A C T A U N I V E R S I T A T I S L O D Z I E N S I S _____________________F O L IA QECONOMICA 85, 1988__________
Tomasz Domański*
IMPLEMENT ING A RETA.IL INNOVATION BY A POLISH INDUSTRIAL COMPANY (A Case S tu d y )
I n t r o d u c t i o n
The 1981-1983 reform of the P o l i s h economy c r e a t e d c o n d i t i o n s f o r making e f f e c t i v e d e c i s i o n s by companies. Microeconomic g o a ls of companies d id not c o n s t i t u t e p r e v i o u s l y a b a s i s f o r s e l e c t i o n of d i r e c t i o n s of development in the m arket. A n e g a t i v e consequence of the p r i o r s i t u a t i o n was la c k of a d a p t a t io n of companies to c o n d i t i o n s p r e v a i l i n g in t h e i r environm ent.
The new l i b e r a l a c t on s t a t e companies passed in 19B11 did not s o l v e t h i s problem. I n d u s t r i a l companies were equipped w ith a wide range of autonomy in the sphere of p r o d u c tio n and tra d e but o n ly in a fo rm a l, l e g a l sense. In p r a c t i c e , numerous a d m i n i s t r a t i v e c o n s t r a i n t s hampering the making of independent d e c i s i o n s by com p a n ie s c o n tin u e to e x i s t . These c o n s t r a i n t s are f e l t most a c u t e l y in s i t u a t i o n s of s h o rta g e s in s u p p ly . ihe absence of s t a b l e r u l e s o f economic o p e r a t io n seen in f l u c t u a t i o n s in the range of commands a p p l i e d by the c e n t r a l a u t h o r i t i e s and in f l u c t u a t i n g t a x a t i o n ma kes d e v e lo p in g c o h e re n t s t r a t e g i e s im p o s s ib le f o r managers of state • companies. Such i n s t a b i l i t y causes s k e p t i c i s m among many managers
of companies w it h reg a rd to the su c c e s s of the 1981-1983 reform . The data c o n t a i n e d in t h i s a r t i c l e were c o l l e c t e d in the course of i n t e r v i e w s conducted w ith e x e c u t i v e s of the p a r t i c i p a t i n g
com-* Dr, s e n i o r l e c t u r e r , I n s t i t u t e of M a r k e t in g , U n i v e r s i t y of Łódź ( P o l a n d ) .
1 Ustawa o p r z e d s i ę b io r s t w a c h państwowych z 25 w rze śn ia 1981 r . [A ct on S t a t e Companies from 25th September 19ül] , " D z ie n n ik Ustaw'* 1981, nr 24.
Tomas7 rjomartakt
pany. The adopted case study method p e rm it te d f o r the c o l l e c t i o n of managers' o p in io n s on f a c t o r s d e te rm in in g p a r t i c u l a r d e c i s i o n s . The company's name has been d i s g u i s e d .
2. pesc r i p t i on of the Company
The White B i r c h Company i s today an e c o n o m ic a lly independent s u b s i d i a r y of a major s t a t e e n t e r p r i s e , FOREST. W hite B i r c h p r o duces canned f r u i t and v e g e t a b le s and o t h e r p ro d u c ts f o r s p e c i f i c market a re a s in P o lan d . These markets are c h a r a c t e r i z e d by some degree of c o m p e titio n due to a sea son a l s u r p lu s of raw m a t e r i a l s and d i f f e r e n t i a t i o n of economic u n i t s o p e r a t in g in i t .
White B i r c h o p e r a te s in a market c o v e r in g f o u r n e ig h b o r in g ad m i n i s t r a t i v e p r o v i n c e s , the b oundaries of which have been f i x e d in an a d m i n i s t r a t i v e way. Th is i s a r e s u l t of the command system un der which such r> p:»t i a 1 d i v i s i o n of the market was c a r r i e d o u t . In the p a s t , the economic a c t i v i t y of the White B i r c h Company was focussed on the purchase of wood, v e n is o n , and f o r e s t f r u i t . P r o d u c tio n in v o lv e d s m a l l - s c a l e p r o c e s s in g of food and c o n s t r u c t i o n of wooden packin g c r a t e s . The White B i r c h food p r o c e s s in g o p e r a t i o n resembles t r a d i t i o n a l , home-type, p r o c e s s in g .
A c e n t r a l r e o r g a n i z a t i o n of the market s t r u c t u r e in Poland c a r r i e d out in the s e v e n t i e s fo rc e d W hite B i r c h to take ove r a number o f s m a ll and medium-sized p r o d u c tio n p l a n t s , both s t a t e owned and c o o p e r a t i v e , w it h o b s o le t e c a p i t a l equipment t u r n in g out f r u i t and v e g e t a b le p r o d u c ts , e . g . , w in e s , j u i c e s , s a l a d s .
At t h a t tim e, s e v e r a l of the t h i r t y s u b s i d i a r i e s o f the parent company, FOREST, took ove r s m a ll p l a n t s prod uc ing c l o t h i n g , k n it-, wear or fancy goods, which had n o th in g in common w it h t h e i r p r e v io u s p r o d u c tio n p r o f i l e s . Thus, d i v e r s i f i c a t i o n of p roduct s t r u c t u r e was not an independent s t r a t e g i c d e c i s i o n f o r th e se s u b s i d i a r i e s but i t was f o rc e d upon them by the type of e n t e r p r i s e s c o vered by i n t e g r a t i o n . In the case of the White B i r c h Company, the new assortm ent l u c k i l y proved to be complementary to t h a t produced e a r 1l e r .
B e f o r e the 1981 economic reform was in tr o d u c e d , p ro d u c ts of W h ite B i r c h had beer, sen t to twenty seven buyers in d i f f e r e n t ad m i n i s t r a t i v e p r o v i n c e s . These buyers were branches of coo p e ra
t i v e t r a d i n g company m onopolist in food t r a d e . In tra d e s i m i l a r to p r o d u c tio n , monopolies were s e t up c e n t r a l l y . A tra d e m onopolist r e c e i v e d both w h o le s a le and r e t a i l m arg in s. Both the buyers and tho s i z e s of the t r a n s a c t i o n were determined u s u a l l y c e n t r a l l y . Neither p r i c e s nor margins were m a tte r s of n e g o t i a t i o n s . D i f f e r e n c e s in m a rk eting c o s t s among p a r t i c u l a r markets were not r e f l e c t e d in the l e v e l of p r i c e s or m arg in s. D e s p ite these c o n s t r a i n t s , some p r o d u cers s t r i v i n g to sh o rte n p h y s i c a l d i s t r i b u t i o n r o u t e s of p r o d u cts decid ed to sup p ly prod uc ts d i r e c t l y to l o c a l w h o le s a le w a re houses b e lo n g in g to the m o n o p o list, e l i m i n a t i n g in t h i s way one middleman, namely the c e n t r a l p r o v i n c i a l w h o le s a le warehouses. The ensuing r e d u c t i o n of c o s t s d id not a f f e c t , to any e x t e n t , the d i v i s i o n of margins between p a r t n e r s to the exchange or the l e v e l of p r i c e s f o r these p rod u c ts in the m arket. The produce1» , moreover, d id not have any p o s s i b i l i t i e s of ch oosing h i s b u y e r s , d i s t r i b u t i o n forms, o r d e te rm in in g o t h e r terms of t r a n s a c t i o n in p r a c t i c e .
3. B e g in n in g s of Economic Reform in Poland
In the i n i t i a l phase a f t e r the 1981 reform was in tr o d u c e d , the management of The White B i r c h Company e v a l u a t e d the p r o f i t a b i l i t y of i t s s u p p l i e s to p r e v io u s b u ye rs. Due to p l e n t i f u l a v a i l a b i l i t y of f r u i t and v e g e t a b le p rod u c ts in P o la n d , White B i r c h d id not ex p e r i e n c e any p r e s s u r e from the c e n t r a l a u t h o r i t i e s toward main t a i n i n g the p r e v io u s s t r u c t u r e of b u y e r s . ' Because f r u i t s were not c o n s id e re d to be n e c e s s i t i e s by the c e n t r a l a u t h o r i t i e s . White B i r c h had autonomy in the sphere of d i s t r i b u t i o n . Thun, the com p a n y 's s i t u a t i o n was q u i t e e x c e p t i o n a l in P o lan d . O ther s t u d i e s conducted by the au th o r show t h a t o n ly in v e ry few companies d id a n a l y s e s of p r o f i t a b i l i t y le a d to a change in the s t r u c t u r e of b u y e r s 2 . The c o n t in u e d i n t e r f e r e n c e of the c e n t r a l a u t h o r i t i e s m a in ly the M i n i s t r y of Trade and S e r v i c e s , in the d i s t r i b u t i o n pro c e s s h in d e re d the u n d e rta k in g of Independent d e c i s i o n s by companies S h o rta g e s in supply a re the mast commonly a p p l i e d argument f o r c o n t i n u a t i o n of command-type d i s t r i b u t i o n methods.
2
The same r e s u l t s were o b ta in e d by the au th o r in the studv nf
2_l О_________________________________ lomas/ Damask i_
S im u lt a n e o u s ly , l o c a l 5 a d m i n i s t r a t i v e a u t h o r i t i e s began tu ex e r t p res s u re on W hite B i r c h to -open i t s own s t o r e . P r e v i o u s l y , the company did not m a in t a in i t s own r e t a i l s a l e s netw ork. This p r e s sure was not accompanied by any i n c e n t i v e s g ran ted to W hite B i r c h such as a f a v o r a b l e l o c a t i o n f o r a new s t o r e or any tax r e l i e f s . D i f f e r e n t i a t i o n of l o c a l t a x a t i o n l e v e l s does not. s e r v e as an i n strument m o t iv a t in g companies to u nd ertake a s p e c i f i c p r o d u c tio n , t r a d e , or s e r v i c e a c t i v i t y in a g iv e n a re a . This s i t u a t i o n c o i n c id e d w ith p la n s of some managers In the White B i r c h Company to open such a s t o r e . P r e s s u r e was a p p l i e d , meanwhile, by the l o c a l a u t h o r i t i e s f o r a l o c a l r e t a i l s t o r e In an attempt to Inc rease, the f a v o r a b l e Image In the p o p u la t io n t h a t the l o c a l a d m i n i s t r a t i o n was w e l l managed.
The b e g in n in g s of the 19B 1 economic reform in P oland c o i n c id e d w ith a d i f f i c u l t socio-econom ic s i t u a t i o n , the o r g a n i z a t i o n of S o l
i d a r i t y and i t s c o n f r o n t a t i o n w it h the c e n t r a l a u t h o r i t i e s .
The im p o s it io n of m a r t i a l .law on December 13, 1981 was fo llo w e d by d e t e r i o r a t i o n of the W hite B i r c h Company's f i n a n c i a l m ark eting s i t u a t i o n . Que to the r e d u c t i o n of P o l i s h e x p o r t a t i o n of machines and equipment to s e v e r a l c a p i t a l i s t c o u n t r i e s , the p r e v i o u s buyers of wooden p acking p a l l e t s and c a ses w ithdrew f i f t y p e rc e n t of o r ders agreed upon e a r l i e r on. These buyers c o n tin u e d o n ly I n s i g n i f i c a n t ex p orts to t h i r d w orld c o u n t r i e s . Th is new s i t u a t i o n was of major Importance f o r W hite B i r c h because p r o d u c tio n of wooden pack aging r e p r e s e n t e d about f i f t y - p e r c e n t of i t e n t i r e p r o d u c tio n v a l ue. R e s ig n a t io n o f r e g u l a r buyers posed a n e c e s s i t y o f s e a r c h i n g f o r new sou rce s of rev e n u e . The economic b lockad e of P o l i s h compa n i e s to emöark upon such a s e a r c h .
W hite B i r c h ' s e x p o r ts to developed c a p i t a l i s t c o u n t r i e s de cr e a s e d as w e l l , e s p e c i a l l y meats, f r u i t s , and p rocessed v e g e t a b l e s . There was a l s o a c o n v i c t i o n in the White B i r c h management f o r a long time t h a t i t was more p r o f i t a b l e to supply i t s p r o d u cts to the dom estic r a t h e r than f o r e i g n m ark ets. Hence, econo mic m o t i v a t i o n to s e a rc h f o r new f o r e i g n o u t l e t s was m is s in g . The
f i n a n c i a l s i t u a t i o n of the White B i r c h Company was l a r g e l y a g g ra vated Dy i t s s t a t u t o r y o b l i g a t i o n to purchase many p rod u c ts meant f o r export from the dom estic market, such as v e n is o n . Purchase
5 The " l o c a l " c i t y i s a town in Poland w ith a p o p u la t io n above 100 0 0 0
.
p r i c e s f o r these p rod u c ts were f ix e d a t a very high l e v e l by the M i n i s t r y of Home Trade. C on se q ue n tly, a lthoug h White B i r c h was d e c la r e d autonomous by the 1981 reform a c t i t could not stop p u r chases of th e se p ro d u c ts .
A drop in the e x p o rts of the White B i r c h Company le d to f a i l u r e in c o v e r in g i t s f i x e d c o s t s , m a inly the c o s t s of s t o r i n g la r g e i n v e n t o r i e s . . Other c o s t s in c lu d e d energy and product l o s s e s . Many of these p rod u c ts were s to re d f o r almost one y e a r . The company was not allo w ed to s e l l these prod uc ts in the domestic market in s p i t e of the high c o s t s of m a in t a in in g e x c e s s iv e i n v e n t o r i e s . Un der the b in d in g r e g u l a t i o n s , the producer may s e l l o n ly p rod uc ts of the second c l a s s , r e g a rd in g q u a l i t y , to the d o m e s tic , m arket. P r o d u c ts of the f i r s t c l a s s are fo r exp ort u n l y . I t cou ld be s a id t h a t in p r a c t i c e , formal autonomy of companies was r e s t r i c t e d by d e t a i l e d r e g u l a t i o n s of e x e c u t i v e a c t s passed b e fo re the economic reform was in tro d u c e d .
The White B i r c h Company s u f f e r e d a l o s s of t h ie o m i l l i o n z l o t y about 30 000 U . S . d o l l a r s In the f i r s t s i x months of 1982 due to the e x t e r n a l c o n s t r a i n t s of the c e n t r a l a u t h o r i t i e s .
4 • Marke t i ng A l t e r n a t i у es
lh e White B i r c h Company management had to make a c h o ic e from Tinong a number of d e c i s i o n a l t e r n a t i v e s . These were as f o l l o w s ;
1. Expand the market f o r manufactured p r o d u c ts . Th is a l t e r n a t i v e was not very r e a l i s t i c because exp ort r e s t r i c t i o n s g r e a t l y reduce the p o s s i b i l i t y of f i n d i n g new buyers fo r wooden packing m a t e r i a l .
2. Change the t a r g e t market. Exchange of domestic goods on the f o r e i g n market was p r o f i t a b l e f o r W hite B i r c h but a l s o im p o s s ib le due to a d m i n i s t r a t i v e c o n s t r a i n t s . For example, a ban was p la c e d on d e l i v e r y of s p e c i f i c prod uc ts of high q u a l i t y to the dom estic m a rk el, which p r e v i o u s l y had been exported to c a p i t a l i s t c o u n t r i e s
This was the case w it h prepared v e nison p r o d u c ts .
3. Widen the assortment ot' m anufactured p r o d u c ts , d evelop t.ew p ro d u c ts fo r new b u ye rs. ' T h i s a l t e r n a t i v e e n v is a g e d d i v e r s i f i c a t i o n of the White B i r c h product l i n e . The management planned to launch p r o d u c tio n of processed venison a d a p tin g the a v a i l a b l e p l a n t
which "had p r e v i o u s l y been used only s e a s o n a l l y about one month in a y e a r . The c o s t of such an investm ent would amount to o n ly f i v e m i l l i o n z l o t y (50 000 U . S . d o l l a r s ) . This a l t e r n a t i v e was e l i m i n a ted because White B i r c h cou ld not n e g a t i a t e a loan w ith a bank and the M i n i s t r y of F in a n c e r a i s e d o b j e c t i o n s . Although the White B i r c h Company t r a n s f e r s a p p ro x im a te ly ten m i l l i o n zloty, to the c e n t r a l budget a n n u a ll y as a m o r t iz a t io n i t c o u ld not o b ta in the n e c e s sa ry tax r e l i e f s to equip i t v e nison p r o c e s s in g p l a n t . The g r a n t in g of loan i s s t i l l of a d i s c r e t i o n a r y - b a r g a i n i n g n a t u r e .
4. i n c r e a s e p r o f i t s by o r g a n i z in g a d i s t r i b u t i o n network fo r W hite B i r c h . Dun to the i n a b i l i t y to overcome e x t e r n a l b a r r i e r s w i t h i n a s h o rt p e rio d of tim e, the White B i r c h management s e l e c t e d a d e c i s i o n t h a t r e s u l t e d in immediate f i n a n c i a l e f f e c t s . The de c i s i o n was to open the company's own' r e t a i l s t o r e . The W hite B i r c h management cou ld not implement t h i s d e c i s i o n but in fo rm a l c o n t a c t s w it h l o c a l a d m i n i s t r a t i v e a u t h o r i t e s c a r r i e d a hope f o r the success of tho i n i t i a t i v e .
The C o o p e r a tiv e Trade O r g a n iz a t io n , CTO, a m onopolist in the d i s t r i b u t i o n of p ro d u c ts manufactured by White B i r c h , was p l a i n l y a g a i n s t the r e t a i l s t o r e in n o v a t i o n . The CTO was t r y i n g to impede the d e c i s i o n to open a r e t a i l s t o r e by White B i r c h usin g i t s own in fo rm a l l i n k s w ith l o c a l a u t h o r i t i e s . The p r e v io u s d i s t r i b u t i o n system was more f a v o r a b l e f o r the middleman a t the c o s t o f the p r o d u c e r .
S a l e s of o n ly one out o f . a n assortm ent of some two hundred p ro d u c ts manufactured by W hite B i r c h could c o n t r i b u t e to a r a p i d growth of p r o f i t s . The p roduct was f r u i t wine w it h an annual p r o d u c tio n of about t ł y e e m i l l i o n b o t t l e s . P r o f i t o b ta in e d so f a r by White B i r c h amounted to o n ly f i f t e e n p e rc e n t of the c o s t s of p r o d u c t i o n . Th is r e s u l t e d in a v e ry sm a ll p r o f i t because of the low c o s t of f r u i t wine p r o d u c tio n . C o n se q u e n tly , the p o s i t i o n of the d i s t r i b u t o r - m o n o p o l i s t was much more f a v o r a b l e . With the a p p lie d system of p e rc e n ta g e margines being imposed c e n t r a l l y , the CTO's p r o f i t s were much h ig h e r than those of W hite B i r c h . These p r o f i t s amounted to f o u r t e e n p p rcen t of the r e t a i l p r i c e r e t a i l margin of n in e p e rc e n t p lu s w h o le s a le margin of f i v e p e r c e n t . For example, w it h a p r i c e of 145 z l o t y per b o t t l e , . White B i r c h ob ta in e d a u n i t p r o f i t of 2 z l o t y , t h a t i s , ten times l e s s than the d i s t r i b u t o r ' s p r o f i t 20 z l o t y . An a l t e r n a t i v e t h a t would in c lu d e an I n c r e ase in p r i c e s fo r the W h ite B i r c h p rod u c ts was out of q u e s t i o n .
l o r a l c o h o l i c d r i n k s , a l l p r i c e s were f ix e d by the government m i n i s t r y . A sim ple economic c a l c u l a t i o n showed t h a t s u p p l i e s of about f i f t e e n p e rc e n t of the annual p ro d u c tio n of wine to the W hite B i r c h s t o r e , about 300 000 b o t t l e s , would b r in g a p r o f i t f o r W hite B i r c h o f ap p ro x im a te ly s i x m i l l i o n z l o t y , which wolud co v e r the company's lo s s record ed in 1982.
T h e o r e t i c a l l y , the opening of a s t o r e by White B i r c h should a f f u r d a p o s s i b i l i t y of o f f e r i n g a wide range of complementary prod u c t s f o r the consumer. However, i t was known from the beg inn in g t h a t t h i s d e c i s i o n was s t r i c t l y of a t a c t i c a l c h a r a c t e r . I t would not be v e ry p r o f i t a b l e f o r White B i r c h to perform f u n c t i o n s of a d i s t r i b u t o r of p rod uc ts coming from o t h e r s u p p l i e r s . Une s t a r e w ith a sm a ll s c a l e t u r n o v e r , high t r a n s p o r t a t i o n c o s t s e s p e c i a l l y f o r d e l i v e r i e s over 200 km, and high p r i c e s imposed by o th e r s u p p l i e r s excluded any p o s s i b i l i t y ot a d d i t i o n a l p r o f i t th a t would be needed to cover a d d i t i o n a l c o s t s . N o n e th e le s s, White B i r c h agreed to s e l l p roducts s u p p lie d by o th er s u b s i d i a r i e s of the p a re n t company, FOREST, w it h a v e ry ыпа!) p r o f i t margin as a means of o b t a in in g a d d i t i o n a l p r o f i t s from s a l e s of i t s most p r o f i t a b l e item , f r u i t wine.
The management of the White B i r c h Company developed th r e e ar- gruments in fa v o r of the new d i s t r i b u t i o n system.
1. P r o f i t a b i l i t y would be r e a l i z e d in a s h o rt p e rio d of time. Th is would be r e a l i z e d by red u c in g c o s t s of tra d e middlemen.
2. P r o m o t i o n and a d v e r t i s i n g campaigns cou ld be s u p e r v i s e d by
White B i r c h ' s own management.
3. C r e a t i o n o f a u n i q u e t r a d e m a r k a n d a d v e r t i s e m e n t s o f t h e b r a n d w o u l d i n c r e a s e b r a n d l o y a l t y a m o n g c o n s u m e r s .
C o u n t e r a r g u m e n t s i n c l u d e d t h e f o l l o w i n g :
1. The assortm ent of prod uc ts i s too narrow. White B i r c h i s not i n t e r e s t e d in o f f e r i n g complementary p ro d u c ts coming from com p e ti t i v e s u p p l i e r s o u t s id e the p a re n t company, FOREST.
2. Main tenance o f a c o n s ta n t y e a r round s a l e s volume i s c r u c i a l . The output of White B i r c h , food p r o d u c ts , i s s t r o n g l y s e a s o n a l. The W hite B i r c h management i s i n t e r e s t e d in prompt bulk s a l e s to w h o le s a le u n i t s . O p e ra tin g i t own s t o r e , W hite B i r c h would have to have s a l e s throughout the y e a r of s e a s o n a l p r o d u c ts . This would i n v o l v e g a in in g a p p r o p r i a t e s to ra g e c a p a c i t i e s f o r l a r g e i n v e n t o r i e s . l a c k of c o n t i n u i t y of s a l e s i s t y p i c a l f o r most compa n i e s and s t o r e s o p e r a t i n g in the s e l l e r ' s market environm ent of P o l a n d .
3. T r a n s p o r t a t io n c a p a c i t i e s a re u nd erdeveloped. W hite B i r c h ' s p r o d u c tio n p l a n t s o p e ra te in a . l o c a l market but t h a t i s away from
the company r e t a i l s t o r e .
4. A supply system to in s u re a v a i l a b i l i t y of complementary p r o d ucts would have to be d evelop ed .
5. A u x i l i a r y departments o t ' t h e W hite B i r c h Company procurement, s a l e s , and a c c o u n tin g would have an in c re a s e d range of d u t i e s . These employees would not r e c e i v e any f i n a n c i a l compensation. In n a
t u r a l l y would arouse some r e s i s t a n c e among employees assuming such an a l t e r n a t i v e i s accepted w it h o u t growth in the wurk f o r c e .
6. Costs to be c o n s id e re d a te those to the o r g a n i s a t i o n , c o s t s f o r equipment, and the c o s t of o p e r a t in g ttie r e t a i l s t o r e .
Due to the narrow assortm ent of i t s p roduct l i n e , the manage ment of the w h ite B i r c h Company decid ed to expand i t s new product
l i n e w it h goods coming from o t h e r s u b s i d i a r i e s of the p a re n t com pany. The expansion was not r e s t r i c t e d to a complementary c r i t e r - ro n , but was caused by the s t r u c t u r e of p r o d u c tio n in the o th e r s u b s i d i a r i e s . The assortm ent s o ld in the s t o r e was q u i t e d i f f e r e n t i a t e d . P r o d u c ts in c lu d e d f o o d s t u f f s , v e n is o n , w ine, p l a i t e d w i l low p r o d u c ts , and f u r n i t u r e ; the l a t t e r two p rod u c ts coming from othf»r s u p p l i e r s . Th is assortm ent г о з е т Ы е з a con g lo m e ratio n and i s not s u b je c te d t o any »narket segm entation c r i t e r i a . N o n e t h e le s s , the s a l e o f p rod u c ts s u p p lie d by o th e r s u b s i d i a r i e s in the W hite B i r c h s t o r e i s an o r i g i n a l co n ce p t. This form of d i s t r i b u t i o n may prove to be c o m p e t i t i v e i n r e l a t i o n . t o tra d e companies o p e r a t in g in the same market segment.
At the time the s t o r e was opened, the management in the White B i r c h Company c o u ld not s p e c u l a t e about the p r o f i t a b i l i t y of t h i s form o f d i s t r i b u t i o n . T h is was due to the absence of comparable da ta and la c k of e x p e rie n c e in such an a p p l i c a t i o n .
The concept o f a p r o d u c e r 's own s t o r e c o u ld be s u c c e s s f u l l y developed by most f ir m s grouped in the p a re n t company because of t h e i r d i f f e r e n t i a t e d assortm ent of p r o d u c ts . Such a s o l u t i o n would s tr e n g t h e n the s o l i d a r i t y e f f e c t among s u p p l i e r s from d i f f e r e n t s u b s i d i a r i e s who would be s i m u l t a n e o u s l y p l a y i n g the r o l e of b uyers p u rc h a sin g p ro d u c ts coming from o t h e r s u b s i d i a r i e s . Such a c oncept would c o n t r i b u t e to b e t t e r promotion of the trademark of the whole p a re n t company. C o n s o l i d a t i o n o f brand names and d eve lopment of brand l o y a l t y among consumers would r e s u l t . Moreover,
such a form of d i s t r i b u t i o n combines c h a r a c t e r i s t i c s of i n t e g r a t i o n of c o r p o r a t e t y p e , own s t o r e , w it h i n t e g r a t i o n of c o n t r a c t u a l typ e . The p ro d u c ers from o th er s u b s i d i a r i e s c o u ld a l s o p la y the r o l e of s o l i d a r y s u p p l i e r s on the b a s i s of an agreement on j o i n t v e n tu r e or a s s o c i a t i u n .
The a t t i t u d e of the management in the White B i r c h Company to e s t a b l i s h a b ig g e r network of r e t a i l s t o r e s i s s k e p t i c a l . They a l s o wish to promote f u l l e r u t i l i z a t i o n of i n t e g r a t i o n forms based on concluded c o n t r a c t s . W i th in the framework of the p a re n t compa ny, FOREST, f r a n c h i s i n g agreements have been conducted w it h o n ly two tra d e companies. The e n t i r e e n t e r p r i s e had on ly two p ro d u c e r s ' r e t a i l s t o r e s , which was a r e s u l t of a weak i n t e r e s t taken in de velopment of v e r t i c a l i n t e g r a t i o n in the d i s t r i b u t i o n sp he re .
5. C o n c lu s io n
Th is case study shows d i f f e c u l t i e s face d by a t y p i c a l company in the P o l i s h m a rk e t p la c e . P r a c t i c a l a p p l i c a t i o n of s o l u t i o n s t h a t should a llo w the W hite B i r c h Company to o b t a in or r a i s e p r o f i t a b i l i t y of o p e r a t io n s i s d i s c u s s e d . Making n s p e c i f i c d e c i s i o n a l ways i n v o l v e s a compromise between the management and c e n t r a l au t h o r i t i e s . The a u t h o r i t i e s c o n tin u e to encompass the d i s t r i b u t i o n sphere and p r i c i n g p r i n c i p l e s . The W hite B i r c h Company i s not a l ways a b le to make an o p tim a l d e c i s i o n from i t s own p o i n t of view or from the p o i n t of view of the consumers' r e q u ire m e n ts .
The opening of m a n u fa c t u r e r s ' r e t a i l s t o r e s a llo w s many manu f a c t u r e r s a chance to improve t h e i r f i n a n c i a l s i t u a t i o n w i t h i n a r e l a t i v e l y s h o rt tim e. P r o f i t s o b ta in e d in t h i s way a re o f t e n t r e a ted as " u n j u s t i f i e d " by the c e n t r a l a u t h o r i t y , which undermines p o s s i b i l i t i e s of a w id e r a p p l i c a t i o n of such a d i s t r i b u t i o n form. Other companies have a t b e st one or two r e t a i l s t o r e s w h i l e the v a lu e of s a l e s e f f e c t e d through them does not exceed one p e rc e n t of t h e i r o v e r a l l t u r n o v e r . Trade companies d i s p l a y a n e g a t i v e a t t i t u d e to t h i s form of i n t e g r a t i o n i n i t i a t e d by p r o d u c e r s .
Most m a n u fa c tu re rs do not t r e a t d i s t r i b u t i o n as an im p o rta n t element in the m a rk eting s t r a t e g y . C o n d itio n s have not been c r e ated t h a t would promote changes in t h i s f i e l d . I n a s e l l e r ' s mar k e t , t h e r e i s u s u a l l y l i t t l e , i f any, m o t i v a t i o n f o r m anufactu r e r s to d evelop c o n t r a c t u a l forms o f v e r t i c a l i n t e g r a t i o n in the
sphere ot d i s t r i b u t i o n . Prim acy of t a c t i c a l d e c i s i o n s over s t r a t e g i c d e c i s i o n s can be observed in most P o l i s h companies tod ay. F a v o r a b le c o n d i t i o n s f o r the im plem entation of t r u l y s t r a t e g i c de c i s i o n s have not been c r e a t e d . The main goal of many companies seems tobe " w a i t and s e e " as long as an u n c e r t a i n c r i s i s s i t u a t i o n l a s t s . A fundamental sou rce of u n c e r t a i n t y i s absence o f s t a b l e and c o h e re n t r u l e s of the economic and t a x a t i o n system. Th is un s t a b l e environm ent does not g e n e ra te any m o t iv a t io n to expand p r o d u c t i o n . The r u l e s t h a t do e x i s t a re s u b j e c t to unexpected and i n c o n s i s t e n t changes. As a r e s u l t , many p rod uc ers d e l i b e r a t e l y reduce t h e i r l e v e l of o b t a i n a b l e p r o f i t . I n t e r e s t i n g c o n c e p ts , de velop ed by managers u s u a l l y remain unexplored id e a s because of con s t r a i n t s p la c e d on the autonomy of P o l i s h companies.
Tomasz Domański
WPROWADZANIE INNOWACJI W HANDLU DETALICZNYM PRZEZ POLSKIE PRZEDSIĘBIORSTWO PRODUKCYJNE
(studium przypadku)
Celem a r t y k u ł u j e s t o p is i a n a l i z a d z i a ł a ń rynkowych ś r e d n i e j w i e l k o ś c i p r z e d s i ę b i o r s t w a produk cyjnego w pierwszym e t a p i e r e f o r my g osp o d arczej 1981-1983. A r t y k u ł ukazuje wpływ o g ra n ic z e ń ze wnętrznych na wybór przez p r z e d s i ę b i o r s t w o t a k t y k i d z i a ł a n i a , umo ż l i w i a j ą c e j szybką l i k w i d a c j ę pow stałego d e f i c y t u finansowego. Stwo r z e n i e w ła s n e j s i e c i sklepów • stan ow i d la p r z e d s i ę b i o r s t w a środek p o z w a la ją c y uzyskać dodatkowe z y s k i w krótk im o k r e s i e . Autor a n a l i
zu je konsekwencje bezpośredniego oraz pośred n ieg o u d z i a ł u produ ce n ta w sprzedaży wytwarzanych produktów.
