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ScienceDirect Procedia Economics and Finance 32 (2015) 716 – 720

Emerging Markets Quueries in Finance and Business

Possibilities of increasing busiiness sustainability in the context of globalization. Thhe Case of the SMEs Ana-Maria Verjjela,*, Jochen Schmida a

The Bucharest University of Economic Studies, 6 Piata Romana, 1st District, Bucharest, 010404, Romania

Abstract

This paper highlights a part of the results of a doctooral research regarding business sustainability, conducted by authors in the Research Centre of Business Adm ministration, Bucharest University of Economic Studies, Romania The first objective of this paper is to highhlight the factors that influence the sustainability growth of the business developed in a context of globalizatiion along with the appropriate measures which should be implemented in such circumstances. A second objjective of this study is to make a number of proposals for SMEs to improve their capacity to implement the orrganizational change process as a solution for increasing the sustainability growth of their businesses developed in the context of globalisation. The mode of organizational change implementation is crucial to the future and thhe development of the entire organization. © 2015 2015 The Authors. Published by Elsevier B.V. This an open ess access article under CC BY-NC-ND license license © Authors. Published by Elsevier B.V.isThis is anacce open articlethe under the CC BY-NC-ND (http://creativecommons.org/licenses/by-nc-nd/3.0/). (http://creativecommons.org/licenses/by-nc-nd/4.0/). Selection and and peer-review peer-review under Emerging M Roman Markets Queries in Finance and Business local organization. under responsibility responsibility of of the Asociatia Grupul de Cercetari in Finante Corporatiste Selection Keywords: Business sustainability, organisational change, perform mance; globalisation;

1. Introduction In the current context of globalization, developping a sustainable business implies a number of economic, environmental and social dimensions and represents one of the objectives that any manager should take into account. Competitiveness and sustainability are mutually m reinforcing concepts and the general interest is to create conditions and to adopt optimal solutions thhat can help small and medium enterprises to thrive in this regard. This objective is even more discussed and annalyzed within the framework of the global economic crisis. In such a context it is necessary to take adequate meeasures to contribute to the development of the enterprise as well as its sustainability (Braithwaite and Drahhos, 2000; Kaul; et al., 2003; Vogel, 2007). Business sustainability represents its ability to maintain itsself and reap long-term profit. Globalization represents a

* Corresponding author: Tel.: +40-724-187-943. E-mail address: [email protected]

2212-5671 © 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Selection and peer-review under responsibility of Asociatia Grupul Roman de Cercetari in Finante Corporatiste doi:10.1016/S2212-5671(15)01453-7

Ana-Maria Verjel and Jochen Schmid / Procedia Economics and Finance 32 (2015) 716 – 720

process of intensification of cross-border social inteeractions as a result of reduced costs on connection through communication, transfer of capital, goods and people (Held et al., 1999; Beck, 2000; Giddens, 1990). In such a context, any SME should have a number of options that contribute to increasing the business sustainability they developed. The first part of this article will illustratte some of these possibilities that can be implemented amid globalization. In the second part of the paper we will offer some suggestions for improving the capacity of SMEs to implement the organizational change proccess, as a way to increase business sustainability in terms of globalization. We will take into consideration the implications of this new perspective in order to theorize the concepts of sustainable business and organizational change. 2. Research Methodology To achieve the objectives of this research, the study was conducted regarding ten companies with a poor financial and which have benefited from measures of o organizational change. The analysis took into account the evolution of these companies in the last three yeears prior to the implementation of organizational change process in relation with to their external and internall environment. 3. The research results 3.1 Research results regarding the factors which inffluence the grow of business sustainability A sustainable business provides a long-term profit, p minimizing the risks arising from a complex and dynamic environment. At all levels of economic activity organizational transition processes through which these changes are operated are inevitable. National and international practices as well as specialized literature show that organizational transition processes alw ways accompanied by resistance to change are extremely complex and difficult, involving a series of steps taken in this regard. Statistics show that at least half of businesses do not survive the first five years of life which requires envisaging organizational change strategies to increase business sustainability. Under this study, the reorganization measure was taken into account after analysis the tangible and intangible assets evolution (Figure 1). Patrimonial elements Intangible assets 2009 - oct. 2012

Dec-09 5,1333,772

Dec-10 5,738,395

Dec-11 3,375,538

Oct-12 2,243,899

Fig. 1. Intangible assets evolution taking as an example a Roomanian enterprise

The sustainable development of a business is based b on finding those market opportunities that allow the company to generate a competitive advantage by a harmonious and synergistic combination and integration of economic and social dimensions. Within the Eurropean Union, although reorganization is seen as a very expensive procedure for SMEs, this restructuring measure m of the activity becomes the best option for increasing the sustainability of businesses financially distresseed. Ensuring access to funding the reorganization is one of the key issues for sustainable development and grow wth of a business (Figure 2). Entrepreneurs deciding on the necessity for organizational changes need capital, cash c flow and credit. Both private and public actors should

717

718


show more responsibility in all the elements noteed above as well as within actions, strategies and tactics implemented.

Patrimonial element Tangible assets 2009 - oct.2012

D Dec-09

Dec-10

Dec-11

Oct-12

19,606,870

28,901,582

21,227,035

18,261,115

Fig. 2. Tangible assets evolution taking as an example a Rom manian enterprise

One of the options that SMEs can consider in order to increase the sustainability of the business is reorganizing the activity. The reorganization plan iss nothing more than a business plan usually run for a period not exceeding three years and involving various resttructuring measures including: • Corporate restructuring; • Partial liquidation of assets; • Infusion of capital, etc. These measures can be taken together or separattely. The plan must necessarily include a payment schedule of debts prior to the opening of reorganization. Thee main advantage of the reorganization is that it may allow reducing, rescheduling or even completely writinng off some of the debts of the organization (Figure 3). Through the reorganization procedure and the impplementation of the reorganization plan, an organizational change occurs due to problems that have been identtified in the enterprise and virtually imposed this measure to harness development opportunities. In this context, organizational change aims at making essential changes in the organization. Patrimonial element

Dec-009

Debts

392,574,6636.00

Dec-10

Dec-11

519,636,400

404,381,318

Oct-12 427.750.363

Fig. 3. The debt evolution before reorganization plan

The reorganization plan is the same with a planned organizational change and is defined as proactive change that the members of an enterprise initiates and impplements deliberately to anticipate or respond to changes of the economic environment or to pursue new opportuunities.


To propose a viable reorganization plan, will be made, particularly financial analysis and management diagnosis of the enterprise, which will indicate whether recovery is possible within a few years. Not all companies can propose a reorganization plan, given the financial indicators at that moment. Moreover, for implemented a reorganization plan should be reviewed also the creditor confidence in the firm's ability to recover it, the creditor confidence influenced by the historical relationship of collaboration and also the causes that have pushed the company to reorganize. According to some authors, the organizational change due to the adoption of a reorganization plan involves defining the fundamental objective of the action plan, resources, deadlines and responsibilities. (Tan‫܊‬ău, 2004). 3.3 Research results regarding the proposals to increase the sustainability of SMEs through an organizational change process SMEs are facing more and more financial difficulties in the current economic climate where funding has become increasingly difficult to obtain. In some cases, the financial difficulty becomes insolvency or liquidation, WHICH means unable to TACKLE the debt with the available money. In such context the business sustainability IS affected. The difference between insolvent enterprise that resist on the market and those which disappear is the ability of managers to quickly identify the resources needed for its recovery or reorganization. The solutions must be sought primarily in the economic field and always involve profound changes in the functioning of the enterprise. Also, other tools that can help a company in difficulty to recover faster should not be neglected. To identify the necessary measures to grow the sustainability of SMEs a number of aspects were taken into account, including the internal and external analysis of business environment, the development of economic and financial indicators, as well as the competitive and SWOT analysis. To grow the sustainability of the business along with the implementation of reorganizational measures, the following elements must be ensured: • Improving the quality of services and the relationships with suppliers; • Improving the human resources management along with the requirements of organizational change; • Implementing the organizational change process to increase the business sustainability will consider the diversification of activities and human resource training; Business sustainability is affected by the measures implemented along with the organizational change process, namely the creation of a range of products and services that are compatible with the supply, demand and are also profitable. Likewise, reducing the production costs in order to increase operational efficiency, developing of new products with high added value, improving the marketing strategy, obtaining commercial loans FROM the relationship with suppliers, identifying funding sources and refinancing are elements all managers need to think OF TO increase the business sustainability. 4. Conclusions The results of this study points out that business sustainability implies that SMEs must be able to be innovative and flexible. Managers should manage the activities based on processes, in this case, the organizational change process. Furthermore, this analysis shows that there are cases when questioning the poor financial situation of an enterprise leads to conclude that reorganization can be the result of unfavorable circumstances even for SMEs who have a sustainable business. Reorganization can be seen as an opportunity for organizational change and can also increase business sustainability. To increase the business sustainability of SMEs, reorganization can be an option with significant advantages but also disadvantages for those who take such a decision. This choice should be taken after they were informed and only after the expertise of specialists so that all deficiencies are in the worst case minimized. Sustainability after such a change process is analyzed

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by reference to stabilization, namely to ensure the long-term risk reduction and profit improvement of the financial situation of that enterprise.

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