Review of Management and Economical Engineering, Vol. 7, N



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Review of Management and Economical Engineering, Vol. 7, No. 6



FORCES THAT SHAPE THE COMPETITION ON THE ROMANIAN MOBILE TELECOMMUNICATION MARKET
Gheorghe MEGHISAN, Claudiu BOCEAN, Georgeta-Madalina MEGHISAN

University of Craiova, Romania
Abstract: Competition for profits goes beyond es­tablished industry rivals to include, according to Porter, four other competitive forces as well: customers, suppliers, potential entrants, and substitute products. The extended rivalry that results from all five forces defines an industry's structure and shapes the nature of competitive interaction within an industry. Understanding the competitive forces, and their under­lying causes, reveals the roots of an industry's current profit­ability while providing a framework for anticipating and influencing competition (and profitability) over time. The pattern of the rival forces differs by industry. In Romania, on the mobile telecommunication market, the severe rivalry between dominant competitors and the bargain­ing power of these actors are strong, while the threat of entry, the threat of substi­tutes, and the power of suppliers are more benign. Industry structure entails of a set of economic and technical characteristics that determine the strength of each competitive force. In this paper we will examine these drivers, taking the perspective of company already present in the industry of mobile telecommunication (Zapp).
Keywords: competitive forces, mobile telecommunication providers, strategy



  1. INTRODUCTION

The form and nature of competition is changing within the information economy. Correspondingly, as business respond to the challenges posed by the increased competition associated with the information economy, it is apparent that new sources of competitiveness are emerging (Turner, 2000). The development of this new business model is resultant from changes in the industry structure within which the enterprise is operating, and is needed to protect competitive advantage. Strategy is the creation of a unique and valuable position, involving a different set of activities (Porter, 1985).

Figure 1. Competitive forces

The success of competitive strategy is a function of the attractiveness of the industries in which the firm competes and of the firm’s relative position in those industries (Porter 1980). According to Porter (1980), industry structure is determined by five competitive forces (Figure 1): the power of buyers; the power of suppliers; the threat of new entrants; the threat of substitutes and rivalry among suppliers.

Understanding the competitive forces, and their under­lying causes, reveals the roots of an industry's current profit­ability while providing a framework for anticipating and influencing competition (and profitability) over time. A healthy industry structure should be as much a competitive concern to strategists as their company's own position. Un­derstanding industry structure is also important to effective strategic positioning.


Threat of New Entrants

New entrants to an industry typically bring to it new capacity, a desire to gain market share, and substantial resources. An entry barrier is an obstruction that makes it difficult for a company to enter an industry. The possible barriers to entry in a market are:



Organizational (Internal) Economies of Scale. These economies deter entry by forcing the aspirant either to come in on a large scale or to accept a cost disadvantage. Scale economies in production, research, marketing and service are probably the key barriers to entry in the various industries.

Government policy. Although the principal role of the government in a market is to preserve competition through anti-trust actions, government also restricts competition through the granting of monopolies and through regulation. Industries such as utilities are considered natural monopolies because it has been more efficient to have one electric company provide power to a locality than to permit many electric companies to compete in a local market.


Capital requirements. The need to invest large financial resources in order to compete creates a barrier to entry, particularly if the capital is required for unrecoverable expenditures in up-front advertising or R&D.

Patents and proprietary knowledge. Ideas and knowledge that provide competitive advantages are treated as private property when patented, preventing others from using the knowledge and thus creating a barrier to entry.

Unequal access to distribution channels. The new entrant on the market must, of course, secure distribution of his product or service.

Asset specificity inhibits entry into an industry. Asset specificity is the extent to which the firm's assets can be utilized to produce a different product. When an industry requires highly specialized technology or plants and equipment, potential entrants are reluctant to commit to acquiring specialized assets that cannot be sold or converted into other uses if the venture fails.

Customer switching costs. Switching costs are fixed costs that buyers face when they change suppliers. The larger the switching costs, the harder it will be for an entrant to gain customer.
Rivalry among existing firms

We can define the following rivalry determinants among existing firms in an industry:



A larger number of firms increase rivalry because more firms must compete for the same customers and resources.

Slow market growth causes firms to fight for market share.

High fixed costs result in an economy of scale effect that increases rivalry.

High storage costs or highly perishable products cause a producer to sell goods as soon as possible.

Low switching costs increases rivalry. When a customer can freely switch from one product to another there is a greater struggle to capture customers.


Low levels of product differentiation is associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrain rivalry.

Strategic stakes are high when a firm is losing market position or has potential for great gains.

High exit barriers place a high cost on abandoning the product.

A diversity of rivals with different cultures, histories, and philosophies make an industry unstable.

Industry Shakeout. A growing market and the potential for high profits induces new firms to enter a market and incumbent firms to increase production.
Threat of Substitute Products or Services

Substitute products are those products that appear to be different but can satisfy the same need as another product. The competition engendered by a threat of substitute comes from products outside the industry. When the threat of substitutes is high, industry profitability suffers. Substitute products or services limit a potential industry’s profit by placing a ceiling on prices. For Byars (1991), substitute products that deserve the most attention from an organization are those that:



  • have trends improving their price performance trade-off with the industry’s product’s;

  • are produced by industries earning high profits.

Bargaining Power of Buyers

Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other (Wheelen and Hunger, 2000 and 2006). A buyer or a group of buyers is powerful if some of the following factors hold true: a buyer purchases a large proportion of the seller’s product or service; a buyer has the potential to integrate backward by producing the product itself; alternative suppliers are plentiful, because the product is standard or undifferentiated; changing suppliers costs very little; the purchased product represents a high percentage of a buyer’s costs, thus providing an incentive to shop around for a lower price; a buyer earns low profit and is thus very sensitive to costs and service differences; the purchased product is unimportant to the final quality or price of a buyer’s products or services and thus can be easily substituted without affecting the final product adversely.

Bargaining Power of Suppliers

Suppliers can affect and industry through their ability to raise prices or reduce the quality of purchased goods and services. For Porter (1985), the determinants of supplier powers are the following: differentiation of inputs; switching costs of suppliers and firms in the industry; presence of substitute inputs; supplier concentration; importance of volume to supplier; cost relative to total purchases in the industry; impact of inputs on cost or differentiation. Byars (1991) does a short explanation of these determinants according that we saw above and considers that the suppliers are powerful when: their industry is dominated by a few companies and is more concentrated than industry it sells to; their product is unique, differentiated or has built up switching costs; they pose a credible threat of integrating forward; industry is not an important customer of the supplier group.


Wheelen and Hunger (2000 and 2006) refers those that Byars (1991) said and increase that the suppliers are powerful when substitutes firms are not readily available in the industry.

On the other hand, suppliers are weak if:



  • Many competitive suppliers - product is standardized;

  • Purchase commodity products;

  • Credible backward integration threat by purchasers;

  • Concentrated purchasers;

  • Customers weak.

Understanding the forces that shape industry competition is the starting point for developing strategy. Every company should already know what the average probability of its industry is and how that has been changing over time. The five forces reveal why industry profitability is what it is. Only then can a company incorporate industry conditions into strategy.

2. ZAPP MOBILE TELECOMMUNICATION COMPANY’S STRATEGY

Qualcomm, pioneer and global leader of the wireless digital technology CDMA, and Omnia, capital investment specialized in financing the companies from the telecommunication, internet and technology area, confers to Zapp mobile telecommunication company the necessary stability and force for the development as last generation mobile communication operator. Over 350 million dollars were initially invested for the development of the CDMA50 technology – that covers 90% of the Romania’s population, new products and the creation of quality understructure of services needed for the acquisition of international standards operations.
One of the strong points that the group relies on, including Zapp Holdings – that owns two networks with the same name in Romania and Portugal, is the strategic partnership with the Chinese producer of ZTE equipments, that besides the supply with technology, it can open many doors. The Zapp mobile telecommunication provider imposed on the Romanian market as a niche player that offered mobile internet services at a higher speed. Preserving the same niche, Zapp made 500 000 clients in nine years, but now the competition offers comparable data services. Thus, Zapp descended on the fourth place regarding the number of clients, eventhough, it is on the third position regarding the incomes and profit. The company’s strategy foresees that the voice services will remain on the old structure, CDMA-2000 in 450 MHz band, while the new 3G network will be used only for data services. Thus, Zapp confrunts itself with a lack of extended range of mobile telephones adapted to the pre-paid services users, who serach cheap mark telephones. However, the costs of the operation of two networks in parallel – one for voice and one for data, are very high.

Interesting it is the fact that Zapp forsees to obtain profit, even if there are high costs with the new network implementation at a comparable level to the concurrence, there is the necessity to reactivate the dealers from the teritory and extend the points of presence per person, rising the marketing and advertising expences asociated to the new 3G services launching. The estimated costs of a this type of network, for the licenced covering, are 150 million euro and for the services promotion, the company will need a budget of 10 million euro. The Zapp Company promises that the broadband technology will be available not only in the main towns of Romania, but also in small towns. Apart from the network investments, Zapp proposes a more aggressive market positioning, such as the launching of new data services with higher transfer speed and pre-paid services. The Zapp competitor offers subscriptions at 10 dollars for an included traffic of 100 MB at 39 dollars for the Zapp Online Express Unlimited subscription offering unlimited mobile internet access. For the ones that prefer the tariffs per hour, they can find a more restricted offer: 5 hours included for 9 dollars or 15 hours included for 19 dollars. Zapp obtained a net profit of 15 million dollars with a turnover of 125 million dollars with 0,37% more than in 2005.

Analyzing the Zapp mobile telecommunication company’s offer, we can observe that the offer is poor compared to its competitors (Orange Vodafone and Cosmote), this provider having only two subscription types. The lack of variety explaines the number of only 500 000 subscribers compared to 9 310 000 subscribers in Orange network. Thus, facing the serious competition, the Zapp Company focused on data service providing, underlining the speed and quality of its services.
REFERENCES

Birzoi, V. (2007). The new Zapp’s shareholder wants a rapid development of the 3G network. Capital Magazine, 44/01.11.2007

Byars LL.1991. Strategic Management: Formulation and Implementation, Concepts and Cases. Third Edition. HarperCollins Publisher, Inc: New York.

Certo SC, Peter JP. 1991. Strategic Management: Concepts and Applications. Second Edition. Mcgraw-Hill International Editions, Management Series: Singapore.

Mihail, S., & Birzoi, V. (2007). Telecommunication operations warm up for WiMAX. Capital Magazine, 26/28.05.2007

Mihail, S. (2007). Mobile Internet offers more than the cable. Capital Magazine, 46/15.11.2007

Mihail, S. (2007). Mobile telephony overdose. Capital Magazine, 48/29.11.2007

Porter Michael, Competitive strategy, techniques for analyzing industries and competitors. The free press, New-York, 1980.

Porter Michael, Competitive strategy, creating and sustaining superior performance . The free press, New-York, 1985.

Porter M. 1990. The Competitive Advantage of Nations. First Published. Macmillan Press: New York.

Thompson JL.1993. Strategic Management – Awareness and Change. Second edition. Chapman & Hall: London.

Turner C., The information e-conomy – business strategies for competing in the global age, Kogan Page Limited, London, 2000.

Wheelen TL, Hunger JD. 2000. Strategic Management and Business Policy – Entering 21st Century Global Society. Seventh Edition. Prentice-Hall: New Jersey

Wheelen TL, Hunger JD. 2006. Strategic Management and Business Policy. Tenth Edition. Prentice-Hall: New Jersey.



PRICE COMPLEXITY OF A MOBILE TELECOMMUNICATION SERVICE
Georgeta-Madalina MEGHISAN

University of Craiova, Romania
Abstract: The consumers can not always predict the price of a service. Moreover, they are not sure of what they will receive. There is an implying rule among the clients, which states that a service with a higher cost has to be of a better quality and more efficient than a low-cost service. Even though the price can serve as a quality certificate, there is sometimes difficult to be sure of the fact that the added value is real. However, the price establishment is based on three fundamental elements: the costs that have to be covered, the prices of the competitors and the utility perceived by the consumer.

The services price barriers are often complex. Taking the case of two mobile telecommunication services providers that operate on the Romanian market (Orange and Vodafone), we will see that the listed prices have the tendency to be complex, sometimes can not be understood and the comparisons between the mobile telecommunication providers is very difficult to be made.
Keywords: mobile telecommunication providers, mobile telecommunication service, price strategy



  1. INTRODUCTION

Many people find it hard to describe their user profile with precision, what makes it hard to develop price comparisons as long as the telecommunication providers base their prices on a variety of factors.

The mobile telecommunication services price establishment has at its base three fundamental coordinates: the costs that have to be covered (a), the prices applied by the concurrence (b) and the perceived utility by the consumer (c).

(a) The expenses for a telecommunication campaign are made of: expenses linked to the acquisition, replacement and modernization of the technical understructure; marketing expenses; personnel expenses. An important part of costs represents the acquisition of the frequency gamut using licenses and telephony numbers allocated from the national organizations, these fixed costs entering in the establishment of the long term price.

(b) The oligopoly situation that can be seen on the mobile telecommunication markets and price wars leads to a greatest importance of the competition’s prices in a company’s prices establishment.

(c) The consumers’ perceived utility can become a dominant criterion, especially in the case when the operator can offer a superior added value throughout unique supplementary services adapted to the different market segments and create a powerful brand.



  1. MOBILE TELECOMMUNICATION SERVICES’ PRICES ESTABLISHMENT

The elasticity of the demand to the price is diminished in the mobile telecommunication services’ case, because of the development and offer of unique and differentiated services from the concurrence; the creation of a powerful connection with the brand; the costs for the operator’s change such as: financial costs (the lost of some facilities for the older client statute, cancellation charges etc) and non financial costs (the lost of the possibility to use a telephony number known by the reference groups, the affective connection for the brand etc). From the point of view of the expressing modality, the price will usually take one of the following forms: the tariff for one minute/second of conversation for the basic service (voice); the tariff for one minute/second of use or a certain data transferred quantity for the data services; price on the package type (a fixed price that includes a certain quantity of services – a certain number of minutes or written messages, a certain quantity of transferable data etc); other variants depending on the complementary service referring to.The price differentiation in the case of mobile telecommunication services is essential and can be made depending on different criteria.



The payment modality for the service. The prices for the prepaid services will be higher, because the access to the network’s services is free and extremely flexible, permitting higher fluctuation of the consumption from one month to another; in the case of postpaid services, the prices are lower, because the consumer pays a monthly subscription for the access to the network’s services, assuring a constant income for the company;

The pick moments of the service’s use. The price becomes an element serving to adjust the services’ demand fluctuation during the day or week, by establishing a minimum level of tariffs beyond the pick hours. Thus, the risk of network overusage during the pick hours diminishes, an advantage for the business clients who are more receptive to the service quality than the price.


The networks used for the telephonic connection. The prices will be higher for the calls from the provider network to other networks.

The company conquers a great market share. The consequence will be the provider’s popularity, permitting the clients to make cheaper calls within the network.

The consumption’s volume. The higher the consumption is, the smaller the tariff is. There can be adopted two situations: for a higher subscription, the price of the minute per call will be cheaper, whereas in the case of the prepaid services, the consumption will be evaluated and bonuses will be offered.


  1. THE COMPLEXITY OF THE MOBILE TELEPHONY SERVICES’ PRICES

The access to mobile telephony services grew within the last years. Technological developments permitted the rise of the services’ capacities such as the possibility to send image messages, for instance. It is not a surprise if the demand exploded and the competition became ferocious in more and more countries. Within the effort to adapt their services to the needs of different market segments, the mobile telephony companies put into place a great number of subscriptions that stop any comparison between the providers. These subscriptions can be international, Europeans and national. Their price varies depending on the number of minutes or hours included in the package. The minutes outside the package and the call towards other operators are more expensive. Some subscriptions permit an unlimited consumption during pick hours. The family subscriptions allow the parents and children to use their mobile telecommunication package on many telephones on the condition that the total amount of communication doesn’t exceed the monthly subscription. Another alternative is the prepaid subscription which gives the possibility to the consumer to buy a telephone and communication credit when necessary. The communication duration can be calculated from the first second and the written messages can be included in the package.

Table 1. Example of a subscription package with shared minutes from Orange

(Source: www.orange.ro)




Subscription type

Monthly subscription (Euro) without added value

Call type

Tariff/min without added value (Euro)

Shared minutes

Shared national minutes

14

Orange + fixed networks

0,10

60 national minutes

Other mobile networks

0,13

23

Orange + fixed networks

0,09

120 national minutes




Other mobile networks

0,13

31

Orange + fixed networks

0,08

180 national minutes





Other mobile networks

0,13

45

Orange + fixed networks

0,07

300 national minutes




Other mobile networks

0,12

70

Orange + fixed networks

0,07

600 national minutes




Other mobile networks

0,12

100

Orange + fixed networks

0,07

1000 national minutes




Other mobile networks

0,11

195

Orange + fixed networks

0,07

2000 national minutes





Other mobile networks

0,11

285

Orange + fixed networks

0,07

3000 national minutes




Other mobile networks

0,11

375

Orange + fixed networks

0,07

4000 national minutes




Other mobile networks

0,11

465

Orange + fixed networks

0,07

5000 national minutes




Other mobile networks

0,11

530

Orange + fixed networks

0,07


6000 national minutes




Other mobile networks

0,11

Table 2Vodafone’s shared minutes subscription package



(Source: www.vodafone.ro)


Subscription type

Monthly subscription (Euro) without added value

Call type

Tariff/min without added value (Euro)

Shared minutes

Shared national minutes

7,5

Vodafone + fixed networks

0,14

50 national minutes

Other mobile networks

0,19

11

Vodafone + fixed networks

0,13

75 national minutes

Other mobile networks

0,18

13

Vodafone + fixed networks


0,12

100 national minutes

Other mobile networks

0,17

18

Vodafone + fixed networks

0,11

150 national minutes

Other mobile networks

0,16

23

Vodafone + fixed networks

0,11

200 national minutes

Other mobile networks

0,16

43

Vodafone + fixed networks

0,11

400 national minutes

Other mobile networks

0,16

67

Vodafone + fixed networks

0,10

700 national minutes

Other mobile networks


0,15

93

Vodafone + fixed networks

0,10

1000 national minutes

Other mobile networks

0,15

Analyzing the two tables of mobile telecommunication services from Orange and Vodafone for the same subscription type (1 000 national minutes), we find it difficult to compare the tariffs. However, we can make some comments:



  • The monthly subscription for the Orange provider is 100 euro without added value, whereas one has to pay 93 euro / month without added value for the same facility.

  • Whereas the monthly subscription is higher within the Orange offer compared with the same type of subscription at Vodafone, the tariffs for the calls exceeding the 1 000 national minutes included into the package are cheaper for the Orange provider, i.g. 0,07 euro (in Orange and fixed networks) and 0,11 euro (in other mobile networks) than for Vodafone - 0,10 euro (in Vodafone and fixed networks) and 0,15 euro (in other networks).
  • Thus, a client that has to choose between the two subscriptions, he will choose the one that better fits his needs. If he thinks that he will not exceed the 1 000 national minutes included into the subscription package, he will choose the cheaper subscription from Vodafone. If he will exceed the 1 000 national minutes and the next level of subscription with 2 000 national minutes is too much for him, he will choose the Orange provider.


  • There are some clients that don’t pay attention to the small difference of price and choose the mobile telecommunication provider that he feels attached to.




  1. THE DIVERSE MOBILE TELECOMMUNICATION OFFER

Many surveys in different countries revealed the existence of many unsatisfied clients. The site ConsumerReports.org affirms that a user from three in the U.S.A. has the intention to change his mobile telephony operator. Those who had already changed their provider explained that they searched a more adapted and profitable service. According to an analyze of Romania’s ANRCTI (The Information Technology and Communication Settlement National Authority) the national mobile telephony users have no idea of their subscription payment composition, because of the complicated offers and tariffs. A mobile telecommunication operator – Orange commercializes voice services for prepaid cards using seven tariff plans, each one having between four and six tariffs for national calls. For the subscriptions, the same provider offers national voice services within 26 tariff plans, and for almost every one of these plans having no more than one to four combinations of 12 extra options that can be associated to them. However, many of the extra options are commercialized at different prices, depending on the subscription value, others are linked into scale combinations, while within every one of the 26 tariff plans there are at least two different tariffs for national calls. Taking into consideration the fact that Orange Romania has the biggest market share, with a turnover of 1 234 million euro in 2007, either its clients are not disturbed by the large variety of offers, or the price is not the most important element for them.

Figure 1. Romanian mobile telecommunication companies market share (2007)


According to a representative of France Telecom Group, the clients from Romania are the most informed and pay attention to costs. This type of offer was especially created for the clients’ flexibility. From the sales, it was revealed the fact that this approach was successful, compared to the period with a limited number of subscriptions for the Orange clients.




  1. UNILATERAL CANCELLATION OF A SERVICE AGREEMENT

Because of the bad reception quality, interrupted calls, inaccessible services, the clients denounce the excessive prices and errors on the invoice. What makes the problem bigger is the difficulty to change the provider. Generally, a client signs a one or two year contract which has cancellation expenses.

Consumers Protection Associations ask a more rigorous control of the mobile telephony industry in order to protect the clients from the abusing practices throughout the existence of a standard to present their offers agreed by the governments. The Service Agreement at Orange may be cancelled unilaterally at the initiative of the Customer, without intervention by a court of law and with no additional formalities other than those provided below, in the following situations:


  • in the event that the Customer disagrees with changes made to the terms and conditions of the Service Agreement proposed by Orange Romania, in which case written notice must be sent to Orange Romania within 30 calendar days, with no obligation to pay any damages to Orange Romania;
  • during the Minimum Service Agreement Period, by means of written notice sent to Orange Romania at least 30 calendar days prior to the date when the cancellation is due to take effect and following the payment of a sum of money comprising the Amount of the Service Plan multiplied by the number of months remaining until the expiration of the Minimum Service Agreement Period;


  • subsequent to the Minimum Service Agreement Period, by means of written notice sent to Orange Romania at least 30 calendar days prior to the cancellation date and without obligation to pay damages to Orange Romania.

Whereas the cancellation of a subscription can not be easily found on the Orange Company’s Internet site, the same information is not present on the Vodafone Company’s site. In conclusion, the mobile telecommunication providers have complex offers that can be hardly compared and sometimes a client finds it difficult to choose from all the operators’ telecommunications products.


REFERENCES
Joffre O., Plé L., Simon E. Cas en management stratégique. Autour du diagnostic. EMS Publisher House, Paris, 2007

Kotler, Philip, Keller, Kevin L., Dubois, Bernard and Manceau, Delphine (2006), Marketing Management.Paris: ed. Pearson Education

Lovelock C., Wirtz J. and Lapert D., Marketing des services, Pearson Education, Paris, 2004

Maval, P. and J.-M., Decaudin (2005) - “Pentacom”, Pearson Education, Paris

Revista Capital. Supradoza de telefonie mobila, nr. 48, 29 noiembrie 2007, Bucuresti, p.3

Revista Capital. Utilizatorii de telefonie prinsi in traffic, nr. 46, 15 noiembrie 2007, Bucuresti, p. 21

Ziarul Financiar. Cei mai mari jucatori din economie, iunie 2008, Bucuresti, p. 126

www.anrcti.ro



MARKETING TECHNIQUES IN MANAGEMENT CONSULTANCY SECTOR

Daniela Roxana MIHAI

Transilvania University of Brasov, Romania
Abstract: The marketing of consulting services can be summarized as follows: define your market, identify clients, discover their needs, sell the consulting services to them, deliver the service to your clients` full satisfaction and most of all, built a long term relation with him so that he will not go to your competitors. Marketing has become a vital function in most of management consulting companies, having an important role in growing brand awareness, communicating practice competency and increasing competitive differentiation.

The paper’s main objective is to analyze the most relevant marketing techniques applied by the Romanian management consultancy (MC) companies in terms of comparing it to those marketing techniques applied by the multinational MC companies.
Keywords: management consultancy, marketing, services

1. INTRODUCTION
Marketing in consultancy field is as old as consulting itself. James McKinsey, one of the pioneers of management consulting spent many hours serving dinner with its clients or other people who have generated profit to his business. Since then, leaders in this profession have made a considerable effort in marketing their services. They systematically searched for opportunities to establish social relationships with potential clients, to be recommended by existing customers, to achieve rapid polls without taking any charge and actively participated in management conferences. All these methods, combined with the reputation of the company, used to be attractive to consulting firms` customers, as long as the consulting services market used to be limited and the competition not so strong.

Only in 1970 advertising was admitted in the U.S. as an acceptable marketing technique for professional consulting services in a competitive environment. Seen as a fundamental part of the communication system regarding the management consulting firm and its environment, advertising represents the bounding of its activities reflected in services, prices, distribution and its actual or perspective customers. The promotional activities of management consulting companies are being undoubtedly influenced by the general characteristics of services, especially the intangibility and variability of services.

2. MOST COMMON MARKETING TECHNIQUES IN MANAGEMENT CONSULTANCY SERVICES
Management consultancy is focused on meeting the specific needs of customers and the extent to which these needs or requirements have been met is the true indicator of the quality and value of the provided services. A representative definition for management consultancy is given by Greiner and Metzger (1983), according to whom management advisory means a service contracted and provided by persons specifically trained and qualified in this respect, assisting client organization in an objective and independent manner, in order to identify and analyze the problems of management, to recommend solutions and to contribute, at customer request, to the implementation of these solutions.

The intangible characteristic of management consultancy services makes it unable for the customer to quantify the quality of services in advance, especially as this quality can not exist outside the consultant – client relationship. It can be noticed only when the customer believes that a consultant had a vital contribution to successfully solving the problem for which he requested his advice. That is why, in business consulting, management and quality improvement are built on the basis of customers feed-back and focus on increasing customer satisfaction above all other purposes. Management consultancy services are considered to be a part of business services, reason why the target audience consists, largely, in business - to - business market players. Thus, the main categories of potential customers targeted by the marketing of management consultancy services can be found in the public sector (central and local administrations, public institutions or public interest organizations, governments, NGOs) and, most in the private sector (all categories of enterprises, large companies, investors, etc.).

As regards to the marketing methods approached by management consultancy, Cohen (2001) identifies both direct and indirect methods, classified as follows:


    1. Indirect methods: e-mails addressed directly to the customers, advertising with direct response, lists of addresses from its own data base, using the lists of Yellow Pages, former employees and the Internet.

    2. Indirect methods: discussion in front of different groups, newsletters, membership in professional associations or social and active presence within them, writing articles, writing books, developing letters to editors, supporting courses and seminars, distribution of press releases, exchanging information and experiences with other consultants in complementary fields.

Rogerson (2005) suggests that two effective promotional methods for consulting companies are the references (recommendations) and the organizational portfolio relationships consolidated over time. At the same time, the author considers that publications are the most effective means of promoting management consultancy companies, as a result of the functions it performs: it proofs the credibility and expertise of the consultancy firm and it provides fair value for its beneficiaries, in particular, to those effective and prospective customers of the business consultancy.


Based on these considerations, the promotion of a management consulting company involves the following steps:
    1. The development of market research in order to prospect and develop databases (in this stage are being created and developed databases with potential customers and may seek feedback from them regarding articles to be published, with the promise of sending them a copy of the material when it will be published);


    2. Increasing awareness of the brand / name / company image (can be done through press releases, publishing articles of interest to the target group);

    3. Direct marketing or the communication of organizational competencies (the process involves communication of the organizational results, using direct marketing methods; the aim is to transmit to the target group the level of expertise held by the organization in its field of activities).

The method can be implemented by:

      • Performing periodic analysis reports of a certain sector/area or an economic phenomenon by specialists within the organization. Summaries of these reports can be distributed through various sources to effective and prospective customers;

      • Marketing 'by words', which may encourage the distribution of materials inside the target organizations (such target organizations may be encouraged to request a full copy of the report in exchange for providing more information about them).

      • 'Taking verbal commitment’ by organizing events (seminars, discussion groups, forums, etc.) on various topics of interest to the target groups.

      • The 'for sale' meeting with the decision staff of the potential organizational customer.

In addition to the above allegations may be mentioned as means of promoting a professional image of consultant or firm, the following:



        • Publishing articles on business and industrial topics in business and technical newspapers; occasional papers and articles on business and industrial topics oriented towards the consultant areas of intervention; a periodical brochure addressed to existing and perspective customers, to trade associations and government departments;
        • Cooperation with the media - media, helping it to collect, organizing and presenting information about the business environment.


        • Management seminars, round tables, conferences, workshops, information sessions and other similar events are used extensively in the process of building image.

The goal of publicity is to raise the interest of a large number of potential customers, informing them that the products or services of the company are especially attractive to them. There are two recommendations regarding the use of advertising through the press:

  • The ads published in newspapers must ensure visibility over potential customers;

  • The presentation must be effective, which means that: it should provide a small amount of useful and complete information, rather than large quantities of disparate information; it should focus on the benefits that the potential customer seeks rather than to promoting the company name and general information; it should show clearly where and how the consultant can be contacted; it should take into account the tastes and cultural values of potential clients.

Another alternative would be to send the advertising material by mail. This work must target well-established destinations, assuming the existence of a very strong and up to date database. Participating to fairs and galleries represent a way that can contribute to promoting the image of management consulting company. The company participation may be materialized through the existence of a stand or the presence of a team during the event, equipped with relevant promotional material. The conferences are often part of the event and the intervention of a consultant may provide the opportunity to present the organization that he represents there.

Professional and social activities also create promotional opportunities and helps build the company’s image. Members of local, national or international management associations can all contribute to the promotion of its image and to the development of new contacts. Social and community services provide a significant social dimension to the activity of a business consultant. This can be expressed through official recognition or awards and it helps to establish contacts with managers and business people that are also engaged in such activities.

3. STUDY CASE: ROMANIAN MANAGEMENT CONSULTANCY COMPANIES WEB PRESENTATIONS
World Wide Web is today an essential mean of communication for any company, given the magnitude of this environment in recent years. Aware of this aspect, the multinational management consulting companies have made considerable efforts to develop and exploit this promotional environment, building large websites with hundred of pages addressed to their potential customers. Nevertheless, for Romanian management consultancy firms, the presence on the Web is still a resource insufficiently capitalized especially in their attempt to distinguish itself form the competing firms. Most of Romanian management consulting companies felt the need for a web site, but a large proportion of these sites have a lean design, with a reduced utility for the target groups, so that there is a risk of creating more harm than good for the company’s image. In order to highlight a number of characteristics in terms of strategies applied by Romanian management consulting firms in developing their web pages I have undertaken a study among 46 consulting companies members of AMCOR (The Association of Romanian Management Consulting Organizations), recognized and certified by this organization in the attesting session that took place on May 2008.
The study consisted of analyzing arguments used by management consultancy companies on their web pages in order to build the viability and desirability of their services and to generate interest among their target groups. Issues examined in this study consisted in:


  1. The main target groups defined by management consultancy firms in their electronic presentations;

  2. Areas of expertise set out through web pages;
  3. The extent to which advisory services are built taking into account the specific industries of their target groups or they simply offer "recipes for success";


  4. Techniques used to build and define the need for consultancy among target groups;

  5. The means used to provide added value through their web pages;

  6. How the consulting companies or their consultants place themselves in the client - supplier relationship;

  7. The arguments used in generating competitive advantage- positioning on the market;

A series of observations drawn from the analysis carried out will be presented in the following. In regard to the extent that consulting services are designed according to the specific industries of their target groups we could find that services are not classified according to specific industries or they do not communicate the sectors of activity in which the organization holds its competences. This may mean that the companies provide 'standard' consultancy services, regardless of the field of activity or industry of their potential beneficiaries and this situation could be noticed in more than half of the analyzed web pages. This situation is sometimes justified in that the companies nominate the categories of potential beneficiaries of their consultancy services (e.g. Public / private sector) or they declare the fields in which the consultants have competencies to provide consultancy and training, for example: manufacturing, energy production, construction, hotels and restaurants, agriculture. It should be noted that the accreditation process conducted by AMCOR, which joined all 46 companies analyzed in this study had as a result the recognition of both the fields of consultancy practice as well as the industries in which the company is alleged to have attested competencies and expertise, needed to deliver services of the highest quality.

The industries which AMCOR recognized and recorded on the certificate of accreditation are the following: industry, agriculture, construction, business services, financial services (banks and insurance), communications services / media services, tourism, trade, transport, central and local public administration, public services (utilities), non-profit, others. Regarding the methods used to provide added value through the companies` web pages were identified as follows: Various categories of information, the most important one-holding information regards the active financing programs and grants, public classifications of occupation and activities of the national economy, legislation, conferences and seminars, informative articles and on-line services (CV, jobs, questions). Links to web pages ("useful links"): various sites of the institutions that manage the Structural Funds, Ministries, public authorities, agencies and institutions of the European Union and other institutions. Box of 'news / events', through which the company informs their customers about its activities and services.

Articles in various fields, mostly related to the fields of their consultancy intervention (marketing, human resources, management), written by their own consultants or by specialists in various field and press releases. Newsletters: press materials, news, and analysis or case studies for each area of expertise; Services offered through the web page, such as recruitment / selection on line (market research, recruitment and selection, posting ads recruitment), personalized campaigns in order to increase the visibility of ads recruitment.
As arguments for generating competitive advantage one element used by most of the companies surveyed in presenting their organization is AMCOR membership and certification (24 of the companies surveyed mention these issues on their web pages). They position as “one of the biggest consultancy firms, market leader in certain intervention directions, the only ones who can solve a specific problem which customers may have, the leading local market of management consultancy in Romania, experts in their field of activity, the company contributing to the development of Romanian business environment, representative partner for business environment and public communities”.
REFERENCES
Cohen, W.A. (2001), How to Make it Big as a Consultant. Third Edition. McGraw Hill Publisher.

Kubr, M. (2002), Management Consulting: A guide to the Profession. Forth Edition. Geneva: International Labour Organization. Business/Economics/Finance.

Rogerson, A. (2005) Incorporate Publications into Your Marketing Strategy. Consulting to Management –C2M, Vol. 16, Issue 4, pages: 40 – 44.

OPERATIONAL RISK: ONE OF THE MAIN FOCUSES OF BANKING CORPORATE GOVERNANCE

Laurentiu MIHAILESCU

Academy of Economic Studies Bucharest, Romania
Abstract: Operational risk – represents the risk of recording losses or profit decreases, determined by internal factors or by external factors. The definition does not include the legal and reputational risk. Also in analysing the operational risks it is compulsory understanding the charges and the processes in each field. Operational domains must be evaluated simultaneously with the external environment of the financial institution. Analyzing the environment could be the support for defining the starting criteria for defining/identifying the operational risks and in addition they represent the basis for creating the tools for controlling and managing the risks. It must be observed that for identifying the operational risks should be evaluated thoroughly all the possible sources (internal/external, present/potential) as well as the staff that could be the source of such events.
Keywords: business practice, corporate governance, operational risk, risk management

1. INTRODUCTION
Operational risk management has become a very pressing reality for financial-banking institutions in the past years. The need to better understand operational risk is driven by two factors:


  • An increase in the complexity of financial technology;

  • Globalization of the financial-banking industry;

These factors contribute to growth in complexity of the banking activity and thus widen the operational risk profile of the financial services industry. In recent years, a significant number of high profile, high impact losses, some leading to the end of once powerful and respected institutions, have outlined mistakes in operational risk management. This unexpected focus on operational risk management is rather ironical as operational risk has always been a part of the entire risk profile of an enterprise: „Operational risk is as old as the banking industry”, wrote the Fitch rating agency, „and, until now, this industry has just come to the point of defining it”. The Fitch report added that „in rating banks, Fitch will look for evidence for a clearly articulated definition of operational risk examining the quality of organizational structures and operational risk culture, the efforts put into identifying and assessing key risks as well as the efforts in connection to collecting data, and, in addition, will look for a general approach to quantifying operational risk management. „

According to Moody’s, „operational risk management improves the quality and predictability of earnings and thus strenghtens the competitive position of the bank and facilitates its long-term survival” (Moody’s Investor’s Service, 2003). Another comment of Moody’s analysis states that „The control of operational risk is closely connected to good management, which implies a committment to watchfulllness and to constant improvement. It is a valuable activity with direct or indirect implications on performance. For this reason it must become an important point of any business. As operational risk affects credit rating, prices and organizational reputation, analysts will increasingly use it in scoring managament, strategy and long-term expected returns.” In conclusion, it can be stated that rating agencies are currently very interested on how financial institutions approach their operational risk. Actually, it is very probable that the way in which financial institutions manage their operational risk influences the way they will be evaluated by rating agencies.

As the level of complexity and trasparence are affected due to technological developments, in the banking industry, the Basel Committee (2003) draws attention that the emergence of new forms of operational risk requires immediate attention:


  • If not properly controlled, the use of automated technology can, with a high level of probability, transform the error risk of manual processing to system risks, as an increasingly larger confidence is granted to integrated global systems.

  • A growth in electronic commerce brings potential risks (e.g internal and external fraud and problems regarding security systems) which have not been fully understood yet.

  • Large scale purchases, mergers, divisions and consolidations test the viability of new or recently intergrated systems.

  • The surge in retail banking creates the need for maintaining internal control and back-up systems at high levels

  • Banks use hedging strategies (e.g.: accepting collateral, credit derivatives, IT networks, infrastructure security) in order to optimize their exposure. These strategies can result however in other forms of risk (legal, compliance risks).

The above examples can be grouped in the „operational risk” category. The appearance of the types of risk presented above by the Basel Committee is the starting point for the high pressure registered by many major financial institutions. Central authorities in different countries have reported since 2003 the fact that many banks are already creating the first procedures in the operational risk framework. It can be concluded that a coherent and solid operational risk management framework is based on necessity as well as a superior value-promoting management.




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