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Economic basic conditions of transition in Czech Republic
Tuesday, September 22nd, 2009 | University | No Comments
In this post I`ll continue the series “Retail in Prague” and focus on economic basic conditions of transition in retail in the Czech Republic.
Because of the centralistic economic structures before 1989 it has been a radical turn towards the market economy during the period of transition. The relative stable economical situation as well as the high acceptance in the population made Vaclav Klaus (financial minister of Czechoslovakia from 1989-1992) to choose the radical strategy of the so called “shock therapy”. One in all the liberalization of the prices and markets showed a positive development of the GDP especially in the end of the 90ies and 2000 (see c
hart).
The main reform in the economic restructuring plan has been the privatization. Private ownership should be replaced by public ownership to get the basics for market competition. Coupons and restitution made sure to involve every Czech into this process. By the end of 1992 there have been about 100 000 units of small and medium-sized enterprises being privatized (so called “small privatization”), mainly enterprises of the retail, gastronomy and hotel sectors. Therefore the part of the tertiary sector rose to 68%.
Privatization reform in the retail sector had a strong impact on the commercialization and formation of a city in Prague (in terms of a CBD). The demand of foreign companies for modern office and retail estate in the old town center grew steadily from the beginning of the 90-ies. To preserve and to avoid the modernization of the old city structures the old town has been declared as UNESCO world cultural heritage by the city administration.
In these times the „ decisions of the central government as well as local politicians have been grounded in a neo-liberal approach, which has seen the free, unregulated market as the only mechanism of allocation of resources, that would generate a wealthy, economically efficient and socially just system” (Sykora). This reserved point of view in terms of market regulation as well as the lacking competence of this stakeholder group is typical for the institutional reorganization during transition, which will be discussed in the next posts.
Democratization and Transition from Plan to Market Economy
Tuesday, July 28th, 2009 | Film Reviews, University | 2 Comments
To understand the still ongoing political and economical processes in Eastern Europe (or especially in Czech Rep.) since 1989, we have to know something about the existing transition theories. This post gives you a short overview about the main theories predominating the transition research.
Basically there are four directions, which are of importance. It started in the 60-ies with the Systems-Theory of Talcott Parsons which postulates the development of so called ” evolution universals”. He argued that, like Darwin`s evolution of biological organisms, societies progress through their “capacity for generalized adaptation” to their environment. This is achieved mainly through the development of specialized institutions to perform the social functions necessary to meet increasingly specialized needs (structural differentiation). Evolution is then from traditional to modern societies, and progress can be charted via bureaucratic organization, money and market complexes, social stratification, cultural legitimation and the emergence of generalized universalised norms.
Seymor M. Lipset advanced Parsons` theory and developed a casual connection between economical development and democratization. According to this, a growing GDP entails a better education, growing prosperity, tolerance, moderate working style of policy, a consolidation of civil society and eventually democratic structures. This steps of development are essential for the neoliberal paradigm which focuses the free market economy with its constitutive criteria ( e.g. private ownership, free price formation, freedom of competition).
This so called Theory of Modernization and Parsons` Systems Theory expanded into the paradigm of the neoliberal institutions like the World Bank and the International Monetary Fund (Bretton-Woods institutions). While this neoliberal model of development has been implemented on several countries of the third democratization wave (like India, Latin-America, Portugal) more and more criticism began to rise. Mainly the over- simplification as well as the missing explanation for the economical development without further democratization such as in several Arabic countries have been criticized.
New approaches in the transition research began to become more and more accepted. The publication of Huntington`s “Clash of Civilization” in the beginning of the 90-ies focused on the cultural aspects of countries in transition. Cultural theorists assume a close relationship between the secularization of a society and its ability and success in developing democratic structures. Therefor some societies just cannot be democratized because of their special religious-cultural roots which cannot be just replaced by new institutions and values.
Another branch of research are the stakeholder theories, which look on the microscopic level at the small elite-groups which seem to control the transition processes in a country. According to this, different stakeholder combinations can be identified as well as possible activities and developments be fore-casted. This is the main advantage over the Systems and Modernizing theories.
All in one the four theories complement one another so that a stakeholder analysis cannot be made without a system theoretical background. The multidimensional question of the success of the Czech transition strategy as well as the initial situation at the retail market will be targeted in the next post.
Transition of Retail in Prague- A Stakeholder Analysis
Monday, July 27th, 2009 | University | No Comments
Thesis is done! Now I`ve some time to write about it…Let`s start then!
The collaps of the old socialistic system ushered the former Eastern Bloc states in a new era. The transition from the command towards a free market economy has been a tour de forces which ment a radical social and political change.
This thesis focuses on the transitional process at the retail market which is supposed to be “most sensitive to changes”.
Due to the political and economical changes in the Czech Re-public in the beginning of the nineties, this market underwent significant re-structuring, which had an impact on the real estate market, the supply and demand situation as well as on the spatial structure of the city of Prague.
The co-operation between the major stakeholder groups – urban planning, developer, real estate and trading companies – is of primary importance for the empirical analysis of the thesis. Several experts have been interviewed concerning the above mentioned context in Prague.
In the first place it`s intresting to look at the theory, which I`ll introduce to you in the first part of this post-series.
Then we`ll have look at some examples of retail projects in Prague to visualize the current situation.
In the third part, I`ll analyse the stakeholder co-coperation as well as the impact on the urban planning in Prague.
Retail in Transition – Case Study Prague
Sunday, December 14th, 2008 | University | No Comments
In terms of my thesis, which is in process right now, I`ll introduce the theme to you in this new series of upcoming posts!
During the economic transition in the Czech Republic since 1990 there`ve been started reforms on several levels. Restructuring processes in policy, economics, society as well as administration have been initiated by Vaclav Klaus and the so-called “Shock-Treatment”. This transition methodology should guarantee a fast transition from a centrally planed- into a market economy.
A significant role played the restructuring of the retail sector, which is very sensitive to economic changes. It`s sudden expansion had several impacts on real estate markets as well as the city structures. Most important processes if the transition in retail are first, a creation of a estate market, second, a diversification of city functions, third, a scarcity of land in the city. The logical consequence of this development is a dislocation of retail to the periphery of the city (“Greenfield Site”) and therefore a declining buying power in the city.
Parallel to structional changes in the retail sector, an alteration process started also on the state-administration level. The abolishment of socialistic planning ministries and the formation of new governmental bodies led to several administrative gaps, which diminished just years later. Deficiency of competence and force of achievement as well as the absence of a city development plan gave international investors plenty of rope in their location decision strategies.
In the course of reform consolidation and elaboration of a strategic city development plan for the next two decades until 2020, the line-up of stakeholders in Prague retail began to change.
In the context of those developments the exiting question of distribution of power and competence in terms of location decision processes in Prague retail sector will be analyzed and partly answered in my theses.
By means of 4-5 retail projects out of different phases of transition (break, growing, orientation, modernization) shall be exemplified the formation and change of stakeholder line-up as well as their location decision processes.
Changes of the spacial retail allocation structure (city vs. periphery) and its importance in terms of city planning strategies are further aspects of transition of retail in Prague.
Retail in Eastern Europe – Czech Republic
Tuesday, October 28th, 2008 | University | No Comments
From the mid-1998 the Czech retail market showed a continuous growth which speeded up sharply in 2005. Retail sales increased by 4,9% in 2007. Since then, this dynamic growth has apparently slowed down and the market especially for shopping centres and hypermarkets reached saturation at least in cities like Prague.
The allocation of retail area is dominated by the metropolitan region of the capital Prague, the Moravian-Silesian Region, Ustecky Region and South Moravia (see fig.1) with 120-150m²/ p.c.
It is not so long since 1998 there have been just 7 hypermarkets in Czech Republic, whereas the number increased to 231 hypermarkets in 2008. By now the penetration of hypermarkets is the highest in the Central Europe region (16 per 1 Mio. inhabitants). An important reason for this continuous expansion is the high preference for large-area shopping places for grocery by the Czech. With 38% market-share hypermarkets dominate the grocery shopping, followed by the discounters (25%) and supermarkets (16%). Especially in the category of durable food products hypermarkets retain their top position (33-39%). Generally, large-area food retailer (hyper-/supermarket, discounter) have got high preferences with 75-83%. Smaller specialized stores have an inferior position but play a big role at the fresh-food market segment.
Consumer Market Trends
In future increasing per-capita incomes will change the demand situation at the retail market in Czech Republic. The needs and motivations of customers will become more and more diversified. Their increasing interest in “life quality” products such as bio-food and generally quality fresh food (bread, pastry, meat etc.) will strengthen the position of specialized shops with more service and personnel quality. Approximately one half of Czech prefers to purchase those goods in small non-self-service stores or smaller groceteritas (e.g. butchers`s). The growing request for “new/affordable luxury”, covering also the higher interest in health-conscious life, and the preference for specialized drugstores, contribute to the withdraw of hypermarkets at those sensitive good categories. The change for better, in terms of smaller store formats, a more diversified range of products, better service and performance characterize the main brand change strategies of big retail chains in the near future.
The concentration of trade will go on and a small group of three or four retail chains will get segregated. In 2005 the competitive Czech market pulled out major retail chains (Carrefour, Edeka, Delhaize) hence about 45% market-shares are held by just a few retailers (Metro, Ahold, Schwarz, Globus). Besides the consolidation of the existing retailers many experts anticipate the entry (through acquisitions) of retail giants, as Wal-Mart or Aldi.
According the project “Retail Vision 2010” by INCOMA Research and Blue Strategy, the fastest growth is expected with discount stores from current 13% to 17% in 2010 and small-scale hypermarkets (up to 4 000 m²). Several retail chains build new hyper-/ and supermarkets in smaller versions to make it possible to operate in areas with a smaller number of customers or in city centres. A shift of destination for new openings of hypermarkets is expected. Townships below 50 000 inhabitants and even with only 15 000 inhabitants are targeted on by big retail companies as Kaufland, Hypernova or Tesco.