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Trade Deficits and the Health of the Economy-12: Dialog with Nikola Gruevski, former Minister of Finance of Macedonia

Sam Vaknin, Ph.D. - 3/24/2006

NG: The first problem of the three that I mentioned can be solved by the employment of managerial techniques involving better organization and the combining of resources and by the state creating a better economic environment (monetary measures, bonuses, etc.).

Besides, all these problems come from not implementing marketing methods and concepts by Macedonian firms. Those, which do, are the most successful. The word marketing for many, even today, is synonymous with TV advertising. Today people don't buy shoes simply for their feet to be hot and dry anymore. They buy them because they feel manly, feminine, young, gorgeous, or sophisticated wearing this or that brand. Buying shoes becomes an exciting act. Today the shoe manufacturer's job is to sell excitement not only shoes. Cosmeticians don't sell only cosmetics, but also hope. We drink labels. From the bottle of Coca-Cola we drink the picture of a pretty girl or a boy from the TV screen or from the billboard, we drink the motto "a rest which refreshes", we drink the big American dream, and we drink less with our jaws and more with our brain. Marketing is a philosophy and a knowledge, which influence all senses.

SV: "We drink less with our jaws and more with our brain". This is the best summary of what is marketing that I ever heard. I wish Macedonian managers would understand this. Marketing is a branch of mass psychology. Throwing money at advertising is not everything there is to it.

NG: Every enterprise has to subject its business policy to His Majesty – the consumer. The time when you could produce a product and sell it through a strong propaganda campaign on the global market has passed a long time ago. Marketing policies, especially international marketing, demands continuous market research, and the dedication of professionals and financial resources. Most Macedonian enterprises don't have the possibilities to engage in these.

Knowing that the implementation of a marketing strategy, is a fundamental of management philosophy, and that it is imperative for the success of Macedonian economic subjects - the establishment and financing of the state's marketing agency, which will serve as a service to the economy, by the Macedonian government, is a big necessity.

The basic functions of the agency will be:

- The education of managers: holding seminars, preparing projects for international marketing, researching and discovering more adequate markets for the activities of Macedonian enterprises and adequate strategies for penetrating these markets;

- Upon request from its clients, it should provide services: preparation of studies, analyses, project plans, strategies and the financing of marketing projects proposed by the clients;

- Of their own initiative to advice, to notice if there is any problem and to propose a solution for it.

In the start-up period, besides domestic experts, foreign marketing experts should be made accessible to the Macedonian firms. This is in view of the absence of sufficiently experienced experts in the country. In parallel, the agency should work on the sophistication of its experts in this region. Professionalism is like a candle – from one candle a thousand others are lit, without losing its own flame…
I will illustrate the need for this agency by one concrete example. The production of oil for consumption is relatively well protected. But even so, a good part of the Macedonian market is controlled by foreign producers, even though their prices are higher on average by 10%. One study showed that what deters consumers and repulses them and forms their negative position towards the producer is that the bottles are oily. Regarding the quality of the product there are no more serious claims. That is why those consumers with a higher standard decide in favour of the foreign producer. The domestic producer didn't conduct market research because probably he assumed that something like that is not needed because the oil is a basic consumer product which people have to buy and it is the cheapest on the market. By adopting the suggestion of the consumers, the manufacturer may obtain a bigger market share and from this the national economy will derive undoubted benefits. Recently data were published which demonstrated the physical growth of production. Even if we accept these data without any deeper analysis, the question regarding the financial results of the production appears, or about the feasibility of the production and of the employment of the assets.

SV: It is customary to say today that the investor has gained an added measure of sophistication and choice. He will no longer be dictated to, coerced, or cajoled. He fiercely objects to brainwashing. Information is freer. In the sixties, the tobacco companies were able to hide results of studies regarding the addictive properties of tobacco. In the eighties this was no longer possible. Information is more widely distributed and through a myriad of channels. Just think what the internet has done to knowledge and the VCR – to motion pictures. It is more pluralistic and relativistic – the consumer is given several options or points of view and the decision is usually his. It is faster – the full text of Kenneth Starr's report regarding President Clinton's conduct was available within 24 hours on the internet. The whole world has been consumerized. Sex, pregnancy (through surrogate motherhood), soft drink, political candidates, books – are all products to be bought and sold. This blurs the traditional distinction between reality and fiction. Spin doctors (political marketing gurus) created the myths of Tony Blair and Boris Yeltsin. Presidents play themselves in movies (as President Clinton has done a few times). Actors become presidents. We consume, as you say, images.

The second pertinent point has to do with images. A product evokes in us a host of related images, every time we consider buying it or we consume it. These images determine the objective properties of the product. This is the mistake of managers, which deride marketing and advertising. Products have no OBJECTIVE qualities – only subjective ones formed in the consumer by layer upon layer of data, memories, associations, fears, images, sound bites. The VHS standard in VCRs prevailed over the Beta standard DESPITE the fact that it was technologically inferior. MS-Windows is far inferior to the Macintosh operating system – but who is the market leader? Quality counts to a certain extent, of course. But packaging, labeling, positioning, imaging – are as important, usually more so.

Macedonian products suffer both from inherent quality problems – and from a lack of set of associated images. Say Britain and we see the queen, Diana, pompous aristocrats, dry humour, an island, the Tower of London. Say Japan and we conjure up images of small, clever, yellow men toiling at making products better, more reliable and cheaper. Say Macedonia and we draw a blank. It rings no bell. This is bad – but changeable. This is one field of the economy where I welcome government intervention: marketing. Today, all over the world, politicians regard themselves as directors in a huge firm called The State. Presidents conclude export deals. Ambassadors promote trade and joint ventures. Ministers of Finance market their country. This, perhaps, is the main role of the state in the Post Cold War World.

NG: Macedonian products have to attain a higher level of quality.

Macedonian exporters should be stimulated to obtain a higher quality of the working organization and its products, or ISO 9001/2/3 standards of quality and ISO standard certificates for product quality. The data that only 20 Macedonian companies own this standard (and not for all processes and products, but for one, two or three of all the products which are produced by one company) says that the situation is unsatisfactory and worrying. Many Macedonian companies lose markets because of lack of ISO 9001 or 9002 certificates. In today's world of competition one of the most important things, which separates the leading companies from the rest, is quality. Even companies, which are renowned for their qualitative products or services, must work on getting better in everything they do with an aim to remain on top. This is quality management. Quality means the fulfillment of all the agreed demands, not more nor less, which satisfy the clients. But, to reach work quality it is not enough only for the company to implement an internal system of standards. In the chain of consumers, buyers, partners, distributors, etc. there must be present a certain quality of work. The European Union issued many directives, which made exporting to it extremely hard without having the above-mentioned certificates. For trading within the Union these certificates used to be only a good recommendation, but not a prerequisite for the external traders, more and more they became a condition. The quality standard ISO 9000 is also needed for export destinations in the USA and for many other countries, including even the Arab countries. This means that in the future it will be more difficult to export even to the poorer countries without having this certificate. The quality is not something, which can be guaranteed by controlling the work of others and uncovering their mistakes. The key is in preventing the mistakes, above all by securing the right finish of the work. The systems for quality control should cover everything that we do, or do not do, and which can influence the quality of the product or the service quality, which we forward to our clients. Implementation of the quality standards system represents a documented way of introducing control of the quality. ISO 9001, above all, requests management responsibility and expects it to come up with a policy for quality and to make sure that everyone in the organization understands it. Also, the managers should obtain enough financial resources and trained personnel for doing the job, to appoint a quality coordinator for the system and to check the system in real time for quality to make sure that it is still adequate and efficient. In the other 19 of a total of 20 points of the Agreement it is mentioned that the quality system should be fully documented, to satisfy the requests and expectations of the clients, etc. A review of the Agreement with the confirmation that the order is fully understandable and that we are capable to fulfill it precisely anytime is also a point in it. I will only mention, not analyze, all the other points: the control of the design (projection), control of the documents, ordering, control of the product ordered from the seller, identification of the product, control of the process, inspection and testing, control of the inspection's measurements and testing of the equipment, the situation during the inspection and testing, control of defective products, corrective and preventive measures, operations, warehousing, packing, storing and delivering, control of quality reports, internal quality check-ups, training, service and statistical techniques. To achieve such work and organizational standards, the company needs to employ specialists, whose job it is to prepare the companies to receive a certificate from an independent and juridical body of certification, which, on the other hand, will confirm that the company operates according to the world standard. In the Macedonian Chamber of Commerce there is a register of specialists, which are trained, noted and recommended by the very well known English house Bywater, which has provided the training and comments through the exactly defined standards. This will provide a certain preparation for the time when the representative of the one of the many companies, which issue this kind of licenses, will try to find errors in the system and abstain from granting the license (the money, which is paid in advance, is lost, in such a case). Well known world institutions, which grant ISO 9000 certificates are: BSI – England, Lloyds – England, Bureau Veritas, OQS – Austria, TUF – Germany and others. A big problem is that the preparation and the check-ups needed in order to receive the above mentioned certificate, require an investment of between 8.000 and 25.000 DM (depending on how big the company is) with a validity of three years. Within this price are not included the costs, which the company will, probably, have to commit to for an increase in the level of technical equipment (computers and so on), and are a variable depending on the firm's developmental level. It is important to mention that the company, which issues the certificate, makes regular inspections of the company, which receives the certificate, and if it discovers a breach of the agreement, it has, according to the Agreement, the right immediately to revoke the license without reimbursing the expenses that the company incurred.

Besides the quality standards of the working-organization, there are ISO certificates attesting to the quality of certain products, which is also very important for penetrating and surviving in the world's markets.

There are even higher standards for quality than ISO 9000, such as TQM (Total Quality Management), which I noticed during my visit to the Toyota factory in Japan. But it seems that RM is in too premature a stage for such type of certificate (TQM).

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