BUSINESS IN GEORGIA: SOLVING THE GENERAL PROBLEM

By Dr. Alexander Margishvili

Number of researches was carried out with the purpose of revealing the obstructing and supporting factors of business during the past ten years in Georgia. Numerous Business-Support Informational organisations were also established.

Even businessmen have acknowledged the importance of market opportunities as the basis for setting and expanding business. Some industrial unions and groups working on environment research and analysis, on the perfection of legislative basis were established, One of them is the Centre for Enterprise Restructuring and Management Assistance (CERMA) formed by the Georgian Government with the aid of the World Bank administration. Contrasted with other organisations, CERMA is more practical in supporting business in Georgia. It’s orientated on detailed analysis of enterprise, which means that CERMA experts provide assistance for concrete companies in finding their own place in the market and they do not confine themselves to processing general recommendations. It’s natural that this kind of assistance will influence the industry effectiveness much.
During the process of enterprise restructuring, most of Georgian companies have to encounter some actual difficulties. The experience of CERMA and others could serve as a basis for determining the importance of these difficulties.
Difficulties of business development are divided into two main groups: internal and external problems. We shall consider internal problems of the companies, however, it doesn’t mean that we ignore external ones.
Among the internal problems special attention should be paid to management that gives rise to all other internal difficulties ranging from technical disorder to personnel demobilisation. The four groups can be classified as follows:
1. Working according to the short-term plan;
2. Orientation on production;
3. Centralisation of management functions;
4. Ignoring the importance of control and correction.
1) Nowadays a concrete and well-outlined strategy is necessary for the development of business. Georgian businessmen pay no attention to this issue as a result of which they take thoughtless and hasty decisions. A firm with no strategy resembles a soldier who doesn’t know what he fights for and, finally, loses. Thereof, enterprises are mostly based on a short-term plan. These plans are based on conclusions of the executives and not on a well thought-out strategy. The main negative feature of short-term plans is the risk of inconsequence. Of course, inconsequent actions will not promote the competitiveness of company.
2) In seeking answers to the frequent questions of companies – what to produce? – how much to produce? – whom to produce for? – and how to produce? Georgian managers mostly err. The starting point for them is a product, which the company is able to manufacture. For example, banks and stores work only at the days and hours that are suitable for them, printing-houses make only the deals they want etc. This kind of approach, in business language, is called “orientation on production”. It has been quite popular in western companies for a long time, but since the 70’s the above-sited trend was substituted by marketing and market orientation, in other words companies became customer-oriented. The reason of this change was acknowledgement of concept, according to which company’s success depended not only on satisfying production capacities, but also customer demands. Sooner or later Georgian businessmen will have to share this principle in order to survive.
3) All of the companies in the world face the problem of simultaneous execution of various managerial activities. In parallel, the analysis of consumer demand, processing of the technological cycle of production and supply, control of expenses and incomes, operative exchange of information is to be implemented. In Georgian enterprises, in most cases, a single person or a group of persons perform all the above-mentioned functions. They do not use the principles of labour division and concrete advantages. The best results are achieved only if each worker does what he can do more professionally and quickly then any other. Centralisation of managerial functions, or concentration on all decisions in one centre, causes inflexibility in our companies as well as inertness of middle and lower managers, haste decision making, and, finally, uselessness of organisational opportunities.
4) Recent markets are characterised by increasing dynamism, which gives rise to an elastic demand on permanent development and rapid modification of a company. Company has to be able to change tactic any time in order to meet the market requirements. Using the system of constant control and correction is important. This will also improve the means of obtaining, processing and using information. All this serves as a guarantee for the maximal effectiveness of business.
The best ways of solving the problem are reorganization works performed by the CERMA group.