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DOI: 10.5817/CZ.MUNI.P210-6840-2014-57
THE CORPORATE ENVIRONMENT OF MUNICIPALITIES
PODNIKATELSKÉ PROSTŘEDÍ OBCÍ
ING. MIROSLAVA VAŠTÍKOVÁ
ING. KATEŘINA MATUŠÍNSKÁ, PH.D.
Katedra marketingu
Obchodně podnikatelská fakulta v Karviné
Slezská univerzita v Opavě
Department of Marketing
School of Business Administration in Karviná
Silesian University in Opava
* Univerzitní nám. 1934/3, 733 40 Karviná, Czech Republic
E-mail: vastikova@opf.slu.cz, matusinska@opf.slu.cz
Annotation
This article presents outputs of a primary research aimed on the analysis of the corporate
environment quality and standards of communication between the municipality and resident small and
medium enterprises (SME). An inductive approach, theoretical discourse on the role of the
municipality in creation of corporate environment that is based on marketing of municipalities and
descriptive primary research with analysis of obtained results was used in the article. Municipalities
were divided into two basic categories according to the number of inhabitants (up to 6 thousand
inhabitants and over 6 thousand inhabitants) for the marketing research purposes.
Key words
corporate environment of a municipality, small and medium enterprises (SME), marketing research
Anotace
Článek byl primárně zaměřen na prezentaci výsledků primárního marketingového šetření
posuzujícího kvalitu podnikatelského prostředí obce a úrovně komunikace obce
s organizacemi malého a středního podnikání se sídlem na jejich území. Článek obsahuje
teoretické pojednání o úloze obcí ve vytváření podnikatelského prostředí a analýzu získaných výsledků
z primárního šetření. Pro potřeby výzkumy byly obce rozděleny do dvou kategorií dle počtu obyvatel
(obce do 6 000 obyvatel a obce nad 6 000 obyvatel).
Klíčová slova
podnikatelské prostředí obce, malí a střední podnikatelé, marketingový výzkum
JEL classification: M31, H40
Introduction
Business in the field of small and medium enterprises is influenced by a whole range of factors. Some
of them affect the entire SME sector without exception; particularly the economic environment where
the phase of the economic cycle and the related purchasing power of inhabitants bring considerable
difficulties to small and medium enterprises. Other factors that comprehensively affect the
development of SMEs include the political and legislative environment. According to Kotler (2011),
the “macro-environment” of an enterprise also includes the demographic, cultural and social, natural
or technological environment. In those environments, the level of the effect of the factors of the
macro-environment differs and depends on the specifics of the industry where such enterprises
operate. The function of the macro-environment presents unpredictable impacts of the surroundings.
The macro-environment takes effect differently and continually. It is not possible to influence it, but
only to adapt to this environment in a flexible way. (Kozel, 2006, p. 16)
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SMEs are not only influenced by their macro-environment, but also by the micro-environment. The
marketing micro-environment (the sector of the company business activity or it could also be said
micro-surroundings) includes circumstances, influences and situations which can be changed
significantly by the company activity. (Jakubíková, 2008, p. 83) In this article, we will discuss one of
many components of micro-environment: the place where the company is based, i.e. the municipality
(the city). There is a rule that the image of a company is partially related to the municipality where it
operates and vice versa: a desirable image of a municipality, including all its marketing activities,
helps create the business environment and thus may also promote the business activity of the
company.
1. The Business Environment of the Municipality and Small and Medium
Enterprises
The enterprisers are said to be the persons who make a good thing of initiative and risk. (Staňková,
2007, p. 1) The small and medium enterprises are regulated in the Czech Republic according to the
small and medium enterprises support law. The liberal business environment, providing the same
conditions to all business subjects, is the crucial presumption for prosperous business activities.
(Pražská, 2002, p. 58) Satisfactory definition of territorial marketing becomes increasingly
complicated task also due to the fact that municipality/region represents much more complex unit than
enterprise itself Common signs of territorial marketing can be thus found rather in used instruments,
methods, concepts or common objectives. (Suchanek and Sed´a 2011) The business environment of a
municipality is formed by three subsystems that mutually influence one another: (Vaštíková and
Janečková 1999)
§ The municipality itself.
§ Organizations operating within the municipality.
§ Historical and cultural factors, habits, traditions and customs of its inhabitants.
First and foremost, it is a municipality that co-creates the terms and conditions for the activity of
businesses in its territory. From this point of view, the municipality is an enterprise as it shows the
activity that creates a current or future gain. In spite of that, it is an organization where the allocation
of resources is mainly executed through administrative orders. The municipality is a special type of
organization particularly as it performs the functions of a local autonomy and public administration
within the scope of the activity defined by the Act on Municipalities and some other regulations. Thus
it is obvious that the municipality can choose neither the line, nor the place of business. This affects
the mission of the organization (municipality) and represents a particular specific characteristic when
creating business environment and an image of the organizational culture of the municipality.
On the other hand, some dominant businesses, large enterprises or companies that are the largest
employer in the municipality may influence the municipality. If so, they indirectly affect the
inhabitants and thus the atmosphere in the city or the municipality. Entrepreneurs create the gross
domestic product of the municipality and participate in the economic and social environment, a factor
of the municipality’s image. Small and Medium Enterprises represent 99.84 % of all active companies
in the Czech Republic. (The role of small and medium enterprises in society, 2013). Small and
Medium Enterprises are usually in close relation in the region where they are located. Enterprisers live
mostly in this region. Firstly they provide employment and economical benefits to this region, but also
support many regional charitable and other events. (Veber, Srpová et al., 2005, p. 21). It is now well
established that small and medium-sized enterprises (SMEs) play a vital role in the process of
transition to a market economy. As the large firm sector, the prevalent form of organisation under
central planning, underwent restructuring and decline, thousands of new SMEs took advantage of
liberalised entry conditions and entered the market. They responded rapidly to systemic shocks,
produced goods and services demanded by the population and, in the process, contributed to the
generation of new jobs and incomes. (Gashi et al., 2014)
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Businesses thus affect the economic and social environment of the municipality both in the short and
long term by creating the structure of the economy of the municipality (the region), its business
culture, or the “entrepreneurial spirit” of the locality.
The business environment also includes public organizations of municipalities and cities as a part of
the social infrastructure that may attract entrepreneurs to the municipality and keep them there.
The business environment of the municipality is also formed by the historical and cultural factors,
habits, traditions and customs of its inhabitants, which retroactively influences the business culture of
the municipality as a whole and its image. Creating a balanced municipality, as it is usually defined by
the vision of the municipality and its marketing strategy, cannot ensure the best management of the
municipality in case that its activities remain limited to the city council and the municipal
management. Therefore, the management of the municipality cannot do without cooperation –
partnership of all subjects representing the product of the municipality, and thus businesses.
2. Primary Marketing Research
The party ordering the research was interested in whether or not entrepreneurs are satisfied with the
business environment in their municipality and with the level of marketing communication of the
municipality where they are based. We determined a descriptive objective of the research: a
description and characteristics of the aforementioned factors with regard to the size of the
municipality, according to its population. The respondents were small and medium enterprises in the
profit sector based in the Czech Republic. The total sample of respondents included 165 businesses
based in 48 municipalities and cities in the Czech Republic. The interviewers were students of the
School of Business Administration in Karviná. Random sampling was applied.
The set of 48 municipalities included municipalities of different sizes (as to the population). For a
better comparison, we divided this set into two groups:
§ A group of small municipalities with a population of up to 6 thousand – 23 municipalities. 47
respondents were based in this group (28.49 %).
§ A group of large municipalities with a population exceeding 6 thousand - 25 municipalities. 118
respondents were based in this group (71.51 %).
These size criteria have been already used in realization of previous marketing research relating to
marketing of municipalities.
At the same time, we determined the following three research hypotheses:
§ H1: The respondents in the small municipality group will be more interested in the municipal
activities than the respondents in the large municipality group.
§ H2: The respondents in the large municipality group will evaluate the level of the municipal
marketing communication higher than the respondents in the small municipality group.
§ H3: The respondents´ membership of the group of large municipalities or small municipalities has
no effect on the evaluation of the business environment.
Nonparametric tests of hypotheses – testing of the independence of the qualitative characters – will be
used for testing Hypothesis No. 1 and Hypothesis No. 3. The function in MS Excel CHITEST was
used. The testing was proceeding at the relevancy level a=0.05.
3. Research Information Analysis
As mentioned above, it is necessary to get the entrepreneurs involved in the activities of the
municipality in order to make the municipality participate effectively in the establishment of the
business environment.
The majority of the addressed respondents (53.33 %) are only interested in the activities in the
municipality within their civic awareness, which is not very gratifying. 35.76 % of respondents show
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an active interest and only 2 businesses are directly involved in the activities of their municipality.
However, the most dismal is the finding that almost ten percent of all entrepreneurs (9.7 %) are not
interested in the municipal activities at all.
We wanted to know whether the reality would differ for entrepreneurs based in a small municipality
(up to 6 thousand inhabitants). It is obvious that according to the expectations, there was a greater
interest of the entrepreneurs in the activity of the municipality in this group. 19 companies, i.e. 40.43
%, were actively interested in the activity of the municipality. It was 40 companies (33.9 %) in the
group of large municipalities. Only 3 businesses were not interested in the municipal activity (6.38
%), while the proportion was 11.01 % for businesses based in municipalities with more than 6
thousand inhabitants.
Based on the results of the statistical testing of H1 with the aim to map the effect of the size of the
municipality on the interest of the entrepreneurs in its activity, there is no unambiguous relation
between the defined characters; see Table 1. Therefore, the H1 hypothesis was dismissed.
Tab. 1: Testing of the independence of the qualitative characters – the municipality size and the
interest in the municipality activity
Partial hypotheses
H0: dependence between the municipality size and the interest in the
municipality activity
H1: independence between the municipality size and the interest in the
municipality activity
p-value (result of CHITEST
in MS EXCEL)
0.429788459
Hypotheses interpretation H0 is accepted: p-value > α (0,05) [ independence between the size and the
interest in the municipality activity
Source: Authors´ work
The following set of questions in our survey focused on the field of marketing communication of the
municipality. The respondents were asked to assess the standard of the municipal website, the
municipal promotional material and social public events organized by the municipality. They were
asked to use a range of marks for the assessment, just like at school. The results of this survey in both
groups are presented in Table 2. This question was not replied by 6 respondents, i.e. 3.64 %.
Tab. 2: Selected marketing communication tools evaluation (all respondents)
Marketing communication tools
Evaluation
Average %
1 2 3 4 5
Web sites of the municipality 54 58 25 8 2 1.95
89.09
Promotional materials of the municipality 15 54 54 18 6 2.63
Social and public gatherings which are
arranged by the municipality
41 56 37 11 2 2.16
I don’t know, no interest 12 7.27
Source: Authors´ work
The municipal websites had the best results, with the average mark of 1.95. Social and public events
organized by the municipality were second, with the average mark of 2.16. Promotional materials
received the worst mark – with the average mark of 2.63.
In the group of businesses based in small municipalities, the order in the assessment of the
communication mix tools changed a bit as compared with the total assessment of the respondents from
both groups. Social and public events organized by the municipality received the average mark of
1.89. This evaluation meets the expectations as such events are usually the “events of the year” in
small municipalities and people pay a lot of attention to their preparation. It is also gratifying that the
quality of websites was evaluated quite well, with the average mark of 2, which shows that even small
municipalities have quality website administrators. Promotional materials received the worst
evaluation again: 2.58. Table 5 shows the assessment of the selected elements of marketing
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communication by entrepreneurs based in large municipalities (over 6 thousand inhabitants). This
question was not replied by 6 respondents, i.e. 5.09 %.
Respondents based in municipalities with more than 6 thousand inhabitants marked the websites
higher than the respondents from the small municipality group, as expected. This confirms the
estimate that larger cities and municipalities may allocate more budgetary resources and thus provide
a better quality of processing. Our H2 hypothesis was thus confirmed. Promotional materials were
placed on the second position (the small municipality group respondents evaluated those worse). The
respondents from this group consider the quality of social public events organized by the municipality
to be the worst, as compared with the evaluation by entrepreneurs from small municipalities.
When evaluating the overall level of the selected tools of marketing communication, our H2
hypothesis was not confirmed because the respondents from the group of municipalities with the
population below 6 thousand evaluated the level of the selected marketing communication tools better.
In our opinion, the business environment of a municipality should also include whether or not the
municipality provides links to the companies based in its territory on its website. Data imply that there
is a lot to improve on the part of the municipalities, in both size categories. We believe that a better
connection of the municipality with the businesses would bring benefits to both parties and also
contribute to increasing mutual understanding. The availability of more comprehensive information on
the municipal website should also be for the benefit of the municipality and should mean a practical
step to the required business environment of a better quality for entrepreneurs.
We asked the respondents about the relationship of their organization with the municipality from the
business activity aspect. The entire set of the addressed SMEs mainly relates to the municipalities as
two independent subjects (84.85 %), i.e. 140 businesses. As for businesses in municipalities with more
than 6 thousand inhabitants, this share is even higher – 90.67 %. 10.91 % (18 companies) provide
their products and services to the municipality on the basis of a business contract. This share is even
higher in companies based in small municipalities where 10 companies, i.e. 27.21 % deliver their
products to the municipality. This fact confirms the presumption that the cooperation of the business
sphere with the municipality and the quality of the business environment is better in small
municipalities than in the large ones. Businesses, i.e. 1.82 %, cooperate with the municipality within
the meaning of a joint business activity, out of which 2 businesses are based in the group of
municipalities with less than 6 thousand inhabitants.
The survey also showed that one company, in the group of municipalities with a population exceeding
6 thousand, cooperates with the municipality on the basis of the PPP method.
The main objective of the survey was to examine how the addressed entrepreneurs evaluate the level
of the business environment in their municipality. The positive finding of our survey is that a total of
67.88 % of the addressed respondents are pleased with the business environment in their municipality.
However, only 3.03 %, i.e. only 5 companies, consider those to be very good conditions for business.
A total of 102 businesses are pleased, however, they see some areas for improvement. On the other
hand, 34 companies (20.60 %) consider the business environment conditions in their municipality to
be unsatisfactory. This opinion of about a fifth of all respondents does not only bring a topic for
contemplation, but also a new foundation for the implementation of corrective measures taken in this
area.
The share of satisfied respondents is a bit higher in the group of entrepreneurs based in small
municipalities – 70.22 %; however, only 2 companies are completely satisfied (4.26 %). Nevertheless,
the share of unsatisfied entrepreneurs is also lower than in the set of all companies, i.e. 14.89 %. These
results imply that the conditions for business on the part of the municipality are better in small
municipalities. However, with regard to the low number of respondents and mainly the number of
municipalities in both groups of the survey, we can only consider the informative value of those data
to be indicative.
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The statistical testing of the determined research hypothesis – H3 – confirmed the presumption that
the respondents´ membership of the group of large or small municipalities has no effect on the
evaluation of the business environment (Table 3). Thus, the H3 hypothesis was confirmed.
Tab. 3: Testing of the independence of the qualitative characters – the municipality size and
corporate environment
Partial hypotheses H0: independence between the municipality size and the corporate
environment evaluation
H1: dependence between the municipality size and the corporate environment
evaluation
p-value (result of CHITEST
in MS EXCEL) 0.417920158
Hypotheses evaluation H0 is accepted: p-value > α (0,05) [ independence between the municipality
size and the corporate environment evaluation
Source: Authors´ work
The evaluation of the business environment by respondents based in larger municipalities (cities) with
more than 6 thousand inhabitants is considerably lower, in all types of responses than in the
aforementioned group of respondents. We can only guess what the reasons of this phenomenon are:
whether it is a higher concentration of the competitive environment, aggravated mutual
communication of the business sector with the municipality or the lack of interest of both parties in
dealing with this situation.
In the last free question, the respondents were asked to propose measures that the municipality could
take, in their opinion, to improve the business environment. The responses included a whole range of
various opinions, out of which we selected those that most respondents agreed upon:
§ Focus on the possibilities of more intense cooperation between the municipality and the local
businesses in potential joint projects.
§ Place information about the companies in the territory of the municipality on its website for free.
§ Organize joint meetings of entrepreneurs and the local government, or invite representatives of
agencies such as CzechTrade, CzechInvest, etc.
There are strong relations between prosperous local economy creation and high quality municipality
environment maintainance. These two elements are interactive and dependent on each other. The
problems which influence the economy of municipalities and local small and medium enterprises are
still urgent and substantial. It could be said as the common platform for mutual partnership.
We propose following steps:
§ To create the programs of supporting services which give support to local employers in the form
„the care after“. This support is realized after investment which represents new jobs or the benefit
for municipality (for example financing from the EU funds etc.).
§ To create the „special business panel“ on the web pages of municipalities. This panel should
operate as the probing and interactive area to find out the enterprises´ opinions relating to
services of municipal council.
§ The cooperation between two sides – the enterprises and municipality in the area of the PR tools
use in practice. For example it could be the video-clip creation showing the local tourist places of
interest and local enterprises products and services. This presentation should be placed on the
municipal web pages or municipal facebook.
§ The common participation in Event marketing realization.
Conclusions
Our survey showed that there are many areas of improvement in establishing high-quality business
environment in the municipalities for SMEs, not only on the part of the municipalities, but also on the
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part of the entrepreneurs who should get more interested in the activity of the municipality, namely in
an active way, which 64.24 % of all addressed respondents fail to do. The entrepreneurs critically
assess the level of marketing communication of their municipality, with respect to the sample of
selected tools. Against the presumptions, the level is better in the group of small municipalities of up
to 6 thousand inhabitants than in the large municipality group (above 6 thousand inhabitants). The
survey brought a positive finding: a total of 67.88 % of all addressed entrepreneurs expressed their
satisfaction with the business environment in their municipality. In the group of large municipalities,
66.95 % of businesses were satisfied and in the group of small municipalities, 70.22 % of the
addressed respondents were satisfied with the business environment of their municipality.
It is obvious that the conditions for a “balanced municipality” that would also fulfil the role of a key
factor in the development of SMEs are rather created in small municipalities than the large ones. The
results provide both a range of questions to discuss the causes of the present situation and, first and
foremost, the possibilities of correcting the found out situation. We recommend to realize this type of
marketing research repeatedly. It is possible to reach for the progress in the specific area of
relationships in case of systematic monitoring and the resulting proposals implementation.
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This paper is one of the research outputs of project OP VK No. CZ.1.07/2.2.00/28.0017 Project
„Innovation of study programes at Silesian university in Opava, School of Business Administration
in Karvina“.