Problems of Management in The 21st Century, Vol. 6, 2013

Problems of Management in the 21st Century, ISSN 2029-6932 VOLUME 6, 2013
CONTEMPORARY ISSUES IN
MANAGEMENT – 2013
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Editorial Board
Prof., Dr. Constantin Bratianu, Academy of Economic Studies, Romania
Assoc. Prof., Dr. Tsai-Hsin Chu, National Chiayi University, Taiwan
Assoc. Prof., Dr. Dana Egerova, University of West Bohemia, Czech Republic
Prof., Dr. Ivars Muzis, Riga Teacher Training and Educational Management Academy, Latvia
Prof., Dr. Stephen Nzuve, University of Nairobi, Kenya
Asst. Prof., Dr. Ivona Orzea, Academy of Economic Studies, Romania
Prof., Dr. Sonia Teresinha de Sousa Penin, University of Sao Paulo, Brazil
Prof., Dr. Chris Rensleigh, University of Johannesburg, South Africa
Asst. Prof., Dr. Nikhil Chandra Shil, American International University, Bangladesh
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problems
of Management
in the 21st century
Volume 6, 2013
Contents 3
Editorial
INTEGRATED TALENT MANAGEMENT - A CHALLENGE OR NECESSITY FOR

PRESENT MANAGEMENT
Dana Egerová ........................................................................................................... 4
Articles
OPTIMIZATION OF QUALITY, ENVIRONMENTAL AND OCCUPATIONAL RISK BY

THE SYSTEM AND TECHNOLOGICAL SOLUTIONS
Tatiana Karkoszka ...................................................................................................... 7
AN IMPACT OF RESOURCE PORTFOLIO ON NETWORKING TENDENCIES –

EVIDENCE FROM BIOENERGY BUSINESS
Kirsi Kokkonen, Matti Lehtovaara, Petri Rousku, Tuomo Kässi ................................................. 15
PHARMACEUTICAL MARKET AND OPPORTUNITY IN THE 21ST CENTURY FOR

GENERIC DRUGS: A BRAZILIAN CASE STUDY OF OLANZAPINE
Jorge Lima de Magalhães, Luc Quoniam, Núbia Boechat ........................................................ 31
SIGNIFICANCE OF DATABASE MARKETING IN THE PROCESS OF TARGET SEGMENTS

IDENTIFICATION AND SERVICE
Joanna Łodziana-Grabowska .......................................................................................... 40
CAUSES OF INDUSTRIAL DISPUTE: A CASE OF THE GARMENT FACTORIES AT

THE ATHI-RIVER EXPORT PROCESSING ZONES IN KENYA
Stephen N. M. Nzuve, Lucy M. Kiilu ............................................................................... 48
AN ASSESSMENT OF ISLAMIC WORK ETHICS OF EMPLOYEES IN

ORGANIZATIONS: INSIGHTS FROM THE UNITED ARAB EMIRATES
Shagufta Sarwar, James Baba Abugre ............................................................................... 60
Information
INSTRUCTIONS FOR AUTHORS .............................................................................. 73
PROBLEMS OF PSYCHOLOGY IN THE 21st CENTURY ............................................... 75
Quality Issues and Insights IN THE 21st CENTURY ......................................... 76
INFORMATION & COMMUNICATION TECHNOLOGY IN NATURAL SCIENCE

EDUCATION – 2013 ............................................................................................... 77
PROBLEMS OF MANAGEMENT IN THE 21st CENTURY .............................................. 78
gamtamokslinis ugdymas / natural science education............................... 79
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4
Integrated Talent Management – A
challenge OR Necessity FOR PRESENT
management
Dana Egerová
University of West Bohemia, Czech Republic
The current highly competitive and unstable business environment, the requirements of
the knowledge society and the development of new technologies is a reality which presents new
challenges directed at various areas of the society, including human resources, to organizations
and their management. It is becoming increasingly evident that the quality of human capital and
practical implementation of human resources development are ones of the decisive factors of
organizations´ success and competitiveness and a key source that considerably determines the
operation and economic performance of organizations.
The importance of the talent management concept for organizations is growing as a
consequence of the ongoing globalization of the labour market and as a result of changes in the
structure of labour force, particularly due to the aging and inadequate qualification structure of
workforce on the one hand, and growing demands on the knowledge and skills of employees
and the need for skilled labour on the other hand. Business practice but also studies carried out
in the given area (CIPD, 2009, Deloitte, 2010) confirms that the talent management is becom-
ing one of the main tools of business competitiveness. Above all, the organizations that are able
to recruit, develop and retain existing but also future talents will gain a competitive advantage
over the others. Talented employees are those who significantly contribute to the implementa-
tion of the strategy and objectives of an organization and thus to the success and prosperity of
every organization.
The key questions in connection with the talent management concept are “Who is a
talent?” and “What is talent?” The term talent in the organizational concept is used for high-
quality staff or employees who are vital for company performance. Talent is also understood
as a source of competitive advantage. To approach and define talent in business practice, in-
clusive or exclusive approaches are used. An inclusive approach is based on the fact that every
single person is perceived as a talent that contributes to the success of an organization and is
a source of its competitive advantage. An exclusive approach then associates talent with only
high performing individuals or high potential employees. It is necessary to realize that talent
management in any organization is determined by the fact how such an organization defines
the concept of talent and what approach it adopts. A clear definition of the talent concept that
is accepted by all involved participants is the initial and absolutely essential step for successful
talent management in every organization.
Talent management is a multi-faceted concept that is viewed differently in theory and
practice. There are different definitions and different approaches to talent management in pro-
fessional literature but also in organizations. Talent management can be understood as a phi-
losophy of human resources management, as an organizational mindset, as a discipline with a
specific subject and methods of research or as a set of HR policies, processes and programmes
implemented in a particular organization. The concept of talent management in organizations
often reflects their specific needs.
At present there is no uniform definition of the term. Lewis, Heckman (2006) defined the
following three concepts of talent management definitions. Talent management as a set of per-
sonnel activities; talent management in this concept is, to a greater or lesser extent, perceived
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as a synonym for human resources management. Talent management coupled with the creation 5
of databases of talents (talent pools) and talent management focused on the development of
competencies through managing talents.
Generally, the definitions of talent management can be distinguished in terms of a broad-
er or narrower concept. In the narrower sense, talent management is primarily focused on in-
dividual processes or sub-groups of employees. In the broader sense, talent management is
viewed as a complex, integrated and holistic system that integrates all the components of talent
management.
As mentioned above, present environment brings about a number of changes to which
organizations must react adequately. It follows that management of organizations, inter alia,
need to rethink approaches and strategies, which have previously been applied in various areas
of organizational life, and select those that will enable them to cope with the new economic
reality. For talent management, this means a shift from the traditional, often unsystematic ap-
proach to new approaches that can reflect the changed reality.
Most of the currently used processes of talent management were created almost half a
century ago, and now the time has come to create a new model (Cappelli, 2008). According to a
study conducted by Deloitte (2010), only 20% of executives and specialists in human resources
questioned said they had carefully worked-out talent management programmes; on the contrary,
nearly 40% said that it was necessary to make partial or radical changes in those programmes.
Most respondents also stated that due to the current economic situation it was necessary to re-
think strategies for talent management. Particularly approaches that are mainly focused only on
partial aspects of the given concept and do not sufficiently emphasize the integrated approach
to talent management are currently applied in organizations as far as talent management is con-
cerned. Talent management is not integrated in these organizations in any way or it is mainly
used at the basic level provided that the traditional approaches and practices of talent manage-
ment are applied within an organization. However, in this context it is necessary to realize that
this concept may partially and temporarily suit its purpose, generally, however, this level of
integration does not bring a real value to the organization. (Silzer, Dowell, 2010).
One of the new approaches is integrated talent management. Integrated talent manage-
ment can be defined as an innovative and holistic approach to talent management, which en-
ables an organization to adequately and flexibly respond to changes in the business environ-
ment. The concept of integrated talent management integrates the business strategy, the human
resources strategy, talent management processes and organizational culture (Avedon, Scholes,
p. 80 in Silzer, Dowell, 2010).
Integrating talent management with the strategy of an organization is one of the prereq-
uisites of the effective talent management and the initial step in formulating the talent manage-
ment strategy. The interconnection of the business strategy with the talent management strategy
makes it possible to identify talent management processes that are crucial for achieving strate-
gic objectives of an organization.
The talent management strategy needs to be also interconnected with the human re-
sources strategy. It is necessary that various initiatives of talent management and HR activities,
processes and systems are interconnected at least at the minimum level. However, it is most
effective if they are fully integrated. The integration of the talent management strategy with the
HR strategy can be carried out in different ways from the use of philosophy and principles that
are the basis of human resources strategy through the use of various HR systems to the use of
competency models.
Integration of talent management processes means that these processes do not run as in-
dependent and isolated processes, but as interconnected and related processes, when the output
of one process is the input of the following one.
Integration with the organizational culture means that the values in talent management
processes are consistent with the values of the organizational culture. A culture that supports
processes and policies of talent management is the precondition for its successful integration.
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6 Another important condition for the talent management effectiveness is also the level of manag-
ers´ engagement and support in creating talent strategies. What importance managers attach to
talents as a strategic value for the organization also plays a significant role.
Integration at all the above-mentioned levels is a prerequisite and, at the same time, ne-
cessity for the successful implementation and application of the integrated talent management
concept. From the procedural point of view, it means their interconnection, mutual support and
reinforcement. It is necessary to realize that talent management strategies will vary, especially
depending on the business strategy, the life cycle of a company, but also on the degree of en-
gagement of company management. The organizational culture also plays an important role.
In conclusion, let us add that talent management is not only the HR processes and activi-
ties, but it is also a way of thinking and decision making, in which the holistic and integrated
approaches are used in order to gain a real competitive advantage for an organization and its
employees. Therefore, we should approach talent management as one of the key assets of orga-
nizations´ competitiveness and also as one of their core values.
I believe that this current issue will bring you not only new and interesting findings, but
also ideas and inspiration for your further professional activities.
References
Cappelli, P. (2008). Talent management for the twenty first century. Harvard Business Review, 86 (3),
74-81.
CIPD. The war on Talent? Talent management under threat in uncertain times. Part 1 (2009). Re-
trieved 28/02/2013, from http://www.cipd.co.uk/NR/rdonlyres/DFC760F8-F37C-4548-9470-
5154073FE4EC/0/warontalent.pdf
Deloitte, Talent Edge 2020: Blueprints for the new normal. (2010). Retrieved 29/02/2013, from http://
www.Deloitte.com/us/talent
Egerová, D. (2012). Integrovaný talent management - nové paradigma pro talent management. Trendy v
podnikání, 2 (2), 8-13.
Lewis, R. E., & Heckman, R. J. (2006). Talent Management: A critical review. Human Resource Manage-
ment Review, 16 (2), 139–154.
Silzer, R., Dowell, B. E. (Eds). (2010). Strategy-Driven Talent Management. A Leadership Imperative.
San Francisco: John Wiley & Sons.
Received: March 05, 2013 Accepted: March 29, 2013
Dana Egerová Ph.D., Assistant Professor, University of West Bohemia, Husova 11,306 14,
Pilsen, Czech Republic.
Website: http://fek.zcu.cz/osobni.php?IDWorker=77
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OPTIMIZATION OF QUALITY, 7
ENVIRONMENTAL and occupational

RISK BY THE SYSTEM AND
TECHNOLOGICAL SOLUTIONS
Tatiana Karkoszka
Silesian University of Technology, Gliwice, Poland
Abstract
The purpose of the research has been preparation of the univocal methodology of integrated risk man-
agement and usage of the system and technological solutions as a manner of quality, environmental
and occupational risk optimization. The methodology used for the analysis has included a proposition
of system, technological and cost aspects of integrated risk management. Particularly the methodology
management should be based on the optimization of the risk and realized as the integrated operational
control as well as on the monitoring of integrated system risk. Findings of the research, which have been
conducted on the basis of the prepared methodology, are as follows: one of the manners of the integrated
risk reduction is application of the univocal method of integrated risk estimation, which should be specific
for the organization. Results of the integrated analysis should be a starting point for the minimization
of the integrated risk by assuring processes continuity both on organizational and technological level.
Practical implication, confirmed in the chosen production organization, can be applied in case of any
organization, which wants to manage the integrated risk in the complex meaning of clients’ requirements,
natural environment protection and safety conditions assurance.
Key words: environment, integration, occupational safety, quality, risk management.
Introduction
Nowadays the system approach to management creates in the organization the opportu-
nity to comply with clients’, workers’ and interested sides’ requirements being the best and ac-
cepted by all of the stakeholders manner of aims realization. The essence of system quality, en-
vironmental and occupational safety management is the conception of continuous improvement
of all of the realized processes in the meaning of their conformity, effectiveness and efficiency.
The main aim of the systems is the identification of the real and potential threats and the preven-
tion of their effects occurrence. Therefore it’s possible to integrate the requirements connected
with quality assurance, minimization of the environmental aspects and impacts and elimination
of occupational threats by the implementation of the integrated management system described
by exclusively one: politics, manner of aims determination and supervision of documentation,
procedure of corrective and preventive actions, system of audits and trainings.
However practice of the organizations confirms that the integration of management sys-
tems is limited to the general system solutions. Processes which are orientated towards the
direct realization of quality, environmental and occupational aims remain in the competences of
different organizational units. Very often the reason of the non-integration of the management
systems is the absence of the coherence in operational criterion.
Quality management uses tools and methods of data gathering and processing, which -
when used in the comprehensive way - allow for realize the processes in the supervised way.
From the point of view of risk assessment the methods of the key importance are expert (e.g.
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Tatiana KARKOSZKA. Optimization of Quality, Environmental and Occupational Risk by the System and Technological Solutions
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Volume 6, 2013
8 FMEA) and statistical methods strongly aided by traditional quality management tools. In the
context of environmental management, according to the aim of minimization and elimination of
negative environmental impact, risk assessment methods are used for effectiveness evaluation
of natural environment protection. They allow for the verification of the planed pro-ecological
activities both in the system and the operational meaning, and - as the effect - for monitoring
and minimization of ecological risk connected with occurrence and significance of environ-
mental aspects and impacts. It is possible to differentiate three groups of environmental risk
assessment methods. These are methods resulting from legal requirements (e.g. safety report of
Seveso II directive), environmental standards of utility character (e.g. assessment of environ-
mental activity effects) as well as of the direct need of determination of the probability of envi-
ronmental impacts occurrence their significance for the environment. Occupational health and
safety management uses methods of occupational risk assessment, which allow for minimiza-
tion of the risk of occupational illnesses and accidents at work. Both quantitative and qualitative
methods are used in the organizations, but the widespread methods are: Risk Score, HAZOP,
FTA and PHA.
Thus the identification of the threats, their assessment and prevention of the effects is
usually realized in the specific way even in the integrated management system.
Methodology of Research
Research Instrument
Both the limited possibilities of standardized systems integration and the turbulent char-
acter of internal and external conditions of organizations’ functioning are favorable for new
trends in the processes optimization. In this context it seems to be necessary to seek a tool,
which would allow to fulfill all the integrated legal requirements by elimination the processes’
threats and their effects perceptible by all the stakeholders. As a manner of improvement solu-
tion a risk management has been proposed.
The risk management should have a system character by concerning all the realized pro-
cesses, involving all the employees, using all the resources and being the subject of optimiza-
tion as the effect of conformity assessment, monitoring, measurements and analyzes.
Research Design
On all of the levels of processes realized in any organization the knowledge of the risk
describing those processes minimizes the probability of non-fulfillment of their aims and, if it
is necessary, it shows the points of indispensable optimization. It can be accepted that the risk
management based univocally on the “process approach” relates to three levels of organization
activities: management system processes, operational processes and tactical processes (Figure
1).
The ground of risk management must be always risk assessment. The identified threats
are the subject to analyzes, estimation of risk level as well as to assessment of risk acceptabil-
ity. The applied risk estimation method must be dependent on the process defined earlier as
the system or operational one. The results of risk acceptability assessment are the basis of risk
optimization, which can be realized as the system or technological one.
Selection of the risk assessment method must be dependent on its tactical, operational
and system range and its appliance should assure objective results. Therefore in the proposed
risk estimation usage of both quantitative and qualitative methods is required.
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Risk 9
assessment
Management system processes
Unknown Known Risk

Operational processes
risk risk
optimization
Tactical processes
Figure 1: Scheme of the risk management based on the „process approach” on

the system, operational and tactical level of organization activities.
Character of tactical risk, in most cases, can be described as objective one. Therefore
algorithm of integrated risk assessment is summarized by calculation of the Integrated Risk
Ratio (IRR) value, which reflects the probability of incompatibilities causes and significance of
their effects. Probability of occurrence of causes of nonconformities, environmental aspects and
occupational safety threats as well as significance of nonconformities, environmental aspects
and occupational safety threats effects are expressed in the ten-step scale. Integrated Risk Ratio
is constituted by the sum of risk ratios in the quality, environmental and occupational safety
range. Definition of the operational processes described by IRR of very high values seems to be
a starting point to their optimization.
The nature of the risk in the integrated management system is usually subjective. There-
fore in reality it’s difficult to evaluate it by direct measurement, but it is possible to implement
the system management and assessment of the risk. The system has a character of the require-
ments based on the quality, environmental and occupational criterion and integrated by the
risk and can be applied by any organization independently on its size and kind of the realized
processes effective planning, implementation and improvement of all activities minimizing the
risk of the processes. The basis of system risk evaluation is giving the answers for the risk ques-
tions classified in five main categories of the system risk. Level of system and operational risk
acceptance is determined by the organization.
The accepted by the organization clear method of risk identification and evaluation cre-
ates the grounds for the manner of risk management. According to the proposed methodology
management should be based on the optimization of the risk and realized as the integrated op-
erational control as well as monitoring of integrated system risk.
The integrated operational control includes the definition of the operational criteria and
operational attributes. Based on the risk assessment and using the Integrated Risk Ratio activ-
ity allows for identification of the key incompatibilities creating the main process’ risk value.
Scheme of the feedback realized as the operational control based on quality, environmental
criterion occupational safety has been shown on Figure 2.
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10 Operational key Operational key

criterion identification attributes identification
Incompatibilities
Operational Defects Risk

Products
processes assessment
environmental impacts
effects of occupational
Operational control safety threats
Figure 2: Scheme of operational control based on quality, environmental and

occupational safety criterion.
The range of system monitoring, being a manner of system risk management, is dependent
on the risk categories and subcategories defined by the organization. Each category of the risk is
characterized by the significance of the realized processes for the minimization of the system risk.
Main categories of the system risk monitoring used in the analyzed organization has been shown on
Figure 3.
Figure 3: Scheme of main categories of system risk monitoring.
Sample of Research
The integrated optimization of quality, environmental and occupational risk was car-
ried out in chosen organization with usage of the designed research methodology based on
the integrated risk assessment and operational control as well as integrated audit and system
monitoring.
Main process realized by the organization, being the subject of analyzes, is DPF pro-
duction. Diesel particulate filter (DPF) is now treated as the best outside engine method of the
limitation of particulates emission used in the exhaust system of high-pressure engines. The
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particulate filters produced in the analyzed organization are round and as the right filter mate- 11
rial silicon carbonate is used. The production process consists of: preparation of the mixture, its
kneading and molding, plugging holes in the segments, firing the segments, pasting and cutting
the blocks and finally firing and drying the filters.
The designed research methodology of risk management was used in the described pro-
duction process. Optimization of quality, environmental and occupational risk was realized
both by the technological and system solution. The application of the re-use of the production
wastes was aiming at the elimination of the environmental effects and production costs and the
system operational control aimed at minimizing the probability of incompatibilities occurrence
in the operations realized in the supervised conditions.
Results of Research
On the operational level during the integrated risk estimation the usage of Integrated
Risk Ratio was the basis for classification of the processes dependently on the risk level and
undertaking the activities aiming at the risk optimization (Table 1).
Table 1. Specification of the processes‘IRR values before and after the optimi-
zation.

Process and minimal level of IRR assur-
IRR value and risk of processes depending on it
ing their acceptance
Acceptable
IRR = 0 Acceptable if the defined Unacceptable
IRRA = 200 conditions

are fulfilled
Preparation of the mixture IRR2 = 174 IRR1 = 248

Molding IRR2 = 162 IRR1 = 279
Plugging holes in the segments IRR2 = 202 IRR1 = 202
Firing the segments IRR1 = 178
Pasting and cutting the blocks IRR1 = 84
Firing and drying the filters IRR1 = 182
Specification of the costs of production with and without the application of the techno-
logical optimizing solutions has been shown in Table 2.
Table 2. Specification of the production costs with and without minimizing risk
solutions.
The average cost of materials for the mixture [€]

Process
Lot of material Twenty-four hours Month Year
With risk
1 160 290 115 5 802 312 69 627 744
Minimizing solutions
Without risk minimizing
1 200 301 428 6 028 572 72 342 864
solutions
Differences 40 11 313 226 260 2 715 120
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12 The results of the system monitoring realized as the element of risk system and tradi-
tional system auditing in the analyzed organization have been shown in Table 3.
Table 3. Specification of the results of the system monitoring realized in the

organization and the minimal values of processes’ efficiency on the
improvement levels of the chosen range of system monitoring as an
example as well as the traditional system auditing.

Minimal values of risk system efficiency
and effects of system monitoring and auditing
Risk system
category Degree of requirements’ fulfilment [%] Incompatibilities
in the integrated
Year 2011 Year 2012 Level 0 Level 1 system [number]
Management commit-
65 68 65 70 0
ment
Resource assurance 70 72 70 75 1
Process realization
72 75 75 80 3
- operational control
Measurement, analysis,
74 78 75 80 2
monitoring
Discussion
By the lowest values of the Integrated Risk Ratio (IRR1) processes of firing the seg-
ments, basting and cutting the blocks were characterized. The highest values of the IRR1 were
calculated for preparation of the mixture, its molding and plugging the holes in the segments.
The minimal level of the integrated risk ratio to find a risk as acceptable one the organization
defined on the basis on its own experience and according to the accepted ALARP rule. The
optimization of quality, environmental and occupational risk means making the risk as low as
reasonably practicable. It is not the smallest one, but the optimal one with the consideration of
risk minimization costs. As a range of risk acceptability the organization indicated IRRA of 200
value. Under the assumed acceptability rule all of the processes being described by the IRR1
values higher than the acceptable one were qualified to risk optimization processes.
Analyzes of the plugging holes in the segments revealed the instability of the process
being a result of the human influence on conformity assurance. In this case the use of the op-
erational control proved to be sufficient in the maintenance of the conditions of the supervised
risk. The determined level of IRR1 of 202 was accepted if the organizational requirement of
control is fulfilled.
During preparation of the mixture and molding processes, due to the environmental and
financial reasons, it’s impossible to make the calculated risk acceptable. Therefore the improve-
ment activities based on the technological solution were undertaken. This kind of risk optimiza-
tion aimed at prevention of the cause of incompatibility by the elimination of a threat, which the
incompatibility creates. As the technological optimization manner the organization proposed
the application of the crumbling machine processing the waste material qualified to the recy-
cling. Such solution enabled for re-usage of the waste of molding process in the mixture prepa-
ration. Thus both the quantity of the produced waste creating the environmental risk (Table 1)
and costs of the mixture (Table 2), defined as IRR2 , were reduced.
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In the range of the system processes the application of the worked out methodology of 13
system monitoring in the analyzed organization confirmed both the correctness of the imple-
mentation of the proposed risk system and its improvement from the moment of its initiation
(Table 3).
System monitoring in the analyzed range of the risk management system proved the
“zero level” - the worst one of system improvement. Traditionally realized integrated auditing
reflected the minimal amount of incompatibilities. The used system analyzes confirmed on one
hand the deficiency of the method being in the common practice, on the other hand the imper-
fection of the realized risk system processes and necessity of their improvement.
Conclusions
The integrated optimization of quality, environmental and occupational safety risk can
be realized both by the system and technological solutions. In practice it requires the applica-
tion of the univocal methods of different types of risk management. It should include the iden-
tification of different types of risk, classification of them, usage of the proper risk assessment
methods, acceptability evaluation and undertaking the minimization activities.
In the author’s methodology one has proposed the classification of operational and sys-
tem risk and the adequate methods of the risk assessment. On the operational level the risk
assessment is based on the quantitative methods using the Integrated Risk Ratio. In case of the
system level one should apply the method of the risk monitoring. The acceptable value of the
risk on the operational level, defined by the organization, should be reduced while improving
the processes. The acceptable level of the system risk, appropriate for the category and depen-
dent on its significance for the risk minimization, should be higher with the change of the risk
system maturity.
Definition of the unacceptable risk values, both the system and the operational ones,
should be a starting point for the risk minimization actions. Those activities can have the char-
acter of risk management system, the realization of processes in the supervised conditions dur-
ing the operational control or, in the extreme circumstances, technological changes.
Practical implementation of the proposed risk management methodology in the chosen
organization first of all has confirmed both its originality and effectiveness. Furthermore it has
indicated the system and technological possibilities of integrated minimization of quality, envi-
ronmental and occupational safety risk with the consideration of the costs of the optimization.
References
Bouder, F., Slavin, D., & Löfstedt, R. E. (2007). A New Framework for Risk Management. London:
Earthscan.
Ejdys, J. (2011). Model of improvement of standardized management systems based on the knowledge.
Białystok: Technical University of Białystok.
Karkoszka, T. (2011). Estimation of processes realization risk as a manner of safety management
in integrated systems. International Journal of Quality Research, 5, 131-141.
Karkoszka, T., & Sokovic, M. (2012). Integrated risk estimation of metal insert gas (MIG) and metal ac-
tive gas (MAG) welding processes. Metallurgy, 51, 179-182.
Kendall, R. (2000). Risk Management for Executives. Warsaw: Liber.
Kramer, M., Brauweiler, J., & Nowak, Z. (2005). International Environmental Management. Tools and
management systems. Warsaw: C.H. Beck.
Matuszak-Flejszman, A. (2010). Integration of management systems. In: Standardized management sys-
tems. Poznań: Economics University.
McDermott, R. E., Mikulak, R. J., & Beauregard, M. R. (2000). The Basis of FMEA. New York: CRC
Press.
Staniec, I., & Zawiła-Niedźwiecki, J. (2008). Operational risk management. Warsaw: C.H. Beck.
Shewhart, W. A. (1986). Statistical method from the point of view of quality control. Mineola: Dover
Publications.
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14
Advised by Danuta Szewieczek, Silesian University of Technology, Poland
Received: February 02, 2013 Accepted: March 29, 2013
Tatiana Karkoszka Ph.D., Eng., Assistant Professor, Institute of Engineering Materials and Biomateri-
als, Silesian University of Technology, Konarskiego 18a Street, 44-100 Gliwice,
Poland.
Website: http://www.polsl.pl
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AN IMPACT OF RESOURCE PORTFOLIO 15
ON NETWORKING TENDENCIES –
EVIDENCE FROM BIOENERGY BUSINESS
Kirsi Kokkonen, Matti Lehtovaara, Petri Rousku, Tuomo Kässi

Lappeenranta University of Technology, Finland
E-mail: [email protected], [email protected],
[email protected], [email protected]
Abstract
Indisputably, networking offers many benefits in business. However, at the same time, it may also
restrict the freedom of its actors. The aim of the paper is to complement the knowledge on the benefits
and delimitations of networking by a two-step process. Firstly, the actors’ aims for independency and
associability in their business relations are examined and based on these aims, different tendencies for
networking are found. Furthermore, the paper discusses the resource portfolios of actors, and searches
linkages between the actors’ resources and their networking tendencies. The research question of the
paper is: “How the resource portfolio of an actor correlates with its tendency to form networks?” Case
study research is used as the research strategy. A group of Finnish biomass heating enterprises is studied
as the case, and four groups with different networking tendencies are recognized and further assessed.
The results provide evidence that the actors tend to form different networks which differ from each other
by the power relations and the openness of sharing social capital. In addition, it is noted that the actors
differ in their resource portfolios. That creates dissimilar motives for cooperation and networking which
are well-reflected with the four networking types found in the study.
Key words: associability, bioenergy, independency,networking, resources.

Introduction
There is a global concern about increasing greenhouse gas emissions. The amount of
traditional fossil fuels is exhausting, and their prices are continuously increasing. As a conse-
quence, the use of renewable primary energy sources and improved overall energy efficiency
play an important role in future energy production and consumption (Cowie & Gardner, 2007;
Tekes, 2008). One of the most promising options of renewable energy is the utilization of differ-
ent biomasses. The bioenergy business offers new business opportunities increasingly, to exist-
ing actors as well as to the new ones. In addition, as in several other fields of business, also the
significance of networking is becoming more evident in the bioenergy production solutions.
Links with external actors may be beneficial to a firm in a variety of ways. Networks
offer access to the resources and capabilities of other actors (Chetty & Wilson, 2003), and co-
operative activities can thus provide a valuable source of support and information as well as
means of sharing resources (Fuller-Love & Thomas, 2004). Especially, emerging actors usually
need external networks to provide a variety of resources, capabilities or legitimacy which they
need for successful survival, but which they cannot produce internally (Hite & Hesterly, 2001;
Mei & Nie, 2008).
However, even sharing resources is often vital for firms, they should also avoid to be-
come too entangled in restrictive relationships (Staber, 2005), but maintain their freedom to
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Kirsi KOKKONEN, Matti LEHTOVAARA, Petri ROUSKU, Tuomo KÄSSI. An Impact of Resource Portfolio on Networking Tendencies
– Evidence from Bioenergy Business
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16 maneuver, bargain and even attack in order to secure their own interests. In other words, firms
should be embedded in their relationships (Granovetter, 1985) and independent at the same
time (De Wit & Meyer, 2005). How different firms balance between these two is an interest-
ing field of study.
Kay (1993) argues that to understand the interaction between firms, it is highly im-
portant to gain insight into their relative power positions. Power is the ability to influence the
other’s behavior, and the one who has more power has also access to more resources, such as
higher esteem, praise and positive attention. Since the resources of actors are rarely equal, the
outcome of any particular exchange depends on the relative power of the participants (Davern,
1997; Belaya & Hanf, 2009).
Relationships can be examined in terms of mutual dependence between the parties, and
power can be located at the interdependencies among the actors embedded in these relation-
ships (Pfeffer & Salancik, 1978; Belaya & Hanf, 2009). De Wit and Meyer (2005) state that
one way of measuring power in a relationship is to make a distinction between the closeness
of the relationship (loose vis-à-vis tight) and the distribution of power between the two parties
involved (balanced vis-à-vis unbalanced). This leads to a categorization of four specific types
of inter-firm relationships which are illustrated in Figure 1.
Figure 1: Relative power positions in inter-organizational relationships.

(De Wit & Meyer, 2005 (adapted from Ruigrok & van Tulder, 1995)).
A. Mutual independence: both organizations have full freedom to act according to their
own objectives. Neither organization has significant influence over the other.
B. Unbalanced independence: a loose relationship, where Firm A has more power than
Firm B, i.e. Firm A is more independent. Firm A’s power gives it more freedom to act,
while Firm B can be influenced by the powerful Firm A.
C. Mutual dependence (interdependence): the organizations have a tight relationship, in

which they are mutually dependent on each other, having an equal amount of impact on
their counterpart.
D. Unbalanced dependence: asymmetrical dependence, where one party will be able to

dominate the other. The organization with the lower level of dependence will have
more freedom to maneuver and impose its conditions than its counterpart. (De Wit and
Meyer, 2005)
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In their studies Hite and Hesterly (2001) and Vanhaverbeke (2001) suggest that social 17
relationships and personal ties play a crucial role in developing business networks, especially
those of small and medium-sized enterprises. Building social relationships with the surround-
ing parties is a vital networking capability for the firms. A social network can offer a firm busi-
ness growth and new business opportunities. It is seen that with the right contacts for example
the level of uncertainty can be diminished, the risks reduced and critical market information
provided. Personal relationships also provide security and trust (Pikka, 2007). Social networks
help managers to recognize the knowledge possessed by different actors in the network and to
understand the relevance of applying that information (Westerlund & Svahn, 2008). Through
the actors’ social networks, firms have opportunities to update their knowledge in dynamically
changing markets and to detect future developments in the industry (Vanhaverbeke, 2001).
A social network will not be built by its own but it requires that the actors in the net-
work collectively enhance the network’s social capital. Social capital is the sum of actual and
potential resources that are embedded in, available through and derived from the network by
its actors (Nahapiet & Ghoshal, 1998; Leana & Pil, 2006). The outcome of the opportunity to
engage in social ties is mediated by associability and trust (Leana and Van Buren, 1999; Pearse,
2009). Associability is seen to have two components: an affective component, which means the
willingness to subordinate individual goals to collective goals, and a skill-based component,
which refers to the ability to coordinate activities according to set goals (Van Buren, 2008). It
is confessed that individuals differ in terms of associability (Van Buren, 2008; Wagner, 1995)
which means that every social tie and network is always to some degree dependent on the social
assets of its participants.
As stated above, partners are often vital for firms, because of the need for sharing re-
sources. However, the resources of actors are rarely equal, which set the partners in different
power positions. These power positions of partners may lead to rather different levels of tight-
ness and independency in relationships. Furthermore, it is a confessed fact that a network can-
not be fully developed without an active flow of social capital between the actors. However,
level of associability differs remarkably between firms. These aims related to independency and
associability create certain tendencies for networking and furthermore, for different network
types in an industrial field.
The aim of the paper is to provide evidence on the different solutions the firms seem to
have with balancing between the objectives for independency and embeddedness in their busi-
ness relations. We aim to complement this knowledge with a two-step process. First, we look at
the two aspects mentioned above, the actors’ independency and associability, and examine the
different networking tendencies based on them. Secondly, in order to examine the motives for
networking in a fast-evolving business area, we take a look at the resource-bases of the actors,
and search linkages between the actors’ resources and their networking tendencies. The research
question of the paper is: “How the resource portfolio of an actor correlates with its tendency to
form networks?” Case study research (Creswell, 2007; Eriksson & Kovalainen, 2008) is used as
the research strategy. A group of Finnish biomass heating entrepreneurs is studied as the case.
The case is considered to represent well a group of actors in a fast-evolving business area.
The study confirms that each actor has a certain level of independency and associability,
and based on them, a certain tendency to form networks. These tendencies lead to formation
of different network types. Among the studied enterprises in the Finnish biomass heating field,
four groups with different networking tendencies are recognized and further assessed. These
groups are: 1) actors in local networks of equal partners, 2) actors with strong relationships with
heating plant manufacturers, 3) network developers/lead firms, and 4) independent actors.
In addition, we illustrate that the actors differ remarkably in their bases of resources,
and also that different aspects are highlighted in their resource portfolios. This creates different
motives for cooperation and networking, which are reflected well in the four networking types
found in the study. On the basis of the analysis, correlations between the actors’ resources and
their tendencies to form certain kinds of networks can be found.
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18 Methodology of Research
The empirical study was conducted as a case study. Many authors state that case study
is not a methodological choice, but a choice of what is to be studied (Eisenhardt, 1989). In
case study research, the central feature is the construction of ‘the case’ or ‘cases’; the research
questions are always related to the understanding and solving of the case: what the case is about
and what can be learned by studying it (Eriksson & Kovalainen, 2008).
Creswell (2007) sees a case study as an exploration of a bounded system which can be
defined in terms of time and place, over time and through detailed, in-depth data collection,
involving multiple sources of information which are rich in context. Case studies thus typically
combine several data collection methods, such as archives, interviews, questionnaires and
observations (Barton Cunningham, 1997; Eisenhardt, 1989).
Case research is particularly welcome in new situations where only little is known about
the studied phenomenon, and in situations where current theories seem inadequate (Eisenhardt,
1989; Yin, 2009). According to Halinen and Törnroos (2005) the advantage of case studies over
other research strategies is that case research allows the study of a contemporary phenomenon
which is difficult to separate from its context, but which is necessary to study within the context
to understand the dynamics involved in the setting.
The research data consists of 52 semi-structured theme interviews: 26 of them with
biomass heating entrepreneurs and 26 with the biomass heating system manufacturers. Mainly
the data concerning the biomass heating entrepreneurs is utilized in this study, but the main ideas
of the interviews with system manufacturers are taken into account. The group of the chosen 26
heating enterprises consists of heating plants in different parts of Finland, with different plant
sizes and ownership bases.
Heat energy production is mainly considered as a local activity. Wood chips, which are
the main fuel in the plants, are typically procured in the surrounding area. In addition, the
plants may use supplementary fuels, such as peat, agrobiomass and oil. The heating enterprise
may take care of all the steps from fuel procurement to the delivery of heat to real estates or
the district heating network, as well as the maintenance of the plant, or it may concentrate on
the actual business activities of the plant, or something between these (Okkonen & Suhonen,
2010). Typically, a heating entrepreneur or enterprise is a single entrepreneur, an entrepreneur
consortium, a company or a cooperative (Okkonen & Suhonen, 2010; TTS, 2010). In this study,
the terms ‘heating entrepreneur’ and ‘heating enterprise’ are used interchangeably, referring
to all these possible forms of ownership. In Finland, the number of heating plants operated
by heating entrepreneurs was 455 in 2009. The number of heating enterprises was a bit lower,
because some enterprises operated in several heating plants. The average size of the plants was
550kW, and 90 percent of the solid fuel used in the plants was wood chips (TTS, 2010). As in
many other countries, the possibilities for small-scale combined heat and power production
(CHP) have been discussed widely in Finland as well, also among the heating entrepreneurs.
However, many of small-scale implementations still require significant research and development
investments before they are feasible for possible commercialization (Lehtovaara, 2011; Motiva,
2011).
Results of Research
The results of the study are introduced in this section. Based on the interview data, the
differences in independency and development activeness of the studied biomass heating enter-
prises are first analyzed, and the firms are divided in four groups with different networking ten-
dencies. Secondly, a look at the resource portfolios of the firms is taken, and their correlations
with the networking tendencies are examined.
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The question of power relations and dependency on networks was examined by the “in- 19
dependency” dimension, which depicts the heating enterprises’ tendency to lean on the other
actors. Simply put, the more independent the heating enterprise is, the less its partners are
involved in its activities. Secondly, the questions concerning the actors’ associability were com-
bined to a dimension called “development activeness”. This dimension depicts the enterprises’
tendency to develop their business and network - the more active the firm is, the more positively
it responds to the development, plans the future and engages its partners. The dimension thus
indicates the firms’ tendency to share social capital with others which is considered as associa-
bility.
Independency was examined through the following interview questions:
• Ownership base: the plant and the heating network.
• Nature of business activities of the enterprise (was independency highlighted?).
• Fuel procurement: procurement, delivery, and the enterprise’s own forest property
and its impact on procurement.
• Structure of the network and the enterprise’s role in the network.
• Independence from the heating system manufacturer (HSM).
• Distribution of work in maintenance and repair.
• Other questions where independency was discussed.
There are clear differences in the ownership base of the plants and district heating
networks. Some heating enterprises own the plant and the heating network, but in many cases,
the heating network is owned by the municipality. Differences can also be found between the
plants of a certain enterprise – some plants and district heating networks can be completely
owned, whereas in others the enterprise only maintains the plant.
Clear differences were also found in the ways the fuel is procured. In some cases, the
enterprise seems to take care of the whole procurement chain, whereas in some other cases,
the procurement is far outsourced. As regards the maintenance of the plants, some enterprises
maintain their plants nearly completely on their own, whereas some have outsourced the
maintaining activities.
The business activities and some other questions were also taken into account if aspects
related to independency were mentioned by the interviewee. In addition, the network structure
and the heating enterprises’ roles in their networks, as well as their relationships with the heating
system manufacturers were analyzed regarding their dependency on the partners.
Development activeness was examined through the following interview questions:
• Nature of business activities of the enterprise (were developmental activities
highlighted?).
• Willingness to cooperate with heating system manufacturers.
• Attitude towards opportunities and challenges of the development of cooperative
networks.
• Planning of new heating plants or other activities.
• Future views.
• Other questions where development activeness was discussed.
The enterprises seem to differ in their willingness to cooperate with the system
manufacturers and also in the amount of support they are willing to receive from them. Attention
was also paid to the interviewees’ emphasis on opportunities/challenges of cooperative
development and their views on the importance of cooperation. Clear differences were found in
the emphasis of the future – some entrepreneurs seem to be satisfied with the current situation,
whereas others are constantly finding new business and cooperation opportunities, for example
in combined heat and power production (CHP). The business activities and some other questions
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20 were also taken into account if aspects related to development activeness were mentioned by
the interviewee.
In Tables 1 and 2, the heating enterprises are assessed by the above-mentioned dimensions.
The sub-questions of both dimensions are assessed with the scale 1-5. The higher the number in
the questions related to independency, the more independent the enterprise is. Correspondingly,
the higher the number in the questions related to development activeness, the more actively
the enterprise develops its network(s) and thus the higher its level of associability. The scores
for the dimensions are averages of the scores of the used sub-questions, and in order to clarify
the differences between the groups better (Figure 2), the averages have been weighted by 2.
As can be seen, the level of independency varies from 5.13 to 8.96. Thus, the differences in
this dimension are notable between the groups. Similarly, there are clear differences between
the levels of development activeness, as the highest number is 8.49 and the lowest 5.83. The
meaning of these differences is further discussed below.
Table 1. Assessment of the independency of the biomass heating enterprises.

Ownership base: plant and
work and the enterprise’s

The structure of the net-
maintenance and repair

Independence from the
Distribution of work in
Nature of business
Fuel procurement
INDEPENDENCY
heating network
Other questions
(Weighted by 2)
HEATING FIRM
AVERAGE
activities
role in it
GROUP
HSM
1 Group 1 5 1 3 1 2.50 5.00

2 Group 1 2 3 3 1 2.25 4.50
6 Group 1 3 4 4 3 4 2 3.33 6.67
13 Group 1 3 2 1 2 2 5 2.50 5.00
14 Group 1 1 2 1 3 5 3 2.50 5.00
15 Group 1 3 3 1 4 2 4 2.83 5.67
21 Group 1 4 3 2 3 3.00 6.00
22 Group 1 1 2 3 3 4 2.60 5.20
24 Group 1 5 1 3 3 4 3.20 6.40
26 Group 1 4 3 3 2 4 3.20 6.40
2.79 5.58
10 Group 2 5 2 2 1 3 2.60 5.20
12 Group 2 3 3 2 1 4 2.60 5.20
19 Group 2 5 1 1 3 2.50 5.00
2.57 5.13
3 Group 3 4 4 2 5 4 5 4.00 8.00
5 Group 3 3 3 2 4 4 2 3.00 6.00
7 Group 3 3 5 4 3 4 3.80 7.60
11 Group 3 5 2 5 3 3 3.60 7.20
18 Group 3 4 2 5 3 4 3.60 7.20
20 Group 3 3 4 1 4 5 3 4 3.43 6.86
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23 Group 3 5 4 2 5 4 4.00 8.00 21
3.63 7.27
4 Group 4 3 4 5 5 4 4.20 8.40
8 Group 4 5 5 5 4 5 4.80 9.60
9 Group 4 3 5 4 4 4 4 4.00 8.00
16 Group 4 4 5 5 4 5 4.60 9.20
25 Group 4 4 5 5 5 5 4.80 9.60
4.48 8.96
Table 2. Assessment of the development activeness of the biomass heating en-

terprises.
Nature of business activities
DEVELOPMENT ACTIVE-
Willingness to cooperate
plants or other activities

Planning of new heating
opportunities and chal-
NESS (Weighted by 2)
Attitude towards
Other questions
HEATING FIRM
Future views
with HSMs
AVERAGE
GROUP
lenges
1 Group 1 3 2 2.50 5.00

2 Group 1 3 2 3 2 2.50 5.00
6 Group 1 4 2 4 3 3.25 6.50
13 Group 1 4 4 3 3 3.50 7.00
14 Group 1 1 2 3 4 2.50 5.00
15 Group 1 4 2 4 3 3.25 6.50
21 Group 1 3 2 2 2.33 4.66
22 Group 1 4 2 4 3.33 6.66
24 Group 1 3 4 3 3.33 6.66
26 Group 1 3 2 3 2.67 5.34
2.92 5.83
10 Group 2 5 2 4 3.67 7.34
12 Group 2 5 3 4 4.00 8.00
19 Group 2 5 5 4 4.67 9.34
4.11 8.23
3 Group 3 5 5 5 5 4 4.80 9.60
5 Group 3 4 5 3 4 4.00 8.00
7 Group 3 4 4 4 5 4.25 8.50
11 Group 3 4 5 3 4.00 8.00
18 Group 3 4 4 4 5 4.25 8.50
20 Group 3 4 5 4 4 4 4.20 8.40
23 Group 3 4 5 3 4 5 4.20 8.40
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22 4.24 8.49
4 Group 4 4 4 3 3 3.50 7.00
8 Group 4 4 2 2 4 3.00 6.00
9 Group 4 4 4 3 3.67 7.34
16 Group 4 4 3 2 3.00 6.00
25 Group 4 5 3 3 3.67 7.36
3.37 6.74
Four groups of enterprises with different networking tendencies can be recognized on the
basis of the analysis. For clarity, the enterprises have already been sorted by the below-presented
categorization and indicated with group numbers in Tables 1 and 2. The four recognized groups
are:
Group 1: Actors in local networks of equal partners
The actors in this group tend to build networks locally, and form tight relationships with
other local actors with a certain role in the network. The meaning of locality in the networks is
emphasized, and all actors are rather equal in the power relations. In addition, the employment
of local people and supporting of small actors are seen as important.
If the power positions of the firms are looked at more thoroughly with the framework of
De Wit and Meyer (2005), this group can be located in the “Mutual Dependence” box (Figure
3). None of the actors in these networks has remarkable power over others. However, each actor
in the network is highly important, because each of them has certain, and probably unique,
know-how or resources to share in the network.
Furthermore, the actors in the group share some of their social capital in their networks
and the operability of the networks is highly based on the unique know-how and assets of
different actors. However, the firms in group 1 are moderate with developing the business or
the network from its present scale and scope, or setting cooperative goals for the future. Thus,
the total level of associability is rather low.
Group 2: Actors with strong relationships with Heating System Manufacturers (HSMs)
These actors tend to build strong relationships with the heating system manufacturers
(HSMs). The plants actively exploit the HSMs’ networks in the maintenance activities of the
plants. In addition, these enterprises have common research and development interests with the
HSMs, and they may operate as lead users for them.
This group can be apparently located in the “Unbalanced Dependence” box in de Wit
and Meyer’s (2005) framework (Figure 3). The networking activities of these actors are mainly
targeted at the utilization of the existing relationships of the HSMs. Thus, these firms are not
eager to build networks of their own, but they are willing to develop the business in cooperation
with the manufacturer and its partners.
At the first glance, the sharing of social capital by the firms of this group may appear
as open but rather one-way, as the heating enterprises utilize the know-how and social ties
of the heating system manufacturers. However, the HSMs have their own objectives in the
cooperation as well: they can gain valuable information straight from their customers (biomass
heating plants), which the heating plants share quite openly. In addition, both parties have
interests in common development activities. Thus, the level of associability of firms in group 2
is rather high.
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Group 3: Network developers/lead firms 23
These actors are willing to extend the existing networks and build new ones. The
networking activities also reach beyond the everyday business and maintenance, as these
actors invest in research and development in cooperation with different instances, such as other
entrepreneurs, different organizations and educational institutes.
The actors in this group can be located in the “Mutual Dependence” box (Figure 3),
because the firms build lively networks which are actively developing business for the common
good. Although the networks may include partners rather big in size (such as educational
institutes), these actors do not have power over the others, but they are considered as equal
research and development partners. The actors are, however, clearly dependent on each other,
because none of them is willing or able to develop the business and the network on their own.
Furthermore, associability can be seen as a prerequisite for the networks.
Group 4: Independent actors
These actors tend to be quite cautious in building relationships with external actors.
That is mainly because these actors are usually co-operatives or family firms which already
have a lot of know-how and expertise on their own. The spheres of responsibilities are clearly
divided between the partners and the meaning of personal ties in the formation phase is highly
important.
The relationships of the firms in this group can be characterized as “Mutual Independence”
(Figure 3), as these firms do not generally form tight relationships, but their cooperation with
the surrounding actors is rather free-form; they occasionally use partners when they need to
procure some additional know-how or resources. No partner in these loose networks has power
over the others. The firms do not tend to share their social capital with others constantly.
However, they plan the future and interact with suitable partners (for example the heating
system manufacturers) if needed. Thus, their associability can be characterized as moderate.
In Figure 2, the enterprises are located in a coordinates where x-axis depicts the
independency dimension and the y-axis the development activeness dimension. As can be seen,
the four above-discussed groups can be easily separated as clusters in the coordinates. Thus,
it can be confirmed that each of the researched biomass heating enterprises mainly follows
one of the above-discussed networking tendencies. Furthermore, in Figure 3, the groups are
located in the framework of De Wit and Meyer (2005) based on their relative power positions.
Figure 2: Grouping of biomass heating enterprises according to their network-

ing tendencies.
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24
Figure 3: Relative power positions of biomass heating enterprises.
Next, the resource portfolios of the biomass heating enterprises are discussed. Each en-
terprise was assessed by the six categories of resources:
• Human resources: The number of associates and workforce in relation to the num-
ber of plants and their capacity. In addition, the division of active and passive as-
sociates is taken into account: how many participants are really involved with the
operational activities of the enterprise.
• Former experience and know-how: Former experience on heating entrepreneur-

ship, entrepreneurship on the whole, or on working in a similar field. Education
and theoretical know-how of the entrepreneur/associates.
• The functionality of the network (s): The number and activeness of the partners,
division of work in the networks. Functionality of cooperation on the whole. The
strengths and weaknesses of the network(s).
• Relationships with HSMs: Amount and regularity of relationships and satisfaction

with the cooperation with HSMs.
• Interest and readiness for CHP: Interest on the whole, readiness of the enterprises’
plants for CHP, cooperative activities related to the development of CHP.
• Physical resources: Number of plants and their capacities.
The assessment of the resources of the biomass heating enterprises is presented in Table 3.
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Table 3. Assessment of the resources of the biomass heating enterprises. 25
Interest and readiness for CHP

Former experience and know-
RESOURCES (Weighted by 2)
BIOENERGY HEATING FIRM
Relationships with HSMs

The functionality of the
Physical resources
Human resources
how of the field
network(s)
AVERAGE
GROUP
1 Group 1 3 2 3 3 2 2.60 5.20

2 Group 1 3 2 3 3 2 2 2.50 5.00
6 Group 1 5 2 3 2 1 1 2.33 4.67
13 Group 1 1 3 4 4 3 2 2.83 5.67
14 Group 1 4 4 4 1 3 1 2.83 5.67
15 Group 1 3 2 4 2 3 1 2.50 5.00
21 Group 1 2 3 3 3 2 2 2.50 5.00
22 Group 1 3 4 3 2 3 1 2.67 5.33
24 Group 1 3 2 3 3 2 2 2.50 5.00
26 Group 1 3 2 3 2 3 2 2.50 5.00
3.00 2.60 3.30 2.50 2.44 1.60 2.58 5.15
10 Group 2 3 4 3 5 2 1 3.00 6.00
12 Group 2 1 4 3 5 3 3 3.17 6.33
19 Group 2 3 3 2 5 3 1 2.83 5.67
2.33 3.67 2.67 5.00 2.67 1.67 3.00 6.00
3 Group 3 3 5 5 5 4 5 4.50 9.00
5 Group 3 3 3 4 2 3 4 3.17 6.33
7 Group 3 1 4 5 5 4 3 3.67 7.33
11 Group 3 3 3 5 3 4 3 3.50 7.00
18 Group 3 3 4 4 4 3 3 3.50 7.00
20 Group 3 1 4 3 3 3 4 3.00 6.00
23 Group 3 3 4 4 4 3 2 3.33 6.67
2.43 3.86 4.29 3.71 3.43 3.43 3.52 7.05
4 Group 4 4 4 3 3 3 3 3.33 6.67
8 Group 4 4 3 3 3 2 3.00 6.00
9 Group 4 4 5 4 4 3 2 3.67 7.33
16 Group 4 5 5 4 4 3 3 4.00 8.00
25 Group 4 5 5 4 4 4 3 4.17 8.33
4.40 4.40 3.60 3.60 3.25 2.60 3.63 7.27
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26 Differences can be found in the averages, and especially, the groups seem to highlight
different aspects and resource categories in their resource portfolios. For clarity, these are high-
lighted with darker colour in Table 3.
Group 1 (Actors in local networks of equal partners) has a rather moderate level of re-
sources in all categories. A notable fact is that their physical resources are rather small, which
is explained by their tendency to form rather small local networks with several other smaller
actors. The meaning of these local networks is to provide energy for communities and munici-
palities, and thus the required capacity is rather low. In relation to physical resources, the group
has a strong base of human resources. This is because each participant in the networks has its
special and meaningful role in the business, and the activities are thus highly chained. In all,
however, the level of resources is lowest in this group.
The levels of the human and physical resources of Group 2 (Actors with strong relation-
ships with HSMs) are low. This is because these enterprises are rather small in size and they
lean strongly on the bigger HSMs and their business relationships. However, the level of expe-
rience and know-how in this group is high, which is explained by the fact that these actors gain
and develop their know-how together with the HSMs, for example by common research and
development activities. Naturally, the relationships with the HSMs are considered as extremely
valuable in the group.
Firms in Group 3 (Network developers/lead firms) have quite strong resource bases.
However, their own human resources are not very large, because their activities are well-net-
worked and thus they utilize a lot of external human resources in their business. The functional-
ity of the networks is naturally experienced as high, although the actors are well-committed to
further development of their relationships and building new networks. The interest and readi-
ness for combined heat and power production (CHP) is rather high, and especially the strong
physical resources support the development of new technologies – for example, many plants
driven by these enterprises are rather big in size and thus have more potential to CHP produc-
tion than the plants of Groups 1 and 2.
Firms in Group 4 (Independent actors) have a high level of human resources – a ma-
jority of the business is driven by own resources, and thus these enterprises also need a large
amount of active personnel. In addition, their experience and know-how is notably high – their
utilization of external forces is much lower than in the other groups. Because the enterprises in
this group do not tend to form long-lasting relationships with external parties, the functional-
ity of the networks and the relationships with HSMs could not be assessed as thoroughly as in
the other groups. However, according to the answers, the actors seem to be quite satisfied with
the contracts they have had with external parties. In all, the level of resources is highest in this
group.
Table 4 sums up the results. As can be seen, the resource analysis supports rather well
the above-discussed characteristics of the four biomass heating enterprise groups with different
networking tendencies. It can thus be stated that the resource-base of an actor correlates rather
strongly with its networking tendency. In Group 1, the actors lean on each other and form a tight
network via which they can operate locally. The resource-bases of the actors are rather low,
which makes the actors equal – none of the participants in the network has significant power
over the others. Enterprises in Group 2 are rather small in size and they are thus dependent on
the stronger partners, especially HSMs. However, they are also desirable partners for HSMs
because of their strong experience and know-how in the field, and their willingness for coopera-
tive R&D. Group 3 consists of enterprises with a rather strong resource portfolio, which they
also eagerly share with their partners. As the partners in their networks are mutually dependent
on each other, they both give and gain a lot of their relationships. Enterprises in Group 4 stand
strongly on their own feet, which is also shown in their resource portfolios – they possess a
sufficient amount and combination of inner resources and do not thus have a need to form tight
relationships. Although both the Group 3 and Group 4 have rather strong resource bases, their
philosophy to do business is rather different, and this is also reflected in the aspects they high-
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light in their resource portfolios: firms in Group 3 lean much on external experts whereas firms 27
in Group 4 trusts on inner experience and know-how.
Table 4. Summary of the results.
Level of
Level of as- Specialities in resource port-
Group Power relations resourc-
sociability folios
es
1: Actors in local networks

Mutual dependence Low Low Small physical resources
of equal partners
Small human and physical

resources
2: Actors with strong Unbalanced

Rather high Moderate Strong experience and know-how
relationships with HSMs dependence
Strong relationships with HSMs
Rather small human resources

3: Network developers/ Rather High functionality of networks
Mutual dependence High
lead firms high
High interest and readiness for
CHP
Strong human resources

Mutual independ- Rather
4: Independent actors Moderate
ence high
Strong experience and know-how
Discussion
Balancing between independency and embeddedness is not an easy task for firms, and
the results of the study indicate that firms can solve this problem in many different ways. Ev-
ery firm has its own objectives related to its independency and associability, which means that
every firm tends to maintain a certain level of independency in its relationships, and that it also
has a certain willingness and ability to share its social capital with its partners. These objectives
may lead to formation of different network types. In the researched group of Finnish biomass
heating enterprises, four groups with different networking tendencies based on these objec-
tives could be found. These objectives may be useful to be taken into account when planning
networked businesses – even though some firms might seem as perfect partners because of
their business fields or technical prospects, they may have totally different aims related to their
networking tendencies.
Furthermore, the results indicate that there is certain correlation between the actors’ re-
sources and their tendencies to form networks. For example, a rather small resource-base of a
firm seems to lead easily to the formation of tight relationships with other small actors - the
actors lean on each other, but none of the participants in the network gains significant power
over the others. In addition, because of the limited amount of resources, the networks do not
have ambitions for wider development, and thus the level of associability in these networks is
low. On the other hand, with a higher level of associability, a small firm can also network with
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28 a more powerful firm (in this study with a heating system manufacturer) and concentrate on
strengthening its experience, know-how and negotiation power through cooperative activities.
Actors with stronger resource portfolios seem to have two, rather diverging networking
strategies, depending on their objectives of the independency-level, and their associability. In
the network developers/lead firms’ case, the activities are well-networked. The firms utilize a
lot of external human resources in their business and do not thus have a remarkable number of
human resources of their own. As the partners in the networks are mutually dependent on each
other, they both give and gain a lot in their relationships, and thus the level of associability is
high. In the independent actors’ case, the situation is rather the opposite – these firms possess
a sufficient amount and a suitable combination of inner resources. Because of their objective
for a high level of independency, they do not tend to build long-lasting relationships with other
actors.
Conclusions
The business environments are becoming more and more complex entities, and the study
supports the fact that networking is an increasing phenomenon in these environments. Especial-
ly fast developing business fields, such as bioenergy, offer numerous opportunities for growth,
but at the same time also require cooperation from firms – no firm can possess all the needed re-
sources and know-how on its own. It thus can be said that success in any business field demands
a certain level of cooperation. However, as the study indicates, the firms in the same industry
may follow rather different networking strategies which may all lead to success.
Every firm aims for certain level of power. However, this power can be provided and
shared in many different ways. Based on the conducted study, a firm with basically small nego-
tiation power has two diverging strategies – to lean on a more powerful firm or to ally oneself
with other smaller actors and thus ways gain negotiation power together. Correspondingly,
firms with stronger negotiation position may lean on own resources or aim to further strengthen
their position by active network development.
Inter-firm collaboration has been widely discussed in the literature from different per-
spectives. According to Varamäki and Vesalainen (2003), these perspectives can be classified
into five groups: resources and specialization, intensity of objectives and investments, formality
of cooperation, uncertainty and the use of power, and socio-psychological concepts. This study
can be seen to settle between the resource-based views, power relation examination and socio-
psychological aspects by offering a practical view on the motives behind cooperative activities.
As the study indicates, aiming for wider resources draw firms into cooperative activities, but at
the same time they have certain aims for independency and associability between which they
need to balance. As a consequence, the firms in the same industry seem to end up in building
rather different actor networks around themselves.
Although the focus of the study was on biomass heating entrepreneurs, the results can
be expected to reflect the situation in many fast-evolving business fields, and that way to of-
fer fresh and wider knowledge on the issues under scope. For the actors themselves, the study
offers a clear view on their tendencies to form relations and networks and thus helps them to
develop their business better according to their objectives. The study does not, however, con-
sider much on the actual structure of the networks nor the actual resource exchange between
the actors. A more thorough examination on these aspects would thus be an interesting field for
further studies.
Acknowledgements
The authors wish to express their thanks to the anonymous reviewers for the invaluable
comments and suggestions, which have greatly helped to improve the earlier version of the pa-
per. The authors also wish to thank M.Sc. (Tech.) Joni Vasama and M.Sc. (Tech.) Olli Viitikko
for their invaluable work with the data collection phase of the research.
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Matti Lehtovaara Researcher, Department of Industrial Management, Lappeenranta University of Technology,

P.O. Box 20
(Skinnarilankatu 34), FIN-53851 Lappeenranta, Finland.
Petri Rousku Researcher, Department of Energy and Environmental Technology, Lappeenranta Univer-
sity of Technology, Finland.
Tuomo Kässi Professor, Department of Industrial Management, Lappeenranta University of Technology,

Finland.
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pharmaceutical market and 31
opportunity in the 21st century

for generic drugs: a Brazilian case
study of olanzapine
Jorge Lima de Magalhães
Aix-Marseille Université, France
Oswaldo Cruz Foundation/FIOCRUZ, RJ, Brazil
Luc Quoniam
University du Sud Toulon-Var, Toulon, France
Núbia Boechat
Oswaldo Cruz Foundation/FIOCRUZ, RJ, Brazil
Abstract
This paper aimed to identify and analyse the evolution of the generic pharmaceutical market in Brazil,
specifically olanzapine drugs. For this purpose, it has been demonstrated trends through access free
tools. By bibliographical survey in indexed databases as well as official data in Brazil for generic drugs
and public policy, it was analyzed and performed a case study . In 2012, global pharmaceutical industry
surpassed US$ 950 billion in sales with trend to reach US$ 1,2 trillion by 2016. In Brazil market has
grown in its global ranking, jumped from 10th place to 7th place in five years and projection it’ll stay Top
five by 2015. Brazil has significant presence in pharmerging markets by increasing US$ 10 billion/year.
Generics segment accounts approximately to 20% of the total market. 2003-2011 registered a growth of
42.3%. Patents expiration in the neuroleptics area becomes more promising like a market of olanzapine
in the last eight years is around US$ 120 million. After the end of the olanzapine patent (2011) sales in-
creased 270% which demonstrate potential Brazilian market in this new century. Management problems
for developing nations and undeveloped such as network management and patents analysis for health
care might reveal great opportunities for investors, e.g., creation of the Big Brazilian biotechnology
pharmaceutical industry.
Key words: competitive intelligence, pharmaceutical trends, technological and innovation manage-
ment.
Introduction
According to IMS Health (2012) shows the growth of the sales in the pharmaceutical
market with expectation about 3% annually. Already in 2011 probably reach US$ 1 trillion.
With sales of US$ 26 billion, Brazil holds the 7th position in the world ranking with forecast to
overcome countries as UK, India, Spain, Italy and the Russia and will occupy the 5th place in
the global ranking. Among the reasons that drive the expectation of Research, Development and
Innovation (R,D&I) in this area are the entry of generic drugs, targeted therapies, new mecha-
nisms of actions and approval of biosimilars and Pharmerging1 market. This market consists
of 17 emerging countries, leading among them China, Brazil, Russia and India (BRIC) which
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Jorge LIMA de MAGALHÃES, Luc QUONIAM, Núbia BOECHAT. Pharmaceutical Market and Opportunity in the 21st Century for
Generic Drugs: a Brazilian Case Study of Olanzapine
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32 accounts for more than two-thirds of the increase those sales (IMS
��
Institute for Healthcare In-
formatics, 2012).
The worldwide market for generic medicines grows approximately 17% per year and
moves approximately US$ 80 billion, with growth predicted for 2012 at around US$ 120 bil-
lion. Projections indicate that by 2015 Brazil will become the third largest generics market in
the world behind the United States and China. Currently, the industry moves around 21.3%
of total medicines and 17% in value, or US$ 3,2 billion. This market is the largest amount of
income for the pharmaceutical industry in Latin America and is the third in all America; back
only from EUA and Canada (IMS Institute for Healthcare Informatics, 2012).
The participation of multinationals in the generics market has tripled since 2009. This
fact is confirmed by the change in this scenario with the entry of the French Sanofi-Aventis to
buy domestic Medley in 2009 and Pfizer, which acquired 40% of Teuto domestic laboratory, in
2010. The Swiss Novartis already operates in generic by Sandoz (PróGenéricos, 2012).
The Brazilian pharmaceutical market contains relevant companies of national capital
(Quental, Abreu, Bomtempo, & Gadelha, 2008), as the EMS group, Achè, Eurofarma, Cristalia
and Hypermarcas. These companies have been shown to innovative with launch of generic
medicines and similars2 not only, as well as reference. This due to the efforts of R,D&I. An-
other example in the pharmaceutical market is the formation of a “super pharmaceutical com-
pany” through a joint venture. In March 2012, four Brazilian companies created the BioNovis,
promising to put Brazil in the future market of biological products. The project brings together
national laboratories EMS, Aché, União Química and Hypermarcas. According to executives
with access to the negotiations the new company must have capital of approximately US$ 400
million. They had the National Bank of Economic and Social Development (BNDES – Brazil-
ian term) in the business. Another company that was created is the Orygen Biotecnologia (Part-
nership companies: Eurofarma, Cristália, Biolab and Libbs). According to director of Syndicate
of pharmaceutical industries in the State of Sao Paulo (Sindusfarma – Brazilian term) the idea
is create an industry of biosimilars.
It is noteworthy that the Brazilian pharmaceutical market has a health public market
(government purchases for hospitals) that is not accounted for in direct sales to pharmacies
(Magalhães, Antunes, & Boechat, 2011). This market represents approximately US$ 6 billion
in annual sales, therefore increasing the total market at around US$ 32 billion in 2012.
According to the Brazilian Institute of Geography and Statistics (IBGE – Brazilian term)
Brazil has more than 192 million inhabitants, an area of over 8.5 million square km and still
has about 9% of people living on the poverty line (IBGE, 2011). However, the social policies
(Gadelha & Costa, 2012) implemented by the Brazilian government in the last decade have
contributed to the increase in consumption in the country.
From 2003 to 2009, 48.8 million Brazilians had the rise of social class (A, B and C) and
therefore decreasing the class E - less favored. By comparing with the other members of the
BRICS countries (a group of countries formed by Brazil, Russia, India, China and South Africa)
in the 2000s, Brazil has the second highest annual growth rate of per capita household income
between the poorest 20% of the population (Fundação Getúlio Vargas, 2011).
According to World Resource Institute, the large potential market opportunity is located
in emerging countries. Looking at the BRICS, Brazil is second behind China promising (World
Resource Institute, 2007). However, a major problem in the health care is still that half the
population does not have full access to essential medicines. Thus, entry of generic drugs with
lower prices assist to improve this problem since the population has increased their purchasing
power.
Public policy should ensure the population access to essential medicines (Quick, 2003).
In this sense, after the government’s actions that encouraged public and private investments, the
country has established itself as emergent in the global scenario. Thus, the pressure for quality
and differentiation in the products has been increasingly demanded, opening the need for in-
novation. In the pharmaceutical area, there’s no difference. So, the main purpose is to highlight
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trends in the Brazilian pharmaceutical market growth and investment opportunities in the field 33
of generic drugs, as an example, neuroleptics area. Nevertheless, it can provide better access to
the population.
On the other hand, identify and analyze the amount of scientific information and state
of the art with respective correlations has become hard work. The world’s technological per-
capita capacity to store information has roughly doubled every 40 months since the 1980s. As
of 2012, every day 2.5 quintillion (2.5×1018) bytes of data were created (Lynch, 2008). So, the
challenge for Science and enterprises is managing big data for scientific visualization and deci-
sion making.
Therefore, researchers depict the relationship international networks connection and ex-
amine the trajectory of Brazilian pharmaceutical market with regard to the generics, especially
olanzapine, at the same time demonstrating the advancement of science and opportunities also
highlights issues for big data management in the new century.
Methodology of Research
General Background of Research
This study involves data mining. The data were taken from IMS Health, Association of
Brazilian generic drug industry (Pró Genéricos) and National Health Surveillance Agency (AN-
VISA), a governmental science and technological research agency. Bibliographical references
were also consulted on indexed scientific databases such as Scielo, Medline and Lilacs. In addi-
tion to get the massive information in the world and demonstrate synthetically a technological
pharmaceutical network connection with Brazil.
Instruments
The big data were treated using data mining in a cluster engineering Lingo3G carrot2
– version 3.6.2. Regarding the data gathered was treated using Excel software spreadsheets
(Microsoft Office 2010). After, the results were analysed and conclusions drawn as set forth in
the following sections.
Data Analysis
Principal analysis was in generic drugs and public policy in this area as well as a case
study of olanzapine drugs analyzed in 8 years (available time in the database).
Results of Research
It was identified 554,000 documents linking Brazil with the world in regard to generic
drugs. With the total amount of data and data mining by Lingo3G there was obtained 203
documents. These results allowed correlations to be found to spot business trends, research
technologies and give subsidies so establishment of public health policies. Figure 1 shows the
clustering of map information. The Brazilian generic drugs are intimately tied to various actions
and partnerships both nationally and internationally. Exemplified by 25 Brazilian generic, 16
generic AIDS, 13 Country, 12 pharmaceutical markets, 10 India and so on.
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34
Figure 1: Cluster map of generic drugs in the Brazil.

Source: Created by the authors.
Brazilian market can be seen in Figure 2. In a decade revenues in dollar grew up over
500%.
Figure 2: Pharmaceutical market in Brazil – period: 2003-2011.

Source: Created by the authors with data from IMS Health.
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In Table 1, shows the Brazilian scenario of seven manufacturer’s olanzapine. Note the 35
entry in 2010 of the first generic medicine.
Table 1: Producers of olanzapine (before/after patent expiration).
Manufacturers of olanzapine Medicine registration Year Quantity of presentation

GLAXOSMITHKLINE Similar 2011 2
EMS PHARMA Generic 2010 3
GERMED PHARMA Generic 2011 3
MEDLEY Generic 2011 9
LEGRAND Similar 2011 3
EMS PHARMA Similar 2011 3
LILLY Reference 1997 7
LILLY Reference (new presentation) 2005 4

Figure 3 can be noted the market evolution of olanzapine drugs with the consistent trend
over the last three years. The same year that the patent expired and the entry of only 01 generic
drug consumption increased more than 37%.
Figure 3: Brazilian market of Olanzapine medicines

The data confirm the influence of “big-data” and growth trends in generic drugs in emer-
ging countries, mainly Brazil. Nonetheless, the urgent need for treatment of information to aid
in the science management and decision makers to improve the health care of their popula-
tions.
Discussion
Somehow access to medicines to the population has been provided through public policy
as the generics strong presence of the pharmaceutical industry and in consequence the need to
seek ways to deal with the massive information management in the new century (Cameron,
Ewen, Rossdegnan, Ball, & Laing, 2009). IMS Health (2012) points to a growth in global
pharmaceutical sales about 3% annually. These countries representing for more than two-thirds
of the increase or about US$ 151 billion, namely will also represent 30% of the total sales in
2016, up from 20% of the total in 2011.
On the other hand, pharmaceutical sales in the U.S. will grow by a little more than 1%
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36 annually during the same period (from US$ 322 billion to US$ 350 billion) accounting for 30%
of the total in 2016 roughly the same as the pharmerging countries compared to 34% of the total
in 2011. Meanwhile, in Europe are expected to drop by about 1% annually from US$ 159 bil-
lion to US$ 135 billion, reducing the European contribution from about 17% of the total in 2011
to about 12% in 2016, where developed markets will account for 57% of total pharmaceutical
sales in 2016, a steep decline from 73% in 2006.
Accordingly, pharmaceuticals sales rises ¾ in pharmerging while the markets of deve-
loped countries have stagnated. BRICS countries are responsible by 73%. Together with 21
far-flung nations ranging from Venezuela to Vietnam, Chile to the Czech Republic etc. In sum-
mary, pharmerging sector accounts for more than 3 billion people or 45% of the planet. While
much is made of their exploding middle-class population as well as its potential buying power
(Fundação Getúlio Vargas, 2011).
Progress of the Brazilian market (see figure 2) includes generic medicines that is linked
to the regulation law in 1999; investments of both national and multinational companies and
the expiration of patents on several medicines. Addition of a new market in general provides a
reduction in approximately 50% of product price and after eight years an increase consumption
about 300% occurs (PróGenéricos, 2012). In 2010 sales grew by 32% with revenues of US$
3,5 billion. Already in 2012, reached US$ 5,3 billion with increase 48.5% (Sindicato da Indú-
stria de Produtos Farmacêuticos no Estado de São Paulo, 2012). In part, this progress can be
explained when throughout of the year 2011 it reached the market some generic medicines with
expired patents. Under Brazilian law, generic must be at least 35% cheaper. In practice, there
is a reduction beyond that percentage due to competition. Some medicines that have expired
patents include Viagra, Lipitor, Crestor, Dilvan and other brands. More than 12 medicines had
patent expiration in 2012, among them Xeloda (Capecitabine) from Roche for the treatment of
breast cancer and colorectal cancer, Gleevec (Imatinib) Novartis’ leukaemia and Pfizer’s Geo-
don, for psychological disorders. These drugs have very high price providing new opportunities
for generic market.
Trust and quality of generic medicines can be measured by ANVISA’s guidelines over
the past 10 years. For example, tests of bioavailability and pharmaceutical equivalence. So,
the formula: trust of the population allied to expand purchasing power makes the choice of the
generic drug grow up. Pró Genéricos research (2011) show that when the consumers replace a
brand medicine by a generic their expenses are reduced by more than US$ 13 billion (ANVISA,
2012; PróGenéricos, 2012).
The Brazilian pharmaceutical market has achieved a higher level of technology. It can be
noted that companies are indeed seeking opportunities in domestic and international markets.
In 2011, among Top 10 pharmaceutical companies operating in Brazil there are four domestic
companies while eight years ago there was only one company. These companies represent 25%
of the national private sector. They are EMS Group, Hypermarcas Group, Aché and Eurofar-
ma.
Among several programs of the Brazilian government to improve people’s access to
medicines, there is the “Popular Pharmacy” (Farmácia Popular – Brazilian term) where gene-
rics account for 65% of the total volume of products distributed free to the needy population
used in the control of hypertension and diabetes (Magalhaes, JL, Antunes, AMS, & Boechat,
N, 2012).
In this sense, we can deduce that investments in generic medicines are a good business.
There are trends to build public-private partnerships (PPP) in research and/or technological de-
velopment through government incentives, patents expiration and the knowledge in universities
and companies (Gadelha, Costa, & Maldonado, 2012).
Nevertheless, one area that is beginning to be explored within this segment is neuroleptic
generic such as Zyprexa® medicine (olanzapine active ingredient) that had its patent expi-
red in 2010. After one year, ANVISA has received several requests for authorizations in news
olanzapine medicines. As can be seen in Table 1, they were granted 15 generics and 8 similars
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generating 23 records. In 2011, 76,7% of all olanzapine medicines are not reference (brand). It 37
is worth noting that in early 2012 ANVISA has granted license for more 6 pharmaceutical com-
panies (4 private companies and 2 public3 institutes). They are Sanofi-Aventis, Novaquímica,
Sandoz, Sigma Pharma (a division of EMS), LIFAL (Laboratory Industrial Pharmaceutical of
Alagoas) and NUPLAN (Center for Research in Food and Drug Administration, Federal Uni-
versity of Rio Grande do Norte). These last two, are public.
The sales potential of olanzapine can be also demonstrated by the quantity of dosage
form registered by manufacturers. In addition to the owner of the brand (Eli Lilly) has 11 pre-
sentations. Other laboratories have 3 generics with 15 different presentations and 3 similars with
8 presentations. With these new authorizations market will contain with nine private olanzapine
manufacturers being strong presence of foreign capital and only two domestic enterprises. This
scenario represents about 78% of this product in transnational companies.
Figure 3 shows the growth in the pharmacy sales for olanzapine in the period 2004 to
2011. Until 2010, represents only the market restrained by Zyprexa®. In 2011, growth repre-
sents also the sale of the generic drug olanzapine. Despite the decline in the number of pharma-
ceutical units from 2007 to 2009 note this fact it was not significantly reflected in dollars but in
Real (Brazilian currency). There was a much bigger drop only in 2008 which perhaps can be
explained due to global crisis. However, market grew 23,1% from 2009 to 2010 with revenues
US$ 16 million in 2009
Notwithstanding, with the expiration of the Zyprexa® patent, sales of olanzapine in 2011
grew 37.2% over the previous year that was only 4.5%. Sales growth in dollars of 2009-2010
and 2010-2011 were 23.1% and 29% respectively. In the same period but in Real were 10% and
22.6% respectively.
Final Considerations

Big data is difficult to work with using most relational database management system,
howsoever becomes great ally to determine public policies that promote intensity in science
research and contribute significantly to innovation and technological development of the coun-
tries. Cluster engineering proves the effective assistance in this area of knowledge

Brazilian government efforts and incentives have placed the country as an important
emerging nation. Thus, in the pharmaceutical area is not different. Evolution investments re-
presented by the internal staff of companies demonstrate a trend for change in the strategic
orientation of these domestic pharmaceutical groups.
The largest domestic enterprises in the Brazilian pharmaceutical industry have shown
signs of capabilities to change strategy and innovation. Biggest domestic pharmaceutical EMS
group pioneered the launch of the first generic olanzapine. In the same year that the patent of
the reference product expired the company managed to meet all legal requirements to register
at ANVISA the generic product which somehow drove the access in 23.1% already in the same
year of 2010.
Considering that after eight years to launch a generic product consumption increases
300%, it can be stated that the olanzapine volume in 2018 will reach 18,7 million of pharma-
ceutical units, with a turnover of US$ 102 million.
Therefore, from a trajectory perspective since 1999, it is possible to infer that the Brazi-
lian market of generics is undergoing a process of acquiring the empowerment for consolidation
in the area. It is clear that, domestic pharmaceutical is not presented as a big pharma in the in-
ternational market. However, their competence and growth in the area of generic medicines and
similars has awakened “looks” of large international players such as French Sanofi (acquired
national Medley) and the American Pfizer (acquired part of the national Teuto).
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38 Acknowledgements
Appreciate the CAPES grant and support infrastructure of the Aix-Marseille Université
as well as the data provided by PróGenéricos.
References
ANVISA (2012). Agência Nacional de Vigilância Sanitária. Lista de Estatísticas. Recuperado

18 de fevereiro de 2013, de http://portal.anvisa.gov.br/wps/portal/anvisa/anvisa/home/
medicamentos/!ut/p/c4/04_SB8K8xLLM9MSSzPy8xBz9CP0os3hnd0cPE3MfAwMDMydnA09
3Uz8z00B_A_cgQ_2CbEdFADghJT0!/?1dmy&urile=wcm%3Apath%3A/anvisa+portal/anvisa/
inicio/medicamentos/publicacao+medicamentos/lista+de+estatisticas+-+genericos.
Cameron, A., Ewen, M., Rossdegnan, D., Ball, D., & Laing, R. (2009). Medicine prices, availability, and
affordability in 36 developing and middle-income countries: a secondary analysis. The Lancet,
373 (9659), 240–249. doi:10.1016/S0140-6736(08)61762-6.
Fundação Getúlio Vargas. (2011). Os Emergentes dos Emergentes: Reflexões Globais e Ações Locais
para a Nova Classe Média Brasileira | CPS/FGV. FGV Editora. Recuperado de http://cps.fgv.br/
brics.
Gadelha, C. A. G., & Costa, L. S. (2012). Saúde e desenvolvimento no Brasil: avanços e desafios. Revista
de Saúde Pública, (ahead), 0–0. doi:10.1590/S0034-89102012005000062.
Gadelha, C. A. G., Costa, L. S., & Maldonado, J. (2012). O Complexo Econômico-Industrial da Saúde
e a dimensão social e econômica do desenvolvimento. Revista de Saúde Pública, (ahead), 0–0.
doi:10.1590/S0034-89102012005000065.
IBGE. (2011). IBGE :: Instituto Brasileiro de Geografia e Estatística (6 No. Tábua completa de
mortalidade - 2010). Brazil: IBGE. Recuperado de http://www.ibge.gov.br/home/estatistica/
populacao/tabuadevida/2010/.
IMS Institute for Healthcare Informatics. (2012). The Global Use of Medicines: outlook through 2016 (p.
36). Recuperado de www.imshealth.com.
Lynch, C. (2008). Big data: How do your data grow? Nature, 455 (7209), 28–29. doi:10.1038/455028a.
Magalhães, J. L. de, Antunes, A. M. de S., & Boechat, N. (2011). Laboratórios farmacêuticos oficiais e
sua relevância para saúde pública do Brasil. RECIIS, 5 (1). doi:10.3395/reciis.v5i1.367pt.
Magalhaes, JL, Antunes, AMS, & Boechat, N. (2012). Technological Trends in the Pharmaceutical
Industry: the matter of neglected tropical diseases – An overview of the Research, Development
& Innovation in Brazil. Synergia Editora. Recuperado de http://www.livrariasynergia.com.br/
livros/M39700/9788561325732/tendencias-tecnologicas-no-setor-farmaceutico-a-questao-das-
doencas-tropicais-negligenciadas-edicao-bilingue.html.
PróGenéricos (2012). Associação Brasileira das Indústrias de Medicamentos Genéricos. Brazilian
Association of Industries of Generics. Recuperado 15 de fevereiro de 2013, de http://www.
progenericos.org.br/index.php/mercado.
Quental, C., Abreu, J. C. de, Bomtempo, J. V., & Gadelha, C. A. G. (2008). Medicamentos genéricos no
Brasil: impactos das políticas públicas sobre a indústria nacional. Ciência & Saúde Coletiva,
13, 619–628. doi:10.1590/S1413-81232008000700011.
Quick, J. D. (2003). Ensuring access to essential medicines in the developing countries: A framework
for action*. Clinical Pharmacology & Therapeutics, 73 (4), 279–283. doi:10.1016/S0009-
9236(03)00002-X.
Sindicato da Indústria de Produtos Farmacêuticos no Estado de São Paulo. (2012). Sindusfarma. Syndicate
of pharmaceutical industries in the State of Sao Paulo. Recuperado 15 de fevereiro de 2013, de
http://www.sindusfarmacomunica.org.br/indicadores-economicos/.
World Resource Institute (2007). The Next 4 Billion: Market Size and Business Strategy at the Base of
the Pyramid. Recuperado 21 de fevereiro de 2013, de http://www.wri.org/publication/the-next-4-
billion.
(Endnotes)
1 Term created by IMS Health to define emerging markets with high growth potential
in pharmaceuticals, in the period from 2009 to 2013.
2 In Brazil, there is this drugs class. They are medicines that have the same active
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ingredient and quality, but differ in the form of presentation (dose, concentration). Just like 39
generics, are granted only after the expiry of patent.
3 Brazil has public pharmaceutical laboratories, which are linked to the Ministry of
Health or state governments. They do not sell to private initiative. Produce only to meet the
specific demands of the Government of medicines whose patent has already been expired. They
supply a small part of the demand of the Brazilian Health System, as medicines for malaria,
Chagas disease, tuberculosis etc.
Advised by Naglis Švickus, SMC “Scientia Educologica”, Lithuania
Received: February 05, 2013 Accepted: February 14, 2013
Jorge Lima de Magalhães DSc, Post-doctoral in Aix-Marseille Université Laboratoire IRSIC (EA462)
France.
Researcher in Public Health in Oswaldo Cruz Foundation/FIOCRUZ, Capes
Fellow 12.298, Brazil.
Website: http://lattes.cnpq.br/9829199474735249
Luc Quoniam DSc, PhD, Professor, University du Sud Toulon-Var – France, Avenue de L
Université 83957 La Garde, France.
Website: http://quoniam.info
Núbia Boechat DSc, Researcher in Public Health in Oswaldo Cruz Foundation/FIOCRUZ,

Head of Organic Synthesis in Farmanguinhos, Brazil.
Website: http://lattes.cnpq.br/9152983185617827
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40
SIGNIFICANCE OF DATABASE MARKETING
IN THE PROCESS OF TARGET SEGMENTS
IDENTIFICATION AND SERVICE
Joanna Łodziana-Grabowska
Academy of Business in Dąbrowa Górnicza, Poland
Abstract
The study aims at presenting the position and role of marketing databases in the enterprise’s market op-
erations and achievement of sales targets.
The study identifies the following elements pertaining to the discussed issue: essence and parts of the
database marketing, significance of the database marketing in the process of target segments service,
database and customer relationship management as well as the problem of the customers’ privacy in rela-
tion to their data being used and processed by market entities.
It should be emphasized that the informational systems constitute the basic elements supporting the proc-
ess of sales management and service of the company’s target segments.
It should be stressed that for the trade marketing the identification of a recipient type is
of significance, which is presented in this study with reference to the database marketing. The da-
tabase may also contain the information on products, departments and sales force involved in
a specific marketing action.
With such database at their disposal the companies become mobile in terms of their offer adjustment to
the market requirements, while by making the customer the central point of their focus, their marketing
becomes an essential and effective tool of building their relationship with the customer.
The database development in order to identify the potential customers is a significant project of impact
on the efficiency of marketing and the process of target market service, both for small and large enter-
prises.
Key words: customer relationship management, database marketing, direct marketing, target market.
Introduction
The informational systems constitute the basic elements that support the process of
sales management and target segments service. It should be stressed that the identification of
a recipient type is of major significance for the trade marketing. Due to the market analysis
it is feasible to determine the size of a potential market, origins and identity of potential and
actual customers, their requirements in the scope of product offer as well as implemented sales
tasks and services, the customers’ preferences and their variability. With such database at their
disposal, the companies become mobile in the context of adjusting their offer to the market
requirements, while by making the customer a central point of their focus, their marketing be-
comes an essential tool of establishing the relationship with a customer as well as an efficient
tool at the same time.
In the conditions of the deep worldwide financial crisis, the market entities face the dif-
ficult situation of solving the decision-related problems, based on compromise, and choices
regarding the initiation of different activities in the area of marketing.
The database marketing provides good results at comparatively low outlays with the use
of properly selected applications from the group of IT marketing system solutions, which are
presented in the further part of this study.
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Joanna ŁODZIANA-GRABOWSKA. Significance of Database Marketing in the Process of Target Segments Identification and Serv-
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The following problems have been solved in this article: 41

 What does the database marketing mean?
 What kind of information are composed by the database marketing?
 What is the significance of the database marketing for the process of target market
service?
 Do the data bases seem to be dangerous for the clients’ privacy?
Essence and Elements of the Database Marketing
Database marketing – is a technique of collecting, accumulating, processing and analys-

ing the information on consumers, competition and operational area. Activities in the field of
the database marketing are aimed at optimisation of customer-oriented marketing activities,
better recognition of the customers’ needs and adjusting the offer to their requirements and ex-
pectations, better identification of opportunities and threats connected with the enterprise’s op-
erations, more efficient management of corporate costs as well as regular monitoring of market
trends (Straszewicz, 2006). Database – is a set of mutually related information pertaining to the
actual and potential customers, which is to be used in different types of applications, such as for
instance customer segmentation and profiling, process of retaining the customer and creating
his/her loyalty, simultaneously being the basis for methods of his/her service.
According to the Dictionary of American Marketing Association database marketing
means an approach by which computer database technologies are harnessed to design, create,
and manage customer data lists containing information about each customer’s characteristics
and history of interactions with the company. The lists are used as needed for locating, select-
ing, targeting, servicing, and establishing relationships with customers in order to enhance the
long-term value of these customers to the company. The techniques used for managing lists
include: 1) database manipulation methods such as select and join, 2) statistical methods for
predicting each customer’s likelihood of future purchases of specific items based on his/her
history of past purchases, and 3) measures for computing the lifetime value of a customer on an
ongoing basis (http://www.marketingpower.com/_layouts/dictionary.aspx?dletter=d).
The customer’s personal data, data pertaining to single transactions (purchase history),
communication with the customer (received mail, motivation stimuli, marketing actions and
market responses) constitute the minimum requirements to be met by a decent marketing data-
base. In the database one may also accumulate the information connected with products, corpo-
rate actions and sales forces, which are involved in a given marketing process.
Basically three types of data are stored in the database (Figure 1):
• Market information;
• Relationship data pertaining to corporate actions and market, in other words – con-
necting the target market with a given company;
• Data on the company.
While discussing data, one may distinguish their internal and external sources.
Most companies have at their disposal the basic internal information required for starting
a database. These are the information connected with orders and invoices, such as: names, cus-
tomer’s surnames, their addresses, bank account numbers, purchase dates, payment methods,
etc. The lists of customers, complied outside the company, which may be for instance purchased
or leased for the direct marketing purposes, constitute the external data. As an example one may
quote the lists of people being the newspapers or magazine subscribers or the databases regard-
ing the consumer’s lifestyle and habits.
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42 DATABASE
MARKET DATA
 Consumers (personal, geographic, socio-

demographic data, data conc. the lifestyle)
 B2B (sector, operational area, decision-
makers)
DATA CONCERN. THE RELATIONSHIP
 Corporate actions (promotions,

advertising, needs satisfaction methods)
 Customer response (reply to advertising,
complaints, purchases)
DATA CONCERN. THE COMPANY
 Branches, products, sales team, sales

techniques
Figure 1: Marketing database.
Such system of data applies both to large and small enterprises. However, the small
enterprises due to the specific character of their operations – both in the context of operational
scope and diversification – do not create the procedurally designed system. It is built as
a useful sub-system of the practical market knowledge. This should in not terms imply that
in large enterprises the formalised actions overshadow the pragmatic objectives of the
informational system. Simply a wider scope of problems must be covered with a certain –
frequently very detailed - procedure of planning the informational and database systems. The
database system for small enterprises is frequently supplemented with access to online databases,
electronic notice boards and Internet forums. Attention should be drawn to the application
software streamlining the company’s data. While discussing the possibility of its application
for the small enterprise’s operations, we may refer to an example of the IT suite MDB Firma.
The suite software may be installed on a single PC or may operate in a network, in the following
operational systems: Windows 95, 98, Me, 2000, NT and XP. The MS Access constitutes the
application database. Microsoft Access – a system for service of relational databases being a
member of Microsoft Office suite for Windows. Access databases are saved as single files (mdb
format, mde complied version). Access has its own integrated database engine (Microsoft Jet),
which functions as an internal database. There is an option of resigning from MS Jet while
using Microsoft Access (adp format), but then all the elements of a database are stored only
on this connected server. The exemplary applications include simple software for small and
medium enterprises pertaining to data analysis and processing. Microsoft Access may be also
used for quick prototyping of database applications.
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The base may store data for one or many applications, and at any moment it may be 43
expanded with the data structure for another suite software. The data may be accessed upon
entering the base password and users’ passwords. The base may contain data from one or many
years. These are among others: the software designated for issuing the VAT sales documents, the
application registering the orders and bid inquiries (forwarded and received), stock application,
the application for issuing the VAT sales documents and purchase registration (it allows for
issuing the sales documents: VAT invoices, VAT correcting invoices as well as for purchase
registration based on VAT invoices and receipts).
Significance of the Database Marketing in the Process of Target Segments

Service
The database marketing assumes that the skill of constructing databases, their adjusting
and exploring their potential is of key importance in marketing actions. Due to the database
marketing application one may (Straszewicz, Database Marketing):
• Collect the up-to-date and current information on the customer in order to under-
stand their needs and requirements, which allows for quick response to the changing
market situation;
• Perform the customer segmentation, identify the most valuable customers for the
company and focus on them the marketing and promotional actions;
• Lower the costs of promotional campaigns by precise identification of target
groups;
• Increase the customers’ loyalty due to relevant actions addressed to the proper target
group and with the right timing;
• Improve the customer service;
• Follow the market trends and respond to them with relevant actions, for instance by
creating a new product or a new product line, modification of the already existing
product, relaunch (e.g. refreshed packaging), introduction of an additional service,
etc.
The management of data on the customer has become not only a strategic option but
almost a strategic necessity in case of the direct marketing. The success of a direct marketing
campaign indeed depends on the structure and quality of the applied database. The efficien-
cy of such campaign shall grow together with the precision of defining the actions and their
addressing to the relevant recipient. It should be stressed that the new transactions require,
in the logical sequence of marketing actions, sustaining the relationship and applying the ef-
ficient communication. The company’s key customers frequently are small in their number.
Therefore it is necessary to analyse very precisely the target groups and new transactions
in the context of consolidating the relationships that prognosticate the good co-operation and
generation of the customer’s significant value for the company. The strategic use of databases
and precise segmentation based on identified and registered consumer profiles is a decisive fac-
tor for achieving the defined targets and efficiency of the target markets service. The success
of each new transaction depends on the skill of identifying potential customers of such profile,
which shall enable meeting the needs of a future customer due to the specific character of the
company’s offer. Therefore the analysis of data pertaining to current customers and storage of
useful information thereon in the database shall facilitate in the future the development of a
good list of potential customers.
The main advantage of a database is a uniform manner of presenting the relationships
with individual customers or segments. This enables better understanding of the consumers’
behaviour and the mechanism of the market functioning, and then using this knowledge for the
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44 marketing purposes (Pilarczyk, Mruk, 2006, p. 96). Thus the marketing databases on one hand
enable the correct identification of the customers to whom the promotional message, a loyalty
program or product offers are addressed. On the other hand, it allows for developing a custom-
made message and constructing a specific offer for a specific customer. Such customised and
individual offer may generate specific tangible sales benefits and in the time perspective it may
establish the relationship with the recipients of services or products. In the conditions of grow-
ing competition a single consumer becomes an asset for the company, while the knowledge
thereof becomes an element that cannot be overestimated. This knowledge allows for taking the
right actions, oriented towards meeting the customers’ needs. The customer is more and more
fed up with the mass advertising, addressed to “anybody” and stops to take notice thereof.
The aforementioned advantages of databases address the aspect of formulating the strat-
egy referred to the relationship with the customer and the process of target markets service. The
discussed communication has also the practical dimension for corporate contacts with the tar-
get groups. Data placed on invoices demonstrate the frequency of contacts and the customer’s
value through the value of concluded transactions. These sets of data become the basis for the
decision on renewing at the specific time the contacts with the customers as well as develop-
ment of special offers for them.
Database and Customer Relationship Management
The companies want to know their customers. The key to this knowledge is a CRM (Cus-
tomer Relationship Management). In the context of the application of tools and technical pos-
sibilities offered by CRM, the use of marketing databases acquires a completely new – almost
strategic - significance. On the other hand, one should bear in mind that CRM is something
more than just a technology, software or hardware. The essence of CRM is the relationships be-
tween the consumers and those people who manage the dialogue therewith while the database
is a strategic tool supporting the development and maintenance of these relationships (Cannon,
2002, p. 43 ).
With the use of the latest IT techniques, due to which one may analyse simultaneously
many variables pertaining to the customer, it is possible to determine in a more efficient way
the feasibility and prospects of the co-operation started with a given customer. The database
marketing is based on a set of information on the customers stored in the form of a computer
database. On the basis of the systematically accumulated information we may analyse and
draw conclusions pertaining to the company’s promotional strategy, sales strategy, etc. The
oriented database allows the company for identification of potential customers as well as better
understanding of their needs and expectations. And since already at the starting point its role
must involve the precise selection of the group that meets the preliminary criteria, at the next
stage, the actions run on the basis thereof are characterised by significantly higher efficiency
(generating tangible benefits in a short time horizon). The company reaches precisely those
customers to whom its specific product package is addressed. It ignores the accidental and
uninterested recipients. What is more, the consumers are targeted with a specific customised
offer (Kowalska, 2004).
The marketing database requires proper management. The continuous update of the data is
of significance. In this context one may indicate five threats connected with the databases
(De Pelsmacker, Geuens, Van den Bergh, 2007, pages 398-399):
 Incompleteness – it may be caused by an incorrect procedure of data collection or
a compilation of data coming from different sources;
 Outdated data – some data very quickly cease to be valid, for instance function,
position at work or home address, which may change very suddenly, while the cus-
tomer’s surname remains the same for the entire adult life;
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 Unreliability, undependability – some data may be untrue since the source of their 45
acquisition is not trustworthy; e.g. the data collected with use of the Internet some-
times contain many fictitious names and addresses;
 Inconsistency (lack of consequence) – some data are not automatically updated,
though they are related to other data being modified, e.g. the failure to enter the in-
formation on a change of phone number due to the change of an address;
 Copying – in the database we may find two (or more) sets of the same data due to
a different manner of entering their elements; this results for instance in the same
promotional materials being sent many times to the same customers, which in turn
may cause their irritation and generate costs for the direct seller.
In order to avoid the aforementioned threats at least one person within the organisation
should be responsible for the database management.
Databases versus the Issue of Privacy
Since the application of databases becomes more and more common, this phenomenon
together with a continuously growing search for recognition of single customers causes that
the consumers are interested in the level of knowledge held by the companies with regard to
themselves as well as the method of acquisition and application of such information. The de-
tailed data pertaining to surnames, addresses, demographic characteristics, lifestyle, shopping
preferences or purchase history constitute a sufficient reason for raising fears connected with
privacy.
The literature discussing the issues of privacy suggests that most information on single
customers, used for marketing purposes, may be divided into five categories. These are the fol-
lowing categories: demographic characteristics, lifestyle (inclusive of habits connected with
media), shopping habits, data on finances and personal data (identifiers) such as: surnames,
addresses, insurance numbers (symbols). It has been agreed that the consumers are most will-
ing to provide direct sellers with the information on demographic characteristics and lifestyle,
whereas they are most unwilling to share the information connected with finances, household
income, credit cards, personal data. Though most consumers do understand the need to provide
the information on finances while making a credit purchase, the request for information on in-
come, especially coming from the marketers not dealing with finance or insurance, is met with
a deeply negative response. Most consumers wish to have more control over the collection and
application of information thereon. Only 33% of the companies inform the consumers about the
method of using the collected information pertaining to them. Since the message on the method
of data application may be perceived as the first basic step towards permitting the customers for
withdrawal of their data from bases, we may assume that the percentage of companies which
offer to their customer the control over the distribution of information thereon is actually much
below 33% (De Pelsmacker, Geuens, Van den Bergh, 2007, p.402). The Direct Marketing As-
sociation strongly recommends the option of resignation – allowing the consumers to remove
their surnames from the list by ticking a relevant column in the form.
The problem of privacy is also connected with the control over insolent, unwanted pro-
motional actions such as telemarketing or spam. The Internet has generated new threats for the
privacy, connected with the easiness of obtaining, storing and exchanging data in the web. The
consumers’ additional anxiety is connected with the volume of spam, which due to low costs
constitutes an integral element of the commercial electronic mail. In spite of this the research
demonstrates that the consumers are more inclined to remove their surnames from phone direc-
tories than from e-mail groups. Simultaneously, the deletion of data from emailing lists is more
frequent than in the case of mail promotion lists.
The Personal Data Protection Act caused that the mail-order companies began to create
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46 the so-called Robinson Lists (“black” and “grey”). The Robinson List, known in some countries
as the Mailing Preference Service or MPS, is a system of the consumers privacy protection
successfully applied in many countries. This is a system developed for the people who do not
wish unwanted address materials of the promotional and advertising character to be forwarded
to their mail boxes. The Polish Robinson List has been run by the Direct Marketing Association
since 1996, i.e. its registration by the Resources Registration Department of the Bureau of the
Inspector General for the Protection of Personal Data. One should distinguish the Robinson
List run by the Direct Marketing Association from the Robinson List run by the Organisation
of Market and Opinion Research Companies. The latter pertains to the respondents’ refusal to
participate in CATI (Computer Assisted Telephone Interviewing) and has been running since
November 2004.
A company purchasing an external database compares it with its “Black” “List and re-
jects people placed thereon. These people have already expressed their unwillingness to re-
ceive the company’s offer, therefore it is not profitable to forward subsequent offers thereto.
The “Grey” Robinson List includes the people that do not wish for their personal data to be
processed outside the company to which they have entrusted such data. It is of significance at
exchange, lease or sale of addresses – it is not allowed to trade in the people included on the
“Grey” List” (Sobolewska, 2000).
Conclusions
Summing up, one should state that the skilful, careful and conscientious development
of databases is of key importance for effectiveness of marking actions as well as efficiency
of the target segment process. The database marketing allows for planning of effective strate-
gies targeted at specific identified customer segments as well as at very narrow groups, which
often constitute target segments.
The database marketing allows for the customer identification, which is of decisive
importance for customisation of business initiatives. The response to the question who the
customer is shall be neither easy nor obvious. Therefore the contemporary organisations, in their
search for creation of informational resources and potential, being a multi-context presentation
of the customer’s characteristics, should develop the marketing database system. The proper
identification of the target segments features shall facilitate its service and creation of new-
quality long-term customer relationships, i.e. creation and application of the relational marketing.
The development and processing of information on the customers constitute in each case the
condition of maintaining the good relationships with the target market.
As a result the good long-term relations form the basis for benefits being drawn both by
the company and its customers.
Database marketing is a key component of CRM, which uses stored data not only for
direct marketing purposes, but to also manage the complete relationship with individual cus-
tomers and to develop customized product and service offerings. A combination of CRM, con-
tent management and business intelligence tools make delivery of personalized information a
reality (Caley, 2010).
It is important to assign the proper significance to CRM system, whose practical dimen-
sion involves the purchase of equipment and software allowing the company to obtain the
detailed information on customer. This in-depth information enables the precise definition of
marketing targets. However, one should bear in mind that the decision on investments in CRM
should be preceded by the system re-organisation as a result of which the company shall turn
into a fully customer-focused organisation. Then the database marketing shall become an es-
sential tool for control of the customer relationships.
The advanced database marketing is oriented towards specific events pertaining to the
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consumer. However, in order to boost the processes of initiating the purchase-sales transactions 47
as well as establishing the relationship with the consumer the companies should find the method
and resources, which properly involved shall guarantee the correctly functioning, available and
regularly updated database.
It should be added that the customers should remain under active observation, which
allows for the identification of their changing needs as well as offering to them a product at a
right moment. While the precise offer customisation substantially increases the chances of a
market success enterprise.
References
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ebscohost.com.
Caley, N. (2010). Database Marketing for the Small Business Operator. Home Business Magazine: The
Home-Based Entrepreneur’s Magazine, 17 (1), 34-37.
Cannon, D. A. (2002). The Ethics of Database Marketing. The Information Management Journal, May/
June, 43.
De Pelsmacker, P., Geuens, M., Van den Bergh, J. (2007). Marketing Communication, a European
Perspective. London: Prentice Hall, 397-402. Retrieved 02/01/2013, from http://www.
marketingpower.com/_layouts/dictionary.aspx?dletter=d.
Gregurec, I., Vranesevic, T., Dobrinic, D., (2011). The Importance of Database Marketing in Social Net-
work Advertising. International Journal of Management Cases, 13 (4), 165-172.
Hansotia, B. (2004). Company Activities for Managing Customer Equity. Journal of Database Marketing
and Customer Strategy Management, 11 (4), 319-332.
Kowalska, S. (2004). Klient rozpoznany z bazy danych [The Client Indentified by the Database]. Man-
ager, Retrieved 02/01/2013, from http://www.9477.pl/strony/1/i/3170.php.
Labus, M., Stone, M. (2010). The CRM Behaviour theory - Managing Corporate Customer Relationships
in Service Industries. Journal of Database Marketing & Customer Strategy Management, 17 (3/4),
155-173.
Pilarczyk, B., Mruk, H. (Eds). (2006). Kompendium wiedzy marketing [Compendium of Marketing
Knowledge]. Warszawa: Wydawnictwo Naukowe PWN, p. 96.
Barcik, R., Łodziana-Grabowska, J. (Eds). (2008). Badanie relacji z klientami jako podstawa strategii
biznesowej w nowoczesnej organizacji [The Customers Relations Research as the Basis of the
Business Strategy in a Modern Organisation], Bielsko-Biała: Wydawnictwo Naukowe ATH.
Sobolewska, S. (2000). Marketing bazodanowy [Database Marketing]. Original publication. Retrieved
02/01/2013, from http://cennik.masterplan.pl/publikacje/124_bazodanowy.php.
Stone, M., (2012). Reflections on a Life in Database Marketing. Journal of Database Marketing & Cus-
tomer Strategy Management, 19 (4), 214-218.
Straszewicz, E. (2008). Marketing baz danych [Database Marketing]. Retrieved 16/03/2008, from http://
www.dbmarketing.pl/index/action/showword/ida/19/Marketing-baz-danych.
Straszewicz, E. (2006). Słów kilka o marketingu baz danych [A Few Words about the Database Market-
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marketingu_baz_danych.htm.
Advised by Jozefa Kramer, University of Economics in Katowice, Poland
Received: December 31, 2012 Accepted: February 05, 2013
Joanna Łodziana-Grabowska Ph.D., Assistant Professor, Associate Dean, The Academy of Business in
Dąbrowa Górnicza, ul. Cieplaka 1C, 41-300 Dąbrowa Górnicza, Poland.
E-mail: [email protected], [email protected]
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48
CAUSES OF INDUSTRIAL DISPUTE: A
CASE OF THE GARMENT FACTORIES AT
THE ATHI-RIVER EXPORT PROCESSING
ZONES IN KENYA
Stephen N. M. Nzuve, Lucy M. Kiilu
University of Nairobi, Kenya
Abstract
An industrial dispute may be defined as a conflict or difference of opinion between management and
workers on the terms of employment (Kornhauser, Dubin and Ross, 1954). In today`s business world,
competition is the order of the day. Production, quality, profits and corporate social responsibility are
critical areas where companies can improve competitive edge. To attain competitive edge, companies
must first ensure cooperation and harmonious relationship between all stakeholders.
The general aim of the study was to investigate the causes of industrial disputes in the garment factories
in the Export Processing Zone (EPZ) Athi-River, Kenya. The study employed a descriptive research de-
sign to determine what caused the disputes and what the possible solutions were. The study population
consisted of the shop stewards and human resource managers working at the four garment factories that
were in operation at the time of the study. The research instrument used was a questionnaire administered
to the respondents.
It was established that working conditions, pay rates, terms of employment and employee relations were
the main causes of the disputes. Weak trade union movement, inefficient and inadequate social security,
lack of employment benefits, opportunities for training, promotion, trained personnel at the health ser-
vice, short contract and low pay are the main problems encountered by those working at the EPZ.
The study recommended that employee’s welfare and working conditions are important factors to be
considered by any employer. Both supervisors and workers should work on their relationship and change
attitude towards each other. The terms of employment should be looked into as many employees are
unhappy with the terms of employment especially the short contracts and majority feel they are not rec-
ognized or awarded for their contribution to the organization.
On the other hand, employees need to understand clearly the company policies, rules, regulations and
procedures in place. This can be initiated by management providing employee with manuals or hand-
books. There should also be clear channels of communication in the organization to enhance smooth
operation, understanding and enhance healthy industrial relationships.
Key words: industrial relations, industrial disputes, export processing zone, employee welfare and em-
ployee relations.
Introduction
Background of the Study
The domain of work and organization constitutes an arena in which diverging aims and
interests provide an inexhaustible source of dispute at all levels (Nauta, 1998). The terms of
working relationships must be defined and settled through collective bargaining with each party
(Aswathappa, 2005). Disputes may emerge between different organisations or within the or-
ganisation, or among individuals, employees and employers, organisations and their social and
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Stephen N. M. NZUVE, Lucy M. KIILU. Causes of Industrial Dispute: a Case of the Garment Factories at the Athi-River Export
Processing Zones in Kenya
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political environments. When an industrial dispute arises, the parties involved will normally try 49
to pressurize each other to agree to their terms (Kluwer and Nauta, 2008).
In the industrial field, good industrial relations are necessary to ensure industrial peace.
Verma (2005) states that it is in the interests of all parties that good relations are maintained as
when disputes arise or remain unresolved, there are repercussions for all. To the employer, an
industrial dispute results in the stoppage of work, production, an increase in the average cost of
production as fixed costs are still incurred, fall in sales, turnover and profits in the short term.
The employer may also be liable to compensate customers with whom there is a contract for
regular supply. In the long term, the organization suffers loss of prestige, credit and alienation
of the labor force. In extreme cases, there may be a resultant loss due to destruction of prop-
erty, personal injury, physical intimidation or inconvenience while an employee suffers a loss
of income and psychological consequences of being idle and where the dispute is not resolved
amicably, loss of work. Prolonged stoppage of work will also have an adverse effect on national
productivity and income.
The affairs of industrial disputes are regulated by the Industrial Act, 1947 that provides
for various courts of inquiry, industrial tribunal and boards of reconciliation (Industrial Rela-
tions, 2012). There are two types of industrial disputes: - Interest disputes and Rights or griev-
ance disputes. Interest disputes relate to determination of new wage level and other conditions
of employment while rights dispute relate to interpretation and application of existing standards
and usually involve a worker or group of workers. Under the category of right disputes, claim is
made that the workmen have not been treated in accordance with the rules, individual contracts
of employment, laws and regulations and as per collective agreements. Such grievances may
be regarding retrenchment, dismissal, payment of wages, working time, overtime, demotion,
promotion, transfer, seniority, job classification, work rules and fulfilment of obligation relating
to safety and health laid down in an agreement.
However sound the underlying relationship between a management team and the work-
force may be, there is always a scope for mistakes and misunderstanding on both sides. It is
prudent, therefore, to devise an agreed upon procedure to be followed by the parties if a dispute
arises (Cole, 2002). It is also necessary to develop supportive climate around social and psycho-
logical needs of all employees and management.
The Export Processing Zones (EPZs) are a special kind of industries that specialize in the
production of goods mainly for export to the European and USA markets. Kenya inaugurated
her EPZ program in 1990 as part of the Export Development Programme being undertaken
by the government to transform the economy from import substitution to a path of export led
growth. EPZs are designed to further integrate Kenya into the global supply chain and attract
export oriented investments in the zones thus achieving its economic objectives of job creation,
diversification, expansion of exports, increase productive investments, technology transfer and
creation of backward linkages between the zones and the domestic economy. The zones are set
up within designated areas in Nairobi, Thika, Mombasa and Athi-River.
The zones provide superior industrial and business infrastructure which includes ready
factory buildings for rent or sale, serviced land for construction of building, office premises
to let, water, electricity, sewerage, supply service, access roads to the factories, landscaping,
garbage collection and disposal, street lighting, illuminated perimeter fence, 24 hour security
and customs offices within the premises. Athi-River EPZ is Kenya`s leading industrial park
designed to offer new export oriented projects an ideal location for establishment. It was the
first publicly developed zone, offering the best of world class infrastructure, generous tax incen-
tives, a supportive environment and a business friendly operating system all within a spacious
and well maintained park (Export Processing Zones, 2012).
The EPZ are managed and promoted by the Export Processing Zone Authority (EPZA).
At the EPZ, attractive incentives schemes are offered to ensure lower cost operations, faster set
up and higher profitability through the establishment of an effective service at the EPZ author-
ity to facilitate all stages of the investment process. The program has contributed significantly
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50 to achieving these objectives with over 40 zones in place, close to 40,000 workers employed
and a contribution of 10.7% of national exports. These enterprises have been set up to engage
mainly in the production of garments and other textiles in order to meet an export quota allo-
cated by the US under a third World Markets Assistance Programme. Over 70% of EPZ output
is exported to the USA under the African Growth and Opportunities Act (AGOA). Projects
particularly desirable at the EPZ are garment manufacturing, food processing, fresh produce,
jewellery and gem stones, pharmaceutical products, herbal medicines,cosmetics,personal care
products, packaging materials plastics, glass, aluminium and cans, textile yarn, electronics and
building materials.
Statement of the Problem
Despite the critical contribution of the EPZ zones to the national economy and the large
success realised towards the attainment of the original intended aims of the zones, the industry,
especially the garment factories in Athi-River are prone to industrial stand offs with employees
frequently calling for strike action and striking.
Mkok (2011) did a study in this area but with a focus on the efforts made by the
government through the Ministry of Labour to resolve these disputes to sustain employment
thus eradicating poverty among employees and protect investors who have invested heavily in
the zones. Another study by Omollo (2006) focused on investigating the relationship between
employee indiscipline and limited education.
There is thus no known study investigating causes of the rampant industrial conflicts
despite the critical importance of such a study as establishing the cause would go a long way in
providing long lasting solutions to the industrial dispute and conflict at the garment factories at
the AthiRiver EPZ.
Aim of the Study
The aim of the study was to establish the causes of industrial disputes in the garment
factories at the EPZ in Athi-River.
Contributions of the Study
The findings of this study would be of value and interest to various stakeholders.
1) The employees and management at the garment factories at the EPZ in Athi-River will
benefit as it will reveal causes of the disputes and propose solutions.
2) The EPZ will also benefit as better relations will lead to greater productivity and in-
creased brand value.
3) The study will provide information that will be useful to Governments and in particular
the ministry of labour in the region in designing and implementing policies of indus-
trial disputes resolution.
4) Other researchers and students of human resource management, industrial disputes and
EPZs will find this study a useful guide in carrying out more research in this area.
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Methodology of Research 51
Research Design
The researcher employed the descriptive research design which attempts to determine,
describe and classify as it uses description, classification, measurement and comparison to
describe a situation. A cross sectional survey was adopted with the population of the study
being all cadres of workers from different departments in the four garment factories.
Sample Size
The sample population was the shop stewards and the human resource managers of the
four garment factories as these were assumed to have expert knowledge on industrial disputes at
the factories. There were eight shop stewards who also acted as employee representatives in each
factory and one human resource manager per factory thus making a sample of 36 respondents.
Table 1. Sample Population and Response Rate.
Designation No. Per Factory Total in the four factories

1 Factory Manager 1 4
2 Shop steward/employee representative 8 32
36
Data Analysis
Characteristics of the Sample
Out of 36 questionnaires distributed as per table 1, 29 were returned signifying a re-

sponse rate of 80% with a distribution of 57% of female gender and 43% female. The analysis
of the respondents also showed that 23% of the employees were between 19 and 25 years, 50%
between 26 and 29 years, 23% between 30 and 39 and only 4 % above 40 years old. Of the
respondents, 42% were married, 57% single and 1% either divorced or widowed.
Education Level
The study sought to determine the respondents’ level of education. 1% were university
graduates, 18% had college papers with 81% having just secondary level education or below
with a distribution across the four factories as in Table 2. This data was provided by the human
resource managers of the whole population.
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52 Table 2. Respondents’ level of education.
Factory 1 Factory 2 Factory 3 Factory 4 Total
Education
level Count
Count
Count
Count
Count
%
%
%
University 15 1 15 1 13 1 9 1 52 1
degree
College 375 27 250 16 230 15 187 16 1042 18
Secondary 975 71 1335 83 1257 84 1004 84 4571 81
and below
1365 100 1600 100 1500 100 1200 100 5665 100
Terms of Employment
Three types of terms of employment were identified from the analysis as casuals, perma-
nent and contract. 67% of the respondents were casuals, 19% on short contract of one year and
less with only 14% on permanent terms of employment.
Figure 1: Terms of employment.
Salary Scales
Human resource managers from the four factories were asked to indicate level of earn-
ings for the various categories of employees. 55% of the employees within the factories were
earning less than 10,000 Kenya shillings, 33% between 10,000 to 19,999 Kenya Shillings, 10%
between 20,000 and 40,000 Kenya Shillings with only 1% earning higher than 40,000 Kenya
Shillings.
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Table 3. Salary scales. 53
Salary in
Kenya Shil-
scales
Count
count
count
count
count
lings %
%
%
Below 10,000 Very Low 754 55 891 56 879 58 611 51 3128 1
10,000- low 490 36 534 33 468 31 392 33 1897 18
19,999
20,000- Medium 103 8 157 10 138 9 189 16 589 81
39,999
40,000 and High 18 1 18 1 15 1 8 1 51 81
above
1365 100 1600 100 1500 100 1200 100 5665 100
Results of Research
Satisfaction with Working Conditions
The respondents were asked to indicate their levels of satisfaction with the working
conditions at the garment factories. None (0%) were completely satisfied, 13% were satisfied,
63% were dissatisfied while 25% were completely dissatisfied. Of the respondents, 64% were
satisfied with the efforts management were making to improve the working conditions while
14% commended progress made.
Table 4. Levels of satisfaction with working conditions.
Satisfaction with
working condi-
Count
Count
Count
Count
Count
tions %
%
Completely satis-
0 - 0 - 0 - 0 - 0 -
fied
Satisfied 2 25 2 25 13 1 1 13 6 13
Dissatisfied 7 87.5 5 62.5 6 75 - - 13 63
Completely
1 12.5 1 12.5 1 13 2 25 5 25
Dissatisfied
Satisfaction with Management Efforts to Improve Working Conditions

While a large percentage of the respondents were dissatisfied with working conditions,
44% were satisfied with management efforts to improve working conditions, 37% were dissat-
isfied while 19% were indifferent.
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54 Figure 2: Satisfaction with management efforts to improve working condi-

tions.
Relationship with Management
The respondents were asked to evaluate relationship with management. 2% described

the relationship as very friendly, 19% indicated friendly, 31% not bad, 47% rated the relation-
ship as bad and 1% as very bad.
Figure 3: Relationship with management.
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Effectiveness of the Grievance Handling Procedure 55
19% of the respondents rated the effectiveness of the grievance handling procedure as
satisfactory, 31% as poor, 50% as very poor while none rated the procedure as very effective.
However, all the respondents were aware of the procedure.
The respondents were asked to indicate whether the grievance handling procedure in
place was effective and provided a platform for the resolution of industrial disputes at the gar-
ment factories. It was a concern that none of the respondents (0%) indicated that the procedure
was very effective. 19% indicated thought it was satisfactory while a 81% felt it was either very
poor or poor.
Table 5. Effectiveness of the grievance handling procedure.
Effectiveness
Count
Count
Count
Count
Count
%
%
%
Very effective 0 - 0 - 0 - 0 - 0 -
Satisfactory 1 12.5 2 25 2 25 1 13 6 19
Poor 4 50 3 37.5 3 37.5 3 38 13 31
Very poor 3 37.5 3 37.5 4 37.5 4 50 13 50
Dissatisfied 8 100 8 100 8 100 8 100 29 100
The researcher recommends that this procedure be reviewed urgently to ensure that the
majority of the respondents believe it to be effective as this is key to industrial dispute resolu-
tion.
Causes of Industrial Disputes
From the data analysis, the causes of employee grievances are poor leadership styles
and interpersonal relations, low salary or wages, poor working conditions, rigid company rules
and regulations, low recognition for work done, terms of employment, intimidation of work-
ers and their representatives, long working hours and job insecurity. All the causes have a very
close range of the mean and standard deviation and thus contribute almost equally to industrial
disputes.
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56 Table 6. Causes of industrial disputes.
Cause Mean Std. Deviation

Poor leadership styles and interpersonal relations 3.7 0.48
Low salary/wages 3.7 0.48
Poor working conditions 3.6 0.52
Rigid company rules and regulations 3.5 0.85
Low recognition for work done 3.5 0.85
Terms of employment 3.4 0.84
Intimidation of workers and their representatives 3.4 0.84
Long working hours 3.3 0.82
Job insecurity 3.2 0.63
Proposed Solutions
The respondents were asked to identify possible solutions to the industrial disputes in the
garment factories of Athi-River, EPZ, Kenya.
Table 7. Possible solutions to the industrial disputes.
Possible solution Mean Std. Deviation

Annual salary reviews 3.6 0.52
Bonus and rewards based on performance and discipline 3.5 0.71
Team work enhanced 3.4 0.70
Clear communication, especially on matters affecting employees 3.4 0.70
More workers should be on permanent terms of employment 3.3 0.82
Recognition of trade unions 3.2 0.79
Health and safety of employees within the factories should comply with government rules
3.1 0.74
and regulations
Contracts should be at least for three years. 2.9 0.84
Overtime should be well compensated. 2.4 0.54
Discussion
The study reveals that with the world economy sinking deeper into recession, millions
of workers at the Garment factories in the Athi - River are on temporary terms without benefits
or job security at minimum wage per day. Unions are also weak with predominantly strained
employee relations. This situation leads to industrial disputes in these factories and some of
the proposed solutions by the respondents include instituting annual salary reviews ,bonus and
rewards based on performance and discipline,enhacing team work and clear communication
especially on matters affecting employees, having more workers on permanent terms of em-
ployment.Others are recognition and strengthening of trade unions, improving health and safety
of employees within the factories to comply with government rules and regulations while con-
tracts should be at least for three years with terminal benefits and overtime should be well
compensated.
These findings agree with those of (Mkok 2011) , a study that had focused on the efforts
being made by the government through the Ministry of Labour to resolve the disputes with the
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aim of sustaining employment and eradicate poverty. Omollo (2006) investigated the relation- 57
ship between industrial disputes and employee indiscipline and lack of education and came up
with the same findings as this study citing working conditions,terms of employment, pay rate
, weak grievance handling mechanisms and employee relations as being major factors causing
industrial disputes and unrest.
Conclusion
The new Kenyan constitution 2010 extends equal rights and freedoms to all. The Labour
Relations Act, 2007; the Employment Act, 2007; Work Injuries Benefits Act, 2007 and the
Occupational Safety and Health Bill, 2007 are the primary pieces of legislation governing em-
ployment matters in Kenya. The Acts codify the common law rules of the work place including
basic conditions and benefits of employment. The findings of the study however indicate that
despite this comprehensive legal framework, there is a high level of temporary jobs in the EPZ
garment factories. Due to the rising unemployment rates in Kenya, workers are forced to perse-
vere poor industrial relations, poor working conditions, high job insecurity, long working hours,
discrimination and low wages. It was further established that during compliance audit visits by
the brand customers, employees are provided with working facilities and protective gear and
cautioned on what to say to the audit officials so as to pass the compliance audit.
However, the study also showed significant progress made by management to resolve
industrial disputes with employees being provided with better working facilities, medical ser-
vices, health and safety equipment and affordable food canteens within the EPZ premises. Em-
ployees are also being allowed to join trade unions freely and one of the factories has a day care
facility run by employees of the company to look after small babies while their mothers work.
The study had a limited sample of human resource managers and employee representa-
tives. It would be useful if the scope was expanded to include all cadre of employees.
Recommendations
The study identified a number of causes of industrial disputes and possible solutions to
the challenges experienced:
1) The EPZs should offer greater flexibility to its employees ensuring, job satisfaction,
growth on the Job through promotion, training and job rotations thus improving morale
and loyalty.
2) Disputes arising should be addressed as quickly as possible to avoid simmering ten-
sions and loss of trust.
3) Employees should feel that there are mechanisms in place for their protection includ-
ing a safe working environment, fair treatment, proper incentives and rewards, recog-
nition, participation in decision making and appreciation.
4) Causes of industrial disputes such as poor leadership styles and interpersonal rela-
tions, low salary or wages, poor working conditions, rigid company rules and regula-
tions, low recognition for work done, terms of employment, intimidation of workers
and their representatives, long working hours and job insecurity need to be addressed
in the long term. Proposed solutions are Annual salary reviews, bonus and rewards
based on performance and discipline, team work enhanced, clear communication, es-
pecially on matters affecting employees, more workers should be on permanent terms
of employment, recognition of trade unions, health and safety of employees within the
factories should comply with government rules and regulations, contracts should be at
least for three years and overtime should be well compensated.
5) Guidelines for dispute resolution and work place ethics including company rules and
regulations should be disseminated and made available to all employees.
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58 6) Managers and supervisors must be developed to be good mentors and team leaders.
7) Communication channels within the EPZs must be enhanced.
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Lucy M. Kiilu BBA (HRM), MBA, Human Resources Manager, Box 2032 00100 Nairobi, Kenya.
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60
An Assessment of Islamic work
ethics of employees in
organizations: Insights from the
United Arab Emirates
Shagufta Sarwar
Swansea University, Wales, UK
James Baba Abugre

University of Ghana, Legon, Ghana.
Abstract
The purpose of this research is to present a critical assessment of Islamic work ethics (IWE) of employees
in public and private organizations in the United Arab Emirates (UAE). The work uses a quantitative
survey method to gather the opinions of employees in both public and private organizations in the UAE
on IWE. The findings of the study revealed that the ability of a worker to balance his or her personal
and organizational needs in the workplace meant success in his religious and organizational life. Also,
findings showed that being productive in work organizations should not be tied to the amount of money
one gets, and that illicit behavior like stockpiling grains and other essential commodities for the purpose
of profit - making in times of need is unethical and un-islamic. This study clearly indicates the need for
employees and managers to uphold the Muslim teachings which can be manifested in their daily work
attitudes (best practices) in various organizations. The study highlights the various ethical variables that
employees believe are essential to work organizations while keeping faith to the Islamic religion.
Key words: commitment, employee work practices, HRM in UAE, Islamic work ethics, organization.
Introduction
In recent years, attitudes toward work in organizations are being assessed as the panacea
to organizational success. In fact, empirical results provide strong evidence that commitment
to work ethics and ‘Professional integrity’ as a moral quality or virtue has become increasingly
topical (Banks, 2010). Work ethics and employee commitment to ethical work patterns are
important subjects in organizational studies, and work ethics in particular form an integral part
of an organizational set up (Peters & Waterman, 1982; Singhapakdi, Kraft, Vitell, & Rallapalli,
1995). Both employers and employees have equal roles in bringing up the work ethics which
should be practiced in organizations. The relationship between organizational dedication and
work ethics has been presented quite well in the commitment literature (Elizur, Borg, Hunt,
& Magyaribeck, 1991; Jones, 1997; Yousuf, 2001). Work ethics influence employees’ attitude
toward their job as well as the organization they work for (Glazer, Daniel, & Short, 2004). The
dawn of the industrialization era in the 18th and 19th centuries is widely attributed to the emer-
gence of work ethics in the Western world. This was mainly due to the economic changes and
increases in religious awareness (Zuboff, 1983; Weber, 1992). However, researchers have sug-
gested that the industrial capitalism of 18th century drove the trend towards increased productiv-
ity and profit making, forcing employers to look for some new approach in relating employees
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to work demands (Zuboff, 1983; Welsh, 2005). Thus, the conceptualization of work ethics was 61
necessary for the management of the newly established organizations to fuel the industrial
growth while engaging the employees both physically and spiritually (Diddams & Whittington,
2003).
Similarly, the religious and economic conditions of the 19th century have also been at-
tributed to the increasing interest in ethical work practices in the West and the Europe region
(Porter, 2004; Ali & Al Owaihan, 2008). Prior to the industrial revolution, work was not held
in high esteem and was associated with negativity. However, after research proved that work
ethics is associated with the need for achievement (McClelland, 1961); several researchers
have since shown an increasing interest in examining the relationships between work ethics and
organizational and social factors. This has been particularly manifested in Islamic work ethics
as a source of employee commitment to good organizational practice. Consequently, various
researchers in IWE have attempted to look at IWE vis-à-vis employees’ attitude, commitment,
satisfaction, and performance in organizational work. For example, Abeng (1997) looked at
‘business ethics in Islamic context: perspectives of a Muslim business leader’; Ali and Al-
Kazemi (2006) on ‘Islamic work ethic in Kuwait’; Ali (2001) on ‘the Islamic work ethics in
Arabia’; Ali and Al-Owaihan (2008) on ‘Islamic work ethic: a critical review’; Yousuf (2001)
on ‘Islamic Work Ethics : A moderator between organizational commitment and job satisfaction
in a cross - cultural context’.Notwithstanding its wide-ranging importance to organizations, the
above research works have been centered on the importance of Islamic work ethic (IWE) on or-
ganizational outcomes. However, little study has been devoted to assessing Islamic work ethic
(IWE) within the scheme of employees’ knowledge and practice. Thus, this work hopes to fill
this part of the Islamic literature gap by assessing employees’ IWE in the United Arab Emirates
(UAE). Consequently the main objective of this work is to provide an empirical assessment of
employees’ views on work ethics with relation to the Islamic faith.
Problem of Research
The Islamic work ethic
Literature on Islamic work ethics gives an expressive and a wide range of features under-
pinning the moral foundation of Muslims. The concept of Islamic work ethics (IWE) is a body
of literature that deals with work related values, attitudes and job commitment. The IWE traces
its origin to the Quran and the teachings of the Prophet Muhammad (Peace be upon him). For
example, in chapter 6: 132 of the Quran, it is stated that ‘‘for all have been ranked according
to their deeds’’. This means all true believers should engage and be committed to their work
faithfully, and that ‘‘God hath permitted trade and forbidden usury’’ (Quran 2:275). Hence, the
foundations of good deeds that men ought to abide by are rooted in the Quran.
According to Ahmad (1976), Islamic work ethics (IWE) does not stand for life denial
but rather for life fulfillment that holds business motives in the highest regard. Similarly, Imam
Ali (A.D. 598-661) advised that “persist in your action with a noble end in mind… failure to
perfect your work while you are sure of the reward is injustice to yourself”. Therefore, a decent
engagement and commitment to work is the cornerstone of the IWE. Such engagement facili-
tates personal and societal goals (Ahmad, 1976). According to Ali (2005), the IWE is founded
on four primary concepts: effort, competition, transparency, and morally responsible conduct.
He thus suggests that, the four pillars collectively would inspire confidence in the business set-
ting and reinforce social contract, ethical understanding, and motivates market actors to focus
on meeting their primary business responsibilities. Hence, employees ought to have faith and
commitment in each others’ good intentions and adequately perform their responsibility at the
workplace. Therefore, it can be observed that IWE is a means to further one’s self-interest eco-
nomically, socially and psychologically, and also; to sustain social prestige and to advance so-
cietal welfare while keeping and reaffirming one’s faith in Allah. For this reason, Islam attaches
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62 utmost importance to all sort of productive work. Not only has the Quran elevated al- ‘Amal
(productive work) to the level of a religious duty but it has also consistently stated in more than
50 verses productive means of work in conjunction with imaan (faith).
In view of the importance of IWE as a core human process to successful work in orga-
nizations, an assessment of employees’ knowledge and practice of the IWE in some selected
organizations in the United Arab Emirates (UAE) is necessary.
Islamic religion and HRM
Despite the fact that there is a potential association between religious beliefs, manage-
ment practices and organisational outcomes, most organizational theorists have failed to report
that religion constitute an important aspect of management practices (Sedikides & Gebauer,
2010). Extant literature has been neutral in linking or delinking religion to management prac-
tices. However, Hofstede (1997, p. 16) argues that culture precedes religion and states that:
“Religious affiliation by itself is less culturally relevant than is often assumed if

we trace the religious histories of countries, then the religion a population has embraced
along with the version of that religion seem to have been a result of previously existing
cultural value patterns as much as a cause of cultural differences”.
Thus, religion and religious belief have become a part of national cultures which intend
seep into management practices of organizations. Thus, while Saturday and Sundays are rec-
ognized as universal resting days after a week’s labor , in the UAE and in most Arab countries,
Fridays are rather given as holidays in order to make ways for Muslim prayers. Similarly, there
is an extensive body of research on the impact of rituals and ceremonies in Japanese organisa-
tions, and in many other countries. For example, in most Ghanaian organizations, prayers are
offered before the start of work each morning. Hence in present times, there is a conscientiza-
tion of what has been variously referred to as a religious (re)awakening, - the subject of religios-
ity and religion has come to the forefront of management and organisational research (Mellahi
& Budhwar, 2010). This interest is reflected in the growing evidence affirming that religious
beliefs and values have significant direct and indirect effects on a wide range of behaviors in
the workplace including job satisfaction (King & Williamson, 2005), leadership styles and ef-
fectiveness (Reave, 2005), ethical behaviour (Weaver & Agle, 2002), as well as legal challenges
to deal with religious diversity in the workplace (Morgan, 2005) and employment practices
(Budhwar & Fadzil, 2000).
There has been some development on the impact which Islamic religion brings to HRM
practices as evident by the recent works of Branine and Pollard (2010), on a range of Islamic
behaviors in the workplace including HRM and Islamic management practices, Ali’s(2010)
research on Islamic challenges for the HR function in present day organizations, Islamic work
ethics (Ali & Al-Owaihan, 2008), work levels of motivation in Islam (Ali, 2009), Leadership
and Islamic work motivation (Ahmad, 2009), Influence of ethical beliefs, national culture and
institutions on preferences for HRM (Katou, Budhwar, Woldu, & Al-Hamadi, 2010) have all
been documented in the HR literature. These studies confirm an expected understanding of the
various aspects of cultural and religious values, and organizational and ethical beliefs which can
help to distinguish HRM practices thereby predicting managerial behaviors in organizations.
HRM from the Islamic perspective is viewed as an extension of the organizational as-
pects which relate to employee and management behavior, such as their relationships with one
another, management style, and more importantly, the culture of the organization itself (Tayeb,
1997). Thus, Mellahi and Budhwar (2010) assert that management from Islamic standpoint
deals with decision making styles in Islam emphasizing the principle of consultation (Sharia),
and Islamic core values including the principles of honesty (Al-Sidq), trust (Al-Amanah), jus-
tice and fairness in dealing with employees (Al-Adl), team work and cooperation (Al-Ta’waan),
and excellence or perfection (Al-Ikhlas).
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Hence, it is worth noting that HRM from the perspective of Islam is not only relevant for 63
organisations operating in major Islamic countries, but also in the global world of management
since Muslims are found working in all corners of this globe. Beside, Islamic work behaviors
may not be largely at variance with mainstream work behaviors in orthodox organizations.
Islam is a religion and culture of people like other sects. Islam is just an Arabic word which
literally means submission to the will of God in all aspects of life. Hence, this current work as-
sesses the employees work behavior in organizations in relation to the edicts of Islam in a bit to
contribute to the overall HRM literature.
Research Focus
This study focuses on organizational behavior with respect to Islamic work ethics. The
historical significance of IWE is that it represents the compromise made between the moral
and the practical requirements of workers in contemporary organizations. Hence, the demand
that Muslims strive to submit themselves for good behavior in respect of Islamic principles of
work ethics. Consequently, this piece of work assesses both private and public organizations’
employees on IWE in the UAE. The substantial need to examine IWE and organizational out-
comes in a non-Western environment where about 90 percent of workers are expatriates is very
important. Thus, this paper hopes to share the Islamic perspective on business ethics, and to
provide some knowledge of Islamic philosophy in order to help managers conduct business in a
predominantly Muslim culture. The findings of this study are expected to provide a theoretical
and practical representation of Islamic work ethics of employees in both the formal and infor-
mal sector organizations.
Research Methodology
An empirical study was set up to assess Islamic work ethics on the practices of individual
employees in a cross-sectional corporate sample in the UAE. To achieve the objective of the
study, a quantitative survey of the opinions of a large number of workers in both private and
public organizations was employed.
A non-probability sampling method was used in selecting the organizations for the study
while a probability sampling was used to select the employees.
Sample Population
The sample for the organizations was conveniently drawn from the directory of organi-
zations in the UAE. To be able to manage the sample size effectively, we selected four organiza-
tions from the directorate made up two public organizations and two private organizations. The
preference for public and private organizations is to present a fairly representative and different
viewpoints among members of diverse administrative communities. The two private organiza-
tions comprised of (1) Bottled water production and (2) Printing press, while the two public
organizations are from (1) a hospital and (2) a University. Thus, 25 questionnaires were given
equally to each organization in order to create a balance.
Sampled Participants
The sampled participants of the study were based on a random sample size of 100 full-
time employees of the four organizations to whom the questionnaire was distributed. Our main
objective was how accurate or uncertain the sample results will be in terms of representing the
population (Yang, 2010). Thus, the choice of probability sampling of the participants. Similarly,
“One of the real advantages of quantitative methods is their ability to use smaller groups of
people to make inferences about larger groups that would be prohibitively expensive to study”
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64 (Holton & Burnett, 1997, p. 71). Consequently, 100 constructed questionnaires were distributed
among the randomly selected employees at the four companies equally ( 25 questionnaires
each). However, only 76 questionnaires were returned. Out of these 4 questionnaires were filled
incorrectly making them unusable thus representing an overall response rate of 72% which was
used for the analysis. The response rate for male participants was 60%, while that of female was
40%. Participants with higher university degree represented 64%, those with college education
represented 17%, participants with post graduate masters degree constituted 17%, while those
with doctoral degree represented 0.3%. Therefore, without any shred of doubt, it could be said
confidently that participants were not ignorant of their opinions on the issues discussed, because
they constituted the people of high academic integrity.
Construct Measurement
The survey questionnaire was pre-tested with 10 people in order to get a feedback to
refine the content and the structure of the survey questionnaire. In addition, the survey instru-
ment was sent to all the four Human Resource managers of the selected organizations before
distribution to employees. This was necessary to ensure that the content did not go against the
ethics of the various organizations, especially as the UAE is an Islamic country. Likewise, this
was to get a feedback to refine the content and the structure of the survey questionnaire, and
also enhance the internal validity of the instrument. The survey itself included a cover page that
informed participants about the study’s purpose, confidentiality of results, research ethics and
the survey format. All these were to help offset any common method bias and also to strengthen
the reliability of the measures. Descriptive statistics were employed to explore the data.
Measurement of Variables
A questionnaire comprising of 16 questions relating to participants’ biographical infor-

mation, and work related conduct was developed. The first section comprised of six biographi-
cal questions (gender, age, religion, educational background, and professional experience)
which were collected using a nominal scale with pre-coded options. The second part that looks
at the overall Islamic work conduct e.g. Assessing the value of work in life and gauging legal
and illegal work comprised of 10 constructs using a��
five point scale for the purpose of measure-
ment (1=Strongly Disagree; 2=Disagree ; 3= Neither ; 4= Agree ; 5=Strongly Agree). The
items constituting the value of work were adapted from Ali and Al Owaihan (2008), and Ali and
Al-Kazemi (2006)’s instruments and modified to fit into the present study.
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Table 1. Measures on Islamic Work Ethics. 65
Please indicate to what extent you agree with the following questions
1 (Strongly Disagree) 2 (Disagree) 3 (Neither) 4 (Agree) 5 (Strongly Agree)
Q1 Feeling a sense of obligation and dedication towards work is vital for success
Q2 Balancing personal and organizational needs means success in the work place.
Q3 Being productive in work is not important if the salary package is good enough
Q4 Delaying/ Missing prayers is acceptable for work related reasons.
The position at work must be based on one’s qualifications, skills and knowledge rather than connections and
Q5
networking.
Q6 Sharing all the information / training subordinates are vital for successful business operations.
Using job resources (telephone, fax, printer, internet, time and personnel) for personal purposes is occasion-
Q7
ally acceptable.
Q8 Doing indirect trade or business with alcohol or related products is fine its means more money.
Q9 Stocking up food products such as rice, wheat or other necessities is fine since it means more profit.
Making the laborers to work extra hours for a project in hot weather is acceptable since they are paid well for
Q10
their overtime
Data Analysis
Descriptive statistics including simple frequencies were employed as analysis of the data
collected for the study. Descriptive statistics are essentially concerned with summarizing, pre-
senting and describing the data set. They focus on establishing facts and are used particularly
when, “...the researcher is more concerned with describing the extent of occurrence of a phe-
nomenon than by studying its correlations” (Punch 2005, p. 14-15). Hence, the descriptive sta-
tistics in this study contain percentage frequencies of all items which highlight the descriptive
analysis of the variables based on the assessment of the Islamic work ethics of the participants
in the various organizations studied.
Results of Study
The results of this research were divided into two major parts which constitute Islamic
work ethics that the study elicited from the participants. The first set of seven questions repre-
sents the value of organizational work life, and the second part assesses the constituents of what
is legal and illegal work ethics with regard to Islamic principles.
Measuring the Value of Work Life in Organizations
The value of work in Islam is different from other religious and political doctrines.
Therefore, we pose the above questions in Table 1 to respondents. From the results, 66% of
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66 participants responded with ‘strongly agree’ that a ‘sense of obligation and dedication towards
work is vital for success’ according to Islamic principles, while 26% responded ‘agree’; 7%
said ‘neither’, and only 1% said ‘disagree’.
With regard to ‘balancing personal and organizational needs as a means of success in the
work place’, 42% of the total number of respondents said they ‘strongly agree’, 38% of respon-
dents said they ‘agree’, 13% of respondents stayed ‘neutral’, while 3% and 4% said ‘disagree’
and ‘strongly disagree’ respectively. This is visually depicted in the figure below.
Figure 1: Balancing personal and organizational needs means success at work-

place.
The study also sought to know from respondents if people worked hard only because of
higher salaries. Thus, question three was posed to respondents and the following results were
procured: 43% of the total respondents said ‘strongly disagree’, 33% said ‘disagree’, 7% said
‘neither’, 13% said ‘agree’ and 4% said ‘strongly agree’.
With regard to linking prayers to public work, respondents were asked if it was essential
to delay or overlook prayers for the sake of work related reasons. The majority of the respon-
dents constituting 42% said they strongly disagree with taking prayers at the time of work, 26%
said they also disagree, 7% said they neither agree or disagree, 21% said they agree, while 4%
said they strongly agree to prayers at the time of work.
The study also sought to solicit workers’ views on the relationship between one’s skills
and position at work. Hence, question five was posed to respondents. More than half of the total
respondents representing 58% strongly agreed that an employee’s position at work should be
based on qualification and skills, 14% said ‘agree’, 19% said they neither agree or disagree, 4%
said they ‘disagree’ and the remaining 5% ‘strongly disagreed’. The response is illustrated in
the figure.
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67
Figure 2: Position must be based on credentials or networks / connections.
On sharing of information and training subordinates to succeed in business, 43% of the

total respondents said ‘agree’, and 38% of respondents said ‘strongly agree’ to the importance
of information sharing and developing junior workers to succeed in their work. On the other
hand, 2% and 11% of the respondents said ‘strongly disagree’ and ‘disagree’ respectively, while
6% of respondents said ‘neither’.
With regard to the use of office resources for personal purposes, 31% of the respondents
agreed that it was good to use organizational resources for personal purpose from time to time,
22% said they neither agree or disagree, 21% said they disagree, 19% said the strongly agree,
while 7% said they strongly disagree.
Gauging what is Legal and Illegal Work
Since ��
Islam forbids all forms and practices which are based on alcohol, gambling, ex-
ploitation, fraud or monopoly either directly or indirectly, the study sought to elicit responses
from employees as what constitute legal and illegal work ethics.
With regard to employees dealing directly or indirectly with businesses associated with
alcohol and related products, 80% of the total respondents answered ‘strongly disagree’, while
10% of respondent said ‘disagree’ meaning that they vehemently oppose to business practices
associated with alcohol and related practices. Six percent answered neither agree nor disagree,
and 4% said ‘agree’.
The study further sought to understand if stockpiling food products in the form of grains
and other necessities to gain more profit in the future was ethical in the eyes of Islam. With
this, 60% of the total respondents said ‘strongly disagree’, 17% said ‘disagree’, another 17%
said they neither agree nor disagree, while 5% and 1% said ‘agree’ and ‘strongly agree’ respec-
tively.
On aspects of over-using people who work under others, it was sought to find out if mak-
ing labourers work extra in dire conditions simply because they are paid for it would constitute
a bad or a good practise. The results are depicted in the figure below.
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68
Figure 3 : Extra work in harsh condition is not acceptable even if the overtime
is good.
So as evident from the figure above, out of the total number of respondents, 54% said
‘strongly disagree’, 28% said ‘disagree’, 7% said they neither agree nor disagree, another 7%
said they agree, while 4% said ‘strongly agree’. This shows that the majority of the respondents
believed it was not correct to make employees work extra in dire conditions even if the pay is
excellent.

Discussion
The purpose of this study was to evaluate employees’ attitudes towards Islamic work eth-
ics in UAE which is predominantly a Muslim country. One major reason for this is that, Islamic
work ethics are based on a very simple principle of distinguishing between right and wrong
along with the reward and punishment concepts. These ethics originate from the most complete
and authentic sources of the Holy Quran and Sunnah (the teachings of Prophet Muhammad).
Hence, Abeng (1997) argued strongly in one of his works that “To function effectively and ef-
ficiently, every organization needs an ethical framework, not just laws and regulations”(Abeng,
1997: p. 47).
The current study findings revealed that most employees consider it an Islamic duty to
have a positive sense of obligation and dedication towards work. Thus, more than 90% of the
respondents agreed that obligation and dedication to work is vital for success because it con-
stitute a positive work value. Similarly, respondents were of the opinion that the ability of a
person to balance his or her personal and organizational needs in the work place meant success,
and so; about 80% of the total respondents in the study agreed that harmonizing personal and
organizational needs eventually tantamount to success in the work place. This finding is consis-
tent with Al-Modaf (2005) who said ‘In Islam, the activity of work is organized and regulated
in a specific and systematic way’. Hence Muslim employees must be able to balance their per-
sonal desires and needs alongside organizational duties positively if they indeed wish to keep
to Islamic work ethics. Likewise, findings of the current study showed that being productive
in work organizations should not be tied to the amount of money one gets as compensation.
Respondents felt that it is un-Islamic for Muslim workers to match reward with creativity or the
amount of work needed to be done. Thus, 77% of respondents agreed that being productive at
work should not necessarily be tied to the salary package that goes with it. This finding is also
consistent with Abeng (1997: p. 50) who advised that Islam attaches utmost importance to all
sorts of productive work. Not only has the Quran elevated al- ‘Amal (productive work) to the
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level of a religious duty but it mentioned such a work consistently, in more than 50 verses, in 69
conjunction with imaan (faith).
The discussion about justice and care arising from employees work has been observed by
Gilligan (1982) that men operate within an ethic of justice that emphasize rights and rules, while
women function within an ethic of care based on relationships and responsibilities. Hence, three
main questions which dealt with fair promotion, relationship with subordinates, and the use of
organizational resources yielded the following results: first, 72% of respondents agreed that it
is fair and just as a Muslim to seek promotion in a just and righteous manner. While 19% of
respondents neither agreed nor disagreed, 9% of respondents disagreed that position at work
should not be based on connections. Secondly, majority of employees (81%) were in agree-
ment that care and sharing of information among employees in the same organization, and also;
assisting junior workers in terms of training were vital for organizational success anchored in
good ethical work behavior. Thirdly, while about half of respondents (40%) believed that the
use of organizational resources e.g. (telephone, fax, internet, time, and workers) for personal
gain is unethical as per Shariah laws, more than half of the number of respondents (58%) felt
that enjoying the use of organizational resources for personal gains did not necessarily consti-
tute a negative work ethic in Islam. Therefore, from an Islamic ethicist’s perspective, justice,
care and sharing of information are also the legacy of Universalist Kantian and Utilitarian eth-
ics in which rights and justice are seen to belong to rational, autonomous individuals in control
of their own destiny. Similarly, a personal commitment to good practice ought to be found
within a set of political commitments (Ferguson, 2008) so that people are able to resist nega-
tive neo-liberal policies and practices and promote the social justice processes and outcomes
that should be at the heart of all professions. Accordingly, Abeng (1997) advocates a general
appreciation for the vocation of business, because the Quran often speaks about honesty and
justice in trade. (See Quran 6:152; 17:35; 55:9). The Quran has repeatedly emphasized on good
conduct, and therefore employees must keep to the Islamic ethics by emulating the teachings
of Prophet Muhammad (peace by upon him) throughout their lives, including, of course, their
conduct in their work places. The study findings also showed that respondents were candid to
give their opinions on what constitute legal and illegal work with reference to Islamic work eth-
ics. An overwhelming majority of the total respondents (91%) vehemently opposed practices
like workers engaging directly or indirectly in businesses associated with alcohol and related
products. It is a widely held belief that these practices instigate workers to behave irresponsibly
towards their fellow beings (Hino, 2011).
Also, results showed that illicit behaviors like stockpiling grains and other essential com-
modities for the purpose of making profit in times of need is unethical, accordingly; 77% of
respondents opposed this practice. In addition, making employees do extra work in a project
under cruel conditions because they might have been paid well was strongly opposed as a good
ethical work behavior. Hence, 82% of the respondents said making laborers work extra hours in
hot conditions even if they are paid for it is bad. The contribution of this article should be an eye
opener to human resource management practices particularly in the Arab world. For instance,
there have been many accusations of the ill-treatment of foreign workers in work organiza-
tions of the Gulf regions (Khan, 1991). Muslims who are at the helm of affairs must realize
that it is un-Islamic and unethical to treat people of other faith or foreign workers with disdain.
Compensations must be determined in advance and wages must be given equally to all workers
immediately once work is completed. The Holy Quran states that ‘if one hires an employee, he
must inform him of his wage’ and ‘the employee must get his wage promptly after the work
is done’. No employer should ‘withhold from the people the things that are their due’ (Quran,
7:85). Along the same lines, Prophet Muhammed ( Peace be upon him ) has urged employers to
ensure prompt payment of dues as quoted in Ibn Majah Collection of Hadiths, by saying that,
“Pay the worker for his work before his sweat dries” (Ibn Majah, Hadith #: 2443).
Thus, management and leaders in organizations must rise above religious rhetoric, and
rather embrace the practical realities of extending the teachings of the Quran to all workers ir-
respective of their origin.
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70 Conclusion and Implications of the Study
This study has shown the important relationship between Islamic work ethics and em-
ployee attitude to work. The results of the study demonstrate that workers in the UAE are very
aware of their limitations to what constitute bad ethical work behaviour that would not be
tolerated in Islam. Even though most respondents believe that all workers have an obligation
to work according to the dictates of the Quran, there are pockets of employees who still need
to understand the significance of pursuing total work etiquettes espouse by the Islamic faith.
The study thus call for a serious look at the operations of organizations in the UAE to focus
on developing all levels of employees in the area of organizational work ethics with emphasis
from an Islamic perspective. One area of organizational process to reinforce this is effective
communication from the side of leadership in organizations. Effective leadership communica-
tion will encourage work behaviors in a positive manner and consequently affect organizational
work output (Abugre, 2011).
From a social point of view, this study clearly indicates the need for employees to keep
upholding the Muslim teachings which can be manifested in their daily work attitudes (Best
practices) in the various organizations in the UAE. Theoretically, the study has contributed
to the literature of Islamic work ethics in gulf regions, and a modest input into organizational
behavior.
Nevertheless, like all other theoretical works the study is limited in the generalizability
of a small sample of workers in a limited number of organizations in the UAE. However, the
merits of quantitative methods is their ability to use smaller groups of people to make infer-
ences about larger groups that would be impossible for researchers to access (Holton & Burnett,
1997). Hence the study contributes significantly to the HRM literature in the area of ethics and
organizational commitment. Future research direction can extend this topic by engaging in a
much larger sample sizes of both the respondents and the organizations.
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72
Advised by Nikhil Chandra Shil, American International University, Dhaka, Bangladesh
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SA2 8PP, Wales, UK.
James Baba Abugre Lecturer, University of Ghana Business School, Box LG 78, Legon, Accra, Ghana.
Phone: +233 244 924 323.
Website: http://www.ugbs.edu.gh/site/
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Dr., prof. Vincentas Lamanauskas, Scientific Methodical Centre „Scientia Educologica“, Republic
of Lithuania (Editor-in-Chief)
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Century is an international, periodical,
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ISSN 2029-6932
Volume 6, 2013
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Problems of Management in the 21st Century, ISSN 2029-6932 VOLUME 6, 2013

Scientific Methodical Center „Scientia Educologica“, Lithuania,

ISSN 2029-6932 © SMC „Scientia Educologica“, Lithuania, 2013

INTEGRATED TALENT MANAGEMENT - A CHALLENGE OR NECESSITY FOR

OPTIMIZATION OF QUALITY, ENVIRONMENTAL AND OCCUPATIONAL RISK BY

AN IMPACT OF RESOURCE PORTFOLIO ON NETWORKING TENDENCIES –

PHARMACEUTICAL MARKET AND OPPORTUNITY IN THE 21ST CENTURY FOR

SIGNIFICANCE OF DATABASE MARKETING IN THE PROCESS OF TARGET SEGMENTS

CAUSES OF INDUSTRIAL DISPUTE: A CASE OF THE GARMENT FACTORIES AT

AN ASSESSMENT OF ISLAMIC WORK ETHICS OF EMPLOYEES IN

INSTRUCTIONS FOR AUTHORS .............................................................................. 73

PROBLEMS OF PSYCHOLOGY IN THE 21st CENTURY ............................................... 75

Quality Issues and Insights IN THE 21st CENTURY ......................................... 76

INFORMATION & COMMUNICATION TECHNOLOGY IN NATURAL SCIENCE

PROBLEMS OF MANAGEMENT IN THE 21st CENTURY .............................................. 78

gamtamokslinis ugdymas / natural science education............................... 79

Received: March 05, 2013 Accepted: March 29, 2013

ENVIRONMENTAL and occupational

Management system processes

Unknown Known Risk

Figure 1: Scheme of the risk management based on the „process approach” on

10 Operational key Operational key

Operational Defects Risk

Figure 2: Scheme of operational control based on quality, environmental and

Figure 3: Scheme of main categories of system risk monitoring.

IRRA = 200 conditions

Preparation of the mixture IRR2 = 174 IRR1 = 248

The average cost of materials for the mixture [€]

Table 3. Specification of the results of the system monitoring realized in the

Advised by Danuta Szewieczek, Silesian University of Technology, Poland

Received: February 02, 2013 Accepted: March 29, 2013

AN IMPACT OF RESOURCE PORTFOLIO 15

Kirsi Kokkonen, Matti Lehtovaara, Petri Rousku, Tuomo Kässi

Figure 1: Relative power positions in inter-organizational relationships.

C. Mutual dependence (interdependence): the organizations have a tight relationship, in

D. Unbalanced dependence: asymmetrical dependence, where one party will be able to

Table 1. Assessment of the independency of the biomass heating enterprises.

work and the enterprise’s

maintenance and repair

1 Group 1 5 1 3 1 2.50 5.00

23 Group 3 5 4 2 5 4 4.00 8.00 21

Table 2. Assessment of the development activeness of the biomass heating en-

plants or other activities

1 Group 1 3 2 2.50 5.00

Group 1: Actors in local networks of equal partners

Group 3: Network developers/lead firms 23

Group 4: Independent actors

Figure 2: Grouping of biomass heating enterprises according to their network-

Figure 3: Relative power positions of biomass heating enterprises.

• Former experience and know-how: Former experience on heating entrepreneur-

• Relationships with HSMs: Amount and regularity of relationships and satisfaction

• Physical resources: Number of plants and their capacities.

Table 3. Assessment of the resources of the biomass heating enterprises. 25

Interest and readiness for CHP

Relationships with HSMs

how of the field

1 Group 1 3 2 3 3 2 2.60 5.20

Table 4. Summary of the results.

1: Actors in local networks

INSTRUCTIONS FOR AUTHORS .............................................................................. 73

PROBLEMS OF PSYCHOLOGY IN THE 21st CENTURY ............................................... 75

Quality Issues and Insights IN THE 21st CENTURY ......................................... 76

PROBLEMS OF MANAGEMENT IN THE 21st CENTURY .............................................. 78

gamtamokslinis ugdymas / natural science education............................... 79