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Вестник Челябинского государственного университета.
2016. № 14 (396). Экономические науки. Вып. 55. С. 95—101.
УДК 334.021
ББК У290.31
POSSIBILITIES OF POSITIVE USE OF ITALIAN EXPERIENCE ABOUT INTERNAL AND EXTERNAL SUCCESS FACTORS IN RUSSIAN SMALL AND MEDIUM-SIZED ENTERPRISES1
D. А. Pletnev, A. Campa
Chelyabinsk State University, Chelyabinsk, Russia
The study of internal and external factors permits to understand new dynamics of enterprises and more specifically of small and medium enterprises. The essay takes in consideration not only the general phenomenon inherent internal and external factors, but it compares the actual situation in two different countries, Italy and Russia. Aim of the essay is not simply to show differences about Italian and Russian SMEs, but also to underline the importance of such extra-economic factors as those sociological or cultural or psychological for the economic life of an enterprise. In the end the analysis show positive and negative aspects of a specific internal or external factor in Russia and Italia and it explain also from where were born such considerable differences between these two nation.
Keywords: internal factor, external factor, SME, Russia, Italy.
Literary review
In ancient times concept of internal and external factors was not so developed, but since the IV century before Christ, in Greece, Platone started to analyze the importance of one internal factor, the division of work.
Platone is of the idea that people are not able alone to satisfy all their needs, so a man cannot live without its community and society, and the cooperation between people is the only way to satisfy all personal needs. That's why, Platone wrote that the division of work doesn't create differences between people, vice versa it is an element that create union and cooperation between people, as they act as one person only [10. P. 93]. This analysis became also an important input for Karl Marx, who used Platone's thought to explain the subdivision of classes inside society; Marx was of the opinion that the subdivision of work of Platone represented the fundament of differences between social classes inside society [9. P. 66—67]. Instead, Emile Durkheim underlined the strictly connection between subdivision of work and needs [5]; he affirmed that the subdivision of work is a factor of union and cooperation between people only if it is regulated by rulers and laws, otherwise it will be only cause of the destruction of social relations between people [4]. During centuries, studies about internal and external factors had taken more importance also because studies about economy knew a continue development. A more developed economy meant
xThe study was supported by the Scientific Russian Fund, project #14-18-02508.
more complexity in studying economic operations outside and inside an enterprise. Elton Mayo became famous when in 1927, in a fabric of Western Electric in Hawthorne, decided to conduct a study to understand conditions in which workers operated. He was one of the first who understood the importance of quality of light level in a fabric, or the importance of breaks during work. In practice terms, he understood the importance of motivation of workers [1]. Today economists are all agree when, motivation and other personal factors, are watched as factors that have an important impact also in economic production. One of most youth factors that are analyzed in this study and generally in economy are the transaction costs; a factor that was "discovered" only one century ago by the Institutionalists and more specifically by O. Williamson2, who studied also the concept of opportunism. Another important study about this speech, is the theory of Herbert Simon [12], who underlined the correlation between motivation and productivity and especially the limited rationality during the decision process made by entrepreneurs [6]. In modern economy, Dosi and Marengo's theory represent a new steps of studies in internal and external factors. Their theory is represent a new innovative step about studies of internal and external factors because it is as a synthesis of sociology and math. Their work started more than twenty years ago, when Marengo (1992 [7]) and Marengo (1996 [8]) has
2 About this speech: Williamson O. E. The economic Institution of Capitalism. — New York : The Free Press, 1985.
started a study which could be able to understand and value capabilities of individuals or subunits within the organization, namely as "process of "structural" learning [3]. Their theory moved by the consciousness that is not possible to reach a common optimal model that will maximize profits and results of every kind of company. That's why is necessary to study and to try to give a mathematical explanation to every factor that influences life of a company, moving by the presupposition that a factor acts differently in every company, so it will generate also different results. Dosi, Riccaboni and Varaldo had started to talk about it on 2000, when they analyzed the dynamics of relations between SMEs and big companies [2]. They started and also now Dosi and Marengo are studying a mathematical model that is able to understand and "translate" in number such not-mathematical or simply not full economic variables that, in all cases, influence determinedly life and results of a company.
Introduction
In the previous century, economic theory considerably developed the concept of internal and external factor, contributing to give more importance to these aspects of economic studies in order to understand better life of an enterprise. In ancient times, "cycle of production" and "organization of work" were the most important and probably the only factors that economists took in consideration. However, since the first contributions of the neoclassical school on XIX to this argument, internal and external factors had started to take more and ever more importance in the economic analysis because the can make more efficient economic life of an enterprise. In this essay are studied some of most common external and internal factors that influence life of small and medium enterprises, more in details the analysis regards main differences of these factors in Russian and Italian SMEs and also the different approach that economic operators have in consideration of their origin and of the place in which they operate. This study shows indirectly that the definition of "homo aeconomicus" suffers from a structural lack that is the not consideration of factors as psychology, sociology, culture and traditions and many others, that influence also determinately the most generic economical process. Is important to underline that the following analysis uses mainly the deduction instead of induction, for this reason it can be summarized as an empiric study that compares the Italian and Russian experience.
Generally, an internal factor influences directly the enterprise from inside, so there is not a connection with an actor or a variable that is not a part of the company; the company is the only subject that can manage them.
Vice versa, an external factor influences from outside life of an enterprise, usually there is another actor that is not a part of a company, that's why it cannot be controlled and company cannot have a direct control on this factors.
In this study are taking in consideration not all internal and external factors that exist in economy, but only main factors that are decisive for small and medium enterprises and that evidence an important difference between Russia and Italy.
It is very important to do the previous clarification because, as for example Dosi and Marengo theorized too, there are thousands variables that influence life of an enterprise, so is complicated to define them but more important, is not possible to create a generic model that values for all companies. The first of these variables is of course the size of a company, that's why in this specific study are taking in consideration only small and medium enterprises; some factors affect considerably of this difference, indeed they can act in a different way because of the size of a company.
Internal factors that are analyzed in this study are:
— Relation with competitors: it shows the relation that there is with other companies that are operating in the same market. It can be different, indeed geographical context shows that there are different approach in this problem, but generally there are two ways to act: or to be individual and to try to fight with other competitors to conquer their part of market; or to try to make a contract with competitors and try to not fight, but cooperate all together. As is clear, it depends also from the natural conformation of society that is influenced by the historical process that changed society.
— Relation with Customers: Instauration of a relation with customers is necessary to start an economic activity. With the help of other subjects as psychology and sociology, economists know that there are different kinds of relations with customers. It is a different factor than "marketing", because it does not study how to understand needs of customers; relation with customers studies how to how to build customer loyalty. Today, new economic theories that take in consideration needs of customers, are all agree about the fact that a company must take in consideration not only the economic aspect of a product, but all process of buying must be considered as an experience.
— Place of work: It is one those factors that influence directly all theories from both sides, scientific and sociological. Indeed this element was analyzed by Taylor (1911 [13]) in his scientific division of work, in which is true that a better composition of place of work guarantees more productivity because all operations of workers are faster. At the same time place of work represent one of psychological elements that was taken in consideration from the first part of XX century, when Mayo before, and Simon later, they correlated place of work with a better productivity of workers. Place of work can be defined as where work takes place, it can be place where is produced a good as a service sold, is the setting in which workers make their job.
— Nationality and territoriality: At first can seem that this factor is not inherent with economic theory, but it is at the base of all communities and societies, that they are characterized also in base of the degree of power that this element covers. It is important especially today, in a World in which Globalization became an important element that permitted and controls this new World market in which all population can discover, try, buy and sell all those products and services that in past times were reachable only in some determined parts of the world. It can be defined in geographical and social terms, so it can have a regional valence or national, but in other cases it is connected with the concept of nationality, that is more social and cultural than simply geographical.
— Grade of openness to foreign investors measures grade of difficulty for foreign investors to enter in a national market and start an economic activity. It depends from different variables as the previous concept of nationality. Usually, it is regulated by national law, that's why in part is the State that decides level of grade of openness to foreign investors, although is also true that State is a direct representation of a population, so there is a positive correlation with the sentiment of openness to foreign investors by people and legislation system. It is an index that is taken in consideration by all most important Economic world institute, as the International Monetary Fund and the World Bank.
— Grade of Internal regulation of market measures degree of strictness of national code in merit of economic activity; it is directly correlated with modalities that authorities control the correct application of law.
— Governance of Small and Medium Business takes a high importance not only as a general internal
factor, but also in merit of analysis between Russia and Italy. Indeed, even if governance's structure is easier in SME than in big corporations, is also true that the analysis discovers more differences in it. Governance is what controls and takes decision in the company de facto; in some cases, it is included in the property, other times there are two different subjects. This element in some cases is not so considered, but it is a mistake because the governance that is not able to manage a company, is the first element that will declare the death of the company.
— Transaction costs. Theory and definition of this factor was developed by the Institutionalism; the first economist who gives the definition of transaction costs was Ronal Coase on 1937, then O. Williamson on 1986 developed the idea of this factor.
— Access to credit: today it represent an important factor especially for small and medium enterprises for different reasons. The global economic crisis has made this factor to be very important, maybe too much important considering that, many small and medium companies can close because of the lack of liquidity today. In some cases, the financial fragility of SMEs make them to close definitely, even if they have a good production and a market in which operate.
The specific case: Italy and Russia
As first step of the study, is important to define correctly every factor for its own situation in Russia and in Italy. In this phase the numeric question is not taken in consideration because the most important differences don't regard about a mathematical question, but at first there is a methodological difference, that is based not only in economic factors, but also extra economic.
More in details, the tab. 1 shows all internal and external factors that were specifically analyzed in the previous chapter in Russia and Italy.
Comparison of Russian and Italian factors
In second analysis, is important to see how these different external and internal factors have an impact in their economic setting. More in details, the tab. 2 gives to the reader a better knowledge about how this factors influence positively and negatively life of companies in Russia and in Italy. Is important again to underline that differences are theoretical and not numerical, but is also true that these differences are the base for that mathematical division that guarantee different incomes and expenditures.
Table 1
Internal and External Success Factors of Business in Russia and Italy
Criteria Situation in
Russia Italy
Relations with competitors SMEs can tries to create unions or more generally to not enter in "war" with other companies Individualism of SME is the principle. Unions are not the rule and usually they are short in time
Relations with customers There are a lot of different formula of discounts, promotions and advertisings; but there is not a real trusting relationship between customer and seller Discounts are a mode to attract new customers. With old customers (who are people who seller knew in his activity) starts a strong relation that could move also forward the economic relation
Place of work Usually is a small place; generally a worker shares his job place with other colleagues Places are generally bigger and every worker has his own space to work
Sense of nationality and territoriality SME and generally all companies are interested to show in their brand that they are a regional or at least a national company English terms are becoming cool, and they are taking place of traditional Italian name of companies, products and advertisings. The aim of this policy is to seem more international; indeed the internationalization
Grade of internal regulation of market Internal Market's regulation is not oppressive and strong With the introduction of EU's directives, all activities are strictly regulated by law in all stages of an enterprise
Governance of small and medium business In almost all SME companies, the property of a company did not represent also the governance of it. Usually there is an external manager that become worker of the company A feature of Italian SME is that in almost all cases the governance and the property are concentrate in the same person or (more rarely) in the same group of investors
Transaction costs by type Transaction in Russia are low inside a company ( regarding workers and managers), but they become higher in relation of customers, suppliers and competitors In Italy, general level of transaction cost is high and in proportion higher than in Russia. The difference with Russian economy is that the relation with State (so taxes and bureaucracy) represents the higher transaction cost; then there are transaction costs with workers and in the end with suppliers and competitors. Transaction costs about customers are generally higher than in Russia
Access to credit Is not difficult the first step in which a SME has to ask for a loan. The most difficult part is represent by the payment of interests that in more occasions are too much high for enterprises Today is becoming too difficult to access to credit market. It is because of crisis, indeed today banks and credit institutes are requiring too many guarantees to SME to receive a loan, for this reason a lot of them cannot receive a loan
Tables show that internal and external factors are generally influenced by extra economic factors that in past theories were not considered in economic analysis. For example, one of main reasons because relations with competitors change in Russia and Italy is that societies have two different concepts: in Italy prevails the individualism that is typical of Western countries. Instead Russian people were born with the concept of collectivism, so also for this reason is more possible in Russia to make trade unions than in Italy, at the same time Italian community stimulates more the free individual economic initiative. Talking
about relations with customers, the more emotional behave, typical of Mediterranean population shows main differences with Russian people; in Italy sellers are more friendly and confident also because Italians pay more attention to details and are not so practical as Russian. Place of work is determined in Italy by the concept of beauty and in Russia by their practical sense and by the idea of collectivism. For this reason, Russians usually works together in the same office, at the same time place of work is smaller than in Italy, it could be less comfortable and beautiful but it is more practical and it requires less cost.
Table 2
Comparison of Success Factors of Small and Medium-Sized Enterprises in Russia and Italy
Criteria Positive Factors Negative Factors
Russia Italy Russia Italy
Relations with competitors SMEs can divide peacefully a market sector. The union creates the force Competition make SMEs to reach the excellence, and also customers will receive benefits from this SMEs manipulate relation price/quality of good, offering goods that in other markets could be better In the economy of corporations and multinational, can be impossible especially for SMEs to survive alone
Relations with customers Customers are encouraged to buy in time and in quantity that is more comfortable for sellers Relation customers/ sellers is very strong, so probabilities to lose a customer are few Customers will change sellers very easily; there is not a particular motivation to go to buy a good or a service in a determined enterprise Cure a relation with a customer require time, sometimes too much time to pay attention to enough customers
Place of work There is a better interconnection between workers, organization of work is leaner As Marx said: if a worker has his own instruments, he feels more job that he is doing as of him, and it influences positively the production A bigger place of work increase motivation and esteem of the worker. In all cases size of Russian places of work is adequate for worker's motivation and happiness Too much privacy can make worker to feel himself free to do what he wants, then is more difficult for head's department or for a boss to control every worker
Sense of nationality and territo-riality A company that showed his closeness with territory, could be considered not so far and alien that other companies. They leverage the patriotism factor A global brand, as an international name and business dimensions, can give more possibilities to have affairs abroad SMEs that use too much the concept of national products close other opportunities in other markets Nationality of a company or an item is very important and that is strictly connected with popular tradition and culture
Grade of openness to foreign investors Russian SME are preserved, they have a regulation that favorites national companies instead of foreign There are more possibilities of development and more investments Market will be closed to new opportunities of investments, at same time Russian SME have more difficulties in becoming an international powerful company National identity is losing dangerously, is more difficult to produce and to buy the real "Made in Italy"
Grade of Internal regulation of market Is easier to open a business for some reasons: place and build at first but also time to open it, and a less regulation permits entrepreneurs to concentrate their forces in the governance of business There is an high protection of customer's rights; at same time also competition between enterprises is regulate more strictly There can be a distortion in the collective market stability, because a better result could be the result of a not application of rulers In general, all entrepreneur use one day for week to resolve all bureaucratic problems and to control if business fulfills in all regulations
Governance of small and medium business To have a manager in a governance of a small business, it means that there is an expert and selected that knows how to control the company SME's structure and generally the process of decision are lighter. For workers is a motivation to see that owner is working with them Can happen, that managers are more interested in their affairs and goals. To motivate managers can happen that the property decides to pay them more, but it can spoil the relation property/governance In some cases, SME's fail because who control the business does not have necessary know-how
End of tab. 2
Criteria Positive Factors Negative Factors
Russia Italy Russia Italy
Access to credit SMEs can access easier and faster to financial market and receive a loan for their activity As they open easer, they can close too. Every time that an enterprise failed, is it a loss for all community in social and economic terms Those SME that have the possibility to receive a loan have a lot of guarantees so probabilities that they will not pay back loan are very minimal A lot of potential good project cannot start because of difficulty in receiving a loan
Grade of opening of market to foreign investors and sense of nationality and territoriality is not an economic factor but it influenced strategies, life and structure of an enterprise. Different evolution of history in both countries has generated differences in Italy and Russia. Italy became a nation only 150 years ago, vice versa Russia became a nation 4 centuries ago, but for Russian people, their nation exists since the Rus' of Kiev, so since the VIII—IX century A.D.
Grade of international regulation of markets presents a situation in which the liberal nation is Russia instead of Italy; there are less directives and rulers concerning the regulation of markets, that's why in Russia is easier not only to open a company but also to managed it, even if level of bureaucracy represent a common element in both countries. In part this difference is the consequence of a different economic development: in Italy capitalism is a consolidate system, vice versa in Russia capitalism is a new system in developing; then capitalistic system in Italy is very different than in Russia. Analyzing internal and external factors in Russia and Italy, is important to see and give a panoramic of the economic context of crisis in which companies are operating.
Conclusion
The impact of sociological and psychological variables in economic results is an important speech that in the previous century was understood also by some important managers; in Italy the clearest example is Adriano Olivetti, that was manager of the informatics company Olivetti. He applied a different policy of governance, which provided to build kinder garden near his fabrics, canteen inside and more than one break during the workday. In few words he
decided to humanize the scientific division of work elaborated in Taylor's theory (Rizzato, 2010).
It's difficult to talk about homo economicus when there are a lot factors that cannot be under the control of a person, for the simple reason that they are too big or that in some cases they are a part of this person. For this reason is necessary today to study every economic problem using also other subjects that can give more answer and a more clear explanation of a determined phenomenon. Concerning the specific analysis between Russian and Italian SMEs, is possible to affirm that there are many differences that in some cases are not taken in consideration. Even if today is a globalized world in which is very easy to create new international connection, the nature of humans make them to be very different one from the other. These difference influence determinately life of a SME, for this reason is very important to maintain them under control and to understand where, when and how is better to act if something is not working correctly. This study can represent also an important guide for all those entrepreneurs that took the decision to invest in Russia or in Italy; in this way is important to consider not the nature and ideas of the investor, but the setting in which the small or medium enterprise will operate. Only in this direction, the entrepreneur has chances to survive and continue his economic project. In a new economic setting, in which foreign markets are not something of unknown but a new possibility to increase affairs, is necessary to know with which approach an entrepreneur has to start a new activity; it is not enough today a business plan and capitals to start or to develop a SME. Internal and external factors are fundamental and they must be studied not only to prevent possible problems, but to know how to operate and act in an economic setting.
Сведения об авторах
Плетнев Дмитрий Александрович — кандидат экономических наук, доцент кафедры экономики отраслей и рынков Челябинского государственного университета, Челябинск, Россия. pletnev@csu.ru
Кампа Антонио — магистрант кафедры экономики отраслей и рынков Челябинского государственного университета, Челябинск, Россия. campa@csu.ru
Bulletin of Chelyabinsk State University.
2016. No. 14 (396). Economic Sciences. Iss. 55. Pp. 95—101.
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