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11steps could be some additional benefits, price reduction or just more attentive interaction while maintaining client's application.
Big Data will undoubtedly become a great tool to bring positive shift of insurance industry that could be characterized by increased quality of service, pricing accuracy and reduction of costs in fraudulent cases. In addition, insurance industry has a set of specific challenges of Big Data implementation that are concerned with ethical and privacy problems. This will become a remarkable trend of insurance industry and certain technology will widen mostly in health insurance sector. Insurance industry will show all the carried opportunities of Big Data and no carried threats in case of proper utilization for providing higher quality and efficient services, client services and marketing.
References
1. Pikus, R., Prykazyuk, N., Lobova, O., 2015. Mizhdystsyplinarnyi slovnyk zi strakhuvannia ta ryzyk-menedzhmentu. Kyiv: Logos
2. Prykazyuk, N., Motashko, T., 2015. New vectors of the motor insurance development in Ukraine. Bulletin of Taras Shevchenko National University of Kyiv. Economics. №3 (168)
3. Prykazyuk, N., Motashko, T., 2014. Role of internet in insurance services realizations Bulletin of Taras Shevchenko National University of Kyiv. Economics 156.
4. A.T. Kearney Analysis Report, 2014 [Electronic resource]. Access mode: https://www.atkearney.com/ documents/10192/4572735/ReadyforTakeoff-FDICI2014.pdf/
5. Capgemini Financial Services Analysis, 2015 [Electronic resource]. Access mode: https://www.capgemini. com/insurance/archive/2015/
6. Insurance Fraud [Electronic resource]. Access mode: https://www.fbi.gov/stats-services/publications/insurance-fraud
PERSPECTIVES ON THE CONCORD-BASED MANAGEMENT IN THE AGE OF INNOVATION
Kovalevskaya E.A.
PJSC "Blitz-Inform" Kiev branch Printing house "Blitz-Print"
Chief of the Finance Department
ABSTRACT
In this paper, the author investigates the influence of the interests of the participants of economic relations on the innovative readiness of Ukrainian machine-building holding companies. She briefly analyzes the socio-economic state of the machine-building industry of Ukraine, and then compares strategic plans of the holding companies VAT "AvtoKraz ", VAT "Kh "Luhanskteplovoz", DAKHK "Chornomorskyi sudnobudivnyi zavod". The author finds the facts of neglect of workers' contribution in financial results and presence of a social tension in the holding companies. She makes accents on the necessity of raising innovative readiness of the holding companies. To overcome mentioned difficulties the author represents the concord-based management.
Keywords: innovative readiness; participant's interest; the concord-based management; the concord budgeting; impact factor; the concord coefficient.
Introduction
Now innovation has become a new imperative of management in the world. Integration processes with the CIS and highly developed countries stimulate using of different methods and tools of management to raise innovative activity of companies. But the difficult socio-economic state of Ukrainian companies, increased by the physical and moral aging of industrial capacities, reduces the competitiveness of national products, needs searching for the strategic directions of its improvement. This question becomes keen while studying a large business and acquires a special actuality for machine-building companies, especially, holding companies.
In scientific national and foreign literature strategic management directs in a greater degree on strengthening the interests of business owners, but the interests of the other participants of economic relations - customers, suppliers, production workers, administrations of corporate enterprises and a managing company, transporters, creditors and et cetera -haven't been studied enough. Namely, concord of marked above participants we might examine in the strategic development of a holding company, because their interests directly or indirectly influence on the financial result. This question acquires the special actuality within the research of a holding structure in the context of contradiction interests of corporate (daughter, subsidiary) enterprises and a managing (mother) company according allocation resources and the profit.
The results of studying theory and practice of strategic management have shown the attempts of concord of participants' interests (Momot, T.V et al., 2010; Gaponenko, A.L. et al., 2010; Nusinov, V.Ya. et al., 2006; Pavluk, A.P. et al., 2012), but no accents on creating the concord-based management as the component of a managerial system. Too many networks have studied theory and practical implementation of concord (Makashina, O.V; Huei, T.H.; Blagov, Yu.E.; Post, J.E. et al.). As a result, many conceptions have appeared one of which is the conception of interested participants by J. E. Post, L. E. Preston and S. Sachs. Nevertheless, the problem of concord of participants' interests exists. Up to now there are no effective tools of managing this process. Every company tries to do this in their own way, sometimes intuitively, do not understanding to the end the impact of interests on raising innovative activity. This is caused the objective of the study - improving on strategic management on the core of concord of participants' interests towards raising innovative activity of a holding company.
Results and discussion
Machine-building holding companies of Ukraine are in the conditions of variable environment which has been caused by the unstable economic situa-tion in the industry. During the period from 2010 to 2015 the long absence of the stably positive dynamics of the indexes of machine-building production points to it [see figure 1]. The world financial crisis has become the principal cause of worsening financial and economic state of the industry, which conse-quences influences on companies
up to this day. All of this took place on the background of part (24,2 - 28,7 %) accounted for machine-building companies increasing innovation activity of the industry and the amounts up to 2014 [Ukrstat]. of innovative-active companies among which the considerable
Figure 1. Index of machine-building production
It is known that the machine-building industry represents the basis of the reproductive process of the national economy. Therefore, the search for the ways of stimulation of innovative activity should embrace strategic manage-ment of companies. Economists are unanimous in the necessity of active put-ting highly skilled and experienced workers at the governance, marking also their necessity in deserving payments and labour conditions. In fact, the level of workers' month labour payments of this industry (3 433 grn) is below the middle index of the whole industry (3 988 grn) in 2014 year. Such a situation provokes a social tension and deepens the depression of the industry which we have defined on the results of SWOT-analysis (see figure 2). Sharing national researchers' opinion about the necessity of realization the important steps from the side of state and business owners in the direction of providing the steady development of the industry through the technological and structural reorganizations of production on investment-innovative basis with the aim of overcom-ing crisis financial events of the present time
(Peretyatko, A.V et al., 2013), we should note that top-managers and workers are the direct fulfillers of these tasks, whose interests are not always agreed with national and corporate interests. For this reason owners might initiate the active putting workers at innovative process, providing the control of its development. In its turn top-managers might create the base of innovative knowledge, might organize the exchange experience between workers, and might create the conditions for realization knowledge management. One of the favorable conditions for creation innovative knowledge is an effective collaboration of workers with top-managers towards common strategic orients, which will satisfy not only shareholders but the other participants of economic relations. This is caused the necessity of examining strategic orients of machine-building holding companies on the examples of VAT "AvtoKraz», VAT "Kh "Luhanskteplovoz", DAKHK "Chornomorskyi sudnobudivnyi zavod". We have come to such conclusions.
Strong parties of the machine-building industry Weak parties of the machine-building industry
— the presence of enterprises that produce unique products; — the presence of research institutes in production structure; — aspiring for vertically integrated chain, desire of its locking — the low competitiveness of products and service; — high dependence on prices of raw materials and materials; — low motivation and labour payments of workers and, as a result, low labour productivity and gradual decline of qualification; — low innovative activity; — low investment attractiveness because of a hard financial state and wear of basic funds; — disparity in management
Opportunities of environment Threats of environment
— stable demand in the Russian market and other markets of the CIS; — revival of the international market because of modernization and technical update of the metallurgical industry; — investment climate improvement and possibility of foreign capital investment; — strengthening integration processes and possibilities of entrance to a global market of IPO — the absence of the stable financing of the industry from the side of the state budget; — politicizing of holding companies; — the world financial crisis; — increasing prices on raw materials; — instability in courses of the world currencies; — high competition
2. SWOT-analysis of the machine-building industry
Figure
First, the missions of the companies do not concord with workers' inter-ests. The investigated holding companies have defined missions as the satis-faction of the necessities of the machine-building national market and markets of the CIS in trucks with a carrying capacity from 10 to 30 tones (VAT "AvtoKraz «), main diesel locomotives (VAT "Kh "Luhanskteplovoz"), ship-building and repairing of ships (DAKHK "Chornomorskyi sudnobudivnyi za-vod") with a gradual expansion of the demand on the international market. De-claring about the expansion of markets, business owners examine a mission as the sense of the existence of a company from the position of satisfaction their own ambitions and needs of customers. Moreover companies have defined strategic orients that should be concord at least with workers: development on innovative basis, usage of corporate information technologies, and increasing the sales on the international market.
Second, top-managers neglect workers' contribution in financial results. For instance, the top-managers of DAKHK "Chornomorskyi sudnobudivnyi zavod" took a high minimum wage to the factor that weakens realization of strategic orients. It is regrettably that top-managers consider a high minimum wage to be the negative phenomenon. Such a neglect of the workers' contribu-tion in the results of the company is impermissible and testifies about the pres-ence of intercommunicative barriers. But top-managers continue to ignore pre-sent difficulties, directing efforts and resources to the renewal and moderniza-tion of production capacities for the sake of the increase of the market, forget-ting that this strategic direction needs well trained and supported staff.
Third, holding companies declare about the necessity of raising innova-tive activity from the position of raising innovative capacity. It is necessary to note that innovative capacity and readiness of a company come forward as preconditions of activation innovative activity. If a holding company can poses innovative capacity which is testified by the presence of intellectual property, new technologies, skilled personnel and financial stability, then it does not mean that it is ready to activate
innovation process. Innovative readiness of a holding company is reached by the reduction of the resistance of top-managers and workers to the changes in a company.
So, the holding companies have chosen the right strategic orients but they need improving towards raising innovative readiness to overcome the so-cial tension of workers. Therefore, we present the concord-based management. It is based on strategic management that is deepened by the compositions of activation of innovative activity of corporate enterprises on the stage of defini-tion of strategic orients. The mechanism will get such a schematic presentation (figure 3). As we see innovative activity is evaluated on the results of financial and economic activity. At the time, evaluation of innovative readiness is depended on the efficiency of the concord-based management. The concord-based management gets such a definition - the process of planning, organization, motivation and control execution corporate interests of the participants of economic relations to reach the concord level of innovative readiness. The aims of the concord-based management are:
- to plan and control participants' interests;
- to analyze rejections of reached interests from planned, impact of par-ticipants' interests on the profit;
- to evaluate innovative readiness.
The following principles underpin the concord-based management (Stakeholder engagement. Practitioner Handbook, 2008):
- communication (open and effective communication means listening, understanding and talking);
- transparency (clear and agreed information and feedback processes);
- collaboration (work to seek mutually beneficial outcomes where feasi-ble);
- inclusiveness (recognize, understand and involve participants in the process);
- integrity (conduct concord in a manner that fosters respect and trust).
Mission of a holding company
I
Strategic analysis of internal and external environments
Defining strategic orients -1-
Ways of activation innovative activity t-1-
Forming, analyzing and Evaluating innovative Evaluating innovative ca-
choosing aims readiness pacity
i
Forming, analyzing and Concord-based -> Financial and economic
choosing a strategy management activity
Functions: Tools: Principles:
planning budgeting communication
organization factor analysis transparency
motivation concord coefficient collaboration
control inclusiveness
integrity
Control, analysis and regulation strategy realization Operating activity of corporate enterprises
Figure 3. The concord-based management
The concord-based management needs fulfilling such well-known func-tions as planning, organization, motivation and control.
1. Planning is a part of the concord-based management that consists of developing the concord plan and its realization. The concord plan in numbers determines the size of the corporate interests of the participants of the econom-ic relations of corporate enterprises and administrative company for the next period. The realization of the concord plan envisages the discussion and setting the list of responsible persons on the general meeting of the shareholders of a holding company, the development of the stages of implementation and the ways of its achievement.
2. Organization is the complex of the principles, the forms and the meth-ods of co-ordination of participants' actions to concord their interests. The managerial component needs adjusting intercommunicate relations and de-mocratization.
3. Motivation is the part of the concord-based management, which in-duces top-managers to search for the best level of concord.
4. Control is an operative process of searching for the reasons of the re-jection of the reached indicators from planned.
To realize mentioned above functions we propose using budgeting to plan and control interests, factor analysis to analyze impact of the interests on the profit, the concord coefficient to estimate innovative readiness of a holding company. In the next sections we will talk about them.
Budgeting as an effective tool of the concord-based management
Now budgeting is widely spread in companies, especially in holding companies. Implementation of the automated management system allows using this tool for the most different, actual tasks one of which is increasing innovation readiness. It is important to underline that not long ago researchers have displaced the accent of budgetary management from expenses to the results, so called results-based budgeting (Tkachenko, G.A., 2013). The center of busi-ness-technologies TOT presents budgeting in intercommunication with strategic planning oriented to the financial and economic raise of a company (Center of business-technologies TOT). Other authors examine budgeting, as an inde-pendent functional subsystem of management, and mark out the blocks of tasks in the perspective, retrospective and operative budgeting of structural subdivisions, associations. Researchers argue the necessity to
create the informative base to optimize costs (Beskorovaynaya, S.A., 2012; Ivakhnenkov, S.V., Melikh, O.V., 2009). On the whole, home and foreign researchers (Dyadechko, L.P., 2008; Kompanets, N.M; Lukyanova, W, 2011) pay much attention to adaptation budgeting to the aims, tasks, financial and economic results of a company, its innovative capacity. At the time, using budgeting for raising innovative readiness is not enough studied.
Up to now, Ukrainian holding companies adhere to the generally accept-ed procedure consisted of four steps: strategy clarification, prognostication of indicators, business-plan and affirming. Holding companies spend from one to three months on drawing out business-plans and budgets that do not differ much in a high quality. The main reasons are a low qualification of top-managers, complications in determination the aims and prior ways of strategic management, absence of mutual actions between corporate enterprises and a managing company. This indicates to a low efficiency of budgeting, as the tool of realization of strategic plans. The formal character of budgeting points to the necessity of improving on methods of stimulating interests of corporate en-terprises.
It is necessary to underline that ultimate target of activation of innova-tive activity of a holding company is the increase of the net sales revenue of a holding company. This is the concord level which is presented by planning of the volume of the net sales revenue that will satisfy the main participants of economic relations. These participants are:
- suppliers;
- administration of corporate enterprises;
- administration of a managing company;
- transporters;
- creditors;
- shareholders;
- production workers;
- customers. In this connection the interests of the marked above partici-pants we have defined as the parts of the net sales revenue. Trade unions, pub-lic organizations, local unions, regulative agencies did not make the set, as their impact is secondary and it is rather difficult to mark them out in number from the impact of the others. The division of the workers of corporate enterprises on productive (basic and auxiliary workers, specialists and leaders of the middle link of management of productive direction) and administrative (spe-cialists of financial, transport, ware-house, economic, commercial subdivisions and et cetera) categories was caused by the difference of their interests. In spite of coinciding administrative workers' interests with production workers' interests in part of providing deserving payment and terms of labour, their fulfilling depends on satisfaction the interests of the top-managers of corporate enterprises. Therefore, interests of these groups are incorporated. For this rea-son the interests of the top-managers and the workers of a managing company are incorporated too. The schematic presentation of these intercommunications in the budgeting - the concord budgeting - might look like this (see figure 4).
Suppliers' budget Material
Budget of administration Variable and fixed expenses of produc-
of corporate enterprises tion and management
Budget of administration Expenses of a managing company <—
of a managing company
Transporters' budget Transport
Creditors' budget Bank expenses
Shareholders' budget Profit
—► Expenditure nomenclature:
Production workers' wages; social deductions; maintenance
budget of the objects of social and cultural purposes; health and safety; bonus; professional literature; quality of production; improving on production technology and organization; corporate information systems Net sales revenues Customers' budget
Figure 4. The concord budgeting of a holding company
The objects of our budgeting are the participants of economic relations, and their budgets - interests expressed in number and concord with the strate-gic plan of a holding company. The
concord budgeting combines the elements of expense budgeting in the part of quantitative definition of interests and re-sults-based budgeting in the part of the increase of the net sales
revenue through activation of innovative readiness of corporate enterprises.
The realization of the concord budgeting lies down on administrations both corporate enterprises and a managing company. For this reason the own-ers might initiate the budget committee. The members of it are responsible for fulfilling such budgets:
- suppliers' budget - logistics of corporate enterprises;
- budgets of administrations both corporate enterprises and a managing company - financial and economic subdivisions of a managing company;
- budgets of administrations both corporate enterprises and a managing company - financial and economic subdivisions of a managing company;
- transporters' budget - transport subdivision of a corporate enterprise;
- creditors' budget - financial and economic subdivisions of a managing company;
- shareholders' budget - financial and economic subdivisions of a man-aging company;
- production workers' budget - financial and economic subdivisions of a corporate enterprise;
- customers' budget - commercial subdivision of a corporate enterprise. All participants of economic relations of a holding company are interested in the increase of their budgets. The higher the dependence of a company on somebody's interests, the more difficult the concord process occurs.
First of all we form customers' budget which based on the net sales rev-enue and taken into account such factors: the presence of finished goods inven-tory on the beginning of the planned period; dynamics of the volumes of sales of previous periods; intercommunication of sales with economic indexes; rela-tive profitability of goods; market research, determination of key customers, advertisement campaign; competition; price politics and quality of goods; sea-sonal fluctuations; long-term tendencies of sales for different goods. Custom-ers' budget is the source of forming of production plan that determines the prearranged nomenclature and production volume in a budgetary period (year, monthly) in natural and cost expressions. Customers' budget is the basis of calculation of the budgets of the other participants.
Suppliers' budget is defined by material costs coming from production plan and is corrected on the size of stocks in storages and planned balances providing trouble-free work of a company. Production workers' budget is characterized by the expenditure nomenclature that supposes not only wages but also creation of deserving, safe conditions for workers' development. The budget prepares on the basis of production plan, data about labor productivity, rates of payment, plans about activation of innovative activity of a company. Budget of the administration
of corporate enterprises is defined by the part of variable and fixed expenses of production and management. These are power mediums, depreciation, total manufacturing expenses, managing, selling and other operating expenses except the components of the expenditure nomenclature. Transporters' budget is formed on the basis of customers' budget and prognosis tariffs, makes part of selling expenses. Creditors' budget is defined by the terms of credit line and is the part of operating expenses of a holding company. Budget of the administration of a managing company de-termines general and managing expenses needed for functioning of a corporate center. And shareholders' budget is defined by the prognosis sum of profit calculated in the last turn.
Returning to the work of the budget committee, it is necessary to deter-mine its functions:
- to plan, control and analyze fulfilling of the budgets at the end of the month;
- to present the reports on the concord-based management to the repre-sentatives of suppliers, administrations of corporate enterprises and a manag-ing company, transporters, creditors, shareholders, production workers, cus-tomers (see the section "The concord-based management in practice");
- to make the conclusion about reserves of concord and the ways of rais-ing innovative readiness of participants. Every year the budget committee should study and analyze the results of concord and find the possibilities of raising innovative readiness.
Analyzing the interests of the participants of economic relations
It is important to analyze participants' interests that influence on form-ing profit, because the profit remains the key indicator of business efficiency. Factor analysis is that tool which helps most economists in this question. Up to this day factor analysis is used to estimate the changes of such factors (Ishchenko, N.A.; Yankovyi, O.H., 2013; Kryvytska, O.R., 2010; Lobacheva, I.F. et al.; Nusinov, VYa., 2012; Sklyaruk, I.; Volkova, N.A.):
- the volume of sales, the assortment and the cost of sales, the price of sales;
- the quantity and the staff of personnel, workers' economic stimulation, labour productivity;
- the state of material and technical bases, fixed assets turnover ratio;
- the indexes of the financial station and others like this. However, the development of a large business in the conditions of transformation from in-dustrial to postindustrial society needs corresponding adaptation of the tool of forming a profit. Therefore, certain interest can present improving on factor analysis of a profit on the core of participants' interests. The components of the profit we classify depending on participants' interests and consider them to be the criteria of factor analysis. The impact of the participants might look like this (see figure 5).
Participant Interest Factor
Customers Increase the volumes of pur- Net sales revenues
chase of goods due to the re- (f1)
duction of price
Suppliers Increase the price and the Material
amounts of material supplying (f2)
Production workers Deserving wages and working Expenditure nomenclature
conditions (f3)
Administration of cor- Control the usage of productive Variable and fixed expenses
porate enterprises resources, deserving wages and of production and manage-
working conditions ment
(f4)
Administration of a Deserving wages and working Expenses of a managing
managing company conditions company
(f5)
Transporters Increase the tariffs on freight Transport
transportations (f6)
Creditors Payment of credit and bank Bank expenses
percents (f7)
Figure 5. Impact of the participants on forming the profit
These factors we consider depending on the direction and the source of impact. The factors of the interests of the participants who directly influence on the efficiency of the activity of a company are related to internal factors - production workers, administrations of corporate enterprises and a managing company
(see figure 6). The reason is that namely these participants take part in production and the sales of goods of a holding company. The interests of customers, suppliers, transporters, creditors who have indirect influence on the process of forming the profit and its effective usage, become external factors.
Figure 6. Classification of impact factor of a holding company
All the factors except the customers' factor are reverse factors, as they subtract from the net sales revenues in calculation of the profit (n):
n=
f1 - £ fi
(1)
where i - the amount of the concord indicators, fi - impact factor.
The factors are calculated by the methods of chain increase and growth rate, and their changes are characterized by:
- the increase of expenditure nomenclature related to the level of satis-faction of production workers decreases the profit;
- the increase of variable and fixed expenses of production and man-agement - their increase related to the level of satisfaction of administration of corporate enterprises raises a total cost of production and, hereupon, diminish-es the profit;
- the increase of the expenses of a managing company - their increase related to the level of satisfaction of administration of a managing company conduces to the reduction of a profit in connection with the increase of total cost of production;
- the increase of material - the increase of the size of the factor related to the level of suppliers' satisfaction, first of all, influences on the increase of cost of production and reduces the profit;
- the increase of transport - their increase related to the level of trans-porters' satisfaction influences on the increase of total cost of production that reduces the profit;
- the increase of bank expenses - their increase related to the level of creditors' satisfaction conduces to the increase of total cost of production and reduces the profit;
- the increase of the net sales revenues - the increase of the size of the factor due to the reduction of the price related to the level of customers' satis-faction conduces to the reduction of the profit.
It is necessary to underline that improved factor analysis gives us the opportunity to define the source of increasing profit that is in the range of par-ticipants' interests.
Evaluating innovative readiness of a holding company
Returning to raising innovative readiness we should not forget that con-cord of participants' interests is the best way of reaching it. In this context we have studied networks concerning methods of evaluating concord of partici-pants' interests (Yankovyi, O.H., 2013; Volkova, N.A.) and have found that the set of participants was too limited and concerned in better case sharehold-ers, top-managers and workers. Thus we have expanded the set of participants and propose to evaluate innovative readiness on the base of the concord coeffi-cient.
We express the concord coefficient (Kc) by formula:
Kc = ^ pi * Eyxi
1=1 (2), where i- the amount of the concord indicators, pi - the point of partici-pant's interest; Eyxi - the elasticity coefficient.
Kc is calculated by the four steps: defining the concord indicators, the calculation of the dynamics of the concord indicators for two cases, the defini-tion of the point of the
participants' interests and the calculation of the elastici-ty coefficients.
Step 1. Defining the concord indicators. We have already defined the participants' interests within the net sales revenue in the previous sections. They were expressed as budgets in the concord budgeting, impact factors - in the factor analysis. For
evaluation innovative readiness we will call them the concord indicators. The concord indicators are: expenditure nomenclature (k3), material (k2), variable and fixed expenses of production and management (k4), expenses of a managing company (k7), transport (k5), bank expenses (k6), and profit (k8) (see figure 7).
Production workers
Suppliers
Administration of corporate enterprises
Administration of a managing company
Transporters
Creditors
Shareholders
Expenditure no- cn !-H Hi
menclature ((kJ) S o «
Material (k2) U
Variable and fixed !-H O o
expenses of pro- c o o
duction and man- <+H O
agement (k3) (L) > (L)
Expenses of a man- (L) A
aging company 1 C«
(k-f) C (L)
Transport (£5) > (L) !-H
Bank expenses (k6) (L) 13 M
Profit (k7) <L> ;
¡4 •
previous
accounting
planned period
The best level of concord
Figure 7. Evaluation of innovative readines s of a holding company
Step 2. The calculation of the dynamics of the concord indicators for two cases. In the first case we calculate the increase of the reached concord indica-tor in compare with planned, in the second - the previous period.
Step 3. The definition of the point of the participants' interests. We use three types of the points - 0; 0,5; 1. These points mean:
- the point 1 - the participant is satisfied (the dynamics of the concord indicator is positive in both cases);
- the point 0 - the participant does not satisfied (the dynamics of the concord indicator is negative in both cases);
- the point 0,5 - the participant is partly satisfied (the dynamics of the concord indicator can be positive in one of the cases).
Step 4. The calculation of the elasticity coefficients. Firstly, we calculate the elasticity coefficient (Eyxi) for every participant by formula:
Eyxi = — • — Ax y
(3),
where Ay - the increase of the concord indicator in the accounting period in compare with the previous period; Ax - the increase of the concord level in the accounting period in compare with the previous period; x - the concord level in the accounting period; y - the concord indicator in the accounting pe-riod. Secondly, we correct the elasticity coefficients (Eyxci). If the elasticity coefficient is negative, we will consider it equals zero. The reason is that the participant's interest does not influence on the concord level.
We propose to evaluate innovative readiness (IR) on the base of concord of interests of a holding company by comparing reached concord coefficient Kc with its best result (Kcb):
IR =
Kc Kcb
(4).
Got indicator IR we propose to interpret according to Harrington's scale:
1) 1 - 0,8 the company reaches a high level of innovative readiness, the majority of the participants is satisfied, the aim of top-managers is to save the concord level;
2) 0,8 - 0,63 the company reaches a good level of innovative readiness; the most important participants are satisfied, the aim of top-managers is to analyze the reasons of restriction of the participants and its influence on the financial result;
3) 0,63 - 0,37 the company reaches a satisfactory level of innovative readiness, the participants are partly satisfied; the top-managers might initiate the budget committee to control the fulfillment of the participants' interests;
4) 0,37 - 0,20 the company reaches a bad level of innovative readiness, the participants are not satisfied, the budget committee have to plan the urgent events to improve the situation;
5) 0,20 - 0,00 the company reaches a very bad level of innovative readi-ness, the shareholders together with the budget committee might overlook the strategic orients of a holding company.
In the conclusion we might note the advantages of the proposed method: flexibility and preventability; analytical accompaniment of the function of con-trol above concord of interests; increase of efficiency of operating and strategic decision-makings.
The concord-based management in practice
Financial and economic subdivisions of corporate enterprises and a man-aging company might monthly fulfill and present for the budget committee the report on the concord-based management which consists of such forms:
- form 1 "The report of fulfilling participants' budgets of a holding company";
- form 2 "The factor analysis of the profit of a holding company";
- form 3 "The concord coefficient of a holding company. Innovative readiness". The budget committee gets acquainted the representatives of par-ticipants with the results of the report on the concord-based management, give comments, recommendations about the reserves of raising innovative readiness. The detailed calculation of these forms is shown on the example of one of Ukrainian industrial holding company.
Form 1 "The report of fulfilling participants' budgets of a holding com-pany" (see table 1).
Table 1
Form 1 "The report of fulfilling participants' budgets"
Budget Planned, thousands grn Reached, thousands grn Increase, thousands grn Growth rate, %
Customers' budget 617 632 591 371 -26 262 -4%
Suppliers' budget 369 221 389 244 20 023 5%
Production workers' budget 46 403 50 610 4 207 9%
Budget of administration of corporate enterprises 147 092 168 310 21 218 14%
Transporters' budget 36 991 11 180 -25 812 -70%
Creditors' budget 76 090 72 327 -3 763 -5%
Budget of administration of a managing company 38 139 43 190 5 050 13%
Shareholders' budget -96 304 -143 490 -47 185 -49%
As a result of comparison reached interests with planned the holding company received less 26 261 thousand grn in 2013 year. It means that cus-tomers have been satisfied by competitors. At the time, the participants of the holding company did not want to hurt the interests. Positive growth rates of participants' budgets testified to this: administration of the corporate enter-prises - 14 %, administration of a managing company - 13 %, production workers - 9 %, suppliers - 5 %. In our view, the restriction of the interests of customers became the main reason of shareholder's dissatisfaction. The nega-tive growth rate of their interests (-49%) needs further analyze.
Form 2 "Factor analysis of the profit of a holding company" (see table 2). The analysis supposes defining the factors of
raising (reducing) profit of accounting period in compare with the previous. The factor analysis has de-fined the impact of satisfaction participants' interests on the reduction of the profit (-22 377 thousands grn): suppliers - (-109 793 thousands grn), clients - (+125 000 thousands grn); administration of a managing company - ( -8 820 thousands grn), creditors - (-12 704 thousands grn), administration of corporate enterprises - (-26 268 thousands grn), production workers - (-6 608 thousands grn), transporters - (+16 816 thousands grn). The results of factor analysis have shown that supplies and administration of a managing company were satisfied in the best way.
Table 2
Form 2 "Factor analysis of the profit"
Factor Previous period Accounting period Increase, thousands grn
1. Profit (loss) before taxes -121 113 -143 490 -22 377
2. Internal factors -220 414 -262 110 -41 696
including:
f3 -44 002 -50 610 -6 608
f4 -142 042 -168 310 -26 268
f7 -34 370 -43 190 -8 820
2. External factors 99 301 118 620 19 319
including:
f1 466 371 591 371 125 000
f2 -279 451 -389 244 -109 793
f5 -27 996 -11 180 16 816
f6 -59 623 -72 327 -12 704
Form 3 "The concord coefficient of a holding company. Innovative read-iness" (see table 3). The company reached a good level of innovative readiness in researched period (IR
= 0,73). The majority of the participants were satisfied except transporters and shareholders. But they are ready to wait for the best times.
Table 3
Form 3 "The concord coefficient of a holding company. Innova-tive readiness."
Concord indicator Eyxi Eyxci Pi Kci Kcbi
K 1 1,00 1,00 0,5 0,50 1,00
K 2 1,33 1,33 1 1,33 1,33
K 3 0,62 0,62 1 0,62 0,62
K 4 0,74 0,74 1 0,74 0,74
K 5 -7,12 0,00 0 0,00 0,00
K 6 0,83 0,83 0,5 0,42 0,83
K 7 0,97 0,97 1 0,97 0,97
K 8 0,74 0,74 0 0,00 0,74
The concord coefficient: 4,57 6,23
Innovative readiness (IR): 0,73
The aim of top-managers is to save the concord level and provide following measures of raising profit:
- strengthening of control of suppliers' budget through changes in bonus system of top-managers and orient it on the result;
- establishing the limit of the growth rate for administrations. In our case if the company establishes the growth rate at the level 9 %, the financial result will be raised on 9 599 thousands grn.
So, the results of the report on the concord-based management shows that a holding company works on external interests, satisfying suppliers, cus-tomers, creditors, forgetting about producer's interests and the interests of shareholders. However, the interests of administrations of corporate enterprises and a managing company, whose are responsible for effective division, purchase and usage of resources, were satisfied. We think that their interests can be the source of the increase of the profit of the holding company. It becomes obvious the necessity of overlooking the system of management and improving it on the core of the concord-based management.
Conclusions
Now the machine-building industry requires decisive actions from own-ers towards the increase of competitiveness of companies that in market trans-formations can be reached on the condition of activation their innovative activ-ity. However, the diagnostics of the socio-economic state of the industry has testified to a low innovative readiness of machinebuilding companies. The low motivation and labour payments of workers, the unwillingness of owners to fulfill innovative functions and, hereupon, to carry up additional costs complicate mutual relations between the participants of economic relations. The research of the strategic plans of VAT "AvtoKraz ", VAT "KH "Luhanskteplovoz", DAKHK "Chornomorskyi sudnobudivnyi zavod" has de-fined their innovative orients with simultaneous non-acceptance of human cap-ital as the major element of economy and the necessity of its developing and financing to provide innovative development of a holding company in a long-term prospective. In this connection we have done a new improvement on the-oretical and the practical basis of management of a holding company - the conception of the
concord-based management with its tools representation. First, we have deepened the strategic management by innovative readiness on the core of the concord-based management. Second, we have proposed the concord budgeting which allows to estimate in number the level of satisfaction (restrictions) of the interests of the participants, defines backlogs of improvement of the financial result. The concord budgeting might raise the quality of strategic and operative decision-making of topmanagers of corporate enter-prises and a managing company.
Third, we have improved the criteria of factor analysis of the profit of a holding company, that, unlike existing, are based on the interests of the partic-ipants, in number expressed by the components of forming the profit of a holding company and classified depended on the direction and the source of an impact. This method gives us the opportunity to estimate in number impact of interests on the profit and define the source of its increase that is in the range of the interests of the participants. In its turn this might motivate top-managers to find the ways of improving mechanism of organizationally-economic impact of factors on a financial result.
Finally, we have improved on the criteria of evaluating innovative readi-ness of a holding company. The proposed method poses such advantages: flex-ibility and preventability; analytical accompaniment of the function of control above concord; increase of efficiency of operating and strategic decision-makings.
In the conclusion we might underline that this study is the attempt to concord participants' interests and its tools presentation needs further developing.
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IMPROVING THE EFFICIENCY OF AGRICULTURE WATER USE IN KHOREZM
REGION
Matyakubov U.
Department of Economics, University of Urgench, visiting researcher at the Department TESAF, University of Padova, Italy
Defrancesco E.
Department TESAF, University of Padova, Italy
ABSTRACT
The problem of water scarcity is growing as water demand continues to increase worldwide. Indeed water demand is rising as a result of population growth, urbanization, agriculture intensification and industrialization, while local environmental conditions and climate change affects is limiting or reducing the overall water availability in specific regions. Paper explores the problem arising in the Khorezm region due to the increased water scarcity. Khorezm is situated in the lower Amu Darya river basin in the Central Asian Republic of Uzbekistan and the delta region of the Aral Sea. Recently, Khorezm has experienced an increase in environmental, economic and social problems which can be substantially related to the water uses. Indeed, the deterioration of the environmental conditions is a result of: i) the relevant expansion of the utilised agricultural area, progressively including marginal areas, and ii) the very intensive and water consuming cotton production method adopted on a significant share of the arable land. Paper concludes by providing some suggestions aiming to implement more rationale and water saving irrigation method in the area.
Keywords: irrigation, water scarcity, ground water, yields of cotton, drip irrigation.
1. INTRODUCTION
The problem of water scarcity is growing as water demand continues to in-crease. Water needs are rising throughout the world as a result of population growth, urbanization, agriculture intensification and industrialization. Discussions related to water use increasingly address to the competition among water uses in different industries, such as agriculture, forestry, manufacturing firms, hydropower production, as well as for ecosystem and civil uses. Furthermore, mismanagement and unfavourable climatic conditions in many regions of the world cause water demands to exceed water supply, which causes environmental, economic and social negative impacts.
In the Republic of Uzbekistan, a country located in Central Asia, 31 million people live in an area of 447,400 square km. Natural arid and sandy deserts occupy around 80% of the territory; the country comprises a variety of agro-ecological zones: farmland accounts for the lowest share of the land, while agriculture is the largest water user. Uzbekistan is divided into 12 provinces (oblasts) plus the autonomous Republic of Karakalpakstan.
Khorezm is one of these oblasts, in the lower Amu Darya Basin, close to the Aral Sea, an area strongly affected by the
well-known ecological problems resulting from the inefficient water use policies adopted in the last decades. Khorezm occupies an area of 646,400 ha, which includes a large desert area on the right bank of the Amu Darya. The irrigated areas are only about 276,000 ha, the largest share of which is occupied by cropland (Akramkhanov A, 2012). It is one of the smallest administrative regions of Uzbekistan, but contributes much to the country's revenues from cotton export and wheat production as well as to the overall water use. The water in Khorezm is a scarce recourse due to many internal and external factors, such as the increasing water demand in the upper reaches of the river, the expansion of cultivated areas within the region as well as the poor state of the irrigation and drainage systems, leading high water losses. All these factors threaten not only the agriculture production, but the whole way of life in the region and have led to such disastrous results as the drying up of the Aral Sea (Matyakubov U, 2013).
2. PROBLEM OF WATER RESOURCES
Khorezm is considered as a leading region of the country in consumption of water resources. In 2000-2013 years, one hectare of land water consumption was 1.4 times higher than other regions and stood third in the position of the country shown the following figure (Fig.1).
