Foreword

Abstract

The special issue of the journal is devoted to the papers presented at the International Scientific Conference “Sustainable business development under scenarios of possible economic slowdown” held at Riga International School of Economics and Business Administration (RISEBA), Latvia, on 10-12 April 2008 and was hosted by three leading in the field of Business Administration academic institutions of higher education in Latvia that are: Riga International School of Economics and Business Administration, Ventspils University College and BA School of Business and Finance (these institutions also run a joint PhD Business Administration program).

Participants from twelve countries – Latvia, Lithuania, Sweden, Germany, Switzerland, United Kingdom, Russia, Australia, Estonia, Poland, Denmark and USA – took part in the conference.

The conference topic was announced in February 2007 (during the previous conference), when Latvia and other countries experienced the rapid economic growth. At that time, it seemed that the conference issue on business development under scenarios of economic slowdown was too pessimistic. However, the forecast appeared to be right.

Nowadays discussions of economists and politicians are focused around the duration and seriousness of consequences of the slowdown in contrast to the last year‟s focus – how long the rapid world economic growth would last. It is particularly applicable to the Baltic countries, where a number of indicators show that economic changes are occurring rapidly. The fast slowdown of the economic growth indicates on the fact that the Baltic countries have entered into a reverse stage of the development cycle, although the future positive growth is forecasted with respect to all three countries.

The conference agenda addressed three basic questions: 1) the severity of the situation in the Latvian economy and possible scenarios of further development; 2) the economic behavior of entrepreneurs under conditions of economic slowdown; 3) the Government‟s role in the period of the rapid slowdown of the economic growth.

The considerable decline of the Latvian economy was forecasted the current economic situation. Simultaneously, the participants counted on the fact that the Government is able to avoid the economic recession and other shocks, e.g. depreciation of the lat. The overall forecast of entrepreneurs in the middleof 2008 is quite optimistic: 4-5% growth rate of GDP1. However, despite of this optimistic viewpoint it was admitted that the economic risks still remain very high, driven mainly by the current trade deficit and high inflation rate. Therefore, sound and rapid qualitative changes applied to the country‟s economy are required in order to eliminate these risks.

The participants also admitted that the Latvian economy is strongly dependent on exports and, thus, on the global tendencies that are hard to influence. Hence, in order to solve Latvia‟s economic problems the internal state changes are required in the first place. These changes have to be undertaken by both entrepreneurs and the Government.

It is of an utmost importance for the economy that the entrepreneurs were optimistic and proactive, although they have to understand that their growth opportunities will be limited due to two reasons. The first one has already been mentioned in connection with the economic slowdown. The second is tied to the fact that the Latvian in-house market is not very big and in order to continue to develop in line with their business ambitions the entrepreneurs often have to open up new markets outside Latvia.

Given the decline of the economic growth rate and the consequential growth of demand, the competition is expected to increase, the price competition in the first place. However, the price competition has its own limitations and, thus, could not be regarded as the entrepreneurial optimum. The involvement of business growth in the price competition could be a sound strategy in the markets where the competition level was low. Yet, in most of the economy sectors the growth and development potential is underpinned by innovations, by offering new and unique products, by improving relationships with customers, by modernizing the internal organization structure.

The great potential of the business development had hitherto been carried by the “copy-paste” strategy: when the demand grows rapidly, a number of other template businesses arise (whether local, or foreign). Nowadays, in contrast, the greatest potential lies within the creative and innovative thinking.

What do the entrepreneurs expect from the Government? The answer is: they do not possess the unified plan of actions. However, the entrepreneurs‟ feasible expectations include: macroeconomic stability, rise of the economic competitiveness (that has fallen during the last years) and adequate support of the economy sectors, which do not feature free competition and which are dependent on public support.

The entrepreneurs are still in the lack of the vision of the country‟s course of economic development, the vision that is clear and simple enough. Latvia is a small country and its resources are limited – it pertains to both nature and human resources. Therefore, consolidation of human resources in a number of priority directions could result in the larger contribution to the state economy as opposed to the case when there are no such priority directions or they are not clear enough for the entrepreneurs. However, in order for this consolidation to ensue, it is necessary to manage this process. And that is where the Government‟s role as the leader lies corresponding with the entrepreneurs‟ expectations.

Considering the complicated situation in the state economy, it is imperative to think innovatively and pragmatically as well as to increase productivity not only on the business, but also on the state level. The Government sector‟s task is to serve the society. It is, therefore, essential that every lat spent carried a clear justification from the viewpoint of the goals set due to the reason that the state competitiveness is influenced by the consumers‟ and entrepreneurs‟ degree of reliance to the Government. In case the processes causing uncertainty towards the Government‟s actions, e.g. it works in favor of one of the group‟s interests or accomplishes such projects that are not supported by the society, then the entrepreneurs‟ confidence towards the future weakens.

Under circumstances of the economic growth rate declining, the Government could initiate large-scale projects that encouraged the economic growth. At the same time for the sake of effective allocation of resources it is required to provide calculations on the project‟s return justified scientifically. The current practice when decisions are taken on the subjective grounds is not viable from the state‟s development viewpoint.

A number of the conference participants mentioned the importance of ensuring alterations in relation to the education system. One of the modifying criteria is that the education system has to be capable of preparing ambitious leaders thinking creatively and able to make decisions in the ever-changing environment.

Key words of conference: the Government‟s role in the business environment stabilization, leadership, economic slowdown, sustainable development and competitiveness

On behalf of the Conference editorial board, 2008: V. Kozlinskis, A. Nipers