generally agreed, “single” definition of the term “Information and Communication Technology” (ICT). Consequently, there is no such definition for the ICT-industry either. The reason is that the ICT-industry is widespread and constantly changing/developing especially in light of very dynamic technological environment (Samsonova, 2012) In addition, traditional boundaries of originally separated (sub-) industries (sometimes also referred to as “sectors” or “sub-sectors”) tend to blur. The sectors – at least partly – converge (Wendt, 2013, Hagenhoff, 2003) or http://www.telekom.com/company). This phenomenon is described in more detail below using the term “digital convergence” or just “convergence” in this paper. The digital convergence is not limited to the IT and TC sectors which are in the focus of this paper. Some publications investigate an even broader scope of the so-called TIME-industries (TIME = Telecommunication, IT, Media and Entertainment) (Wendt, 2013). A practical example for combined offerings in the IT, media and entertainment area is Deutsche Telekom’s offering “Entertain”, launched in 2006. Next to TV via Internet protocol (IPTV) it provides full video-on-demand and Internet services. Today Entertain is even also available mobile. Moreover, the ICT term is used in different ways depending on the context in which it is used, meaning that e.g. according to the subject of an investigation/analysis the boundaries of what is called “ICT” are defined differently. Following a definition of Krcmar, 2005 this thesis uses the term ICT as the sum of all (electronic) resources for storage, processing and communication including the way these resources are organized. Regarding an industry definition this thesis is basically using OECD’s ICT-industry definition. In 1998 the OECD member states agreed to define the ICT-industry “ … as a combination of manufacturing and services industries that capture, transmit and display data and information electronically.” (OECD, 2002).
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This verbal definition is rendered more precisely through assigning specific industrial activities to the ICT-industry. This assignment is based on an internationally accepted statistical classification of the industrial activities, which has been revised several times since 1998. To provide a rough picture: The worldwide ICT-market was estimated to be around 3,650bn USD with a yoy-growth of 3.9% and is expected to be 3,875bn USD in 2019 (2.8% growth) (Gartner, 2019).
2.2 Convergence in the ICT-Industry
In this paper convergence is only referred to in the context of the ICT-industry or in the broader context of technology markets.50 It does not refer to “convergence” in a mathematical sense, nor does it refer to the economic convergence theory, nor to any macroeconomic use of the term (e.g. convergence criteria of the EU). An explicit definition is provided in the following. Traditionally, technology markets are more affected by change than other industries and those changes can have a significant impact to the economical success of “technology companies” (Wendt, 2013, Gerpott, 2006). Next to pure technological changes/developments like for example increasing bandwidths51 both in the fixed-line and wireless area, increasing processor speed or increasing storage availability due to enormously decreasing prices per Megabyte the ICT-industry is significantly affected by the phenomenon of digital convergence mentioned briefly already in the previous section. According to Rockenhäuser digital convergence is the process of transformation and integration of technologies in the IT- and TC-industries leading to vanishing boundaries of formerly separated sectors/industries. The digital convergence leads to – or better: allows for – a convergence of functionalities that were formerly distinct products/services
50 The broader context is especially the so-called TIME-industries (telecommunication, IT, media and entertainment). For convergence in these industries see Wendt, 2013 or Kunkel, 2003. 51 The terms bitrate, speed and bandwidth are used synonymously in the paper.
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or only parts of them. As a result of this the boundaries of value chains and even sectors/industries are vanishing in the same way (Rockenhäuser, 1999). This definition clearly distinguishes between cause and effect. Cause is the technological change (the digital convergence) and effect is that functionality converges and ultimately traditional boundaries between industries more and more disappear (BITKOM, 2005/2006).52 Already in the late 1970s the Japanese NEC Corporation predicted the convergence of computers and communication and even reflected this expectation in its corporate vision (known as “C&C”). NEC’s convergence prediction was driven mainly from a technological perspective, especially in the semiconductor field. Another company envisioning convergence was Apple Inc. However, Apple’s view was less technical but more market-/customer-driven. In 1991 Apple’s chairman John Scully presented his view of converging markets (telecommunication, office equipment, computers, consumer electronics, media & publishing, info vendors custom publishing) by detecting products in their overlapping areas. Many of the products mentioned by Scully back in 1991 are well known commodities today, such as video conferencing, copier/printer/scanner/fax (today so-called multifunctional peripherals), 2-way TV (today also called interactive TV), virtual reality and interactive entertainment and education (the latter today well known as e.g. e-classrooms) (Yoffie, 1997). Especially the Apple example shows that the cause and effect relationship mentioned above (technological changes drive convergence of functionality and thus convergence of industries) can also be inverted in the following way: Customer needs/demands (even without customers knowing them yet!) “incentivize” industries to think about converged functionality delivered through a technical device that enables the merge of functionality. So, in addition to Rockenhäuser’s definition of digital convergence the author suggests to look at convergence so to say from “both directions”.
52 BITKOM defines the term „digital convergence“ as the convergence of sectors, value chains and services and thus reflects more to what Rockenhäuser sees as the outcome oft he digital convergence process.
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Technological convergence affects the value chains of companies or even complete industries or vice versa and has ultimately also an effect on the way we live and work. These interrelations are summarized in figure 1.
Figure 2: Convergence Phenomenon Source: own figure based upon Rockenhäuser, 1999)
In the following 2 important examples of convergence in the ICT-industry are described in more detail to make the said more explicit and to show the practical relevance of convergence specifically in the ICT-industry. The examples will show in an impressive way that convergence in the ICT-industry has to be seen as a multi-dimensional phenomenon, i.e. route-cause can originate from numerous areas such as technologies, competition, market demand, other industries, etc. Figuratively speaking, convergence can be affected from any circle in figure 1 and may continue in both directions – towards the inner circle (technology core) or outer circle (the was we live and work). Beyond these examples there is a lot of literature available dealing with convergence from all kinds of angles (e.g. convergence and its macroeconomic impact and/or impact on user’s behaviour (BITKOM, 2005/2006, Brosius & Früh, 2007), convergence of services
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(Günter, 2007), user device convergence for TV incl. interactive services (Sattler, 2007, Weber, 2007), technological convergence focus (Stobbe & Just, 2006), convergence in the media industry (Burmann & Nitschke, 2003, Würtenberger & Oetker, 2003, Wirtz, 2003 or convergence of “media politics” (Hofbauer, 2008).
3 Research Methodology
In order to investigate the practical relevance of convergence, its appearance, its progress and its implications in the ICT-industry 2 areas are examined. One is originating from the communications technology area being Triple/Quadruple Play – Convergence of mobile telephony, fixed-line telephony, broadband Internet and TV. The other originates more from the information technology area being Software as a Service (SaaS) as part of cloud computing – convergence of software, hardware and IT services. For both areas specific practical examples of convergence are investigated in detail, described and analysed with a specific focus on how the industry players are acting/re- acting, what implications convergence has to their traditional markets and how they eventually changed their business models.
Two areas of questions are in focus of the research: 1) How did convergence occur in the respective (sub-) markets/industries? Where did it come from (technology, market demand, competition)? Where is it supposed to further take place in the future? 2) What impact does convergence have for the market players in general and for specific examples in terms of threat, adaption/change effort, offering to their customers and future development.
287 ECONOMIC POLICY AND EU INTEGRATION 4 Research Findings 4.1 Triple/Quadruple Play
Figure 2 shows how the functionalities mobile and fixed-line telephony, broadband Internet and TV have grown together within the last decades in Germany.
Figure 3: Convergence in the telecommunication arena in Germany (source: own figure based upon BITKOM/Roland Berger, 2007, Freyberg, 2007, Hofbauer, 2008)
In each of the platform53 “silos” (fixed-line network, mobile network and cable network) the incumbent providers (dark grey area) have expanded their traditional offerings (“functionalities” in terms of the above mentioned definition of convergence) into the other incumbents core products and thus are now offering 3 or even 4 products instead of just one. This is why this phenomenon is also referred to as “triple or quadruple play”. 54
53 The term „platform“ is dealt with at the end of this example in more detail. 54 There is no uniform definition for the terms “double, triple and quadruple play”. The use of terms depends on the point of view of the author and is sometimes also used differently from country to country. All definitions have in common that a combination of 2, 3 or even 4 items of
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TV is no longer provided by cable companies only but also increasingly by incumbent telecommunication carriers. The example of Deutsche Telekom’s Entertain IPTV offering was already mentioned. Moreover, increasing bandwidths allow for watching TV via mobile, too.55 Broadband Internet services have been offered originally by the incumbent telecommunication carriers only because bandwidth in mobile telephony was not yet sufficient and cable networks have not been designed for internet traffic (nor for telephony). As the latter mentioned obstacles have disappeared due to technological developments, broadband Internet today is provided by cable and mobile carriers, too (Freyberg, 2007). Main driving force in the mobile area is the evolution of wireless bandwidth illustrated in figure 3. Coming from a bit rate of approx. 14.4 kbit/s in the early 1990s 4G networks are designed for bitrates of 100 Mbit/s (and today even more). 5G networks will provide speed beyond 500 Mbit/s. That means an increase in speed by a factor of approximately 35,000!
the quartet fixed-line telephony, mobile telephony, broadband internet access and TV is meant. For more information see Freyberg, 2007, Penava, 2007, Picot, 2007 or Hofbauer, 2008. 55 Debitel for example was the first German provider offering a “Broadcast-Mobile-TV-Offering” based on Digital Multimedia Broadcasting (DMB) in 2006.
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Figure 4: Evolution of wireless transmission technology (source: own figure based and expanded as per Hofbauer, 2008) 56
Fixed-line telephony originally was the domain of the telecommunication carriers. Today, due to the expanded technical capabilities of the cable networks (mainly having a feedback channel today) and VOIP technology voice services can be offered by cable carriers, too. Additionally, the fixed-line telephony is affected by the user’s communication behaviour substituting fixed-line telephony by mobile telephony (Freyberg, 2007). The resulting competition between especially the incumbent telecommunication carrier and cable companies but also alternative telecommunication providers (in Germany for example Arcor, Alice or Tele2) has led to significant price wars with according drastic price decreases (Freyberg, 2007).
56 Not all technical terms in this figure are explained in this paper as the required technical “deep-dive” would go too far. The figure is meant primarily to illustrate the massive technological progress over the last 20+ years. The same development has taken place in the fixed-line/broadband area.
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Last but not least, traditional mobile telephony next to the already existing fierce competition amongst mobile carriers is affected by alternative offerings like e.g. Scype or WhatsApp.. The effect in terms of competition might appear at first sight to be less significant than in the examples mentioned above as the according data traffic still may stay with the mobile carrier. However, WhatsApp for example with its roughly 600 million customers is seen as a main driver for SMS services nowadays being mostly part of flat rates offered by mobile carriers. Customers simply no longer accept to pay SMS- fees in light of WhatsApp. Increasing availability of Wireless Local Area Network (WLAN) offerings (e.g. WiFi, hotspots, etc.) has an impact on mobile carrier’s business, too. Technologically, WLAN, of course is also a form of wireless transmission. However, in many cases WLAN is offered by different carriers, for example fixed-line carriers or third parties. Fixed-mobile convergence finally, offers the possibility to use only one device (and one phone number) regardless of the used network. In a pure economical scenario the user gets additional rebates if he purchases fixed and mobile service from the same carrier then billed through just one invoice.
Summary Summarizing it can be said that the originally existing more or less “fixed” interrelation between content (voice, SMS, data, TV, multimedia, etc.) and transmission technology does no longer exist. As a consequence companies formerly acting in separated (sub-)markets are now direct competitors competing in a “war of platforms” (BITKOM/Roland Berger, 2007, Hofbauer, 2008).57 In fact, within the convergence process one of the probably most important aspects is what platform is going to be successful to become an industry-wide platform/standard. Next to architectural/technological aspects, the success of a platform is significantly affected by the ability of the platform provider to attract not only users but
57 The term platform can be defined as „... a foundation or base of common components around which a company might build a series of related products.“ (Cusumano, 2010).
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also developers, partners contributing value-adding products/features/functionalities to the platform or providing peripherals like printers, etc. and in some cases like Internet services providers or mobile platforms advertisers. This is “mission-critical” to leverage network effects driving a fast adoption of the platform (Consumano, 2010). The next example (Software as a Service – SaaS) will underline this point even more drastically.
4.2 Software as a Service (SaaS) as Part of Cloud Computing
In a very simplistic way SaaS can be defined as „Software deployed as a hosted service and accessed over the Internet“ (Chong, Carraro (2006), p. 2). The main difference to the traditional software business model is that instead of purely selling software (legally correct: a license) to a customer the operations and maintenance of the software is added to one single service – the SaaS. Traditionally, a customer buys a “piece of software” for which he then has to provide appropriate infrastructure, operations of the infrastructure and the software running on it (application operations), maintenance and support. Unless the latter components are in place the software is useless regarding the (business) function the software is supposed to support for the customer. Purchasing SaaS instead, the customer does no longer care about huge parts of the required infrastructure, etc. but ultimately just pays for a service (Benlian, Hess, Buxmann, 2010). The payment is usually a subscription based on some kind of metric, e.g. per user per month (Bandulet et al., 2010). The “predecessor” of SaaS was the so-called Application Service Provisioning (ASP) in the 1990s (Consumano, 2010). However, ASP failed to succeed because the technological development was not yet mature enough especially in terms of bandwidths, virtualization and multi-tenant software architectures. Increased maturity of these components is the technological foundation of the success of SaaS (Benlian, Hess, Buxmann, 2010).
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SaaS is to be understood as part of the broader concept of cloud computing. There is no generally accepted definition of cloud computing, often referred to also simply as “cloud”. Generally, cloud computing is a collection of applications, services and resources (e.g. hardware, network, basic services) that can be consumed flexibly and scalable via the Internet. Structurally, cloud computing can be divided into the three layers Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS), building on top of each other (SaaS building on PaaS building on IaaS) (see figure 4). IaaS is the provisioning of infrastructure resources such as processor power, storage and network capacity flexibly and at scale. Main characteristic is that the customer owns and manages all operating systems and applications run on the IaaS. The customer is fully responsible for his applications and also for the correct sizing of the infrastructure. PaaS (on top of IaaS) provides a programming and development platform to develop and run cloud applications. PaaS providers should automatically provide all required resources such as computing power, memory, network, middleware e.g. message queuing or load balancing and databases when the application is deployed and scale them according to the requirements. In addition, built-in monitoring functions are expected, with which the runtime behaviour of the applications can be monitored. SaaS represents the top layer in the cloud model. A SaaS provider offers his own applications to users. In this SaaS differs from the precursor ASP (Application Service Provider), in which the service providers offered applications from other manufacturers for rent. These were mostly not multi- tenant, while support for several clients at SaaS is the common (Repschläger et al.. 2010), Kurz, 2008, BITOKOM, 2009 and Computerwoche, 2015).
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Figure 5: Principle layers of Cloud Computing (source: own figure as per Deutsche Bank Research, 2012).
Regarding its accessibility cloud computing is further distinguished into public, private and hybrid cloud models (see Figure 5). Public clouds are available for everyone in most cases via the Internet whereas private clouds are exclusively dedicated within the boundaries of for example a company.58 Hybrid models combine both types in order to e.g. keep mission critical or sensitive processes/data within the boundaries of the own organization (for a brief „non-technical“ overview see e.g. Deutsche Bank Research, 2012). Similarly to mobility cloud computing has to be seen in the context of digital convergence. In a similar way Platform- and Infrastructure-as-a-Service (PaaS, IaaS) can be understood as examples for digital convergence.
58 Private clouds can be further distinguished into dedicated and virtual private clouds. Dedicated private clouds are built with dedicated resources for a specific customer, whereas virtual private clouds use shared resources with enterprise characteristics like availability, performance, AMM, SLAs and additional security and also compliance functions. For more details see for example EITO, 2014.
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Figure 6: Public, Private and Hybrid Cloud – schematic (source: Deutsche Bank Research, 2012, translated by the author).
Like mobility cloud computing is on CIOs’ and business agendas of companies since at least 5-8 years already (e.g. Ovum, 2014a). Nonetheless, cloud remains a key trend in the industry. However, the first “hype” including its unrealistic promises (such as 80% cost savings in IT-energy consumption or cloud being the “all-singing, all-dancing conveyor” to all IT problems) (Deutsche Bank Research, 2012, EITO, 2014) is over and the overwhelmingly majority of European companies is paying attention to cloud in a very pragmatic way. They want to see individual use cases and understand what specific benefits they are able to earn. That ranges from “absolute beginners” still educating themselves, via “the advanced” testing specific workloads within the cloud or even having concrete implementation plans up to “professional users” already working within a cloud model. Two thirds of Western European companies use at least one public cloud offering such as email or unified communications. Many companies have come much further already consuming e.g. CRM or accounting solutions out of the cloud or purchasing computing power and storage (EITO, 2014). Some serious concerns, though remain for many companies especially regarding public clouds. One is trusting mission-critical processes (incl. their data) to the cloud. Another
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one is around security, data location and data privacy.59 And, last but not least there remain to be tremendous doubts regarding availability and performance of public cloud solutions (EITO 2014). Thus, many organizations in Europe prefer private cloud models with dedicated resources or hybrid ones where they can put less sensitive workloads into a public cloud while keeping mission-critical processes including their data in a “fenced-environment”/private cloud (EITO, 2014, Ovum, 2014b, Ovum, 2014c and Ovum, 2014d).
Technically and also with regards to market segments, SaaS can be seen as the convergence of software, hosting services (running the software on an appropriate infrastructure), related IT services incl. network resources and bandwidth in order to be consumed over the Internet. Figure 6 provides a practical example how major worldwide leading companies expanded their traditional territory. Although, mirroring the status quite a while back (2010) it impressively shows and explains these tendencies. Later on the convergence impact and its latest status for one specific example in detail will be shown. For now, the underlying drivers and effects, competition and reactions will be discussed alongside figure 6.
Figure 7: Players in the converging IT arena (source: Anding, 2010)
59 The „NSA-scandal“ from 2013 has “contributed” a lot to these concerns.
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The areas of expansion of big market players like Oracle and SAP (dotted lines in Figure 6) show in a very impressive way what impact the SaaS business model and cloud computing overall has on the competitive landscape of nearly the whole industry. The complete IT value chain is affected. SAP for example expands its traditional core competence area ERP software plus related consulting and systems integration services into what is called “integrated services” in Figure 6 being nothing else but SaaS. To be able to do so SAP enters the hardware area as well. In this regard the figure is not hitting the point exactly. Being able to provide SaaS services does not mean to merely “have” hardware. It means much more. It means for SAP next to designing software in a way that enables highly efficient usage of hardware (e.g. the already mentioned multi-tenant architecture) to build a core competence in running infrastructure extremely efficiently, too (e.g. virtualization incl. load balancing). For a detailed description of SaaS maturity stages see for example Chong, Carraro, 2006. Even more important is the question how SAP in this example is developing its SaaS offering on a platform which has the potential to become an industry standard. As in the previous example one of the key questions is to which extent the SaaS players will be able to establish their platform – one might also use the term “ecosystem” – as an industry-wide de-facto standard (Consumano, 2010). Here we see exactly the same key driver and success factor as mentioned in the telecommunication example above. The mentioned “war of platforms” is taking place in numerous areas. By entering the SaaS space SAP (more or less directly) becomes a competitor of IT operations service providers like EDS (now DXC), IBM Global Services or T-Systems (far left in Figure 6 “ITO”). Today, these service providers run huge SAP installations for their big customers in a traditional way. It is obvious that their application operations business is potentially going to be hit hard by SaaS.
By offering their products as SaaS traditional software vendors are becoming their own competitors, too (Anding, 2010), Cusumano, 2010). Within traditional delivery models two thirds of software companies’ revenues are coming from maintenance/support and
297 ECONOMIC POLICY AND EU INTEGRATION updates for which in a SaaS model usually the customer does not pay at all. Of course, this might hit their profitability and they have to manage this conflict carefully (Consumano, 2010). However, obviously the traditional big software vendors like SAP or Microsoft see a major strategic advantage in entering the SaaS space. Otherwise, they wouldn’t invest billions into this. And, if they don’t enter the SaaS arena others like the big Internet players might become serious competitors. WebEx and Salesforce have built their businesses upon a SaaS model directly and thus are not carrying any of the legacy mentioned above like Oracle, SAP or Microsoft.
Next to the described change of the competitive landscape shown in Figure 6 there is an additional factor to be mentioned. Delivering software as a service leads to significant economies of scale compared to the traditional delivery model. The reason is e.g. more efficient use of required hardware in an environment that serves thousands of customers rather than just one or a few. In addition, customizability of SaaS solutions increases their reach in the market place as the ability to meet the requirements of a larger customer groups increases as well. This phenomenon is typically referred to as “catching the long tail”. Demand for products like software (or SaaS) typically follow a power law distribution depicted in Figure 7. (Chong, Carraro, 2006).
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Figure 8: Revenue per customer in relation to the number of customers
Efficient SaaS models allow for shifting the price point for the service on the price curve in Figure 7 to the right. Thus markets can be addressed which before could not be reached as the requirements of this segment originally have been to specific to be affordable for the customers in a traditional software/solution delivery model (Chong, Carraro, 2006).
Between 2010 and 2013 the worldwide SaaS market grew from 10.75bn USD to nearly 20bn USD (CAGR: 22.6%!) and was expected to grow by further 18% annually until 2016 to then around 33bn USD (Statista, 2014). This is even more remarkable as the worldwide IT market grew only in the low to medium single digit percentage area between 2010 and 2013 (EITO, 2014).
Some authors predicted SaaS to have a similar disruptive impact on the I(C)T-industry as the switching of companies from producing their own electricity to taking it from utilities had on the production industry a hundred years ago (Benlian, Hess, Buxmann, 2010).
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Bandulet et al (2010) have identified SaaS to have all necessary characteristics of a “disruptive technology”. What the ICT-market is experiencing since these predictions is proving them as completely right. Today, it is undisputable that SaaS/Cloud is no more “one of many” new technologies but widespread reality (for example EITO, 2016). As per Gartner the worldwide SaaS market is expected to reach 117bn USD by 2021. So, since 2010 an annual average growth rate of 24.2 %! To put this into context: The worldwide ICT- market, in contrast has grown in this decade in the range of 1.8% p.a. (2015/16) to 6.6% (2012/13) (Gartner, 2016, EITO, 2014 and EITO, 2016).
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To underline the enormous impact of convergence in practice even more, the business transformation of SAP in the last 10-15 years is described in the following with specific regards to SaaS and the latest developments. As outlined above already, changing a traditional software business model into SaaS is an enormous challenge as major revenue streams are affected – licence, maintenance and service revenue. Without exaggeration one can compare such endeavour with an open-heart surgery or self-cannibalisation. SAP is one of the largest IT-players in the world with revenues of 24.7 bn €, more than 96,000 employees serving 425,000 customers in 180 countries on nearly every continent in 2018 (SAP, 2019-1). For more information on the evolution on the cloud business at SAP see SAP (2007- 2018). SAP started its SaaS/cloud journey in the second half of the first decade of this century. Originally, one motivation was to provide an easier access to SAP’s core enterprise resource planning (ERP) functionality to small (<100 employees) and midsized businesses 100-500 employees). As traditional SAP introductions are pretty complex, time-consuming and thus expensive SAP was for a long-time somewhat limited to large enterprises (>2,500 employees) that could afford and benefit from massive implementations. In order to address the midmarket (in Germany called “Mittelstand”) SAP introduced more standardized products to be used in an (more) out-of-the-box style. The idea was to provide software “from the socket”. First step – however not yet SaaS - was SAP Business One specifically designed to the needs of small businesses (<100 employees) – introduced in 2002. Business One emerged out of the acquisition of the Israeli software company TopManage (Israel’s Business Arena, 2002). 2007 SAP introduced SAP Business ByDesign as a pure SaaS product/service and the first SaaS-/Cloud-ERP product of SAP (SAP, 2017) and Schauß, Krzyzak, 2007). Until 2017 SAP Business ByDesign was implemented over 4,000 times. However, the start into this new business model was difficult and real improvement was very much un-linear. In fact, business is picking up significantly only from 2015 onwards. In the early years there were strong concerns from the customer side especially regarding security. However, this
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was not a product-specific concern but a widely spread concern towards Internet/cloud usage in general. Moreover, customers feared not to be able to adjust the ERP software to their specific needs and thus losing their competitive advantage. Last but not least international availability was a question (Schmitz, 2017 and SAP, 2015-2017). Despite all scepticism SAP continued to invest heavily into the SaaS/cloud business not only through own developments but also by acquiring pure cloud players. Since 2010 most prominent examples are: SuccessFactors (December 2011), Ariba (October 2012), Ticket-Web (February 2013), Hybris (May 2013), Fieldglass (March 2014), Concur (September 2014) and Callidius (January 2018) covering numerous functional areas such as HR, procurement, reporting, management information, Analytics/Big Data, IoT, travel management, CRM, B2B ecommerce and many more (SAP, 2010- 2018). A major milestone for SAP was to introduce its own cloud platform in 2012 named SAP NetWeaver Cloud (SAP, 2012). This platform was not only allowing for integrating SAP services but also established a “SAP ecosystem” providing the possibility to build new cloud-based solutions for any third-party provider (may it be an IT-service provider or even a customer). In 2017 SAP presented the latest version of its cloud platform – now named SAP Cloud Platform – containing new developments and enhancements. In the same year SAP and Apple announced a partnership regarding the common development of an iOS Software Development Kit on the basis of SAP’s cloud platform to enable the development of iOS-Apps directly on the SAP cloud platform (SAP, 2017). Obviously, this is a step to expand the ecosystem around SAP’s products in the mobile world as especially the mobile integration and the extension of core enterprise applications to mobility is increasingly important. Figure 8 provides a picture of SAP’s transformation path within the next 3-5 years with regards to their main products incl. acquired cloud applications in the past.
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Figure 9: Migration path to SAP Cloud
The figure is to be red from left to right time-wise in principle, there is not “linear” correlation but a principal direction. The bottom part of the figure shows main parts of SAP’s infrastructure development. Traditionally customers run their SAP systems either on own or third party infrastructure. In most cases this has been and still is dedicated infrastructure – so in the proper meaning not IaaS. In parallel to its HANA database development SAP started to offer an own IaaS which can even be combined with traditionally established SAP core systems, SAP’s own cloud products and Line-of-Business (LoB) applications that have been added to the SAP ecosystem (see upper part of figure 8). Moreover, customers have the flexibility to run SAP applications on public cloud offerings such as Microsoft Azure or Amazon Web Services, too. This flexibility is centrally enabled by the SAP Cloud Platform Integration functionality on the PaaS layer. Figure 8 shows that SAP intends to migrate both traditional and all cloud applications onto its SAP Cloud Platform. This is supported by the fact that service for classical ERP suites will end by 2025 while, at the same time SAP
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is offering the possibility to integrate with services from the SAP Cloud Platform already (SAP, 2019-2). Next to the already mentioned cloud applications the SAP Cloud Platform itself provides centrally analytics functionalities and a broad variety of 3rd party applications which constantly grow in main areas such as machine learning, big data/analytics, IoT, artificial intelligence and blockchain.
Summary SAP is an outstanding example for a successful change of the complete business model from a traditional software provider to a fully cloud-based company it will be in the future. Obviously, this is not only covering the SaaS component being in focus of this chapter but including all dimensions of cloud computing. So, this example underlines practically what has been stated above with regards to the description of convergence in general. Convergence can be driven from multiple angles – technology, business model, market demands, competition, etc. – and in practice this is actually happening simultaneously. This makes it so difficult to master such process for especially well established players carrying a lot of “legacy” and having many things to change in their product portfolio, their organization, their processes and their personnel (namely skills and mind set). It is obvious that such endeavour carries a lot of risk. Nonetheless, SAP was able to master this challenge very successfully. SAP stock price grew from around 35 Euro beginning of 2010 to around 87 Euro beginning of 2019. That equals an average compound growth rate of 10.6%. During the same period German DAX performed at 6.6% (ca. 10,600 points beginning of 2019 compared to ca. 5,960 points beginning of 2010) and German TecDAX at 12.3% (respective values were ca. 2,450 points and ca. 860 points) (see for example https://www.finanzen.net).
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Regarding the two major areas of questions it can be stated: First area of questions 1) How did convergence occur in the respective (sub-) markets/industries? Where did it come from (technology, market demand, competition)? Where is it supposed to further take place in the future?
In both cases – Triple/Quadruple Play and SaaS as Part of Cloud Computing – convergence was mainly initiated by technological developments allowing the players to introduce new/expanded offerings, e.g. IPTV provided by traditional fixed-line carriers in telecommunications and Software to be consumed over the Internet. This allowed the “actors” to expand their revenue streams and vice versa threatened the incumbents in their traditional business. As technology allowed for and to defend their territory the latter reacted by entering the others’ markets, too. One major difference between the two examples is the occurrence of new entrants being much higher in IT than in TC. The IT market was very much influenced by pure SaaS players such as Salesforce, Webex, SuccessFactors, etc. The reason for this is to be seen in two facts. Firstly, entrance barriers in the telecommunication market are much higher due to needed infrastructure (network!) compared to “just” developing software. Secondly, entering into the SaaS space for a traditional software company was and still is much more “complicated” due to cannibalizing effects. For both areas the future development will remain to be very dynamic and characterized by fierce competition. Especially SaaS as part of cloud computing will play a huge role beyond the industry boundaries in the age of digitization. Second area of questions 2) What impact does convergence have for the market players in general and for specific examples in terms of threat, adaption/change effort, offering to their customers and future development.
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Convergence has impacted the ICT industry significantly over the last decades and will continue to do so. Technical development suggested and will further suggest innovative business opportunities for new market entrants. These will continue to threaten/challenge the incumbents seriously. As mentioned above already, digitization as a phenomenon across all industry, public institutions and also private live is leading to a vast effect in many other areas beyond ICT as well. Incumbents on the other hand side are very much forced to continuously re-think and adjust their business model, innovate new technologies and constantly change. Especially in SaaS this is a very difficult and also risky endeavour as the SAP example shows.
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Kunkel, Clemens L. (2003): Der Dienst im Kern des Konvergenzprozesses; Berlin 2003. Kurz, Jörg (2008): Cloud Computing – IT in der Wolke; in: Netzwoche 17 (2008). OECD Publishing (2002): Measuring the Information Economy; Paris 2002. Ovum (2014): 2015 Trends to Watch: Enterprise Mobility – Moving from mobile connectivity and applications to mobile workspace; publication date: 14 November 2014; Ovum (2014a): 2015 Trends to Watch: Cloud Computing – New twists for a global phenomenon; publication date: 6 November 2014. Ovum (2014b): 2014 Trends to Watch: Cloud Computing; February 2014. Ovum (2014c): 2014 Trends to Watch: From Private to Hybrid Clouds; March 2014. Ovum (2014d): 2014 Trends to Watch: Public Clouds, March 2014. Paletta, Matthias (2017): Information and Communication Technology (ICT) in Agriculture; in: Academic Association of Management and Administration „Acta Avada“, Mokslo darbai, No. 4, 2017, Vilnius 2017. Penava, Damir (2007): Triple Play – Konvergenz der Kommunikationsnetze – Technik, Anbieter, Märkte; Saarbrücken 2007. Picot, Arnold (2007): Begrüßungsrede Konferenz „Triple Play“; in Picot, Arnold; Bereczky, Andreas; Freyberg, Axel (Eds.) (2007): Triple Play – Fernsehen, Telefonie und Internet wachsen zusammen; p. 2-8; Berlin, Heidelberg 2007. Repschläger, Jonas; Pannicke, Danny; Zarnekow, Rüdiger (2010): Cloud Computing: Definitionen, Geschäftsmodelle und Entwicklugnspotenziale; in: HMD Praxis der Wirtschaftsinformatik, Volume 4, Issue 5, p. 6-15; Berlin 2010. Rockenhäuser, Jörg (1999): Digitaler Konvergenz und Kompetenzmanagement; Wiesbaden 1999. Samsonova, Tatjana (2012): Industrial Research Performance Management – Key Performance Indicators in the ICT-industry; Berlin, Heidelberg 2012. SAP (2007): SAP-Geschäftsbericht 2007 Innovation nach Mass, Walldorf 2007. SAP (2008): SAP-Geschäftsbericht 2008; Walldorf 2008. SAP (2009): Klarheit fördert Innovation Geschäftsbericht 2009; Walldorf 2009. SAP (2010): Mehr erreichen Geschäftsbericht 2010; Walldorf 2010. SAP (2011): Geschäftsbericht 2011 Das Leben von Menschen verbessern; Walldorf 2011.
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SAP (2012): Geschäftsbericht 2011 Nachhaltig mehr erreichen; Walldorf 2012. SAP (2013): Geschäftsbericht 2013; Walldorf 2013. SAP (2014): Geschäftsbericht 2014 Run simple; Walldorf 2014. SAP (2015): Geschäftsbericht 2015 Reimagine your Business; Walldorf 2015. SAP (2016): Wertsteigerung durch Innovation SAP Integrierter Bericht 2016; Walldorf 2016. SAP (2017): Integrierter Bericht der SAP 2017 Intelligente Unternehmen; Walldorf 2017. SAP (2018): Halbjahresbericht 2018; Walldorf 2018. SAP (2019-1): Investor Relations Fact Sheet – Januar 2019; last Internet retrieval 30.1.2019: https://www.sap.com/corporate/de/investors/capital-market-story.html#pdf- asset=f6a26d20-387d-0010-87a3-c30de2ffd8ff&page=2 SAP (2019-2): SAP Maintenance & SAP Enterprise Support - Prolonged Commitments until 2025; official SAP statement regarding maintenance of SAP systems; last Internet retrieval 11.2.209: https://support.sap.com/en/offerings-programs/strategy.html#section_1610563356 Sattler, Claus (2007): Fernsehempfang auf dem Handy: Basis für neue mobile interaktive Dienste; in Picot, Arnold; Bereczky, Andreas; Freyberg, Axel (Eds.) (2007): Triple Play – Fernsehen, Telefonie und Internet wachsen zusammen; p. 152-163; Berlin, Heidelberg 2007. Schauß, Christian; Krzyzak, Daniel (2007): SAP Business ByDesign: Erste Einschätzung einer SaaS-Lösung; INTARGIA Managementberatung GmbH, Dreieich 2012. Schmitz, Andreas (2017): 9 Mythen über SAP Business ByDesign; official SAP Internet site; last Internet retrieval 30.1.2019: https://news.sap.com/germany/2017/08/9-mythen- sap-business-bydesign/ Statista (2014): Umsatz mit Software-as-a-Service (SaaS) weltweit von 2010 bis 2016 (in Mrd. USD); http://de.statista.com/statistik/daten/studie/194117/umfrage/umsatz-mit-software-as-a- service-weltweit-seit-2010/ ; last internet retrieval : 18.10.2016. Stobbe, Antje; Just, Tobias (2006): IT, Telekom & Neue Medien: Am Beginn der technologischen Konvergenz, Frankfurt 2006.
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Weber, Michael (2007): Interaktives TV – Konvergente Geschäftsmodelle für TV und TK – Kriterien für erfolgreiche interaktive Geschäftsmodelle; in Picot, Arnold; Bereczky, Andreas; Freyberg, Axel (Eds.) (2007): Triple Play – Fernsehen, Telefonie und Internet wachsen zusammen; p. 163-179; Berlin, Heidelberg 2007. Wendt, Susanne (2013): Strategisches Portfolio-Management in dynamischen Technologiemärkten – Entwicklung einer Portfoliomanagement Konzeption für TIME- Unternehmen; in: Becker, Wolfgang; Weber, Jürgen (Eds.): Unternehmensführung & Controlling; Wiesbaden 2013. Wirtz, Bernd W. (2003): Integration und Konvergenz im Medien und Multimediabereich; in: Wirtz, Bernd W. (Ed.): Handbuch Medien- und Multimediamanagement; p. 705-724; Wiesbaden 2003. Würtenberger, Peter; Oetker, Marie (2003): Die multimediale Erweiterung von Printmarken und daraus folgende neue Wertschöpfungssteigerungen; in: Wirtz, Bernd W. (Ed.): Handbuch Medien- und Multimediamanagement; p. 249-263; Wiesbaden 2003. Yoffie, David B. (1997): Chess and Competing in the Age of Digital Convergence. In: Yoffie, D.B. (Eds.): Competing in the age of digital convergence; Boston, Massachusetts 1997.
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9th International Scientific Conference of Business Faculty
“Economic Policy and EU Integration”
3-4 May 2019 Durres, Albania
Stochastic aspects in credit management
Mauro Bisceglia1* 1Department of Economics and Finance, University of Bari Aldo Moro, Bari, Italy
Abstract The aim of this work is to provide some observations and implications on how the problem of credit analysis and management can be addressed, in the dynamics of the management of a credit institution, contextualized in its field of Territorial jurisdiction. In particular, we want to pay attention to the management of credit dynamics, in view of the expectations of the delivery of the same by those who request it, with the predominant aspect of their relative utility functions. It is therefore taken into account the various random variables utility, which determine the field of observation, and the management of these variables’ utilities, using the distributions of probability, and consequently of the density functions which measure precisely the Density of the degree of satisfaction of users of the credit service offered by lenders. In the structure of the different types of credit transactions present on the market in relation to the different characteristics of the subjects under consideration in addition to the amount of the financing themselves, it is possible to measure the expected utilities and to orient the Management of the credit offer in order to achieve predetermined objectives, related to the business activity of credit institutions and in respect of territorial development. A decisive role, in this game of combinations, is given by the stochastic aspect of the problem, which considers the expected usefulness in combination between the allocation of risk and expected return, in view of their uncertain appearance. The work lays the foundations for considerations and suggestions in a sector of primary importance for economic and territorial development and therefore for a full European integration.
© 2019 The Author.
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Keywords:expectedutility;Investmentdecisions;Riskaversion;Utilityfunction;Expectedyields;
JEL Classification:E43, G12, G21, G32
∗Corresponding author, Professor in mathematical methods of economics and of actuarial and financial sciences; tel. + 39-080-5049168, Email:[email protected]
1 Preliminary observations The search for a measure that allows to evaluate quantities in the stochastic field, where criteria used in certain areas, such as the expected value and consequently the criterion of the expected gain valor, do not hold up, leads to a Afterthought also of the certain quantities. Think of the theory of decreasing marginal utility of the currency, where in homogeneous increments, they do not correspond homogeneous increments of value. It is considered useful to introduce, therefore, the principle that individuals do not evaluate the financial magnitudes according to their amount, but according to the level of usefulness, which they in a completely subjective way, attribute to their possession.1 According to this approach, each Individual will assign to certain quantities a "value" that measures the degree of desirability at that time; This value is a real number that can coincide with the amount of the magnitude, but determined on a wholly subjective basis, therefore the utility functions enter into play.2 In general, we can define a function of usefulness of a given individual, the following Real function: : : ()∈→∈∀⇔→ RxuRxuRRu [1.1] This function associates with each determination of a random variable the "value" or the "usefulness" that the subject attaches to its possession; and it makes sense to think of increasing utility functions, continuous and at least, several times derivable. You should also consider utility functions defined as less than a growing linear transformation, which is assigned a generic utility function: : ()∈→∈∀ RxuRxu This can be replaced by the function: ∗ ()()+= xhukxu , con h > 0 [1.2] Without altering its significance, in the presence of a useful linear transformation, this in order to be able to easily normalize the function itself.
1 Roberts, F. S. (1979). Measurement Theory with Applications to Decision making, Utility, and the Social Sciences 2 Kreps, D. M. (1990). A Course in Microeconomic Theory
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This is equivalent to saying that anyway assigned a utility function ∗ ()()+= βα xuxu You have: u()0 α −= ∗ u () = 00 ()()− uu 01 ⇔ ∗ = 1 u () 11 β = ()()− uu 01 In literature there are several functions of utility, we pause, in order to have an idea about their potential use, on some of these, or on: Linear utility function () = xxu ; a Quadratic utility function () xxu −= x 2 , with a > 0 ; 2 Logarithmic utility function () = log xxu ; Function of exponential utility () 1−= exu −ax , with a > 0 . For the purposes of a useful application of the same, some of their main properties are observed; as for concern the first function, this is the identity function and you should consider the following restriction, as it would not make sense to consider it for negative elements, that is: xu ∈∀ [[,0: +∞ () xxu ∈=→ [[,0 +∞ Therefore ascending, concave and convex, not limited, but endowed with a minimum, and its normalised to less than a linear transformation, is: u()0 1 ∗ () βα =+= ()xuxxu in that α −= = 0 and β = = 1 so it ()()− uu 01 ()()− uu 01 turns out: u ∗ () = 00 u() =⋅ 001 = ∗ u () = 11 u() =⋅ 111 a Regarding the second function, () xxu −= x 2 , it is noted that u() = 00 and that 2 a ′()xu −= 21 x , therefore 2 1 ′()xu 010 xax ≤⇔≥−⇔≥ So, in order to be able to consider the increasing a function, its set of definition will be a closed and limited interval, with its advantages, for all that this implies, and also being 2 11 a 111 u −= ⇔ u = we can therefore affirm that aa 2 a 2aa
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1 a 2 1 xu ∈∀ ,0: () xxu x ∈−=→ ,0 . a 2 2a ∂ Therefore, positive, limited and concave as it ′() −= axu and of course with the ∂x parameter a that best suits the function to the subject that uses it. Its normalized to less than a growing linear transformation, it results: u()0 ∗ ()()+= βα xuxu in that α −= = 0 , u() = 00 , and ()()− uu 01 1 1 2 2 − a β = β =⇔ = in that u()1 = for which: ()()− uu 01 a 2 − a 1− 2 2 2 2 ∗ u() = 00 u() = 00 u () = 00 2 − a 2 − a = = u ∗ () = 11 2 2 a u() = 11 1− = 1 2 − a 2 − a 2 While the third function () = log xxu , which by its nature is applicable without restriction, is: xu ∈∀ ][,0: +∞ () log ∈=→ Rxxu 1 growing in its definition set as it ′()xu = is always positive, and concave, being x ∂ 1 ′()xu −= not limited and is the exception for its normalization. ∂x x 2 Finally, for the fourth function () 1−= exu −ax being () eu −ax =−= 010 , and ∂ a resulting ′()xu = ()1 −ax =− −ax ⇔ ′()xuaee ⇔= ′()xu > 0 in his domain, ∂x e ax therefore ascending and even concave in which ∂ ∂ ∂ ′()xu = −ax = aae −ax 2 −ax ⇔−= ′′()xueae < 0. ∂x ∂x ∂x 1 Moreover, it is noted that, being lim ()1 e −ax lim 1−=− = 1we can say that x +∞→ x +∞→ e ax xu ∈∀ [[,0: +∞ () exu −ax ∈−=→ [[1,01 , And its normalized to less than a growing linear transformation, it turns out:
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u()0 ∗ ()()+= βα xuxu thus α −= = 0 in that u() = 00 and ()()− uu 01 1 1 1 e a e a −1 β = β =⇔ = = in that u()1 = it results: ()()− uu 01 1− e −a 1 e a −1 e a 1− e a e a ∗ u() = 00 u () = 00 e a −1 = u ∗ () = 11 e a e a −1 = 1 e a −1 e a
2 The random variable utility If therefore the principle that a subject measures every magnitude by its utility function, with regard to stochastic quantities, in the eyes of the subject which evaluates them by its utility function, uncertain remains even his expected utility3. Therefore, in reference to a utility function, : ()∈→∈∀ RxuRxu in the presence of a generic random variable = { (ii )()∈∀ {,...,2,1,, nixpxX }}, The usefulness of its possession will then be measured by a random variable utility of the same type, and which we'll denote it with:
( )= { ( ) (ii )()∈∀ {,...,2,1,, nixpxuXU }} [2.1] Consequently, for the purposes of an evaluation it is advisable to speak of the expected value of the random variable utility, which we will indicate with []Xu and that consists precisely in the expected value of the new random variable utility, that is [][]() = XuXUE , for which we will have, in the case of a variable consisting of a finite number of determinations, that its expected usefulness, will result: n [] = ( )()= ∑ ( ) (xpxuXUEXu ii ) [2.2] i=1 While in continuous, by using its function density, it will result +∞ = = . [] ( )()∫ ( )X ( )dxxfxuXUEXu [2.3] ∞− In this way we have reached the determination of a random magnitude, as a certain magnitude, through the value of the expected utility; Although another important consideration must be made, concerning that number c ∈ Rx such that, you have
()c = []Xuxu , it is therefore apparent that the utility assigned to xc is exactly the
3 Kreps, D. M. (1988). Notes on the Theory of Choice. Westview Press
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same as the expected utility of the new utility variable, and then the value assigned
to xc , represents the certain equivalent of the random variable X, relative to the utility function assigned = ()xuu , and then its possession assures the same level of satisfaction as that given by the possession of the variable X. It is also interesting to dwell on the following equality [] = (XEuXu )(), which is true, if and only if, the underlying utility function is of a linear type, of the type () += βα xxu , because, in fact, it is: n n []Xu ∑( += βα ()()xpxu ii ) += βα ∑ ()()xpxu ii [2.4] i=1 i=1 or: [] βα ( )=+= (XEuXEXu )() [2.5] It is therefore clear, that in the case of nonlinear function, the attitude of the subject changes, whether adverse, or inclined, at risk; And the delta that is created, []− (XEuXu )() , will depend on how strong the attitude of the subject represented precisely the underlying utility function.
3 Risk allocation and utility function One of the main problems in the decision-making decisions of management, in particular of a banking company, is that of lending, where the risk allocation is a first-level component. Therefore, it is well understood that an effective allocation of the same, entails an increase of the probability of success of the underlying activity, and of course if it improves the results in terms of expected yields4. In this regard it is interesting to take account of the different characteristics which the subjects towards which to direct the granting of the credit, present; therefore,
observing a sample of subjects, if we indicate with θ j ∈∀ {},...,2,1, nj the j-th
characteristic of the j-th subject, and withθ j Θ∈ , its cumulative distribution function of such characteristics, results:
: θ () =→∈∀ ∑ pxHRxH ()θ j [3.1] θ j ≤x
The characteristicsθ j influence the preferences of the financed subjects, we can express them by the utility function ()wu ,θ [3.2] Where w is the variable expressing the amount of credit the debtors receive to enter the bank's investment project; and let's assume that the utility function, both
4 Roberts, F. S. (1979). Measurement Theory with Applications to Decision making, Utility, and the Social Sciences.
317 ECONOMIC POLICY AND EU INTEGRATION increasing in function of w, and concave, always in function of w, of course such properties of utility function, are necessary for the very identification of the function, the first, and for a kind of reluctance to earnings, the second. If we also consider that the project faces the riskσ ∈ X that it could take several levels and with cumulative distribution function:
: σ () =→∈∀ ∑ pxFRxF ()σ j [3.3] σ j ≤x And finally, if it is taken into account that l, the total amount of the credit provided by the investment project, can be seen through a function that expresses it, under the influence of risk, or through the function : σ ()σ =→∈∀ lzXz with cumulative distribution function
: z () =→∈∀ ∑ ()lpxGRxG j j ≤xl and thus, taking into account the z function, we can express the cumulative distribution as
: z () =→∈∀ ∑ ppxGRxG (σ j )() [3.4] j ≤xl and in the continuous, if we consider that z′ ()()= z tgxG provides the probability density function, we can write x =→∈∀ : z ()()∫ z dttgxGRxG [3.5] ∞− Therefore, we can express the variable w, as the amount of the availability to enter the investment program, in turn as a function of the variables z and θ , that is ()zw ,θ , the amount of revenue to be considered beneficial in choice of the subjects to be financed, subject with characteristic θ , in the circumstance that the risk of the project σ impacts on the function z. It is therefore the quantity gained in a certain risk situationσ by a subject with characteristicθ , and thus expresses a function of allocation to the risk. The sensitivity of the variation of the function w, compared to the function z, measures therefore the risk assigned to the subject with characteristicθ .
4 Waiting utility and constrained maximization So, if we take into account what we have said so far, we can express the utility function as a composite function (zwu )(,, θθ ) [4.1]
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and for the respective cumulative probability distributions, we can now consider the expected usefulness of the credit requester, based on its own compound utility function and its underlying feature +∞ θθ = θθ [](zwuE )(,, ) ∫ ( )(,, )z ( )dxxgzwu [4.2] ∞− Now, if we consider the function : ()θλθλ ∈→Θ∈∀ [[,0 +∞ we can pose the following problem of constrained maximization, in which taking
into account that θ′ ()()= θ xhxH , you have +∞+∞ = θθθλθθθλ max [ ( ) (zwuE )(,, )] ∫ ∫ ( ) ( )(,, )z (xgzwu )dxhθ ( )dxx [4.3] ∞− ∞− and from which +∞ θ = ∫ ()(), θ zdxxhzw ∞− So, the problem can be simplified, always in conditions of constrained maximization of the expected value, placing +∞ = θθθλ (zv )max ∫ ( ) ( )(,, )θ ( )dxxhzwu [4.4] ∞− so, it boils down to the following expected value +∞ = []() ∫ ()()z dxxgzvzvE [4.5] ∞− and for the problem of maximization, the conditions of first order, for its solution are ∂ ( ) ( )(,, θθθλ )= ′ (zvzwu ) [4.6] ∂z a problem that describes an efficient Pareto configuration in the risk allocation; And such a configuration involves the same marginal rate of substitution in any state and in all parts5.
5 Risk aversion Moreover, it remains useful and interesting to take into account the further considerations inherent in assessing the degree of risk aversion6.
5 Vasicek, O. A. (2016). Finance, Economics, Mathematics. Wiley. 6 Matz, L. and Neu P. (2007). Liquidity Risk, Measurement and Management. Wiley, Stati Uniti.
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In general, the measurement of the influence of the risk factor on the choices of the individual, takes place through the risk aversion function in relation to its utility function ()xu , which results: ′′()xu α()x −= , con ′()xu ≠ 0 [5.1] ′()xu and consequently, if we consider the properties of the utility function, in particular that the denominator remains positive, you have:
′′()xu 0 −⇔> > 0 ′()xu concava α()x 0 ⇔= ′′()xu = 0 ⇔ ()xu lineare ′′()xu convessa 0 −⇔< < 0 ′()xu we are therefore in the presence of risk aversion, indifference or risk appetite7, respectively. As it is useful, to use the value assigned to risk aversion, or, in the presence of an integrable aversion function, to go back, less than a growing linear transformation, to the underlying utility function ()xu 8. ′′()xu ∂ In fact, being α()x −= α()x −=⇔ log ′()xu from the differential ′()xu ∂x equation of second order, one has: x x x −∫α () +cdtt −∫α ()dtt log ′()()()∫α ⇔−= ′ = exudttxu 0 , or ′() = hexu 0 0 thus x 0 ∫α ()dtt () = ∫ u + kduehxu [5.2] 0 In the scenario observed in this work, we are faced with the aversion ′′()wu ,θ ()w,θα −= [5.3] ′()wu ,θ and with the aversion ′′()zv α()z −= [5.4] ′()zv
7 Forestieri, G. and Mottura, P. (2009). Il sistema finanziario, quinta edizione, Egea 8 Bagato, L. and Bussoli P. (2014). Investire con le obbligazione. Conoscere gli strumenti e valutare i rischi. Hoepli, Milano
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which represent respectively the absolute risk tolerance index for the functions considered. The characteristicθ of the participants, must therefore be considered to share the ratio of risk which is proportional to their absolute tolerance to the risk of the cost9. The higher the risk tolerance, the greater the relationship should be sharing. So, the allocation to risk rule can be so deduced: at the moment you share a risk assignment, Pareto efficiently, or the frontier curve Efficient, the sensitivity to financial changes per participant's income, is equivalent to the proportional ratio between the absolute risk tolerance of a part component, and the average risk tolerance. However, in the process of allocating credit, i.e. depending on the risk in real financing, it is very difficult to measure the degree of risk aversion, of the participants; Their risk tolerance is linked to the ability to have resources, to the ability to understand the level of risk, to the behavior of organizational risk, and to the willingness to control the risk10. They are therefore all elements and evaluations to be considered as a basis in the allocation of credit and then for a desired expected return that can be transformed without big surprises in an effective yield11.
6 Conclusions In this work, important relations have been highlighted between the expected return of an investor, in particular, of a credit institution, and the expectations of the subjects to whom the credit is directed, with the implication of their expected usefulness, in order to allow a correct assessment of the choices to be made. A very important role is given by the function of allocation to risk, a function that takes into account the different characteristics of the subjects that come into play, then a subjective evaluation as well as simply objective; And in fact, starting from the latter that one comes to the evaluation of the expected return, expressed also under certain constraints. Without underestimating the element risk aversion, function in dependence of the characteristics and volumes, in the determination of both the investment, and the cost of supply of the capital of thirds.
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Matz, L. and Neu P. (2007). Liquidity Risk, Measurement and Management. Wiley, Stati Uniti. ISBN 978-0-470-82182-4. Menoncin, F. (2006). Mercati finanziari e gestione del rischio. Editore ISEDI.EAN 9788880083153. Pederzoli, V. (1989). Approcci teorici sulla determinazione dei tassi di interesse. Giappichelli Editore. ISBN 978-88-34807194. Resti, A. and Sironi A. (2008). Rischio e valore nelle banche, Misura, regolamentazione, gestione. Egea Milano. ISBN 978-88-23831254. Roberts, F. S. (1979). Measurement Theory with Applications to Decision making, Utility, and the Social Sciences. Encyclopedia of mathematics and its applications, n. 7, Addison-Wesley, London. Rosenbaum, J. and Pearl J. (2013). Investment Banking: Valuation, Leveraged, Buyouts and Mergers & Acquisitions. Wiley, Stati Uniti. ISBN 978-111- 847220-0. Saita, F. (2000). Il risk management in banca. Performance corretta per il rischio e allocazione del capital. Egea, Milano. ISBN 978-88-23806375. Sakovich, M. (2012). Asset-Liability Management in banking as an instrument for minimization of expenses in the implementation of Basel III requirements. Available at SSRN: http://dx.doi.org/10.2139/ssrn.2189606. Vasicek, O. A. (2016). Finance, Economics, Mathematics. Wiley. Von Neumann J. and Morgenstein O. (1974). Theory and Games of economic behavior. Princeton University press. ISBN 978-06911-3061-3.
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ASPECTS OF REFORMING THE ROLE OF MANAGEMENT IN PRE-UNIVERSITY EDUCATION IN ALBANIA
NOVRUZ AHMETI, Msc Ministry of Education, Sports and Youth [email protected]
JANI SOTA, Prof. Assoc. Ph.D. "Aleksandër Moisiu" University, Durrës [email protected]
Abstract
The role of management in education is understood as the process of meeting the basic goals of the system or educational institutions by defining the purpose, organization of work, motivation and management of human resources, filling vacancies, controlling the work and assessing the fulfillment of the goals.Achieving the educational outcomes or goals of an educational institution is closely related to the management skills of educational leadership at all levels of schooling. In many countries of the world, as in Albania, much attention has been paid to this fact in this important process, although the Albanian state, through governance and legislation was oriented to the empowering and functioning of decentralization of the decision-making process, always has tried to identify issues related to governance and management in pre-university education and the needs for completing the legal framework through the years. Undoubtedly, the focus of this study are also the issues for strengthening the links of the education system with the labor market and the role of various mechanisms for increasing the efficiency of work: the practical use of knowledge guarantees students success.
Key Words: Management, planning, decision making, organizational structure, motivation, standards of achievement.
Introduction
The history of post-communist education in Albania at the historical perspective (1992- 2013), as part of the development of Albanian national education, includes the entirety of activities and achievements in the education and educational fields of the people. There have been many generations in during the years, which have given a valuable contribution and have influenced the course of Albanian civilization. The developmental phases of postgraduate education in post- communist Albania, depending on the cultural, social and political circumstances, have had their dynamics of development, which were once normal and in other cases slowed down.
"In 1989, the percentage of schooling of ten-year-olds had reached 91.8%, while that of women was 88%. (It should be mentioned that the percentage of schooling was lower, perhaps 85% if calculated on the basis of international standards, from 15 years old and
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more). In 1989, 89% of the 6-17 years old were enrolled in 8-year schooling cycle or high school. High education was 7% of population which was lower compared to the average of 15% of the industrialized countries"194.
The events of 1990, followed by the overthrow of the political-social system in Albania, would mean overwhelming the features and functioning of the education system, which would already prepare citizens toward a new formation. As the arena of numerous and rapid changes in all areas of life, Albania began to attempt since 1992 to reform the education system, particularly the pre-university system. This goal served the course of undertaking deep reforms over the years in all sectors of the country's economic and social life. Changes to the past are actually impressive.
Reform is the difference: change of thinking and perception, reflected in the change in product relationship. Studying the dynamics of educational developments in post-communist Albania, we will affirm that:
"Educational reform, through institutional arrangements, provides sufficient state authority in order to combine policy-making, resource allocation, technical services, monitoring and quality assessment. The establishment of this mission is achieved through a new network of institutions created in the education sector and extending to central and secondary school level"195.
As we will have the opportunity to elaborate in this study, we have touched upon issues of fundamental changes in form and content (curricula, school documentation, organization of inner school life), new developments in pre-university education (secret abandonment, issues of vocational education, mass education of general secondary education), decentralization and administration of pre-university education, as well as the role and place of teachers in Albanian post-communist society. Therefore, the insistence on the interdisciplinary character of the study seems to be inevitable.
The selection of the issues we have been trying to draw in this study is first dictated by "identifying the fundamental problem that remains to be resolved regarding the transfer of responses, the new mode of administration and the growing autonomy granted to the educational institution, which should be set between the necessary coherence of the whole system (at national level) and the exercise of an autonomous power (in terms of freedom and responsibility) at other levels (regional, local, school)"196.
194Raport për Zhvillimin Njerëzor - Shqipëria 1995 (më tej: Raport për Zhvillimin Njerëzor ...), botim i Departamentit për Zhvillimin Ekonomik e Ndihmës së Huaj, Institutit të Statistikave (INSTAT) dhe Programit të Kombeve të Bashkuara për Zhvillim, Tiranë, 1996, f. 38. [Human Development Report - Albania 1995 (hereinafter: Human Development Report ...), publication of the Department of Economic Development of Foreign Assistance, Institute of Statistics (INSTAT) and United Nations Development Program, Tirana, 1996, pg.38.] 195Jani Sota, "Educational Phenomena in Albania in the Years of Communist Dictatorship and the Reformation Efforts After Nineties" Societies (hereinafter: "Educational Phenomena in Albania..."), in:Journal of Educational and Social Research (JFSR), Vol. 2, No. 2, May 2012, Mediterranean Center of Social and Educational Research (MCSER), Rome, 2012, pg. 13. 196Idid, pg. 31-46.
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We point out that the time limits that this work covers for the first two decades of the post- communist period are thought to bring some of the needs reflections to the current dynamics and development goals of the education system in Albania, published in various educational policy over the years.
1. The legal framework of the new educational system
The first measures to improve the school system, though insufficient, gave a new impetus to the process of change. The changes would primarily serve the further strengthening of democratization and reform of the educational system, its transformation into a powerful tool "not only to preserve and develop intellectual curiosity but also to enable learners to learn independently, think critically and to understand the world, to recognize and accept the individuals of other peoples, to discover self-identity and to acquirethe common European and world values”197.
The first problem encountered during the implementation of the new educational reforms of the countries of Eastern Europe and Albania in particular was the gap in the field of legislation198.The fundamental principles on which education in Albania is based are expressed in the Albanian Constitution, in the basic laws as well as in laws and by-laws and other important documents of the Parliament, the Government, the Ministry of Education, Sports and Youth. The Albanian Constitution grants to every citizen the right to complete the compulsory education, general secondary education, professional and social-cultural education in public schools which is free of charge.
Albanian Parliament is the legislating body, which issues laws and amendments. The Government, the Council of Ministers (CM) and the Ministry of Education, Sports and Youth (MESY) issue by-laws, such as: normative provisions, regulations, orders and instructions, etc., for the implementation of the laws. In this context, we mention some of the laws and documents that guide the daily work in the school, divided into several categories, along with some comments or instructions when needed:
1. Law No. 7952, dated 21.6.1995 "On the pre-university educational system"199, as amended by Law No. 8387, dated 30.7.1998 "On some amendments to Law No. 7952, dated. 21.6.1995 "On the Albanian pre-university system"200, amended by Law No.
197 Luan Memushi, "Education As a Fundamental Human Right and a Vital Necessity for Societies" (hereinafter: "Education As a Fundamental ..."),in: MoES, National Education Strategy 2004-2015, pg. 4. 198Ibid, pg. 30. 199Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 15, 17 Korrik 1995, botim i Kuvendit Popullor, Tiranë, f. 619, Ligji Nr. 7952, datë 21.06.1995 "Për sistemin arsimor parauniversitar", 67 nene. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 15, 17 July 1995, publication of the Center for Official Publications, Tirana: "Grafon", 1995, pg. 619. Law No. 7952, dated 21.06.1995 "On the pre-university educational system", 67 Article. Published material web site: www.qpz.gov.al] 200Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 20, August 1998, botim i Kuvendit Popullor, Tiranë, f. 831, Ligjin Nr. 8387, datë 30.07.1998 "Për disa ndryshime në Ligjin Nr. 7952, dt. 21.06.1995 "Për sistemin parauniversitar shqiptar". Material i botuar në faqen web site: www.qpz.gov.al
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8872, dated 29.3.2002, "On Education and Vocational Training in the Republic of Albania"201;as amended by Law No. 9903, dated 17.4.2008 "On an amendment and adjustment to Law No. 7952, dated 21.6.1995 "On the pre-university education system"202; amended by Law No. 9985, dated 11.9.2008, "For regulated professions in the Republic of Albania"203; amended by Law No. 10137, dated 11.5.2009, "For regulated professions in the Republic of Albania"204; amended by Law No. 69/2012 "For the pre-university education system in the Republic of Albania"205; amended by Law No. 48/2018 "For some additions and changes in Law No. 69/2012, "On the sistem pre-university education in the Republic of Albania"206.
2. Code of Labor of the Republic of Albania.
[Official Journal of the Republic of Albania, No. 20, August 1998, publication of the Center for Official Publications, Tirana: "Grafon", 1995, pg. 619. Law No. 8387, dated 30.07.1998 "On some amendments to Law No. 7952, dated. 21.06.1995 "On the Albanian pre-university system". Published material web site: www.qpz.gov.al] 201Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 11, 18 Prill 2002, botim i Kuvendit Popullor, Tiranë, f. 320, Ligji Nr. 8872, datë 29.03.2002, "Për Arsimin dhe Formimin Profesional në Republikën e Shqipërisë". Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 11, 18 April 2002, publication of the Center for Official Publications, Tirana, 1995, pg. 320. Law No. 8872, dated 29.03.2002, "On Education and Vocational Training in the Republic of Albania". Published material web site: www.qpz.gov.al] 202Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 61, 17 Maj 2008, botim i Kuvendit Popullor, Tiranë, f. 2726, Ligjin Nr. 9903, datë 17.04.2008, "Për një ndryshim dhe stesë në Ligjin Nr. 7952, datë 21.06.1995 "Për sistemin arsimor parauniversitar". Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 11, 17 May 2008, publication of the Center for Official Publications, Tirana: "Grafon", pg. 2726. Law No. 9903, dated 17.04.2008 "On an amendment and adjustment to Law No. 7952, dated 21.06.1995 "On the pre-university education system". Published material web site: www.qpz.gov.al] 203Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 143, 22 Shtator 2008, botim i Kuvendit Popullor, Tiranë, f. 6386. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 143, 22 September 2008, publication of the Center for Official Publications, Tirana, pg. 320. Published material web site: www.qpz.gov.al] 204Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 86, 12 Qershor 2012, botim i Kuvendit Popullor, Tiranë, f. 3775, Ligji Nr. 10171, datë 11.05.2009, "Për profesionet e rregulluara në Republikën e Shqipërisë" (i ndryshuar). Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 86, 12 June 2012, publication of the Center for Official Publications, Tirana, pg. 3775. Ligji Nr. 10171, datë 11.05.2009, ""For regulated professions in the Republic of Albania" (i ndryshuar). Published material web site: www.qpz.gov.al] 205Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 86, 12 Qershor 2012, botim i Kuvendit Popullor, Tiranë, f. 3775, Ligji Nr. 69/2012 ""Për sistemin arsimor parauniversitar në Republikën e Shqipërisë" (i ndryshuar). Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 86, 12 June 2012, publication of the Center for Official Publications, Tirana, pg. 4402.Law No. 69/2012 "For the pre-university education system in the Republic of Albania" (i ndryshuar). Published material web site: www.qpz.gov.al] 206Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 115, 3 Gusht 2018, botim i Kuvendit Popullor, Tiranë: "Shtypshkronja e Qendrës së Botimeve Zyrtare", f. 7109. Law No. 48/2018 "For some additions and changes in Ligji Nr. 48/2018 "Për disa shtesa dhe ndryshime në Ligjin Nr. 69/2012, "Për sistemin arsimor parauniversitar në Republikën e Shqipërisë". Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 115, 3 August 2018, publication of the Center for Official Publications, Tirana: "Printing House of the Official Publications Center", pg. 7109.Law No. 48/2018 "For some additions and changes in Law No. 69/2012, "On the sistem pre-university education in the Republic of Albania", Published material web site: www.qpz.gov.al]
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3. Work Contract.
4. Decisions: Decision of the Council of Ministers No. 78, dated 08.02.2006 "On the Establishment of State Matura and Admission to Public High Schools"; Decision of the Council of Ministers No. 707, dated 16.10.2003 "On the reorganization of district education departments in the regional education directorate and in the education office"; etc.
5. Instructions: "On teaching workload" (issed by the Ministry of Education Sports and Youth); 'On the beginning of the new school year" (issued annually from the Ministry of Education Sports and Youth); other instructions.
6. Important documents: Normative provisions for public schools; Universal Declaration of Human Rights; Convention on the Rights of the Child; National Strategy for the Development of Secondary Education 2004-2015; National Strategy for the Development of Secondary Education 2009-2013; Different periodicals for education; Orientation programs for teacher qualification.
7. School documentation:Annual school plan, teaching and educational, for the following school year; Division of duties of the members of the directorate, role and responsibilities; Monthly plans; A list teaching staff for the respective school year, with individual data (including, but not limited to, addresses and contacts); Division of the teaching workload, weekly, with the exception of the respective profiles; Data on the number of teaching rooms in the school (teaching, office); Number of classes per classes that are taught; Plans for crosscultural activities (if any);
As above, we emphasize that in Albania the educational changes were realized with the legal and sub-legal acts of the legislative body and the central and local institutions that were reviewed for each school year.They significantly affect the teaching process as well as the very structure of the school, the teaching, education method and its guidanceOn the basis of this legal framework, new policies were developed for solving the major problems in the field of pre-university education, which left deep traces and made the process irreversible to date.
2. New changes in the field of preparation of Albanian teachers
No doubt the teachers, those who play an important role in improving the quality of education. Bearing this in mind, in Albania, governments have shown commitment to teacher training and qualification, hitherto.
Human Resources Reform after 1992, aimed at improving the quality of education sector employees particularly teachers to implement the curricular reform and to realize the process of democratization of education. What should be noted is their postgraduate qualification, social status, their initial formation, the possibility of further perfection.
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Conceptual change in the treatment of human resources would mark a clear distinction between educational policies designed not only during the 90s, but also a good part of the medium- term and annual plans strategies drafted by MES in the first 10 years. The two main pillars of reform for the teacher's profession have been: compilation of a full legal framework and implementation of a new policyin the field of staff training.
In the period before the 1990s, the preparation of basic education teachers was realized at the higher pedagogical institutes, the preparation of teachers for secondary schools was realized at the University of Tirana, while the preparation of the kindergarten educators was realized at pedagogical high schools. The qualification of post-graduate teachers was carried out in an organized way by the Ministry of Education periodically every five years in the pedagogical and scientific aspect. The district-based pedagogical cabinets, methodological circles, and school- based commissions supported the teacher's qualification. Teachers work with estimated badge"Distinguished Teacher"and titles "Teacher of the People"and "Meritorious Teacher" which were issued starting from 1950 respectively by the Ministry of Education and Presidium of the People's Assembly207.
In Albania, there are a number of institutions and bodies that work to enforce legislation related to the issues of the of teacher's profession. The institutions responsible for the preparation of teachers, have always been: Ministry of Education, Sports and Youth (MESY) - sets policies for University programs; Higher Education Institutions (HEI) - offer programs in the first cycle of study - "Bachelor", programs in the second cycle of study - "Master in Teaching", as well as programs in the third cycle of study - "Doctorate in Pedagogy"; and Public Accreditation Agency for Higher Education (PAAHE) - is responsible for ensuring the quality of undergraduate programs and Higher Education Institutions.
The preparation, professional development and qualification of teachers are carried out on a legal basis that is made up of laws approved by the Albanian Parliament and by-laws (decisions, orders, directives, regulations) approved by the Council of Ministers, Ministry of Education and Sports. Such as status, qualifications, employment, salaries, professional development, training, rights, duties and promocion from the institutions and authorities responsible for granting the right to practice a teacher's profession are:Ministry of Education, Sports and Youth (MESY) - sets policies for University programs; Higher Education Institutions (HEI) - offer programs in the first cycle of study - "Bachelor", programs in the second cycle of study - "Master in Teaching", as well as programs in the third cycle of study - "Doctorate in Pedagogy"; and Public Accreditation Agency for Higher Education (PAAHE) - is responsible for ensuring the quality of undergraduate programs and Higher Education Institutions.
Courses, the institutions responsible for the process of qualification of teachers in the pre- university education system are set out in the Ministry of Education and Sport (MES) Guideline No. 2, dated 05.02.2014 "On the criteria and procedures for the qualification of teachers". According to this instruction, the responsible institutions are: Directorate of Internal Services at
207Shefik Osmani, Fjalor i pedagogjisë, Botime enciklopedike: Seria e fjalorëve tematikë, Tiranë: "8 Nëntori", 1983, f. 434-436. [Shefik Osmani, Dictionary of Pedagogy, Encyclopedic Editions: Series of Themed Dictionary, Tiranë: "8 November", 1983, pg. 434-436]
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the Ministry of Education and Sports, Institute for Educational Development (IED), Regional Education Directorates and Education Offices (RED/EO).
From 2004 to 2013, the policy on the formation, professional development and qualification of teachers is presented in two basic documents: Pre-University Education Strategy 2004- 2015208and National Strategy for Higher Education 2008-2013209. The main achievement of the reform based on these two documents is the inclusion of the profession of teachers in regulated professions. The undertaken policies reformed the teacher education system by changing the curriculum structure, but the higher education institutions' curricula were not approached because of the different approaches they selected.210 The training scheme was changed, specifying the required programs, criteria, credits and liberalizing the training market.
But, the main achievement of the reform based on these two documents is the inclusion of the profession of teachers in regulated professions. The undertaken policies reformed the teacher education system by changing the curriculum structure, but the higher education institutions' curricula were not approached because of the different approaches they selected.211 The training scheme was changed, specifying the required programs, criteria, credits and liberalizing the training market.
At present,pre-school teachers and elementary education teachers should be formed by 3- year Bachelor studies with 180 credits, with curricula built for this cycle. Primary and elementary education teachers should be formed by 3-year Bachelor studies with 180 credits, with curricula designed for this cycle. The second Cycle of studies of Professional Master which lasts one year and has got 60 credits should be distinguished from Master's Degree which prepares teachers for pre-school education or Professional Master's Degree for the primary classes.Courses for Secondary education teachers should be trained by following this course: Graduation in the relevant field of science (first cycle: 3-year Bachelor's Degree, 180 credits), Second cycle studies, 2-year Master of Science 120 credits, who prepares teachers for lower and upper secondary education.
However, we think that teacher training should be continued. Higher Education Institutions should create conditions for training and continuing education of teachers in cooperation with the institutions of higher education.
3. Problems of massive pre-university education
208 MoES, National Education Strategy 2004-2015, Tirana, 2004, pg. 1-41. 209 Ministry of Education and Science (MoES), National Education Strategy 2008-2013, Tirana, 2008, pg. 1-16. 210Ministria e Arsimit dhe Shkencës të RSH, Raporti Përfundimtar për Reformimin e Arsimit të Lartë dhe Kërkimit Shkencor, Tiranë, 2014, f. 1-48. [Ministry of Education and Science in the Republic of Albania, The Final Report on the Reformation of Higher Education and Schientific Research,Tirana, 2014, pg. 1-48.] 211 Ministria e Arsimit dhe Shkencës të RSH, Raporti Përfundimtar për Reformimin e Arsimit të Lartë dhe Kërkimit Shkencor, Tiranë, 2014, f. 1-48. [Ministry of Education and Science in the Republic of Albania, The Final Report on the Reformation of Higher Education and Schientific Research,Tirana, 2014, pg. 1-48.]
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After 1990, Albanian state policies would bring new elements in the field of education. in. Attention would be focused more and more on the expansion and consolidation of the education system remained part of the change. Within the disproportionate structure and the problems carrying out, new measures would be initiated between the school categories. Priorities shift to those who provided an ever-increasing number of educated people and were able to participate extensively in the market economy. In the mosaic of the new system, the central location would be reserved for the compulsory 8 and 9-year secondary education system, and further to the higher educational links. The developments within it would enable the transition to a unified and diverse secondary education with a focus on the professional and the high.
Pre-school education. The years 1992-2013 would be characterized by a pre-school activity, of this first link in the scheme of the education system∗. Pre-school institutions were educating children aged 3-6 years old on the basis of a program aimed at cultivating the correct pronunciation of their mother tongue, counting, drawing, light physical exercises in the form of games etc. Referring to the resources of 1990, in the country functioned 3.329 kindergartens with approximately 125.300 children, respectively 786 in urban areas and 2.543 in rural areas212. Compared with other educational links, developments would be slower. Given the fact that most of the population lived in the village, the number of institutions would be insufficient. The state cared for the kindergartens and towns, while their expansion and welfare in the village was an obligation of municipalities that actually had limited funds.
"Inadequate preparation reflected significantly on the rates of child benefit. It was to prioritize the curriculum, bypassing the activity of children during their free time. Education with the workplace was poorly accomplished. Part of the educators had easy access to the most developed children, engaging little with others. Undoubtedly, the overcrowding of children in groups also caused difficulties. The situation was particularly problematic for rural areas, where the level of the material base was lower. This was compounded by the low interest of municipalities focusing on the fulfillment of economic indicators. Despite all the weaknesses, educational institutions will face increasing demands of working parents, more pronounced in urban areas or large industrial centers such as Tirana, Durrës, Vlora, Fier, Shkodra, etc."213.
Obligatory 8 and 9-year secondary educationsystem. In the first decade of 1990-2000, despite the ongoing efforts of the educational structures, the main concern of all governments was to increase the percentage of school dropouts in elementary education, both in rural and urban schools. Especially the phenomenon of school dropouts grew steadily in the nineties during social
∗ Pre-school education in the Republic of Albania is public and private. It is composed of nurseries and kindergarten. Nurseries are insitutions depended on local government and include children of 0-3 year old group age. Kindergartens are insitutions depended by the Ministry of Education, Sports and Youth (MESY) and include children of 3-6 year old group age. Pre-school education is not obligatory. There are two categories of kindergarten, full day and half day care. Kindergardens function all year long. [Taken from: Ministry of Education and Sports (MoES), StatisticaL Yearbook of Education (2011-2012 and timely series), the Directory of e-Education and Statistics, Tirana, 2013, pg. 9-48. Statistical data and indicators in pre-university education]. 212 SPC, Statistical Yearbook of P.S.R of Albania 1990, Tirana, 1991, pg. 147-173. XIV. Education and culture. 213 AMAS, Raport i Bankës Botërore, Tiranë, 1996, f. 1-48. [AMAS, World Bank Report, Tirana, 1996, pg. 1-48.]
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and political instability in Albania214, reaching an average of 3,9%, with a maximum of 6,3% in the 1991-1992 school year215. The average school attendance for Albanian children in 1989 was 11,6 years, which means six years less than the OECD average. But in 1998, after a decade, the average years of education for Albanian children were 9,5 years, marking a drop in school years by two years less216.
From the official statistical data for Albania (2002) reported that only 62% of 14 year old children had completed the eight years of basic education for the aforementioned period.The factors that contributed to the increase in drop-out rates and were: economic reasons (according to the survey of 10-14 year-olds, 35% identify them as a primary cause) and lack of interest caused by a lack of quality assurance in education (20% of total abandonment)217.
"Other factors were also the distance of schools, security issues, cultural prospects for girls' education, and internal and external migration, which also influenced the completion of basic education by students. The highest percentage of abandonment was observed in peripheral areas in the first period of change involving 1992-1997"218.
After 2003, abandoning the school would take on another physiognomy that in education districts up to policy-making levels would be recognized by the term "Secret Drop-out"219. It is a worrying phenomenon, especially in those areas that continued to preserve blood feuding customs. Also, school drop out is a more evident phenomenon for children in needy and especially roma. The problem is and the children of low-income families, remote mountainous areas, girls in backward mentality and other social problems. Concerning the abandonment of compulsory 9- year secondary education, it results in 0,94%. As noted, it is a relatively low figure with the time when the studies cited above were conducted. As noted, it is a relatively low figure with the previous time.
To develop basic education capacities and to align the years of compulsory schooling with OECD standards, the Albanian government would start applying from 2004 the nine year system.
Secondary general education. Even secondary education, after the 1990s, would be characterized by a generalization of the general education. If we refer back to 1989 in relation to 1998, we notice that that the number of students enrolled in general secondary education was 24,4% whereas in 1998 it was 34,9%220. A satisfactory increase in the number of students attending secondary education would be observed especially in the last years of the second decade, as a result
214 Burimi: Zyra e Statistikës të Ministrisë së Arsimit dhe Shkencës të RSH. [Source: Stattistics Office of the Ministry of Education and Science of the Republic of Albania.] 215 MoES, National Education Strategy 2004-2015, Tirana, 2004, pg. 1-41. 216Ibid. 217Jani Sota, Pre-University Education in Post-Comunist 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini(hereinafter: High Education in Post-Communist Albania ...), Berlin: ''LAP LAMBERT Academic Publishing'', 2018, pg. 183. 218Ibid, pg. 183-184. 219Ibid, pg. 186. 220Ibid.
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of some favourable educational policies pursued by the MoES. Thus, for the 2008-2009 school year221, students’ attendance in secondary education increased to 80% of students who completed compulsory education versus 71% in 2003-2004222. It should be noted that this percentage is still considered low compared to European standards (95-100%).
Secondary vocational education. In Albania, owever, not all types of secondary education recognized the same extent. Vocational education would be among the most affected sectors in the transition period. Special attention would be paid to rural areas schools where vocational schools were focused on agriculture and zootechnics. If the enrolment in secondary education in rural areas would drop from 60% in 1990 to 30% in 1998, for vocational schools this figure would dramatically increase from 49% in 1990 to 2% in the year 1998223.
These drastic changes were influenced by several factors: a) In the education policies pursued in the early 1990s by the Albanian state there is a noticeable indifference to the professional education of rural areas. Thus, out of 575 professional schools in rural areas in 1990, in 1998 we only have 54 such. b) Lack of qualified staff of these schools, due to continuous migration and free movement.
After the approval of Law No. 8872, dated 29.03.2002 "On Vocational Education and Training in the Republic of Albania" there were 41 vocational and professional educational schools and 33 social-cultural schools (5 of which were technical and vocational schools) in 22 districts. Among them, in the rural areas, there were 3 vocational schools, agriculture-agribusiness ones. The schools were divided into 4 main areas: electro-mechanical (19 schools), economics (9 schools), construction-furniture (4 schools); agriculture, forestry, veterinary (9 schools). The students were prepared for 35 different specialties224.
Also, in Albania there are:Vocational Formation (VF), it is offered through 10 public vocational training centers in the major cities such as: Vlora, Shkodra, Tirana (2 centers operating), Durrës, Elbasan, Korça, Tepelena and Fier and the Moving Center of Public Professional Training for the Northeast Area, as well as 150 licensed private entities providing vocational training, out of which 24 are NGOs, with an extension to the Albanian territory.
4. Arsimi jopublikë
After the collapse of the communist dictatorship, the private non-public education schools started in 1992, with the opening of these first kind of schools (madrasa). The "Pioneer" of this kind of education is the Turkish "Mehmet Akif" College of the private NGO "Gylistan". This system was legalized by the Assembly's approval of Law No. 7952, dated 21.06.1995 "On secondary education", where a special emphasis is the provision on the approval and functioning of non-public schools. In 2001-2002, there were 70 non-public educational institutions in Albania, such as kindergartens, 8-year-schools, religious and secular ones, which existed in 14 districts of
221Ibid. 222Ibid, pg. 188. 223Ibid, pg. 189. 224MoES, National Education Strategy 2009-2013, Tirana, 2009, pg. 1-38.
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Albania. Only in Tirana, the Albanian metropolis, have been opened during the last 9 years 22 private educational institutions, kindergartens and schools, as well as madrasas225. Only during the academic year, '98 -'99, non-public schools were attended by 5.400 children and there are about 450 educators and teachers employed there, a number that varies according to student flows226.
It must be emphasized that non-public educational institutions are all-around, they appear competitive in the face of public schools through several advantages such as: infrastructure far better than public schools, heating systems, recreational facilities; transport and insured meals; as well as more labs.
Conclusions
Drawing once again the historical context in which education took place after 1990, as an era of overturns and major transformations in all former communist countries, the new orientation of the political scene would undoubtedly determine politics education, not merely as a country's individualistic policy, but as a comprehensive and integrative policy, in line with European standards and beyond.
Although in essence, the Albanian state policy aimed at pursuing the Western school model, for many reasons in practice, Albanian governments reached the last decade of study to adopt the necessary legislation, which allowed the adoption and implementation of a decentralized system in the sector of education - shifting responsibilities from the central to the local level.
Contemporary developments in the field of education highlighted the tendency of delegating the responsibility of improving school work to self-discipline. It was intended that school staff, community, local government and educational authorities would work in partnership to increase school outcomes.
Above all it should be noted that, the development of the education system created equal opportunities both within it and in relation to other educational systems having approximate standards as a result of globalist policies.
225 "Education" in: Shqiperia.com, the Albanian portal, material published on the web site: https://www.shqiperia.com/Arsimi.7/ 226Ibid.
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BIBLIOGRAPHY
• AMAS, Raport i Bankës Botërore, Tiranë, 1996[AMAS, World Bank Report, Tirana, 1996
• Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 11, 18 Prill 2002, botim i Kuvendit Popullor, Tiranë, 2002. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 11, 18 April 2002, publication of the Center for Official Publications, Tirana, 1995. Published material web site: www.qpz.gov.al]
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• Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 15, 17 Korrik 1995, botim i Kuvendit Popullor, Tiranë, 1995. Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 15, 17 July 1995, publication of the Center for Official Publications, Tirana: "Grafon", 1995. Published material web site: www.qpz.gov.al]
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• Fletorja Zyrtare e Republikës së Shqipërisë, Nr. 86, 12 Qershor 2012, botim i Kuvendit Popullor, Tiranë, f. 3775, Ligji Nr. 10171, datë 11.05.2009, "Për profesionet e rregulluara në Republikën e Shqipërisë" (i ndryshuar). Material i botuar në faqen web site: www.qpz.gov.al [Official Journal of the Republic of Albania, No. 86, 12 June 2012, publication of the Center for Official Publications, Tirana, 2012.Published material web site: www.qpz.gov.al]
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• MEMUSHI, Luan - "Education As a Fundamental Human Right and a Vital Necessity for Societies",in: MoES, National Education Strategy 2004-2015.
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• Ministria e Arsimit dhe Shkencës të RSH, Raporti Përfundimtar për Reformimin e Arsimit të Lartë dhe Kërkimit Shkencor, Tiranë, 2014 [Ministry of Education and Science in the Republic of Albania, The Final Report on the Reformation of Higher Education and Schientific Research,Tiranë, 2014]
• Ministria e Arsimit dhe Shkencës të RSH, Raporti Përfundimtar për Reformimin e Arsimit të Lartë dhe Kërkimit Shkencor, Tiranë, 2014 [Ministry of Education and Science in the Republic of Albania, The Final Report on the Reformation of Higher Education and Schientific Research,Tiranë, 2014]
• Ministry of Education and Science (MoES), National Education Strategy 2008-2013, Tirana, 2008
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• Raport për Zhvillimin Njerëzor - Shqipëria 1995, botim i Departamentit për Zhvillimin Ekonomik e Ndihmës së Huaj, Institutit të Statistikave (INSTAT) dhe Programit të Kombeve të Bashkuara për Zhvillim, Tiranë, 1996[Human Development Report - Albania 1995, publication of the Department of Economic Development of Foreign Assistance, Institute of Statistics (INSTAT) and United Nations Development Program, Tirana, 1996]
• SOTA, Jani - "Educational Phenomena in Albania in the Years of Communist Dictatorship and the Reformation Efforts After Nineties" Societies (hereinafter: "Educational Phenomena in Albania..."), in:Journal of Educational and Social Research (JFSR), Vol. 2, No. 2, May 2012, Mediterranean Center of Social and Educational Research (MCSER), Rome, 2012
• SOTA, Jani Pre-University Education in Post-Comunist 1992-2013 (Monograph) - With a foreword by Prof.Phd. Antonello Biagini, Berlin: ''LAP LAMBERT Academic Publishing'', 2018
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• "Education" in: Shqiperia.com, the Albanian portal, material published on the web site: https://www.shqiperia.com/Arsimi.7/
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The new era of TV industry
Raffaella Girone University of Bari Aldo Moro
Abstract
It’s a fact that viewers increasingly want to watch their favorite TV shows anytime, anywhere, and on any screen. To satisfy such a request it’s necessary to deliver all programs over the internet rather than just over the air, satellite, or cable. It seems simple but it is not. This shift has game- changing implications for advertisers, TV programmers, and TV distributors. Which are the dynamics that are transforming TV?
Although we're still in the early stages of this transformation, the internet has an incredible ability to increase the velocity of change.
If that happens, we could be at a turning point earlier than expected, with numerous challenges left unsolved.
The aim of this research is to analyse how consumer demand and the television industry have evolved over time, as well as how the shift to internet delivery presents risks and opportunities for programmers, distributors, and advertisers in each of the changing dynamics.
The assessment of the dynamics in transition let us to better understand the multiple risks and opportunities that the change taking place is creating. The purpose is to combine users demands with TV industry constraints (accountability, monetization, efficiency, scalability, and engagement).
(JEL CODES – O31, O32, O33)
Keywords: television, internet, technology, innovation, strategy, profitability
1. Introduction People new trend is to watch their favourite TV shows anytime, anywhere, and on any screen. On the internet it is possible to find a lots of TV contents, but not every programme can be watched anytime and everywhere. This implies a greater shift to delivering programming over the internet rather than just over the air, satellite, or cable. The consumer demand for that is growing more and more.
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It isn’t simple because the shift has crucial implications for advertisers, TV programmers, and TV distributors. The possibility to watch whatever we want everywhere it is not yet granted for every tv show. It is necessary to shift the way of programmes are delivered. Although we're still in the beginning of this transformation, the internet has an extraordinary ability to quickly increase the velocity of change. If that happens, we could be at a turning point sooner than anticipated, with numerous challenges to face. Embracing this shift can benefit each player in the TV ecosystem. By considering every dynamic in transition, we can better identify the multiple risks and opportunities that the shift to internet delivery creates. Our hope is to provide a perspective that will help marry what users want—ubiquity of TV programming in a user-friendly way—with what TV programmers, distributors and advertisers require for success: accountability, monetization, efficiency, scalability, and engagement
2. Just a little history
Television was the output of the efforts of many people working over the years, together and separately. At the beginning, two competing experimental approaches led to the breakthroughs that eventually made the tv technology possible: early inventors built a mechanical television based on Paul Nipkow's rotating disks and electronic television using a cathode ray tube developed independently in 1907 by English inventor A.A. Campbell-Swinton and Russian scientist Boris Rosing. Because electronic television systems worked better, they eventually replaced mechanical systems. Electric televisions were first demonstrated to the public in 1932 by American inventor Philo Farnsworth. The BBC broadcast the first regular “high-definition” television service from Alexandra Palace on 2 November 1936. In 1925, Russian TV pioneer Zworykin filed a patent disclosure for an all-electronic colour television system, but it wasn’t until 1954 that the first colour broadcasts were introduced in the US. The system used a new National Television Systems Committee (NTSC) standard encoding brightness and colour separately so that black and white TVs could use the signal too. A European colour standard wasn’t set until 1963 with Phase Alternating Line (PAL), which was technically superior and able to deal with weather better than NTSC. Colour broadcasts did
338 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY not start in Europe until 1967 with BBC2 becoming the first channel in the UK to broadcast in colour. Colour television continued to improve in quality, with screens becoming larger and sharper, cameras more sensitive, and broadcasts stronger for better picture quality. The next big change in TV technology came in the form of time-shifting, although the word “time-shift” hadn’t been invented yet. Video tape recorders were developed in the early 1950s using magnetic tape employed by the television industry. An evolution of that technology made it into homes as the video cassette recorder in various formats by the 1970s, starting with the Philips Model 1500 in 1972. TV closed captions debuted in 1973 on the Public Broadcasting Service. It was the first time that users could record a programme and then play it back at a time convenient to them, the very basis of time-shifting, leading to one unsuccessful entrant even being called “the great time machine”. VHS recorders won the battle for the time-shifting tape format, which were succeeded by DVD recorders in 1999. DVD recorders died out but DVRs continue to be popular, forming the basis of most time-shifting equipment and broadcast TV recorders that can “pause live TV”. After the invention of time-shifting, digital television broadcasting was the biggest thing to happen to TV since colour – and, combined with DVRs, it paved the way for further evolution. Digital television brought with it many advantages over analogue TV: the most obvious for the consumer was an increased picture quality and an expansion of the number of channels that could be broadcast at the same time over the same radio frequencies. Digital TV also enabled enhanced services, typically accessed through the “red button” and a replacement of the teletext services. Several specifications battled it out for the digital TV crown in the 80s and 90s, with various countries and regions adopting different standards, but it wasn’t until 1998 that the first digital broadcast was made in the UK. The digital switchover followed in most countries, where the analogue broadcasts were switched off leaving only the digital broadcasts, which paved the way for new 4G mobile data services in the UK by releasing the existing spectrum for new uses. The airwaves that carried fuzzy analogue TV now carry your cat gifs, breaking news and place-shifted video, but more on that later.
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Around the same time as digital television grew in popularity, the 16:9 widescreen format started to replace the original squarer 4:3 format. The widescreen format allowed wider framing of TV shots, as well as being a better fit for films on TV without the use of large black bars at the top and bottom of the picture. Widescreen broadcasts started in the UK in 1998 along with digital television. Between 2000 and 2003, most TV broadcasters in the UK switched to 16:9 before introducing HD channels. Europe’s first HDTV broadcast to the home was in 2004 in Belgium. But the real evolution started with devices such as the Slingbox in 2005, which allowed users to watch TV streamed from their homes anywhere they have an internet connection. That “anywhere at any time” model was later adopted by services such as Netflix and the BBC iPlayer. The ability to watch what you want, when you want and wherever you want (within the UK) where you have an internet connection has become popular. Now even traditional broadcasters are starting to enable users to place shift. Sky’s new Q system, for instance, allows users to stream broadcast television around the home using a home network as well as download shows onto a tablet or stream them via an app. That’s in addition to Sky’s Go streaming and video on-demand services. BBC’s iPlayer, ITV Hub, All4, as well as Virgin’s TV anywhere and others also do a similar job in a less sophisticated fashion, that means almost anyone can now place-shift their content and consume it on their own terms. Like time-shifting before it, place-shifting is an important evolution of the television experience and crucial for it to stay relevant in the on-demand era, when competing with so many other instant forms of entertainment. The biggest thing standing in the way of every service allowing place shifting is copyright protection and the regional licence agreements with movie and television studios. Streaming service Netflix, for instance, has recently been forced to crack down on the use of region unblockers – tools that allow a UK customer to access content from the US library, bypassing restrictions – demonstrating the power of regional restrictions. Since its first becoming available in the late 1930 television has captured our hearts . And its power has constantly increased over time. Tv evolution over the past 80 years clearly illustrates how technology influences consumer behaviour, while this change in consumption
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drives the TV industry to take on new forms that radically change the way we experience the medium. Television has certainly changed a lot since its outset. In 1948, only one in ten Americans had seen a television set. Later TV’s popularity exploded by 1960, when 70 million U.S. viewers could watch Senator John Kennedy and Vice President Richard Nixon in the first-ever televised presidential debate. By the end of the 1980s, almost 53 million households were subscribed to cable, while the number of cable program networks reached 79 by 1989. About 10 years later, the number of national cable video networks had grown to 171,and more than 65 million people were cable subscribers. This was the same year that Netflix first launched its subscription service providing unlimited rentals for a monthly fee. A 2013 Nielsen study227foundthat the number of American households with TVs had been dropping since 2011, as a growing number of people were switching from traditional cable companies to watching videos online via their mobile phones or through streaming services such as Netflix, Amazon Prime, Hulu and others. Incredibly, by 2013, there were more than five million American households without TVs, up from just over 2 million in 2007. And this trend has definitely been continuing. Clearly, a growing number of people are taking a technological leap from traditional television services to new offerings, creating an exciting time in the industry for extensive changes and innovations in content delivery. Most industry analysts228 agree that interactive OTTwill be the future, and TV with non- touchable graphics will disappear in just a few years. The functionality of interactive platforms carries the potential to take video consumption to a whole other level of engagement, such as the ability to post favorite Tweets directly from inside a video, swipe news tickers backwards, purchase products, and much more. We are truly on the cusp of a new world of video creation and consumption, with spectacular direct-to-consumer possibilities to generate new revenue streams, including shoppable videos and individually targeted advertising. The future of video consumption is only limited by the imaginations of developers, while those who are able to deliver exceptional user experiences through innovative technological creations will lead the way.
227https://www.nielsen.com/us/en/insights/case-studies.html 228Sergey Bludov
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3. The new way to consume TV
Since its first appearance in 1920s, television has passed through five major shifts that influence the way viewers use it. Now we’re at the beginning of a different shift that will bring people into a new world of TV everywhere. The change is being driven by the younger generations. The UK is the most advanced TV-watching country in the world, according to Ofcom, and has seen a record rise in the use of tablets for consuming media. The living room TV is no- longer the be-all and end-all of television consumption. The change is being driven by the younger generations. Recent data from Childwise suggests children aged under five are watching more TV than ever at 2.6 hours a day, accessing on- demand content through tablets and other devices. Meanwhile, Childwise229 also found that, on average, five- to 15-year-olds are spending more time online than in front of the TV230. They are place-shifting their content, watching TV online through devices at a time that suits them. This year will see that behaviour cemented with the continued rise of on-demand and the launch of new services, such as Sky Q, which allow all television to be place-shifted – the sixth evolution of TV.
4. The new business “Over the top” OTT stands for “over-the-top,” the term used for the delivery of film and TV content via the internet, without requiring users to subscribe to a traditional cable or satellite pay-TV service. Because OTT apps and services are delivered over the internet, users still need a broadband connection, which they usually get from their cable providers. Depending upon the service level, the content may be freely available or it may be encrypted to prevent theft of services. Some OTT content providers, like YouTube, include ads with their free content to bring in revenue, while other providers use a subscription and/or pay-per-view revenue model. Customers who do not have internet-capable TV can purchase video streaming devices like
229https://www.childwise.org/ 230 http://www.ansa.it/saluteebenessere/notizie/rubriche/salute_bambini/la_crescita/2016/01/26/giovani-meno- teledipendenti-ma-inchiodati-al-web_e0d91796-ce80-4d43-a911-37848b3da520.html
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Roku, Apple TV, Amazon Fire TV or Google Chromecast to access and display internet content on an older TV screen. OTT can largely be broken down into three different revenue models: SVOD (subscription- based services such as Netflix, Amazon and Hulu); AVOD (free and ad-supported services such as Crackle); and TVOD (transactional services such as iTunes, Vimeo On Demand and Amazon Instant Video that allow users to pay for individual pieces of content). While none need to die for the others to survive, how content owners approach these options will go a long way in determining which OTT apps break through the clutter. Over-the-top (OTT) and pay TV are two business models that allow consumers to subscribe to television content. Pay TV, which is generally more expensive, typically bundles content and requires the user to lease a proprietary coaxial cable or satellite dish network set-top box. In contrast, OTT content is delivered through a proprietary content delivery network (CDN) over the public internet. OTT content delivery allows customers to cut the cord and view content in a more mobile and on-demand manner. Competition among and between Pay TV and OTT providers has resulted in a wider range of user choices and a transformation in how to access content. Take, for example, a customer who likes to watch a specific TV show that's broadcast once a week on a certain network. A cable provider might bundle that network with hundreds of other networks and charge the customer accordingly. However, with OTT content delivery, the customer might be able to download an app for the preferred network and binge-watch the entire television series, only paying for internet access. The increasing availability of public Wi-Fi and unlimited wireless data plans has also helped bolster the growth of OTT providers and services. This has challenged traditional content and service providers with finding ways to stay relevant or risk losing customers. The likely outcome: traditional distributors will continue to play an important role in the growth of OTT because they also specialize in areas that TV networks don’t have an expertise in, including sales, marketing and customer management. “Part of the reason OTT didn’t develop more quickly than it did is that for a lot of content owners, they were able to solve the tech challenge [of delivering content over the web], but they didn’t have the DNA to sell directly to consumers,” said Simon Jones, vp of marketing at Conviva, a video analytics company.
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Forecast about OTT business are optimistic: revenues will more than double from US$53 billion in 2017 to reach US$129 billion in 2023231.
5. The key enablers of the new online ecosystem The television industry has a long history of incremental evolution: black-and-white gave way to color, big boxes turned into flat screens, 3 channels became 300, networks made room for cable and satellite, and now all three are making room for online and mobile platforms. Each evolution tightened up competition among all the participants in the value chain. But even with all these changes, incumbents were able to coexist and, for the most part, thrive. And the core sources of value within the industry stayed the same. Content rights and production have always been the name of the game—and all relationships within the industry have revolved around this critical piece of the puzzle.
231Digital TV Research
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The greatest threat to traditional television as we know it comes from the emergence of new online and mobile pathways and the increasing cloud-based ability to provide on-demand, nonlinear services. Streaming video completely bypasses the traditional video-aggregation and distribution models around free-to-air (FTA) broadcast networks, cable, and satellite— disrupting long-standing value chains and dedicated infrastructure (for example, broadcast towers, cable lines, and satellites) that have historically been critical to the television industry. The online and mobile ecosystem also changes how content reaches viewers, and on-demand viewing has made the fixed, mediated schedule of linear programming seem obsolete. Until recently, changes in industry dynamics have been evolutionary rather than revolutionary. However, the new online ecosystem is threatening the roles and relationships among key companies in the ecosystem that up to this point have been consistent. It is instructive to understand the enablers of the new ecosystem before considering the future. Three encompassing forces stand at the forefront: • Advances in Technology. The robust fixed-broadband infrastructure that is needed to meet the demand for online video is now available in most countries. In North America, 85% of households are today ready for streaming, and in Europe are ready about 74%. For users who are on the go, improvements in wireless connectivity have enabled greater access to digital content, and devices that can access mobile video have saturated the market. In 2017, the number of tablets and Internet-connected, or smart, TV sets was nearly 1 billion worldwide. Streaming video has advanced to the point that it is now viewed as a direct threat to traditional TV.
• Increasing Availability of High-Quality Online Content. Traditional studios have begun to invest in online productions, allowing viewers to access a wealth of excellent programming when and where they want it. Lions Gate Entertainment, for example, joined forces with Netflix, Hulu, and YouTube to create original series. In 2015, Lions Gate launched a subscription-based online-streaming service with Tribeca Enterprises. Disney acquired Maker Studios, a multichannel network that creates and distributes YouTube clips. FTA networks, such as CBS All Access, and premium channels, such as HBO and Showtime, have announced stand-alone streaming services. To make matters more interesting, global tech leaders are bringing disruptive models to the market. Amazon.com, Apple, and Google have all launched online-streaming devices to supplement their video-streaming services, and all three have
345 ECONOMIC POLICY AND EU INTEGRATION commissioned original content as well. The abundance of high-quality online content has attracted consumers and encouraged the shift from linear viewing to on-demand, time-shifted viewing.
• Development of New, Low-Cost Content-Production Models. Digital studios and semipro content creators are challenging the belief that high-quality content must be expensive. Top-tier network entertainment programs can draw 10 million to 15 million viewers and cost up to $5 million per episode, and top-tier cable shows—at up to $3 million per episode— routinely draw millions of viewers. By comparison, the top YouTube channels have proved they can drive millions of views for $30,000 to $50,000 per episode. In some cases (for example, Recipe Rehab on CBS or AwesomenessTV on Nickelodeon), online productions have migrated to linear television. With low costs, and a growing ecosystem of digital aggregators, online and mobile content creators are challenging the long-held belief that producing hit entertainment content must be a very expensive proposition available only to those with deep pockets.
6. The disruptive impact of the online video value chain The significant advances in technology and high quality of content available online have led to enormous increases in audience numbers and, as a further result, fundamental changes in industry dynamics. Market structures, relationships among companies, and distribution of value are all in flux. Viewers are gaining access to a massive amount of nonlinear online content, and, as a result, business models are shifting rapidly to capture value through these new channels. As more and more consumers choose to watch streaming video rather than traditional TV, their appetite for serialized entertainment has grown, and industry companies have also scrambled to create or buy the rights to top-tier entertainment content. The main core trends inciting the disruption. Online and mobile viewing will exceed facilities-based video viewing. In the US, the amount of time people spent watching television shows on a television set dropped marginally (1%) from 2013 through 2014. However, an increasing amount of content is being delivered online, leaving video-only distributors (for example, satellite service providers) with an asset— facilities-based video distribution—that is quickly declining in relevance. Online viewership,
346 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY on the other hand, is growing quickly. The amount of time people spent watching television shows online jumped 50% from 2013 through 2014. By 2018, online video will likely account for nearly 80% of fixed-data traffic and close to 70% of mobile traffic. This rise of online and mobile viewing has had important implications for the traditional subscription-TV business. It has shaken the price-to-value relationship of the bundle, because less traditional viewing equals less value for the bundle. This has created an incentive for consumers to drop pay TV altogether (these are the “cutters”) or actively manage their cable bills downward (“thinners”). For many years, as consumers purchased more and larger video packages, average revenues per user rose. Now, however, consumers are disaggregating their video bundles. Our research suggests that the compounded effect of cord cutters, thinners, and “nevers” (people who never subscribe to cable) will not be just a few percentage points. Rather, it will be a few dozen percentage points. Nevertheless, we expect the decline to occur slowly over time—not unlike the drop in newspaper readership and magazine circulation and the demand for CDs. (See Exhibit 4.) On-demand viewing will exceed live, linear viewing. The other fundamental shift in consumer behavior is the mass exodus of audiences away from live, linear viewing. The DVR, the first disruptive force, started driving this change more than 15 years ago, and now online and mobile-video-on-demand-only services have accelerated the shift. The model has clearly changed from “watching what is on” to “watching what I want, where and when I want it.” The share of nonlinear viewing is currently reported to be just over 20% in the US, but this number is expected to double to more than 40% by 2018. And many European markets are not far behind. These figures also massively understate the share of entertainment that viewers already watch in a time-shifted fashion. In the US and the UK, some 40% of serialized TV- show content is viewed in nonlinear formats. We are quickly approaching the point at which more entertainment programming will be viewed in nonlinear formats than live. Not all video content follows this shift toward nonlinear viewing, of course. News, live sports events, and live blockbuster events (for example, the Grammy Awards and the Academy Awards) remain primarily live viewing experiences with a short shelf life. But entertainment is closing in on 50% of nonlive viewing, and live online streaming of major events is becoming commonplace. (We saw this in the first-ever free global live streaming of a National Football
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League [NFL] game between the Jacksonville Jaguars and the Buffalo Bills in the fall of 2015.) Linear programming for TV is already becoming an archaic medium. New companies and business models are capturing value online. The online and mobile ecosystem is structured around three business models: advertising-supported video on demand, which provides viewers with free access to a large library of video content supported by advertising revenues; transaction-based video on demand (TVOD), which allows consumers to own or rent content for a one-off fee; and subscription-based video on demand (SVOD), which allows consumers to access a large library of content for a monthly fee. For each of these models, the online economics are scaling up quickly. In the US, online-advertising revenues increased sevenfold from 2010 through 2015, and growth shows no signs of slowing down. Taking the global view, we expect TVOD and SVOD revenues to nearly double over the next four years. Furthermore, advertising never keeps pace with changes in consumers’ media-consumption patterns. This was true for the development of Internet display advertising, it was true during the early days of cable network programming, and it will be true for video streaming and nonlinear viewing. But that advertising will catch up is inevitable. We believe that the tipping point will occur when online media companies can replicate the time-sensitive reach that big- event TV networks can offer. Advertising technology is quickly advancing toward this endgame. Networks are experiencing a collapse of the middle and a rise of the “long tail.” Online, time-shifted video has altered the types of content that viewers consider valuable. Top-rated, unique content has become essential in the online and mobile ecosystem, and midtier programming is losing ground. Viewership of such “water cooler programs” as the NFL’s broadcast of the Super Bowl, AMC’s Breaking Bad, and NBC’s The Voice has increased as second screens and parallel social media lead to greater engagement. Niche content shows— such as FX’s Louie, Amazon Studios’ Transparent, and the Food Network’s Chopped—have passionate but small audiences, and nonlinear viewing provides them with increased access. Content creators and rights holders are capturing a greater share of value. Content creators and rights holders are gradually gaining share—up from 33% in 2010 to 36% in 2014. Although these changes have been subtle on a global level, in mature video markets, such as the US and the UK, where competition for top-tier programming is robust, the trends are more
348 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY pronounced. Naturally, media rights for top sports events have seen the biggest cost inflation, because they provide “exclusive” and predictable hit programming. In the UK, the costs for sports content nearly doubled from 2008 through 2013. The competition to create original series has also led to original programming’s representing a larger share of total costs for traditional TV networks and online companies alike. In the past two years, companies as varied as Amazon, BBC, Microsoft, and YouTube have all commissioned original programming. A small percentage of these companies produce movies, but most are focused on serialized—scripted and unscripted—drama series, the leading drivers of nonlinear, online viewing. Netflix’s licensing costs are projected to rise from $2.3 billion in 2013 to $3.8 billion in 2017.
7. Where is the industry headed Until recently, the video content industry’s evolution has been gradual. Some consumers are canceling TV subscriptions, but most use online and mobile services in addition to, not instead of, their existing TV service. In response to the growth of online and mobile services—and consumers’ preferences for nonlinear and streaming video—incumbents are gradually developing new offerings to compete. Content creators, networks, and distributors have collaborated to deliver their traditional, facilities-based services over the Internet through “TV everywhere.” Cable and satellite operators are creating on-demand services, building navigation layers, and enabling consumers to view content on multiple devices. Networks are spending more for premium sports and entertainment content. The three video-on-demand business models—advertising supported, TVOD, and SVOD—continue to earn healthy returns. In other words, while online-content networks and aggregators have assumed an increasingly important role in the value chain, many traditional content providers have made investments to stay in the game. And the symbiotic relationships among content creators, aggregators, and distributors remain largely intact. It is surprising that a number of industry executives still believe that we will continue along the path of gradual evolution. To be fair, executives in the industry have spoken about ways to achieve this low-risk scenario: cutting off Netflix deals, aligning multiplatform rights and downstream syndication rights with multichannel-video-programming distributors’ on-demand
349 ECONOMIC POLICY AND EU INTEGRATION and TV-everywhere solutions (in exchange for higher rates, of course), and continuing down the evolutionary, structured, and safe path. Others in the industry, however, believe in the coming disruption, citing the strength of new participants, disruptive content models, and the shift of consumer demand from one-size-fits-all video solutions. We are in the second camp: industry shifts have been gradual thus far, but it is highly unlikely that the situation will not change. We see four disruptive scenarios in the making, and who the winners will be will depend on which industry participants seize the advantage in the battle for market share. These scenarios are not mutually exclusive, and more than one may shape a given market. But this much we know: all participants whose businesses are built on traditional TV and streaming video do need clear strategies to prepare for the changes to come and—where possible—to influence outcomes in their favour. The universal remote: global, all-inclusive navigation solves the discovery problem. As viewers embrace new ways to access video, they are challenged to find the specific content they want to watch. A wealth of compelling content exists in the fragmented mosaic of FTA programming, pay TV, and Internet-based offerings, but nobody has yet solved the discovery problem. That is, consumers can’t access and stream all video content across pathways and devices using a single point of navigation. The business that can integrate these ecosystems and become the go-to, anytime-anywhere access point for living-room TV, smartphone, and tablet viewing will create a huge competitive advantage. Cable service providers with broadband infrastructure are especially well positioned to develop such global navigation. By partnering with or acquiring online providers (such as video-on-demand services) and gaining access to a broad set of online and nonlinear content rights, they can provide one-stop shopping for a comprehensive array of video programming. The walled garden: exclusive entertainment becomes the critical strategic asset. Certain types of content, such as serialized dramas and top-tier sports events, are becoming increasingly popular with viewers, and distributors and aggregators can capitalize on this trend by locking up exclusive entertainment content. Large online aggregators such as Amazon and Netflix are already making big bets on exclusives—not just buying rights but also creating and distributing their own original series. Netflix’s spending on original programming will skyrocket from $5 million in 2012 to $550 million in 2017. Cable providers, too, are locking up exclusive
350 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY entertainment—especially top sports content. DirecTV paid for the rights to broadcast every out-of-market NFL game, and though the cost of purchase exceeds its direct revenues, the company won big with customer acquisition and retention. With subscribers choosing distributors on the basis of content preferences, exclusive entertainment content can be a critical strategic asset and differentiator in the competition among aggregators and distributors. Distribution disintermediation: direct-to-consumer takes on traditional TV bundles. For networks with strong brands and top-tier programming—and for those that own the rights to hit content—the ability to reach consumers over the Internet opens the door to new monetization opportunities: networks that can deliver content directly to consumers. Networks don’t have to share revenues with cable and satellite partners. Studios and sports leagues can reach fans directly, no longer relying on a TV bundle to carry their content. But when studios, networks, and other players go direct to consumers, without the benefit of the cable or satellite provider’s customer base, they face a challenge: they must attract enough subscribers to make it profitable. And à la carte offers facilitate cord cutting, which means pricing must both woo subscribers and compensate for likely losses in traditional subscriptions. The prognosis for this scenario is related to how successfully content owners and networks tackle the challenge of attracting viewers without the benefit of traditional TV bundles. Although it might seem counterintuitive, brands will be more critical than ever in this scenario. TV networks with name recognition and top-rated sports and entertainment content will be the most likely to gain the requisite subscriber numbers and price points to succeed. If this scenario takes off, traditional TV-service providers could suffer, because successful direct-to-consumer offers enable TV networks and owners of content rights to leapfrog their traditional distribution partners. Live TV online: online players stream live water-cooler programming. One of the main reasons viewers do not cut the cord is that traditional TV-service providers still offer live programming and content across all categories (not just entertainment, but news and sports as well). Online aggregators that can integrate live content with their own on-demand offerings— and price the package right—will transform their value proposition for consumers, in effect offering the advantages of traditional TV bundles combined with the advantages of a nonlinear online provider. A growing list of companies—for example, Sony, Dish Network, Zattoo, and Magine TV—already deliver live linear channels online, bypassing traditional cable and satellite providers. But the channel selection each of them provides is more limited than a
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traditional TV bundle. For this scenario to take hold, online companies need many networks and content owners to license them the rights to live linear programming, but these rights will not come easy—or cheap. What we are seeing now—online aggregators making content available faster and a growing number of companies delivering live TV over the Internet— makes this scenario one to watch.
8. The Netflix revolution
Netflix shows how long-term strategy and decision-making ensured the company crested the wave of vastly increased internet connectivity in recent years.
Netflix started as a personalized web-based movie recommendation and rental system, transforming over the years into a streaming video giant. The management’s commitment to digital content has enabled Netflix to emerge as the biggest name in the streaming video industry, and more importantly, to stay at the top of its game as it expands globally and seeks to capture increasing audiences internationally.
Founded in 1998 by Reed Hastings and Marc Randolph, the story of Netflix’s founding must be situated amidst the dot com bubble. This was a time when online businesses would sell consumer goods directly via their dot com domains. Amidst the excitement around internet- enabled delivery of services and goods, companies sell goods directly to consumers raised funding from venture capital firms. However owing to flawed business models which meant losses at each sale, these companies burned cash from the outset.The dot com bubble crashed in due time.
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In September 1999 Reed Hastings implemented a subscription-based business model. Netflix, although unprofitable until the mid-2000s, survived the dot com bubble. The company offered DVDs via US Postal Service, and had put up their catalogue online. Relying on US Postal Service’s delivery meant that Netflix could focus on their core offerings of a curated and personalized catalogue.
Netflix’s unique offering was its web-based catalogue of films. This meant that every user in every part of the country could have access to the full library that Netflix possessed, rather than being limited to the titles the nearest stores carried. This also meant that users could shop around for the films they wanted to watch in the leisure of their homes.
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Netflix’s Subscription-based Business Model
The company at the time struggled with two fundamental problems in their business model. One was that because the DVD was sent via mail, it would take anything between one day to 4 days for the shipment to reach the subscriber. Even though people were likely to try Netflix, conversion to repeat rentals was low. Secondly, people would far more inclined to rent out the latest releases. For the company to break even on the cost of purchasing a DVD to rent-out, they would have to generate 15-20 rentals for each DVD.
Two of the most important elements of Netflix’s business model emerged out of their responses to the problems. The company shifted to a recurring-revenue model – the subscription model – which improved second-time movie rental rates considerable. Customers were locked in to the platform, and were therefore much more likely to try rentals again. The company also created a queue, one in which users would select the movies they would like to watch next. This speeded up the process for subscribers to receive another DVD once they returned their first one. This also eliminated the point of late fees charges – the motivation for returning DVDs was to get another DVD to watch by mail. Netflix business model of subscriptions was a response to the problem of
354 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY retaining customers. Secondly, to enable maximum utilization of their DVD content catalogue, the company created their movie recommendation system. Through Cinematch Netflix would recommend shows for their subscribers to watch. The point for this was to alleviate pressure for DVD rentals away from new releases, to a more uniform renting out of their content library. This solution has over the years become considerably sophisticated, and drives how customers experience Netflix and how the company makes decisions when acquiring new content.
Netflix’s response to these problems was reflective of how the management was focused on building a sustainable business model, as opposed to growing up too fast. Instead of focusing on building a huge content library the company instead optimized their DVD-on-mail solution for their existing library. This business decision was what helped the company survive the crash that followed the dot com bubble.
Netlfix’s business model of subscriptions was strengthened in February 2000 when Netflix started their Unlimited Movie Rental programme. This ‘All-You-Can-Watch’ subscription model, at a fee of $19.95 per month, offered customers unlimited movie rentals in a month, receiving upto 4 DVDs at a time. With a view towards maintain subscriber goodwill and loyalty, the company eliminated all per-movie, shipping and late-fee charges. Netflix, under the direction of technical head Neil Hunt, had by then also implemented their content recommendation system – Cinematch.
Netflix’s content curation was headed by Ted Sarandos, Chief Content Officer. Sarandos joined in 2000, and had prior experience in movie and television distribution. He has managed Netflix’s content offerings over the years, initially curating and providing inputs for the movie recommendation system, and is now a major cog in the wheel of the company’s original content – Netflix Originals – initiative.
Competition with Blockbuster
Netflix’s business model and vision in the movie-rental industry was considerably different from that of their chief competitior – Blockbuster. The chief of retail video rental chain Blockbuster, John Antioco, on the other hand believed that video rental was a much more spontaneous process, and that receiving copies in-store and watching immediately was prefered by customers over waiting for days for the DVD on mail.
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Amidst this new rental programme, Netflix was losing money. Reed Hastings met with Blockbuster CEO John Antioco in Dallas, proposing to sell a 49% stake in Netflix to Blockbuster for $50 million and in exchange for running Blockbuster’s brand online. However Blockbuster passed on the deal, believing that Netflix, which was not profitable at the time, did not add value to their own business. It was this inability to see the long-term view, which Netflix was committed to, that led to the contrasting fortunes the two companies faced.
Netflix presented a considerable disruption to the business model of retail video rental chains. DVDs would be sent through the US Postal Service, Netflix completely eliminated the late fee, with the incentive for returning for the customer being access to another DVD. Netflix’s products key differences were their lack of stores, instead mailing DVDs ordered online, and secondly not charging late fees. These two counts that ensured that Netflix beat Blockbuster in the home- entertainment ecosystem.
Netflix offered their initial public offering (IPO) on March 24, 2002, bringing in $82.5 million. At the time the company was not profitable, making a loss of $4 million on $30.5 million of revenues. This was, however, an improvement over the previous years figures of loss of $38.6 million on revenues of $75.9 million.
Netflix launches Video on Demand
Netflix put further pressure on competition when they announced the launch of their streaming service in January 2007, as Watch Now. At the time the streaming service was expected to be of use only for power users with broadband internet connections, which were few at the time. Users were required to have a 1 mbps internet connection to be able to stream movies, with a 3mbps connection required for streaming DVD-quality films. Subscribers under the $17.99 plan had access to 18 hours of streaming content. Video delivery was through a special browser applet that subscribers would have to install. By 2008 however Netflix had given access to unlimited video streaming for subscribers to its biggest plan.
About 1,000 titles were available for streaming online, as opposed to 70,000 that Netflix offered in its DVD mail-to-order business. Although digital delivery was part of Reed Hastings’ strategy from inception, at the time of its launch the streaming service was provided as an add-on to the
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DVD subscriptions business. The primary motivation at the time was to reduce user churn. At the end of 2006 results showed a net margin of 4.9%, with a net income of $12.7 million on $255 million of revenues. Although it needed to improve its margins, the company had also been seeing subscriber churn of more than 4% each quarter.
Helped by the launch of streaming video, 2007 was the first time that Netflix generated upwards of $1 Billion in revenue. Over that year the company’s subscriber base grew 18%, revenues were up by 21% and net income was up by 36%, compared to the 2006 figures. The rise in revenue offset the increased costs from the online video initiative and strong competition helping the company generate higher profits.
Netflix’s approach to starting its streaming video service was a gradual process. Launched in January 2007, the company did not roll out its services for all its users at once, instead gradually scaling up the service offerings, completing it for all customers in June 2007. In hindsight, seeing Netflix’s experimentation with its video delivery infrastructure in terms of optimizing for the cloud, this slow and steady approach definitely makes a lot more sense than offering a full fledged streaming service and then dealing with downtime and error rates. Prioritizing building a robust technical infrastructure has helped Netflix keep their first-mover advantage. Oftentimes the first- mover advantage is squandered by technology companies who have to make way for businesses that solve the problem more efficiently. Netflix, however, by relying on a solid content and technical team, has managed to keep its competitive advantage since the launch of its streaming video service.
Partnership with Hardware Platforms
As the company started work towards building a streaming video solution, they also started to develop solutions for streaming video through hardware platforms. In 2004/05 the company was considering working with contract manufacturers on DVD disc drives with a video processor, which could download video content over the internet, and then stream it on TV. This model was similar to TiVo, which enabled TV owners to record TV shows on a disc. This was however shelved as competition with Blockbuster intensified and Netflix had to put resources into engaging in a pricing war with the market leader.
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In 2008 Netflix began work on a device for streaming videos. Netflix started work on developing a video player to connect to television, through which streaming video can be played over the internet. However Reed Hastings was concerned that potential partnerships with consumer electronic platforms would be negatively impacted by having their own platform. Roku was subsequently spun out as a separate company. For much of its history Netflix has had to face questions from cable TV providers whose content it would license, movie studios for movie licensing, as it presented a competition to their respective business models. Being perceived as a threat by the device manufacturers with which it was seeking to partner in the early stages of its streaming video business would hardly have severely limited its growth options. For this reason Netflix decided to spin out the Netflix Player team as a separate company.
Shift to the Cloud
In August 2008 Netflix experienced a major database corruption, and could not ship out their DVDs for three days. This led Netflix to choose to host their business logic on the cloud. This cloud migration took place for the main part in the period of 2010-2011, and was completed in 2015, when the company finally setup its billing infrastructure, the most sensitive part of its business operation, on the cloud. The complete shift to the cloud was a pathbreaker in the tech industry. Netflix has over the years built a highly robust cloud infrastructure, which has enabled the company to scale up seamlessly as it has seen exponential growth and as it has expanded to 190+ countries.
First Major Content Licensing Deal
In 2008 Netflix agreed a deal with Cable TV channel Starz to broadcast their content library for $30 million annually (Starz’s library of 2500 movies and TV shows, including movies Disney and Sony Pictures, became available for streaming on Netflix). The deal was a hugely important step in the history of Netflix. Starz on the other hand, probably expecting the streaming video industry to remain a niche segment, did not expect the deal to cannibalize their own PayTV offerings.
In 2011 Starz stopped its content licensing deal with Netflix, even after Netflix offers $300 million for licensing Starz’s library. Starz CEO went on record saying that he considered the deal a terrible mistake for Starz.
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Netflix and the Culture of Binge Watching
Netflix soon started entering into content licensing deals with television studios. For television studios the income from Netflix’s streaming videos supplemented other geographical licensing deals. Television studios only make episodes of previous seasons available, in the belief that showing the episodes from the last aired/ currently airing season would through online video streaming services would lead to them losing users from the cable platforms, who were the primary monetization channel for television studios. Netflix would later turn this monetization scheme on its head when they started licensing original content, becoming a major revenue channel for television studios in their own right.
Original Programming
In 2011, initiating their strategy to differentiate themselves from other services, Netflix started outlaying budget for original programming, with their first original series House of Cards premiering in 2013. Netflix Originals became a critical component of the Netflix Business Model. The original content initiative would enable the company to become less dependent on movie and television studios, giving it leverage over its supply chain of content providers, while helping build a loyal audience. Netflix’s original initiatives would be copied by other OTT providers as well, with companies like Amazon Prime Instant Video and India based Hotstar all investing on originals to broaden their appeal.
Spinning out DVD and Online Streaming
In 2011, in a move aimed at generating revenues for further investment into their video catalog, Netflix made major changes to their business model. The company separated memberships for DVD rental and online streaming businesses, getting users to buy different subscriptions. As a result of a price hike, 800,000 left the service, forcing Netflix to partially reverse the decision. Although the price hike remained, Netflix did not spin off the DVD company as a separate entity. Reed Hastings reiterated his belief that the future of home entertainment was in streaming video online, but regretted the communication gap with their customers. Although the move was something of a PR disaster, it was eventually only a blip as the company kicked off its exponential
359 ECONOMIC POLICY AND EU INTEGRATION growth. The price rise also helped boost the company’s revenues, putting it in a strong financial position.
Domestic Growth in US and International Expansion
Netflix’s tech innovations have ensured that even though the company contributes to over 30% of peak traffic in North America, its impact on the broader internet infrastructure is minimal. Innovations in video encoding and content delivery have ensured that the company has managed to minimize its footprint, meaning that customers continue to get the best possible experience while not impacting other internet services.
In January 2016 Netflix accounted for 37.1% of traffic in North America’s fixed networks. This share declined to 35.2% in June 2016, which can be attributed to encoding efficiencies that Netflix implemented. Per-title encoding optimization replaced a more general encoding criteria. This ensured that lower bitrates were used for better quality video encoding. For some titles, these optimizations would yield a 20% reduction in bitrates, while achieving a better viewer experience.
In January 2016 Netflix launched across the globe. The company’s streaming video service is now accessible in 190 countries, with the only major exception being China, with their cloud solutions scaling up and responding to the demands of global internet requirements.
From Dot Com Bubble to baring FANGs
There has been much internet-enabled transformation in the world that has enabled Netflix’s emergence. The company is a part of the tech industry’s FANGs, an acronym coined by US finance expert Jim Cramer in 2013, FANGs – Facebook, Amazon, Netflix and Google. Although a relative minnow when compared to FB, Amazon and Google (now Alphabet), the acronym reaffirms how Netflix has over the two decades of its history captured a significant mindshare amongst the internet populaiton.
These tech companies have gained the most as the internet has taken an increasingly more significant role in our lives. Mobile phones have made internet access ubiquitous, meaning that for the youngest generations internet now informs global culture much more than other media.
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Technological behemoths such as Google and Amazon have enabled technical infrastructure in the form of Platform-as-a-service (PaaS) that anybody can use. By abstracting away the technological complexities and leaving more capabilities in the hands of software developers, these companies have enabled the development of technological infrastructure to develop consumer-facing products. This history of Netflix would have been considerably different were it not for the maturing technical infrastructure and internet popularity.
Amidst a decline in market sentiments around tech companies in 2016, Netflix was one of the very few companies to have a steady stock. This signifies the confidence that investors have over the revenue-model of Netflix. Throughout the history of Netflix the company has been a step ahead of market trends – their decisions towards online catalogue of films, then offering an unlimited movie subscription model, then inaugurating streaming video, and finally creating their niche by investing in original content have contributed to the dominant position the company finds themselves in. In the early 2010s, at a point when its technology no longer served as an effective enough competitive advantage, Netflix took on the incumbent cable television industry by investing in high-quality content. As it reaches saturation in the US market, Netflix needs to expand internationally. Finding the right content formula for international audiences is the challenge facing Netflix.
9. Conclusions The global television industry is in the midst of a digital revolution. Online video has been spreading empowering consumers to watch what they want when they want it, sometimes cutting TV out of the equation altogether. Networks, with their long legacy of linear programming (that is, airing news, sports, and entertainment at set times), are fighting to stay relevant. Cable and satellite companies, too, have seen their traditional bundles come under attack from a lot of streaming offerings. Content producers are scrambling to develop hit shows that can help networks and digital aggregators differentiate themselves and capitalize on evolving consumer preferences. All these changes make the market for media stocks extremely volatile. Industry giants, such as Twenty-First Century Fox, Time Warner, Liberty Global, Sky, Dish Network, CBS, Viacom and, of course, Disney, all hit near-52-week lows, raising fundamental questions: Which
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companies will emerge as victors in the digital age? Which business models will prevail? Will current industry leaders retain their winning positions, or will they crash and burn?
References https://whatis.techtarget.com/reference/Whats-the-difference-between-pay-TV-and-over- the-top-OTT-TV https://www.broadbandtvnews.com/2016/07/18/global-ott-tv-and-video-revenues-to- generate-65-billion/ https://www.digitaltveurope.com/2018/09/20/global-ott-revenues-to-more-than-double- between-2017-and-2023/ https://digiday.com/media/what-is-over-the-top-ott/ http://widgets.weforum.org/techpioneers- 2015b/https://www.bloomberg.com/quicktake/the-streaming-revolution https://www.swrve.com/weblog/the-new-era-of-digital-media-and-what-it-means-for- marketing https://www.forbes.com/sites/aalsin/2018/07/19/the-future-of-media-disruptions-revolutions- and-the-quest-for-distribution/#bc5f9bb60b90 https://www.bcg.com/it-it/publications/2016/media-entertainment-digital-revolution- disrupting-tv-industry.aspx https://it.wikipedia.org/wiki/Storia_della_televisione https://digilander.libero.it/tender.rose/didattica/UA5%20- %20L%27evoluzione%20della%20televisione.pdf http://www.360com.it/media/evoluzione-consumo-televisivo-youtube-nuova-tv-3-0/ https://www.agendadigitale.eu/cultura-digitale/come-cambia-la-tv-italiana-l-impatto-dell- evoluzione-digitale-su-offerta-e-consumi/ https://www.gralon.net/articles/photo-et-video/tele/article-la-television--histoire-et-evolutions- technologiques-772.htm https://www.futura-sciences.com/planete/dossiers/geographie-visite-departement-hauts-seine- 1237/page/3/ https://www.ladissertation.com/Monde-du-Travail/Progrès-Technique/L'évolution-de-la- télévision-280495.html https://www.ladissertation.com/Monde-du-Travail/Progrès-Technique/L'évolution-de-la- télévision-280495.html
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An overall view of risk identification in Albanian’s Companies
Rovena Troplini232
Abstract
The business risk is one of the determinants of company’s capital structure and if the firm is exposed to increased volatility of the cash flow, then the level of debt will decrease. Empirical evidence is not clear about the relationship between leverage and risk. Bradley (1984) argues that, when there are significant financial costs, the debt and business risk are reciprocally linked to each other as it turns out even from the study of Titman and Wessels (1988). The bankruptcy costs, according to the Trade-Off Theory, may increase because of the rising of business risk, while the tax benefit from using debt may be reduced. This theory suggests that if the volatility of the income rises, firms should use less debt. A high operational risk, combined with high financing risks, will result in a higher probability of bankruptcy (Myers, 1984). While a complicated version of the Pecking Order Theory states that if a firm does not want to give up profitable projects in the future, then it should use less debt in the present (Dincergok and Yalciner, 2011). Thus, if a company poses a high risk, even due to asymmetric information, it will prioritize their sources of financing then it will try to accumulate internal funds and be more cautious about increasing external financing or debt. The material will analyze the business risk, and how is it related to capital structure of Albanian companies. In the same time we will identify what kind of Capital Structure Theory does Albanian company fits better. We will gather secondary data from financial statements, and we will try to identify the volatility of the income before interest and taxes. Also, we will try to identify if the volatility of their income had a relationship with the leverage.
Key Terms: Business Risk, Capital Structure Theory, Volatility of EBIT, Leverage
JEL classification: G30, G31, G32
INTRODUCTION Since the theory of firm’s value presented by Modigliani and Miller (1958), capital structure determinants have been a cores research topics for financial reserachers (Ullah, 2012). Several theories have been devoloped for capital structure like: • Trade off theory
232Lecturer, Finance Accounting Departament Business Faculty “Aleksander Moisiu” University of Durres [email protected]
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• Pecking order theor • Agency theory • Free cash flow theory • Signaling theory • Market timing theory Their aim was to prove the best ration of debt and equity needed to increase the company’s value. Considering the above theories, it seems that risk factor is critical for capital structure decision. Therefore, level of risk has been measured in our case for the construction/ commercial related to construction industry, determining also what kind of capital structure does these industry have, and which theory does fits beter for our industry. Also, another aim of this research is presenting a general view of most known risks that these sector faced during their activities like business risk and financial risk. Nevertheless, these findings will contribute in the literature by considering this as a modest study of some risk exposure factor for the construction industry and commercial industry233, though finding a connection of the capital structure decisions made by the manager towards profitability and banks too. So, the study incorporate the business risk factor and financial risk, through volatility of earning before interest and taxes, earning after taxes, debt and the capital structure.
To state an overall view of risk exposure in Albanian company, this study considers the data of two nonfinancial sector for a period of seven years from 2011-2017. LITERATURE The most knows theories of capital structure are described as below: ■ Modigliani & Miller (1958) theory – Zero taxes – Corporate taxes – Corporate and personal taxes ■ Trade-off theory (Korajczyk & Levy, 2003). – Optimal debt - equity mix – leverage (agency cost reduction and tax benefits) against the increased leverage cost (bankruptcy cost) ■ Pecking order theory (Myers & Majluf, 1984) – gives weight to internal financing. – Asymmetry of information among managers and security holders Firms with more volatile cash flows experience high operating risk and there are high chances of failure to pay their debt payments (Johnson, 1997).According to Kim & Sorensen (1986), firms with high operating risk uses smaller amount of debt in their debt equity mix because of increased financial risk.When the profitability of the firm increases, firms go for internal financing (Rajan
233Trading construction materials, also related with construction industry itself
364 9th INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY and Zingales, 1995; Supanvanij, 2006 and Akhtar and Oliver, 2009) which lowers their bankruptcy risk. Firm’s risk is compound by the sum of business risk and financial risk: •Is affected by volatility in earnings (σ of EBIT) and earnings become volatile when Busine the environment is uncertain. ss risk •Depends on business factors such as •competition,is allied with operating the leverage, promises etc. Financi related to debt obligation and al risk preferred stock financing (σ of ROE)
Many suggestion as Amidu (2007), present study incorporating the business risk factor. Bokpin, Anthony and Kofi (2010); Abor and Biekpe (2009 and 2005) studied the effect of risk exposure on the debt equity mix in emerging economy. This research gives empirical evidence of volatility of earning before and taxes, debt, earning after taxes, profitability ratio (return on equity), and capital structure literature. The study will add value to the literature of capital structure by providing practical evidence concerning the risk effect on the capital structure of the non financial firms from industrial sector and commercial (related to construction materials). For examining the effect of business risk and financial risk and its relation to leverage or capital structure of 40 firms for a period of 7 years. Glen and Singh, (2004) argues that corporations in emerging economies apply less debt in their capital structure and this level of debt inclusion have fallen down in recent years. As (Eldomiaty, 2007) says that level of efficiency and institutional arrangements in the emerging economies are different from the developed economies. Therefore, it is essential to conduct a study in an developing economy as Albania economy is for providing the insights about the present situation of capitalstructure arrangement in the non financial firms. As Jong, Kabir and Nguyen (2008) also argue that firm’ specific determinants of capital structure diverge from country to country and industrial sector to sector. Firms risk can be defined as financial risk and business risk (Ward, 1993). Business risk is affected by volatility in earnings and earnings become volatile when the environment is uncertain. Financial risk is allied with the promises related to debt obligation. When the business increased then the bankruptcy risk also increases which is positively related with financial risk of company (Peirson, Bird, Brown & Howard, 1990). Firms with more volatile cash flows experience high operating risk and there are high chances of failure to pay their debt payments (Johnson, 1997). According to Kim &Sorensen (1986), firms with high operating risk uses smaller amount of debt in their debt equity mix because of increased financial risk. Hence the firms working in highly risky environment should reduce their debt usage so that they can reduce business risk which will reduce their bankruptcy risk. This shows that business risk and bankruptcy risk are inversely related with use of debt (Andersen, 2005). Increased leverage in the capital structure increases the rate of
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interest and subsequently bankruptcy risk also increases (Baxter, 1967). When the debt is less risky than the interest rate increases slowly but when the debt is more risk than interest rate also increase accordingly at a higher rate. Riskiness of debt is related to volatility of firm’s earnings (Baxter, 1967). If the earnings are stable and less volatile, then the debt is considered as less risky and interest would be low but the volatility is higher and lead toward instability in earnings then debt is considered as highly risk and interest rate charged would be higher. The analysis of Mohd and Alnajjar (2015) confirmed that executives of industrial sector are very sensitive about risk factor, giving considerable importance to sales growth, profitability, business risk and size while incorporating andincreasing the level of debt in their capital structure. Long & Malitz (1985) found a negative effect; but Ferri & Wesley (1979); Flath & Knoeber (1980) and Titman & Wessels (1988) conclude that business risk have no significant relationship with leverage. This study provides a clear answer about the question of effect of business risk on optimal level of debt (Kale, Noe & Ramirez, 1991).
METHODOLOGY This study uses secondary data from financial statements of construction/ wholesale and retail trade sector (of construction materials) in Albania (40 firms), over the period of 2011- 2017234.Descriptive statistics from stata are used for data analysis. The variable used in this study to state a general view of risk are divided earnings before interest and taxes where its deviation will be used as a measure of business risk; while profitability ratio as return on equity (Roe) where its deviation is used as a measure of financial risk235. For capital structure we have seen the ration of debt to total asset.
• Why construction sector? GDP from Construction in Albania decreased to 35480.86 ALL Million in the fourth quarter of 2018 from 36655.55 ALL Million in the third quarter of 2018.
Figure 10: Albania GDP from construction GDP From Construction in Albania averaged 36104.41 ALL Million from 2009 until 2018, reaching an all time high of 45498 ALL Million in the second quarter of
234http://www.qkr.gov.al/kerko/kerko-ne-regjistrin-tregtar/kerko-per-subjekt/ 235 Hoti I.- “Amvisimi i rrezikut dhe Industria e Sigurimeve”, Botimi II, Tiranë, 2011
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2009 and a record low of 28028 ALL Million in the second quarter of 2014236.
RESULTS This section describes the results of descriptive statstics. Descriptive statistics charters and table explains the mean values and standard deviation values. a) Business RISK-Descriptive Analysis
Figure 1: The Mean value of earnings before interest and taxes
The mean value of business risk (measure as standard deviation of earnings before interest and taxes, Figure 1) is higher in commercial sector (45.49 mil) comparing to construction sector of 42.56 mil. The highest deviation of business risk is from construction sector (Figure 2) of 264 mil far away from commercial sector. While the lowest deviation of business risk is from commercial sector (0.639 mil) without much difference with construction sector (0.644 mil).
Figure 2: Highest and lowest business risk
236https://tradingeconomics.com/albania/gdp-from-construction
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Figure 3: Standard deviation of volatility of earnings before interest and taxes
Figure 3 shows us that construction sector had the highest deviation of Ebit (79.8mil) comparing with commercial sector (34.5 mil), showing that construction sector had faced a higher business risk comparing it with commercial sector.
Table 12: Year of highest and lowest business risk
Year of highest business risk Year of lowest business risk Construction Sector 2013 2016 Commercial Sector 2015 2017
Construction sector suffered first problems with business risk (2013), while problems with business risk came later at 2015 for commercial sector related with construction equipment. On the other hand construction sector decreased sooner its business risk (at 2016), and later on at 2017 the same did commercial sector. Years 2013-2015 were considered as the riskier, known as the years when construction sector decreased their role in economy (stated also from the Figure 1 above).
b) FINANCIAL RISK-Descriptive Analysis
Table 2: Financial risk-descriptive analysis
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AVERAGE ROE AVERAGE STAND DEV DEBT_STR
Construction sector 1.24 0.31 16.15787884
Commercial sector 21.90 78.18 95.58715308
Source: Stata results from the author
Financial risk measured with volatility of profitability ratio of return on equity results higher in commercial sector (related to construction materials) with 95.58% comparing with 16.15% of volatility of return on equity for the construction sector. Also the commercial sector has higher financial performance due to higher mean of ROE (21.9%) comparing to 1.24% of the construction sector. While debt structure is higher in commercial sector (even due to lower equity237) with 78% comparing with only 0.31% (even though construction sector had higher level of debt)
Table 3: Descriptive Analysis – All variables Variable Obs Mean Std. Dev. Min Max
EBIT 280 56,2 mill 125 mill -90,2 mill 869 mill
EAN 280 38,8 mill 93,1 mill -12,7 mill 729 mill
Debt 280 185 mill 480 mill 0.00 2,89 bn
Equity 280 198 mill 738 mill -35,4 mill 10,2 bn
ROE 280 8.99 60.57 -126.90 956.52
DEBT_STRUC~E 280 29.51044 161.16 0 1083.756
Source: Stata results from the author
From the overall data showed in the table 3 we see that earning before interest and taxes has a high deviation comparing with earning after taxes. Equity has higher deviation (738 mln) comparing to
237 Almost 30% of companies has the lowest equity required from the law
369 ECONOMIC POLICY AND EU INTEGRATION debt of (480 mln). The average profitability of firms is 8.99% with a higher deviation. The average debt structure of the firms result 29.5% with a high standard deviation of 161.16%.
CONCLUSION ■ Business Risk is present almost to the commercial sector – 2013 and 2015 the riskiest year ■ Firms use the internal funds for financing (Pecking order theory) – 36% of the firms has 0 zero Debt – 36% of the firms has the lowest capital required (100 000 ALL) – Strange higher ROE ■ Business risk does not effect debt structure (p-value>0.375) ■ Profitability has positive association with debt structure (trade off theory) – so that they could enjoy the tax shield benefits. ■ Outcomes are representing that construction sector had a low financial risk and low profitability comparing to commercial sector (the one related with construction materials) ■ Firms with good earnings and high profitability (ROE) do not take debt (pecking theory) – They use internal financing ■ When the firm’s revenues become more unstable than managers reduce the level of debt from their financial policy. – so, that bankruptcy risk could be avoided – they act like risk averse. ■ Both sector suffers more from the business risk rather than financial risk, being risk averse about using loan.
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REFERENCE
1. Rajan, R. G. and Zingales, L. (1995), “What do we know about capital structure? Some evidence from international data”, The Journal of Finance, Vol. 50, No. 5, pp. 1421–60. 2. Abor, J. and Biekpe, N. (2005), “What determines the capital structure of listed firms in Ghana”, African Finance Journal, No. 71, pp. 37-48. 3. Abor, J. and Biekpe, N. (2009), “How do we explain the capital structure of SMEs in sub- Saharan Africa?: Evidence from Ghana”, Journal of Economic Studies, Vol. 36, No. 1, pp.83 – 97. 4. Akhtar, S. and Oliver, B. (2009). Determinants of capital structure for Japanese multinational and domestic corporations. International Review of Finance, 9, 1-26. 5. Andersen, T.J. (2005), “Risk management, capital structure, and performance: a real options perspective”, Global Business & Economics Anthology, pp. 1-19. 6. Baxter, N.D. (1967), Leverage, risk of ruin and the cost of capital”, The Journal of Finance, Vol. 22, No. 3, pp. 395-403. 7. Bokpin, G.A., Anthony A.Q.Q. and Kofi, A.O. (2010), Risk exposure and corporate financial policy on the Ghana Stock Exchange”, The Journal of Risk Finance, Vol. 11, No. 3: 8. Eldomiaty, T.I. (2007), “Determinants of corporate capital structure: evidence from an emerging economy”, International Journal of Commerce and Management, Vol. 17, No. ó, pp. 25-43. 9. Ferri, M.G. and Wesley, H.J. (1979), “Determinants of Financial Structure: A New Methodological Approach”, Journal of Finance, Vol. 34, pp. 631-44. 10. Flath, D. and Knoeber, C.R. (1980), “Taxes, Failure Costs, and Optimal Industry Capital Structure: AndEmpirical Test”, Journal of Finance, Vol. 35, pp. 99- 117. 11. Glen, J. and Singh, A. (2004), “Comparing capital structures and rates of return in developed and emerging markets”, Emerging Markets Review, Vol. 5, No. 2, pp. 161-92. 12. Johnson, S.A. (1997), “An empirical analysis of the determinants of corporate debt ownership structure”, Journal of Financial and Quantitative Analysis. Vol. 32, No. 1, pp. 47-69. 13. Jong, A., Kabir, R. and Nguyen, T.T. (2008), “Capital structure around the world: the roles of firm and country-specific determinants”, Journal of Banking and Finance. Vol. 32, No. 9, pp. 1954-69. 14. Kale, J.R., Noe T.H. and Ramirez, G.G. (1991), The effect of business risk on corporate capital structure: theory and evidence”, Journal of Finance, Vol. 46, No. 5, pp. 1693-715. 15. Kim, W.S. and Sorensen, E.H. (1986), “Evidence on the impact of the agency costs of debt on corporate debt policy”, Journal of Financial and Quantitative Analysis, Vol. 21, No. 2, pp. 131- 44. 16. Korajczyk, R.A. and Levy, A. (2003), “Capital structure choice: macro-economic conditions and financial constraints”, Journal of Financial Economics. Vol. 68, pp. 75–109. 17. Long M. S. and Malitz. I.B. (1985), Investment Patterns and Financial Leverage. In B. Friedman ed., Corporate Capital Structures in the United States. Chicago: University of
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Chicago Press. 18. Michael Bradley, Gregg A. Jarrell, E. Han Kim, (1984), “On the Existence of an Optimal Capital Structure: Theory and Evidence”, Finance Volume. 19. Modigliani, F. and Miller, M.H. (1958), “The cost of capital, corporation finance and the theory of investment”, American Economic Review, Vol. 48, No. 3, pp. 261-297. 20. Mohammed Amidu, (2007) "Determinants of capital structure of banks in Ghana: an empirical approach", Baltic Journal of Management, Vol. 2 Issue: 1, pp.67- 79, https://doi.org/10.1108/17465260710720255. 21. Mohd I M Alnajjar, (2015), “Business Risk Impact on Capital Structure: A Case of Jordan Industrial Sector”, Global Journal of Management and Business Research (C finance) Volume XV Issue I Version I Year 2015. 22. Myers, S.C. and Majluf, N.S. (1984), “Corporate financing and investment decisions when firms have information that investors do not have”, Journal of Financial Economics. Vol. 13, pp. 187-221. 23. Peirson, G., Bird, R., Brown, R. and Howard, P. (1990), Business Finance.5th ed., McGraw- Hill, Sydney. 24. Supanvanij, J. (2006). Capital Structure: Asian firms vs. multinational firms in Asia. The Journal of American Academy of Business, Cambridge, 10, 324-330. 25. Titman, S. and Wessels, R. (1988), “The determinants of capital structure choice”, The Journal of Finance, Vol. 43, No. 1, pp. 1-19. 26. Ward K, (1993), Corporate Financial Strategy , Butterworth Heinemann, Oxford.
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Voluntary Turnover & Job Satisfaction in Employee Tenure Sonila Cvilo, 1 Përparim Dervishi2
Abstract The main aim of the thesis is to conduct a comprehensive research and explore the relationship of job satisfaction related with its impact in employee turnover in the Albanian banking sector. Today, banks are developing in the face of fierce competition. The reward offered to bank employees, to a considerable extent, is dependent on the reward of human capital that the market offers. Considering all the challenges the financial institutions are facing, the main aim of the research is to identify which factors are the most important in their employee’s job, as their most valuable asset. Data’s show a higher voluntary turnover rate and a lower ROI (of the human capital), in the Albanian banking sector. There are a lot of factors that indicate job satisfaction and which correlate with each other. Two models that passed through Regression Analysis in SPSS have provided the predictors of the job satisfaction. Interestingly, the ranking of the most important factor of job satisfaction match almost 100% with the ranking of the factors that an employee would leave the organization. Consequently, this compliance makes the relationship between job satisfaction and turnover solid. As a result, the model could be used to predict turnover. Understanding the gap between the expected and the actual employee’s criteria for job satisfaction helps to identify some strengths and weaknesses of the organization. By ensuring the consistency of the strengths and by working on the improvement of the weaknesses the organization
1 Corresponding author: Master of science in Business Administration, University of New York in Tirana, Senior Credit Risk Analyst, [email protected] 2 Dr. Perparim Dervishi, University of New York in Tirana, Chair of Business Administration Department, [email protected]
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can significantly boost the level of job satisfaction, have lower turnover rates and higher ROI of human capital. Key words: Voluntary Employee Turnover, Involuntary Employee Turnover, Job Satisfaction, Albania Banking Sector. JEL classification: O15, J28, C83,G21,
Introduction
There are a lot of aspects to study voluntary turnover. Its impact in the organization can be crucial in terms of financial costs, implicit costs, and profitability. Implicit costs consist on organization talented employees, by whom the companies urge to gain the competitive advantage in the market. Even though the efforts to predict the turnover ratios have been constant based on the macroeconomic data’s, deeper analysis and research should be done to understand the individual behavior, taking into consideration the changes and the dynamics of the markets due to globalization. Turnover has been studied and analyzed by a lot of researchers, which have laid the foundations before 80’ and which continue up to now. Nevertheless, different researches have combined factors and described variables in different dynamic ways through the years. The main variables presented before 80’ are concept that today are labeled as job satisfaction and perceived alternatives. Other variables like organization performance, work environment relationship with manager and co-workers, even network have been presented. Their analysis was focused mainly in the individual-level. A lot of other studies considering the foundation up to 80’ deepen more on explaining the process and the reasons for an employee to make the turnover decision, leaving their companies. In the years ahead researches broaden the framework on the consequences of turnover. The consequences of turnover were studied from the individual
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perspective toward the impact that provide into the organization. The research axes were extended to individual differences and employee personality, trait, stress and change related attitudes, studies on the unfolding model, contextual considerations, focus on staying not leaving, dynamic modeling of the turnover process, expansion of previous work. Organizations are facing the necessity to change, in order to survive and get competitive advantage in the market. Due to the work dynamics and rapidly changing environment employees have to adapt their behavior and attitude. The frequency of change and the pressure to be part of the changing environment have an impact in their attitude and decisions. What has increased the interest of the researches the last decade is the impact that job satisfaction and turnover have into the organization. The most salient impact is searched inside the business units. A lot of variances toward turnover are presented: stress and changing attitudes is often related with the frequency of change inside the organization and mostly by the way how it is communicated. The financial impact of turnover and especially in the employee and unit performance is presented. “Gender difference” is another factor represented as a variable in turnover decision. Through the years it has been researched a lot of different impacts due to gender differences. Women are more likely to make a decision of turnover comparing men. Gender differences are seen in another context like proportions of women and men inside the organization. Interestingly, it is found that when the proportion of women is higher than men’s, women are more volatile to leave the organization. In the organization context there is an impact of pay dispersion toward turnover decision. The high performers inside the organization were less likely to leave if the pay dispersion in another organization was higher. Contrary the low performance staff was more likely to leave the organization for high pay
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dispersion. Procedural and distributive justice is another variable closely related with the intention to leave the organization. Well-being of the employee it is represented as an important variable. There is a relationship between a person well-being with job satisfaction, job performance and turnover. It is concluded that employees identified with a low well-being, accordingly had lower job satisfaction, job performance and as a result higher intention on turnover. If work congruence is in line with the organization request and preferences the higher are the job satisfaction level and its commitment, which lead to a negative correlation with turnover intentions. One of the most important indicators of the stability of an employee into organization is job satisfaction but in the mean while one of the most difficult factor to measure, as it depends from one person to another and one factor to another. The importance of satisfaction in the workplace has become vital for the organizations. The importance of how employees feel toward their job has got a lot more focus than before. Globalization, market dynamics and competition lead to an unavoidable change for organization. The most valuable asset that can make this change and lead the organization forward are employees. Employees are the competitive advantage an organization can have. Due to the importance of one the most important factors that implicates turnover, SHRM as a leading provider of the data’s and resources to the Human Resource Managers all over the world, presents a survey every year since 2002. One of the key variables that SHRM is focused and analyzes as the most important in turnover decision is employee satisfaction. Through a study done for 15 years in a row, the organization presents the development and trend of the employee satisfaction. The survey presented in this material is in line with SHRM reports and its insightful conclusion. Banking system is changing rapidly due to the 4 Revolution: Technology. Higher turnover rates and lower ROI of human capital are presented for the last 2 years. During
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the last year’s most of the banks have faced a lot of struggles with their financial performance. Turnover ratios, staff motivation, and satisfaction are critical in their solvency. Staff development and sustainability are the main focus and in the meantime the main challenge of Albanian banks. Technology and consistent change require reformation of the human capital. The banks should build new human capital ready for the challenges ahead, and in the main time develop and maintain the excising one. Considering all the challenges the financial institutions are facing, the main aim of the research is to identify what factors are the most important in their employee’s job. Understanding the gap between the expected and the actual employee’s criteria for job satisfaction helps to identify some strengths and weaknesses of the organization. By ensuring the consistency of the strengths and by working on the improvement of the weaknesses the organization can significantly boost the level of job satisfaction, lower turnover rates, and higher ROI in human capital.
1. Literature review
“Employee turnover by definition is viewed as being both the entrance of a new employee into the organization and the departure of existing employees from the organization.” (Price, 1977) It is classified in two groups as voluntary and involuntary turnover. Voluntary turnover is classified as: the employees who leave the organization by their own decision making. So, voluntary turnover is initiated by the employee itself. Involuntary turnover is considered dismissals, and exits due to different reasons like: illness, deaths etc. Involuntary turnover is initiated mostly by organization. Turnover can be impacted by different reasons that may be internally or externally, inside or outside the context of organization. External factors can be defined as industry trends, and macroeconomic conditions and
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trends.(Griffeth & Hom, 2004). According to (Bucknall & Wei, 2006) in their book “Magic Numbers for Human Resource Management the mathematical formula for measuring staff turnover in any organization can be:
Equation 1: Turnover Rate
= 100 𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁𝑁 𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇𝑇 ∗ This formula is limited 𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴𝐴because doesn’t 𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜give the voluntary𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜𝑜 employeeℎ𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒𝑒 ratio, which is with much more interest for the organization. Additionally, the company cannot be focused and study the reason of the turnover intentions. Higher turnover ratios can be impacted by different reasons. The focus of the research consists on the factors that primarily indicate voluntary turnover.
1.2 Why is important studying voluntary turnover? We are much aware that from significant aggregate-level economic- demographic studies that the unemployment rates and economic market conditions influence the turnover rate. Accordingly, when it is assessed and analyzed the process of decision making in individual levels through the organization to stay or leave, it is found that the economic market conditions and moreover the unemployment rates do not influence that decision. (Holtom B. C., Mitchell, Lee, & Eberly, 2008) Moreover, based on the Bureau of Labor Statistics indicates that different industries face different ratios. Firstly, involuntary turnover like firing, lay-offs is presumed to be within the control of the organizational leaders. Nevertheless, the findings for voluntary turnover are not predicted by the models or by organizations. Due to its
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impact in the organization both researchers and managers are eager to predict the factors that lead to a turnover decision. Secondly, high performance and intelligent employees have more external opportunities in the job market which makes more vulnerable to leave the organization (Trevor, 2001). High rates of voluntary turnover can have a strong correlation with the organization performance (Harter, Schmidt, & Hayes, Business-Unit-Level Relationship Between Employee Satisfaction, 2002) Thirdly, voluntary turnover can be considered to have a positive impact depending on the employee that leaves the organization. It is linked to the employee behavior, attitude, and performance.(Dalton & Todor, Turnover Turned Over: An Expanded and Positive Perspective, 1979)(Sullivan, 2009). For example, a low-performance employee or an employee that uses backbiting which leads to an unhealthy work environment. Backbiting as a definition is talking negatively about a third person which is not present. According to the psychotherapist Glenn D. Rolfsen, this phenomenon is harming the health of the employees in the organization and it is very difficult to change. (Rolfsen, 2016) Fourthly, it is important for the managers to set the balance between the desirable and no desirable voluntary turnover, in order to embolden not accurate turnover cases. A very important issue for the organizations is to distinguish between avoidable and unavoidable turnover (Barrick & Zimmerman, 2005) Financially, the voluntary turnover costs are sheltered from the managers. Furthermore, these costs are not being registered in the financial statements as expenses for the companies. These costs are covered by the selection, recruitment and training expenses. Additionally, implicit costs like customer
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dissatisfaction and its continuity which vary from the turnover or the implicit cost of knowledge are unmeasured. The replacement cost of an employee is estimated to vary up to 200% of the person’s salary. The replacement cost varies from one industry to another from one type of job to another and as well some other factors (Brooks, Terence, Thomas, & Marion, 2008). A study estimated that turnover cost in an organization can be as 12% of pre- tax income for the average companies and 40% for companies with 75% TO rate.(HR & Allen, 2008). So, financial impact in high turnover ratios can be critical for organizations. The turnover costs and rates vary across the globe depending on the mobility to move, economic condition and of course individual decision making. Some studies show that there are differences between the European Union and the United States. Euro stat data indicate that Europeans change jobs 50% less than the American’s in a specific year. Furthermore, there are rates of 0% of voluntary turnover in many parts of the world. Nevertheless, it is not explained by the job enrichment, employee empowerment or reward system only. As a conclusion, there are a lot of aspects and reasons to study voluntary turnover. Its impact in the organization can be crucial in terms of financial costs, implicit costs, and profitability. Implicit costs consist of its talented employees by whom the companies urge to gain the competitive advantage in the market in many different industries (Blair, 2011). Even though the efforts to predict the turnover ratios have been constant based on the macroeconomic data’s, more deeper analysis and research should be done to understand the individual behavior, taking into consideration the changes and the dynamics of the markets due to globalization (Brooks, Terence, Thomas, & Marion, 2008).
380 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY 1.2 Turnover research before 80’ and up to now A lot of important models according the voluntary turnover were developed before the period of 1980. This period laid the foundations of the researches and studies developed later after. The most important researches who founded the key principles, key models of turnover and scientific research’s for the period are listed as below: March and Simon (1958), Porter and Steers (1973), Mobley (1977), Mobley, Griffeth, Hand, Meglino (1979), Price and Mueller (1981, 1986). Nevertheless, different researches have combined factors and described variables in different dynamic ways. The main focus up to 90’ consists on the personal condition of the individuals. The key variables of this period are factors like exhaustion and stress related with the individual. These 2 variables are categorized in two groups: organization variables and person statement focusing on their behaviors and relationship with colleagues, managers. The period presents researches focused in more complex and dynamic organization variables like culture, group cohesion, organizational reward systems, gender composition, and demography. In some studies, pay structure and inequality is shown to be negatively related with turnover (Pfeffer & Davis-Blake, 1992). In addition, the relationship with colleagues, managers, and organization environment had a considerable focus in this period According to (O'Reilly III, Chatman, & Caldwell, 1991) the employee value should fit with the organization values. Turnover is positively related with the relationship of these two statements. Mentoring and social network are presented to be as other key variables in turnover. Turnover is less likely to happen if the social network inside the organization is stronger, and the opposite.(McPherson, Popielarz, & Drobnic, 1992)
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Furthermore, the key variables empathized mostly like stress; exhaustion and uncertainty are considered to be very important in the decision of turnover. These factors can be classified as burnout phenomenon. Burnout phenomenon appeared to be positively related to turnover. (Wright, Thomas A; Cropanzano, Russell, 1998). During this period of time and up to now deeper researches have been done. The researchers have been focused on 7 directions related with: individual differences/employee personality, and trait, stress and change related attitudes, studies on the unfolding model, contextual considerations, focus on staying not leaving, dynamic modeling of the turnover process, expansion of previous work. Employee personality and its trait are considered as two influential factors. According to a research made by (Barrick & Zimmerman, 2005), the turnover can be predicted in the selection phase through combined bio data and trait like self- assuredness and conclusiveness. The focus in individual differences and its personality should be developed further due to the dynamics it shows and its relationship in the decision process of turnover.
2 The outcome of voluntary turnover 2.1 Stress and changing attitude as key variable Due to the work dynamics and rapidly changing environment employees have to adapt their behavior and attitude. The frequency of change and the pressure to be part of the changing environment have an impact in their attitude and decisions. Changing environment and the way how it is communicated to the employees lead to a negative impact and turnover decision. (Oreg & Goldenberg, 2015). Employees with negative attitude and not open to change lead to low job satisfaction and higher intention to quit. The psychological effect during the organization changes has a strong correlation with the decision to quit. It differs
382 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY from one individual to another, as it is related with the individual personality, behavior, and trait. The organization transformation change should have a focus on employees, due to the effect that it has as being positively related with turnover intentions.(Oreg, Shaul; Michel, Aleksandra; Todnem, Rune, 2013). Stress as a key variable in the decision process of turnover is categorized by the researches in different categories. Categories are defined as critical life events, hassles and chronic stressors. These categories have different impact in stress level.(Griffeth & Hom, 2004) The organizations are facing downsizing due to the need to adapt and change. This changes and especially downsizing, the question to stay or to live, implies stress at employees and even incentives to quit. (Avey, Luthans, & Jensen, 2009)
2.3 Gender differences and well-being impact “Gender difference” is another factor and a variable in turnover decision. According to (Weisberg & Kirschenbaum, 1993) there are gender differences which are negatively related to turnover. Women are more likely to make a decision of turnover comparing men. Interestingly, it is found that when the proportion of women is higher than men’s, women are more volatile to leave the organization. Furthermore, in the organization context it is studied as well the impact of pay dispersion toward turnover decision. The study has analyzed if there is an incentive for the employees to quit in competitors that offers pay dispersion higher than their actual organization. The study concluded that the most important variable in this context were the employee performance. The high performers inside the organization were less likely to leave if the pay dispersion in another organization was higher. Contrary the low performance staff was more likely to leave the organization for high pay dispersion. (Carnahan, Rajshree, & Benjamin, 2012)
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Person context toward turnover has been studied for 2 years through a sample of 112 managers by (Wright & Bonett, 2007) . The study consisted on the relationship of a person well-being with job satisfaction, job performance and turnover. It concluded that the employees identified with a low well-being, accordingly had lower job satisfaction, job performance and as a result higher intention on turnover. Well-being as a definition by (Ryan & Deci, 2001) is described as below:” Well-being is a complex construct that concerns optimal experience and functioning. Current research on well-being has been derived from two general perspectives: the hedonic approach, which focuses on happiness and defines well-being in terms of pleasure attainment and pain avoidance; and the eudaimonic approach, which focuses on meaning and self-realization and defines well-being in terms of the degree to which a person is fully functioning”.
2.4 Organization-level consequences The impact of turnover in the organization exceeds the limits of the cost of substituting the employee. There has been a lot of researches on how voluntary turnover affects the organizational performance. According to a research based on 48 months’ turnover data’s in a US store found that turnover rates influence performance and as a result profits, and customer margins. With the increase of turnover there is a decrease of profits and clients. (Ton & Huckman, 2008) A research done in 7’939 business unit and 36 companies, concluded that the employee level satisfaction inside the organization have a negative impact in turnover as well as business unit performance. (Harter, Schmidt, & Hayes, Business-Unit-Level Relationship Between Employee Satisfaction, 2002). Another research has been done in a multi-unit commercial bank in United States, in 31 regional subunits banks which operate in 50 states. The data were gathered for 2 years. The ratios measured were the one of voluntary turnover, as it was considered an independent factor from organization control. The other variable
384 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY used is organization performance which is measured by both profitability and customer satisfaction. Customer satisfaction was measured using a survey. The research concluded that the turnover rates caused by unexpected employee retention result in a decrease of organization performance. Recommendations focus HR to appropriate training and plan replacements of experienced staff and should apply a strategy plan to have a constant base of employees in order to avoid the replacement with inexperienced staff which led to inefficiency. (Morrow & McElroy, 2007)
3 Job Satisfaction 3.1 Job Satisfaction and turnover Job satisfaction has received a very important focus as one of the most important key variables that impacts turnover. Accordingly, there have been done a lot of studies and researches in this field. The relationship between job satisfaction and turnover has been concluded since 1977 (Mobley, 1977) up to the last decade from a lot of different researches, studies and surveys. Even though there are a lot of other key variables that impact turnover as it is mentioned and elaborated in the chapters above, the linkage with job satisfaction according to the researches have been consistent through the last 5 decades.i One of the most widely used definitions in organizational research of Locke (1976), defines job satisfaction as "a pleasurable or positive emotional state resulting from the appraisal of one's job or job experiences" (p. 1304). The main factors presented in the Organization Behavior of (Robbins & Judge, 2012) that implicates the difference between high levels of job satisfaction and low levels of it are: work itself, pay, promotion, supervision, coworkers. These factors have been provided that are being perceived differently from different employees. Not only demographic factors, culture or country can affect them differently but as well the personality of the employee. In different studies it has been presented that the levels of job satisfaction have been
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different. The difference varies from one continent to another and as well from one country to another. According to a study done form University of Zurich to different countries the level of job satisfaction is presented differently (Robbins & Judge, 2012):
Fig. 1. Level of job satisfaction by country
Source: M. Benz and B. S. Frey, “The Value of Autonomy: Evidence from the Self-Employed in 23 Countries,” working paper 173, Institute for Empirical Research in Economics, University of Zurich, November 2003
Another study has been issued in 2009 (Borooah, 2009) to compare the job satisfaction levels in Europe, between the western and eastern countries. The research was based on the data’s of 20’000 questioners filled by employees. The result of the study showed that the level of job satisfaction of West European countries (France, Germany, Hungary, Italy, Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom est.) were higher that East European Countries (Russia, Ukraine, Belarus, Romania, Moldova, Bulgaria est.) An issue identified in the research was that the importance of the weight of the factors defined as “important”, were directly related to the job satisfaction levels. The ones that defined as the most important the external aspects like pay, promotion, holidays, the more likely was to be less satisfied. The greater the weight on the internal aspects likes responsibility, relationships inside the organization, the more likely was to be with higher level of satisfaction. In the end, the study suggests that one of the reasons why the Western employees present high levels of job satisfaction is due to the
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investment and focus that the companies dedicate to the attributes of job satisfaction. The impact of low levels of satisfaction into organization for employees results in some response from the employee perspective: a) Turnover intentions which can lead for searching new job opportunities b) Loyalty toward organization c) Employees remain patient and wait for the organization to “do the right thing” d) Neglect is a response toward organization followed by absenteeism.
3.3 SHRM Organization about Job Satisfaction The SHRM Organization is founded in 1948. The organization is part of 275’000 members in 160 different countries. According to data’s presented, the more experienced are more likely to make a turnover decision. The average rate is 12%.Through a study done for 15 years in a row, the organization presents the development and trend of the employee satisfaction. For 2015, the survey is assessed on 43 aspects of employee job satisfaction and 37 aspects of employee engagement. In 2015, 88% of the employees reported they were overall satisfied with their job. Since 2002, this trend is the highest reported from the employees. Even though the majority of the employees were satisfied the satisfaction was presented to be some extent, which represents the opportunity for improvement. Additionally, the employees indicated that 40% were very satisfied with their organization and 45% of them were somewhat satisfied. Due to a more stable economic condition presented in the last years, the organizations have had the opportunity to introduce incentives and motivate their employees in order to get satisfied employees. On the other hand, the employees have the opportunities to fit their needs in the job market, which gives them more confidence to evaluate their alternatives. 45% of the employees reported that they would be likely or very likely to look for other jobs outside their current organization.
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Fig. 2. Employee Job Satisfaction 2005-2015 Additionally, to the level of job satisfaction the survey is based in the importance of the contributors of job satisfaction. The top five contributors for 2015 are ranked as below: 1. Respectful treatment of all employees at all levels 2. Compensation/pay, overall 3. Benefits, overall 4. Job security 5. Trust between employees and senior management
4. A survey in Albanian Banking Sector about job satisfaction 4.1 The research objectives The main aim of this research is to conduct a comprehensive research and explore the relationship of job satisfaction related with the impact of it in employee turnover in the Albanian service sector. Today, banks in Albania are developing in the face of fierce competition, nationally and internationally. The reward offered to bank employees, to a considerable extent, is dependent on the reward of human capital that the market offers. Banking sector has an advantage comparing the other sectors when it comes to compensation structure, motivation and engagement. Bank employees also benefit from add-ons depending on the performance level as
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well as various benefits such as: social and health insurance under the applicable legislation, low interest housing loans, training, etc. The training and methods used are more effective and contemporary. The recruitment resources for banks have been mainly universities, bachelor and master programs. Recruitment procedures are characterized by transparency and emphasis is placed on the ability and potential of the individual to perform the tasks and in the same time be a team player. The average number of recruited staff per year is approximately 440, or 7% of the staff, who has served and refreshes the staff from the point of view of age, potential, and so on. As a result, the average age of staff is 35.3 years old, and the median is 35.0 years old, while the interval, from the minimum to the maximum of the average age of employees, ranges from 33 to 37 years. This process has increased the potential staff, and at the same time has diversified the specialties, giving the banks guarantees for a long-term success. Related to the recruitment process, there has been continues training in function of increasing human capital, thus increasing the competencies of existing employees and offering them the opportunity for further development in the organization. Training plans are designed in line with individual needs of employees in order to meet the demands of creating new jobs and modernizing existing ones. These are realized through a pipeline where the needs of individual requirements are identified both in the short and strategic terms. During 2015, the number of days spent on average for an employee for training is 2.1 while in some banks it is spent from 6 to 13 days; depending on the training strategy each bank has. (Source: Albanian Association of Banks) During the last year’s most of the banks have faced a lot of struggles with their financial performance. Turnover ratios, staff motivation, and satisfaction are critical in their solvency. Staff development and sustainability is the main
389 ECONOMIC POLICY AND EU INTEGRATION focus and in the meantime the main challenge according to the Human Resource Managers of the Albanian Banks: Valbona Zeneli (Raiffeisen Bank Albania), Ariana Tushi (National Bank of Albania) , Entela Zigori (Intesa San Paolo Bank Albania) (Zeneli, Tushi, & Zigori, 2017). A questioner is development to measure the level of job satisfaction but as well as to identify which are the most important factors that drive their job satisfaction. The questioner has identified some insightful findings. The data collected from the questionnaire have been analyzed to understand any important correlation between these two factors and the job satisfaction and the extent in which the variance of job satisfaction can be explained by these factors. Another field of interest of this study is to rank and rate different sources of job satisfaction. By analyzing the correlation between the level of job satisfaction and the ranking of the sources of job satisfaction important hints can point out. Understanding the gap between the expected and the actual employee’s criteria for job satisfaction helps to identify some strengths and weaknesses of the organization. By ensuring the consistency of the strengths and by working on the improvement of the weaknesses the organization can significantly boost the level of job satisfaction.
Fig. 4. Staff Turnover in Banking System 2016-2016
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Source: Albanian Association of Banks
4.2 Research Methodology Demographic data The target populations of the research were employees of the banking sector in Albania. The target population works in 7 banks. The distribution of the respondents is presented below. According to the statics of Bank of Albania and Albanian Association of Banks, the total population in the banking sector is 6’588 employees presented from banks in the end of the years 2016. The population of the institution of the employees interviewed is 3’757 employees or (57%), distributed as below in the
Research Population 7% 8% Raiffeisen Bank Albania IntesaSanPaolo Bank Albania 11% 36% Alpha Bank Albania Tirana Bank Societe Generale Albania 12% ProCredit Bank 11% 15%
Fig. 5. Research Population The sample size of the research includes 139 employees distributed as below:
Interviwers Distribution Procredit Bank Shqiperi 7% 4% 7% 23% Banka Societe Generale Albania Intesa San Paolo Bank Shqiper Raiffeissen Bank Shqiperi Banka Alpha SH.A 21% Tirana Bank 18% NBG Bank 20%
Fig. 6. Interviewers Distribution The population and sample based on gender is presented as below:
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Gender Population Male 33% Female 67%
Gender Sample
Male 25% Female 75%
Fig. 7. Gender Population Fig. 8. Gender Sample
Age distribution in the banking sector is presented with an average age of 35.6 years per staff. The same is for the population of the employees of the respective banks. The results of the survey show a concentration in the category 24-34 years old by 64.49%.The category 18-24 years old is presented by 16.67%, which shows the new comers in the banking system. The age distribution is concentrated by Y Generation, both in the population and the sample data’s. Considering the dynamic, frequent changes and technology in the banking system this generation is considered to adapt more easily. Below it is presented the sample data about age distribution:
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Age Distribution er or 55 55 or older old to 45 54 45 to 54 to 35 44 35 to 44 to 25 34 25 to 34 to 18 24 18 to 24
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%
Fig. 9. Age Distribution Work experience is another independent variable presented in the research. Average length of service of employees in the banking sector is 6.4 year/employee. Considering the flat organization in the banking sector it was decided that all the participants in the questioner were from Head office and in the specialist position. The deployment of the staff in the between Head Office and Network is 49%/51%. Considering the data’s presented for the population it is estimated that the sample represents significantly the population in the banking sector.
Survey data collection The research is based on a questioner. The questioner was developed based on the questioner done by SHRM organization during the last 15 years, but as well the questioners like Minnesota Questioner. The questioner was developed in four main areas. First area is developed with the main focus on demographic data’s; second area is focused in the level of job satisfaction, and all the independent variables like: a) Opportunities for career development b) Relationship with direct supervisor c) Relationship with co- workers d) Work Itself (autonomy and independence) e) Job Security f) Compensation/Pay d) Work Stress. The level of satisfaction is measured in a scale from 1- 4 (1 is very dissatisfied- 4 very satisfied) for each of the
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independent variables. Compensation from a scale 1-5 (and Work stress are measured on a scale from 1-5). The third area is focused in ranking the most important factor of job satisfaction. The least important is presented by 1 and the most important is presented by 7. The fourth area is focused in ranking the most important factors an employee will leave the organization on a ranking order from 1 the least important to 7 the most important factor. Each alternative in the questioner will serve as an independent variable that will be analyzed further in the multiple-regression analysis. Interviewers were provided with the confidentiality of the questionnaire data, before participating in the survey.
Research design: Cross-sectional studies Research design is based in a cross-sectional study from a sample of 139 respondents of employees in the banking sector during the period May 2017.
Data analysis Survey results were analyzed using SPSS version 22 (provider IBM Statistics). Descriptive analysis has been used. Multiple regressions are also used to measure the depended variable job satisfaction and independent variables mention above. It is used logistic regression to measure the dependent variable (job satisfaction) which is a binary variable, which make the linear regression inappropriate.
4.3 Results, correlation, descriptive statistic and regression analysis Multiple regression analysis is used to analyze the correlation between the depended and in depended variables of job satisfaction. The overall satisfaction in the banking sector represented by the sample is presented as below:The results of the data’s show that 88.3 % Albanian banking employees are more than 75% satisfied with their job. Respectively 59.1% have a shown a level of satisfaction
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50%-75% and 29.2% showed a level of satisfaction of 75% -100%. Nevertheless, only 11.7% showed a level of job satisfaction below 50%. Below are presented as well the descriptive statistics for the ranking of the most important factors of job satisfaction.
Std. Descriptive Statistics Mean N Deviation Overall Satisfaction 2.15 0.69176 137 Career Development Opportunities 4.92 2.052 103 Work Itself (Challenging, autonomy 4.45 2.066 111 and independence) Compensation/Pay 4.86 1.533 106 Relationship with direct supervisor 3.79 1.681 110 Relationship with Co-Workers 3.56 1.797 111 Job Security 3.7 2.068 121 Workplace Stress 4.18 2.111 130 Fig. 10.Descriptive Statistic for Overall Satisfaction
Hypothesis 1: Gender is negatively correlated with job satisfaction level In this case it used Pearson Correlation because two variables are correlated, and there is a linear correlation. A negative value presented from Pearson Correlation means a negative correlation between the independent variable gender and depended variable job satisfaction. Nevertheless, this relationship is not significant due to the result of p >0.05. So, satisfaction level has not significant relationship with gender. The same it is applied for age and experience as it is presented in the population pyramid and in the correlation table. There is a negative correlation, but due to a p>0.05 this relationship it is not significant. As a result, level of job satisfaction is not correlated with the years of experience of the employee.
Ranking the most important factors that boost job satisfaction Two of the last questions of the questioner were composed to rank the most important factor of job satisfaction, and the other one was to rank the most
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important reason to leave the organization. The respondents had to rank from the least important reason to the most important one. Considering SPSS results on Standard deviation, Variance, Skewnees, Standart Erro of Skewness, Kourtis and its standard error the values are between the segments -2, +2, which presents a normal distribution of the sample. Considering the data’s presented, in the figure below are ranked the independent variables from the least important to most important:
The most important factor of Job Satisfaction
Relationship with co-workers 3.56 3.70 Relationship with direct supervisor 3.79 4.18 Work itself (Challenging, autonomy and… 4.45 4.86 Career development opportunities 4.92
Fig. 11. The most important factor of Job Satisfaction
The respondents have ranked as the most important factor Career Development Opportunities. Banks are investing in their employees continuously. Considering the level of education and the flat organization structure that bank has the career development opportunities are the one that are considered to be from employee perspective. Nevertheless, the second most important factor is Compensation/Pay with a small difference of 0.06 points. Interestingly, even in a development country like Albania, with slight trend of economic growth the compensation it is not evaluated as the most important factor that an organization can satisfy their employees. The fact that compensation is not in the first place is due to the payment structure that banking system has comparing the other sectors. It is evaluated that the average salaries in banking sector are higher than all the other sectors in Albania.
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According to a study done by (Robbins & Judge, 2012) presents that once an individual reaches a level of comfortable living, virtually the relationship between job-satisfaction and pay disappears. In the third place it is ranked the work itself which is related with the job characteristics, like independence, autonomy. This factor has a large contribute in the job satisfaction level. From the results of the level of satisfaction appeared that 86% of the Albanian Employees are somewhat satisfied and 33% very satisfied with their work characteristics, autonomy and independence. The results are presented with a standard deviation of 0.86:
Work Itself 13% 1% 33% Very Satisfied Somewhat Satisfied Somewhat dissatisfied Very dissatified 53%
Fig. 12. Work Itself Considering the flat organization structure in the banking sector the autonomy and independence the employee get in their daily job is a drive toward satisfaction. Additionally, the banks present different projects to their employee who gives them the freedom and flexibility to decide. Work place stress is ranked in the fourth place. From the research, resulted that respondents were at least half of the time under stress. Due to the results, and the high level of stress presented, further analysis through SPSS has been elaborated below:
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Never, 3.0% Always, 2.2% Most of the time, Once in a while, 23.0% 25.2%
About half of the time, 46.7%
Fig. 13. Work place stress
Considering the high level of stress reported from the questioner a hypothesis is elaborated. Hypothesis: Stress effect is negatively correlated with job satisfaction
Correlations Overall Stress Satisfaction Correlation 1 -.226** Overall Coefficient Satisfaction Sig. (2- tailed) . 0.004 N 137 131 Kendall's tau_b Correlation -.226** 1 Coefficient Stress Sig. (2- tailed) 0.004 . N 131 131 Correlation 1 -.242** Overall Coefficient Satisfaction Sig. (2- tailed) . 0.005 N 137 131 Spearman's rho Correlation -.242** 1 Coefficient Stress Sig. (2- tailed) 0.005 . N 131 131 **. Correlation is significant at the 0.01 level (2-tailed). Fig. 14. Correlations between Overall Satisfaction and Stress
Two stars in - 0.226, moderate negative correlation, and significant at 1% level, its significant different from 0. Additionally, p-value (Sig. (2-tailed) is tiny 0.0004. So there is a negative correlation between job satisfaction and work stress reported. Due to the work dynamics and rapidly changing environment employees have to adapt their behavior and attitude. The frequency of change and the pressure to be part of the changing environment have an impact in their attitude and decisions. Changing environment and the way how it is
398 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY communicated to the employees lead to a negative impact and turnover decision. (Oreg & Goldenberg, 2015). Employees with negative attitude and not opened to change lead to low job satisfaction and higher intention to quit. The work stress should be carefully indicated by companies, so that they do not pass in the burnout process. In order to understand better the reasons, of the high level of stress reported from the employees, further analysis should be done. Nevertheless, some of the reasons affected the results can be the changes, and challenges the banking system is passing through. The technological changes, the NPL ratios of arrears, the staff abbreviation could be some other reason. Relationship with supervisor is the other factor ranked after work stress. This factor is considered to be very important, even more important than the relationship with co-workers and job security. 87% of the respondents were more than 50% satisfied with their relationship with their supervisor, in terms of communication, performance recognition, trust, and respectful treatment), with a standard deviation of 0.78.
Relationship with direct supervisor 9%4% Very satisfied 41% Somewhat satisfied Somewhat dissatisfied 46% Very dissatisfied
Fig. 15. Relationship with direct supervisor
Considering the education level, transparent structure of salary, performance measurement and recognition in the financial institution like banks it is considered normal to have such a high level of satisfaction. This factor has been one of the most ranked in the SHRM report in the sixth place. The relationships with direct supervisor, respectful treatment, open communication, and
399 ECONOMIC POLICY AND EU INTEGRATION performance recognition are contributors in the satisfaction level. Additionally, it can influence strengthen the commitment of the employee in the organization and furthermore improving employee performance, through feedback, encourage, constructive dialogs especially during difficult time and changing. Job security is ranked in the sixth place. This factor is mostly influenced by the economic condition. In the years of 2008-2011 this factor has been ranked as one of the most important in the job satisfaction of employees. Actually in SHRM Report it is reported in the 4 place. This factor is evaluated in terms of stability at workplace: organization financial stability, employee turnover). Even though, the financial ratios of banks have not been with an increase trend, in the last year it has shown a more stable financial situation. Form the research resulted that 83% of the respondents were somewhat satisfied, and very satisfied. Only 17% of the responded were not satisfied. In these terms, even in difficult times of profitability toward financial statements of banks, they offer security in the working environment.
Job Security
Very Satisfied Somewhat satisfied Somewhat dissatisfied Very dissatisfied
17% 52% 15% 2% 31%
Fig. 16. Job Security
The last one from the importance is ranked relationship with co-workers. Even though it is ranked I the last place it is a very important factor that can boost the engagement if the employee in the organization as well as the productivity. A better relationship with co-workers is important for a better work environment,
400 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY moral support, respectful treatment, better communication, which are critical in the changes time inside the organization. Even more can lead to less backbiting, which directly influence the behavior. Good networking inside the organization is bond which lead to less turnover in the organization. In the SHRM report 77% of the employees reported they were satisfied with their relationship inside the organization. 88% of Albanian employees reported being satisfied:
Somewhat Very dissatisfied, dissatisfied, 8.8% 2.9%
Somewhat Very satisfied, satisfied, 47.4% 40.9%
Fig. 17. Relationship with co-workers
Ranking reasons to leave the organization Below it is presented the ranking of the most important reason ‘s the employees consider in leaving their existing organization.
Reason's to leave the organization (SHRM)
2 Opportunities for training and development 2.1 2.3 Challenging work 2.5 2.7 Workplace stress 3.1 3.2 Meaningful work 3.3 3.7 Career advancement opportunities 4.3 4.6 Compensation/pay 4.9
Fig. 18. Reason’s to leave the organization (SHRM)
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Interestingly, comparing with the job satisfaction factors are rated differently. Instead the Albanian employee presented almost the same ranking as job satisfaction ranking. This enforce more the importance of the job satisfaction factors they value, and are important for them. Below it is presented the Ranking of the Albanian employees about the reason that they could leave their organization ranked by importance:
Reason's to Leave the organization (Survey)
Relationship with co-workers Challenging work, autonomy and… Career development opportunities Career Challengin Relationsh developm g work, Relationsh Compensa Workplace ip with Job ent autonomy ip with co- tion/Pay stress direct Security opportunit and workers supervisor ies indepen… Series1 5.10 4.84 4.44 3.85 3.75 3.72 3.36
Fig. 19. Reason’s to leave the organization (Survey) Regression Analysis
Model 1:Dependent variable Job Satisfaction and 7 independent variables In standard multiple regression all of our independent or predictor variables, are entered in the equation or into the model simultaneously. So each independent variable is evaluated in terms of its own predictive power, over and above that offered by all the other independent variables. The main objective is to understand how much variance in an outcome variable can be explained by the level of job satisfaction. The linear multiple regressions are selected in SPSS. The depended variable is selected Job Satisfaction and the in depended variable selected are: a) Opportunities for career development b) Relationship with direct
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supervisor c) Relationship with co-workers d) Work Itself (autonomy and independence) e) Job Security f) Compensation/Pay d) Work Stress. In the linear statistics are checked: Regression confidence: Estimates, and Confidence Interval 95% Some other factors included are Model fit, Descriptive, Part and Partial Correlations, Collinearity diagnostics, and Case wise diagnostic for the standard deviation more than 3 from the mean of our variables. From the Person Correlation it is obvious that the variables that negatively correlate with job satisfaction are: a) Work Itself b) Relationship with Co-workers and c) Work Stress. P value resulted <0.05 only for work stress which makes this the only variable with a significant relationship between the depended and independent variable. Testing the null hypothesis: Multiple R in the population equals 0, (the model cannot predict accurately the outcome). The model resulted with a p-value >0.05, which mean that there is no statistical significance for this model.
The variables in the model that contributed more in the prediction of the outcome are checked in the Coefficient table, in Standardized Coefficients Beta. The one with the highest score makes the strongest contribution in the model. The ones presented with the highest score in the model are compensation, job security, and career development opportunities. And for SIG the most significant contribution is form job security 0.018 and compensation 0. 049. The significant contributors are job security and compensation.
Model 2: The depended variable: Job Satisfaction and the Independent Variable Job Security, Compensation Model 2 is as a result of the conclusions from the Model 1. The model is analyzed as follows: First Assumption: Our variable does not have mullticollinearity relationship. Mullticollinearity is present when the predictor variables are highly correlated to each other, which result in an R value 0.9. If the variables result to be
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mullticollineartiy it means that we have got some redundant predictor variables that tend to make the model more cumbersome and less accurate. Second Assumption: Excluding outliers in order to have accurate data’s and results, for dependent and independent variables. The results of the outliers will be deleted in order to have accurate data’s and results. Correlation variables:
Correlations Overall Job Security Salary Satisfaction Overall 1 -0.272 -0.441 Pearson Satisfaction Correlation Job Security -0.272 1 0.205 Salary -0.441 0.205 1 Overall . 0.001 0 Satisfaction Sig. (1- tailed) Job Security 0.001 . 0.008 Salary 0 0.008 . Overall 137 137 137 Satisfaction N Job Security 137 137 137 Salary 137 137 138 Fig. 20. Correlations between Overall Satisfaction & Job Security & Salary
Pearson Correlation for both variables it is presented negatively correlated, and respectively -0.272 for the independent variable job security and -0.441 for the independent variable Salary. Considering the p vale that for both independent value is almost 0, it is concluded that there is a strong correlation between the dependent variable and the independent variable. Comparing the independent variables with each other they show coefficients lower than 0.7, so we can confirm that there is no multicollinear relationship, so we can use all the variables as predictors. Tolerance and VIF (variance inflation factor):In the coefficients table presented below, the independent variables show a tolerance of 0.958 which is closed to 1, but less than 1 and the VIF 1.0404 which is less than 10. We confirm that our predictors are not mullticollinear.
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Coefficientsa Standard 95.0% Unstandardize ized Collinearity Confidence Correlations d Coefficients Coefficie Statistics Model t Sig. Interval for B nts Std. Lower Upper Zero- Toleranc B Beta Partial Part VIF Error Bound Bound order e (Constant) 2.884 0.13 22.52 0 2.63 3.137 1 Job Security -0.18 0.07 -0.19 -2.453 0.02 -0.33 -0.04 -0.27 -0.21 -0.19 0.958 1.04 Salary -0.33 0.06 -0.402 -5.192 0 -0.45 -0.2 -0.44 -0.41 -0.39 0.958 1.04 a. Dependent Variable: Overall Satisfaction Fig. 21. Model 2 Coefficients The normality linearity as it is presented in the normal probability plot the distribution is almost the same as the line. So there are a few deviations, but nevertheless they are near the line, as it is presented below:
Fig. 22. Normal P-P Plot Regression (SPSS)
Considering the critical vale and the Mahal that in our case the highest score is 10, there is no outliers presented in our model. The sample is accurately represented. The limit value of Mahal that should predict an outlier is 12.
Residuals Statisticsa Minimum Maximum Mean Std. Deviation N Predicted Value 1.2199 2.8836 2.1489 0.3302 137 Std. Predicted Value -2.796 2.227 0.009 0.997 137 Standard Error of Predicted Value 0.054 0.18 0.085 0.03 137 Adjusted Predicted Value 1.2352 2.8782 2.1498 0.33062 137 Residual -2.55791 1.12876 -0.00291 0.60731 137 Std. Residual -4.181 1.845 -0.005 0.993 137 Stud. Residual -4.226 1.868 -0.006 1.006 137 Deleted Residual -2.61398 1.15724 -0.00385 0.62434 137 Stud. Deleted Residual -4.523 1.886 -0.01 1.027 137 Mahal. Distance 0.081 10.805 1.978 2.241 137 Cook's Distance 0 0.377 0.009 0.036 137 Centered Leverage Value 0.001 0.079 0.015 0.016 137 a. Dependent Variable: Overall Satisfaction Fig. 23. Residuals Statistics
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Std. Adjusted Error of Change Statistics Model R R Square R Square the Estimate R Square Change F Change df1 df2 Sig. F Change 1 .479a 0.229 0.218 0.61183 0.229 19.928 2 134 0 a. Predictors: (Constant), Salary, Job Security b. Dependent Variable: Overall Satisfaction Fig. 24. R-Square
R Square presents a level of prediction form variables by 23%, and it is almost in the same level with the Adjusted R Square. For high level of job satisfaction, the variables of job security and compensation are predictor of 23%. What remains is to see if our model can make accurate prediction. Testing the null hypothesis: Multiple R in the population equals 0, (the model cannot predict accurately the outcome).
ANOVAa Sum of Mean Model df F Sig. Squares Square Regression 14.919 2 7.46 19.93 .000b 1 Residual 50.161 134 0.374 Total 65.08 136 a. Dependent Variable: Overall Satisfaction b. Predictors: (Constant), Salary, Job Security Fig. 25. Anova The model has a p-value less than 0.05, which mean that there is statistical significance for this model. The variables in the model that contributed more in the prediction of the outcome are checked in the Coefficient table, in Standardized Coefficients Beta. All the variables are converted in the same scale. Comparing the contribution of each independent variable in the model. The one with the highest score makes the strongest contribution in the model. The ones presented with the highest score in the model are compensation and then job security.
406 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY Conclusion • In an ascending scale from 1 to 4 the average level of job satisfaction in the banking sector is presented by a mean 2.14 and a standard deviation of 0.69 from a total sample of 137 respondents. • Job satisfaction variance can be explained with a strong relationship based on the Model 2, by Job security and Compensation. • The most important factors that boost the employees in the banking sector are ranked as below: 1. Career development opportunities 2. Compensation 3. Work Itself 4. Workplace Stress 5. Relationship with direct supervisor 6. Job Security 7. Relationship with co-workers Model 1: R Square tells how much of the variance in the dependent variable perceived all the independent variables/predictors. So how much all the predictors: (Workplace Stress, Relationship with Co-Workers, Relationship with direct supervisor, Job Security, Compensation/Pay, Work Itself (Challenging, autonomy and independence), Career Development Opportunities) explain the level of job satisfaction. Our model explains 10.4% of the variance in the level of job satisfaction. So the high or low levels of job satisfaction are predicted 10.4 %by all the independent factors, which means than 89.6 % are explained by other factors. What might affect the result is the number of large sample and 7 variables. Model 2: R Square presents a level of prediction form variables 23%, and it is almost in the same level with the Adjusted R Square. For high level of job satisfaction, the variables of job security and compensation are predictor of 23%.
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The model has a p-value less than 0.05, which mean that there is statistical significance for this model. Considering our model, the predictors with high variance of the job satisfaction model are Job Security and Compensation.
Recommendations: The organization in banking sector should take into consideration all the factors that boost job satisfaction, like:
1. Career development opportunities 2. Compensation 3. Work Itself 4. Workplace Stress 5. Relationship with direct supervisor 6. Job Security 7. Relationship with co-workers All the factors are correlated with job satisfaction of their employees. Additionally, employees have ranked with the same rank the reasons they would leave their organization, which shows a strong relationship between the importance of job satisfaction factor and turnover intention (or reasons to leave the organization). More focus should be channeled to the job security factor. Job security and compensation are the only factors that have remained in the top contributors of job satisfaction during years in the SHRM survey as well. The Albanian banks are facing downsizing due to the need to adapt and change. This changes and especially downsizing, raise question to stay or leave, which implies insecurity to employeesand even incentives to quit. Banks should carefully reflect changes, and through accurate communication should make their employees feel more secure for their jobs. Additionally, the salary structure should be transparent and avoid inequality for all its employees.
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Management of Intellectual Property as an Instrument for Business Development Sabrina Spallini, 1KarolaShehu2 Abstract Innovation is a fundamental tool for economic development, especially for countries with economies in transition, such as Albania in the last decades. The aim of this paper is to analyze the dynamics of innovation in Albania to outline the characteristics of the innovators and what are the elements of success and causes of failure. For the analysis we use the database of the Albanian Office of Intellectual Property (www.dppm.gov.al) Through this source of information we classify the main innovative actors in the Albanian economy in terms of geographical origin, linguistic affinity and cultural similarity. Secondly, we distinguish the type of innovators, such as companies, individuals, various legal forms and other entities. Third, we analyze the sectoral specialization of the actors involved and their diversity in terms of combinations of sectors of activity. Fourthly, we illustrate the role of large companies in terms of asset size, years of market experience, corporate branding practices and others. Last but not least, we provide some management suggestions for companies operating in the Albanian market. Key words: Innovation dynamics, transition economy, trademarks, innovation management. JEL classification: M 10, O 32,
1 Corresponding author: Professor, University of Bari Aldo Moro, Department of Economics, Management and Business Law, Largo Abbazia di Santa Scolastica, 23, 70123 Bari, Italy, [email protected] 2 Catholic University Our Lady of Good Counsel, Rr. DritanHoxha, Laprakë 1000, Tirana, Albania, [email protected]
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2. Obiettivi In questo lavoro si cercherà di definire le caratteristiche dei marchi registrati in Albania attraverso la costruzione di un dataset che serva a: i) elaborare una tassonomia dello stato legale delle domande e registrazioni di marchi presso il DPPI, (Drejtoria e Përgjithshme e Pronësisë Industriale, Ufficio Centrale della Proprietà Industriale Albanese); ii) analizzare statisticamente le determinanti dello stato legale della domanda e registrazione di un marchio in funzione della caratteristiche specifiche del marchio, tra le quali il contesto merceologico d'uso, la complessità linguistica e l'associazione figurativa; iii) analizzare statisticamente le determinanti dello stato legale della domanda e registrazione di un marchio in funzione della caratteristiche demografiche del titolare della proprietà intellettuale, il contesto istituzionale e geografico di provenienza, la forma legale societaria, l'esperienza nel mercato, la dimensione delle attività economiche, e la tipologia delle strategie di marketing in riferimento al branding; iv) elaborare una tassonomia del contesto geografico di provenienza del titolare della proprietà intellettuale e stimare statisticamente il relativo impatto sullo stato legale della domanda e registrazione del marchio. Tali classificazioni serviranno a definire quali sono le caratteristiche di un marchio di successo, quali 1. Il numero di parole e l’utilizzo di parole in lingua albanese. 2. L’utilizzo del nome del titolare del marchio nella denominazione. 3. La permanenza sul territorio del titolare del marchio. 4. Le caratteristiche merceologiche del settore oggetto di innovazione.
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5. Le forme societarie degli innovatori di successo e la loro provenienza geografica. L’individuazione delle caratteristiche di un marchio di successo può costituire una valida guida per gli investitori o per i policy maker per svolgere il loro business in attività innovative o vogliano agevolare lo sviluppo di particolari attività o settori.
3. Metodologia La principale fonte informativa di questo lavoro è rappresentato dall'archivio del DPPI3 (Ufficio Centrale della Proprietà Industriale Albanese), liberamente accessibile online al www.dppm.gov.al. Rispetto al motore di ricerca paneuropeo www.tmdn.org, l'accesso all'archivio del DPPI costituisce la fonte statistica più aggiornata, per cui abbiamo scaricato manualmente tutte le schede delle domande e registrazioni di marchi pubblicate fino al 1 gennaio 2019. L'archivio del DPPI fornisce informazioni dettagliate riguardante il numero identificativo della domanda ed eventuale registrazione, le date della domanda e registrazione, il nome del marchio quando è previsto, le classi merceologiche della classificazione di NIZZA, il nome del titolare del marchio e il relativo paese di origine, lo stato legale della domanda e la registrazione ed altre informazioni. La status legale del marchio utilizzato in questo lavoro è dato dal momento del censimento del dataset, cioè il 1 gennaio 2019. Il focus principale è stato costituito dalle domande presentate direttamente al DPPI, escludendo le schede collegate alle domande e registrazioni di marchi trasmesse tramite l'Organizzazione Internazionale della Proprietà Intellettuale (World Intellectual Property Organization, WIPO).
3Istituzione Albanese preposta per la Proprietà Intellettuale
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Una volta scaricati i dati sono stati gestiti con il software Stata (www.stata.com), elaborando un dataset che sia di facile utilizzo per le analisi statistiche. Per aumentare la qualità dell'analisi statistica il dataset dei marchi è stato arricchito con due altre fonti di informazioni. Da un lato, attraverso il motore di ricerca di Google Maps,abbiamo calcolato le distanze geografiche del paese di provenienza dei titolari dei marchi in Albania (Pere &Ninka, 2017),prendendo come riferimento il capoluogo di ogni paese censito. Sebbene la distanza geografica è stata calcolata esclusivamente attraverso il sistema delle coordinate di longitudine e latitudine delle città capoluogo di riferimento, questo metodo di misurazione è caratterizzato da una maggiore oggettività dato il lungo periodo di osservazione del nostro dataset. Per chiarire l’effetto della complessità linguistica nella sopravivenza e successo del marchio (Krasnikov A., Mishra S., &Orozco D. 2009), abbiamo analizzato la tipologia del nome di un marchio in termini di affinità linguistiche con la lingua albanese, utilizzando il dizionario dell'albanese fornito da Wikipedia. Questo dizionario è costituito da circa 36 mila lemmi, un numero che rappresenta circa il novanta percento dei lemmi contenuti nel dizionario moderno della lingua albanese pubblicato nel 1980 (Fjalori i gjuhëssësotmeshqipe). Rispetto alla ripubblicazione del dizionario moderno del 2006, Wikipedia rappresenta un numero più contenuto ma sempre oltre trequarti dei lemmi riportati. Per rispondere agli obiettivi della nostra ricerca abbiamo costruito il modello statistico di regressione lineare modificandolo al caso della variabile dipendente binaria. La variabile dipendente è costituita dallo stato legale della domanda o registrazione alla data dell’1 gennaio 2019 (Tab. 1). Nel caso di una registrazione la dipendente è una variabile binaria con esito positivo quando la registrazione è attiva. Quando si tratta semplicemente di una domanda, la variabile dipendente binaria assume esito positivo se la domanda risulta effettivamente
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registrata, cioè la domanda ha un numero di registrazione unico progressivo ed una data di registrazione.
Tabella 1. Stato legale della domanda o registrazione del marchio. Attività Inattività Në pritje të pagesës së regjistrimit Apelim i refuzimit Rrëzimi i kundërshtimit E refuzuar nga gjykate Domanda Shqyrtimi i kundërshtimit E refuzuar(formalitete) E publikuar, në pritje të kundërshtimit Nuk u apelua në gjykatë Në proces ekzaminimi Në pritje te vendimit të gjykatës E Migruar E Skaduar E regjistruar E braktisur Registrazione Nuk u kundërshtua E cregjsitruar nga gjykata E dorëhequr Periudha e shtese para skadimit Fonte: www.dppm.gov.al, 1 gennaio 2019.
Lo stato legale della domanda o registrazione del marchio può assumere diverse modalità, che possono essere classificate in due macro categorie, attività o inattività. La Tabella 1 riporta le varie modalità di attività o inattività in funzione di una domanda o registrazione di un marchio. I marchi registrati e mantenuti attivi sono indicativi di un maggiore valore del relativo progetto innovativo, in quanto l'innovatore ha dovuto sostenere i costi delle procedure per il rinnovo della registrazione e perpetuare le condizioni per il soddisfacimento dei requisiti di legge richiesti per la registrazione del marchio (Melnyk, Giarratana e Torres, 2014).
Le variabili indipendenti sono state raggruppate in due macro-categorie per rispondere agli obiettivi della ricerca: 1) le caratteristiche della domanda o registrazione del marchio;
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2) le caratteristiche demografiche del titolare della proprietà intellettuale. 1) Gli elementi individuati per definire le caratteristiche del marchio sono: 1. a) Lunghezza testuale del nome del marchio in numero di caratteri includendo gli spazi presenti tra le parole. 1. b) Parole del marchio: Lunghezza testuale del nome del marchio in numero di parole. 1. c) Marchio solo figurativo: Variabile binaria che assume esito positivo se il marchio non presenta alcuna descrizione testuale. 1. d) Similarità linguistica: Variabile binaria che assume esito positivo quando la descrizione testuale del nome del marchio include almeno una parola del dizionario moderno della lingua albanese. Per il migliorare la qualità statistica del dato, sono state considerate solo le parole con almeno quattro caratteri. 1. e) Numero di classi: Numero di classi merceologiche della classificazione di NIZZA in cui il marchio è stato registrato. Questa variabile è trasformata utilizzando il logaritmo naturale. Quando la scheda presenti valori mancanti (circa 6 osservazioni), il numero di classi assume valore unitario. Marchio di servizio: Variabile binaria che assume esito positivo se il marchio è stato registrato in almeno una classe merceologica della classificazione di NIZZA riguardante i servizi (classi merceologiche 35-45). Classi merceologiche: 45 variabili binarie con esito positivo in corrispondenza della classe merceologica in cui il marchio è stato registrato. I marchi con informazioni mancanti sulla classe merceologica hanno costituito la variabile di riferimento statistico nell'analisi di regressione.
2)Le variabili riguardanti le caratteristiche demografiche del titolare del marchio sono elencate in questa sezione.
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2. a) La forma giuridica assunta dall’impresa titolare del marchio: Individuo: Variabile binaria che assume esito positivo se il titolare del marchio è un individuo (e.g. "self-employed"); un’impresa, cioè un'organizzazione for profit; una Società a responsabilità limitata; una società per azioni una organizzazione non profit:. 2. b)Corporate branding: Variabile binaria che assume esito positivo se la denominazione societaria del titolare del marchio è utilizzata anche come nome del marchio. 2. c) Esperienza del titolare: Età del titolare del marchio calcolata come numero di anni trascorsi dall'anno di deposito della prima domanda di marchio da parte del titolare fino all'anno 2019. Questa variabile è trasformata utilizzando il logaritmo naturale. 2. d) Dimensione del titolare: Il numero cumulato di domande depositate precedentemente fino all'anno di deposito del marchio. Questa variabile è trasformata utilizzando il logaritmo naturale.
Distanza geografica: Sette variabili binarie con esito positivo in corrispondenza di sette categorie indicative della distanza kilometrica del capoluogo del paese di provenienza del titolare del marchio. In particolare, le categorie sono le seguenti 1-250km, 251-1000km, 1001-2000km, 2001-4000km, 4001-8000km, oltre 8000km, dove la categoria considerata come variabile di riferimento nell'analisi di regressione è il contesto domestico, al quale è stato assegnato una distanza kilometrica nulla. Albania: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Albania. Questa variabile viene considerata come il riferimento statistico nell'analisi di regressione.
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Balcani occidentali: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Bosnia ed Erzegovina, FYROM Macedonia, Montenegro, Kosovo e Serbia. Francia: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Francia. Germania: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Germania. Grecia: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Grecia. Italia: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Italia. Paesi Bassi: Variabile binaria che assume esito positivo se il titolare del marchio è residente nei Paesi Bassi. Regno Unito: Variabile binaria che assume esito positivo se il titolare del marchio è residente nel Regno Unito. Svizzera: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Svizzera. Comunità europea: Variabile binaria che assume esito positivo se il titolare del marchio è residente nei rimanenti paesi della Comunità europea. Comprende anche Norvegia, Islanda e Liechtenstein. Canada: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Canada. Giappone: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Giappone. Stati Uniti: Variabile binaria che assume esito positivo se il titolare del marchio è residente negli Stati Uniti d'America.
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OCSE: Variabile binaria che assume esito positivo se il titolare del marchio è residente nei rimanenti paesi dell'Organizzazione per la Cooperazione e Sviluppo Economico (OCSE). BRICST: Variabile binaria che assume esito positivo se il titolare del marchio è residente in Brasile, Russia, India, Cina, Sud Africa o Turchia. Resto del mondo: Variabile binaria che assume esito positivo se il titolare del marchio è residente in altri paesi del resto del mondo.
4. Risultati Un marchio registrato che soddisfa i requisiti di legge può essere mantenuto attivo se ogni dieci anni viene pagata la tassa di rinnovo. Inoltre al quinto anno dalla registrazione deve essere dimostrato il requisito di uso commerciale del marchio. I requisiti di legge considerati validi per la registrazione devono essere riconfermati ad ogni scadenza di rinnovo. La Figura 1 presenta il trend cumulato di domande di marchi presso il DPPI (Ufficio Centrale della Proprietà Industriale Albanese) per anno di deposito, distinguendo le domande tra marchi che riguardano solo beni (classi merceologiche 1-34 della classificazione di NIZZA) dai marchi che coinvolgono almeno un servizio (classi merceologiche 35-45 della classificazione di NIZZA). Come si può notare il trend delle domande di marchi è in continua crescita e con tassi più che proporzionali a partire dall'anno 2013. Questa accelerazione è principalmente attribuibile alle domande di marchi che coinvolgono almeno un servizio. Le domande cumulate presentate fino al 1 gennaio 2019 rivelano una crescita costante specialmente nelle innovazioni relative a prodotti (fig. 1). Fig. 1
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18000
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solo beni almeno un servizio complessivo
Fig. 1. Trend cumulato di domande di marchi presso il DPPI per anno di deposito (dataset aggiornato al 1 gennaio 2019). La popolazione di riferimento per la stima del modello statistico ha riguardato tutti i marchi registrati durante il periodo dal 1999 al 2008, i quali hanno come prima scadenza decennale di rinnovo il periodo dal 2009 al 2018. Le regressioni hanno utilizzo delle variabili binarie per controllare possibili effetti statistici collegati all'anno di registrazione. Dato che la variabile dipendente è binaria, il modello statistico si è basato sulla regressione probit, che è un modello assimilabile alla regressione lineare ma adattato al caso delle variabili discrete. Utilizzando il software statistico Stata abbiamo tenuto conto anche di possibili correzioni nelle stime dovute alla eteroschedasticità. La Tabella 2 presenta le statistiche descrittive. Tipicamente un marchio viene registrato in due classi merceologiche, e nel periodo 1999-2008 i marchi che riguardo anche un servizio sono circa un quarto. Il nome di un marchio in media è
424 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY composto di una parola e mezza, lunga circa dieci caratteri, mentre i marchi senza informazioni testuali sono piuttosto rari (circa il tre percento). Nel sessanta percento dei casi i nomi dei marchi includono parole che appartengo alla lingua albanese moderna, e dall'altro lato il corporate branding rappresenta circa il 15 percento dei marchi registrati nel periodo considerato. I titolari della proprietà intellettuale sono nella quasi totalità imprese. I risultati principali sono riportati nella Tabella 3 per un totale di cinque modelli. Il Modello 1 stima le regressioni utilizzando la variabile binaria Marchio di servizio, mentre il Modello 2 viene regredito con l'inclusione delle variabili binarie per tutte le 45 classi merceologiche della classificazioni di NIZZA. Il Modello 3 sostituisce le variabili binarie sul paese di origine del titolare del marchio con le variabili geografiche sulla distanza kilometrica del paese di origine considerato. Infine, nei Modelli 4 e 5 sono regrediti nuovamente le specificazioni dei Modelli 1 e 2 ma con un dataset ridotto ai solo titolari residenti in Albania.
Quali caratteristiche hanno i marchi dei successo? Sono costituiti da molte parole? I marchi costituiti da nomi più lunghi hanno un minore valore commerciale, per cui vengono rinnovati meno frequentemente. Infatti, i nomi più lunghi sono più complessi da comunicare da parte dell'innovatore e più difficili da memorizzare nella mente dei consumatori. (Krishnan, H. S., 1996). In questa direzione, si può affermare che i nomi lunghi dei marchi sono meno efficaci come fattore critico di successo per una strategia di marketing. Questa affermazione è confermata anche dall'effetto positivo sul rinnovo della registrazione di marchio della variabile che misura la similarità linguistica del nome del marchio con la lingua albanese moderna, benché l'effetto statistico è significavo solo ad un livello del dieci percento.
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Hanno un valore più elevato i marchi che sono registrati i più classi merceologiche? I marchi utilizzati in diverse classi merceologiche hanno un valore più elevato, anche se questo risultato è dimostrato solamente per i marchi che riguardano esclusivamente beni e non servizi. In generale, i servizi sono soggetti ad una più rapida dinamica di mercato, per cui c'è una maggiore proliferazione e ricambio dell'offerta commerciale. L’anzianità sul territorio implica un maggior successo per il marchio? Le caratteristiche demografiche del titolare hanno un effetto significativo sulla probabilità di rinnovo del marchio. In primis, gli innovatori che sono presenti nel mercato albanese da un più lungo tempo tipicamente hanno affrontato degli investimenti di marketing più elevati, accumulando maggiori risultati in termini di valore del portafoglio dei marchi. Esiste un effetto positivo quando il nome del marchio è lo stesso con quello del titolare? Gli innovatori con più esperienza hanno superato la curva dell'apprendimento e quindi sono in grado di garantire una maggiore qualità dei propri prodotti. Questa interpretazione è in linea con l'impatto positivo del corporate branding: quando il nome del marchio è utilizzato anche come denominazione del relativo titolare, l'offerta innovativa coperta dal marchio viene garantita dall'immagine complessiva a livello di corporate(Srinivasan, Hsu & Fournier, 2011). Per quanto riguarda la forma societaria, le organizzazioni non profit hanno mediamente il valore dei marchi più basso, seguiti dagli individui e poi le organizzazioni for profit. In aggiunta si nota che la dimensione dell'attività del titolare in termini di numero cumulato di marchi ha un effetto negativo sul valore del marchio. Questa evidenza può essere spiegata dal fatto che le imprese più
426 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY piccole sono più specializzate e dedicano le loro risorse su un numero più esiguo di linee di prodotto, che mantengono più a lungo nel mercato. Un'ulteriore conferma di questo risultato è fornita dai modelli di regressione 4 e 5 che sono stimati con un dataset più ristretto riguardanti le sole imprese residenti in Albania, per le quali è stato identificato la forma societaria (società per azioni oppure società a responsabilità limitata). Infatti, i portafogli delle società per azioni, le quali sono dimensionalmente più grandi delle società a responsabilità limitata, includono dei marchi dal valore tipicamente più basso. Vale la pena notare che le grandi imprese possono detenere alcuni grandi marchi dal valore estremamente elevato, ma la cui valutazione non è sufficientemente e accuratamente misurata da questa analisi. In conclusione, il modello 3 è confermativo dei risultati anche quando l'analisi di regressione viene eseguita con delle variabili geografiche che misurano la distanza kilometrica del paese di residenza del titolare del marchio al posto delle semplici variabili binarie calcolate per paese di residenza. Le Figure 2 e 3 riportano gli effetti marginali delle variabili geografiche analizzate rispettivamente nei Modelli 2 e 3, considerando come variabile statistica di riferimento il contesto domestico albanese.
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Tabella 2.Dataset del mantenimento in attività della registrazione di un marchio: Registrazioni di marchi durante il periodo 1999-2008. Osservazioni Media Mediana Dev. Std. Minimo Massimo Caratteristiche della domanda/registrazione del marchio Caratteri del marchio 4,607 9.941 8.000 7.377 0 106 Parole del marchio 4,607 1.616 1.000 1.149 0 17 Marchio solo figurativo 4,607 0.028 0.000 0.165 0 1 Similarità linguistica 4,607 0.592 1.000 0.491 0 1 Numero di classi 4,607 1.860 1.000 2.340 1 45 Log(Numero di classi) 4,607 0.925 0.693 0.418 0.693 3.829 Marchio di servizio 4,607 0.237 0.000 0.425 0 1
Caratteristiche demografiche del titolare del marchio Individuo 4,607 0.022 0.000 0.146 0 1 Organizzazione non profit 4,607 0.008 0.000 0.088 0 1 Impresa 4,607 0.970 1.000 0.170 0 1 SRL 761 0.537 1.000 0.499 0 1 SPA 761 0.210 0.000 0.408 0 1 Log(Esperienza del titolare) 4,607 2.957 3.045 0.245 2.303 4.779 Log(Dimensione del titolare) 4,607 1.345 0.693 1.510 0.000 5.308 Corporate branding 4,607 0.156 0.000 0.363 0 1
Paese di origine del titolare del marchio Albania 4,607 0.165 0.000 0.371 0 1 Balcani occidentali 4,607 0.016 0.000 0.124 0 1 Francia 4,607 0.028 0.000 0.164 0 1 Germania 4,607 0.014 0.000 0.117 0 1 Grecia 4,607 0.077 0.000 0.266 0 1 Italia 4,607 0.023 0.000 0.151 0 1 Paesi Bassi 4,607 0.053 0.000 0.225 0 1 Regno Unito 4,607 0.042 0.000 0.200 0 1 Svizzera 4,607 0.030 0.000 0.169 0 1 Comunità europea 4,607 0.089 0.000 0.285 0 1 Canada 4,607 0.308 0.000 0.462 0 1 Giappone 4,607 0.003 0.000 0.053 0 1
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Stati Uniti 4,607 0.041 0.000 0.199 0 1 OCSE 4,607 0.107 0.000 0.309 0 1 BRICST 4,607 0.053 0.000 0.224 0 1 Resto del mondo 4,607 0.041 0.000 0.197 0 1 Modello 1 Modello 2 Modello 3 Modello 4 Modello 5 Caratteristiche della domanda/registrazione del marchio Caratteri del marchio 0.013** 0.010 0.008 0.005 0.005 [0.006] [0.006] [0.006] [0.016] [0.019] Parole del marchio -0.112*** -0.097** -0.091** -0.068 -0.070 [0.039] [0.040] [0.040] [0.107] [0.120] Marchio solo figurativo 0.237* 0.117 0.100 0.411 0.191 [0.128] [0.132] [0.132] [0.379] [0.456] Similarità linguistica 0.081** 0.081* 0.078* 0.121 0.106 [0.041] [0.043] [0.042] [0.116] [0.125] Log(Numero di classi) 0.094 0.311** 0.339** -0.302 0.276 [0.057] [0.142] [0.142] [0.200] [0.738] Marchio di servizio -0.243*** — — 0.072 — [0.058] [0.140]
Caratteristiche demografiche del titolare del marchio Individuo 0.228 0.502* 0.584** 0.788*** 0.995*** [0.274] [0.282] [0.276] [0.270] [0.298] Impresa 0.584** 0.883*** 0.966*** — — [0.233] [0.239] [0.233] SRL — — — 1.290*** 1.431*** [0.216] [0.246] SPA — — — 0.708*** 0.859*** [0.240] [0.272] Log(Esperienza del titolare) 0.792*** 0.801*** 0.808*** 1.924*** 1.651*** [0.166] [0.182] [0.170] [0.462] [0.529] Log(Dimensione del titolare) -0.114*** -0.120*** -0.100*** -0.085 -0.123 [0.022] [0.023] [0.023] [0.091] [0.101] Corporate branding 0.382*** 0.368*** 0.380*** 0.162 0.160 [0.058] [0.061] [0.061] [0.148] [0.161]
Classi merceologiche NO SI SI NO SI Paesi di origine SI SI NO Solo titolari albanesi Distanza geografica NO NO SI — —
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Variabili binarie annuali SI SI SI SI SI
Osservazioni 4,607 4,607 4,607 761 704 Esiti positivi 2,397 2,397 2,397 192 192 R2 0.094 0.119 0.119 0.135 0.190 * significativo al <10%; ** significativo al <5%; *** significativo al <1%
Tabella 3. Le determinanti del mantenimento in attività della registrazione di un marchio: Registrazioni di marchi durante il periodo 1999-2008. Effetti marginali della regressione probit.
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Paese di provenienza del titolare del marchio
Fig. 2. Effetti marginali delle variabili geografiche del Modello 2.
Entrambe le figure confermano l'evidenza riguardante il fatto che titolari provenienti da mercati esteri più distanti geograficamente e culturalmente
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detengono tipicamente marchi dal valore più elevato. Paesi come il Giappone e il Canada, distanti rispettivamente circa nove e sette mila kilometri e i quali hanno ricevuto relativamente anche una minore immigrazione della diaspora albanese rispetto a paesi come Grecia, Italia e Stati Uniti, si posizionano all'apice della classifica. I titolari italiani, assumendo una distanza tipica di circa sei cento kilometri, si posizionano oltre la statistica media di questa classica e avente un valore simile a paesi più distanti o molto più distanti come la Germania o gli Stati Uniti. Inoltre per quanto riguarda il caso della Grecia, che insieme all'Italia hanno rappresentato negli ultimi decenni i principali partner dell'interscambio albanese, viene riscontrato un minore tasso di mantenimento in attività dei marchi registrati. Questo risultato da lato è riconducibile alla difficoltà di utilizzare direttamente alcuni marchi affermati nel mercato greco in quanto diversi stilisticamente e testualmente (la lingua albanese utilizza l'alfabeto latino e non quello greco). Dall'altro lato il minore tasso di mantenimento dei marchi registrati dai titolari greci potrebbe riflettere una diversa specializzazione produttiva (e.g. più servizi e meno beni), un'ipotesi che richiede un approfondimento maggiore e che potrebbe essere oggetto di futuri lavori. Nella conformità dell’elaborazione di una tassonomia del contesto geografico di provenienza del titolare della proprietà intellettuale, in conclusione, si nota che i marchi detenuti dai titolari residenti nei Balcani Occidentali, specialmente quei paesi confinanti con l'Albania, sono caratterizzati da valori più bassi rispetto agli altri paesi. Più in generale, la correlazione tra valore dei marchi e distanza geografica rispetto la provenienza del titolare potrebbe essere collegata ad un effetto di selezione dell'offerta commerciale sostenuta nei mercati internazionali rispetto ai mercati nazionali. In altre parole, le imprese cercano di internazionalizzare l'offerta di quei prodotti e servizi che hanno sperimentato un
431 ECONOMIC POLICY AND EU INTEGRATION maggiore successo commerciale nei mercati nazionali e quelli geograficamente vicini.
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Figura 3. Effetti marginali delle variabili geografiche del Modello 3.
4.1. Analisi di robustezza Per analizzare la robustezza dei risultati abbiamo regredito i modelli utilizzati nella sezione precedente allargando il dataset a tutte le domande presentate al DPPI e non solo quelle registrate, stimando in questo modo gli effetti dei fattori determinanti della registrazione della domanda di un marchio. Dato che il ritardo nella registrazione della domanda di un marchio è uguale o inferiore ai due anni nel circa 96.1% dei casi, abbiamo considerato come dataset di riferimento tutte le domande presentate fino all'anno 2016. Le statistiche descrittive sono riportate nella Tabella 4, mentre la Tabella 5 presenta le stime dei modelli di regressione. Sebbene esista una minore
432 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY variabilità statistica della variabile dipendente (gli esiti positivi sono oltre il novanta percento), si può concludere che i risultati riguardanti le caratteristiche del marchio sono sostanzialmente confermate. In particolare, i marchi con nomi più lunghi hanno un minore probabilità di essere registrati perché sono percepiti come meno distintivi nel mercato, mentre il contrario vale per i marchi usati in diverse classi merceologiche. In quest'ultimo caso i titolari hanno probabilmente affrontato degli investimenti di marketing maggiori incrementando la funzione distintiva del nome del marchio tra i potenziali consumatori ed acquirenti. Allo stesso modo i marchi linguisticamente simili all'albanese moderno sono registrati più frequentemente, in quanto sono percepiti come maggiormente distintivi visto il loro più facile utilizzo. Infine, la variabile relativa a Marchio di servizio assume un coefficiente positivo sulla probabilità di registrazione verosimilmente a causa della forte crescita dei servizi presentata nella Figura 1. Per quanto riguarda gli effetti delle caratteristiche demografiche dei titolari è utile tenere in considerazione il fatto che la preparazione e il deposito della domanda di un marchio comporta un costo significativo anche in funzione degli onorari degli uffici legali che trasmetto la domanda al DPPI. Per questa ragione le domande presentate dagli individui sono accompagnate da un minore probabilità di successo rispetto alle altre due categorie di titolari, considerati i loro maggiori costi (relativi alla loro attività) nell'assicurarsi assistenza legale, mentre le imprese dimensionalmente più grandi hanno più facilità nel registrare una domanda di marchio. In aggiunta le imprese che perseguono strategie di corporate branding sono facilitate nella registrazione in virtù del fatto che i marchi collegati a questa tipologia di domande godono di una maggiore funzione distintiva nel mercato.
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Tabella 4. Dataset di domande di marchi depositate durante il periodo 1994-2016. Osservazioni Media Mediana Dev. Std. Minimo Massimo Caratteristiche della domanda/registrazione del marchio Caratteri del marchio 14,453 10.050 8.000 7.428 0 106 Parole del marchio 14,453 1.636 1.000 1.169 0 18 Marchio solo figurativo 14,453 0.033 0.000 0.178 0 1 Similarità linguistica 14,453 0.583 1.000 0.493 0 1 Numero di classi 14,453 1.736 1.000 2.241 1 45 Log(Numero di classi) 14,453 0.891 0.693 0.394 0.693 3.829 Marchio di servizio 14,453 0.247 0.000 0.431 0 1
Caratteristiche demografiche del titolare del marchio Individuo 14,453 0.046 0.000 0.209 0 1 Organizzazione non profit 14,453 0.009 0.000 0.097 0 1 Impresa 14,453 0.945 1.000 0.228 0 1 SRL 4,193 0.506 1.000 0.500 0 1 SPA 4,193 0.166 0.000 0.372 0 1 Log(Esperienza del titolare) 14,453 2.667 2.890 0.611 1.099 4.779 Log(Dimensione del titolare) 14,453 1.183 0.693 1.463 0.000 5.375 Corporate branding 14,453 0.164 0.000 0.371 0 1
Paese di origine del titolare del marchio Albania 14,453 0.290 0.000 0.454 0 1 Balcani occidentali 14,453 0.039 0.000 0.194 0 1 Francia 14,453 0.030 0.000 0.170 0 1 Germania 14,453 0.022 0.000 0.146 0 1 Grecia 14,453 0.056 0.000 0.229 0 1 Italia 14,453 0.026 0.000 0.160 0 1 Paesi Bassi 14,453 0.048 0.000 0.213 0 1 Regno Unito 14,453 0.025 0.000 0.157 0 1 Svizzera 14,453 0.023 0.000 0.149 0 1 Comunità europea 14,453 0.062 0.000 0.241 0 1 Canada 14,453 0.238 0.000 0.426 0 1 Giappone 14,453 0.003 0.000 0.058 0 1 Stati Uniti 14,453 0.046 0.000 0.208 0 1
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OCSE 14,453 0.093 0.000 0.290 0 1 BRICST 14,453 0.043 0.000 0.203 0 1 Resto del mondo 14,453 0.033 0.000 0.180 0 1
Tabella 5. Le determinanti della registrazione della domanda di un marchio: Domande di marchi depositate durante il periodo 1994-2016. Effetti marginali della regressione probit. Modello 6 Modello 7 Modello 8 Modello 9 Modello10
Caratteristiche della domanda/registrazione del marchio Caratteri del marchio 0.012** 0.011** 0.013** 0.002 -0.001 [0.005] [0.005] [0.005] [0.006] [0.007] Parole del marchio -0.124*** -0.122*** -0.126*** -0.010 0.008 [0.032] [0.033] [0.033] [0.044] [0.046] Marchio solo figurativo 0.046 0.023 0.023 0.189 0.170 [0.112] [0.116] [0.115] [0.189] [0.191] Similarità linguistica 0.098*** 0.096*** 0.091** 0.047 0.048 [0.035] [0.037] [0.036] [0.046] [0.048] Log(Numero di classi) 0.000 0.731*** 0.747*** 0.039 0.350 [0.059] [0.136] [0.136] [0.086] [0.223] Marchio di servizio 0.181*** 0.173*** [0.044] [0.052]
Caratteristiche demografiche del titolare del marchio Individuo -0.164 -0.318** -0.305** -0.114 -0.208** [0.145] [0.152] [0.153] [0.079] [0.083] Impresa -0.125 -0.232 -0.246* [0.136] [0.145] [0.146] SRL -0.081 -0.094 [0.065] [0.068] SPA -0.113 -0.093 [0.080] [0.088] Log(Esperienza del titolare) -0.165*** -0.104 -0.114* -0.362*** -0.236*** [0.058] [0.063] [0.063] [0.083] [0.091]
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Log(Dimensione del titolare) 0.152*** 0.154*** 0.170*** 0.146*** 0.136*** [0.022] [0.024] [0.023] [0.035] [0.038] Corporate branding 0.267*** 0.296*** 0.296*** 0.390*** 0.378*** [0.056] [0.058] [0.058] [0.072] [0.076]
Classi merceologiche NO SI SI NO SI Paesi di origine SI SI NO Solo titolari albanesi Distanza geografica NO NO SI — — Variabili binarie annuali SI SI SI SI SI
Osservazioni 14,383 14,383 14,383 4,089 4,089 Esiti positivi 13,235 13,235 13,235 3,282 3,282 R2 0.200 0.242 0.244 0.043 0.107 * significativo al <10%; ** significativo al <5%; *** significativo al <1% 5. Conclusioni Questo lavoro è tra i primi studi sulla gestione della proprietà intellettuale come strumento di sviluppo del business in Albania. In particolare, abbiamo elaborato una nuova metodologia statistica e costruito un nuovo dataset in riferimento ai dati disaggregati sulle domande dirette e relative registrazioni di marchi presso l'Ufficio Centrale della Proprietà Industriale (Drejtoria e Përgjithshme e Pronësisë Industriale, DPPI) in Albania. Questo dataset è costituito da diverse migliaia di domande e registrazioni di marchi. Inoltre, è stata proposta una nuova tassonomia dello stato legale di attività/inattività delle domande e registrazioni di marchi presso il DPPI. Successivamente, le determinanti dello stato legale così definito sono state statisticamente analizzate considerando una numerosità di variabili calcolate sia al livello del singolo marchio che in riferimento al titolare della proprietà intellettuale. I risultati di questa analisi statistica suggeriscono diverse implicazioni per il management delle imprese che operano in Albania. La scelta del nome del marchio costituisce un fattore critico di successo fondamentale, in quanto la sua complessità può ostacolare l'efficacia di una strategia marketing. Per esempio nomi troppo lungi in termini di numero di parole
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sono più difficili da comunicare nel mercato e memorizzare da parte dei consumatori. Allo stesso modo il significato del nome del marchio gioca un ruolo altrettanto importante in quanto nomi più distanti dal punto di vista della similarità linguistica con la lingua albanese moderna riscontrano un minore successo in termini di mantenimento della relativa registrazione nel mercato albanese. Da un lato questa evidenza indica che le imprese operanti in Albania possono trovare più opportuno utilizzare dei propri marchi già affermati piuttosto che crearne dei nuovi con nomi più sofisticati. Dall'altro, non tutti i nomi di marchi possono risultare versatili nel mercato albanese, ma solo quelli che possono essere facilmente interpretati dai consumatori. L'importanza della coerenza della scelta del nome del marchio viene confermata anche da una serie di altri fattori. Marchi utilizzati da più contesti merceologici sono caratterizzati da una maggiore longevità nel mercato, un'evidenza che indica che i nomi di questa tipologia di marchi potrebbero risultare più facilmente comunicabili ai consumatori. Inoltre, quando il nome del marchio viene garantito anche dalla denominazione complessiva del business (cioè una strategia di corporate branding), i consumatori percepiscono una maggiore qualità collegata all'offerta commerciale, per cui il marchio viene utilizzato più a lungo nel marcato. Le strategie di diversificazione del business non necessariamente sono corrisposte con un maggiore successo commerciale. Piuttosto, imprese che sono focalizzate su un più basso numero di linee di prodotto e hanno superato più rapidamente la curva dell'apprendimento hanno una maggiore probabilità di successo nel mercato albanese. In altre parole, le imprese più specializzate potrebbe essere in grado di mettere in atto una strategia di marketing con un posizionamento più adeguato e credibile sebbene più focalizzato. In conclusione, le imprese operanti nei servizi devono prestare una maggiore attenzione alla dinamica di mercato, in quanto le proposte commerciali
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in questo settore possono risultare più complesse da comunicare ai consumatori e soggette ad una maggiore pressione competitiva. I risultati ottenuti da questa prima indagine potrebbero essere ampliati, al fine di verificare i risultati, includendo anchel’analisi dei dati delle domande provenienti dal WIPO.
References
Akademia e Shkencave (1980), Fjalor i Gjuhës së Sotme Shqipe, Instituti i Gjuhësisë dhe Letërsisë, Tiranë. Della Malva, A., Santarelli E. (2016), Intellectual property rights, distance to the frontier, and R&D: evidence from microdata Eurasian Bus Rev .Vol. 6, 1– 24. Eicher T. S., Newiak M. (2013) Intellectual property rights as development determinants Department of Economics, Canadian Journal of Economics, Vol. 46 (1) 4–22. Krasnikov A., Mishra S., &Orozco D. (2009). Evaluating the financial impact of brandingusingtrademarks: a framework and empiricalevidence. Journal of Marketing, Vol 73, 154-166. Krishnan, H. S. (1996). Characteristics of memoryassociations: A consumer- basedbrandequity perspective.International Journal of Research in Marketing, Vol 13, 389- 405. Massa S., Testa S. ( 2008). Innovation and SMEs: Misaligned perspectives and goals among entrepreneurs, academics, and policy makers Technovation 28 (2008) 393–407 Melnyk, V., Giarratana M., & Torres A. (2014). Marking Your Trade: Cultural Factors in the Prolongation of Trademarks. Journal of Business Research, Vol 67, 478–485. Pere E. &Ninka E. (2017). International Trade in Western BalkanCountries: AnalisysBased on the Gravity Model. The wiiwBalkanObservatory, WorkingPaper. Srinivasan Sh., Hsu L. & Fournier S. (2011). Branding and Firm Value. Edward
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Elgar Publishing. TrabelsiRamzi and Akri Ben Salah, (2018), The Determinants of Innovation Capacity in the Less Innovative Countries in the Euro-Mediterranean Region, Journal of the Knowledge Economy, Vol. 9 (2), 526-543.
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Cooperation as an internationalization strategy for Italian Universities.
SABRINA SPALLINI* DOMENICO VIOLA* PAOLO LATTANZIO**
*University of Bari Aldo Moro
**Italian Parliament
Abstract
Italian Universities, like any other public and private institution, are subjected to global competition. To succeed in overcoming the challenges, they must operate competitive strategies to maintain or extend market shares, first of all across national boundaries.
The aim of this paper is to analyze whether the Italian Universities have precise market strategies that allow them to be attractive to foreign countries and whether these strategies are oriented towards culturally and geographically similar countries. And then we investigate the results achieved by these strategies.
The data-sets have been aggregated both by geographical area of the Italian University and by foreign destination country.Then we observed if there is a precise focus in the strategies and if these strategies bring results.At the last we tried to identify the appropriate tools to resolve any critical issues, proposing some corrective models.
JEL Classification: M 10; I 23; O 21.
Keywords: Competitive Strategies; Cooperation; Universities; Mediteranean Area.
1. Introduction
Economic and social development passes through cultural development; it is observed that the a territory economic growth is due to the acquisition of knowledge. Universities have a fundamental role in managing these processes. indeed being institutionally entrusted with the task of qualifying "human capital".
Although a steady reduction in public spending on research and higher education is underway in recent years (Spallini et al 2017),
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This situation increases the gap between Italian Universities and the Universities of the most advanced Countries (Banfi & Viesti 2016), as well as within the Italian country the gap between the economically more developed territories and those of disadvantaged territories increases.
The recent university reform with the aim of increasing the efficiency of the Italian university system compared to that of the advanced countries, has favored the creation of competitive poles of excellence in the world.
In this way the gap between the Universities in the highest positions of the ranking compared to the lower ones has also increased.
Therefore, the Universities of southern Italy have a growing reduction in funding as they are located in economically disadvantaged areas and are mainly financed with public resources.
The result is a continuous migration of the intellectual classes from the regions with the least development prospects and the impossibility for these territories of future growth.
The Italian government policies to cut education spending are at odds with the European directives that have main goal the integration of knowledge and the main strategic objectives to favor the global development of the economy, culture and innovation.
Among the multiple objectives, Universities must favor development processes beyond national borders through internationalization (Capano et al. 2017).
Universities, like companies that implement market expansion processes, must define objectives that aim to improve professional qualification or to expand it (penetration or differentiation strategies). They must identify niche markets that are not yet saturated.
Universities must select the market to outline an effective strategy, and this selection, if oriented beyond national borders, must move towards countries characterized by cultural and/or economic affinities.
Universities must select the market to outline an effective strategy, and this selection, if oriented beyond national borders, must move towards countries characterized by cultural and / or economic affinities.
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Thus a clear separation between the geographic areas of the Italian country would arise due to economic affinities with the countries of destination. A Northern axis would be more oriented towards the Central European and Anglo-Saxon areas and a Southern axis which, at least for geographical affinities, should be oriented towards the areas of the Mediterranean basin.
In the Mediterranean basin there are areas characterized by considerable opportunities, which have enormous potential for growth and development. Like the North Africa regions, often considered as a limit to the development of Mediterranean rather than an opportunity (Raffaelli 2017).
More than ever in this field, a fundamental role could be played by the Universities of southern Italy, which could train the very young population of these areas and allow the exploitation of the huge resources of these territories.
In this way, the virtuous process of transforming intellectual capital into economic capital would be triggered, which is the basis of all training processes.
These strategic objectives can be achieved only through their declination in operational short time plans where they can be measured and evaluated according to a planning process.
In this research we will try to verify if Italian universities have a specific internationalization strategy towards countries having similar or complementary interests.
The analysis will be aimed at measuring the level of international dynamism of Italian Universities and above all at capturing the specific vocation of destination countries.
In the subsequent analysis, we will verify the success of the strategies adopted by assessing the level of attractiveness of Italian universities, according to a planning process.
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2. Objectives
The research consists of two phases
1. In a first phase we will verify the dynamism of Italian universities in international cooperation relations. The universities are aggregated by region of origin and by country of destination of cooperation agreements. This is to verify whether the internationalization process implemented:
• responds to an effective strategic plan;
• is casual, without any strategic vision.
2. In the second phase of the research we will analyze the flows of foreign students entering Italian universities which can be considered a proxy for the success of cooperation agreements. In the analysis of the data the same methods used for international cooperation agreements will be followed, both in the aggregation by region of the universities, and in the subdivision by territory of origin of the foreign students enrolled.
The analysis will be carried out by examining the number of international cooperation agreements entered into by Italian universities in the last three years. This period is a good reference for defining an operational objective in the planning process. (Anthony et al. 2012).
The purpose of aggregation is to verify if there is a territorial strategy that guarantees a differentiation between the regions on the destination countries. Another objective of the research is to see if the southern Italy universities have relations with the Mediterranean area, a territory with enormous potential for development and characterized by cultural affinity.
These relations would guarantee both parties an integrated development, not only cultural, but also economic and social.
The analysis of the attractiveness of Italian Universities considering the number of students enrolled will be used to verify the results of internationalization strategies, but also to give suggestions on the policies to be implemented in the future.
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3.Method The data for the analysis of international relations have been acquired by the CINECA website (www.cineca.it), an inter-university Consortium that carries out management activities for the Ministry of Education, the University and scientific research.
70 Italian universities and 8 research institutes adhere to the Cineca and data collection is done by voluntary updating by the universities, which is not always punctual.
The data set acquired relates to the five-year period 2012-2016, in the analysis it was decided to operate on cumulative data in order to compensate for the gaps arising from the information deficiencies and to have a more consistent number of data for analysis.
The data-set of foreign students enrolled in the universities in 2015/2016, is acquired by the CINECA website,for the second phase of the analysis. The analysis aims to measure the level of attractiveness of Italian universities.
We have chosen the year 201/2016 as a check of the strategies implemented by the universities. The data of the foreign students enrolled have been aggregated by region of the University and by Area of origin of the students, with the same criterion used for the first phase of the analysis.
We have considered a foreign student "the student on the move to our education system with the aim of completing a full course of study and not just for a period of study".
4. Results and discussions
4.1 Phase I: Analysis of the dynamism of Italian universities
The data examined in the first table (Fig. 1) consider the number of agreements that are subsequently considered as a percentage for each geographical area. (Fig 2.)
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Fig. 1
Sourse: our elaboration on CINECA data.
Fig. 2
Sourse: our elaboration on CINECA data
An examination of the data reported in the previous Tables shows that Italian universities are more interested in entering into cooperation agreements with Central and South America, with 1.186 agreements signed, equal to 23% of the total.
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This is the trend throughout the national territory: no Italian region has a percentage lower than 12% of agreements with this territorial area (except for Abruzzo which reaches 75% and Molise, which is not very indicative as an absolute value, only 9 and 12 agreements).
Lazio (956 agreements), Lombardy (871 agreements) and Tuscany (671 agreements) are the three most dynamic Italian regions in internationalization
These three regions prefer Central-Southern America as a destination country; in fact, 28.2% of the agreements of the Lazio region, more than 20% of Lombardy and 27.7% of Tuscany, are targeted towards this country.
Certainly the development of such numerous relationships with these territories does not depend on Italy's affinity for these countries, but on the European directives and policies that guide the policies of the individual states. Like the LAC-EU Knowledge Area Program, which aims to develop a "Knowledge Area" of the European Union, Latin America and the Caribbean.
The Euro Area is the area of greatest interest for our universities with 1.012 agreements (equal to 19.5% of the total). All the Italian regions have cooperative relations with the euro countries, even if the percentages are not so high except for Veneto, which has 40% agreements in the Euro area.
For the other regions, the percentage of agreements in the Euro Area with respect to the total of the agreements is in a range that goes from a minimum of 10% to 21.8% (Lombardy).
East Asia ranks third in terms of number of agreements (873, equal to 16.8% of the total). The agreements, numerous both in absolute and relative terms, are distributed with uniform percentages throughout the national territory with higher peaks in Umbria (31.9%,), in Trentino Alto Adige (27.3%), in Piedmont and Lombardy (21.6%), in Emilia Romagna (24.3%).
Also in this the presence of agreements towards East Asian countries derives from the existence of governmental political addresses decided at central level and not from individual Unversities (such as the Marco Polo project, launched in 2004 by the
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Rectors' Conference of Italian Universities which has place the attraction of Chinese students in the universities of our country as a priority objective).
There are few Italian universities' relations with the countries of North America (only 404 agreements with a percentage value of 7.8%), with very small percentages per single region that never exceed 12%. Even in regions where there is a strong presence of North American students for particular disciplines pertaining to the artistic / literary field (think of cities like Rome or Florence), the percentages of stipulated agreements stop for Lazio at 7.9% and for the Tuscany at 7.6%. This discrepancy is probably due to the educational policy of the United States, which has always preferred to establish autonomous higher education institutions rather than use operational bases in the various countries of the world, including Italy.
In fifth position are the European countries not included in the Euro area (580 agreements equal to 11.2% of the total), equally distributed among all the Italian regions with the same percentages, except for the case of Puglia which, with the 29 agreements total, has a percentage of the total of 24.2%.
All other areas in Northern and Central-Southern Africa, the Middle East and Central Asia, have very low percentages, around 3% - 4% of the total agreements.
Also at a regional level the percentages are low everywhere, except for Basilicata which has 14.7% of agreements with the Middle-East Area, or Friuli Venezia Giulia (14.6%) and Trentino Alto Adige (12, 1%)
Sicily has a high percentage (12.3%) related to that of other regions, but it is really small if we consider the geographical proximity of the two areas, the considerable human flows in this part of the world.If these human flows were properly planned, they could be a strong point for a development strategy in the economic and cultural sphere by both countries.
For an overall view of the international agreements entered into by the Italian universities in the various geographical areas, Fig. 3 can be analyzed.
Fig. 3 Geographical Areas of primary interest to many agreements signed by Italian universities.
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Sourse: our elaboration on CINECA data
4.2 Phase II Analysis of the attractiveness of Italian universities
The internationalization process should result in the primary increase in the number of foreign students at our universities.
To this end, foreign students enrolled in Italian universities were examined by implementing the same aggregations used for cooperation agreements.
The data refer to the students enrolled in Accademic year 2015-2016 and they have been aggregated by region of the University and by Area of origin of the students.
In Fig. 4, the number of foreign students enrolled is indicated by absolute values, in Table 4 these values considered as a percentage.
As a first consideration. The 77 491 foreign students enrolled in Italian universities have different origins from the various geographical areas. Furthermore, the distribution of foreign students enrolled in the different Italian regions does not seem to follow the same trend shown in the previous analysis, based on the concentration of agreements.
Fig. 4
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Sourse: our elaboration on CINECA data
Fig. 5
Sourse: our elaboration on CINECA data
The non-EU European countries (21,031 students equal to 27.1%) are in first position for the number of students enrolled in Italian universities, in second place the European countries not falling within the Euro area, only in sixth place the countries included in the Euro area.
The situation examined brings out Italy's position in the European Union: despite the numerous political solicitations that call for the creation of relations between European
449 ECONOMIC POLICY AND EU INTEGRATION nations, these efforts almost never turn into tangible results: despite the numerous agreements stipulated, it does not seem that our universities have proved to be attractive to students in these areas.
On the contrary, Italian universities continue to be attractive for that part of Europe not included in the eurozone, such as Balkan or Mediterranean Area, which is often undervalued in intercultural programs.
The reasons for the attractiveness of our universities for the citizens of these countries could be different. They could concern the historical-political affinities, the lower costs of staying in our nation compared to others like France or Germany, the reception relations of our population with respect to the North-European one, the knowledge of the language, given the geographical proximity of many nations that face the Adriatic or are affected by particularly large migratory flows in the last twenty years. However it must be considered that many of the members of Italian universities as foreign citizens are only foreigners now naturalized in Italy for more than one generation, who for legal reasons retain the status of foreign citizens.
However the reasons for these flows should be investigated in order to implement policies aimed at encouraging them, also because if they are not encouraged they could progressively be reduced. Here we highlight the need for an analysis of the market and the opportunities that could derive from the development of economic / cultural relations with these countries.
The attractiveness of Italian universities to non-EU Europe is widespread in all Italian regions that have an average inflow of students from this area of over 20% and touches peaks of over 50% in Puglia, 43.6% in Campania and almost 40% in Veneto.
In third place are the students coming from East Asia, (8,976 equal to 11.6% of the total). The same considerations made for non-EU European students also apply to this area.
Furthermore, the high development potential and the need for these territories to have direct economic and cultural contacts with European populations could constitute a real development opportunity for Italian universities.
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The level of concentration of East Asian students in Italian universities is not high: they are distributed a little on the whole national territory with the highest concentrations in the regions of the North, Lombardy (2.988, 15.2%), Piedmont (1.505 , 17%), Emilia Romagna (1,074, 11.6%).
The numerous cooperation agreements with Central and South America have produced a relatively high number of registrations (7,283, equal to 9.4% of the total), probably due to the presence of communities of Italian origin in these countries.
Taking a consideration on students from northern Africa, we believe that the total number is very limited compared to the potential of this education market, only 5.6% from northern Africa and 8.3% from southern Africa.
The greater number of them go to Northern Italy, only a small part remains in the South.
Considering the figures: if you add up the students from Northern Africa who stop in the regions of Southern Italy (Basilicata, Calabria, Campania, Molise, Sardinia, Sicily), they are just 480, just over half of those registered in Lombardy .
The geographical representation of the origin of foreign students enrolled in Italian universities is shown in Figure 5.
Fig. 5 Geographical areas of origin of foreign students enrolled in Italian universities
Sourse: our elaboration on CINECA data
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5. Conclusions
The analysis carried out shows that Italian Universities do not have a specific strategy developed on an individual basis in internationalization processes. Cooperation relationships seem to respond to nationally based policies that do not take into account the specificities of individual territories.
This shows that there is no territorial focus on cooperation relations,infact, the destination countries have homogeneous percentages for all Italian regions.
The potential offered by the education market, which could be a leverage for development of Southern Italy Universities geographically and culturally close to European and African Mediterraneanareas (Viesti 2016).
The actions undertaken by each university should not be developed on a national political line, but on a regional basis for the peculiarities of each territory of the Italian peninsula.
Each university should consider the regional context in which it is located both in the initial phase for the segmentation of the target market with the aim of implementing effective stratetegies and in the final phase for monitoring the results achieved.
From the analysis carried out the internationalization strategies have not produced results. The number of foreign students enrolled is not high and the countries of origin are different from those to which the international cooperation agreements are addressed.The Italian Universities are most attractive for the the BalkanArea. In these territorial areas the migratory flows towards Italy have determined a high attractiveness for our universities, especially in the southern regions.
Despite this, the attention of our Universities does not seem focused on these territories.
Just as the countries of Mediterranean Africa have no priority in relations with the Universities of Southern Italy, despite the market potential of these territories and the geographical proximity that sees them exclusively linked to clandestine migration flows.
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References
Anthony R. H., Hawkins D. F., Macrì D. M., Merchant K. A., (2012), Sistemi di Controllo, McGraw-Hill.
Banfi A., Viesti G. (2016), Il Finanziamento delle Università italiane, in Viesti G. (a cura di), Università in Declino, Un’indagine sugli Atenei italiani. Donzelli Editore.
Capano G. Regini M., Turri M. (2017) Salvare l’Università italiana, il Mulino.
Raffaelli M. (2017), La triste fine del metodo italiano e qualche idea per riavviarlo. LiMes, Rivista italiana di geopolitica, 11, 95:101.
Spallini S., Nisio A., Romanazzi P. (2017), Il costo standard nelle Università da parametro di finanziamento a strumento per il controllo di gestione, in Etica, Legalità ed Efficienza nella Pubblica Amministrazione (A cura di) Angiola N., Mongelli G., Varricchio E., Aracne Editrice.
Viesti G. (2016), Il declino del sistema universitario italiano, in Viesti G. (a cura di), Università in Declino, Un’indagine sugli Atenei italiani. Donzelli Editore.
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"Municipal fix asset management and problems of last Administrative- Territorial Reform in Albania" Dr. Tatjana Elezi Abstract The Albanian Administrative - Territorial Reform carried out during 2013-2015 aims improving local public services, increasing the public local budget efficiency, and acceleration of local development. The number of local government units reached 61 municipalities and 12 regions against 65 municipalities, 308 communes and 12 regions before. The functions of new municipalities were added and some slightly improvements were made in local fiscal decentralization. This study aims to make an analyses of impact of recent administrative- territorial reform on local public properties management, and problems arising from this process, underlying the impact they have on local governance, local finance and local development as well. The objective of the study is to find out all implications come after reform implementations, impact of these implication on municipal asset management, and drafting some recommendations on haw municipalities can review and improve management of their properties. There were used method for analyzing the municipal asset management problems come out from survey used for testing the system being in used, as well as reviewing and analyzing all other documents such are regulatory system and resultscomes from STAR II project on municipal capacities improvement on public asset management field.
Key words:municipal fix asset management; strategic asset management; risk base asset management; evaluation and re-evaluation of assets. JEL classification: H82: Governmental property
1. Introduction Based on the Constitution of Albania "the administrative-territorial divisions of local government units are established by law on the basis of common economic needs and historical traditions". The Albanian Government referred to the technical criteria used by different countries that have a population close to that of Albania, and had similar goals to those of the Albanian government expected of the reform, (Ireland Denmark Sweden). The main purpose of the territorial reorganization has been maximizing the efficiency of public services through the reduction of administrative costs as well as administrative-territorial consolidation.
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There are considered some criteria in conceptualization of the new units of local government as territories that are considered "functional zones" that means a territorial space/local unit organized around an urban canter with the highest number of population and is likely to provide the full range of public services, the distance between units, the number of population, the historical and traditional relations and protection of ethnic minorities. There were 373 local government units in Albania before 2014. After reform consolidation, from 2015, there are two levels of local governance; 61 municipality and 12 regions councils. By new low No. 139/2015 "On local self governance", there are enlarged the functions and competencies of municipalities through functions decentralisation process. By low, the functions of municipalities are: infrastructure and public services (water supply, treating wastewater, flood protection, construction, rehabilitation and maintenance of local roads, sidewalks and public squares, local public transport, parks gardens etc, collection, removal and treatment of solid and household waste, construction, rehabilitation and maintenance of educational buildings of the school system pre-university, administering of the pre-school education system, construction, rehabilitation and maintenance of primary health service building, planning, administering, developing and controlling the territory, etc. social services offering at local level (for people in need, persons with disabilities, children, women, abused women, victims of trafficking, midwives or parents with many children, etc), and construction and administration of social housing, building and administering centers for providing local social services etc. protection and promotion of sport, culture & entertainment, (development organization and protection of cultural values and promotion of national and local identity, organization of recreational activities, development and administration of institutions and facilities related to these functions, etc). environment protection at the local level (protection of air, land and water from pollution, acoustic pollution& develop educational and promotional activities related to environmental protection) . agriculture and rural development, (forestry and pastures, nature and biodiversity, administration, use and maintenance of irrigation and drainage infrastructure, administration and protection of agricultural lands and other resources) strategic development plans and programs for local economic development (public markets and trade network, small business development support such as business information,
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promotional activities, making public assets available, financial grants to support small and medium business etc) public safety ( civil protection, fire service) There are other delegated functions and competencies by low (as mandatory or non- mandatory), for most of which the central government guarantees the necessary financial supporting for municipal delegated functions, while the most of above functions must be supported with municipal resources/incomes; (a) from the lease of municipal assets; (b) from capital investments; c) titles and other rights; ç) income from the profit of publicly owned enterprises; d) income from private-public partnerships; e)income generated from municipal economic activities;f) rents and sale of property; g) gifts, h) interests, i) fines, j) grants or donations; k) income from their cultural, sports and other activities. Transferring the above functions it is necessary that the municipalities not to own the respective assets only, but to build an efficient asset management framework for better fulfilling local government functions. Decentralization process is enlarging the number and the value of the asset portfolio which rises the need for improved asset management knowledge and capacities in terms of both human resources and infrastructure.
Furthermore, also by low, the municipalities have the right and responsibility of ownership on all municipal properties as well as the right of using efficiently all these assets in providing community services and improving the quality of live. From what all above comes the question: How ready are the municipalities to manage these assets efficientlyin fulfilling the above legal functions and even more,are the new municipalities well prepared to do this? To accomplish this study is used a survey method for collecting data, as well as data analysis methods forevaluation of process and drawing of conclusions and recommendations. The questionnaire delivered for 61 municipal staff which are responsible for asset management, including all levels.
2. Strategic Municipal Asset Management Framework Main objective of asset management is to assist the municipality in achieving a level of servicesfrom assets in the best possible way with regard to cost effectiveness, with purpose extending the expected service life of the asset and thereby maintain desired performance of their services.
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In general assets are the property of municipality in different forms/types, or a controlled resource of entity from which the municipality expected to receive future benefits by using assets in short or long terms (within or beyond 12 months or an operating cycle).
The assets have two main characteristics, by which there is given below asset classification framework.
• Tangible/Materials Long terms • Intangible/ Non assets materials • Financial
• Monetary Short term • Inventars assets • Financial
Fig. 1. Asset by characteristics In the focus of this paper are fix assets, or long term assets, for which exactly the long life in use requires policy and procedures in management during all their life, as well as municipal capacities to ensure better and sustainable service delivering issued from assets to municipal community, during all their long term life. The asset management is "An integrated approach / process of monitoring, operations, maintenance, improvement, evaluation, reevaluation and asset disposal in a cost-effective way, while maintaining a desired level of service, and aimed at improving the performance of general asset service performance", Furthermore asset management includes processes of inventory, evaluation, use, strategic portfolio review, reporting and auditing of municipal assets, as part of the local government decision-making process. The strategy of asset management includes eight steps, as below.
reviewing Measurement Management & Reporting practices
Integrated plans Evaluation for long term Assets practices communication financing People Finance Information Management Rievaluation Plans practices
Management Management Strategies policies commitment
Fig. 2. The Strategic Municipal Asset Management Framework
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Municipal assets are controlled or in used property by local governments, and can be managed directly or indirectly in providing local services. Municipal assets are well managed when they serve for a sustainable distribution of municipal services with desired service performance. In this meaning, we ask a question; Why strategic management for fix assets? The main benefits of an effective asset management system are those that assist local governments in: Ensuring improved services comes from municipal assets usagefor local residents. (infrastructure, water systems, parking etc.) Revenue growing. Improve overall collateral assessment for local government borrowing Attracting more domestic and foreign investors Improving land valuation that make land assets attractive for productive and real estate purposes. Enhancing the environment and improving the quality of life Providing an useful information to local governors and other stakeholders about the net real and potential value and the assets/properties of a city/municipality.
3. Service oriented of municipal fix asset management Fix asset management support municipality in performing functions through offering services to local community. Municipal asset management is the process of inventory, valuation, use, strategic portfolio reviews, reporting and auditing of municipal assets as part of the decision making process of local governance. But the main benefits of an effective asset management system are to help local governments in providingto local residents with improved services based on municipal asset use (such as infrastructure, potable water systems, cleaning and waste management, kindergartens etc.)
Fix assets have a certain long term service life. Then begins the degradation of the asset's condition and the performance of its use, thus their operating costs comes to increasing.To avoid it, many actions are needed (repair, maintenance, or general rehabilitation). Using an effective strategic investment on time, the overall life cycle of assets can be extended and their performance of services can be as desired or foreseen. The key issue is to intervene before the degradation has reached a certain point (is it more economical to replace it, or to rehabilitate it?) An service levels oriented asset management approach means that the targeted service level from a given asset, should foster investment and decision making for; a) rehabilitation b)
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replacement c) wiping / extinction / extrusion/disposal, or d) nothing/no action. The service level should be response tocommunity needs, strategic goals of local government, legal requirements or compliance requirements and, local community expectations. It is also important to consider the trends affecting service levels such are demography, usage rates, population growth, etc. On the other hand to measure the service levels, the municipal government should set up the performance key indicators for getting an approach based on asset management services. The asset performance key indicators are based on what is the desirable services level from asset using, how the assets accomplish it, and what should be improved with management? Such kind of asset performance indicators based on service lever are; i) m2 per student (schools); ii) m2 parks per resident; iii) quantity/m3 drinking water per inhabitant/family; iv) meter linear asphalt road per total m2surface, v) m2 forests per resident; etc. Aiming for a desirable performance indicator, asset management is carried out to achieve this indicator.
4. Evaluation of Albanian municipal fix asset management 4.1 Internal control system designed for fix asset management Using the questionnaire (survey) technique, this study has achieved to perform the evaluation of municipal capacities in place for fix asset management after the recent administrative and territorial reform, through evaluation of internal control system a certain relevant aspects. Building an adequate and strong internal control for asset management, means; better safeguarding of municipal properties more efficiency in using taxpayers money more quality and quantity services for community.
Based on each above, are drafted sections of questionnaire, for evaluation of effectiveness and adequacy of internal control system of each of 61 tested municipalities in Albania, in meaning; what system was in place compared with better internal control standards and practices of field, which specifically are: a) Control environment, includes; i) Field legal and other regulatory framework; ii) financial reporting system; iii) inventory and information system; iv) asset registration system; v) administration and organisational considerations; vi) technology in place for asset management; vii) strategic management and its periodic review, etc.
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b) Control activitiesincludes;i) roles and responsibilities in asset management process; ii) asset documentation (accounting records, entrance, sale, re-evaluation, etc); iii) segregation of duties, safeguarding of asset, etc. c) Fix asset risk managementincludes; i) risk identification; ii) risk measurement; iii) risk management (risk response, risk control etc). d) Monitoringincludes: i) everyday/periodic control; ii) everyday improvements/corrections. e) Information and reporting on assetsincludes; i) management reports, ii) operational reports and iii) financial reports. The most necessary fix asset management activities must include: and financial); vii) evaluation and re- evaluation of assets; and viii) efficient data
Legal framework Mof public finance rules and base on asset and its maintenance . regulations Municipal rules and regulations
Strategic asset Invetory and management information system
Fix Asset management system Asset database and Registration of IT data mainatin and municipa processing fixlassets/properties
Organisational structure and HR Financial Reporting roles System and evaluation of assets Job desctription
Fig.3. Fix asset activities
The main finding from the survey The survey was organised on 8questionnaire sections, respectively;
(i) general information; (ii) capacities owned on municipal fix asset management (knowledge/skills and financial); iii) evaluation of internal control system on fix asset management in place; (iv) the most significant municipality services supported by fix assets and their conditions; (v) internal audit on asset management; vi) strategic management, strategic planning (managerial
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The questionnaires were sent via email to all 61 municipalities. Are received about 39 or 64% of them which represents different size, economic development, social- cultural, and geographical position of municipalities. The received information comes from different levels of municipal staff; executive managerial, executive middle level, and experts responsible for assets. No one on political level answered. The key finding are:
Municipalities are lacking capacities to manage efficiently their assets: Staff have limited knowledge/skills, sometime basic information is missing 25% of municipalities have no dedicated structures with clear role and responsibilities. Often municipalities have no systems for asset management in place A good number of municipalities are lacking periodic inventory and reassessment of assets No periodic reporting. Some of them report only when this is requested No internal rules and regulations, sometime even no audit trail for asset management Ministry of Finance instruction is in place, but needs further clarification; Information and communication system is the weakest point of asset management. Municipalities very rare share information with community and involve them in important decision with regard asset management. Internal audit and control has mostly a good financial focus on asset management. Investment on new assets are not related with municipality policies; plans and strategies No transparency is developed on municipal asset management policies and practices. Some of them have skills on asset risk and critical asset, but they don't use in practice.
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More than half of the municipalities have no strategy for asset management at all, as result the financial resources are allocated based on emergency needs and no strategy. The indicators on surveyed participant, their knowledge level and internal control in place, shows that most of them have some skills on asset management and internal control system.
3 mayor 7 good 28 29 midle some 69 61 other no one
have 20
don't have 20 60
no answer
Fig.4. Participants in the survey by role Fig. 5. Knowledge level Fig.6. Internal control system The effective asset management system needs to build professional capacities with dedicated structure with people with several expertises and identification role in field of management, finance, risk management and analyse, engineering, and other technicians and operators with necessary skills. By the survey only 63% of municipalities have a dedicates structure for asset management, while 54 have clear responsibilities.
26 have 16 have
63 don't 54 don't have have
Fig.7. Dedicated structure Fig.8. Clear role
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To check if the municipalities maintain a asset data base system for operational management purposes (not financial), and if they complete an periodic inventory in annual bases, the result of the survey are: i) most of them about 80% have a register; ii) only 17% do not perform inventory in annul bases; iii) more than 70% did not undertake a process for re evaluation of fix asset in annual bases comparing with par value.
have 14 17 6 don't have yes no 80 no 83 answer
yes 7 16
no 60 partialy
Fig.9. Asset data base Fig.10. Asset inventory Fig.11. Asset re- evaluation
Strategic asset management evaluation results that more than 52% have not a strategy for asset management. Almost all of them have not in place an asset allocation based on strategic objectives or priorities, while the allocation is mostly based on needs. Policies on asset man agent and efficiently are evaluated into 5 levels, which are; 32% very good, 38% good, 17% sufficient, and 3% not sufficient
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have 5 16 yes don't 52 30 have no 90 no answer
3 very good 17 32 good
38 sufficient
not sufficient Fig.12. Strategic asset management Fig.13. Asset allocation strategic base Fig.14. Asset re- evaluation
Internal procedures on asset management, documentation and policies
One of the key principles of asset management is the link between asset management and the long-term financial plan. In best practice terms means a minimum ten-year planning timeframe.Transparency and community participation in decision making on asset management is as below. Asset maintenance process showed that mostly is not sufficient. The most of municipalities have not established the key performance indicators for services from assets. involved very good 4 5 20 17 some 20 good 36 involved not sufficient 41 envolved 52 no not answer sufficient 5 have 18 don’t have 78 have some
Fig.14. community involve Fig.16. Asset maintenance process Fig.16. KPI for asset services
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The municipal responders are answered also on some asset condition as below. Table 1. Asset condition Service Conditions Very good + Sufficien Not sufficient + good t very bad
Municipal road conditions 57% 11% 18%
Waste management and roads 64% 21% 4% cleaning
Public transport 32% 32% 21%
Potable water and sanitation 50% 18% 21%
Health care canters 46% 21% 25%
Kindergarten and pre-university 71% 21% 0% education institutions
Drainage and irrigation system 64% 11% 18%
Fire protection and rescue canters 46% 4% 43%
Municipality premises 61% 7% 25%
5. Other potential asset management problems caused from merger of local government units
The territorial administrative reform absorbed more than 300 small local government units from 61 municipalities, thus legally transferred their assets into jurisdiction of the new bigger municipalities.The process of transferring properties/assets from previous to new local government units started in 2015, giving to the 61 new municipalities all the right and responsibility on asset management, as well as their control on all respective properties.
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To accomplish the one of key purpose of the reform "increasing of efficiency and accountability of municipal governance in improving public local services, and thus the quality of community life through better using of local assets and other resources and better decision making the reform should ensure that this transfer is complete, safe and documented, but also to guarantee human capacities capable of this management
Even as the process of transfer of immovable property to local units in Albania started from year 2001 is still ongoing and municipalities are now key owners on several public properties. The transfer process seems complicated in terms of properties typology such as: local public buildings, schools, primary health clinics, roads, and public spaces (recreation area, cultural canters etc). Some municipalities having a good public finance management system (PFM system) make good efforts to manage their assets especially the immovable ones while only few consider them as a benefit to their budget management and taking into consideration their opportunity cost by different way of use of municipal assets. In many cases, the register of assets is not updated or even worst having just a list of assets items with no financial value for either the entry value not for their current / book value.
Other problems are identified by survey, as"other comments"
i. Fixed assets should not only be checked / used or be under municipal control, but should be owned by the property registration on public register.Many of the immovable properties of the former municipalities/communes, as well as new ones after the merger, have only been taken under control but the municipalities do not have any legal documents / certificates of ownership onimmovable properties. This prevents them to lease, or sale assets as well. ii. Revaluation of fix assets with market valueis necessary not only because it shows the real value of the municipality properties, but also for other reasons such are those
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for borrowing using a hypothec/collateral, or for other investment purposes. On the other hand, no reevaluation process is used periodically/each year. iii. In many cases, the assets were delivered as a list of items with no clear inventory procedures and no associated book value (entry, amortization and residual value), so the most of municipalities even after of about 4 years have not included them with a certain value in the accounting system iv. While the information for financial management purposes is generally well- regulated and in use, the database system is weak and deficient for everyday fix asset management purposes. The municipalities do not have a data base for each individual asset with information on asset life, real situation and real capacity in offering services, asset geographical ordinations, identification code, material from it is composed, how many routine maintenance or capital services are performed, or any other non-financial data. If we consider an wide information of data base on asset management (not for financial purposes) at list the most necessary information may be: Table 2. Data necessary for asset management process
-
at the
that uses from re from
price
evaluation of evaluation
/profit /profit of entry of asset and name a of out of use use of out of a re-
icy/method set description set he sale oss As sets As Data Location Department ID entrance of Cost Reevaluation amount When is carriedout the last value book Depreciation (accumulated) Current depreciation value Residual Depreciation pol L evaluation Finance resource Mortgage agreements Dat T date of exit
v.Strategic managing financial and human resources on asset management activities is not well understand, planed and scheduled efficiently. Asset management requires the design of activities over the all entire life cycle of assets by addressing decisions that relate to internal resources such as financial, material and human resources. No one of municipalities has drafted a specific strategy, plan or policy dedicated on long
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term fix asset management. Some of the respondents did not have clear understanding on roles in asset management, on policy making and strategies approval, asset management, asset coordination, and financial asset management.
6. Concussions and recommendations
The municipalities have not been well prepared for the problems that might arise after the reform in the field of asset management.
In addition to their inherent weaknesses, they also relate to respective problems arising from merger of former local units.
There is in place a regulatory framework as regulation on public finance management and asset management, for recording, reviewing, evaluating, addressing and controlling risks, emergency plan and contingency fund, etc. but none of municipalities have an internal rule on fixasset risk managements, on treating the critical assets, asset management activity plan etc.
They have not an correct asset inventoried list verified with physical presence of all listed assets, some of them have not a book value, some others are unregistered in the public property register /ownership certificate.
The municipal staffs do not have the right knowledge for a professional service in the area of asset management such are: i) strategic management and planning; ii) critical asset and risk; iii) professional asset auditing; iv) periodic asset evaluation and reevaluation techniques.
Municipalities are not able to build an services oriented fix asset management. They don't have foreseen key performance indicator as desirable for services expected from assets, as result no asset management policy is in place for maintain those asset in the best level or service performance.
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The municipalities has to design a strong internal control system in field for better use, save and maintain assets toward economical social and cultural development of their territories. Some internal rules and regulations are necessary for efficient processes ensured from assets.
Recommendations
1) Building a complete asset management system, with strategy, planning, transparency, decision making, database, reporting etc. 2) Immediately realizing the valuation of properties/assets acquired without book value, based on fair market value, and including in accounting system. 3) Immediately undertaking the necessary legal steps for registrations of immovable properties in public register ensuring property certificate. 4) Building a system of defining the desired performance indicators of asset services, with the purpose of service-oriented management from them.
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1. Ministry of Local (April 2014) "The Administrative-Territorial Reform"; https://portavendore.al/wp-content/uploads/2018/03/Raport-Studimor- Ministria-per-Ceshtjet-Vendore-Analiza-e-Situates-se-Qeverisjes-Vendore- 2014.pdf. 2. Ministry of Finance Albania; Law 10296/2010 “On Financial Management and Control", www.financa.gov.al 3. Ministry of Finance Albania, "Regulation no.. 30 Date 27.12.2011 “For asset management in public sector entities". https://www.financat.gov.al. 4. USAIN Program for local governance Albania, "Guideline for asset management in local level" Sep. 2010. 5. Adjo Amekudzi, Ph.D.; and Sue McNeil, Ph.D., P.E. "Infrastructure reporting and asset management". ISBN (print): 978-0-7844-0958-9ISBN (PDF): 978- 0-7844-7216-3
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The Social Responsibility and Innovation Activities at the Decreasing of Food Losses with Special Focus on the Sustainable Use of the Natural Resources Zuzana Kapsdorferová1, Petronela Tarinová2, Mária Kadlečíková3, Pavol Grman4
Abstract In the world, there are ongoing more and more discussions about the food losses and food waste. This is urging problem, as in the every year, worldwide is disappearing about one third of food, which is originally designated for human consumption – approx. 1,3 bill. tons, or it is ending in the food waste. From the social point of view, the food losses and food waste are creating not only social but also economic and environmental problems. If the food losses and food waste would be halved, then required food production enhancement for nutrition of 9,1 bill. people in 2050 would reach instead of 60 % only 25 %, in comparison with forecasted recent calculations in the strategic visions. In any case, there is the consensus that the decline of food waste and food losses is realistic objective, so from the technical, economic, environmental, as well as from social point of view. Food losses and food waste are having negative impact on the environment. This is linked to the exhaustion of soil and water resources, externalities caused by utilization of pesticides and chemical fertilizers, but also this refers to the water and air pollution; into consideration has to be taken the employees ‘and consumers health problems. The residues are leaving their significant signs on the environment. The food losses and food waste are responsible for additional 3,3 bill. tons of greenhouse gasses, which are escaping to the atmosphere. The decline on the food losses is also considered as the meaningful tool for downsizing of GHG emissions, for the creation of which is paradoxically responsible agrifood sector, despite of its main task to ensure food security and food safety.
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Key words:food security, responsibility, innovation, food losses, natural resources, food chain JEL classification:O29, O 32, Q50
1. Outline of Current Research in Food Waste and Food Losses Food losses refer to the decrease in edible food mass throughout the part of the supply chain that specifically leads to edible food for human consumption. Food losses take place at production, postharvest and processing stages in the food supply chain. Food losses occurring at the end of the food chain (retail and final consumption) are rather called food waste, which relates to retailers’ and consumers’ behavior [Parfitt et al., 2010]. Food waste is any food, and inedible parts of food, removed from the food supply chain to be recovered or disposed, including the followingdestinations: composting, crops ploughed in/not harvested, anaerobic digestion, bio-energy production, co-generation, incineration, disposal to sewer, landfill or discarded to sea but not including food or inedible parts of food removed from the food supply chain to be sent to animal feed or bio-based material/chemistry processing[Tostivintetal., 2016]. In addition, packaging is not included in the food waste definition and shall not be taken into account in the food waste quantification. According of FAO [2013], if the food losses and food waste would be halved, then required food production enhancement for nutrition of 9,1 bill. people in 2050 would reach instead of 60 % only 25 %, in comparison with forecasted recent calculations in the strategic visions. In any case, there is the consensus that the decline of food waste and food losses is realistic objective, so from the technical, economic, environmental, as well as from social point of view. Food losses and food waste are having also negative impact on the environment. This is linked to the exhaustion of soil and
472 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY water resources, externalities caused by utilization of pesticides and chemical fertilizers, but also this refers to the water and air pollution; into consideration has to be taken the employees ‘and consumers health problems. The residues are leaving their significant signs on the environment. The food losses and food waste are responsible for additional 3,3 bill. tons of greenhouse gasses, which are escaping to the atmosphere [FAO, 2014]. The decline on the food losses is also considered as the meaningful tool for downsizing of GHG emissions, for the creation of which is paradoxically responsible agrifood sector, despite of its main task to ensure food security and food safety. Organization of United Nations considers the food losses and food waste as the real mean for the hunger eradication and for the attainment of the permanently increasing need for sustainable food systems. In these days, 807 mil. people is suffering by hunger. To deal with issues of food losses, means to deal with resolution of social conditions both for poor food producers, so for the poor food consumers; this approach may have positive impact on the whole society. The increased income of food producers and poorer food consumers is resulting into higher incomes for both groups, as they consequently can buy more foodstuffs owing to lower food prices. However, it is the frequent case, stemming from cultural backgrounds, habits by which consumers are regulating their home food supplies, as well as due to absence of relevant information and knowledge, consumers are doing bigger shopping in comparison to their real needs, respectively that they do prepare more food, as they are able to consume. These all factors are leading to the fact that large amount of the prepared foodstuffs are ending in the waste. This everything is requiring qualified work with consumer awareness, in order to be more selective at decision-making during the food shopping and to deal with food in more responsible way. This is particularly important in the countries with higher living standard where is obvious systematic access to the food shopping. In these
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countries the consumers should be guided to the smaller, but more frequent shopping. The preference to bigger food procurements is leading to the larger food wastes. The majority of food waste in the developed countries, is originated in the consumption phase, while in the countries with middle, or small income, the biggest losses are in the production and post-harvest phases of the food chain. The habit linked to the creation of large home supplies, the purchase power of citizens and consumers’ preferences are causing that about 25 % of food waste is from cereals and on this fact has the largest affect the group of consumers with high income. The level of food waste up to 8,5 % is appearing in the countries with middle-level income of citizens (including of Slovak Republic). This value is declining below 5 % in the low income countries[FAO, 2013].
2. Aim, Data and Methods The main objective of the submitted scientific paper is to assign the situation with food losses and waste in Slovak Republic and to propose measures on minimization of the food losses and food wasteto develop and implement tools for monitoring of food losses and to develop such scientific and educational publications through which will be enhanced the citizens information and responsibility.Stemming from the above mentioned, the main objective of submitted paper is to find out the data about the food waste in our circumstances and to suggest optimization measures on their minimization. Into the research had been involved 156 respondents who responded on 16 questions related to food waste. The survey was undertaken in June 2018 and for its delivery had been utilized hardcopies of questionnaire, as well as its electronic form distributed through social media and the email communication.
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3.1. Food waste in the Slovak republic and innovation activities at the decreasing of food waste Food losses are occurring practically in each segment of the food chain, starting from agricultural primary production, continuing through food processing and ending with food consumption in households. In the more developed states, the food losses are dominating at the end of the food chain. Food waste is a global problem that is not avoided by Slovakia and serious action plan must be drawn up to improve the situation. As far as we know there are five main problems of food losses and food waste in Slovakia that we have to pay attention at: 1. Measuring food losses and food waste – the scarcity of data or no data at all is a big problem. The problem is that there is no defined method of data collection: surveys, administrative data, statistical estimations as well as their combination. There is also need to clear define food waste, distinction in edible and non-edible required and clear operationalisation of food and non food.
2. Need of change legislation. If we want to reduce the production of food waste we have to change a law, which is freer in the EU countries. Example can be removing of durable food from food waste category, unconsumed food offered for feeding animals or deducted of taxes for food donations. There are also talks going on about the possibility to sell food after the date of minimum durability. Currently it is forbidden in Slovakia to sell food after the date of minimum durability.
In 2015, the stores in the Slovak Alliance of Modern Business – Billa, Lidl, Kaufland, Metro and Tesco donated food worth 904,000 Euros, so the value
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compared to previous your doubled.This was also the case with items such as flour, pasta, sugar, legumes or rice. Food donations can be deducted from taxes by the merchant. There would be more donate, especially food with expire date of minimum durability, but it is law that prevents it to happen. The reality is that the chains must continue to expel food at their own expenses to help the poor. Food surpluses include foods, including donations for human consumption, animal feed and waste. Gifts for human consumption are gifts to non-profit organizations for human consumption. Animal feed mainly consists of food surpluses intended for feeding animals in Zoos or hunting associations. These donations are qualified as gifts unsuitable for food banks. Food waste is unsold food that is being disposed. This includes foods that are suitable and unsuitable for human consumption.
6000 Food waste suitable for human consumption 5000
4000
3000 5878 TONES 2000 2807 1000 1256 46 135 0 Dameged Unsuitable Donated for Food for Written-off goods for donation human animals good consumption
Fig.1 Food waste in selected food chain store in Slovakia in 2017 Source: Own research based on revealed data of selected store chain Food waste in a selected stores are mainly created by: fruit and vegetable with share of up to (47%), pastry (27%), finished meal (7%), dairy products (6%), meat and fish (3%), non –alcoholic beverages (3%), the rest (7%). Food surpluses
476 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY include unsold foods, including donations for human consumption animal feed and waste. Gifts for human consumption are gifts to non-profit organizations for human consumption. 3. Hunger is not „happening somewhere else“, hunger is there – the risk of poverty threatened 670 thousand people, 12,7 % of population in Slovakia in 2018 and is continueslly growing . In the European Union, 112.9 million people lived in poverty or social exclusion in 2017, which is about 22.5% of the total EU population. The number of people at risk of poverty has fallen by 1.5% since 2008 (Eurostat, 2018).. The largest share of the population at risk of poverty and social exclusion was in Bulgaria (38.9%), Romania (35.7%) and Greece (34.8%) last year. The least vulnerable countries were the Czech Republic (12.2%), Finland (15.7%), Slovakia (16.3%) and the Netherlands (17%). The poverty indicator counts people at risk of poverty due to income levels, people in serious material distress, and households with very low work intensity. Therefore there is place to help to these people rather than through the food in a bin. It is our responsibility to find a way how to help them.
4. 30-40% of all food is never eaten – it is not persist in other industries. Our research pointed out that 24,36% consumers in Slovakia buy only those things what they actually need. In the figure 2 could be seen the answers of our respondents. The number of answers with the option “I always buy more, according to current discounts” reaches a high share with 10.26 %. This may lead to the higher wastes in the households, as for example in Slovakia is characteristic to sell e.g. paprika in one package for 2 or 3 pieces. In the case that more pieces are bought, they are often rotting
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and as such not consumed, but thrown into a trash bin. The fact is, that everyone has to eat in order to have balanced physiological and psychological development, but majority of the people are accustomed to buy much more, as they need for their healthy and well-balanced nutrition. Sales, advantageous purchases, “last chance” actions and many others are just very good marketing activities. Then, it is worthwhile to mention the placement of products in a shelves, since people tend to buy a product in sales, if there is a remarkable price difference in comparison to other similar products, or the attractive packaging is forcing the consumer to buy products, despite that he/she is not familiar with it and most likely this would be thrown after a few days into the garbage.
10.26% Yes, but sometimes I use discounts and buy more
24.36% Yes, I buy only the products I need
65.38% I always buy more, according to the current discounts
Figure 2 [Buying products according to personal needs, 2018] Data: own processing, source: own survey 5. Environmental problem – uneaten food accounts 25% of all fresh water, land, labour, energy, manufacturing, packaging. When the food waste goes to landfill it is decomposed without access to oxygen and creates methane. The amount of a waste producted by households in Slovakia is
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enormous, no matter whether we live in a house, flat or at a dormitory. Approximately 300 kg of a waste is produced by each citizen of the Slovak Republic. The waste that´s being generated is mostly mixed garbage which means that everything is thrown into one bin (Kročková B., Lieskovská Z., 2016) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%
May be Good Recyclable Unrecyclable reused after for to a limited composting recycling extend
Figure 3 [Structure of waste generated by the household, 2016] Source: KROČKOVÁ Beáta – LIESKOVSKÁ Zuzana 2016, own processing We consider the biological waste – compost - as a valuable natural resource that may be used for the soil fertility enhancement. This agro-ecological approach will obviously boost soil productivity and reduce the need for use of chemical fertilizers which to the end will prevent the undersurface water from the contamination. The analysis of a municipal waste in the region of Nitra from 2016 says that only 8.8 % of a waste is used for composting, or for energetic purposes, but 91.20 % of garbage is defused. Most of the defused part creates the mixed municipal waste generated by a household (more than 70 %).
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4. Conclusion
The costs of a food waste do create at least two kinds of costs. The first one is the economic cost and the other is the environmental cost. To the first one mentioned does not belong only the costs related to the value of products, but also the costs for production, including of costs for human resources inputs, financial and material inputs, storage or transport, as well the storage of unused products and their handling. The other cost above mentioned, include wastage of resources through the whole life cycle of a product, which means that for example water or energy is wasted and this is increasing the emissions of greenhouse gases. The survey pointed out how extremely big problem is a food waste in Slovakia. It is our responsibility to solve it and reduce food waste. From the data gained within this survey we may state that high number of respondents is affected by the current discounts in stores and therefore they use to bring home more food that they actually need, which may then be the reason for higher waste. From our viewpoint, in order to stop wasting of food, citizens must also know their weaknesses which would lead to the decline of food waste, as well as less spending for purchased foodstuff. 20 % of respondents do not understand the terms related to the durability of foodstuffs correctly. It is suggested in connection to the food waste to better inform the citizens about the sing on every single piece of food which says “minimum durability”, this doesn´t necessarily mean that the food cannot be eaten after stated date. From the results connected with the opinion towards wasting food in households we see that women do incline more to the idea that their household really wastes food and feel guiltier for that fact more, than men do. Well, for a better economic situation of families with tighter budget, but not only those, as well as growing population in every year and environmental consequences connected with food waste, is important a free removal of the separated waste.
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This actually means a free garbage disposal of plastics, and glass, as well as paper and let people only pay for a garbage from the foodstuff, which will lead to decline of their waste of actually compostable stuff, but set the average amounts of the kitchen waste. The question of the food losses and food waste represents very complex problem which is calling for participation of all participants of the food chain, if the significant results should be achieved in this field. Responsibility for sustainability of the natural resources for future generation is in our hands.
References
Gustavsson, Jenny, - Cederberg Christel - Sonesson Ulf - Van Otterdijk Robert - Meybeck Alexandre: Global food losses and food waste. FAO, 2011 Rome, Italy, ISBN 978-92-5-107205-9
KROČKOVÁ Beáta – LIESKOVSKÁ Zuzana, 2016, Zelená domácnosť alebo konajme 3E – ekonomicky, environmentálne a eticky – hospodárenie v domácnosti, 2.časť, Bratislava: Ministerstvo životného prostredia SR, ISBN: 978- 80-89503-49-0 FAO UN, 2013: Sustainable Food Rresources, Food Systems, Food Security and Nutrition. FAO UN World Food Day 2013, FAO – UN, Rome FAO UN, 2014: The Food Losses and Food Waste in Europe and in Central Asia, FAO Regional Conference for Europe and Central Asia, 2014, Bucurest, Romania, 2.- 4. Apríl, 2014. FAO, 2017, Key facts on food loss and waste you should know!, [online], available at: http://www.fao.org/save-food/resources/keyfindings/en/ KROČKOVÁ Beáta – LIESKOVSKÁ Zuzana, 2016: Zelená domácnosť alebo konajme 3E – ekonomicky, environmentálne a eticky – hospodárenie v domácnosti, 2.časť, Bratislava: Ministerstvo životného prostredia SR, ISBN: 978- 80-89503-49-0
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Tostivint Clément et.al., 2016: Food waste quantification manual to monitor food waste amounts and progression. Fusions project, c.n. 311972 [online] available athttp://www.eu- fusions.org/phocadownload/Publications/Food%20waste%20quantification%20 manual%20to%20monitor%20food%20waste%20amounts%20and%20progressi on.pdf Julian Parfitt - Mark Barthel - Sarah Macnaughton, 2010: Food waste within food supply chains: quantification and potential for change to 2050. Philosophical transactions of the royal Society B. doi.org/10.1098/rstb.2010.0126. ISSN 0962- 8436 Acknowledgement: This article was realized based on research grant: VEGA 1/0802/18, Corporate social responsibility and innovation activities focused on decreasing food losses with regards of environmental issues.
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9TH INTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY Internal Control System at Public Institutions. Zamir Kurushi1 Albana Jupe2 Abstract The change of the economic climate in Albania requires changes in procedures and working processes, which lead to new policies. Generally these policies are applied in Albania from international standards. For example in accounting, which plays a main role in internal control system, is represented by “The International Public Sector Accounting Standards” and “International Accounting Standards”. International Accounting Standards are quickly adapted and implemented from the private sector, but International Public Sector Accounting Standards are still in process to be approved, which might have not a good impact on internal control. From above example we can identify that private sector is more flexible in the changes of the procedures than public sector. Therefore an efficient internal control system with updated methodology and legislation at public institutions will help top management and staff of institution to achieve predicted objectives and preventing fraud. The COSO framework defines internal control as a process, effected by an entity's board of directors, management and other personnel, designed to provide "reasonable assurance" regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations; Reliability of financial reporting; Compliance with applicable laws and regulations; assets protection. This study will be focused internal control system at public sector and main Albanian legislation. The results of this study will suggest future possibilities on how to develop better internal control system in public institutions. Key words: Internal Control, System, Public institutions, Accounting, Policies, JEL classification: 1. H83 Public Administration; Public Sector Accounting and Audits 2. M41 Accounting; 3. M49 Other;
1 MSc. Head of Internal Audit at Institute of Statistics, Email: [email protected]
2Prof As. at Agricultural University of Tirana, Faculty of Economics and Agribusiness, Email:[email protected]
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4. E61 Policy Objectives; Policy Designs and Consistency; Policy Coordination 5. G18 Government Policy and Regulation 6. O21 Planning Models; Planning Policy 1. Introduction
Internal control system is a process which helps institutions and organizations to achieve their objectives. This system is designed by the top management and is implemented from all the employees. One of the organizations that is preparing guidance for internal control system is the Committee of Sponsoring Organizations of theTreadway Commission (COSO),3which is dedicated to providing thought leadershipthrough the development of comprehensive frameworks and guidance on internalcontrol, enterprise risk management, and fraud deterrence designed to improve organizational performance and oversight and to reduce the extent of fraud in organizations. In Albania government has approved a law no. 10296, date 08.07.2010 “On Financial Management and Control”. This law is amended during these years and the last one was with law no. 110/2015, date 15.10.2015. In regard to this law Ministry of Finance has issued an order no. 108, date 17.11.2016 for “Approval of Financial Management and Control Manual”. The aim of this manual was to give more details to the employees at public sector regarding five components of internal control system: a. Control environment; b. Risk management; c. Control activities; d. Information and communication; e. Monitoring;
To have more clear view how to implement effective control system, the Manual of Financial Management and Control, is describing the principles of each component of internal control system. The above law and its respective manual it supposed to be read and implemented from all the employees at public sector regardless of the education completed, but in reality is not done properly. The employees at public sector when read the title of the law no. 10296 date 08.07.2010 “On financial management and control”, amended, immediately they react that “this law is only for the unit of finance not for them”. This situation leads that the government employees are not very
3https://www.coso.org/Documents/2017-COSO-ERM-Integrating-with-Strategy-and- Performance-Executive-Summary.pdf
484 9thINTERNATIONAL SCIENTIFIC CONFERENCE OF BUSINESS FACULTY familiarizing/updated with laws, regulation and manuals that highlight internal control system, which may impact the process, procedures and segregation of duties, because they do not have adequate knowledge regarding internal control system. As soon as they will gain this knowledge, faster they will understand the weaknesses and react to increase internal control. On the other hand the employees in public sector, especially those who are working in financial unit, are familiarized with the laws which affect directly by increasing internal control system for public entities such as: • Law no. 9936, date 26.6.2008 “On Management of the Budgetary System in the Republic of Albania”, amended • Law no.9228, date, 29.04.2004 “For Accounting and Financial Statements”, • Order no.8, date 09.03.2018 “Procedures for Preparation, Presentations and Annual Reporting of Financial Statements in Units of General Government”, issued from Minister of Finance. • Guidelines no. 30, date 27.12.2011 “For management of assets in public sector entities”, amended, issued from Minister of Finance; • Guidelines no. 21, date 25.10.2016 “For implementing officer at all levels” • Guidelines no. 9, date 20.03.2018 “Standard Procedures for Budget Implementation” • Etc.
All laws, orders, regulations, guidelines in general attempt to promote effective internal control system, but the above acts have direct impact on what an institution should design procedures and processes with aim to make adequate internal control. 2. Methodology
The information on this paper is based mainly in the interpretations of the laws implemented in public entities in Albania compare to the rules of EU. The authors conducted interviews with representatives of the main public entities, their opinions and experience is shared with the author’s opinion. The paper is focused on the internal control system in Albania how to design an effective system in compliance with European regulations. Conclusions and recommendations are mainly based on experience of the authors and literature review.
3. Importance of Internal Control System in accordance with best practices.
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To have good governance it is important to implemented effective policies and procedures. It is not possible that five components of internal control system (Control environment, Risk management, Control activities, Information and communication and Monitoring) to be implemented in other public entities with the same documents (i.e. risk register is different and specific for each institution). Each of these components has its own principles. These principles are indicating the core of the controls, policies, procedures, etc that all public entities must have it installed. The top management of the public institutions should install these controls based on their judgment and in compliance with the nature of institution. As above stated Internal Control is an integral process (i.e. a series of actions that permeate an entity's activities) that is affected by an entity’s management and personnel. Internal control is designed to address risks and to provide reasonable assurance that, in pursuit of the entity’s mission4. To have an effective internal control it means that this public entity is accountable and will produce: • better planning, • objectives are SMART, • adequate risk management, • reliable financial reports, • the operational activity is in compliance with laws and regulations, • lower risk of fraud, • safeguarding of assets, • better reputation of the institution, etc.
An inefficient internal control would lead that the institution will jeopardize what was written above,which may lead the top management will not achieve their duties, objectives and goals. This situation will increase the risk that institution operate ineffectively and perform just a part of their activities. To have e efficient internal control system it is even e part for accreditation criteria from EU. These are described in Framework Agreement between the Republic of AlbaniaRepresented by the Government of the Republic of Albania and the European Commission on the Arrangements for Implementation of Union Financial Assistance to the Republic of Albania under the Instrument for Pre- Accession Assistance for IPA I and IPA II: • in IPA I - it is stated in Commission Regulation (EC) No 718/2007 of 12 June 2007 implementing Council Regulation (EC) No 1085/2006
4Financial and Compliance audit Manual Directorate of Audit Quality Control, September 2017, page 29.
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establishing an instrument for pre-accession assistance (IPA), Annex Accreditation Criteria, • in IPA II –it is in Framework Agreement, Annex B Internal Control Framework.
European Commission is giving financial assistance under IPA I and IPA II to Republic of Albania with aim that laws, governance, etc will be alignment to the acquis and best practices of EU.In order Republic of Albania to gain EU funds must establish policies, procedures and institutions to be involved together. If we are going to analyses the procedures and methodology implemented, they are promoting and implementing pure effective internal control system activities related with IPA funds. From the Framework Agreement for Instrument for pre-accession assistance (IPA II), 2014-2020, it was lunched “Programme with title IPA 2014 Action Programme for Albania”, Action Title Sector Reform Contract (SCR) for Public Finance Management (PFM). Based on above Programme, as a result of an in- depth screening of the existing PFM arrangements and related weaknesses, thestrategy has identified six main pillars of intervention: 1) Sustainable and prudent fiscal framework; 2) Well-integrated and efficient planning and budgeting of public expenditure; 3) Efficient execution of the budget; 4) Modern Accounting and Reporting System; 5) Effective system of internal control of budget spending units; 6) Effective oversight of public finances. All the above areas are more related with increasing effective internal control for the public sector. Referring Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending, for the general budget of the Union (the ‘budget’) in article 36 Internal control of budgetit indicates what measures need to do done to have an effective internal control. For implementation of the budget it is vitally to have an effective and efficient internal control which shall be applied in all the organizational hierarchy form top management to the execution officer of the organization. In the following are stated the objectives, policies and procedures, elements of internal control system. 1. The internal control system should be designed to give a reasonable assurance the objectives which are as following: (a) reliability of reporting;
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(b) effectiveness, efficiency and economy of operations; (c) adequate risk management related to objectives of the institution,legality and regularity of the transactions and payments concerned; (d) prevention, detection, correction and follow-up of fraud and irregularities; (e) safeguarding of assets; (f) efficient and effective information and communication; 2. Based on the best practices and in accordance with Regulation (EU, Euratom) 2018/1046 of the European Parliament, article 36, an effective internal control need to be includes the following policies and procedures: • adequate risk management; • top management prepare procedures to conduct effective and efficient monitoring process; • segregations of duties and tasks; • avoidance of conflict of interests during the procedures; • periodically assessing the functioning of internal control of the institution. • blue print (designing) procedure to identifying weaknesses of internal control, preparing action plan and conducting follow-up; • adequate audit trails and data in the documents must be fulfilled with integrity and reserved in data systems;
3. Referring Regulation (EU, Euratom) 2018/1046 of the European Parliament, article 36, to have an efficient internal control the following elements are needed: (a) the implementation of an appropriate risk management and control strategy coordinated among appropriate actors involved in the control chain; (b) the accessibility for all appropriate actors in the control chain of the results of controls carried out; (c) reliance, where appropriate, on management declarations of implementation partners and on independent audit opinions, provided that the quality of the underlying work is adequate and acceptable and that it was performed in accordance with agreed standards; (d) the timely application of corrective measures including, where appropriate, dissuasive penalties; (e) clear and unambiguous legislation underlying the policies concerned, including basic acts on the elements of the internal control; (f) the elimination of multiple controls;
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(g) the improvement of the cost benefit ratio of controls.5
4. Implementation of internal control in public entities.
Public entities collect taxes and spend them with aim to give better services to the citizens. The taxpayers should be ensured that these public entities administer the funds with due care and the services are conducted with economically, efficiently and effectively. To achieve the above goal public entities developed and implemented internal control system. An internal control system may give reasonable assurance, not absolute, to the top management in relation with the achievement of the objective at the respective institution. The term “reasonable assurance” it means a satisfactory level of trust taking into consideration the costs, profits and risks. To decide reasonable the assurance, it requires professional/managerial judgment, based on researches and analysisof inherent risks in their activities, programs and projects, assess these risks and determine acceptable levels of risk under different circumstances. The process when employee should be familiarized with internal control methodology and tools should starts after the recruitment process. The employees after are hired, they are not trained on topics that are related with “internal control”. Employees, because of lack of knowledge regarding the internal control (law no.10296), after understanding just some monotone technical processes will refuse to conduct internal control efficiently, because their behavior is to be operative and not making “bureaucratic procedures”. In these situation regardless how effective “Control environment” it is imposed by the top management, the other 4 components will be not efficient. On the other hand the persons that are implementing and reporting what is required in accordance with law no. 10296 date 08.07.2010 “On financial management and control”, amended, are aware the importance of internal control. In this group are included Internal Audit for and External Audit for public sector. As we know the communication is not only from the bottom to top, but also vice versa. Top management is the main responsible actors to implement internal control system. Heads of Public Units, in addition to tasks which they are assigned, in compliance with law for Financial Management and Control (FMC) and its respective regulations, they are also responsible for:
5Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012
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• setting, approving the goals and objectives of the institution, • to encourage the employees to identifying risks at all units levels that have an impact on fulfillments of the objectives, • establishing an appropriate and effective system in accordance with the requirements of laws, bylaws and instructions. • drafting policies and proceduresfor monitoring: the objectives of the public entities they run, annual and strategic plans, risk management strategy and action plans for achieving the objectives; • establishing efficient of management information systems for the institution ; • approval of rules and procedures for safeguarding, protecting and disposing of the assets of the public entity, as instructed by the Minister of Finance; • establishment of internal audit unit function in accordance with applicable legislation; • introduction of anti-corruption procedures, based on the legislation in force, which includes the registration and reporting procedure to the competent structures on the measures taken to prevent fraud and irregularities; • ensuring the implementation of FMC rules through internal administrative acts; • approving the procedures of “ex-ante” and “ex-post” controls in;
Authorizing officers (AO)of the public entitiesare responsible for implementing the FMC Law and reports to the Head of the Public Unit for the implementation of FMC systems in all units, structures, programs, activities and processes managed by it, in accordance with the principles of legality, ofsound financial management and transparency.NA public entity proposes to the head of the public unit the internal administrative acts, monitors and updates the FMC system of the public unit, within the regulatory framework of MoF, and takes measures to improve the systems, following the recommendations of internal audits,external audits and assessments and other analyzes. Some other functions of Authorizing officers are as follows:
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• designing of the objectives and the implementation of the strategic plans in accordance with the objectives set forth by the head of the public entity; • monitoring of risk controls that jeopardize the achievement of the objectives; • designation and dismissal of Implementing Officer. • planning, managing and reporting financial statements of public funds; • respecting the principles of legality, sound financial management and transparency of public funds in accordance with the respective laws; • effective oversight and management employees of the institution and maintaining their professional level for FMC; • creation of conditions for lawful, appropriate management and ethical conduct of staff within the entity; • protection and guarantee of assets and documentation of the unit against loss, theft, unauthorized access / use and misuse; • Implementation of anti-corruption procedures; • analyzing and updating controls aimed at minimizing risk, according to the risk strategy; • implementing the rules for carrying out ex-ante and ex-post controls within the entity, in accordance with the needs and specifics of its activity; • etc.
Based on law no. 10296, date 08.07.2010 “On Financial Management and Control”, and Law no. 9936, date 26.6.2008 “On Management of the Budgetary System in the Republic of Albania”, top management are implementing internal control systemand its five components, because they have clear methodology specific tasks how to perform the tasks, but because the employees are not very familiarized always will be in question if the procures are done adequately. If all components of internal control are harmonized properly will lead to an effective internal control. The above Venn diagram illustrates that to have effective internal control all components must be harmonized.
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Control Environment
Risk Effective Management Monitoring Internal Control
Control Information and Activities Communication
Even though there is a clear methodology and tool that describes 5 components and respective principles for internal control, they are not absorbing properly this information. It is difficult to differentiate the components of Control environment with Control activities. Furthermore sometimes they do not know the terminology of the “risk” and how to manage it with aim to achieve the objectives of the organization. In some institutions the top management has set the objectives in the “internal regulation” of the institution not in the Annual Plan or Strategic Plan. In general the objectives are described with beautiful and academic words, but are not settled as S.M.A.R.T. (Specific, Measurable, Achievable, Realistic, Time- bound), which is difficult to monitor if they are realized or not. An institution that did not decided put annual objectives, it means that this institution do not know that to do for the respective year. Some issues that some institutions do not achieve the objectives are: • are not SMART; • not identified risks that may impede the achievement of objectives • to broad, ambiguous, or academic words, which employee does not understand.
Internal Auditors Internal Auditors are familiarized with all laws that are related directly with internal control framework, also they are trained every year for different fields.
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Based on the law no.114, date 22.10.2015 “Internal Audit for Public Sector”, internal auditor are conducting different types of audit such as: • compliance; • financial; • performance; • IT
Internal Auditors based on law 10296, date 08.07.2010 “On financial management and control”, amended, article 24 Monitoring, paragraph 2 it is stated that “The monitoring and evaluation of the system is mainly accomplished through ongoing monitoring, self-evaluation and internal audit. Internal audit is not part of the financial management and control system. The internal audit function is regulated by the law on internal auditing in the public sector”. Based on their trainings Internal Auditors are step ahead from other employees, because are updated with changes in laws, which have direct affect in internal control system. Internal auditors mainly are conducting compliance audits. Their reports are focusing more on economic loss other than in increasing efficiency of internal control system. Internal audits recommendations are to improve the findings situations, which leads partially improvements of internal control system. Process diagrame ilustrates steps how auditors improve internal control through audit engagement. An efficient internal control it can not be designed only from internal auditors,
Better To improve the process / Recommendati procedures/pro procedure Auditors ons improve a cess auditors increase Audit findings analyse the part of the make situation procedures / internal recommendati process control ons system of the institution
because it is not possible to audit all the activities, processes, procedures, etc of the organization for short period of time. Auditors are not a part of internal control system, but they are only to monitor it. From the law of internal auditors and international standards issued from IIA, internal auditor must not conduct operational activities only audits, they can conduct only assurance or consulting services for the institutions. It is a duty and the responsibility of top management of the public organizations to design internal control procedures to safeguard assets, make reliable financial reports, reduce the risk of fraud, etc.
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However, Internal Auditors to focus efficiently on monitoring internal control system need to have proper tools such as questioners to identify inefficiencies in internal control in accordance with its components. The above table represents how internal audit can assess internal control during the audit plan. 6
5. Conclusion and Justification
Internal controlis the integral process of the financial management and control system as well as of internal audit, established by the head of the public entity, within his/her governing objectives. Internal control is a tool to help head of the public entity with aim to performance activities, and achieve objectives with economy, efficiency and efficiency. The internal control system is designed primarily to manage risk at a reasonable level rather than to eliminate all risks that may lead to the failure of the entity's policies, and objectives; therefore, it offers only reasonable assurance and no absolute guarantee of effectiveness. The internal control system is based on a continuous process designed to identify and prioritize risks in relation to the achievement of thegoals and objectives of the entity to assess the probability of the materialization of these risks as well as the impact they would have. Top management in their annual plan it is not essential that the objectives to be sound beautifully, but are more effective if they are set S.M.A.R.T. This will facilitate the monitoring process for achievement of the objectives. It is not essential that top management in their annual plan set objectives to be sound beautifully, but need to be understood , simple and in S.M.A.R.T manner. This will facilitate the monitoring process for achievement of the objectives. It is very important that all employees after recruitment process should be familiarized laws and other regulations that are prepared for internal control. Understanding the components of internal control from the employees will have direct impact in achievement of the objectives in efficiency, economy and effectiveness manner. Internal Audit of the institution, as value added, during the planning process may consider preparing further analysis to evaluate efficiently internal control system. This procedure maybe standardized with aim to make straightforward process.
6. Recommendations
6European Court of Audits, Financial and Compliance Audit Manual, Directorate of Audit Quality Control, September 2017, Appendix II - Details Relating to Internal Control Components, page 118.
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• Public institutions should take in to consideration that after recruitment process, the personnel should take adequate training on internal control system, its components and how they are harmonized with each other. • Top management may consider before setting the objectives to be set as SMART in their annual plan or strategic plan. Further each objective should be prepared risk assessment with adequate control activities with aim to reduce the impact and probability of the respective risks. • Public institutions for each process should prepare regulations, manuals with aim to increase audit trial and make internal control more efficient. • Internal auditors should prepare additional check-list during planning process with aim to further analysis to evaluate internal control components.
CONTROL How to gain PURPOSES Component elements COMPONENT understanding The pervasive nature of the control environment requires the auditor to consider whether the following elements provide an appropriate foundation for, or conversely, undermine the effectiveness To provide for the of, the other internal control fundamental components: Inquiries; organizational structure, • Observation; Control discipline and values of communication/enforcement Inspection of environment the entity. This creates an of integrity/ethical values documents, e.g. appropriate framework to • commitment to Code of ensure good governance of competence Conduct the resources entrusted. • participation by those charged with governance • management philosophy and operating style • organizational structure • assignment of authority and responsibility • human resource policies and practices
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To identify and analyse As the basis of the auditor's internal and external risks own risk assessment, (s)he Review of the to the achievement of the considers how management entity's risk- entity's objectives. In the manages business risk, and assessment Commission, all activities in particular how it: process and must have objectives that • identifies risks relevant to documents such Risk assessment are intended to be specific, financial reporting & as Annual measurable, achievable, compliance Activity relevant and timely • estimates its significance Reports; (SMART), as well as risk • assesses the likelihood of Annual Plan; analysis and risk occurrence Strategic Plan, management of the main • decides upon actions to activities. manage it To define the policies and specific procedures implemented by the entity to ensure that the The auditor's focus is on identified risks are how control activities, appropriately managed. individually or in They include a range of combination, reduce risk, Inquiries; activities as diverse as with a particular emphasis Observation; Control authorisations, on: Reports; activities verifications, reviews of • authorization Internal operating performance, • performance reviews Regulations; information processing, • information processing physical controls and • physical controls segregation of duties. • segregation of duties Control activities include controls over related party relationships and transactions.
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As the repository of all the entity's records and transactions, it is crucial that To ensure an appropriate the auditor acquires an framework for achieving understanding of: the financial reporting and • significant classes of Inquiries as to compliance objectives; it transactions how includes the accounting • procedures to initiate, transactions are Information & system, procedures and record, process and report originated and communication records to initiate, record, transactions processed; process and report • accounting records Walk-through; transactions and to • financial reporting process Inspection; maintain accountability for • processing of the related assets, exceptionally large or liabilities and equity. unusual transactions • reprocessing of rejected transactions By assessing how well the entity monitors controls, and takes corrective action where necessary, the auditor To ensure ongoing gains insight into how assessment of Inspection of effective internal control is performance. This includes sources of within the entity. Aspects to Monitoring internal audit and monitoring be considered include: evaluation, as well as the information; • management and annual review of internal Inquiries supervisory activities control. • internal audit • information from third parties (e.g. complaints) • evaluations
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7. Bibliography / Reference
From sides: • https://en.wikipedia.org/wiki/Committee_of_Sponsoring_Organizations_of _the_Treadway_Commission • https://www.coso.org/Documents/2017-COSO-ERM-Integrating-with- Strategy-and-Performance-Executive-Summary.pdf • http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Internal%20c ontrol%20systems.aspx
Material references: • Law no. 10296, date 08.07.2010 “On Financial Management and Control”, amended. • Manual for Management and internal control approved by Minister of Finance with order no.108, date 17.11.2016. • Financial and Compliance audit Manual Directorate of Audit Quality Control, September 2017, page 29. • Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on the financial rules applicable to the general budget of the Union, amending Regulations (EU) No 1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) No 1316/2013, (EU) No 223/2014, (EU) No 283/2014, and Decision No 541/2014/EU and repealing Regulation (EU, Euratom) No 966/2012. • European Court of Audits, Financial and Compliance Audit Manual, Directorate of Audit Quality Control, September 2017, Appendix II - Details Relating to Internal Control Components, page 118. • Law no. 9936, date 26.6.2008 “On Management of the Budgetary System in the Republic of Albania”, amended • Law no.9228, date, 29.04.2004 “For Accounting and Financial Statements”, • Order no.8, date 09.03.2018 “Procedures for Preparation, Presentations and Annual Reporting of Financial Statements in Units of General Government”, issued from Minister of Finance. • Guidelines no. 30, date 27.12.2011 “For management of assets in public sector entities”, amended, issued from Minister of Finance; • Guidelines no. 21, date 25.10.2016 “For implementing officer at all levels”
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• Guidelines no. 9, date 20.03.2018 “Standard Procedures for Budget Implementation”
499 CIP Katalogimi në botim BK Tiranë
Universiteti “Aleksandër Moisiu” Economic policy and EU integration : 9th international scientific conference of Business Faculty : Durrës, 3-4 Maj, 2019 : book of abstracts / Universiteti “Aleksandër Moisiu”. – Durrës : Luis print, 2019 500 f. ; 21x29.7cm. ISBN 978-9928-267-19-1
1.Politika ekonomike 2.Integrimi ekonomik ndërkombëtar 3.Konferenca 4.BE 5.Shqipëri 6.Evropë
338.2(496.5) (062) 339.92(496.5 :4) (062)