To our opinion, Russian corporate entities represent a complex, open, controlled system, made-up of its interrelated elements, accumulating the considerable flow of resources for the achievement of stated objective.  Thus, corporate system is an integral part of a more complex national economic and social system, which, in turn, is included into a global economic system. In such a manner, processes, taking place in global economy, cannot but affect the national economy and further development of Russian corporate entities. Under the conditions of the world economic crisis, which  covered the whole world economy, sustainable development of corporate national systems acquires a special topicality.

 The stability of corporate entities in the age of globalization is defined as a striving of the organization to reach such a balance state, which assumes functioning of all system elements, securing the efficient achievement of stated developmental objectives. Furthermore, constancy and stability are an indispensable condition of its efficient functioning.

Though, we assume that a complex, open controllable system with stable development can not reach complete balance, because its constitutive elements function, develop, and interact in different conditions, and their dynamic interaction has impact on the development of the entire system, thanks to which the corporate entities are in the steady dynamic state, balancing about permanent condition. 

 The lаw of supply-and-demand equilibrium is the basis of sustained development of corporate entities in the age of globalization. It is impossible to imagine a steady operating enterprise in the absence of demand for its production. Therefore, to our opinion, it is necessary to conduct a complex analysis of external and internal factors/conditions for sustainable development of corporate entities, under which the corporate entity is developed and situated, and which exert influence on the shaping of demand and supply of the output product. We define external and internal factors of sustainable development in corporate entities in the age of globalization for this purpose. It is our belief that corporation, as an open system, is developed in four interrelated and interdependent spaces (Figure 1):

— internal space of corporation;

— national state space;

— international space;

— global space;

 

 

Fig. 1. Levels of interaction of corporate entities

in conditions of globalisation

We chose the following factors as basic ones:

Analysis of external factors, affecting steady system operation.

Analysis of internal factors, including the rates, characterizing financial activities of corporation:

indicators of production efficiency;

indicators of financial stability;

indicators of corporate liquidity;

indicators, characterizing the position of the company at the market of valuable securities.

Analysis of indicators, characterizing social system elements.

The external factors are the following in our work:

— international economic policy, conducted by the actors of globalizing world, including corresponding international legislative regulation, standards, agreements etc.

— international business environment of corporate structures, i.e. international market structures, structure and number of business rivals, consumers of the output at the international markets, possible obstacles for market entry, connected with international, intergovernmental and regional organizations, and international banking structure, belonging to the industry sector, its specific features at the  world market, intrasectoral, international interaction;

  policy, inclusive of economic one, conducted by the state, which, includes legislative laws on market regulations, customs regulations, insolvency proceeding, privatization, adjustment of refinancing rates, credit policy etc.

— structure of home market, structure and number of domestic business rivals, production consumers, exit barrier at the home market, interrelation with government institutions and national core of banking system, sector functioning features of corporate entities, interdisciplinarity within the state boundaries (Figure 2).

 

 

 Steady functioning of corporate entities is impossible without efficient management, including management of finances, personnel, corporation manufacture, development and implementation of competitive marketing strategy, modernization and development of business processes. Sustainable development of corporate entities in the age of globalization, uncontrollable shift in demand, development of innovative technologies and information, should be, to our opinion, accompanied by continuous development, restructuring and modernization of all spheres of corporation activities. In this regard a complex approach to restructuring of business processes is necessary, within the bounds of which the interaction and interrelation between all elements of enterprise system are taken into consideration, norms and regulations of their functioning are set.

Efficient management of corporate entities should be based on the analysis of the following structural elements (Figure 3).

The internal factors are the following:

— organizational management of corporate entities, with account of previously accumulated experience;

— level of technique;

 — managerial efficiency;

— requirements, presented to the given production on its quality, condition realization, price characteristics by its consumers;

— the degree of market saturation with this product;

— the level of development of business rivals, value of the market segment they occupy (as this information is most likely closed, it is efficient to rest upon the information, reflected in mass media, Internet, conferences, presentations, and other sources).

 

 

Fig. 3.   Functional layout of sustainable development of corporate structure

 

From our point of view, it is efficient to perform either product line diversification, or implementation of innovations, which would contribute to the sustainable development of corporate entities, resting on the results of such analysis: 

provision of favourable economic conditions, contributing to acceleration of renewal and modernization of basic production assets of corporate entities, for the securing of competitive level increase at the world global market;

production diversification of corporate entities;

mobilization and utilization of resources for the result of top objectives and tasks,

increase of innovative technology rate during the manufacturing activity of corporate entities, for the purpose of acquisition of competitive advantages at the global market.

 In such a manner, the objectives of corporation functioning need to be defined for the sustainable development of corporate entities in the age of globalization. From our point of view, the objective consists in the provision of long-term sustained development of corporate entities, based on the principles of resource conservation, securing of growth in the living standard of employees, and participation in the development of national economy, by means of production diversification and application of innovative technologies.

The basic objectives of corporate entities under the conditions of world economic crisis are the following:

preservation of positions, won at the world market;

product line diversification by means of redistribution of resources and development of innovative technologies;

development of strategies, focused on the maintenance and realization of social and economic development.

Organization of stable corporate entities in the age of globalization should lead the national economy of Russia to the qualitatively new stage of development and allow:

to diversify the primary trend of Russian economy by means of arrangement of conditions for regular corporate sector development;

 to increase the volumes of competitive scientific production;

to reduce expenses of production;

to secure a stable decrease of harmful environmental impact of corporations by means of energy conservation techniques, renovation of old manufacturing facilities.

Sustainable development of corporate entities in the age of globalization should also secure the impact decrease of adverse factors and risks:

foreign investments outflow from the real economy;

capital consumption of corporate structures;

ineffective utilization of resources;

insufficient attention to questions of ecological safety and elaboration of environment conservation measures;

 low level of labour productivity, shortage of qualified personnel;

 low implementation level of novel technologies, and innovations in production.

The following principles are in the basis of sustainable development of corporate entities in the age of globalization:

immensity of capital investment, defining the attraction of financial resources of not only domestic investments, but also the attraction of financial resources to corporate entities;

 discourse ethics is a theory of corporation morality, securing the desired degree of responsibility, and interaction efficiency of economic entities of enterprise system in the globalizing world;

transboundary impact refers to pollutant transfer beyond the state boundaries, on the territory of which the corporation is situated;

transculture is a bottom line activity of corporate entities on the territory of various states, evolving a new concept of culture in relation to all current cultures;

provision of favourable economic conditions, contributing to the acceleration of renewal and modernization of basic production assets of corporate entities, for the securing of competitive level increase at the world global market;

production diversification of corporate entities;

mobilization and utilization of resources for the result of top objectives and tasks;

increase of innovative technology rate during the manufacturing activity of corporate entities, for the purpose of acquisition of competitive advantages at the global market.

Sustainable development of corporate entities in the age of globalization should secure even development of corporate economy sector, neutralize the shift to the materials sector, by means of development of knowledge-intensive economy industries, support of innovative and nanotechnologies on the part of state.  These tasks are impossible to solve without development and realization of programmes, focused on the level increase and the quality of personnel development, that should in turn lead to economic growth of national economy and human wellbeing.

Sustainable development of corporate structure is impossible without regard to internal factor impact, including their properties and interaction features (Table 1).

 Table 1

Internal stability factors of corporate entities

 

No.

Factor

Indicator

FINANCIAL FACTORS

1

Productive efficiency

1. earning before interest and taxes adjusted for amortisation

2. Profit remaining after all obligatory state payments and interests on the credit have been made

3. Net profit

4. Profit from sales

2

Financial stability

1. Absolute financial stability

2. Normal financial stability

3. Unstable (pre-crisis) condition

4. Critical financial condition

3

Enterprise liquidity

1. General solvency ratio

2. Rate absolute liquidity/creditworthiness

3. Rate of current liquidity

4. Rate of flexibility

5. Rate of turnover means in assets

6. Equity ratio

4

Position of corporation at the market of valuable securities

1. Earnings per share

2. Indicator P/E

3. Return on investment

SOCIAL FACTORS

5

Human resources

1. Labour productivity

2. The level of average salary in comparison with the industry average

3. Salary turnover

4. The advance ratio of the growth rate of labour productivity in comparison with the growth rate of salary

6

Safety and protection of labour

Implementation of unified standards of production safety with account of their specific activity, and development of the merge program, which will promote the standardization of principles for the management of production safety and labour safety (for example, on the ground of international standards ISO 9001).

ENVIRONMENTAL FACTORS

7

Establishment

of ecological balance

1. Search for mitigation ways (purchase and implementation of innovative technologies, creation of department/group, responsible for monitoring, analysis of exposure severity of business operation on the environment);

2. Enforcement of environmental protection measures;

3. Elaboration of set of actions, focused on the reconstruction of environment.

4. Financing increase of environmental measures.

 

Performance indicators combine the coefficient group, focused on the combination of return level of the capital and sale. Performance analysis is carried out for the definition of investment rationality in the project/company, efficiency prediction of growth opportunity etc. In such a manner, production performance is closely bound with the notion of profit, and characterizes company profitability.

Tabular and ratio principle of performance measurement is distinguished in the scientific literature.  We turn our attention to the ratio principle in our work, so to speak as a most accurate way of performance measurement in conditions of inflation impact, foreign-exchange fluctuations and other adverse factors.  The given method includes the following indicators:

earning before interest and taxes with account of amortization (EBITP) – the indicator, forming cash flow;

indicator, with the help of which the ability of the system to be liable for financial obligations is defined – profit remaining after all obligatory state payments and interests on the credit have been made (EBIT);

net profit;

profitability sale is the ratio of net profit to sales revenues, which characterizes the amount of net profit per revenues unit. With the help of correlation of the given indicator of the analysed period with the past period one may define the level of company efficiency in comparison with business rivals.  Thus, if a given indicator has a tendency to reduction, it most likely testifies to the deterioration of corporation competitivity. However, it is inappropriate to speak on the established tendency using one indicator only.

A complex approach, based on analysis, is necessary:

basic profitability ratios (ROA – Return on Assets, ROI – Return on Investments; ROS — Return on Sales);

Extra Value Added (EVA) is widely used;

calculation of expenditures on the ABC method (Activity Based Costing), developed by American scientists P. Cooper and R. Kaplan at the end of the years 1980, helps to define cost release of goods or services rendered, and to adjust the investment policy on its basis as well as to define a more appropriate way of strategic development;

Activity-Based Performance Analysis (ABPA) is based in the notion of «chain of efficiency» according to M.V. Meier (Figure 4).

 

 

 

 

Fig. 4. Chain of corporate efficiency

 

The next factor of our model is the rate of financial system stability.

The rates of financial stability of the company have a special importance considering the needed estimates of stabilized business structure condition and acceptance of operating managerial measures for maintenance and strengthening of balanced condition.

There are various groupings of consistency rates in economic literature (Table 2)

                                                                                                              

     Table 2

Appraisal ratio of financial stability

                            

Authors

Indicators for the financial stability evaluation

 

1

2

A.S. Korezin[1]

Balance formula, reflecting the equation of assets and liabilities rates

VA+OA=SK+DZ+KZ

 

V.S. Gnoyko[2]

The amount rate of proprietory funds and long-term borrowed resources to the balance-sheet total multiplied by 100 per cent.

 

Ye.V. Grebenshchikova[3]

Calculation of financial stability (ratio of business profits to the difference of actual realization volume and direct expenses multiplied by 100 per cent)

 

K.S. Baranov[4]

Leverage ratio (Equity to Total Assets; Equity ratio; Flexibility ratio; Permanent assets ratio ; Long-term gearing ratio; Correlation ratio of mobile and fixed assets;Working capital reserves-to-production ratio)

 

I.N. Rykova[5] 

Capitalization ratio (shoulder of financial leverage) Debt-to-equity ratio;

Financial autonomy (independence) ratio, solvency ratio; Ratio of business solvency, attitude

 

G.S. Mikhalev[6]

Capitalization ratio (shoulder of financial leverage), Equity ratio; Financial autonomy (independence) ratio; Financing ratio; Ratio of business solvency

 

               

Almost all researchers distinguish the following types of business stability (Table 3).                  

  Table 3

Types of financial stability

 

No.

Indicators

Arithmetic formula

Acceptable value

1

General solvency ratio

2

To absolute liquidity/creditworthiness

3

To current liquidity

 

4

To capital flexibility

positive fact- tendency to decrease

5

Rate of turnover means in assets

6

To economic security with proprietory funds

 

The next group of indicators under the consideration is related to the position of corporation at the market of valuable securities. It goes without saying that this type of indicators should be applied to corporations, which shares are at the market. The following ones refer to them (Table 6)[7]:

  Table 6

 Indicators, characterizing the position of corporation

at the valuable securities market  

 

No.

Indicators

Arithmetic formula

Symbols

1

 Earnings per share (EPS)

NP – net profit; D –dividends; N – number of Common Shares Outstanding

2

Indicator P/S

P (price) – price for one share

3

Dividends (D)

div – amount of dividends for the latest accounting year

 

 

Consequently, from our point of view, we set the basic financial indicators of corporation activity.

The next step is to define the impact of social constitutes of sustainable corporation development as a social institution. Human resources are the most important wealth of the system at any level (international, state, regional, local etc.) and provision of optimum payment system, standartization and labour safety. The fact of the matter is that social modernization is an essential element of efficient and sustainable development of corporate entities. 

It is necessary to point out that social modernization is a complex, comprehensive process,  condition, which is impossible to define on one or two indicators only (for example, salary and public health level), a complex approach is necessary.

Social policy is commonly understood as a complex of measures and events, focused on the sustenance of population. We distinguish state, regional, corporate and other social policy kinds.  However, this definition is not considered sufficient. In such consideration social policy is a set of measures, at the absence of which social policy is absent. Notwithstanding, it is present not only in theory, but in practical life as well.  In such a manner, social policy is a complex multilevel system of interrelations, in the field of social and labour relations between individuals, social groups and quarters of society, the objective of which consists in the security enforcement, development and creation of high standard of living. In such a manner, social-labour sphere includes social policy with all its constituent elements blocks and structures (labour market, social security, state-financed organisations, pension system, etc.). In the course of organization of social policy it is necessary to secure sustainable development of all its elements, without separation of priority areas.

Social policy goes through several levels:

it carries a normative character at the state and regional level (regulatory documents are accepted, norms and regulations are set);

Specific actions on the reaching of specified objectives/tasks at municipal, regional and corporative level are carried out as well as monitoring for its accomplishment and corrective actions.

The efficiency of social program realization at all levels depends on the factors of economic development, budgetary supplying, financial support etc. of social policy entities.  At the same time, social policy, conducted within big business, should be the basis for active economic growth, increase of financial flow, extension work of regions, and budgeting.

Let us consider the basic elements of social responsibility of the corporation:

human resources (motivation labour, social benefits, career development);

safety and protection of labour;

environmental protection.

Enterprise system, within the sustained development, strives to strengthen and qualitatively transform its labour forces. A set of measures is carried out on the securing of competitive remuneration of labour, a set of social benefits is given, a possibility of career development and competence development is provided. Various researchers place high emphasis on personnel policy selection, system of motivation and social support. Social set of benefits, provided by the corporation, has a diversified character, and can be expanded depending on the arising needs. Motivation system generally includes not only material remuneration, but various kinds of non-financial recognition as well (corporate rewards, publications and interviews in mass media), contributing to the organization of corporative culture based on the single value of corporation. Demand analysis of enterprise system in the expansion/reduction of human resources is held at multiple levels of system life cycle in accordance with the mission and objectives of corporation. The main aspects of usage, supply, and demand for labour forces of corporation for sustainable development are:

labour productivity;

level of average salary in comparison with the industry average;

salary return;

advance ratio of the growth rate of labour productivity in comparison with the growth rate of salary.

Great significance in the provision of stable functioning of enterprise system is placed on the elaboration and implementation of set of measures on production security enforcement and labor safety. At present there is a great expansion of practice for the implementation of unified standards of production safety with account of their specific activity, and development of the merge program, which will promote the standardization of principles for the management of production safety and labour safety (for example, on the ground of international standards ISO 9001). It is also efficient to carry out a contrastive analysis with the aim of troubleshooting of company security system, with other companies of the given sector, to prepare the event list, focused on the liquidation of detected deviations and drawbacks, to develop a project policy in the area of corporate security and labour safety.

Stable functioning of corporate system is impossible without accounting and continuous monitoring of the system at the level of environmental impact on the company. From our point of view, it is necessary to conduct a set of measures, directed for detection, evaluation and mitigation of company activity consequences. Elaboration of high priority measures, such as:

searching for mitigation way (purchase and implementation of innovative technologies, creation of department/group, responsible for monitoring, analysis of exposure severity of business operation on the environment);

enforcement of environmental protection measures;

elaboration of set of actions, focused on the reconstruction of environment.

financing increase of environmental measures.

The interrelation of factors, which have influence on the enterprise system, is presented in Figure 5.

 
 

Fig. 5.  The scheme of effect of internal

and external factors on the corporate structure

 

We suggest using the following function for stability determination of Russian corporate entities in the age of globalization, reflecting the interrelation of internal and external environment:

,

where,  – ratios, taking in account the value of local consistency indicators; – consistency indicators.

Based on the analysis of selected indicators/factors, affecting the sustainable development of corporate entities, the integral consistency index of the system is formed.

The given equation allows estimating the degree of system stability, and its structure allows detecting the influence of factor on the system stability and working out a set of measures for its enhancement.

The substantiation of set of measures is carried out on the ground of resultant monitoring of operating system rate. 

We make use of the following indicators for the estimation of corporate entity efficiency:

corporation efficiency as an element of business system ;

corporation efficiency as an investment medium;

functional indicators at the level of corporation ;

performance indicators of intracorporate management.

 

The following dependence is provided on its basis:

In summary, the accounting of economic stability effect allows estimating the effects of the rate change on the corporation, and take a complex of operational measures, directed for the elimination of detected deviations.

  



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[2] V.S. Gnatko. Corporations in the transformed economics of Russia: questions of theory and practice: Dissertation//Гнатко В.С. Корпорации в трансформирующейся экономике России: Вопросы теории и практики: Дисс. … канд. экон. наук. – Ярославль, 2003. 172 с.

 

[3]  Ye.V. Grebenshchikova Alternative calculation of financial stability reserves on the enterprise // Гребенщикова. Е.В. Альтернативный расчет запаса финансовой прочности предприятия // Финансы. 2006. № 8.

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[6]  G.S. Mikhalev Project planning methodology of operational corporate entity structure: Dissertation // Михалев Г.С. Методология проектирования организационных структур корпоративных образований: Автореф. дисс. … докт. экон. наук. Красноярск, 2007. 45 с.

 

[7]I.A. Pavlova Monitoring technique of financial stability of enterprise with account of its life cycle: Dissertation // Павлова И.А. Методика мониторинга финансовой устойчивости предприятия с учетом его жизненного цикла: Дисс. …канд. экон. наук.  Нижний Новгород, 2008.  196 с.