FACULTY FOR EDUCATION OF THE EXECUTIVES

INTERNATIONAL JOURNAL OF ECONOMICS AND LAW

Vol. 2, No. 5, August 2012.

Novi Sad, Serbia

INTERNATIONAL JOURNAL OF ECONOMICS AND LAW

ISSN: 2217-5504

Scientific magazine reflecting trends in law, economics and management

Published by: Faculty for education of the executives

Printed: 3 times a year

Editor-in-chief: Života Radosavljević

Secretariat: Vladana Lilić

Editorial board: Branko Tešanović, Mehmed Avdagić, Maja Anđelković, Draško Bosanac, Zoran Jerotijević, Dragana Radosavljević, Vukašin Lale, Vesna Petaković, Aleksandra Pušara, Vojin Marić

International editing committee: Života Radosavljević, Serbia, Vojislav Vučenović, Serbia, Ovidiu-Leonard Turcu, Romania, Ljubomir Madžar, Serbia, John Hughson, England, Nikolaos Vaxevanidis, Greece, Radoje Zečević, Serbia, Miodrag Starčević, Serbia , Anita Trnavčević, Slovenia, Karl Schopf, Austria, Milan Radosavljević, Serbia, Viacheslav Soloviov, Ukraine, Stanka Stjepanović, Serbia, Svetolik Kostadinović, Serbia, Cristian N. Madu, USA, Mirjana Vesović, Serbia, Vidoje Vujić, Croatia, Edita Kastratović, Serbia, Yuri Doroshenko, Russian Federation, Vladimir Parkhomenko, Ukraine, Milan Milošević, Serbia, Dragana Đurić, Serbia, Tufanov A.O., Russian Federation, Raycho Ilariono, Bulgaria

Lector: Marina Kostić

Technical Editor: Aleksandar Vasev

Front page design: Ivan Avdagić

Printed by: Beopress, Beograd

Copies: 200

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FOREWORD

Dear readers,

In front of you is the fifth issue of International journal of economics and law, published by the Faculty of Education of Executives (FORKUP), Novi Sad, and Alpha University of Belgrade. The idea for starting “International journal of economics and law”, is an effort of the Faculty to enable the placement of their scientific works and its critical reviews, theoretical discussions and research to students, colleagues, teachers, other professionals from home and abroad, as well as acquisition and expansion of knowledge in economics, law, management, and so on. Gratitude for publishing this scientific journal belongs to all of you who participated in the work of our international conferences, ANTiM and LEMiMA, to all of you who have created the basis for further expansion of our cooperation to promote these disciplines with yours scientific contributions. The structure of the papers in this journal comprises three dominant scientific disciplines in the social humanistic field that unify the faculty including economics, law and management, but the sciences that have a dominant influence on the global, national, and corporate performance. Integrating these sciences in one place and with the participation of domestic and foreign experts, conditions for exchange of scientific information and experience are created, and thus the achievement of defined objectives of every reasonable organizing. We can achieve that only by common effort of all of us. That kind of note is confirming real wealth of the states, prepositions and initiatives presented in written papers of one hundred seventy authors, sixty of them are from abroad, from third international conference ANTIM 2012. By starting this scientific journal, we have shown our readiness, responsibility, and resources for stimulating scientific research and publishing work, and along with other to improve legal, economic, and management thought, i.e. theory and practice. The challenge is certainly greater bearing in mind the times we live in, and followed by a high turbulence in the natural order (earthquakes, tsunamis, volcanoes, etc.), and so in the social order as well as internal conflicts that shook certain countries, through the technological boom, and moral problems in different spheres of life and work. Due to this complexity, which will in future be more complex and uncertain, it is necessary to put science in the foreground, as new production work force. Scientific journals are one of the most efficient sources of acquiring knowledge, especially in terms of their electronization and possibility of rapid scientific information transfer provided in their facilities. Therefore, the idea is that contents of this journal are modern and actual, but also to be available to all who are interested in economics, law, management, entrepreneurship, and so on. International editorial board invites esteemed scholars, admirers of science and scientific thought, i.e. profession to enrich the quality of journal and thus contribute to improving these disciplines, but also business i.e. legal and management practices.

Welcome to “International journal of economics and law”. Good luck!

Belgrade, 2012.

Editor in chief Prof. dr Života Radosavljević

C O N T E N T

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FOREWORD

1 Simić Antonijević Dragana, Lazarević Mioljub, Buzadžić Nada CONSUMER'S RIGHT TO EDUCATION 7

2 Carraro Natalia

NATIONAL ANTI-CORRUPTION STRATEGIES 15

3 Dolenc Primož, Laporšek Suzana AN OWERVIEW OF SEVERANCE PAY SCHEMES IN SOUTH- EASTERN EUROPE 20

4 Gašević Igor

INFORMATION TECHNOLOGIES INSIDE CHANNEL MARKETING 34

5 Kastratović Edita, Volodymyr Denysiuk DECISION MAKING – THE WAY TO SOLVE PROBLEMS AND DISCOVER OPPORTUNITIES 41

6 Kostić Marina, Schopf Karl

LEGAL ASPECTS OF HUMANITARIAN INTERVENTION 48

7 Markić Marinko, Marković Branka INDICATOR MODELS FOR ASSESSING THE EFFECTIVENESS OF BUSINESS 58

8 Mikić Sanja, Dorosenko Yuri

INNOVATION AND PRODUCTIVITY IN SERVICES SECTOR 65

9 Ratković Milijanka, Grubić Goran, Tasić Svetlana EVOLUTION OF MARKETING: FROM PRODUCT UP TO EMPLOYMENT 72

10 Miletić Lidija, Janić Lazar, Djordjević Jelena, Terescenko Svetlana

THE ROLE AND IMPORTANCE OF HEALTH ECONOMICS FROM THE STANDPOINT OF HIGH EDUCATION HEALTH INTITUTIONS 79

C O N T E N T

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11 Perišić Vladan CODEX OF CORPORATIVE MANAGEMENT IN ECONOMY OF REPUBLIC OF SERBIA 84

12 Radosavljević Dragana

MANAGING THE LEARNING ORGANIZATIONS 91

13 Tomić Radoljub, Radosavljević Života, Pajić Suzana, Mutavdzić Tomislava

REVIEW OF THE GENERAL ACCEPTED FOUNDATION ENGINEERING MANAGEMENT WITH ASPECTS OF EMPIRICISM AND RATIONALISM 98

14 Strašek Rok, Kavkler Iztok, Orbanić Alen, Horvat Boris, Novak

Matjaž LOGISTICS RESEARCH TOOLS FOR FLEET OPTIMIZATION IN ROAD TRAFFIC 116

15 Stanković Vladan, Gijić Nebojša, Zdravković Bojan

GROWING IMPORTANCE OF LEGAL PATENT PROTECTION 121

16 Tesanović Branko, Jović S. BENCHMARKING ANALYSIS OF FOOD CATERING SUBJECTS 128

17 Tomić Radoljub, Nikiforova Evgenia, Pajić Suzana

ONE APPROACH TO SELECTION OF THE EFFECTIVE PRODUCT IN THE DOMAIN OF INTERNAL TRANSPORT 135

18 Vuković Gordana

PERFORMING ENTREPRENEURIAL ACTIVITY IN THE REPUBLIC OF SRPSKA 141

19 Vukčević Zoran

IMPORTANCE OF CORPORATE GOVERNANCE 147

20 Šćekić Velimir, Lilić Vladana, Reko Krstina MANAGEMENT OF PREVENTIVE MAINTENANCE AS A FACTOR OF SUCCESSFUL TECHNOLOGICAL PROCESS 153

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CONSUMER’S RIGHT TO EDUCATION

Dragana Simić Antonijević1, Mioljub Lazarević2, Nada Buzadžić3 1 Agricultural School of Applied Studies Šabac, SERBIA

2 Faculty for Strategic and Operational Management, Alfa University, Beograd, SERBIA, mioljub.lazarevic@fpsp.edu.rs

3 Agricultural School of Applied Studies Šabac, SERBIA

SUMMARY: Consumers’ right to education is one of eight fundamental consumers’ rights. A contemporary state is also interested in the question of consumers’ education, since the general system of education in most cases is within the competence of state. Consumer protection organizations play an important role in educating consumers. Developed European countries and American states pay a lot of attention to the practical realization of consumers’ right to education, using joined efforts of state, educational institutions and consumer protection organizations. A new Law on Consumer Protection was passed in Serbia in 2010. The education of consumers is mentioned only in articles 2 and 128 of this Law, where it is stated that it is left to consumer protection organizations. In this way, the responsibility of state for consumers’ education was eliminated. The state has not recognized the significance of continual educating of young people in the field of consumer rights and their protection. There is no mention of consumers’ rights protection in neither primary nor secondary school syllabuses, contrary to other European countries’ school programs.

Key words: protection, consumer, law, education

1. INTRODUCTION

United Nations General Assembly issued Guidelines for Consumer Protection, in

Resolution 39/248 from 1985, inducing member-states to legally arrange this area (www.un.org.documents). The reason for issuing this document was “realization that consumers are often faced with a disbalance between economic relations, educational levels and powers of negotiations, taking care of the fact that a consumer has a right to approach safe products as well as of the importance of the equally distributed, sustainable economic and social development promotion”.

European signatory countries of the Treaty establishing the European Economic Community adopted European charter on consumer education and protection in 1973, precisely defining the expanded list of rights that comprises: the right to the protection of economic interests of consumers, the right to the protection of life, health and property, the right to efficient legal protection and support from the state, the right to informing and educating the consumers, the right to establishing the consumers’ associations aimed at protection of their interests, the right to representation and participation in the activites of the bodies dealing with issues of interest for the consumers.

2. CONSUMERS’ RIGHT TO EDUCATION

Consumers’ right to education is one of principal rights which implies the acquisition of

knowledge and skills necessary for correct and reliable choice of products and services, accompanied by the awareness of basic rules and ways of their realization (Vilus, 1996).

The positive role which universities and other public and private organizations may have in the preparation and creation of consumer protection politics is highlighted

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in the United Nations Guidelines for Consumer Protection (1985). It is stated in section F. in the Guidelines:

“Governments should develop or encourage the development of general consumer education and information programs, including information on the environmental impacts of consumer choices and behavior and the possible implications, including benefits and costs, of changes in consumption, bearing in mind the cultural traditions of the people concerned. The aim of such programs should be to enable people to act as discriminating consumers, capable of making an informed choice of goods and services, and conscious of their rights and responsibilities. In developing such programs, special attention should be given to the needs of disadvantaged consumers, in both rural and urban areas, including low-income consumers and those with low or non-existent literacy levels. Consumer groups, business and other relevant organizations of civil society should be involved in these educational efforts.

Consumer education should, where appropriate, become an integral part of the basic curriculum of the educational system, preferably as a component of existing subjects.

Governments should encourage consumer organizations and other interested groups, including the media, to undertake education and information programs, including on the environmental impacts of consumption patterns and on the possible implications, including benefits and costs, of changes in consumption, particularly for the benefit of low-income consumer groups in rural and urban areas.

Business should, where appropriate, undertake or participate in factual and relevant consumer education and information programs”. (www.un.org.dokuments)

It is obvious from the above-cited text that consumer’s rights to information and to education are closely related. By all means, an informed and educated consumer acts rationally on the market, choosing the best products at best price and at the same time being ecologically aware. However, if we take a look at reality and for a moment regard technical and technological development and the development of information technology over the last few decades, it becomes clear that a lot of standardly educated consumers both in the world and in Serbia are not able to follow this extremely fast progress. Global knowledge has increased tremendously, whereas an individual’s capacity has remained the same as a thousand years ago.

In the contemporary world, a state is also interested in educating consumers, because the general system of education is mostly under the jurisdiction of a state. Namely, the state organizes finances and controls regular primary, secondary and high education. If consumers’ education belongs to additional education, it is nevertheless in the state’s best interest to organize it provided that it wants to ensure the welfare of its citizens, i.e. consumers. Since any kind of education costs, the question is which ways of organizing this education are the most efficient. Consumers’ education can be incorporated into regular education programs, starting at a very young age. It can also be included via additional seminars, courses, counselings of specific subjects or via mass media, television, radio, newspapers, magazines, etc. Consumer protection organizations play an important role in consumers’ education. One of their main activities, in whatever country they are placed, is “informing and educating of consumers”. The ways and range in which these educational activities take place is different, depending on economic power of individual countries and on the tradition of consumer movement in them.

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3. CONSUMER’S EDUCATION IN THE DEVELOPED US AND EU COUNTRIES

Economically developed countries started paying attention to the education of consumers

in late 1970s. Consumers organizations with long tradition in those countries have been trying to educate consumers through numerous publications, choosing either the topics that are priorities by their own nature, such as: food safety, products marking, dangers from electric appliances, etc., or those topics that are imposed by different cases- affairs which occasionally shake the whole world, including even the already well-protected consumers living in these developed countries. Information technology development contributed to the availability of numerous publications and announcements on web sites of consumer organizations or public institutions dealing with specific issues of interest for consumers. Due to the importance of educating consumers, the state appears as a significant factor which supports the consumer education, either by completely or partially financing the education programs, or by helping this process through legal regulations.

What is importantly related to this is Resolution 86/C184/07EC issued by EU Council and member-states’ Ministers of education in 1986, which indicated that there was the need for introducing consumer education into primary and secondary school programs. According to this Resolution, consumers should be familiar with their fundamental rights and ways to realize them, in the fields of consumer health, life and economic interest protection.

European Commission has developed a net of education about consumption, inviting all member-states to participate in it. The largest parts of this educational net are covered by either actions of General Directorate for Health and Consumer Protection or by European educational programs, “Socrates” and “Leonardo da Vinci”, created by European Commission General Directorate for Education and Culture. The European educational programs are realized on three levels: primary and secondary education, high education and education of adults.

An educational program REVIS has functioned in Germany since 2004, cooperating with much University centers and supported by German Ministry for Consumer, Diet and Agriculture Protection. Its aim is to carry out the reforms of education regarding diet and consumption in German schools (www.evb-online.de).

In Great Britain, a strategic approach to consumer education was created by the Ministry for Consumption and it was presented to the public in 2004 as “Strategy and Framework for Education in the Field of Consumption”. Implementing this strategy, the authorized minister formed work groups whose task was to process three priority areas: credit, scam (illegal tricks on Internet) and quality marks (www.consumered.org). The aim of British strategy is “offering consumers qualifications and necessary knowledge, so that they could spend products or use services in the efficient and suitable way, with trust”.

In Baltic countries, there is currently a project going on in cooperation with the neighboring Nordic countries. It refers to the preparation of school teachers for making consumer education interesting and available to pupils (www.norden.org/publications).

In Spain, European Consumer School has been working for more than ten years, based in Santander, which has developed a national educational net about consumption. It unites autonomous regions, with the support of the Education and Science Ministry and National

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Spanish Institute for Consumption. There is an advisor for consumer education in each region and even in some municipalities, whose duty is to organize teaching staff or to carry out campaigns in schools (www.infoconsumo.es).

Since 2001, Estonian Council for Consumer Protection and Talin University have organized open competitions for consumer organizations’ projects designed for pupils. The idea has been taken from Sweden and adapted to Estonian circumstances. The project was named “Manage you Budget”. The main aspects of this project are consumer rights and duties, the choice of groceries, healthy diet, environment protection and, equally important, the development of practical skills.

Norwegian Council for Consumer Protection has opened its Internet portal for consumption, Forbrukerportalen, a new space for education especially intended for researchers and lecturers. General information about education and consumption, information for primary and secondary school teachers and information for lecturer education can be found there.

Irish Council for Consumer Protection has organized a competition for best primary and secondary student papers on the subject “Water water everywhere!” in 2005. About 2 200 competitors applied (portal.consumerline.org).

Back in 1976, the US Federal Ministry of Health, Education and Social Welfare passed a federal regulation - Consumer Education Program, which is treated as an integral part of Elementary, High and University Education Law and is financed in a similar way. The aim of passing this regulation was to ensure better consumer protection by giving them the knowledge they need in order to be able to make rational decisions in the field of consumption, taking into account both their personal needs and social, economic and ecological factors (Vilus, 1996).

It can be said that developed European and American countries pay a lot of attention to the practical realization of consumers’ right to education, through joint efforts of the state, educational institutions and consumer organizations, which demonstrate exquisite solidarity and cooperation in the exchange of experiences in this field

. 4. THE ACTIVITIES OF INTERNATIONAL CONSUMER

ORGANIZATIONS IN THE FIELD OF CONSUMER EDUCATION

Consumer education is one of important fields of action for an international organization Consumers International (CI). As a top international consumer organization, at the moment it primarily supports consumer education programs in the undeveloped countries, to which its help is indispensable. Namely, the implementation of consumer protection programs into regular school programs has been completed in developed countries, whereas the situation in developing countries is bad.

With the support of CI, the Civil Consumption Net has been developed in Europe since 2004. It gathers 125 university institutions, environment protection institutions and consumer organizations from 29 countries. Its aim is to promote sustainable consumption and mutual solidarity.

On CI’s initiative, Consumer Educators Network - CEN, has been created in Asia. It has been working on introducing consumer education into regular school syllabuses, extra- curriculum activities, teaching staff education and special training for adult and rural population since 1985. To this objective, a web site providing materials for teaching in the field of consumer protection, i.e. free textbooks, was created (www.ciroap.org/ce/books).

In Latin America, the Second Latin America Conference organized by CI, with 70 participants – consumer organizations and government agencies for consumer protection – whose main objective was to promote consumer education, significantly influenced the introduction of consumer education into regular schools.

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BEUC is a European international organization dealing with consumer education. It offers consumers an abundance of materials through its web site and through the cooperation with consumer organizations from member-states.

5. CENTRAL AND EAST EUROPEAN COUNTRIES AND CONSUMER EDUCATION

Central and East European Countries started transition processes in 1990s, after the crash

of socialism. The liberalization of these countries’ markets caused many foreign companies to enter these markets without following ethical codexes that are strictly obeyed in a domicile state. These companies launched on east European markets all those products that could not be sold on well protected markets of European Union. Unprepared consumers, eager to buy foreign goods, bought this, that and the other. One of warning examples were the banks that promoted pyramidal saving, which caused the ruin of numerous gullible citizens’ savings and the loss of trust in banks.

Many of these countries tried to join the EU as soon as possible, after they left the Warsaw Treaty. However, it was necessary to achieve certain economic, political and social level in order to do so, as recommended in the so-called White Book. In order to help these countries reach the required level, the EU started help programs. One of them is PHARE program, designed for restructuring of those economies into market economy, which also includes a consumer help project. Since the level of consumer organizing and protection was generally low in transitional European countries, the guidelines for raising that level were given in these documents. It is stated that the first step is to train teaching staff how to organize courses, seminars or other activities intended for consumer education. The strategy of training was such that it was planned to first train managers, directors of consumer organizations, state officials in charge of consumer protection politics, representatives of professional organizations, politicians and legal experts (lawyers, university professors, researchers) (Vilus, 1996).

6. CONSUMER PROTECTION IN SERBIA REALIZED THROUGH THE RIGHT TO EDUCATION

The three pillars of consumer protection system in all countries, including Serbia, are:

state organs, companies and consumer organizations as consumer representatives. A new Consumer Protection Act was passed in Serbia in 2010, in which the consumers’ right to education is mentioned only in the form of definition in article 2 and in the form of a statement that this education is left entirely to the consumer protection organizations, in article 128. In this way, the responsibility of state, as an agent of educational system for educating consumers has been completely eliminated.

Only consumer organizations and media deal with consumer education in Serbia. There is a few larger consumer organizations which inform and at the same time educate consumers via their web pages.

The state has not yet recognized the importance of continual education of young people on consumer rights and protection. There is no mention of consumer rights protection on primary or secondary schools syllabuses in Serbia, which is a situation contrary to that in other European countries.

The survey that was carried out on the sample of 350 subjects in 24 municipalities in Serbia at the end of 2010 and beginning of 2011 aimed to research consumer habits in Serbia, to

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define the most important problems in consumption and to determine the nature of consumer attitudes and opinions in regard to important aspects of consumer rights protection.

Znate li svo ja p r a va kao potrošača

100

90

80

70

60

50

40

30

20

10 0

100

95

is pod 100 ev ra

7 93

300- 499 ev ra

15 17

85 83

da

ne 1000 ev r a i v iš e

100- 299 ev ra 500- 999 ev ra

Me se čni prihodi

Graph 1. Znate li svoja prava kao potrosaca-Do you know your consumer rights? Mesecni prihodi- Monthly income Struktura...- The structure of the sample according to the knowledge of legal regulations

and consumer rights, in accordance with thier monthly income

Only 10% of 350 subjects demonstrated the knowledge of legal regulations which protect consumers and were familiar with fundamental consumer rights. This survey proves that consumers lack information about the rights they have, so the majority of citizens do not know how, where or whom to ask for help or information if they face problems in any aspect of shopping. However, this survey also demonstrated that consumers get better informed about legal regulations related to their protection as the income and educational level of a subject increases. While the subjects of the survey whose income is lower than 100 euros are not at all familiar with their consumer rights, there is a larger percent of informed subjects among consumers with higher income, and in the group of subjects with higher income, that percentage is as high as 17%.

4.00

3.50

Čime treba da se bave organiz acije za z aštitu potrošača?

(Rangirajte odgovore od najvažnijeg (1) do najm anje važnog (5))

3.27 3.16

3.61

3.00

2.69

2.50

2.00

2.13

1.50

1.00

Kontrola z dravs tvene is pravnos ti namirnic a Savetovanje i informis anje potros ac a Uc esc e u iz radi i donos enju z ak ona i propis a koji se ticu potros ac a Eduk ac ija/obraz ovanje potros ac a Zas tupanje potros ac a u s udsk im i vans udsk im s porovima

Graph 2. The structure of the sample according to the consumers’ attitude towards consumer organization priorities

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What should consumer protection organizations deal with? (Rank answers from the most important (1) to the least important (5))

The survey carried out on the representative sample was also supposed to provide an

answer to the question which activities that consumer organizations usually perform in the world are the most important for consumers in Serbia. The subjects’ answers were ranked on the basis of the calculated arithmetical middle of the answers in each suggested variant. Based on this, a ranked scale of Serbian consumers’ attitudes to priority activities of consumer organizations was created.

In subjects’ opinion, the most important activity of consumer organizations in Serbia is to control groceries safety (product safety) in an objective and unbiased way and to inform the public on that. Second important activity of consumer organizations in Serbia should be counseling and informing consumers. It is interesting to note that subjects of the survey pay a lot of attention to the passing of laws and legal regulations related to consumer rights protection. At the fourth place is consumer education. Although subject did not rank this activity as the most important, the experience of developed consumer movements demonstrates proves that only well educated and informed consumers can protect themselves, at least to a certain level. For this reason, in many developed countries, consumer protection has been introduced as a school subject in primary schools, secondary schools and even in some universities. The activity ranked as fifth and the last is consumer representation in court and out-of-court disputes. The reason for such an attitude of subjects is probably the fact that consumer organizations in Serbia have not performed this activity so far, together with very strong mistrust in courts, since citizens consider them corrupted to high extent.

7. CONCLUSION

Consumer education is one of eight fundamental consumer rights. If consumer education

is defined as acquisition of knowledge and skills necessary for regular and reliable choice of products and services, as well as being familiar with fundamental consumer rights and duties and ways of their realization, it comes out that there is no good regulation of the market without educated and informed consumers.

Realizing the importance of consumer education, economically developed countries in the world and in Europe included consumer education into their school systems, from elementary to high level of education, even as far as postgraduate education. Consumer education is one of fundamental activities of consumer organizations which, in various forms of communication with consumers, put in efforts to raise the level of citizens’ knowledge in order to be able to face the challenges of contemporary economy.

In Serbia, currently only consumer organizations and media deal with consumer education. The survey results prove that consumers in Serbia are mostly not familiar with the legal regulations which protect them, organizations they could address, or their fundamental rights. The groups of consumers with lowest income are those that are the most disadvantaged, and additionally, they have the lowest level of knowledge about protection possibilities.

In the close future, in the process of Serbia joining the European Union, consumer education will certainly become an issue of priority. For this reason, it is necessary to arrange consumer protection rights according to the EU standards, which imply stronger participation of the state and consumer organizations in consumer education. Consumer rights protection should be implemented into educational system, either as a separate school subject, or as a part of already existing subjects, such as Civil Education or a similar one.

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BIBLIOGRAPHY:

[1] Smernice o zaštiti potrošača (United Nations Guidelines for Consumer Protection) (www.un.org.dokuments)

[2 Vilus,J.(1996), Pravna zaštita potrošača, uporednopravna studija sa posebnim osvrtom na prava potrošača u Evropskoj uniji, Institut za uporedno pravo, Beograd

[3] (www.conso.net) [4] (www.evb-online. de) [5] (www.consumered.org) [6] (www.norden.org/publications) [7] (www.infoconsumo.es) [8] (portal.consumerline.org) [9] (www.ciroap.org/ce/books) [10] www.consumersinternational.org

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NATIONAL ANTI-CORRUPTION STRATEGIES

Natalia Carraro Politehnika Pula, Visoka tehničko-poslovna škola s p. j., Pula, Hrvatska,

natalia@green-garden.hr

1. INTRODUCTION

People sometimes confuse corruption with incompetence and slowness of public administration. Citizens in Croatia trying to explain the various problems encountered in the use of state administrative services, so one possible explanation is the assumption that someone somewhere is corrupt. Therefore, too many things called 'corruption'. Organizations and society can function only with a certain degree of depersonalized, implicit trust. We rely on the fact that others abide by the rules - we have confidence in them. However, some members of society - or organization - can behave opportunistically and decide to take advantage of the confidence in their own interest. They abuse the power they were assigned to, in order to satisfy their own interests. This is corruption. The aim of this paper is to systematize the process of national documents regulating the area of combating corruption in Croatia. The purpose of this paper is to evaluate the significance and the results of the national documents application to the perception of corruption in Croatia. The main assumption is, "It is possible to reduce corruption with the promotion of zero tolerance to corruption". During the manufacture of paper, descriptive (descriptive) analytical, genetic, comparative, mathematical, synthesis of the analyzed results and graphical methods were used. The paper is divided into five chapters. The first is an introduction to the work where the defined objective, purpose and hypothesis of the paper, then these are the methods, techniques, and structure of work. In the second chapter, entitled Corruption, the paper covers four thematic units: defining the concept, types, causes and consequences of that measure corruption. In the third chapter, which is the title of national anti-corruption measures, we will discuss Anti-Corruption Strategy, Action Plan of the Anti-Corruption Strategy, and National Strategy for creating an enabling environment for civil society development, anti-corruption program for companies with majority state-owned enterprises and institutions responsible for combating corruption at national and local level. The fourth chapter is entitled Combating corruption in Croatia, followed by, before the list of literature, a conclusion that makes the fifth chapter. After the conclusion and a list of literature, there is a list of images.

2. CORRUPTION

Corruption exists since there is a national organization of human society, and its presence throughout history until today confirms that corruption is inherent in all government arrangements regardless of the political system, regional or religious affiliation. It is impossible to eradicate corruption, but it can be combated against by political will, legal norms and promoting anti-corruption worldview. Corruption is a hidden phenomenon and therefore the presence of corruption cannot be accurately measured, and there is no unique notion to which

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are corruption offenses. Another problem is the unequal treatment of its corruption and the legality of certain forms of criminal law in the world.

Figure 1 - Education of the public

3. NATIONAL ANTI-CORRUPTION STRATEGIES

For an effective fight against corruption, repression is not enough. Modern trends in combating corruption are increasingly turning to prevention to recognize the risks of corruption, they are trying to remove those using preventive measures, and timely adoption of the law, institution building and awareness of citizens and the media is trying to forestall and prevent corruption. The Republic of Croatia in March 2002 began to think strategically about the fight against corruption by adopting the National Program for the Fight against Corruption with an Action Plan. Since the first national program was not carried out satisfactorily, in 2006 was adopted new National Anti-Corruption 2006-2008. During the implementation of the National Program began building of the institutional framework of government bodies with a mandate to specialize in fighting various forms of corruption. During the final year of the National Program for Combating Corruption 2006-2008, the Government has decided to draw up long-term strategy and accompanying action plan.

Strategic documents in Croatia:

1. Anti-Corruption Strategy adopted by the Croatian Parliament 19.06.2008, NN 75/08. 2. Action Plan of the Anti-Corruption Strategy, adopted by the Government 26.06.2008 3. Revised Action Plan of the Anti-Corruption Strategy, adopted by the Government 18.03.2010 4. National strategy for creating an enabling environment for civil society 2006-2011 5. Anti-corruption program for companies with majority state ownership for the period 2010- 2012, adopted by the Government 26.11.2009

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Figure 2 - Schematic representation of a system to combat corruption

3 - Preventing corruption - individuals and bodies within and outside companies Figure

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4. FIGHTING CORRUPTION IN THE REPUBLIC OF CROATIA

Three issues are crucial for the assessment of the ability of the Croatian society to resist corruption, and the worst is an attitude that assumes that all are corrupted and that there is no point fighting. The first question is whether there is corruption and how it is perceived, and secondly – how much the corruption is widespread and in which areas is the most abundant and most harmful? When the famous answer to the first two questions can be concluded with a third, which is the basis for all activities that await Croatian society - What you should do more to fight corruption? It is through the answers to these three questions we can trace the relationship of Croatian society towards corruption in the past 20 years of Croatian independence.

Figure 4 - CPI - corruption perception index - Croatia through the years

5. RESUME

Today, Croatia is still not a country of knowledge, sufficient justice and responsible governance. Corruption, crime, and the fact laws does not implement does not allow citizens an equal chance. In recession, rising unemployment and lack of liquidity growth and corruption risks and the need to express a stronger political will and deeds, and enhance the activities of all holders of the Strategy and Action Plan for the prevention, early detection and rapid processing of any corrupt conduct. The move towards decentralization, public accountability and democratic forms of government at the local level is gaining momentum. In this context, clearly are recognized huge losses caused by corruption, which specifically warns the World Bank, and the urgent need to put an end to abuses by local authorities. In Croatia, it is urgent to take action, measures and establishment of a body that would be responsible for today’s strategies on combating corruption in the local and regional government. Croatian way to combat corruption, although was primarily motivated by the needs and initiated preparations for joining the EU, is a good but slow, and now it is necessary to focus on the local level. Therefore, we suggest as a possible guideline the subject to continued processing of the seminar "Preventing and combating corruption in the local and regional democracy in Croatia."

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BIBLIOGRAPHY

[1.] Žepić, M.: Latinsko-Hrvatski rječnik, XIII. Izdanje, Školska knjiga, Zagreb, 2000. [2.] Etchegoyen, A.: Podmićivač i podmićeni, Laus, Split, 1997. [3.] Derenčinović, D.: Mit (o) korupciji, Nocci, Zagreb, 2001. [4.] Petričić, D.: Hrvatska u mreži mafije, kriminala i korupcije, Argus media d.o.o., Zagreb, prosinac 2009. [5.] Kregar, J.: Nastanak predatorskog kapitalizma i korupcija, Rifin d.o.o.,Zagreb, 1999. [6.] Klitgaard, R., MacLean-Abaroa, R., Parris, L: Korumpirani gradovi, Cronos Info d.o.o, Zagreb, 2007. [7.] Budak, J.: članak Korupcija u Hrvatskoj: percepcije rastu, problemi ostaju, Privredna kretanja i ekonomska politika broj 106, Zagreb, 2006. [8.] Lucijetić, R.: Suzbijanje političke korupcije - Europski standardi i nacionalna politika, doktorska disertacija, Zagreb, travanj 2007. [9.] Organization for Economic Cooperation and Development (OECD) Symposium on Corruption and Good Governance, Paris, 13-14 March 1995, Session 3, page (OECD), (Organizacija za ekonomsku suradnju i razvoj, Simpozij o korupciji i dobrom upravljanju, Pariz, 13.-14. ožujak 1995.) [10.] Tomas, D. Thacher, II, ―The New York City Construction Authority‘s Office of the Inspector-General: A Successful New Strategy for Reforming Public Contracting in the Construction Industry,‖ (Ured generalnog inspektora pri Građevinskoj upravi New Yorka: Uspješna, nova strategija javnih nabavki u oblasti građevinarstva), neobjavljena analiza slučaja, lipanj 1995. [11.] Kazneni zakon Republike Hrvatske, «Narodne novine», br. 110/97., 27/98., 50/00., 129/00., 51/01.,111/03., 190/03., 105/04., 84/05., 71/06. i 110/07. [12.] Zakon o kaznenom postupku Republike Hrvatske, »Narodne novine«, br. 110/97., 27/98., 58/99., 112/99., 58/02., 143/02., 62/03. i 115/06. [13.] Zakon o Uredu za suzbijanje korupcije i organiziranog kriminaliteta, »Narodne novine«, br. 88/01.

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AN OWERVIEW OF SEVERANCE PAY SCHEMES IN SOUTH-EASTERN EUROPE

Primož Dolenc1, Suzana Laporšek2

1University of Primorska, Faculty of Management Koper, Slovenia 2University of Primorska, Science and Research Centre of Koper, Slovenia

Summary: The paper provides an overview of severance pay regulation in the South-Eastern Europe (SEE) countries, thereby complementing empirical analysis of severance pay programs with findings on the SEE countries. We found that in general severance pay schemes are very similar among the SEE countries, but vary significantly in their modalities. The results of the empirical analysis show that generous severance pay is negatively associated with GDP per capita, labor productivity and employment. These results reinforce previous findings on this topic and lead to the conclusion that traditional severance pay schemes need to be reformed. However, the inventory among the SEE countries shows that until now no serious debate on the issue took place.

Keywords: severance pays, SEE countries, overview

1. INTRODUCTION

Severance pay is one of the most common but also most controversial social programs. Introduced by legislation or collective agreement, it requires that employers pay lump-sum compensation to qualifying laid-off workers, with the amount usually depending on years of service and the person’s recent earnings. Holzmann and Vodopivec (2012) argue that these programs can have several, sometimes quite sophisticated, objectives, ranging from providing compensation for job loss to stabilizing employment and preventing unemployment by discouraging layoffs. Further, they encourage long-term relationships that retain valuable workers and reduce transaction costs resulting from labor turnover. But while mandated severance pay is the most prevalent income support system in developing (but not developed) countries (Vodopivec 2004, 2009), these programs are often considered to be one of the least appropriate options for income protection They not only provide deficient and incomplete protection but are often responsible for distorting the behavior of firms and workers, and thus imposing other efficiency costs (see Holzmann and Vodopivec (2012) for a comprehensive evaluation of the program and a review of reform options). 1

Generous severance payments increase costs of dismissal for firms and may therefore induce employers to search for more flexible solutions to dismissal, such as improvement of the functional flexibility of employees and increase in workers’ motivation (Kuddo, 2009), or to use more flexible temporary or part-time employment arrangements. According to Nesporova (2011), most of the countries in the South-Eastern Europe (SEE) have over the past years considerably increased the flexibility of employment relations, which is reflected in the growth

1 See also Holzmann et al. (2011) for a survey of the incidence of the severance pay around the world and a review of the origin, economic rationale, and current attempts to reform severance pay programs

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of self-employment and fixed-term employment. The increase in temporary employment regulations is especially evident among young and lower-skilled people.2

The main objective of the paper is to provide a detailed insight in severance pay schemes in the SEE countries. 3 Besides norms and practices we were interested also in the eventual projected reforms and some other relevant details. However, the task was not an easy one. As already noticed by Holzmann, Pouget, Vodopivec and Weber (2011), one of the difficulties of examining the topic of severance pay is that different types of cash payments can be considered as forms of severance payments and many terms exist in English and other languages. For some countries official or at least unofficial translations of the relevant legislation was not available and we relied heavily on the domestic texts of the legislation. We benefited a lot fro m consultations with local experts, 4 where they were willing to provide the relevant information. Even though this support was of extreme help, the eventual errors in the interpretation and understanding of the severance pay schemes are of course our own. We find that SEE countries have very similar severance pay schemes. Most of the reviewed countries have a mandatory severance pay scheme, where the payment is usually based on the work tenure with the (former) employer. Redundancy is always defined as a legitimate ground for dismissal in the SEE countries. Thus, redundancy payment is mandatory in all the observed countries, whereas the legislation on severance payments for other causes of contract termination varies among countries. Other modalities, such as minimal required tenure, eligibility for severance pay other than redundancy, severance pay generosity index etc., differ considerably from country to country. The paper is organized as follows. Next section provides an overview of severance pay schemes in the SEE countries. Section 3 presents the rationale for and results of empirical analysis. Section 4 concludes.

2. OVERVIEW OF SEVERANCE PAY SCHEMES IN THE SEE

The SEE countries, observed in this inventory, have on one hand very similar severance pay schemes. Figure 1 in Appendix shows that most of them (all except one, i.e. Romania, where severance pay scheme is regulated in collective agreement) have severance pay mandated in legislation, usually Labor Law/Code. Most of these countries further develop severance pay schemes also in collective bargaining agreements. Two other similarities are evident. First, in all the observed countries, the severance pay is mandated for redundancy termination, and in none of the observed countries the end-of-service

2 For example, the share of temporary employment in total employment for young people (15–24 years) in 2009 amounted 37.1 % in Macedonia, 35.0 % in Croatia and 66.6 % in Slovenia. For comparison, in Central and Eastern New EU Member States (without Estonia) the share of young temporary employed, on average, amounted 21.6 %, which is 18.3 percentage points below the EU-15 average (see Laporšek and Dolenc, 2011). 3 The countries in the inventory were Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Macedonia, Moldova, Montenegro, Romania, Serbia, Slovenia and Turkey. 4 Authors would like to thank Predrag Bejaković (Institute of Public Finances, Croatia), Visar Hoxha (European School of Law and Governance, Kosovo), Ana Krsmanovic (Ministry of Finance, Montenegro), Milan Radosavljević (Alfa University, FORKUP) and Kenan Karakulah (Republic of Turkey Prime Ministry Undersecretariat of Treasury, Turkey) for sharing valuable information on severance pay schemes in their countries.

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severance pay is mandated (see Figure 2). Second, in most of the observed countries the severance pay is tied to worker’s tenure with employer. All other aspects of severance pays schemes are very country-specific. Seventy percent of observed countries have mandated severance pay for dismissal, bankruptcy and incapacity. Old- age severance pay is legally enforced in half of the countries (see Figure 2). One of the rare numeric parameters, according to which severance pay schemes can be compared, is its generosity. The generosity of severance pay varies strongly among SEE countries. As can be seen from Table 1 and Figure 3 in Appendix, the severance payments are the most generous in Montenegro and Turkey. In comparison to countries in the region, Montenegro provides substantially generous severance payments for one year of tenure (i.e., 13 weeks of wage), whereas in Turkey severance payments are especially high for five and ten years of tenure. The median value of the severance pay generosity index5in the region amounts 1.7, which is particularly high when comparing to OECD countries (i.e., 0.7), however lower than in Middle East and North African (i.e., 2.5), Latin American (i.e., 2.5), Asian (i.e., 2.1) and African countries (i.e., 2.2) (for details see Holzmann and Vodopivec, 2012). Further, Figure 4 shows minimum tenure with the employer, required for severance pay eligibility. The median minimum tenure equals six months, but this requirement varies strongly among SEE countries. On one hand, half of the observed countries have no minimum tenure in place, but on the other hand the minimum tenure ranges up to 36 months in Albania. Next sub-sections explain severance pay schemes in the SEE countries in more detail.

3. ALBANIA

Information on severance pay in Albania is very limited. The Code on Labor 6 was adopted in 1995 and its Art. 145 stipulates that in case of termination of permanent employment contract due to unreasonable causes the worker is entitled to so called seniority-related reward – at least 15-days wage for each year of service with the employer. The seniority-related reward (i.e., severance pay) must be paid to workers with at least three years of service with the employer. The same regulation is used for workers with temporary employment contract (Art. 152) if the work tenure with the employer is at least three straight years. No severance pay (or seniority related award) is mandated for end-of-service separation or retirement. The severance payment is mandated in case of unjustified dismissal or redundancy termination. Namely, the unreasonable causes for contract termination are explicitly given as: i) the worker has claims that result from the employment contract; ii) the worker has fulfilled all legal obligations; iii) the termination is due motives related to the personality of the worker, having no legitimate ties with labor relations (race, color, sex, age, civil status, family obligations, pregnancy, religious and political beliefs, nationality, and social status); iv) the termination is due to motives related to the worker’s exercise of a constitutional right, which however does not lead to the violation of the obligations resulting from the contract of employment; and v) the termination is due to motives related to the worker’s membership in labor unions created as defined by law, or because of his/her participation in labor union’s activities on the basis of law.

5 We use the standard definition of severance pay generosity index: average severance payment per year of service for workers with 1, 5, and 10 years of service (in weeks of wage). 6 The unofficial translation to English is available on http://www.ilo.org/dyn/natlex/docs/SERIAL/41344/63433/ F1167646799/ALB41344.PDF.

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According to the code, collective agreements could provide more generous severance payments. However, no clear evidence has been found that collective agreements in practice regulate severance payments differently than the mandatory provisions of the code.

4. BOSNIA AND HERZEGOVINA

Bosnia and Herzegovina, being decentralized sovereign country of two entities (Federacija Bosna i Herzegovina and Republika Srpska), has two labor market regulations. In Federacija Bosna i Herzegovina severance pay is regulated by the Labor Law, 7 adopted in 1999. In Art. 100, the law stipulates that a worker is entitled to severance pay in the amount to be determined depending on work tenure of the worker. Eligible are workers with permanent employment contract and minimum of two years of service with the employer. Upon termination of the employment contract, the severance pay applies regardless the cause of the termination, except if the reason for termination is misconduct on the worker’s side. According to the law, the severance pay needs to be determined by collective agreement, the company’s rulebook or the employment contract, however the mandated minimum severance pay is one average monthly wage of the employee as paid in the last three months before the termination of employment contract. In addition, as stipulated in the law, employer and worker may agree on other form of compensation, not only cash payment, but such an agreement must be in the form of written contract. End-of-service and retirement severance pay are not mandatory by the law. However, according to the national collective agreement, 8 the end-of-service severance pay is determined at the level of at least three average monthly wages in Federacija Bosna i Herzegovina. Very similar regulation is in place in Republika Srpska, where the Law on Labor 9 was adopted in 2007 and regulates main provisions of severance pay in Art. 141. In fact, the only real difference is in the level of severance pay: in Republika Srpska the mandated minimum severance pay is 1/3 of average monthly wage in three months preceding the termination for each year of service with the employer. As the taxation is concerned, the severance payment is tax exempt up to the level of 70 % of average wage in three months before the contract’s termination for each year of service with the employer. Beyond that level the severance payment is taxed under the personal income tax legislation.

5. BULGARIA

In Bulgaria, labor market relations are regulated by the Labor Code,10 adopted in 1986 and amended in 2004, and Employment Promotion Act, 11 adopted in 2001 and amended in 2006.

7 The official text is available in Croatian language on http://www.fuzip.gov.ba/uploaded/zakoni/ zakon%20o%20radu%20federacija.pdf. 8 The official text is available in Croatian language on http://www.sobih.ba/siteoo/images/stories/galerije/ Zakonska_akta/opci_kolektivni.pdf. 9 The official text is available in Serbian language on http://www.uspon.ba/down/zakon_o_rad_rs.pdf. 10 The official text is available in English on http://www.mlsp.government.bg/en/docs/labour/ Labour%20code%20consolidated%20en.pdf. 11 The official text is available in English on http://www.az.government.bg/eng/Legislation/EmplPromAct.htm.

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Regulation regarding severance pay is modest. There is no statutory severance pay scheme, with three exceptions: • mandated severance pay in case of termination of employment due to illness for worker with at least five years of service (severance pay amounts two monthly gross wages); • mandated severance pay in case of termination after the worker has acquired the right to a pension (severance pay amounts two monthly gross wages or six monthly gross wages for a job tenure of ten years); • redundancy payment of not more than one monthly wage following any individual or collective dismissal on economic grounds. Beyond this regulatory framework, workers and employers can arrange severance pay in collective bargaining agreements. Except for some individual cases, no detailed information is available on this issue, though. For example, in December 2011 collective agreement has been signed between Bulgarian State Railways and labor unions.12 12 The unions went on strike over draconian restructuring plans for the troubled railway firm, which included 2,000 job cuts, the suspension of 150 train services and pay cuts. The strike caused an estimated BGN 2.5 million (about EUR 1.25 million) in losses. Between the start of the strike and its end, some 1,050 Bulgarian State Railways employees have taken up an offer to leave for a severance pay of six monthly wages.

6. CROATIA

In Croatia, the severance pay is regulated by the Labor Law, 13 which was changed recently (in 2009 and 2011). Under current legislation, the worker is entitled to severance payment in case of dismissal 14 or redundancy under condition that work tenure with the employer is at least two years. Art. 119 stipulates that severance payment is tied to work tenure and needs to be agreed with the employer. It cannot be, however, lower than 1/3 of average wage in the three-month period before termination of contract for every completed year of service with the employer. Further, the law mandates that the maximum severance payment cannot be higher than six monthly wages, except if other laws, collective bargaining agreements, internal regulations of the companies or employment contracts define otherwise. The Labor Law itself does not mention any other type of severance payments, for example, for old-age, end-of-service etc. However, it regulates the exception in case of incapacity due to work injury or professional disease, caused in the service for the employer. In this case the severance pay should be double the amount that would be received by worker in case of dismissal or redundancy. As regards the old-age severance payments, they are usually regulated in collective bargaining agreements. As in many other countries, the law regulates only the minimum standards. According to collective bargaining agreements, however, severance payments are usually more generous. Systematic overview is not available, though, but one example is shown in the Box 1 below. According to tax regulation, the eventual old-age severance payment is tax exempt up to HRK 8,000 (equals approx. EUR 1,050) or slightly more than average wage in Croatia. Severance payments, paid for dismissal or redundancy according to the Labor Law, are tax exempt up to

12 The information is available on http://3e-news.net/show/18861_collective%20agreement%20signed %20at%20bulgarian%20state%20railways%20strike%20finally%20over_en/. 13 The official text is available in Croatian language on http://www.zakon.hr/z/307/Zakon-o-radu. 14 Worker's incompetence or lack of discipline does not apply here.

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HRK 6,400 for every year in service. For severance pay due to incapacity the tax exemption is higher – up to HRK 8,000 per year of service. Note that in Croatia the severance pay regulation is isolated from other form of unemployment insurance, for example unemployment benefits. So, the severance payment due to termination of the contract and eventual unemployment benefits are paid separately. According to the unofficial information, the government in Croatia is not considering of reforming the severance pay regulation in the near future.

Box 1: An example of severance payment under collective bargaining agreement – the case of INA d.d.

In the bargaining agreement of INA d.d., the largest Croatian oil and gas company, the severance pay is agreed for retirement and dismissal/ redundancy under the provisions of the Labor Law. In case of retirement, the worker is entitled to severance payment of HRK 8,000 and HRK 16,000 net of taxes, in case of full or incomplete retirement conditions, respectfully. Note that average wage in Croatia is about HRK 7,600 gross. In case of dismissal/redundancy under the provisions of the Labor Law, the worker is entitled to severance payment of 60% of average gross wage in three preceding months before termination of the contract for every year of service. Note that according to tax regulation and wage distribution in INA d.d., there is a high probability that no taxes would apply for received severance payment.

7. MACEDONIA, FYR

Macedonia adopted the Labor Relations Act15after several years of negotiations with social partners. Other than regulatory minimums, not much information is available regarding the severance pay. According to Art. 97, the employer is obliged to pay the worker redundancy payments in the case of termination of the employment contract for business reasons (severance payments for other types of dismissals are not covered by law). The mandated severance pay is as follows: • one net wage for up to five years of work tenure; • two net wages for five to ten years of work tenure; • three net wages for 10 to 15 years of work tenure; • four net wages for 15 to 20 years of work tenure; • five net wages for 20 to 25 years of work tenure; • six net wages for over 25 years of work tenure.

The basis for calculation of severance pay is worker’s average net wage in six months prior to the termination of the contract, but it may not be lower than 50 % of the average wage in Macedonia within the last month before the dismissal.

15 Official text is available in Macedonian language on http://www.mtsp.gov.mk/WBStorage/Files/ PT_Zakon_za_Rabotnite_odnosi_158_09122010.pdf.

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According to tax regulations, severance payments are tax exempt if they are paid according to provisions of the Labor Relations Act or if retirement severance payment does not exceed two average monthly wages calculated from six months’ average before retirement.

8. MOLDOVA

In Moldova, the severance pay is mandated by the Labor Law, 16 adopted in 2003. In case of redundancy termination (i.e., in case of liquidation of the company, termination of the activity of the employer as physical person or reduction of number of workers in the company) the worker is entitled to: • one average weekly wage for each year of service, but no less than one monthly wage; • preservation of the average monthly wages for the period of looking for another job, but no more than three months, including the severance pay. For the third month the average wages are kept provided that the employee has in a fortnight term after the dismissal applied to the employment agency, has been enlisted as unemployed and has not been employed, confirmed by the corresponding certificate. In case of termination of the employment contract due to incapacity (health reasons or insufficient qualification confirmed by the decision of the attestation commission), the worker is entitled to lump-sum severance pay of two weekly wages, regardless the work tenure. The same severance pay is mandated for terminations of employment contract due to call up for the military service, reduced military service or civil service, or in case of workers resignation due to infringement by the employer of the individual employment contract or collective bargaining agreement. No minimum work tenure is specified by law. Also no severance pay is mandated for termination of contract due to retirement. The law, on the other hand, explicitly stipulates that severance payments can be agreed in the individual employment contract or by collective bargaining agreements in more generous manner. Unfortunately, no formal or informal information is available on the functioning of the collective bargaining agreements in Moldova and related severance pay (other than mandated one).

9. MONTENEGRO

Montenegro introduced a reformed Labor Code17 in 2011; in the reform some changes were introduced also for severance pay. 18 The regulated severance pay denotes minimum requirement for severance in case of dismissal, whereby in Montenegro some collective agreements post a more generous conditions for laid-off workers. It is worthwhile to note that severance pay benefits in Montenegro are in no way connected to other social protection programs (for example, unemployment insurance). The Labor Code sets the following conditions for severance pay (Art. 94):

16 The unofficial translation to English is available on http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/mol/labour.doc. 17 The official text is available on http://www.sllistcg.me/PANapRezultati.aspx?no=&it=&la=-1&ldt=- 1&ai=28&eu=-1&src=-1&dt=-1&fts=&frm=&to=&kw=&nvg=6,12,1. 18 The 2003 Labor Code was very generous: it requested that laid-off workers received a severance pay of 24 monthly wages, regardless the work tenure (by the employer). The amendment in 2008 lowered this to six monthly wages. The reformed Labor Code from 2011 binds the severance payment to working tenure.

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• Laid-off workers are entitled to severance payment in the amount of 1/3 of average wage in six months preceding the dismissal for each year by the employer or, if more favorable for worker, 1/3 of average national wage. Minimum payment is set to three monthly wages in six months preceding the dismissal for each year by the employer or, if more favorable for worker, three average national wages. • There is an exception introduced for disabled workers. If a disabled worker is laid-off due to economic reasons, it is entitled to his/her 24 or 36 wages, if the invalidity was not caused in the company or if the invalidity was caused in the company, respectively. If more favorable for worker, average wage in the company applies also here. The base for calculation is net wage. The severance payment is subject to personal income tax, yet only those amounts of severance that exceed legally binding minimum are taxed (PIT is 9 % flat rate). The above rules apply for dismissal due to redundancy. In case of dismissal, some causes lead to severance payment 19 and some do not. No severance pay is mandated for dismissal in case of incapacity or for old-age/end-of-service separation. For the latter case, the collective agreements usually include some provisions (see Table 2). There is, however, a special rule set for old-age severance pay provisions for companies in bankruptcy, which is specified in Art. 98 of the Labor Code. Workers in company in bankruptcy, which fulfilled the retirement conditions prior to company’s bankruptcy, are legally entitled to severance pay at the level of three average wages in manufacturing sector. Companies in Montenegro usually do pay the required severance pay. In case of non- performance, workers are entitled to file the company to the Agency for Peaceful Dissolution of Labor Disputes or to the court. Workers whose companies went bankrupt can claim their severance payments to the Labor Fund, which was introduced in April 2010. According to the Ministry of Finance of Montenegro, total number of 21,279 claims was submitted to the Labor Fund since its establishment until November 2011. During that period 2,218 claims has been taken into decision, out of which 1,959 claims was accepted and 1,613 paid. In total 256 claims was rejected. Among them, the majority came from non-performed severance pay claims from state-owned companies, which bankrupted in the past. As noted above, the Labor Code sets the minimum standards for severance pay. The collective agreements, however, can be more generous. Table 2 in Appendix shows the severance payments for retirement and for redundancy in different branches. The banking and insurance sector and energy sector step out significantly in severance pay generosity. Just recently, also the government negotiated with labor unions of public sector an agreement that is more favorable for workers than existing Labor Code – see Box 2 below. 20

Box 2: Agreement between Montenegrin government and labor unions on employment and wage policy in public sector

In 2011 the Government of Montenegro signed an agreement with labor unions about the employment and wage policy in public sector for the period 2012–2015. Both parties agreed on conditions for adjustments of wages and number of employees in sectors, financed from the

19Only three cases apply (Art. 143 of the Labor Code): i) if the worker is dismissed because he/she would not agree to sign an annex to work contract intended to change the wage, ii) in case of economic reasons (other than those leading to redundancy), and iii) in case of technological and structural changes. Note that at least the last reason is similar to redundancy lay-off. 20 Full text of the agreement is available on http://www.gov.me/ResourceManager/FileDownload.aspx ?rId=91538&rType=2.

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budget. The agreement was signed under the pressure of current economic crisis. Among others, the agreement set special provisions for termination of employment in the relevant sectors. Those who voluntarily terminate employment/resign are entitled to severance pay of: •8, 12 and 10 gross wages for those with up to 10, from 10 to 30, and from 30 to 35 years or work tenure, respectively; •6 gross wages for those with at least 35 years of work tenure, under condition that they do not meet conditions for pension; and •3 gross wages for those with at least 35 years of job tenure, under condition that they do meet conditions for pension. These workers cannot apply to new employment in public sector for at least five years after the termination of employment. Those whose employment contract was terminated involuntarily (due to economic reasons) are entitled to severance pay of: •8, 12, 15 and 10 gross wages (or, if more favorable for worker, average wage in Montenegro) for those with up to 10, from 10 to 20, from 20 to 30, and from 30 to 35 years or work tenure, respectively; •6 gross wages (or, if more favorable for worker, average wage in Montenegro) for those with at least 35 years of work tenure, under condition that they do not meet conditions for pension; and •3 gross wages (or, if more favorable for worker, average wage in Montenegro) for those with at least 35 years of job tenure, under condition that they do meet conditions for pension. These workers cannot apply to new employment in public sector for at least one year after the termination of employment.

10. ROMANIA

The Labor Law in Romania does not regulate severance pay in any way. As many other provisions of employer-worker relation, also severance pay is determined by national collective agreement. As regards provisions on severance pay, the national collective agreement changed in 2007. The severance pay for individual terminations and collective dismissals was increased from two weeks average wage for each year of service to at least one monthly wage for each year of service. All reasons other than worker’s misconduct apply here. No additional information on the functioning of severance pay was found for Romania.

11. SERBIA

Regulation regarding severance pay in Serbia is very similar to severance pay scheme in Montenegro. This makes sense, as Serbia and Montenegro shared the same sovereignty until mid-2006. In Serbia the current Labor Law21 was introduced in 2005. As regards the severance pay scheme, the Labor Law in Serbia, similarly to legislation in Montenegro, also distinguishes two major types of contract termination from employer’s side. First, a special rule is applied for old-age severance pay provisions for companies against whom bankruptcy procedure has been raised, which is stipulated in Art. 125 and 126 of the Labor

21 The official text is available in Serbian language on: http://www.zakoni.rs/zakon-o-radu/zakon-o- radu.pdf.

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Law. In these companies, workers, which fulfilled the retirement conditions prior to company’s bankruptcy, are legally entitled to severance pay at the level of three average wages in manufacturing sector (same as in Montenegro). For “regular terminations” apply the provisions from Art. 158. Workers, who are redundant due to technological, economical and organizational reasons, are entitled to severance payment. The level of severance payment is agreed in employment contract or collective bargaining agreements, but it cannot be lower than 1/3 of average monthly wage in three months preceding the termination for each year with the employer. Besides severance pay for lay-offs, the law also mandates old-age severance pay of three average wages, calculated from monthly wages in three months prior to the retirement. According to tax legislation, all severance payments are tax exempt up to the level of three average wages in Serbia. Amounts beyond that level are taxed at 20 % rate, where the tax basis is lowered for 20 % (normative costs). Similarly to Montenegro, also in Serbia the Labor Law introduced a special fund (in Serbia it is called the Solidarity Fund). Its purpose is to provide assistance and to secure worker’s rights in case of company’s bankruptcy. Among these rights is, as mentioned above, also the right to severance payment if the worker qualifies for retirement. As in many other countries, the law in Serbia mandates only minimum standards for severance payments. Collective agreements and managerial employment contracts can be more generous or can define some modalities in more detail. In collective agreement for teachers (in public schools), for example, the severance pay is set at the level of mandatory requirement, however, the basis for calculation severance payment can be either average wage of worker, average wage of all workers by the employer or, if even more favorable to worker, average wage in Serbia. In reality, severance payments in different companies and sectors are very volatile. Tomčić (2010) reports that actually paid severance payments ranged from 0 EUR to near 1,000 EUR per year of service. The author claims that the highest severance payments were paid in (state- owned) Telekom and Lukoil. Managerial severance payments amounted to as much as one quarter of million EUR.

12. SLOVENIA22

In Slovenia, severance pay is regulated by the Labor Code, 23 the Law on the Public Guarantee Fund,24 and the Law on Bankruptcy and Liquidation, 25 and is further guided by collective bargaining agreements, as well as individual contracts (on the managerial level). Mandated severance pay is paid to laid-off workers and workers who retire, with the level of pay proportional to the work tenure with his or her former employer. To address the severance pay non-performance problem, the Guarantee Fund was introduced in 1997, to at least partially reimburse the unpaid severance pay claims of workers.

22 The explanation of the severance pay regulation is summarized from Vodopivec, Madjar and Dolenc (2009). 23 The official text is available in Slovenian language on http://www.mddsz.gov.si/si/zakonodaja_in_dokumenti/ veljavni_predpisi/ zakon_o_delovnih_razmerjih/. 24 The official text is available in Slovenian language on http://www.uradni-list.si/1/ objava.jsp?urlid=200678&stevilka=3404. 25 The official text is available in Slovenian language on http://www.uradni-list.si/1/ objava.jsp?urlid=2007126&stevilka=6413.

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Slovenia introduced a Labor Code in 1990 and a new one in 2003. The 1990 Labor Code mandated severance for early retirees as well as for redundant workers. While for early retirees the law did not mandate the amount of severance pay, it did so for redundant workers. Workers with at least two years of service were entitled to half of their monthly average wage for every year of service, with the wage determined on the basis of the wage paid in the last three months of employment. Other cases for severance pay were not legally binding. The 2003 Labor Code significantly differs from the previous one, as it more precisely defines the obligations on the part of employers and the rights of workers. Workers are entitled to severance pay if they retire or they are dismissed (either because of business reasons or bankruptcy or even in the case of incompetence). Retired workers are entitled to the severance pay of two average gross wages, calculated from three-month average gross wage in Slovenia, or (if more favorable to the employee) two average gross wages, calculated from his/her three- month average gross wage before retirement. In contrast, the basis for the calculation of the severance pay for dismissed workers is the average monthly gross wage which was received by the employee, or which would have been received by the worker if working, in the last three months before the termination. The employee is entitled to severance pay amounting to: • 1/5 of the basis for each year of employment with the employer, if the employee has been employed with the employer for more than one and up to five years; • 1/4 of the basis for each year of employment with the employer, if the employee has been employed with the employer for the period from five to fifteen years; • 1/3 of the basis for each year of employment with the employer, if the employee has been employed with the employer for the period exceeding fifteen years. Unless with collective bargaining agreements defined otherwise, the severance pay is limited to ten average monthly gross wages which was received by the employee, or which would have been received by the worker if working, in the last three months before the termination. Severance pay at retirement is tax exempt up to the amount set by the government. This amount is approximately four average gross wages in Slovenia. Other severance payments are tax exempt up to the level of ten average gross wages in Slovenia. It may be noted that legislation provisions for severance payments are usually simply copied to collective bargaining agreements, so these usually do not include more generous provisions for severance pay as the Labor Code. Some collective bargaining agreements are more generous, though. Collective bargaining agreement for banking sector, for example, for a dismissal due to economic reasons and even due to incompetence (!) mandates 1/3 of average monthly gross wage which was received by the employee, or which would have been received by the worker if working, in the last three months before the termination, regardless the work tenure. The maximum is set to 14 monthly wages. At retirement the worker is entitled to three average monthly wages (not two as mandated by Labor code). Severance payments can and in fact are significantly higher for workers with individual contracts – see example in the box 3.

Box 3: An example of severance payment under individual employment contract

One of the most notorious examples of severance payments in Slovenia was an end-of-service severance to former CEO of NLB bank (the biggest Slovenian bank, mostly state-owned). At the end of his mandate he received approx. EUR 1 million gross, which was about 700 average gross wages is Slovenia. The severance pay was “unusual” (as stated by Prime Minister at that time), as the amount was significantly higher than he would receive under the collective agreement for banking sector (max. 14 average wages). The NLB case resulted in a lex specialis, which retro actively applied a tax rate of 95 % (!) to managerial severance payment above a specific threshold. The law was sent to the Constitutional Review, however, the

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Constitutional Court has not ruled yet.

It is worthwhile stressing that also under the 2003 law, the severance pay program remains unrelated to the unemployment insurance program. That is, qualifying workers receive severance pay and, in addition, they also qualify for unemployment insurance benefits (which can be received for up to two years, see van Ours and Vodopivec, 2006). To protect worker’s rights in the case of a firm’s insolvency, in 1997 Slovenia – following the 1980 EU directive 80/987 – introduced the Public Guarantee Fund. Workers, legally entitled to severance pay but unsuccessful in its exaction, can claim partial reimbursement of their severance pay claims from the Fund, with the ceiling on such reimbursements being a monthly minimum wage. 26 Moreover, under the 1993 Law on Bankruptcy and Liquidation, workers can sue their former employers that undergo a liquidation or bankruptcy process, with workers’ severance pay claims having a priority before other claims (up to a limit – for details, see Kresal Šoltes, 1997). Vodopivec, Madjar and Dolenc (2009) addressed the non-performance problem of severance pay in Slovenia. Their findings, which are among the very few of such results in existence, suggest that severance pay non-performance has been a significant problem in Slovenia. In 2000, only two-thirds of total severance pay obligations were actually honored, a small portion of non-paid severance pay claims was reimbursed by the Guarantee Fund, and the rest – one- third of total obligations – was not paid at all. Moreover, authors showed that while both men and women were equally affected, workers older than 40 years were more likely than younger ones to be confronted by severance pay non-performance. And, finally, they also found that among firms that incurred severance pay liabilities, larger and more productive firms were more likely to pay them out. The authors conclude that severance pay seems to be an inefficient income protection program for the unemployed in Slovenia. First, the program fails to protect a significant share of those who are legally entitled to such protection – even after the introduction of the Guarantee Fund. Second, the program is prone to creating inequities, as it disproportionally affected older workers. At the same time, their findings also provide some clues about how to make the program more effective. The fact that less productive – and hence less profitable – firms are less likely to honor their obligations suggests that non-performance is strongly related to the non-funded nature and limited risk-pooling of severance pay, which leads to the recommendation for severance pay to be converted to a funded program.

13. TURKEY

Turkey has mandatory severance pay scheme, where the legislation mandates only the minimum requirements and collective bargaining agreements add modalities to the practice. Even though Turkey has reformed and modernized the Labor Law, 27 which was put in place in 2003, the severance pay regulation has not been changed for decades (Ercan, 2006). The regulation on severance pay in force is the one from the former Labor Law; it remained the same also in the new labor market regulation as labor unions opposed any changes in adoption of 2003 law.

26 Under the 1993 Law on Bankruptcy and Liquidation, workers can sue their former employers that undergo a liquidation or bankruptcy process, with workers’ severance pay claims having a priority before other claims (up to a limit – for details, see Kresal Šoltes, 1997). 27 The unofficial translation to English is available on http://www.ilo.org/dyn/natlex/docs/SERIAL/64083/63017/ F1027431766/TUR64083.PDF.

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Severance pay is mandated for all workers in formal (private and public) sector, regardless the size and type of the employer. As reported by the World Bank (2006), Turkish severance pay legislation is generous one judged by international standards. Workers qualify after one year of service and the legislation mandated a payment of one month wage (most recent monthly gross wage is applicable)28 per year of service for qualifying separations (including separations for economic reasons, just cause discharge cases and retirements, death, compulsory military service, disability, “female getting married” etc., thus in fact all terminations other than resignation or misconduct), with no ceiling on number of years but with a ceiling on amount paid per year. Old-age severance pay applies under the same rules as any other qualifying reason. There is a ceiling on severance pay compensation, which is the retirement bonus of the highest-ranking civil servant (the undersecretary to the prime minister). With the collective agreements, the amount of the severance pay can be changed in workers’ favor. Besides this, workers (labor unions) and employers can determine additional in kind and cash assistances in collective bargaining agreements. If there is not any additional in kind and cash assistances in collective agreements and the amount of severance pay is not determined with collective agreements, the amount of the severance pay equals to the employee’s recent wage. If employees entitle any assistance with the collective agreements, the amount of the severance pay increases. As a result, collective agreements are in general even more generous than regulatory framework. When it comes to implementation, public sector and formal large unionized private blue-collar employees are covered by severance pay legislation, where informal sector of small establishments will not abide by the law (Ercan, 2006). Because severance payment is a generous lump-sum payment, it presents a significant burden for employers and most of the employers try to avoid it. Ad hoc evidence suggests that compliance is limited outside the public sector, and that employers use various practices to avoid payments (including forcing workers to sign undated “voluntary” resignations when starting a job, termination of employment at the last day of annual contract with rehiring the next day, etc.). Due of this reason, entitlement rate to severance pay is quite low. According to the government’s estimate, more than 40 % of workers whose employment contract is terminated in fact resign and do not entitle to severance pay. In addition, those employed on the basis of temporary contracts are usually not eligible to severance payments due to minimum tenure requirement. In Turkey, severance payment is mandated also for firms in bankruptcy. In the case of bankruptcy, government’s claims are the first priority claims, followed by the claims of employees including severance and notice pay. In case of non-performance, the worker can follow two alternative paths. First, the employee can make a complaint to the Regional Work and Employment Directorate. Second, if the employee’s complaint remains inconclusive, the employee must directly go to the labor court. As a result, the employer has to pay the severance pay in accordance with the court decision. Severance pay regulation in Turkey is one of the most generous in the world, however being decades old. Although there is a political will/attempt to change the regulation, oppositions from both labor unions and employer unions prevent such changes. Employer associations oppose the regulation because most of the employers do not pay severance pay. Moreover, they argue that there’s no further need for severance pay, as now there is unemployment insurance in place.29 Also, labor unions oppose the regulation because they do not want any reduction in the amount of severance pay and argue that severance pay is simply a component of gross wage and

28 For those who work part-time, the amount of severance pay is calculated as the monthly average of payments in the year before the termination. 29 Turkey introduced the unemployment insurance only in 2002

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needs to stay. It could be shown that such strict regulation hinders labor market flexicurity and severance pay may be blamed for the employer reluctance in expanding employment. 30

14. CONCLUSION

In this paper we tried to identify similarities and differences in severance pay schemes in the SEE countries. We found that severance pay is mandated by law in all SEE countries except one. The only exception is Romania, where the severance pay is mandated by the national collective agreement. Redundancy is a legitimate ground for dismissal in all studied SEE countries, but always leads to worker’s claim to severance pay. Other grounds for contract’s termination, for example dismissal, incapacity, old-age etc., are justified reasons for severance pay claim only in some of the observed countries. In case of justified reason for contract’s termination, a common basis for severance pay is work tenure with the employer. Even though the basic framework of severance pay scheme is similar in the SEE countries, the modalities are very different. Countries vary significantly in minimal required tenure, eligibility for severance pay other than redundancy, severance pay generosity index and in other characteristics. Severance pay schemes have several weaknesses. One of the important weaknesses is that severance pay increases rigidity of labor markets, which has negative effects on GDP growth, labor productivity and finally on labor market outcomes. The other evident fact is that severance pay, being separated from unemployment insurance, induces inefficiency – it is paid regardless the unemployment spell. On top of that, evidence from Slovenia and Turkey suggest that non-performance of severance pay is not negligible. These considerations call for reforms of classic severance pay schemes; some evidence does exist in other countries (i.e. Austria, Chile etc.). However, it seems that no reforms or upgrades of the existing schemes are expected really soon among the SEE countries. One of the reasons can be that current regulation has been put in place at latest in last decade, whereas the other reason could be the opposition from workers’ and employers’ side. Here again, experiences from Slovenia and Turkey evidently show that the lack of strong political inevitably result is failure of reforms.

30 Note that employment rate in Turkey is extremely low by international standards.

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INFORMATION TECHNOLOGIES INSIDE CHANNEL MARKETING

Gašević Igor

Han Pijesak, Bosna i Hercegovina, igorgasevic@hotmail.com

Abstract: Information technologies, IT, as a source of specific resources, have led to changes in the ways of performing many functions and marketing activities (distribution services) that are related to the distribution of goods and operation of the channel. The introduction of computer technology greatly improves the inter-organizational cooperation, developing retail and changing relations of economic power, and such an environment gives retailers greater chance to become the leading players in the industry. In this context, this paper provides a selective review of key arguments related to information technologies within the marketing channel. First, there is a selective review of key elements relevant to the application of information technology in distribution. On the other hand, illustrates the types of utilization of computer tools in the function of development of marketing channels, and the need for the introduction of computer tools as a contribution to the partnership.

Keywords: marketing channel, information technology (IT), cooperation

1.INTRODUCTION

During the confrontation with the global and dynamic business environment, there is a need to strengthen the internal resources of business organizations and their practical abilities to overcome barriers of trade. Advances in technology can improve relationships among business organizations, the change of power in the channels can be starting point of competitive advantage, but it can also be a significant barrier for those who cannot adapt in time. The introduction of new technology in the form of sophisticated communication, computer and information systems reduces operating costs and speed of performing the operation. The assumption is that the impact of information technologies within the marketing channel is reflected in a better mutual exchange of potential benefits and resources among partners. If the channel is treated as a creation of the group of institutions that perform activities (functions) for the movement of products from production to consumption, then we can say this institution has a number of mutually complementary resources that contribute to the successful functioning of the distribution. It is necessary to achieve the favor of the distribution among the participants, who have extremely different institutional characteristics, through the joint utilization of modern computer marketing tools. But, as it is said: “Application of new concepts and technologies in economics and management is a challenging issue…”. 1

Information technology, IT, represents a departure from the operation of the channel on a global scale. It also becomes a strategic resource that management combines with other available resources to successfully manage. As it is stated: “Globalization, IT and new social values represent… key factors in a proximate future.”2

1 Radosavljević, Ž, et.all, „Modern Technology Application in Economics and Management“, International Journal of economics and law, Vol. 2, No. 4, FORKUP, Novi Sad, April 2012, pp.111 2 Dr Slobodan Stefanovic, et.al, Management in business and ecological logistics, doc.dr Radoje Cvejic, 2010, p. 91

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2. THE IMPORTANCE OF APPLYING IT IN DISTRIBUTION

The use of technology, primarily IT, implies its use and purpose other than to connect the internal organizational units. The standardization of network protocols for the exchange of electronic data (TCP/IP3) and building of a global communications network based on a combination of satellite and other communication links enhance the exchange of data among businesses mitigating traditional IT barriers. Traditional barriers such as distance of the recipient and sender, the distortion of the physical data transfer, unlimited access to users and the like. This opened up the possibility of collecting and using data not only within their organizations, but also from the market of suppliers and customers for the retailers. A model of the supply chain got even wider, global dimension. As the retail sector of the global expansion of retail chains has become an important investor in the computer network, it shows that large retailers were major contributors to the development of world production of computer equipment and application programs. For the retailer, IT development is important from two perspectives. First, how to use IT to achieve the attractiveness of the retail structure of end users, and secondly, how retail management can with the help of IT to gain the acceptance of participants in the marketing channel. The goal of both views is to increase the margin value in the marketing channel. Empirical research of sale in experimental hypermarkets of "Metro Group" ("Extra Future Stores") in Europe (Kalyana, Lal, and Wolfram 2006:109), showed that the introduction of computer innovations influenced the growth of sales in these stores for more than 10%. This market research included the statistics of end customers, however, benefit from increased sales are manifold, increasing the prestige market retailers, reduce the cost of promotion, strengthening its market share, increasing cash flow, and thus strengthen its economic and bargaining power in the channel. Retail is strongly influenced by computer technology, wireless networking, the Internet, global computer information systems and related technologies. Participants of exchange use these technologies to collect, exchange and process data pertaining to facilitate management of production and distribution of goods. The implementation of new IT reduces communication costs and thus affects the transaction costs; making communication ceases to be a limiting factor in the institutional framework of retailing. It appears that the advantage is easier coordination of resources and activities. There is a need for analyzing the impact of IT on the distribution. Continuity of information, which Porter (1985) devoted his value chain requires a computer network of all participants who directly or indirectly affect the physical flow of goods. This connection causes the necessary changes in their mutual relations, so often is a cause for the immediate creation of an inter-organizational cooperation. All participants are looking for ways to provide more data to their managers from the distribution channels. It is known that sudden creation of the narrow types of alliance in the developed economies IT started. Development of distribution in a market economy moves from computer to connecting suppliers of raw materials, manufacturers, warehouses, wholesalers, transporters and point of sale, in a single IT system that will allow the operation of software supply chain. IT is often used for tracking stock in warehouses and stock on the shelves, then the quicker and accurate calculation of the cash account, tracking the needs and habits of final customers, to analyze the procurement process in terms of fulfillment of agreed conditions.

3 Transmission Control Protocol/Internet Protocol - abbreviation – two basic network communication protocols providing access to the Internet for computers

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Figure 1: Information Technology

Tasks in the distribution are clearly divided, the manufacturer is responsible for product design and the manufacturer predicts innovation, while brokers are responsible for placing the product on the buyer’s disposal in the form of what. There are cases where the manufacturer takes over the distribution of all roles from production to the product is placed at the disposal of the buyer. There are many ways in the practice of such direct sales where the vendor uses its network for retail. However, the important point is that IT, in addition to other communication technologies (telephone, television), also provide a specific way of retail over the Internet - Internet sales or in other words "on-line" sales. If the manufacturer can be technologically equipped to offer and charge for their products on- line to end user who accept that form of sale, the distribution process is performed without retail intermediary - directly. By converging of all necessary technologies to perform this type of sale or exchange, "business-to-customer", B2C4 originates. Every day we develop various forms of virtual stores on the Internet that offer and sale of goods without the usual barriers that exist in conventional channels: distance, time, language and other social barriers. Conventional retailers in the future must focus on the supply of goods across multiple channels to ensure the risks of technology development and meet the lower segment of consumers who may be critical to strengthening the bargaining power in the channel of distribution.

3. FORMS OF COMPUTER TOOLS UTILIZATION IN THE FUNCTION OF CHANNEL MARKETING DEVELOPMENT

The assumption of modern marketing is reflected in the exchange process underlying the production of well-known customer. It follows that the manufacturer has market information about consumer preferences, and if with that information plans producing, it means that the dynamics of information is tailored to its production plan. In principle, this is the essence of modern supply chain model developed from the aspirations towards information connectivity goals among all participants of the distribution. Within these factors, it is possible to accommodate the electronic data5 interchange on the development of marketing as a result of the emergence of information society. No significances of communication and information

4 Kotler et al. (2004:137), literate translate of “B2C” would be “from final consumer to business customer” 5 EDI – Electronic Data Interchange, abbreviation

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networking would have come to the fore if there were no will and the real possibilities for cooperation between companies. The application of electronic information interexchange between Europe's leading retailers and their suppliers began in 1993. It is pointed out that the pioneers of such links linking was "Procter & Gamble Inc.", regarding the supplier and the "Metro AG", regarding retailers, and they say that only a few major retail chains in Europe achieved electronic connectivity and that these retailers achieve a stable expansion of stores and increase sales. The task of modern computer tools in the service of exchanging goods and services is to better link trade and production in order to meet demands better. They essentially provide useful information on sales and inventories of goods. For issues and timeliness of research, it is important to analyze the most important marketing tools in the computer distribution channel. Electronic data interchange actually implies the use of various specialized computer software that is under the influence of global convergence and standardization in the industry often occurs through the specific computer marketing tools. The latest such tools are available under the name "Efficient Consumer Response", or "ECR", which when loosely translated means "effective answer to the satisfaction of consumers" are the marketing information systems that have a starting point in the supply chain. The emphasis is on cooperation of all parties that appear in the channel in order to create better conditions for the fulfillment of customer needs. ECR was created by convergence of previous computer marketing tools of narrower scope, but now fully focused on customer relations, i.e. "Customer Experience Management" 6, which loosely translated would mean "the management of consumer's experience." Thus, next computer marketing tools can be introduced under ECR:

• "Efficient Replenishment" or "Continuous Replenishment Program" ("CRP") is the practice among the partners in the distribution channel that changes the traditional way in which the dealer orders goods for supplier until achieves the optimal order quantity. CRP managed deliveries based on data from a computer on the actual and forecasted demand. This software currently registers purchase of goods at the cash register and sent data to the distribution channel. It comes to logistics procurement process that does not begin by the order of retailer, then with the end customer that is buying at the cash register. Delivery by the supplier may also be a reflection of direct information on demand or forecast demand in a shorter period of time. Such a form of inventory management affects the efficient filling of ("efficient replenishment") shelf, i.e., reducing the risk of loss of goods on the shelves, improving information sharing among partners, encourages confidence, reduce costs which require stocks, etc.; • "Efficient Assortment" (abbreviated "EA") in loose translation would mean "effective range". It is used to store revision range in order to better fit on the demand of end customers, while remained profitable enough. That means following the share of revenue from the sale of certain commodity items in relation to total income. This concept takes into account the diversity of retail offer, the availability of space and the like. The support of this concept is very important in avoiding the costs of keeping the product on the shelves that record low revs, then improving the pricing strategy and increase return on investment. The key software in this segment is the "Category Management" ("CM"). To use this tool, it is necessary to classify the

6 Unlike previous computer marketing tool, "Customer Relationship Management" ("CRM"), "Customer Experience Management "(Burke, 2006:115) is representative of a third generation of marketing tools. Unlike CRM, its significance are RFID, PSA, wireless communications, local GPS navigation, different interior design of shops, better promotional information and other improvements

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goods in the group, then to determine their sales, earnings and sales forecast products from the group with separate observation of individual groups. • "Customer Relationship Management" ("CRM") is a set of computer applications used for communication of the supplier to final customers, i.e. retail structure with end customers. Through this segment of the ECR, data about customers7 and their consumption structure are monitored. CRM is used to distribute promotional information, automation of ordering goods over the Internet. • "Radio Frequency Identification" ("RFID") which means "radio frequency identification" 8, represents the latest technological advances in the use of IT. Goods are identified using wireless communication. The application is primarily directed to assist customers buying in the stores, in order to simplify it. However, its achievements in the application are much broader. Although RFID technology is still experimental, it is possible to determine improvements that RFID technology will provide to suppliers chain. • "Personal Shopping Assistant" ("PSA") is an electronic device with a screen, attached to the stroller handle, which is wirelessly connected to a local network with a central computer. This "sales assistant" is asking buyer to enter the assigned PIN code9 before the purchase in order the store computer system identifies it. Thanks to wireless technology, PSA device is in interaction with the central computer. Thus, the central computer can obtain information about past purchases from the database and send them to the screen of PSA devices. According to these data, the customer can align its new purchase or list of commodity items that can be changed and adapted.

4. THE NEED FOR THE INTRODUCTION OF COMPUTER TOOLS AS A CONTRIBUTION TO THE PARTNERSHIP

Computer tools in the function of marketing, such as ECR and CM in the supply chain, create a higher level of trust among channel participants, because the transactions monitoring is entrusted with information system, not individual persons. Recording each transaction in commodity computer allows comparison of flow exchange with the set parameters and pre- agreed terms between the partners. This reduces the channel uncertainty and fear of fraud. These marketing information systems have, therefore, the role of senior controllers that do not create, but monitor the respect for the rules of exchange. Opportunities provided by the application of computer technology in retail can influence the choice of suppliers, negotiation, monitoring stock and sales dynamics and collaboration development. Selection of suppliers helps in negotiating the terms of cooperation and helps in evaluating supplier’s performance. The manager sets the criterions based on which assess cooperation with the supplier in a given period. The computer based on set of criteria on realized sales, delayed or

7Consumer-chip cards that customer is asked to use them with every purchase, receive as a permanent customer, server to retailer for identification of customer and its consumption structure during the payment at POS counters. This information is recorded in a database and later used for the sale analysis. 8Advanced technology that eliminates the "bar code" as a means of marking goods (bar code is used in retail outlets since 1974, - the first time in Marsh's Supermarket in Ohio, USA) and using specific nano- chips embedded in products, wrapping material or container into which a unique code to track merchandise items was added. 9 PIN, Personal Identification Number, abbreviation – usually encompass 4 – 7 numbers used for validation of user’s credibility.

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premature deliveries, compliance orders and deliveries, the quality of goods and movement of commodity prices and compares criteria between multiple vendors, decide which was the most reliable and thus can affect the channel structure. If the key components of the contract are entered into the computer, it can assess the compliance of each delivery with agreed conditions. The computer contains data collected by electronic devices on the dynamics of the goods or the state of average inventory, the quantity of goods sold, the required time of delivery, retail price and the like. During negotiations with the supplier, the computer can provide in-depth data parameters that best fit the dynamics and conditions of sale of certain goods. Retailer and supplier negotiate on these parameters ("Request for Quote", "RFQ") and enter them into the contract. On receiving goods in the store, software and hardware when record store entrance commodity items using POS or RFID device to captures the output of the goods. With these data, we can see the exact dynamics of selling and when will be the optimal time to order to maintain the availability of goods on the shelves. This reduces the risk of failure and automates the procurement of goods if they past participants of the channel have access to this information.

5. RESUME

When it comes to functionality and designing relationships in channel marketing, an important place must be given to computerization of the channel and its rapid transformation in the supply chain. Taking into account some important theoretical contributions and practical side of applying new forms of information technology, above all in developed countries, it can be concluded that introduction of computer technology enhances collaboration, developing retail and distribution methods, and certainly changes the relationship of economic power, which inevitably leads to creating an environment where retail, as an industry, is likely to become even more powerful factor in the distribution channels for goods and services. Suppliers who are not in the channel, will have to change the existing methods (or models) of partnerships with retailers and adapt to their conditions. The task of modern IT in the service of exchanging goods and providing services is to link better trade and production. The application of IT is crucial for retail development because without it the complex structure of retail chains and smaller retailers would be quite difficult. It would make difficult the functioning of the retail and distribution channels of goods. Under the conditions of modern trade, conventional application of IT is evolving further as a support of the supply chain that represents the application of IT to the extent that physical flow and functioning of all channel participants depends on it. Furthermore, IT helps in the selection, negotiation and evaluation of partners, which affects the dynamics and quality of inter-organizational cooperation and reduces transaction costs.

BIBLIOGRAPHY

1. Anderson, E. i drugi (2005), Marketing Channels, 7th ed. Prentice Hall. 2. Badcock, C., Bloom, J. (2003), "Supplier Collaboration: Achieving and sustaining

competitive advantage", Ernst & Young In 3. Bucklin, L. P. (1966), A Theory of Distribution Channel Structure. Berkeley, USA:

Institute of Business and Economic Research Special Publications. 4. Chiang, W. K. (2002), Multi-channel Supply Chain Management in the E-business era. 5. Christensen, C. M., Tedlow, R. S. (2000), "Patterns of Disruption in Retailing,"

Harvard Business Review, 78(1), 42-45.

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6. Clemons, E. K., Row, M. C. (1992), "Information technology and industrial cooperation: the changing economics of coordination and ownership," Journal of ManagementInformation Systems, 9(2), 9-28.

7. Dawson, J. (2001), Is there a new commerce in Europe?," International Review of Retail, Distribution and Consumer Research, 11(3), 287-299.

8. Urbana, USA: University of Illinois at Urbana-Champaign. 9. Radosavljević, Ž, et.al, „Modern Technology Application in Economics and

Management“, International Journal of economics and law, Vol. 2, No. 4, FORKUP, Novi Sad, April 2012.

10. Dr Slobodan Stefanovic, et.al, Management in business and ecological logistics, doc.dr Radoje Cvejic, 2010.

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DECISION MAKING – THE WAY TO SOLVE PROBLEMS AND DISCOVER OPPORTUNITIES

Kastratović Edita1, Volodymyr Denysiuk2

1Business Economics and Entrepreneurship College, Belgrade, Serbia

2G.M.Dobrov Center for Science & Technology Potential and Science History Studies, the National Academy of Science of Ukraine, Kyiv, Ukraine

Summary: This paper explains decision making process as the activity of a manager in solving a certain problem, i.e.in using the given opportunity. Several types of decisions are elaborated in this paper, as well as the elements and methods constituting the decision making process.

Key words: decision making, problems and opportunities, elements and methods of decision making process.

Finding both problems and opportunities Decision making is a mental activity in which man simulates the future, in which he

chooses the right course of action in order to solve a certain problem or to take advantage of an opportunity that has presented itself. Successful managers are rated according to the efficiency of decisions they make and according to how efficient the results of those decisions are [1]. Decision making on the part of a manager is closely linked with problems, i.e. with the state where the difference between desired and real state of a certain phenomena is apparent and evident. Everyday practice has shown that most of the time a problem is actually a vailed opportunity at the same time, an opportunity that presents itself when a certain set of circumstances offers to the organization not only to achieve the planned goals, but to overachieve as well.

According to William Pounds, a manager should be warned that there might be a problem if he faces any of the following four types of situtations: a) diversion from previous experience that shows that existing working scheme of the organization broke down somewhere; b) diversion from adopted plans which means that manager's predictions and expectations are not coming through; c) other people constitute a very common and frequent cause of problems for any manager; d) competition that has reached certain results, and this must be addressed immediately with problem-solving activities [2].

Since problems and opportunities are entwined most of the time, it is not always easy for managers to decide whether it is a problem or an opportunity that the organization is facing. The most common errors that managers make

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when they sense they are facing poblems are: putting events into incorrect order (previous expertise is extremely important in decision making process, but it is not always a reliable guideline regarding future sequence of events), and unrealistic expectations and incorrect judgment regarding manager's own personality and social status.

One of the methods that managers use to locate problems and discover opportunities is the devil's advocate method where the same person makes a decision and then negates his own assumptions and then he creates 'counter solutions' based on negative assumptions.

Types of decisions Types of decisions that managers make are different in nature. Methods that managers

use differ as well. According to the decision making process used, we have routine, adaptive and innovative decisions [3]. Routine decisions form the problem-solving regulations. This type of decision making is fast and simple, and it is mainly used by the lower level of employees. Higher level managers participate in setting ground rules and they base their decision- making process on those rules. Adaptive decisions are adequate for less defined or partly defined problems, as well as solutions of the same kind. Those decisions are the source of the constant improvement of business process in an organization. Innovative decisions are based on defining unknown and unusual problems, and this requires that single, unique and most of all creative decisions must be remodelled. This type of decision making requires implementation of new ways and methods, such as systematic innovation process and random innovations and inventions. Systematic innovation process is a preplanned and systematic activity where certain problems get dismantled into several smaller problems in order for us to find solutions. Random innovations and inventions are results of individuals’ work, where those individuals had dealt with a certain problem commitedly and for a long time, after which process a ‘random’ solution presents itself to them.

According to Stoner, there are two groups of decisions: programmed and non-programmed decisions. Pre-programmed decisions, in accordance with set procedures and regulations, are used to resolve either complex or simple problems that appear repeatedly and their elements that can be defined. Contrary to that, problems that do not appear frequently or problems that are extremely important get solved by using non-programmed decisions.

Decisions can be results of either individual or group decision making. Individual decisions are made by individuals, and group decisions are made by groups and this decision making process is, therefore, more democratic and in accordance with common interests.

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Elements of decision making

Decision making as a mental process dates back all the way to the very beginning of mankind. People used to arrive at various decisions, often even unaware that they were making decisions, because decision making process is an integral part of everyday life. [4].

It is very important for managers in various organizations to get acquainted with elements, i.e. conditions that affect their decision making. Information, certainty, risks, probability and uncertainty are crucial for decision making. Managers base their decision making on available information, tending, at the same time, to fully comprehend and if possible reduce as much as possible the influence of information that are not available. The importance of decision making process is best seen from one of its definitions that reads: decision making is a process of modifying certain information into some other information.

Normal conditions under which we make decisions are: certainty, risks and uncertainty.

[5].

Certainty as one of the elements of decision making represents the state where

managers are fully acquainted with their tasks and where they have clear alternative solutions with reliable data about their outcome.

In decision making processes managers are often not able to foresee with final certainty the outcome of their alternative solution. At the same time, they might have enough information and ∕ or data to foresee the level of probability that a certain desired state shall be achieved. This position represents the risk within managers' decision making processes and it is characteristic of adaptive decisions. Probability is a statistical measure that shows the chances that a certain event or outcome shall materialize. [6].

Uncertainty is the state where managers do not dispose of all the necessary

information and ∕ or data for defining problems or establishing the probability that alternative solutions shall occur. In such a situation managers do not have at their disposal all the key data necessary for decision making or they face external factors that are beyond their control.

«In order to make a better decision, I first cease following a bad decision.»

Claiming that a large number of individuals make many bad decisions and, accordingly, lose their positions at work and in everyday life, in his book Spencer Johnson has put forward a map towards reaching better decisions [7].

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He ascertained that our bad decisions are based on illusions we used to believe in, and our good decisions are based on reality that we did recognize on time.

Rational decision making model helps managers to reach high-quality decisions with high probability of success, through a decision making process that follows four different stages: 1) analyze situation, 2) consider alternatives, 3) rate alternatives and choose the best one, 4) implement and oversee.

Figure 1: Rational decision making model

1. CHECK OUT THE SITUATION - Define the problem; - Establish the cause; - Establish the goal that you want to achieve with your decision.

2. THINK ABOUT ALTERNATIVES - Check out all possibilities; - Do not make final judgment.

4. IMPLEMENT AND OVERSEE - Make plans for implementation; - Implement the plan; - Oversee implementation and introduce necessary changes.

3. RATE ALL ALTERNATIVES AND CHOOSE THE BEST ONE - Rate alternatives; - Choose the best one.

Assistance in decision making

Decision making as a complex process requires various technical support tools for decision making, and those tools are supposed to make managers' job easier. There are various types of support tools: methods, procedures and instruments for easier decision making.

Support tools used for routine decision making are rules and standardized

procedures (external and internal manuals) and artificial intelligence (information technologies for certain functions).

For adaptive decision making we use various support tools, i.e. methods that need to be supported by information technology. Among others, here we have: decision matrix, level of rentability and decision tree. These methods are very important to solve problems and to follow decision making process more easily in situations where we have risk uncertainty.

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Figure 2: Decision tree [8].

Decision tree is used in situations where the person who makes a decision can

postpone that decision until he is satisfied that he has the best decision, i.e. the acceptable solution. In cases where decision is being postponed we have more diversification in decision tree, but at the same time in that same process we get additional information as well as additional expenses in the decision making process. Decision tree consists of: 1) decision nodes, commonly represented by squares; the squares represent decision makers who evaluate many actions and alternatives and select the best one; 2) chance nodes represented by circles; these represent possible outcomes of certain actions, i.e. alternatives, and 3) branches represented by lines and these show certain actions (alternatives) that managers and executives can perform in this process.

Creative methods as decision support tools are linked with innovative decisions, and

here we differ the following: «delphi» technique as the method for group decision making; «brainstorming»; creative thinking, etc.

Delphi method – Aware that resources are limited, the project team must - to the highest possible extent - use wisdom and expertise of those with considerable experience in relation to problems that should be solved. A group must behave and react as a whole. Members of a group are required to individually put forward their opinions and reasons as a base that serves to support their evaluation. After gathering and processing the information, the process should be stopped if a concensus has been reached. Contrary to that, a copy of the processed data (most often summarized) is distributed to every single individual and then they are expected to comment on the report and try and revise their old evaluations. This way the process is continued until either concensus on satisfactory reliability is reached or some other path towards same goal is selected. [9].

Brainstorming decision making method is based on intensive discussions, exchange of ideas and open communication between members of the group that is supposed to make a decision. [10]. This group that is expected to make a decision must be autocensorship free; it must be free of fear and of

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the sense of discomfort as to how someone else shall react upon either suggestions or discussions of any other member of the group. When all the ideas have been presented, they are then being evaluated in order to select the best decision. This technique is very helpful specially when we must collect many ideas in order to arrive to a solution for a certain problem, and it is implemented when certain important strategic decisions in an organization are being made.

Summary Successful manager are rated in accordance with the efficiency of decisions they have

made and according to results of those decisions. Managers' decision making is closely linked with problems, i.e. situations where there is apparent difference between desired state and realistic state of certain phenomena.

Four types of situations should warn managers that a problem is likely to occur: a)

diversion from previous experience that show that existing working scheme of the organization broke down somewhere; b) diversions from adopted plans which means that manager's predictions and expectations are not coming through; c) other people constitute a very common and frequent cause of problems for any manager; d) competition that has reached certain results; this must be addressed immediately with problem-solving activities.

According to the decision making process used, we have routine, adaptive and

innovative decisions. We also have two types of decisions, depending whether they were made by individuals or by groups. Individual decisions are made by individuals, and group decisions are made by groups

It is very important for managers in various organizations to get acquainted with

elements, i.e. conditions that affect their decision making. Information, certainty, risks, probability and uncertainty are crucial for decision making.

Rational decision making model helps managers to reach high-quality decisions with high

probability of success, through a decision making process that follows four different stages: 1) analyze situation, 2) consider alternatives, 3) rate alternatives and choose the best one, 4) implement and oversee.

Decision making as a complex process requires various technical support tools that are supposed to make managers' lives easier. Here we have: methods, procedures and instruments for easier decision making.

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BIBLIOGRAPHY

[1] Kastratovic,E 2006 uvod u menadzment,FMS Beograd [2] Pounds, W.E. (1969): «The Process of Problem Finding»; Industrial

Management Review [3] Gojčič, S. (2003): «Menadžment»; CPU, Ljubljana [4] Čupić, M.E., Tummala, V.M.R. (1994): «Savremeno odlučivanje», Univerzitet

«Braća Karić», Beograd [5] Stoner, Dž. A. F., Friman, R. E., Gilbert, jr. D. R. (2001): «Menadžment»; Želnid,

Beograd [6] Mladenović, D., Đolević, V., Šoškić, D. (1997): «Ekonomska statistika»;

Univerzitet u Beogradu, Ekonomski fakultet, Beograd [7] Johnson, S. (1995): «Da ili Ne – Put do bolje odluke»; IQ Media & HAT;

Beograd [8, 10] Jovanović-Božinov, M., Živković M., Cvetkovski, T. (2003):

«Organizaciono ponašanje»; Megatrend univerzitet primenjenih nauka, Beograd [9] Čupić, M.E., Tummala, V.M.R. (1994): «Savremeno odlučivanje», Univerzitet

«Braća Karić», Beograd

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LEGAL ASPECTS OF HUMANITARIAN INTERVENTION

Marina Kostić1, Karl Schopf2 1 Faculty for Education of the Executives, Novi Sad, Serbia

2 Akademie fur wissenschaftliche forchung und studium, Wien, Autria

Abstract: This paper considers legal aspects of humanitarian intervention through examination of basic international conventions and international customary law that regulates the use of force in international relations. It deals with the various conceptions and justifications of humanitarian intervention by using the examples of NATO intervention on FRY, Afghanistan, Iraq and Libya and tries to examine whether they were justified eider by the some international convention such as the UN Charter or by some international customary norm. It, also, touches the question of ethics of international interventions i.e. the use of force for humanitarian purposes. The use of force in contemporary international relations today is referred by the “Responsibility to protect” principles which provides the situations in which the military intervention could be justified.

Key words: legality, legitimacy, the use of force, intervention

1. INTRODUCTION

Intervention in the domestic affairs of sovereign states by other sovereign state(s) is one of the ‘hot’ issues in international law today. 2 Dilemmas of humanitarian intervention are results of the collision of two major international law principles – principle of noninterference in domestic affairs of another state i.e. sovereignty and the principle of protection of human rights. Absence of intervention of international forces in Ruanda in 1994, and military intervention of NATO forces, first at Bosnia in 1995, and then in FRY in 1999, raised great debate about ethical, legal and political justification of humanitarian interventions.

The only remaining superpower in the post-cold-war period, put the individual at the center of interest, and, at least, formally rose human rights issue at the top of the agenda of international relations and law. After September 11, 2001 terrorist attacks on New York and Washington security of state gained more attention, again, and caused a great debate between supporters of national security and “protectors” of human freedom and privacy. The USA Patriotic Act was signed into law on October 26, 2001. That was the victory of US “hawks”. The election of new President - Barack Obama at 2008 brought hope that fight against terrorism would not shadow fight for the protection of human rights. The world hoped that was the end of unilateral actions and the beginning of cooperation between states as more appropriate and efficient way of dealing with global security issues.

First question that is being asked in humanitarian intervention debates is: Is it morally justified to use force in humanitarian purposes? May it be used without approval of the UN Security Council? What should be done after the intervention to prevent repeating of the same

2 Eric Adjei, The Legality of Humanitarian Intervention, 2005, http://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1001&context=stu_llm, (February, 2013)

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atrocities? These are some of the key questions we will try to answer in this paper or at least to throw some light on them. Central position in this paper occupies the relation between humanitarian interventions and international law i.e. between legality and legitimacy (ethics) of the use of force for humanitarian purposes.

2. THE NOTION OF HUMANITARIAN INTERVENTION

Humanitarian intervention refers to: „the threat or use of force across state borders by a

state (or group of states) aimed at preventing or ending widespread and grave violations of the fundamental human rights of individuals other than its own citizens, without the permission of the state within whose territory force is applied“ 3

This definition defines the subject (or subjects), object, cause, aim and character of humanitarian interventions.

Subject of humanitarian intervention is a state or a group of states. The important thing is that Holzgrefe as the subject of humanitarian interventions does not mention international organizations, not universal organizations such as United Nations or regional organizations like EU or NATO.

Defining state as the subject of humanitarian intervention opens another question: Do states have the obligation or it is their right to decide if and when they are going to intervene? We will deal with this question in the part of the paper related to ethics of humanitarian intervention.

Object of humanitarian intervention are states which widely and openly violate human rights of individuals that represent the victims in which protection and salvation intervention is taken. Fact that the victims are not the citizens of the intervening state or states is important element of the definition since it separates it from interventions aimed at protection of state’s own citizens. This element is also used by many criticizers as an argument against the humanitarian intervention since the victims are “foreign” citizens and intervention would be carried out without the object’s consent.

However, liberalism does not differentiate “our” from “their” citizens and a right to human rights entitles to every human being. This means that every human being should be protected and that it is justified and legitimate to undertake intervention for this end. Widespread and grave violations of human rights, according to this theory, represent sufficient cause for military intervention, when there are no other ways of stopping them. What cannot go unnoticed is that Holzgrefe refers to the fundamental human rights, and not liberal-democratic rights of citizens, that should be protected by military intervention.

Another ethical and legal question, which seems is of key importance, opens when we take into consideration the character of humanitarian intervention. As definition states, humanitarian intervention imply the treat or use of force on the territory of state which did not give the permission for that. Legal question that is posed here refers to the legality of the use of force. Does the use of force in humanitarian purposes must be approved by the UN Security Council, which would be in accordance with the Charter of United Nations, or the military intervention could be carried out without UN SC approval if the subject found it necessary? Beside this legal question there is, also, an ethical dilemma: Is it justified to use violent methods for humanitarian purposes and can human rights be protected by the use of force?

3 J. L. Holzgrefe, The Humanitarian Intervention Debate, in J. L. Holzgrefe and Robert O. Keohane, Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, Cambridge University Press, 2003., pp. 18.

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We will discuss now the definition of humanitarian intervention put by Fernando Tesón. He criticizes Holzgrefe’s definition and makes new criteria for humanitarian intervention. According to him humanitarian intervention is “the proportionate international use or threat of military force, undertaken in principle by a liberal government or alliance aimed at ending tyranny or anarchy, welcomed by the victims, and consistent with the doctrine of double effect” 4

For this definition we can conclude that the subject of intervention, in this case, is not any state or group of states, but the liberal-democratic state or alliance of them. They have a duty not only to respect human rights but also to promote them and make other states do so. In this role they are, however, constrained by the doctrine of double effect. What does it mean? The doctrine of double effect is taken from the theory of just war and implies that the intervening states are led by the good intentions and that good achieved through intervention exceeds the costs of intervention. Since humanitarian interventions cause and innocent victims this doctrine provides that the act in which innocent people get injured permitted only if: act has good consequences i.e. intentions of subject are good (subject has no intention of killing innocent people); and if good consequences overcome bad ones.

On the other side, object of intervention according to Teson, are tyrannies and anarchies5, that means, the states which do not have legitimacy of authority because they do not fulfill their basic function of protecting human rights of their own citizens. Because of this they cannot be protected under the international law. At the same time, this is the argument that Teson uses to neglect the argument of opposition that state sovereignty and integrity cannot be breached because, supposedly, the international law guarantees it to them. However, as he states, collapse of state legitimacy and un-liberal and un-democratic regime in this states is necessary but not sufficient condition for humanitarian intervention.

Teson believes that universality of human rights create an obligation for all to respect them, and to promote and save victims of tyranny and anarchy under certain conditions and with reasonable cost. Aim of intervention is to eliminate essential injustices that have leaded, at first place, to the human rights violations. He establishes the right of humanitarian intervention, the right of providing help to the victims in certain circumstances and use of military force when it is the only way of doing so.

Use of force is the common element of all definition of humanitarian intervention but the special contribution of Teson is in introducing proportionality as one of the basic elements of definition, as the necessary criteria for the humanitarian intervention to be legitimate. War is justified when, and only when, it is carried out with the purpose of protection humans and in accordance with the principle of proportionality and doctrine of double effect. 6 That is not only political criteria but very feature of humanitarian intervention.

By the analysis of above mentioned humanitarian intervention definitions we tried to reveal some key aspects of humanitarian interventions and to point out to the complexity, controversies and some ethical, legal and political dilemmas of humanitarian interventions. We will deal with these dilemmas in the sections that follow.

4 Fernando Tesόn, “The Liberal Case for Humanitarian Intervention”, in J. L. Holzgrefe and Robert O. Keohane, Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, Cambridge University Press, 2003., pp. 94 5 Ib., pp. 97. Teson define anarchy as the state of minimal government i.e. as the complete absence of social order which inevitably leads to a Hobbesian war of all against all. Tyranny lies at the other extreme of the same continuum and it is manifested through “too much” of government. 6 Ib., pp. 99

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3. ETHICS OF HUMANITARIAN INTERVENTION

Ethics of humanitarian intervention is especially important when it comes to the justification of certain violent actions of states or their alliances in other states and when they are not completely in accordance with international law. In that cases many authors, first of all liberals, point out the difference between legality and legitimacy so that actions which are not legal, or not completely legal, could be presented as legitimate and morally justified. However, questions of legality and legitimacy should not be separated since law is “not written in stone”. Legal norms should be changed and transformed constantly so they could appropriately fit the conditions of more and more complex reality.

International environment has certainly changed since Second World War and international society has been created. In these conditions it is absolutely necessary to cooperate and act multilaterally. Still, thing that stayed the same is the place of states. International society is composed of states and from those powerful depends if and when they are going to intervene. And they are, after all, driven by their own interest and not by the interest of all humanity and true care for the human rights of all people. In that sense, liberal argument in favor of humanitarian intervention looks a little bit naïve but provide a solid foundation for justification of certain actions taken by the powerful states.

After all, liberal conception of humanitarian intervention presupposes existence of some benevolent subject, state or alliance, which would be motivated especially by the care for human rights. But in the world in which we are living in, it is hard to find such a state since the states are not moral individuals or single units but a set of various individuals from which each of them have their own point of view.

4. INTERNATIONAL LAW AND HUMANITARIAN INTERVENTION

Enlightened by the experience of the Second World War and failures of the League of Nations, victorious states created a new international organization of universal character – Organization of United Nations. United Nations Charter is the basic document that regulates use of force in international relations and it is almost universally signed. On the other side, customary law, as the oldest source of law, emerges through the state practice, in one long and complex process which, at the end, results in the international customary norm emergence.

Authors differ in their belief whether the right of humanitarian intervention is already incorporated in existing international legal system and requests for its codification culminated during and after the NATO intervention on FRY. Still, till today only thing that has been formulated are political guidelines for humanitarian intervention in the case of approval as in the case of disapproval by the UN Security Council.

4.1. INTERNATIONAL CONVENTIONS AND HUMANITARIAN INTERVENTION

The most important international convention that regulates the use of force in international

relations is United Nations Charter. UN Charter does not clearly establish the right of humanitarian intervention. Dilemma comes from the question can this right be inferred from the UN purposes or not.

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The key of this Charter is contained in Article 2(4): “All Members shall refrain in their international relations from the threat or use of

force against the territorial integrity or political independence of any state, or in any other manner inconsistent with the Purposes of the United Nations.”7

Since Vienna Convention on law of treaties contain the provision that states that international treaties shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose 8, above mentioned provision of the UN Charter clearly points out that the use of force outside state borders against another state is not permitted.

Charter contains two exceptions from this general exception of the use of force. These are the cases of self-defense and the cases of treat to peace, breach of peace and act of aggression when UNSC can bring a decision to undertake a military intervention. Obviously, there is not the case of humanitarian intervention and especially nit that one which would be taken without UNSC approval. Supporters of humanitarian interventions, however, problematized this interpretation by suggesting that provisions on the use of force could be differently interpreted. Michael Byers and Simon Chesterman describe this dilemma with the question: What if the rules about rules change or they are in the process of changing? 9 That mean, introduction of new interpretative rules. Treaties could become interpreted in some different “purposive” way which requires comprehensive research of the context of the treaty so that the will of the parties could be determined. 10 This will of the parties is in constant process of changing and evolving and provisions of international treaties should be interpreted in the way that coincidence with modern ambiance. According to this approach treaty provisions should not be interpreted in their ordinary, usual, meaning but in the meaning that corresponds to the new realities.

The best example of differences between these two approaches (textual and purposive) is the differences in interpretation of Article 2(4) of UN Charter between classicists and legal realists. Namely, classicists interpret Article 2(4) as if it prohibits the use of force for humanitarian purposes against every other state. On the other side, legal realists believe that humanitarian intervention, unless it results in territorial conquer and political subordination, is not prohibited by the Article. Also, second part of the Article 2(4), “or in any other manner inconsistent with the Purposes of the United Nations”, legal realists interpret as if the humanitarian intervention is completely in accordance with the UN Purposes i.e. permitted (although classicists object that this part of the Article of subsidiary character and not as if it introduces the right to use the force). And, at the end, unlike the classicists who believe that the use of force is permitted only in the case of the cross-border threat and breach of peace and security, legal realists differently interpret part of the Charter that refers to the UNSC approval of the use of force (Chapter VII), stating that it is related to the “threat to peace, breach of peace or act of aggression” and not just to the international peace which means that humanitarian intervention is, also, permitted inside other states if they breach or disturb the peace. Holzgrefe, for example, suppose that hitherto UN practice has shown that UN SC by himself has

7 UN Charter. Available from: http://www.un.org/en/documents/charter/chapter1.shtml 8 Vienna Convention on the Law of Treaties (1969) , Available from: http://untreaty.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf 9 M. Byers and S. Chesterman, “Changing the rules about rules? Unilateral humanitarian intervention and the future of international law”, in J. L. Holzgrefe and Robert O. Keohane, Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, Cambridge University Press, 2003., pp. 177 10 Purposive approach to the interpretation of international treaties was proposed by US delegation at the Vienna Conference on Law of the Treaties (1968-69) and was rejected. Today this approach is especially advocated by the US lawyers. USA did not ratify this Convention.

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interpreted Chapter VII of the UN Charter as if it has had authority to approve the use of armed forces inside state borders in order to end grave violation of human rights and gives the examples of interventions in Somalia, Rwanda, and Haiti. He believes that this UN SC practice as well as the history of the UN Charter emergence strongly supports the attitudes of legal realists. 11 One of the leading legal realists Michael Reisman introduces into the debate the impact of non-governmental subjects on the governments to undertake humanitarian intervention in the cases of grave violations of human rights. He completely abolishes the distinction between legality and legitimacy since he supposes that the procedure cannot be the limiting factor of certain action if the majority of actors in the decision-making process consider that action as legitimate. That means that if it is hard to achieve consensus inside the UN SC about the humanitarian intervention undertaken because of the different positions on the question of human rights, unilateral action is permitted and without its authorization if the majority of member states consider it necessary in order to stop massive violations of human rights. In that sense, he justifies the NATO intervention in FRY. On the other hand, through the legal opinion of classicist, we can formulate two key questions for the future examination of humanitarian interventions. First, can humanitarian intervention be retroactively legalized? And second, do regional international organizations have the right to military intervene without the UN SC authorization?

Thomas Franck and Jane Stromseth consider intervention on FRY as retroactively legalized since the Resolution presented by the Russia, where the intervention was condemned and called for its immediate end, was rejected with 12 to 3 votes in the UN SC. At the same time, the Resolution 1244, which provides the imposition of military presence and UN civil administration, was adopted. On the other side, Byers and Chesterman NATO intervention on FRY see as absolutely illegal because it was undertaken without UN SC participation. They believe that the rejection of the Russian Resolution (against which voted 5 NATO members which were members of the SC in that period) and the adoption of Resolution 1244 did not, in any way, constitute the authorization for military intervention or made it legally valid. 12

Besides, UN GA adopted the Resolution in 1999 in which it refused unauthorized violent measures with all their effects as the means of political and economic pressure against any state. 13

As one of the arguments for justification of NATO intervention on FRY, besides the fact that all authors consider it legitimate because of supposed grave violations of human rights, authors use the fact that it was undertaken by the regional organization whose membership consists of liberal-democratic states. However, is it sufficient for carrying out the military intervention to fulfill domestic state procedures or the liberal-democratic character of the intervening states should be proved by acting in respect of decision-making procedures in the United Nations?

Tom Farer and Alan Buchanan agree in opinion that NATO is a regional military organization created in order to defend its member states from an act of aggression. 14 That is an

11 J.L. Holzgrefe, “The humanitarian intervention debate”, in J. L. Holzgrefe and Robert O. Keohane, Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, Cambridge University Press, 2003., pp. 37-43. 12 M. Byers & S. Chesterman, “Changing the Rules about Rules? Unilateral humanitarian intervention and the future of international law”, in J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge University Press, 2003, pp. 182. 13 In favor of UN GA Resolution 54/172 voted 107 member states, 7 were against, and 48 abstained. 14 А. Buchanan, “Reforming the law of humanitarian intervention”, in J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge University Press, 2003, pp. 166.

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organization of collective defense which does not have the right to intervene in the internal affairs of another state in order to protect human rights and especially not without the UN SC approval. Farer believes that NATO military intervention on FYR cannot be justified neither by the referring to the Article 52 of the UN Charter, since the NATO is not a regional agreement or agency but regional military defense organization to which the provisions of Chapter VIII of the UN Charter cannot be applied.15 Equally, it would be very dangerous to constitute such practice or rule since it would give the right to other international organizations, also, to intervene when they find it appropriate, without the authorization of the UN Security Council.

4.2. INTERNATIONAL CUSTOMARY LAW AND INTERNATIONAL INTERVENTION

International Court of Justice defines international custom “as evidence of a general

practice accepted as law” 16 which means that it has two important elements: material, which is manifested through the practice of states, and psychological, opinio juris, manifested through the conscious that rules are obligatory. According to this some authors think that today international customary law on humanitarian intervention exists while others contest this attitude, first of all, because of the absence of the second element - opinio juris.

Michael Byers and Simon Chesterman state that only if majority of states support and none of them or few of them oppose, desirable norm or changed norm can become an obligatory rule. 17 These authors believe that the second half of XX century is the history of non- intervention in humanitarian purposes and that the interventions were usually carried out with the consent of the UN SC or on the state appeal. First case of humanitarian intervention is mentioned in 1991 when the no fly zone was established in Northern Iraq and later the name “humanitarian intervention” was used to describe the military intervention on FRY in 1999. By examining the statements of their leaders before and during this interventions it is clear that states that intervene, also, did not have the intention to establish international customary law on humanitarian intervention without the authorization of the UN SC and that this “rule” was not accepted as mandatory by the majority of other states. The French Minister of Foreign Affairs and the British Prime Minister clearly said that the intervention on FRY represents an exception:

“[T] he way in which we intervened is an exception, not a precedent. As much as possible, the framework established by the United Nations Charter in Chapter VII must remain the rule. If another exceptional situation arises, we’ll take a look at it.” 18

“Under international law a limited use of force can be justifiable in support of purposes laid down by the Security Council but without the Council’s express authorization when that is the only means to avert an immediate and overwhelming humanitarian

15 Tom J. Farer, “Humanitarian intervention before and after 9/11: legality and legitimacy”, in J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge University Press, 2003, pp. 73-74. 16 Statute of International Court of Justice, Article 38(1b), Available from: http://www.icj- cij.org/documents 17 M. Byers & S. Chesterman, “Changing the rules about rules? Unilateral humanitarian intervention and the future of international law”, in J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge Universitu Press, 2003, pp. 179. 18 Interview with the former French Minister of Foreign Affairs Hubert Vedrine, La „Lettre de la Rue Saint-Guillaume”, No. 122-123, July 2001, p. 43, in J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge University Press, 2003, pp. 239.

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catastrophe. Any such case would in the nature of things be exceptional and would depend on an objective assessment of the factual circumstances at the time and on the terms of relevant decisions of the Security Council bearing on the situation in question.“19

Also, after the NATO intervention, 133 states, members of the Group 77 of developing countries for two times brought the Declarations aimed at confirmation of illegality of unilateral humanitarian interventions under the international law which, also, means that we cannot speak of the “practice accepted as law”.

“The Ministers...rejected the so-called right of humanitarian intervention, which had no basis in the UN Charter or in international law”.20

On the other side, legal realist claim that there is continuity in undertaking the humanitarian interventions without UN authorization and rely on the states practices in XIX and early XX century i.e. before the UN system creation. Still, as classicists conclude, these interventions could not establish international customary law because they were motivated by some other reasons and they certainly did not outlast the UN system creation which established jus ad bellum. The fact is also that the UN SC, in order to act under the Chapter VII of the UN Charter, qualified the internal conflicts in which grave violations of humans rights happened as a threat to peace and security and not as human rights violations.

5. CONCLUSION

Before September 11, 2001 President of the USA George W. Bush stated that he had been

against the use of American army for the peacekeeping and peace building operations and believed that USA should not be engaged in humanitarian interventions, with little exception, and that if some other Rwanda happens again he would not sent American troops but encourage United Nations to act.21 After the September 11 attacks the mission of Bush administration became the fight against terrorism and intervention in all states that are thought were their supporters. Terrorism has become the primary threat to peace and all those states that supported the right of humanitarian interventions now as the primary goal have the fight against terrorism. Not one single state has launched an international intervention for humanitarian purposes after the terrorist’s attacks on New York and Washington. Intervention on Afghanistan was qualified as the self-defense and the war against Iraq was the preemptive war i.e. intervention taken to neutralize the development of the weapons for mass destruction. This state of affairs disables formation of “normative consensus” (J. Stromseth) as well as the emergence of the treaty outside the UN system (A. Buchanan). What developed were more specific political guidelines for the UN intervention in the cases of states that support terrorism. Activities of the United Nations concerning international terrorism were marked by the set of the conventions, resolutions, reports and studies brought by various UN organs. All of them together predicted around 112 instruments related to international terrorism. September 11 terrorist attacks were condemned as threat to international peace and security and the right of states individual or collective self-defense, contained at the UN Charter, was strengthened.

19 British Prime Minister Tony Blair, Written Answer for House of Commons, 29 April 1999, Hansard, col. 245, ib. pp. 236-237. 20 Ministerial Declaration, 23rd Annual Meeting of the Ministers for Foreign Affairs of the Group of 77, 24 September 1999, available at http://www.g77.org/Docs/Decl1999.html (5 March 2002), paragraph 69, ib., pp.184. 21 Tom J. Farer, “Humanitarian intervention before and after 9/11: legality and legitimacy”, у J. L. Holzgrefe and R. O. Keohane, Humanitarian intervention: Ethical, Legal and Political Dilemmas, Cambridge University Press, 2003, pp. 54.

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New dilemmas that have arisen are gathered around the question: does the right of self- defense refer to one state attack on the other or it can include and the case of attacks of non- state actors across the other state borders? Different institutions gave different answers and the dilemma is still to be resolved. As we could see, until recently it has not been clear under which conditions military intervention could be taken, who could undertake it and for what purposes. New principle, that overcomes the dilemmas between the right and obligation to intervene, was offered in the form of the document “Responsibility to protect”. The Canadian International Commission on Intervention and State Sovereignty was established in September 2000. The Commission had brought the report “Responsibility to Protect” which was presented to UN Secretary General Kofi Annan. It consists of an emerging norm, or set of principles, based on the idea that sovereignty is not a right, but a responsibility.22 It was included in the Outcome Document of the 2005 World Summit through the two important articles. 23

Put in a simple way R2P initiative relies on three “pillars” 1. A state has a responsibility to protect its population from mass atrocities (genocide,

war crimes, crimes against humanity and ethnic cleansing) 2. If the state is not able protect its citizens, international community has a responsibility

to assist it. 3. If the state fails to protect its citizens from mass atrocities and peaceful measures have

failed, the international community has the responsibility to intervene through coercive measures such as economic sanctions. Military intervention is considered the last resort

These “pillars” are included in the UN SC Resolution 1674 (2006) and UN GA Resolution 63/308 (2009) after the debate about the UN Secretary General “Implementing responsibility to Protect” Report. First application of this norm could be found in the military intervention on Libya in March, 2011. The world economic crisis made it ever harder to provide necessary means for intervention, and not just justification. We will conclude this paper by stating this: “By thinking, people evaluate that this world is faced with serious value problems. Politicians

22 Iqbal, Zareen, "Democratic Republic of Congo (DRC): MONUC’s Impending Withdrawal", International Institute for Justice and Development, April 29, 2010. 23 Resolution adopted by the General Assembly, 60/1, 2005 World Summit Outcome, Available from: http://unpan1.un.org/intradoc/groups/public/documents/un/unpan021752.pdf Article 138 states: “Each individual State has the responsibility to protect its populations from genocide, war crimes, ethnic cleansing and crimes against humanity. This responsibility entails the prevention of such crimes, including their incitement, through appropriate and necessary means. We accept that responsibility and will act in accordance with it. The international community should, as appropriate, encourage and help States to exercise this responsibility and support the United Nations in establishing an early warning capability.” And Article 139: “The international community, through the United Nations, also has the responsibility to use appropriate diplomatic, humanitarian and other peaceful means, in accordance with Chapters VI and VIII of the Charter, to help protect populations from genocide, war crimes, ethnic cleansing and crimes against humanity. In this context, we are prepared to take collective action, in a timely and decisive manner, through the Security Council, in accordance with the Charter, including Chapter VII, on a case-by-case basis and in cooperation with relevant regional organizations as appropriate, should peaceful means be inadequate and national authorities manifestly fail to protect their populations from genocide, war crimes, ethnic cleansing and crimes against humanity. We stress the need for the General Assembly to continue consideration of the responsibility to protect populations from genocide, war crimes, ethnic cleansing and crimes against humanity and its implications, bearing in mind the principles of the Charter and international law. We also intend to commit ourselves, as necessary and appropriate, to helping States build capacity to protect their populations from genocide, war crimes, ethnic cleansing and crimes against humanity and to assisting those which are under stress before crises and conflicts break out.”,

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are interested in power, and therefore pragmatic actions, and economists for economic growth and profit. Not taking into account moral and political issues of modern humankind burdened with inadequate answers, it is evident that the financial crisis in 2008 opened Pandora’s Box from which all the bad things of the contemporary global economic system, especially global capitalism came out.”24

BIBLIOGRAPHY:

1. Eric Adjei, The Legality of Humanitarian Intervention,

2005, http://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1001&context=s tu_llm (February, 2013)

2. J. L. Holzgrefe and Robert O. Keohane, Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, Cambridge University Press, 2003, p. 18.

3. UN Charter. Available from: http://www.un.org/en/documents/charter/chapter1.shtml 4. Vienna Convention on the Law of Treaties (1969) , Available

from: http://untreaty.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf 5. Statute of International Court of Justice, Article 38(1b), Available

from: http://www.icj-cij.org/documents 6. Hansard magazine 7. Ministerial Declaration, 23rd Annual Meeting of the Ministers for Foreign Affairs of

the Group of 77, 24 September 1999, available at http://www.g77.org/Docs/Decl1999.html (5 March 2002).

8. Iqbal, Zareen, "Democratic Republic of Congo (DRC): MONUC’s Impending Withdrawal", International Institute for Justice and Development, April 29, 2010.

9. Resolution adopted by the General Assembly, 60/1, 2005 World Summit Outcome, Available from: http://unpan1.un.org/intradoc/groups/public/documents/un/unpan021752.pdf

10. New republic, Interview, January 27, 2013, Available from: http://www.newrepublic.com/article/112190/obama-interview-2013-sit-down- president

11. Dragana M. Djuric, “From Crisis to Crisis?”, International Journal for economics and law, Vol. 1, No. 1, FORKUP, Novi Sad, April 2011.

24 Dragana M. Djuric, “From Crisis to Crisis?”, International Journal for economics and law, Vol. 1, No. 1, FORKUP, Novi Sad, April 2011, pp. 36.

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INDICATOR MODELS FOR ASSESSING THE EFFECTIVENESS OF BUSINESS

Markić Marinko, Marković Branka

Alfa Univerzitet, Fakultet za strateški i operativni menadžment, Beograd, Srbija

Summary: The effectiveness of business systems is a key issue for survival of these systems (but not only them). Hence, the need of modern management theory that focuses its interest to the question how to ensure the effectiveness of business system. However, in order for management theory to give an answer to the question it is important to resolve some "technical" issues among which, of course, is those related to measuring the effectiveness of business systems, because if you do not know how to express the effectiveness of business systems, it is difficult to say whether commercial system is realized or not realized adequate effectiveness. The purpose of this paper is to presents potential approaches to measuring the effectiveness of business systems and then develops a model by means of standard indicators that will be best able to express the efficiency of business systems.

Keywords: measurement of performance efficiency, business system, the organization

1. INTRODUCTION

Effectiveness is defined as the degree of fulfillment of objectives, which ultimately means insurance of products/services that represent values to customers. In other words, a business system that ensures the right products/services at the right place at the right time is effective. Hence, is understandable, the effectiveness of business systems is the key question of survival of these systems (but not only them). Hence, the need of modern management theory that focuses its interest on the issue, to ensure the effectiveness of business systems. As it is stated: “In time of rapid changes and uncertainty those business systems that continuously create new knowledge, distributing them through new business models, new technologies, new products or new services are successful.” 1

In order for management theory to give the answer to that question, it is important to resolve some "technical" issues among which certainly includes that which relates to measuring the effectiveness of business system. If it is not known how to express the effectiveness of business systems, it is difficult to find out whether business system is achieving an adequate level of efficiency or not. However, measurement of efficiency is not as simple as it may seem at first glance. Namely, the fact is that it is necessary to be able to measure the effectiveness of various business systems, and within each of them measure the effectiveness of different organizational levels. It should be borne in mind that between the efficiency measures are key differences in the nature of frequency of measurements, sources of data controllability. From the above it is evident the problem of measuring the effectiveness of design models for each business system. Effectiveness can be viewed from various aspects and as a consequence, different approaches have developed to determine the effectiveness of different models of standard indicators, through which will be best able to express the effectiveness of business systems.

1 Drašković Milan, et.al., “Intellectual capital – a competitive advantage of modern business systems”, International Journal of economics and law, Vol.2, No. 4, FORKUP, Novi Sad, April 2012., pp. 27

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2. LEVELS OF EXPRESSION AND MEASUREMENT OF EFFECTIVNESS

In a study of measuring the effectiveness of business systems, one of the initial questions that arise is that which refers to the level of the measuring. Namely, it is known that business system consists of multiple levels of which usually generalize three basic: individual level, group level and the level of business systems as entirety. In accordance with this, there are three levels of efficiency: 1. Efficiency of individual 2. Efficiency of group 3. Organization efficiency

In the context of each of these levels is very important to determine the method of measurement and presentation of effectiveness. 1. Individual effectiveness emphasizes the execution of individual tasks of employees at the lowest organizational level. Tasks that individuals end up are very different given the opportunity to express performance. Usually three types of tasks distinguish tasks in information processing and management tasks, for which are used various measurement methods: often the effectiveness at this level managers evaluate routinely. 2. In the business systems individual rarely work alone, isolated from the others in the organization, but usually work in formally established or organized groups in large companies: in big multi-division enterprises divisional and functional groups (departments) differ. In terms of measuring the effectiveness, these groups organize the appropriate forms of responsibility. Each center of these centers has its effect, which is expressed by different criteria, so there is a need to develop an adequate system of measuring the effectiveness of these centers. 3. Business system is comprised of individuals and groups - it is treated as an organization. Therefore, organizational effectiveness consists of individual and group efficiency. However, organizational efficiency is greater than the sum of individual and group effectiveness, which is a result of this synergy effects. Of that arise the need to form a separate system of measuring the effects of the business system that will meet the three interested groups (stakeholders) – owners - shareholders, the top management and other stakeholders.

Group effectiveness depends on the individual, while organizational effectiveness depends on individual and group efficiency. From the aspect of the business system, it is important to determine the causes for which effectiveness has been achieved at each of these levels. In this context, each level of effectiveness can be considered as a variable caused by the other variable (i.e. causes of effectiveness). The literature on management and organizational behavior presents the results of different studies is that different theories about the causes of the effectiveness of each of the three levels of analysis.

Individual effectiveness:

Causes: - Ability - Skills - Knowledge - Attitude -Motivation - Stress

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Group effectiveness: Causes:

- Cohesiveness - Leadership - Structure - Status - Role -Norms

Organizational effectiveness:

Causes: - Environment - Technology - Strategy - Structure - Processes - Culture

Accesses in determining the effectiveness: Effectiveness can be viewed from various aspects, which, consequently, have developed different approaches to this phenomenon. However, in theory and practice usually can be find three approaches to the definition of effectiveness, namely: 1. Target approach to effectiveness 2. Systemic approach to effectiveness 3. Multiply-constituency approach

It should be noted that business systems must be able to use each of the three approaches when appropriate.

Target approach to effectiveness. A feature of the target access is to highlights the central role of achieving a goal as criterion of effectiveness assessment. Under this approach, there is a business system to achieve certain goals. On that basis were developed a number of concepts from which the most famous one is based on management by objectives (MbO). It is a comprehensive concept that integrates many of the key management activities in a systematic way and that is consciously focused on efficient and effective achievement of organizational and individual objectives. Its essence is that for every new pre-determined objectives that needs to be achieved, periodically control its requirements. MbO requires to define so-called, Key Result Areas-KRAs) and Key Indicators- KIS, for all levels of management on the principle of cascade, from the top to the bottom of the business system.

3. THE SYSTEMATIC APPROACH TO EFFECTIVENESS

The systematic approach to analyzing organizational behavior and emphasizes the necessity of maintaining the basic elements of the cycle of input-process-output, and adapting the general business environment that supports system. It starts of systems theory to describe the internal and external behavior of the organization, it emphasizes the connection between the business system with the environment and that the environment receives inputs, transforms them into outputs, and (inputs in altered form) returns the environment.

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Manufacturing Competitiveness Flexibility Quality Development Efficiency Flexibility Satisfaction Short term Medium term Long term

Systems theory emphasizes two important conclusions: 1. Final durability of the system depends on its ability to adapt the requirements of the environment. 2. In meeting these requirements, in center of the business interest must be the total cycle of input-process-output. Therefore, the effectiveness criteria must express both aspects, and efficiency must be precisely defined accordingly. Multiply constitutive approach to effectiveness System approach to effectiveness highlights the importance of access to the external environment and the balance between different parts of the system of which business system is only one part. In practical and concrete terms, access to multiply constituency means achieving a balance between different parts of the system satisfying the interests of the constituent parts of the business system (i.e., individuals and groups ). Therefore, the theory can be used to multiply the constituency combination of the two previously mentioned approaches in order to gain access to the appropriate organizational effectiveness. In other words, it is possible to link all three levels of effectiveness from the point of all interested parties (stakeholders) for its achievement. Each of stakeholders expects from the business system to behave in accordance with its expected benefits, with the expectations of all concerned need not to be congruent with each other.

4. THE CRITERION OF EFFECTIVENESS

Management and others with an interest in the organization must have indicators to assess the likelihood of its stability. In practice, managers use a number of short-term indicators of long- term stability, including productivity, efficiency, accident, overruns, lack of, quality, degree of recovery, morale and satisfaction of employees. Any of these criteria may be relevant for a particular purpose. Production, quality, efficiency, flexibility are short-term satisfaction of the efficiency criteria. Two other criteria - development and competitiveness - complete model of time dimension. These two criteria reflect efficiency in the middle period of time. However, the main criterion of effectiveness is the stability of system. If managers do not achieve satisfactory performance of short and medium terms, criteria of effectiveness and durability cannot be guaranteed.

Figure 4: Model of time dimension of efficiency

5. MODEL OF EFFECTIVENESS STANDARDS

Standard in the original significance is a form with which is possible to compare items and actions. It means regulations to determine certain characteristics of a product or define a numerical value, size, units, names, properties and actions. According to that, in terms of objects this standard work can be defined as the target size that should be achieved by individuals, groups or business systems as entirety. Accordingly, sizes leads to the conclusion of individuals, groups or organizations. In other words, the effectiveness appears here as a measure of achievement of results at each measuring level. Therefore, it is one of the key

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questions to determine the effectiveness. In this regard, Figure 5 shows some basic standards of effectiveness by the levels. Criteria defined like this are the basis for setting standards of effectiveness, and for that purpose, the manner of their determination is given.

The way of setting standards of effectiveness From what said above we can conclude that efficiency standards are the result of which will be achieved if the specified key tasks performed in satisfactorily way. These results must be realistic, but stimulating. Two categories of standards of effectiveness differs - quantitative (measurable) and qualitative (estimable). The abundance of standards is based on the effectiveness of selected indicators (benchmarks) which is then calculated from the data of specific companies and thus forms a standard-size. In contrast, there is the target size to be achieved, and the realization that in relation to the standard-size indicates the achievement of the objective. While standard-size excerpts from works in the past, the target size should be derived from the expected achievements in the process of establishing actions in the future. The whole action of standard defining could be shown in Figure 5.

│ Preparation of efficiency standards

│ Determination of effectiveness benchmarks

│ Determination of data collection system

│ Setting of new standards

│ Monitoring

│

Figure 5: The process of establishing standards of efficiency

Preparation of standards of effectiveness is oriented primarily to define the level and temporal dimensions of a standard, and then specify the goals that are expected to achieve and fulfill the technical activities associated with establishing standards of effectiveness. It is necessary to define the possibility of determining the effectiveness of measures for each target size of the selected levels of effectiveness in a given period of time. The selected criteria should be quantitative (and qualitative) expressed, which is possible only by using the appropriate database: it is therefore necessary to pre-format data collection system in order to determine a standard-size. For this, it is necessary to adjust the accounting system, and focus on measurement output rather than input controls. Appointment of new standards is the most important phase in the whole process. They, as mentioned before, are derived from the expected to achieve in the future, and generally use a benchmarking process that comes to comparing the target size or standard efficiency. After standards of effectiveness are determined, it is necessary not only to monitor their implementation, but their operation in practice, and report the findings to be taken and new activities to improve them.

Temporal dimensions of efficiency standard Temporal dimensions of effectiveness standard are an important element of the model since it is only in the dynamics can make the correct conclusions about the effectiveness of business

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system. It should be borne in mind that effectiveness standards vary depending on, about whether it is short, medium or long period. The most important for the long-term is sustainability (persistence) of business systems, while virtually all other standards are in function of that sustainability. Therefore, it is necessary to identify constantly the causes of individual, group and organizational effectiveness in the short term, medium term and the long- term. It is important because a business system can be effective in terms of some standards that apply in the short to medium term, and that in the long-run there is no chance for survival. Therefore, maintaining of an optimal balance means balancing of the organization over time

Level Stakeholders Potential effectiveness standards Organ. level

Business system

Owners - Stockholders ROI;ROE;EPS;DPS;VA; ROVA;ROVA/ROI;MVA;EVA;SV

Top manager ROI;ROE;EPS;SV, various qualitative criteria

Others Different, considering the number and diversity of interested employees: labor productivity, customers, sales volume, and suppliers, material use, country, size of income, etc

Group level

Divisional units

Investment centers ROI;ROA,ROCE Profit centers Profit Income centers Income Cost centers Costs

Functional units

Manufacturing Production performance, performance per worker, productivity processing, utilization of materials, the course of production, capacity utilization, the effect of repair, the effect of fleet

Purchasing Acquisition speed, price development, control the price index, the dispersion of the volume of procurement, the use of storage

Selling Realization of sales, net income, employment status, the coefficient, the success of supply, the index of customers

Finance Liquidity, the level of cover constantly connected permanent capital, the degree of coverage of permanent capital, the level of capital, ROI, cash flow

Personnel Staff turnover, the average wage, performance per hour, profit contribution

Individ. level

Jobs Manufacturing tasks Quantitative and time standards, natural and value standards

Department tasks Appraisal of performance Managerial tasks Key results Figure 6: The potential efficiency standards

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6. RESUME

Measuring the effectiveness of business systems is very complex. Model of indicators to measure the effectiveness of business systems related to the measurement of individual, group and organizational effectiveness, but the model includes indicators for all levels of management. Therefore, it should be noted that the standards of efficiency vary depending on whether it is a short, medium or long-term period. The most important for the long-term existence is the business systems, while virtually all other standards in the function of that sustainability.

BIBLIOGRAPHY

1.Bennis, W.G.(1984):the 4 Competencies of Leadership,Trening and Development jurnal 38(August),pp.14-19 2.Black J.S.,Porter W.L.,Management-meeting new challenges, Prentice hall, New Jersy,2000 3.Buble M.,Management malog poduzeća,ekonomski fakultet, Split,2003 4.Burke J.R.,Cooper L.C.:The organization in cries, Blakwell ltd.,Oxford,2004 5.Burns J.(1990):Leadership,New York (Mc graw-Hall Book Company) 6.Etzione A.(1984):Modem Organization, New York(mcgraw-Hill Book Company) 7.Gardner J.(1986):The Nature of leadership, New York(The Indepedent Sector) 8.Kotter J.P.(1988):The leadership factor, New York(Free Press) 9.Markić M., Bussines system management ,university of Mostar, Mostar 2001 10.Markić M.,Međuovisnost stilova vođenja i poslovne efikasnosti malih poduzeća,Doktorska disertacija, Sveučilište u Mostaru 2007. 11.Peck D.,Whitlow D.(1978):Teorije ličnosti, Beograd (Nolit) 12. Drašković Milan, et.al., “Intellectual capital – a competitive advantage of modern business systems”, International Journal of economics and law, Vol.2, No. 4, FORKUP, Novi Sad, April 2012.

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INNOVATION AND PRODUCTIVITY IN SERVICES SECTOR

Sanja Mikić1, Dorosenko Yuri2

1Alfa Univerzitet, FORKUP, Novi Sad, sanja.mikic@fpsp.edu.rs 2 Belgorod State Technological university n.a. V.G. Shoukhov, Belgorod, Russia

Abstract: Services are becoming backbone of the economic growth in order to propel economy in more balance economic growth orbits through its impact on the unemployment issue. So in the volume the services will be highly addressed because of this sort of reason. Also, we live in age of highly and broadly diversified division of labor that at the same time sometime brings uncertainty and complexity. When we look at the appliances equipment, personal computers and cellar phones we can find that many different nations have been involved in the making of these products.1

Key words: Services; Technology; Market; Euroepan integration;

INTRODUCTION

Services are intangible, invisible and perishable, requiring simultaneous production and consumption. Goods, in contrast, are tangible, visible and storable. At the other hand, there is no way to storage the service. 2 However, there are exceptions to each of these characteristics of services: a software program on a diskette or an architect’s design on paper are both tangible and storable, many artistic performances are visible, and automated cash-dispensing machines make face-to-face contact between producers and consumers unnecessary. These exceptions do not however, detract from the usefulness of the general definition of services presented above. For services it is required physical proximity between the user and the provider. Services with the development of electronic means of delivery – proximity is not necessary, though it may enhance the quality of the service. A variety of financial, entertainment, information and communication services can be produced in one country and deliver, either electronically or stored in some medium (paper, disk, cassette), to consumers in another country. The introduction of new technology, one will reduce the physical strain, will have more free time and will be able to make better ideas. In this concept, new techniques of management need to be developed in which the basic task of governing elites would be to create an innovational atmosphere where ideas will be generated and adopted by employees who will implement them in practice. 3 Trade in these services is not much different from trade in goods. In every day communication process, buyers often make difference between products and services according to their tangibility – product is tangible, but service is not.4 Services including construction services, where the supplier moves to the location of the consumer, tourism, where the

1 Hiroshi Teraoka, Small and medium sized enterprise policy in Japan, vision and strategy for the development of SMEs, Osaka international center, JICA, pg. 167. 2 Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012. str.166. 3 Scott, W. and Maliard, D. D.: Skill of winning a man”, translation, Stylos, Novi Sad, 1999. 4 Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012. str.165.

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consumer moves to the location of the supplier and hair cuts or surgical operations, where either the supplier or the consumer moves. The movement of the supplier could involve the flow of capital, i.e. foreign direct investment (FDI), labor, or both. FDI has its certain impact on the GDP growth also there is very important role of the economical policy. Economical policy of the development can be a two-edged sword because on one hand increasing consumption is needed to stimulate demand but on other there is need for saving and investment. Also credit lines are strongly needed too, for that system banking network should work perfectly and for that purpose it needs high level of the information. Significant information is necessary for successful making of the job.5

Let us to mention various types of services what can be listed like following, by the General Agreement on Trade in Services (GATS): 1. Business services 2. Communication services 3. Health-related and social services 4. Construction services 5. Financial services 6. Tourism and travel-related services 7. Distribution services 8. Recreational, cultural and sporting services 9. Educational services 10. Transport services 11. Environmental services 12. Other services not elsewhere included Thus, there are four ways in which international service transactions take place (four modes of delivery) which can be categorized as follows:

Cross-border trade

Services supplied from the territory of one country into the territory of another. Examples include financial transactions conducted over the phone, and software services supplied by a supplier in one country through mail or electronic means to consumers in another country. Consumption abroad: services supplied in the territory of one country to the consumers of another. Examples are where the consumer moves, e.g. to consume tourism, education or medical services in another country. Also covered are activities such as ship repair abroad, where only the property of the consumer moves.

Commercial presence

Foreign direct investment means that services are supplied through any type of business or professional establishment of one country in the territory of another. According to the European law there is need for the harmoniyation of the law framework in the field of foreign direct investment (an insurance company owned by citizens of one country establishing a branch in another country).

Presence of natural persons

5 Đurišić, B., Miladinović, M.,“Informative system for human resources and project management“, International journal of economics and law, vol.1, No. 3, Novi sad, 2011.

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Labour movement is the basic condition for services supplied by nationals of one country in the territory of another. Professional services are regulated with the law framework. This mode includes both independent service suppliers, and employees of the services supplier of another country. Examples are a doctor of one country supplying through his physical presence services in another country, or the foreign employees of a foreign bank. Service trade differs from goods trade in two major ways. First, while the majority of goods trade involves shipping goods from one country to another; cross border trade accounts for less than half of trade in services. For services which require personal contact between customers and clients, trade is possible only via sales through a foreign affiliate or if either the customer or producer travels across borders. While foreign investment and labour mobility are also issues affecting goods trade, they are fundamental aspects of trade for some services. Second, services tend to be highly regulated. Many types of services are publicly provided or are produced by regulated monopolies. In contrast to goods, relatively few services are subject to simple discriminatory taxes on trade. Instead barriers to trade in services arise from domestic regulations that often serve the dual purpose of responding to market failures (such as ensuring quality standards for medical practitioners) and protecting local suppliers from foreign competition. This means that identifying and measuring trade barriers in the service sector is very complex. It also means that simple rules for trade liberalization that worked for goods trade (such as reducing all tariffs by 30%) are not available as an option for service trade liberalization. Instead service trade liberalization is organized around the notion of non-discrimination and is often linked with domestic regulatory reform. Professional and sophisticated managers in modern terms of the business are using methods and concepts which are more aimed to the people and less to the material factors of the organizations. 6Government policies that affect international trade in services. Although the analysis of barriers to service trade has much in common with the analysis of barriers to goods trade, trade policy in the service sector is much more complex. Government regulations can inhibit trade in services. For goods trade, analysts typically distinguish between tariff and non- tariff barriers to trade. Tariffs are discriminatory taxes on trade. An import tax is a tax levied on foreign goods but not domestic goods. Tariffs tend to be easy to measure and are very transparent. It is therefore quite straightforward to design an agreement to liberalize trade via tariff reduction (provided governments have the will to open up their economies to trade). Successive rounds of GATT negotiations were successful in achieving broad based reductions in trade barriers via across-the-board reductions in trade taxes. Another feature of tariffs is that it is fairly clear what is meant by free trade: zero tariffs. This means there is a clear focal point for negotiations, and this has been exploited in numerous regional free trade agreements such as NAFTA, which have eliminated substantially all taxes on trade flows. Non-tariff barriers is any government policy that has the effect of favoring local producers over foreign producers or which restricts or raises the cost of access to domestic markets by foreigners. These can include delays at the border, quantitative restrictions on foreign products, government purchasing policies that give preference to local suppliers,subsidies, quality and certification requirements that favour local suppliers, etc. Nontariff barriers are more difficult to measure and are less transparent than tariff barriers. Moreover, there is often not an obvious focal point for negotiations because the trade Regulation of Professional Services Most professional service providers, such as doctors, engineers and lawyers, have to be certified in order to practice their profession. The certification

6 Radosavljević, M., Radosavljevic, D., Somina, I.,“Innovation and motivation as the key factors of teh success“, International journal of the economics and law, vol.1, No. 3, Novi Sad, 2011.

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requirements can serve as barriers to trade because they raise entry costs for foreign service providers. Foreigners often have to take courses, exams, and sometimes establish a residence to meet local certification requirements. In some cases, such as in law, foreigners are sometimes completely shut out of the market. Certification requirements, however, cannot simply be dismissed as a trade barrier because they are a response to problems of asymmetric information in these markets. The client often does not have enough information to judge the safety and quality of the service. Actually, Changes in the environment clearly indicate that business is entering a new era of competition which is increasingly called hyper competition. 7 Even if the client could determine quality and safety at some cost, it can be more efficient to require certification to economize on screening costs. To illustrate the interaction between trade policy and regulation of professional services, we consider an example where low quality service providers generate externalities. For example, if a bridge collapses or if a public building is not constructed safely, then there will be costs to society at large, not just the contractor. Similarly, in countries with public medical systems, the costs of bad medical treatment will fall not just on the patient but also on taxpayers. We consider two scenarios. First we consider a case where the domestic regulatory system is initially inadequate. That is, screening is imperfect and there is a mix of good and bad service providers in practice. In this case, we show that trade liberalization without reforms the domestic certification system can lower welfare. Next we consider the effects of trade under a well-functioning certification system. In this case, trade will be welfare-improving. However, the magnitude of the gains depend on the way in which foreigners are screened. Trade liberalization, accompanied by domestic regulatory reform raises welfare. A final issue is how foreigners should be screened. Trade liberalization in many service industries, and especially in professional services requires both that foreigners be given market access, and that they not be subject to discriminatory barriers. There are several ways of implemented non- discrimination rules. In a National treatment regime governments have the flexibility to implement their own regulations subject to the requirement that the same regulations apply to domestic and foreign suppliers. That is, national treatment regime essential requires nondiscrimination. Such as rule does not completely eliminate discrimination, however. For example, an insurance company might be required to establish a local office before it can sell insurance. While both domestic and foreign firms are subject to the same requirement, it may be much easier for local firms to meet the requirement - such a rule essentially imposes a fixed cost that excludes foreign firms who might want to do only a small amount of business locally. Similarly, a requirement that engineers, doctors, or truck drivers obtain domestic licensing and certification can impose additional costs on foreigners who have already gone through a similar certification process in their own country. In a mutual recognition regime, each country agrees to accept services providers who meet the certification requirements of their home country. For example, under a mutual recognition regime, a US resident can be permitted to drive in Canada as long as he or she holds a valid US driver's license. Under a national treatment rule, the US resident could be permitted to drive in Canada only if a Canadian drivers license is obtained. The advantage of mutual recognition regimes is that they can economize on regulatory costs. The disadvantage is that it can be more difficult for a government to meet its regulatory objectives. If the trading partner has weaker certification requirements, then the average quality of service provision may fall when imports increase.

7 Martinović, M., “Globalization and environment impact on business enterprises”, International journal of the economics and law, vol.1, No. 3, Novi Sad, 2011.

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For this reason, mutual recognition is not appropriate for many types of services, and may also only be feasible for countries with very similar approaches to regulation. However, in countries with very different standards, the country with the weak standard can agree to recognize certification from the country with the high standard, but not vice versa. Harmonization of regulatory standards is another option. In this case, countries agree on common regulatory standards. Engineering as a set of the intellectual activities necessary to optimize the investment of the path realization of the concept selection and model design to the practical application of the conclusion, i.e. solutions that we obtained based on the certain models and methods. 8

For example, countries may agree on a common set of rules to regulate insurance companies, and this then may facilitate easy access by insurers to markets in each country. The advantage of harmonization is that it removes the ability of governments to unilaterally adjust standards to favor local suppliers. The disadvantage is that it can add inflexibilities into the system that make it more difficult to change regulations when conditions merit changes. As well, harmonization by its nature eliminates diversity in regulatory approaches. Regulations appropriate for one country need not be the best solution for other countries. Each of these approaches constrains government flexibility in some ways, and so may raise regulatory costs. They may also conflict with other government objectives. For example, a government may choose to have an exclusively public education or health system. In cases of cultural services, a government pay prefer to explicitly favor local providers. For some types of services, governments may see value in having them provided by producers with a long term vested interest in a local community. The literature on social capital suggests that this can strengthen communities and provide both economic and non-economic benefits. Consequently, for some types of services the conflicts between regulatory objectives and trade liberalization may be difficult to circumvent. Under this regime, output is higher and price is lower. The gains from trade aregiven by A+B+E+C. The gains from trade will be larger if the government chooses the most efficient screening regime. D. Protection to preserve local product variety Much of the above analysis of trade barriers assumed that local and foreign products are essentially the same. However, in some cases, local and foreign products may be very different. This is particularly true in the cultural sector, where a foreign movie or television program is often very different from a local production. Hence while foreigners may object to local content rules in broadcasting and other media asprotectionist, the motivation for such policies may be to preserve distinctly local cultural products. The issue of the preservation of distinctly local services arises other contexts as well: for example, allowing foreign restaurant franchises (such as fast food chains) may squeeze out local restaurant selling indigenous cuisine. There are two ways to analyze protective policies in the case where locally produced services are distinct from foreign- produced services: the first allows for externalities in service provision, and the second is to confront the larger issue of optimum product variety. Suppose that a trade agreement eliminates local content preferences, and more foreign firms enter the local market. Because foreign services are imperfect substitutes for the domestic service, the local demand curve shifts. Foreign movies, television programs and music squeeze out domestic products. Now it might be thought that these products should be squeezed out because domestic demand is below average cost. However, this is not necessarily correct.

8 Mikić, S., Doroshenko, Y., „Economy reengineering at the beginning of 21st century“, International journal of the economics and law, vol.1, No. 3, Novi Sad, 2011.

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Summary

Trade in services is in some important ways different from trade in goods. First, many services require proximity between the supplier and the consumer, and hence factor mobility is necessary for many international service transactions. Secondly, the limited scope for “border” restrictions implies that domestic regulations have a much stronger influence on trade in services. However, while interesting twists arise because of the way services are traded and regulated, the basic insights from the theory of trade in goods apply to trade in services. There are likely to be substantial gains from liberalizing trade in services, immediately and in the longer term provided the regulatory framework is adequate. Strong institutions in the globalization process are the basis prosperity and economic development in the world. Technological progress has caused the destruction of the sophisticated processes of globalization. Crisis is an inevitable phase of business cycles and its overcome also is driven by technological progress and successful economic policy. Continuous improvement in order to keep up with modern processes is essential. New knowledge and new competitive skills are necessary to handle the obstacles for integration and prosperity. Nobel Laureate Paul Krugman notes that there is a recession not only because of bad legislation or negligence in the stock market but also due to an error in the theoretical models. America needs to find solution in monetary policy to regulate the issue of unemployment, inflation and growth. Finally, we need a modern theoretical model that will help us to explain these changes and to understand their meaning.

BIBLIOGRAPHY

1. Deardorff, A. V. "Comparative Advantage and International Trade and Investment in Services," in Robert M. Stern, (ed.), Trade and Investment in Services: Canada/US Perspectives, Toronto: Ontario Economic Council, 1985.

2. Krugman, P., "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, 70 (1980), 950-959.

3. Sapir, A. and C. Winter, "Services Trade," in D. Greenaway and L. A. Winters (eds.), Surveys in International Trade, Oxford: Basil Blackwell, 1994.

4. Radosavljević, M., Radosavljevic, D., Somina, I., „Innovation and motivation as the key factors of teh success“, International journal of the economics and law, Vol. 1, No. 3, Novi Sad, 2011.

5. Martinović, M., “Globalization and environment impact on business enterprises”, International journal of the economics and law, vol.1, No. 3, Novi Sad, 2011.

6. George, Soros, The new paradigm for finnacial markets, the credit crisis 2008 and what it means, Perseus books group, USA, Philadelphia, 2008.

7. Mikić, S., Doroshenko, Y., „Economy reengineering at the beginning of 21st century“, International journal of the economics and law, vol.1, No. 3, Novi Sad, 2011.

8. Drašković, M., Vujičić, J., Smiljić, S., Elektronic banking models, International journal of the economics and law, Vol. 1, No. 3, Novi Sad, 2011.

9. Drenovak, M., Urosevic, B., Exchange traded funds of the eurozone sovereign debt, Economic anals, vol.4, no. 187, October – December 2010, Faculty of economics, University of Belgrade

10. Botric, V., Foreign direct investment in western Balkans: Privatization, institutional change and banking sector dominance, Economic anals, vol.4, no. 187, October – December 2010, Faculty of economics, University of Belgrade

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11. Osintsev, Y., Venture financing of start – up: A model of contract between VC fund and entrepreneur, Economic anals, vol.4, no. 187, October – December 2010, Faculty of economics, University of Belgrade

12. Markovic, P., Urosevic, B.,Market risk stress testing for internationally active financial institutions, Economic anals, vol.4, no. 187, October – December 2011, Faculty of economics, University of Belgrade

13. Laseen, S., Svensson, L.E.O., Anticipated alternative policy rate paths in policy simulations, International journal of central banking, UCB, vol. 3, no. 3, September 2011, San Francisko, USA

14. Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012. 15. Đurišić, B., Miladinović, M.,“Informative system for human resources and project

management“, International journal of economics and law, vol.1, No. 3, Novi sad, 2011

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EVOLUTION OF MARKETING: FROM PRODUCT UP TO EMPLOYMENT

Milijanka Ratković1, Goran Grubić2, Svetlana Tasić3

1Visoka škola za menadžment i poslovne komunikacije, Sremski Karlovci, Srbija, milijanka@yahoo.com

2Fakultet organizacionih nauka, Beogradski Univerzitet, Beograd, Srbija, goran.grubic@gmail.com

3London School of Commerce, Beograd, Srbija, svetlana.tasic@lsc.edu.rs

Abstract: Although the marketing concept is relatively long, yet not all companies facing the market, or finding ways to increase customer satisfaction, but they often turned to their own needs and possibilities of making the decisions on outdated concepts in formulating their business philosophy. However, more frequent changes of conditions in the global marketplace are forcing participants adjust to the changes in business philosophy with a focus on creating stronger and longer-term relationships with customers. After a brief consideration of the characteristics of previous concepts of marketing, this paper will present the current trends to develop marketing that are connected to each other and largely based on modern information and communication technologies. In this context, we emphasize the importance of relationship marketing as a concept that enables new market opportunities.

Keywords: Customer relationship management, holistic marketing, relationship marketing, information and communication technologies, model 4O

1. INTRODUCTION

The concept of production is one of the oldest concepts in business, which assumes that consumers want the products and services that are inexpensive and available. Mass distribution, high efficiency and low costs of production are the basic principles of this concept, the application of which makes sense only in developing countries like China, where companies use cheap labor to dominate the global market. In contrast to this concept, product concept counts on innovation, performance and product quality as a core competitive advantage that should attract consumers. The problem of this concept is that new or improved product and may not be successful in the market because in spite of proper pricing, distribution and promotion of good can be on the market that does not need or that he cannot produce sufficient customer satisfaction. “It is necessary to analyze the customer, the way in which he uses the product and how it fits in his system of consumption.” 1

The concept includes aggressive sales promotion and sales efforts in order to sell more goods and is usually applied to products and services that are not required when the manufacturer has non-engaged excess capacity. The problem with this concept, similar to the above concepts, is that it tends to sell what is produced rather than to produce what the market wants. Because of the obvious shortcomings mentioned business philosophy, there was a need to create a new concept at the center of their attention has market and consumer needs as a goal of creating superior customer satisfaction is recognized for its customers. At the same time, market trends, especially in the field of information and communication technologies allow marketers to find new opportunities to increase customer satisfaction and create long-term good relationship with them and other participants in the chain of distribution values.

1 Dr Stefanovic S., et al., Management and Industrial Design, “TOM” Centar, Zrenjanin, 2010, pp.53.

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2. TRADITIONAL MARKETING CONCEPT

Marketing concept believes that organizations should strive for greater efficiency compared to its competitors when it comes to communicating, creating, and delivering greater value to consumers in selected target markets. Many researchers have found that companies that embrace the concept of marketing do better in the market, which confirms its validity. [4] Marketing is a complex process that requires the formulation of appropriate methodology and approach to the strategy of attracting customers. 2 In the early 20th century, marketing becomes a scientific field that is developed by considering the problem of distribution and marketing are the educators of the fifties and sixties primarily engaged in marketing techniques, while the later focuses on the marketing philosophy that deals with business in general. [3] Marketing is in its development received wide range of tools, techniques and models that help companies to make marketing plan in order that their organizations deliver superior value to customers. In the later stages of development in order to cope with the limitations of traditional settings theorists have defined two types of marketing models of behavior:

• monitoring of the market (market-driven) • managing the market (market-driving)

The traditional marketing concept insists on exclusive meet identified customer requirements and market. If the organization does not take pro-active action will quickly fall into the tracking model that considered the market structure and market behavior as given on the condition that cannot be affected (Figure 1).

Figure 1: comparative analysis of two models [2]

Managing the market tends is aimed to pro-active action or exercising influence on the characteristics of the market and an upgrade of the traditional concept of marketing. In Figure 1,

2 Kastratovic Edita, Denysiuk Volodymyr, „Marketing Principles and their Application in Sport Management“, International Journal of economics and law, Vol. 1, No. 2, FORKUP, Novi Sad, April 2012, pp. 52.

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we see that this model promotes the development of competencies that are difficult to imitate and that definitely include the concept of customer relationship management (customer relationship management - CRM).

3. HOLISTIC MARKETING

The concept of holistic marketing as an important area of evolution of marketing concept emphasizes the interdependence of the effects of marketing programs, processes and activities. Interdependence leads to the conclusion that every important aspect of marketing that is often required broad and integrated perspective. As the basic elements of holistic marketing are integrated marketing, internal marketing, social marketing and responsible marketing relationships (Figure 2). Integrated marketing, following a holistic setting, emphasizes the coherence and mutual impact of integrated marketing programs and activities shaped the marketing mix. The starting positions of integrated marketing are:

• That many marketing activities serve trade and delivering value • That all marketing activities must be coordinated to maximize their joint effects

Figure 2: The development of modern marketing concept and marketing place of relationship in holistic marketing

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Internal marketing ensures the acceptance of appropriate marketing principles throughout the organization recognizing that marketing activities within an organization can be of equal importance as well as activities that are directed outward. Attracting suitable staff and maintaining good long-term relationships with them, is the basis for building an internal marketing. [6] The task of this element of the holistic marketing to recruit, educate and motivate skilled people who want to serve customers well. The purpose of internal marketing is to ensure that staff of the organization is capable and ready to provide outstanding service that is promised through promotional activities and other forms of communication with the market. Acceptance of socially responsible marketing is a natural consequence of the holistic worldview that requires understanding of the wider interests and ethical context of marketing activities. Respect for these principles often leads marketers in a difficult situation in which they must resolve the conflict between respect for the wider social - public interest, to fulfill customers' desires, and realizing the company's profits.

4. RELATIONSHIP MARKETING

The evolution of the science of managing the production flowed from concept to relationship marketing (relationship marketing - RM). The concept of RM is excluded from the scope of the concept of holistic marketing environment in which it was analyzed. The merit of his separation and separate treatment can be found in the development of modern information and communication technologies in their environment creates many opportunities and resources to develop good relations with customers and other stakeholders, and key parties in the supply chain value. Separating the concept of relationship marketing and finding possibilities for achieving differential advantage in this field has become inevitable given the increasing intensity of competition at the global level. In this context the recent decades involves the exploitation of modern information technology in so far as to determine the particular situation. Application of these technologies in the marketing activities that can create some advantages for the participants in today's market, but it is certain that their absence creates a great risk for the overall operation and survival. By moving the idea of integrated marketing to develop good relations with key parties, relationship marketing is a logical stage in the evolution of marketing to be implemented in accordance with the appropriate utilization of current information and communication technologies. Defining key pages, we can extract the most important categories with which to establish good long-term relationships. The authors define the field of different models of key aspects of relations with foreign number from two to several tens of elements. However, many models can make a rational consideration of the overall relations of the organization. However, following the existing literature, primarily in line with previous research, the author, in this paper can be described in four categories, which we interpret in the framework of the model 4O. Thus, the model is defined by allocating 4O key pages as the optimal framework for the further consideration of the concept of relationship marketing as related groups into logical units that correspond to practical experience and when it starts from already existing ideas. 4O models consist of the following categories of relations:

• Relationships with customers - Customer relationship management (CRM); • Relationships with partners; • Public Relations: • Relations within the organization

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As most analyzed relationships are noted for their relationships with customers, which in some interpretations are used as a synonym for the concept of relationship marketing. However, in this model, they represent only one foreign key, because today's market conditions warrant consideration of mandatory marketers and other relationships that are listed here.

5. CRM IN AN ENVIRONMENT OF INFORMATION AND COMMUNICATION TECHNOLOGIES

Customer relationship management should be realized within the concept of relationship marketing, which, as already said, is aimed at creating long-term relationships with key parties to the model we separated through 4O model. CRM includes applications based on information technologies that integrate information about the company's customers with the knowledge of how to use this information to effectively create and maintain mutually beneficial long-ter m relationship. [5] Thus, CRM is focused on creating and maintaining long-term relationships with customers whereby relies heavily on new information technology and internet services. Precisely because of the development of these technologies in recent decades, the concept of CRM is gaining importance, primarily in the context of evaluating the potential for realizing the potential competitive advantage. Therefore, the CRM can be viewed as a relatively new concept that started in a scientific and professional public at the end of the last decade of the twentieth century, in parallel with the development of information systems for asset management companies (enterprise resource planning - ERP). [1] Because of the time and technological environment in which the concept originated, most authors believe it is very difficult to separate the eCRM (electronic customer relationship management) of CRM, it is virtually impossible to imagine the realization of this process is complete or at least mostly not based on new information technologies and Internet services. Determining the relationship between CRM concepts and advanced information and communication technologies, we logically set the concept of marketing relationship in the surrounding of the same technologies. Like CRM and relationship marketing is a concept that has gained much greater significance of the emergence of advanced information and communication technologies. It can therefore be interpreted in the context of traditional marketing, but its contribution is still much higher than the occurrence of these technologies. In this sense, it is often said that although these technologies have created a marketing relationship, they have it changed and improved significantly through optimization and automation. Thus, although the ideas that are an integral part of CRM concept existed previously under other names, information technology and promote its implementation led to a rapid expansion of CRM software. The importance of information technology for CRM authors explain the essential similarity of these two scientific fields that are based on a wide range of communication forms. Prerequisites CRM IT development is a consequence of the fact that no information means any practical and technically impossible to manage such a wide range of information about each customer and transform that information into useful and applicable knowledge. The process of implementing CRM can be viewed through four main phases: identification, differentiation, interaction and adaptation. Identification involves identifying potential and real customers with a need to make a selection of those which by their potential merit special monitoring. After selection of the primary customers create a database that is regularly updated and supplemented by information collected through all channels and touch points with customers. Differentiation of identified consumers is based on two criterions - the perceived

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needs of customers and the value that the buyer has for the company. Interactions with individual customers, as the third phase of the CRM, to obtain more information on their individual needs in order to create closer ties with them as a result of which should have the customization of products, services and messages to customers.

6. CONCLUSION

Maintaining relationships with customers and extend its life becomes the main goal of the modern concept of marketing due to strengthening the competitiveness of the market which leads to a permanent reduction in the average duration of such a relationship. In the earlier concepts of marketing are giving too much attention to attracting new customers while maintaining existing relationships neglected. RM and CRM promote the cooperation of market actors as a basis of operations of the company in the market, which faces opposition from traditional marketers and political concept of liberal capitalism, which is considered too large to co-operation leads to the collapse of the market and regulatory forces that only full competition can solve all the problems of society and economy. A new marketing concept encourages cooperation between buyer and seller, and is easy to see how on the modern B2B markets, customers often require some innovations, upgrades, and sometimes changes in the sales and distribution in accordance with their needs. In this situation, the seller has much better and timely information based on which can adapt its performance on the market. The development of information communication technologies in recent decades has opened new ways of building relationships with customers, but also with other key parties in this paper, we extract the model 4O. Interpretation of the relationships through this model, the importance of building relationships with employees, partners and the public equally and customer relations is emphasized. The previous theoretical discussion of this topic are especially emphasized the importance of managing relationships with customers, but how the market is increasingly competitive, it is necessary to find new ways of business development. The use of modern information and communication technology has become imperative for all participants who want to survive in today's market, while finding the right ways and measures of their efficiency is a major challenge for marketers in the field of relationship marketing. Apart from the possibilities offered by modern technology and limiting factors are the result of growing competition, the processes of transition, globalization and deregulation have helped dissemination of modern marketing concept and the concept of relationship management.

BIBLIOGRAPHY

1. Greenberg, P.: CRM at the Speed of Light. Berkeley. CA/USA: Osborne/McGraw-Hill, 2001. pp. 3. ISBN 0-07-212782-1.

2. Hollensen, S.: Marketing Planning. Berkshire. UK: McGrawHill, 2006. pp. 29. ISBN. 0-07-710418-8.

3. Jobber, D. & Fahy, J.: Osnovi Marketinga. Beograd: Data status, 2006. pp. 5. ISBN 86-7478-023-7.

4. Kotler, Ph. & Keller, K.L.: Marketing Menadžment. Beograd: Data Status, 2006. pp. 16. ISBN 86-7478-013.

5. Milenović, B. & Ratković, M.: Strategije marketinga, kako ući na tržište i uspešno opstati na njemu. Beograd: Fakultet za trgovinu i bankastvo, Univerzitet BK, 2009. pp. 252. ISBN 978-86-7746-174-4.

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6. Ratković, M.: (2009). Interni marketing u funkciji povećanja zadovoljstva kupaca. Marketing, Vol. 40. (2009), No. 4, pp. 269-275. ISSN 0354-3471.

7. Kastratovic Edita, Denysiuk Volodymyr, „Marketing Principles and their Application in Sport Management“, International Journal of economics and law, Vol. 1, No. 2, FORKUP, Novi Sad, April 2012.

8. Dr Stefanovic S., et al., Management and Industrial Design, “TOM” Centar, Zrenjanin, 2010.

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THE ROLE AND IMPORTANCE OF HEALTH ECONOMICS FROM THE STANDPOINT OF HIGH EDUCATION HEALTH

INTITUTIONS

Miletić Lidija,1 Janić Lazar2, Djordjević Jelena2, Svetlana Terescenko3

1 High Vocational School for Entrepreneurship

2 High Medical School of Professional Studies in Belgrade 3Faculty for economy and management, saint Petrsburg State Forest Technical University, Saint

Petrsburg, Russian Federation

ABSTRACT: The paper describes the role and the importance of the study of health economcs, as a young scientific discipline in high education medical institutions. The research results have been presented through a student survey, carried out by High medical school of professional studies in Belgrade, that had recognized the need for the study and research of health economics and included the course into its program.

Key words: health economics, subject, efficiency, students

1. INTRODUCTION

Health economics is an applied economic discipline that uses general economic knowledge, methods and skills to find answers to the questions on an optimal allocation of scarce resources in connection with health protection while making clinical, investment and business decisions, i.e. public health and political decisions.

The literature implies that health economics is also called economics of health care. As a new scientific discipline, it covers both economic and medical issues. It is based on two basic principles of health policy: on the principle of fairness and the principle of efficiency. It is closely connected with public health, especially with social medicine, social policy and health protection.

The foundations of health economics were laid by William Petty (1623-1687), a doctor and economist. He claimed that „doctors and economists should work together“. The economists that study health and health protection issues are obliged to understand health issues, health policy of a country and the public health organisation. Doctors that study economic issues, on the other hand, are obliged to understand economic logic of rational use of resouces and economical approach to problem solving. People want to live in communities and in environment that protects and improves their health and also expect from the authorities to

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define necessary practical policies that imply organization and action from the local to international levels. 1

In the beginning of 1980s, an idea was launched in the World Health Organization of linking the researchers that study health protection economics. The aim was to improve the study of the discipline and ensure the exchange of experiences. Numerous authors were gathered and a study group with the aim of improving the study of economic issues in connection with health was formed. Starting from 1982, there have been many gatherings and a number of publications have been issued that recapitulated the first two decades of the development of the scientific discipline.

In our country, Health economics intended for economists has been studied within the specialist study program at Medical Faculties in Belgrade and Novi Sad. It was also studied in the 1980s within the specialistic studies of Social medicine at the Medical Faculties and doctors studied the program that referred to the implemetation of economics in health through this specialization.

High Medical School of Professional Studies in Belgrade has recognized the importance of study of this scientific discipline. It carried out a survey among the students related to the introduction of the subject as obligatory in undergraduate studies. The survey results have shown the positive attitude of students towards acquiring the adequate knowledge of health economics that they can implement in their future professional work.

2. THE SUBJECT OF HEALTH ECONOMICS

Starting from the roots of the study of health economics and the need for the profiles of personnel with the adequate knowledge of economy and health, a syllabus of the subject that is studied at this high education institution was made. With the help of consultants from different scienctific areas the most adequate syllabus intended for the students of high educational medical insitutions was created. The results have shown that for this scientific discipline it is needed to study the following areas: economic characteristics of health, macroeconomic approach to health care, the allocation and mobilisation of resources, health care costs, economic issues of mental illnesses, payment mechanisms in health, distribution of medicines, health projects and programs evaluation, fairness and medical ethics, variations in small areas, measuring health status as well as health system reforms.

Economic characteristics of health justify the separation of the economics of health care into a separate scientific discipline. These refer to the uncertainty of health needs, the dependence of the users and providers of health services’ behavior from the specific interpersonal doctor- patient relationship, assymetric information that appears in the form of insufficient information of insurance company in comparison to the insured in the market of voluntary health insurance. Macroeconomic approach to health and health care includes the following areas of research:

1 Miletić L., Janić L., »Impact of the orgnaization of primary health protection on its efficiency“, International Journal of Economics and Law, Vol 2. No.4, FORKUP, August 2011, Belgrade

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economic issues of health system operation, interrelation between economic and health system, interrelation between the population health and economic development, the influence of unemployment on the population health, economic inequalities and health, total spending on health care and its distribution across areas of health care, the choice of priorities in formulating the strategy of health system development, interrelation between health and environment. Allocation and mobilizing resources is a wider area of study of health protection economics that encompasses three narrower areas – health services market and private health care, the model of national health care and compulsory health care. Health care costs are costs in primary health protection, the costs of the programs of prevention and screening programs, costs of a family and economic cost of time, hospital care economics, hospital economic models and hospital organization, hospital care costs, the issues related to economy and diseconomy of scale, uncompensated care, high technology and costs, cost control.

Economic problems of mental illnesses were separated to a special area of research due to the range of specific characteritics important for economic analysis that emerge in connection with these illnesses. A special magazine of international importance (,,The Journal of Mental Healthand Econnomics..."). was launched in 1998. We talk about the economics of mental illnesses, since mental illnesses, taking into the account the characteristics important for economic analysis, differ from other diseases and injuries. Payment mechanisms in health that are used in different countries and in different circumestances offer numerous modalities that health care economics pays attention to in its research studies. Different mechanisms of paying doctors, nurses (capitation „per service“, fixed salary), pharmacists, medical and non medical staff are studied. Distribution of medicines is an issue that has been gaining the importance recently. The occurrances in pharmaceutical industry have been studied partially in health protection economics as well. The issues that are studied include: the channels of distribution of medicines, the price control of medicines, the measures for cost limitation, such as limitation of the total number of medicines that are given the approval for in a country, positive lists, referral rates, etc. Health projects and programs evaluation take into account, beside other criteria, economic criteria: the concept of fairness and economic efficiency, the methods of economic evaluation (minimizing costs, cost-benefit, cost-effectivenes and cost-utility analysis). Fairness and medical ethics encompass the issues such as the right to health protection, the concept of fairness in health protection resources use, horizontal fairness, vertical fairness, geographical distribution of resources, intergenerational fairness. Variations in small areas in medical service use have been researched in numerous studies. The different use of medical procedures and treatments in different regions may be caused, among other things, by economic factors, for example by payment method. Measuring health status presents an interdisciplinary issue. Health care economics in this area has contributed in great extent. The health state indicators and indexes are defined and they are to be used for the selection of priorities when deciding on resource use. Health status measuring is also necessary for the evaluation of used resurces efficiency. Health system reforms are partially studied within health protection economics as well. Of particular interest are international experiences in implementing various economic solutions to financing health care, the form of payments in health care and the possibilities of their implementation, the relationship of private and public in health care, the degree of decentralization and the like.

3. RESEARCH RESULTS

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INTERNATIONAL JOURNAL OF ECONOMICS AND Vol. 2,

The survey included 220 undergraduate students and 50 students of specialistic studies. The questionnaire included 5 closed-type questions and an open-type note.

QUESTIONNAIRE

1. Have you acquired, in the process of previous education, before taking these classes, certain knowledge of health economics?

YES NO

2. Are you aware of the importance of funds for health care operation?

YES NO

3. Do you have any knowledge about the Republic Fund for Health Insurance?

YES NO

4. Do you think that information received through health econom1cs classes IS

important for your education?

YES NO

5. Are you going to implement the knowledge acquired at practical classes of health economics in your job?

YES NO

6. Note: What is your opinion about the subject Health economics that you have

had?

Figure 1.The questionnaire

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The results have shown that 70.7% of undergraduate students replied that in their process of education, before attending these classes, had had no knowledge of health economics;

64.1% of the respondents replied that they were aware of the importance of funding for health operations.

Only 30.9% of the respondents/students replied that they had had some knowledge on the Republican Fund for Health Insurance and 66.3% of them thought that the information received within the study of the subject of health economics was something important in the process of their education.

The students of graduate – specialistic studies replied that in their process of education, before attending these classes, had had no knowledge of health economics (54.4%); that they were aware of the importance of funding for health operations (83.0%); that they had had some knowledge on the Republican Fund for Health Insurance (81.2%) and that they thought that the information received within the study of the subject of health economics was something important in the process of their education (91.8%). There is a note that 26% of students of specialistic studies emphasized the advantage of their undergraduate colleagues that would acquire the knowledge in health economics in the earlier phase of education.

4. CONCLUSION

Health economics is the inter-connection between medicine and economy based on the principles of fairness and efficiency. The roots of health economics date back to the 17. century. The important development has been recorded during 1980s. High Medical School of Professional Studies in Belgrade has recognized the importance of the study of health economics. The survey carried out among the students of undergraduate and specialistic studies has shown that the majority of students do not have any previous knowledge in the subject and think that the information received within the study of the subject of health economics is something important in the process of their education.

BIBLIOGRAPHY:

1. Lazarević A, Đorđević J, Janić L. Public Health, Social Policy and Health Protection. Belgrade: High Medical School of Professional Studies in Belgrade; 2012. 2. Šolak Z. Health Protection Economics – development and current issues. Privredna izgradnja 2002; 45 (1-2): 63-85. 3. Šolak Z., Health Protection Economics. Belgrade: Zavod za udžbenike Belgrade; 2003. 4. Lazarević A. Social Medicine. Belgrade: High Medical School of Professional Studies in Belgrade; 2012. 5. Cerjan-Letica G. Theory of health justice and public health ethics. Revija za sociologiju 2004; 35 (3–4): 205–216. 6. Miletić L., Janić L., «Impact of the orgnaization of primary health protection on its efficiency“, International Journal of Economics and Law, Vol 2. No.4, FORKUP, August 2011, Belgrade

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CODEX OF CORPORATIVE MANAGEMENT IN ECONOMY

OF REPUBLIC OF SERBIA

Vladan S. Perišić Higher Educational Institution for Applied Studies of Entreprenurship, Belgrade

Sažetak: Kоdеks kоrpоrativnоg upravljanja (u daljеm tеkstu: Kоdеks) оbuhvata pravila о upravljanju i nadzоru nad upravljanjеm u društvima kapitala. Ovaj Kodeks kako se u preambuli kodeksa ističe svrstava našu zemlju u uređene zemlje koje imaju sopstveni naciоnalni kоdеks kоrpоrativnоg upravljanja. Kodeks ima dоsta uopštenosti i određen je nizоm оriginalnih rеšеnja koja dоprinоse razvоju autоnоmnоg prava i praksе dоbrоg kоrpоrativnog upravljanja. Instituciоnalizacijоm оvе praksе i njеnоm prоmоcijоm u оkviru privrеdnih kоmоra dоprinеćе se jačanju autоritеta prava, prеpоznatljivоsti praksе dоbrоg kоrpоrativnоg upravljanja, dizanju vеla nеtransparеntnе praksе i prava i оtvaranju vrata kulturi prava i vladavini prava. Samо jе tо put razvоju prava i institucija kоjе ga primеnjuju. Samо jе tо put оslоbađanja prava iz оkоva tvrdih ograničenja i pоlitičkоg omeđenja. Slobodno određeno pravо vоdi prema оslоbоđеnoj privrеdi. U takvom radnom okruženju dоminira i vlada praksa dоbrоg kоrpоrativnоg upravljanja, оdgоvоrnоg samо svоjim invеstitоrima. Samо jе tо put sеоbе privrеdе iz vоda pоlitičkе privrеdе u vоdе tržišnе i kоnkurеntnе privrеdе.

Ključne reči: - Kodeks. – Privreda.- Korporacija. - Kotirana akcionarska društva. Privredna komora Srbije. - Sud časti.

Summary: Codex of corporative management (in further text: Codex) contains rules of management and of supervising management in corporations. As pointed out in the preamble of the Codex, this Codex places our country in the group of regulated states that have their own national codex of corporate management. Codex is characterized by generality and is defined by a whole set of original solutions that are a contribution to development of autonomous laws and practice of good corporative management. Institutionalization of this practice and its promotion within chambers of commerce contribute to the following: strengthening of the authority of law, recognition of quality corporative management practice, more transparency within both practice and law, and towards opening of doors that lead to the culture of legal rights and the rule of law. Nothing but this will lead us towards development of legal framework and institutions that implement it. Nothing but this will free the law from rigid boundaries and political limitations. A law that is freely defined leads to a free economy. Such a business environment is dominated and ruled by quality management practice, answerable only to the investors. That is the only way for an economy to transform itself from a political pawn into an economy that is both market-oriented and competitive.

Key words: - Codex. - Economy. - Corporation. - Listed joint stock companies - Serbian Chamber of Commerce. - Court of honour.

1. INTRODUCTION

‘He who knows nothing but the words of law, does not really know it until he is able to grasp the mind and the meaning of the law.’ 1

The main responsibility for adequate behaviour lies within economy itself. Shareholders’ longterm interests – as well as an economy’s decision to be an ethical society – these must have

1 V. Bogišić, excerpt from the Codex preamble

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the outmost importance. Corporative culture is a reality that exists within every single organization. 2

Whether we are aware of this corporative culture, whether we are satisfied with it – different subjects within the same business environment have different answers towards those questions. For subjects in an economy corporative culture is exactly the same thing as personality is for any single individual. In this regard, corporative culture can be compared with flow of things within an organization. This flow can be directed towards Quality, where all the efforts result in positive effects and organizational development, but it can also be a major stumble block that makes realization of company’s objectives considerably more difficult. In corporative culture education seminars today we regularly ephasize poor examples characteristic of previous periods when it was believed that company’s management can – using slogans, messages and proclamations- spark up the changes and create an ambient that would lead to increased efficiency and productivity. At the same time, we know that corporative culture cannot be created with ‘storytelling.’ It is necessary to include all the resources and to carefully monitor what happens. Those employed in business organizations in any given economy3 have both the right to express their opinion, as well as the wish to do so. Modern corporations and modern management setups require their employees to declare their position on basic issues related to their work and the business activity of the whole organization. Corporative culture is a unique configuration of values, norms, believes, standpoints and behaviour types that exist within an organization and that has a very strong influence on the way this organization functions.

2. CORPORATE CULTURE

Corporate culture is the key factor to achieve outstanding and longlasting performance and it is absolutely omnipresent: it is either working for you, or it is working against you. It is made of values that are rooted within the primary source of competitive advantages of an organization. As professor Vujic stated: „Business ethics that regulate dealings with customers, shareholders and employess is opposed to the „petrified” principles of continuous learning process that requires continual work”. 4

3. SOCIAL RESPONSIBILITY

Social responsibility of both individuals and of organizations means continuous care for adhering to laws, to national and international standards, and to adequate business manners, in the interest of all individuals and groups that depend on this organization’s activities. Social responsibility includes environmental care, and it can be achieved by implementing ethical decision-making process. Corporative sustainability codex describes our principles and expectations regarding sustainable and socially-responsible growth. The specific form of this codex is defined by the standards implemented in every single economy subject.

2 MTK, Department of political and business practice, The Basic Principles of Corporative Management / excrept from MTK presidium commentaries 3 See: Z. Stefanović, Statutory corporate law, Belgrade, 2006. pp 43-44 4 Vujic Vidoje, “New Business and Social Responsibility of a Manager”, International Journal of economics and law, vol. 2, no. 4, Faculty for education of the executives, Novi Sad, 2012, pp.146.

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Corporative management represents the owners’ – shareholders’ needs, their concerns for the interests of management, interests of shareholders, interests of emplyees, interests of creditors, and, last but not least, interest of the state. In order for us to be able to speak of corporative management as a positive social issue, the following predispositions must be complied with: efficient law framework, developed corporative practical work, unprejudiced state-civil service apparatus, efficient chamber of commerce and high-quality judical protection. Disregard of regulations on the part of corporations is absolutely unacceptable. It could destroy companies, ruin people’s jobs and pension plans, undermine people’s trust towards national economy and interfere with economic development. Codex of Corporate Behaviour (CCB) is of the opinion that answers lie in strict adherence to law, in selfregulation and continual efforts of all the interested parties. Government, in particular, must rigorously implement existing laws and encourage selfregulation within the framework of national economy. Law makers and accountaning boards should clarify and simplify as much as possible the existing proceduress, so that any cover-up attempt becomes significantly harder. Any possible new laws should be carefully discussed in order to avoid creating obstacles towards economic development. Corporative boards must insist on ethical behaviour and strict selfregulation. Executive directors must prevent any situation in which short-term market pressures might lead to unethical behaviour or distorted reports. Codex of behaviour contains general principles of organizaton and general rules of behaviour, and it helps the employees to behave in appropriate and adequate manner when faced with ethical and legal issues. Codex of team work offers guidelines for behaviour of management and all other employees in all levels. Codex of corporate sustainability describes our principles and expectations regarding sustainable and socially-responsible business practice. Its concrete form is shaped by standards implemented in the general business environment.

4. CODEX OF CORPORATE MANAGEMENT OF THE SERBIAN

CHAMBER OF COMMERCE

The Serbian Chamber of Commerce codex of corporate management5 is based on the company law. The regulations that define this codex are classified into autonomus regulators of corporate relations. Company management is faced with the new regulations from the Company law. Without any experience whatsoever, faced with the possibility to create less rigid forms of regulatiosn through autonomuous legal acts, the chamber of commerce used this opportunity to partly regulate its needs by adopting the Codex of corporative management. The codex preable contains explanations regarding the legal aspects of the codex, it explains the normativ approach, and the subjects falling under its jurisdiction. Preable also offers the explanation why it is necessary to invervene with autonomous acts in the area of shareholder – management relationship. In the same way, it also clarifies the purpose of social responsibility. 6

The codex of corporative management applies to all listed joint-stock companies that are members of the Serbian Chamber of Commerce. A listed joint-stock company7 is any open shareholders company whose shares are traded in any market whatsoever (on the stock market, free market, official or unofficial market, on the first, second, or any other market).

5 "Sl. glasnik RS", No. 1/2006. 6 Social responsibility of any individual or organization means strict adherence to laws, national and international standards, and good business manners in the interest of all those individuals and groups that depend on the activities of the very organization 7 Act 4. Codex of corporate management

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It is recommended that other corporations should adopt the Codex as well, in the degree that the codex can apply to them. In this case, certain regulations specific of listed joint-stock companies are applied in accordance with the specific type of the given corporation.8

The codex regulations are in their nature guiding or explaining, interpretive or helping in nature, and only if they are supported by a legal basis are they impretive as well. 9 Still, this does not mean that those rules are not obligatory. On the contrary, being in their nature as stated above, these rules are obligatory for corporations on which the codex applies. Choosing some other codex or arbitrary deviation from this codex brings in turn an obligation to explain the reasons and motives behind this deviation. These explanations might even not be acceptable for the shareholders. In such environment where even ‘hard law regulations’ often are not strictly adhered to, this type of ‘soft law regulations’ so to say can often seem quite powerless and imperfect. Still, we do not introduce these laws only because there is a need for Serbia to adapt into the mode of current times, but most of all because there is a need to help business practice of corporate management organizations (most of all in listed and open joint-stock companies), to make the whole process more transparent because they find themselves in a certain triangle: shareholders (investors) – management – supervising bodies. Quality corporate management means quality regulations, both legal as well as autonomous regulations. Still, this alone is not enough. Adequate implementation of these regulations in both judicial and autonomous practice, stable and nourishing interpretation of these regulations, nurturing of the shareholders’ type of culture in general, creating an environment that as a whole offers positive climate for investors, investors’ trust, all these issues are building blocks of business environment where law – legal and autonomous – and the implementation of that law – business and judicial application –stand firmly hand in hand, and these relations do not get broken by political changes or by personnel shifts. 10

The preamble of the codex states: ‘Quality corporative management comprises not only the shareholders’ interests, even if that is indeed the primary interest that sets any investment process into motion. Quality corporative management also presumes adequate participation and protection of other interests as well, interests that are both relevant and legitimate: interests of creditors, employees, management, clients, of the corporation in the sociological meaning of the word.’ Further, the preamble of the codex points out the goal of this codex and explains this goal in detail: The goal of this codex is to make all the above interests transparent and institutionally represented. The institutional capacity for protection and promotion of those interests and its bearers in open companies has changed radically in the last years, both regarding legal framework as well the business interpretation. The shareholders’ position has changed with the very fact that from being ‘uneducated’ they more and more become professional investors (institutional investors dominate the investment map); hence their position has become more important. Therefore, this position seems to be increasingly professional. Bicameral management model (board of directors and supervising board) increasingly gives way to a single-board model. Further, the structure of this board changes (independent and non-executive directors within management more and more play the supervising role for professional investors instead of separate supervising bodies); the scope of independent bodies within a company broadens further

8 Ibid., act 5. 9 Ibid., act 7. 10 II part act.1. Preamble, Codex of corporate management

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(independent remuneration committees, committees for appointments and audit), transparency broadens (availability of acts and documents, obligatory reports regarding vital business events, transparency in financial reports, minority shareholders’ rights are getting stronger. In these conditions, any codex such as this one should contribute – with its principles, recommendations and guidelines - to the clarity of the idea behind any law and to the clarity of the goals of any new legal framework.

Content of the Codex

The Codex was adopted in 2005 and it contains 345 acts divided into 8 parts. Part one contains general regulations regarding the codex and the corporations’ relations towards the codex. Part two, The chapter on shareholders meeting and the shareholders’ rights is divided into five paragraphs and it contains: shareholder’ rights, convening the meeting of shareholders, voting, voting rights, voting in absentia, voting in writing, voting by proxy, voting contracts, overseas voting, voting mode, working mode, quorum and voting majority, committee for voting, telephone sessions and institutional shareholders. Part three, The part on Board of directors is divided into seven parts and it contains: Goals and duties, connected companies, how to defend from hostile takeovers, members of the board, Executive and non-executive members, Independent members, The Chairman of the board, election and dismissal, Election preconditions, Election process, Voting system in election of members, Dismissal of a member, working mode, keeping the members of the board regularly informed, Board meetings, Decision-making, Work evaluation, Committee for appointments, Remuneration Committee, Committee for audit, remuneration of the members of the executive and board of directors, conflict of interest. Part four, The chapter on the supervising body is divided into seven paragraphs and it contains: Goals and duties, types and composition of the supervising body, how to elect and how to release members of this body, how to keep the members of the body regularly informed, how this collective supervising body should work in a corporation and how to avoid conflict of interest. Part Five, This part on informing the public is divided into three chapters and contains: corporations’ internet sites, reports on corporative management and financial reports. Part six, Audit of financial reports contains: regulations regarding auditor and certified auditor. Part seven, Violation of codex contains: regulations on violation of codex and the court of honour jurisdiction. Part eight, Transitory and final acts contain: regulations on the start of implementation and the deadline for accepting the codex. Codex of the corporate management comprises the regulations on management and management control within corporations.11

The main goal of the Codex is implement quality business manners into corporative management. These should establish the balance of power and influence within the corporation, to create a lasting and consistent system of management control, to protect the investors’

11 Act 1. Codex of corporative management

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interests. All this would enable the corporation to achieve economic success which would, in turn, provide economic growth in the country as a whole. 12

Implementation

Codex of corporative management applies on all listed joint-stock companies that are members of the Serbian Chamber of Commerce. Listed joint-stock company is any open joint-stock company that has its shares traded in any kind of market (stock market, free market, official or unofficial market, first, second or any other market.) Being a member of the Serbian Chamber of Commerce means that you accept this codex and no further statement in this regard is necessary.

Legal rules, recommendations and suggestions

The Codex contains three types of regulations: 13

legal rules that are in the Codex often worded differently than in the Law, but this does not alter the meaning or the correct interpretation of the Law. Legal rules within the Codex can be recognized by the following words: ‘must,’ ‘must not,’ ‘is obliged to,’ etc.

recommendations or the so-called ‘implement and clarify’ type of regulations. Any individual should accept and abide by these regulations, and if he does not do so or does not do so in the manner described in this Codex, he must put forward an explanation, i.e. reasons justifying the deviation from the Codex. ‘Implement and clarify’ types of regulations can be recognized within the Codex by the following words: ‘should;’ and

suggestions representing the regulations that an individual does not have to abide by, nor is he obliged to put forward any explanation for deviation from these regulations, but these regulations are still regarded as desirable manner of behaviour within corporate management of listed joint-stock companies; suggestions can be recognized within the Codex by the following words: ‘may do,’ ‘could do,’ etc.

Consequences in cases of violation or lack of adherence

In case of violation of the rules of this Codex, the following can file a case at the court of honour: the chamber of commerce, a member of the chamber of commerce, state authority or a citizen whose rights had been damaged. All this keeping in mind that it is not only about violating business ethics and good business manners, but violating the obligatory acts of the Serbian Chamber of Commerce. 14

In case a listed joint-stock company (a member of the Serbian Chamber of Commerce) already had already adopted some other corporate codex of behaviour before this Codex is adopted, this company must within three months from the day this Codex comes into force file a Statement of Acceptance of this Codex or correct its existing codex according to Act 5 from the first Chapter of the Codex. 15

12 Ibid., Act 3. 13 Ibid., act 7. 14 Ibid., act 342. 15 Ibid., act 345.

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5. CONCLUSION

By engaging the most qualified individuals to develop the Codex of Corporate management, the Serbian Chamber of Commerce wanted to create an autonomous law that will enable implementation of general ethical principles and protection of all the individuals defined by the ‘corporate’ laws. Quality corporative management includes adequate representation and protection of all the other interests that are both relevant and legitimate: the interests of creditors, employees, management, clients, society within the scopes of the basic meaning of this word, keeping in mind companies’ social responsibility. Codex rules, represented as recommendations, suggestions or legal rules, enable us to be consequent in our behaviour and to establish quality business manners within corporate managers, considering that all the mentioned forms can take any of the following names: ‘ethics,’ ‘must not do,’ ‘is obliged to,’ ‘can do,’ ‘should do,’ etc.

BIBLIOGRAPHY

1. Z. Stefanović, Statusno privredno pravo, Beograd, 2006. 2. Zakon o privrednim društvima (“Sl. glasnik RS”, br. 125/04). 3. Kodeks korporativnog upravljanja (“Sl. glasnik RS”, br. 1/06). 4. Vujic Vidoje, “New Business and Social Responsibility of a Manager”, International

Journal of economics and law, vol. 2, no. 4, Faculty for education of the executives, Novi Sad,

2012.

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MANAGING THE LEARNING ORGANIZATIONS

Dragana Radosavljević Alfa Univerzitet, Beograd, FORKUP, Novi Sad, Srbija, dragana.radosavljevic@fpsp.edu.rs

Abstract: In today's business environment, characterized by uncertainty, it is more difficult to manage organizations. The goal of this paper is to show that without investing in a symbiosis of knowledge, research and business there is no progress. The task of modern management is to create organizations that will be teaching through the process through its life cycle. In the long term, success only those who are willing to innovate, to experiment and are responsible for new ideas will be successful. Retention at a high level, a strong corporate culture, steady growth, in a word and stability ahead of the competition, will achieve only one organization, with management at the helm, which places an emphasis on knowledge economy, new ways of managing and building relationships. Such a management knows the value of the organization makes potential employees, and it will be used only if employees are motivated to do so.

Keywords: management, learning organization, knowledge, innovation, masterful

1. INTRODUCTION

The main characteristic of the natural and social order is that they are in a constant process of change. Once established the state remains so briefly, rapidly changing and there is establishment of a new qualitative state, which again, as before, is briefly retained. And so on. People, with their innate ability were creating, create and will create the processes of transformation, using all its available resources, with the aim of mastering the order that is constantly changing. These constant changes make market competition “sharper” since the “goal of each company is to attract new costumers to its products and to keep the old ones… For a company it is essential to survive in the market, i.e. to be faster and better than the competition.”1

In order for management of a company adequately answer the challenges of modern business, such as the struggle for markets, shortening product life cycle, rapid technical change, etc., it must be innovative. It has to improve employee management skills to make them successful employees, satisfied with their job and motivated to work. That is, it must create a working environment in which to initiate, support activities and behavior of employees, which leads to constant learning, knowledge sharing and personal development. Only in that, way the productivity will increase, and they will respond to consumer demands. In these organizations are always moving forward, in the sense that they are not satisfied with achieved goals. The foregoing shows that good actors in a competitive battle, on the market will be those who have gained more knowledge and skills, i.e. those who are curious, with "pioneering spirit" and who have the desire for knowledge that will encourage them to discover and use the professional secrecy in the exercise of champion (masterful) results. Top results are looking for the top managers. These are the managers who are open and curious, who are experts in the implementation of ideas through the work of others i.e. they are experts in learning and work through others. They share their knowledge; learn the art of managing younger counterparts, creating good relationships in the organization and creative teams. This creates a critical mass of masterful managers in the organization. Their combined forces with

1 Milojević Miroslav, et al, “Business Intelligence”, International Journal of economics and law, Vol.2, No. 4, FORKUP, Novi Sad, April 2012., pp. 84.

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the vision and discipline create an organization that is constantly renewed, constantly going on and ahead of the competition.

2. THE LEARNING ORGANIZATION

"Old Economy" was based on standardized production, a stable hierarchy, even autocratic, how to manage the business systems and national economies brought prosperity and competitive advantage. This order was strong from 30’s of the second half of the twentieth century to the early 70's of XX century. Upon this follows crisis and in response to them a "new economy" was created that is global in character and where the only certainty is that is constantly changing. Those organizations, from multinational to the smallest ones, who have realized that still thrive, grow and get rich. They changed the course of business, continuing invest in knowledge and technology at all levels, to achieve the desired goal and so became learning organizations. All others that do nothing, do not perform adaptation to changes, will not work and will experience the fate of extinct species. The learning organization adapts to challenges by encouraging continuous learning, education and improvement of existing resources, both individually and collectively. This creates a more productive workforce, which corresponds to the modern concepts of business. Intellectual work creates most of the economic values, and knowledge is the foundation of successful organizations. The above-mentioned helps creating innovative climate, or in such organizations there is free exchange of information and ideas. Employees are open to each other, they are more flexible, willing to cooperate without prejudice, and interpersonal relationships are built on trust. The opinion of each employee is respected so each employee is involved in identifying and solving problems. Employees are the primary force of these organizations and they provide the most to organization. The point is to change consciousness. All must participate in learning; it is a process without end. Those organizations are capable of learning faster than the competition will help build a competitive advantage in today's turbulent and unpredictable business environment.

3. IMPROVING PERSONAL MANAGEMENT SYSTEM

"People gradually acquire new knowledge throughout life, but are not able to gain complete knowledge about the reality of the natural and social order."2 Managers are particularly interested in acquiring new knowledge and personal development, in order to efficiently and effectively manage people in business systems. Every man is another story. Two are no two same people on the planet Earth. This shows that there are no two identical personal management systems. Manager its own system of managing people in organizations builds and builds, first, by presenting and evaluating their own potential. It is necessary to always be compared with those who have greater success in achieving goals, because they are an incentive to initiate a competitive spirit and desire to be better than others are. Every man, manager, has unique potential, interests and behaviors. According to them defines its objectives and sees real possibilities for achieving them.

2 M. Radosavljević, V. Vučenović, Holistička tehnologija uspešnosti – kako postati uspešan, FORKUP, Novi Sad, 2011, p. 17

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Besides education of the manager, defined in the family, school, and social and cultural system in which it matures, it is important to master the knowledge of the implementation of defined objectives. The existing management systems lead a technology management system to new original levels. In order to manipulate them, it is necessary to constantly learn and practice that, observed for the longer term, create new knowledge and lead to innovations. Innovations arise in business environments that provide freedom to employees and allow heterogeneity in business behavior. They require special management and control system, because they do not suffer formalized, centralized form of government. It is therefore important for professional managers to know people and work with their employees to take an interest in their successes and any problems, to respect them and respect their opinions. Because if they know will help them gather around a common interest and will fully utilize the entire potential for the realization of objectives. Of the managers are asked to be able to quickly learn about the characteristics of their employees to easily assess their skills and other resources. That he will be able to do so only through a proper process of communication. Communication skills could be taught through many years, through careful listening and observation. Those managers who want to become "masters of their craft" know this very well. They are trying to listen to those from which they want to learn and master management skills, to carefully observe, listen and when they do not speak directly, respect their work and are always interested in their work. In order for manager to perform its job in the professional way he has, of course, gradually, to build the value of their personality, that is through its work to gain respect and create a personal and professional (expert) authority. This is achieved through learning, the implementation of existing knowledge and skills development and training in the activities they want to achieve top results. Also important is the openness towards people and willingness to help others, because it is a requirement to exchange information and review their own achievements and further upgrades. Only those managers who knows what they wants, i.e. clearly defined its goal and constantly work on its self-organization and self-efficacy, improve their existing personal management system and becomes successful professionals.

4. INNOVATIVE MANAGEMENT

The concept of management under the influence of constant changes in the environment and the organization suffers changes, which is the logical development of the organization and its management. Once these are radical changes and sometimes the changes are of "cosmetic" nature. Management has to live with changes, to adapt them and not only that, but it is desirable to create them. In the contemporary business, that performs an organization who innovate and its corresponding management, so-called, innovative management. Such management is made not only of professionals who efficiently and effectively direct the work of the organization and its overall resources to achieve the set goals, but they are broadly educated, professional, competent and creative staff. Innovative management as its basis has an innovation as basic resource. To innovation is coming by creative thinking. Creativity generates new ideas, which in turn is caused by individual human potential. The task of innovation management is to create a favorable atmosphere in the organization, in which each individual will have a chance to create ideas. In such an organization will be operated under the principle of "creative chaos", which is a known target, but how an individual chooses to achieve the goal and they are varied and flexible. Practice shows that whenever employees have the freedom to decide how to do some

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work, that he generally worked more effectively than if it was working on the principle of tutelage. Innovation is the implementation of new ideas and creating the conditions for newly created intention or action become useful work and be useful. Innovative management is the opposite of conventional management, which has the task of establishing order, control and sanction. Innovative management, rather than uniformity of classical management, in the work organization encourages, values the diversity of the business environment, hierarchical levels, deletes authority, and puts the knowledge and ideas, most valuable resource. Innovative management aims to create good, healthy relationships and eliminate the conflicts as a source of some problems. Nevertheless, that same so-called management encourages professional, creative conflicts, which are permitted and desirable in the innovative organization. In such organizations are exempt from the innovators in classical forms, for example, adherence to working hours, are not obliged to act according to certain operating and technological regimes, no deadlines, no norms, and so on. Thus the slogan, "Yes, you will work, but you will also have fun", an authentic incontestable business culture and not only business success but also success for humanity, the biggest brand in the world of "Google", says a lot about why it is necessary to give more attention to people’s choice. We are looking for not only knowledgeable and experienced people, but people who are open to new ideas, people who take initiative, who are patient, persistent, etc. All employees at headquarters called the "Google Pack" are obliged to spend one day in a week spent doing nothing. "Google" calls that day the innovation time. How much this motivation technique is successful, demonstrate fact that some of the most popular solutions were created just this way. Innovative management puts employees know that they will not be penalized if the search for new methods, techniques and ways to work more efficiently, make mistakes, and even damages. Because, thanks to the people who are not reconciled with the existing ones, which have struggled to find new and generally more efficient ways to achieve the defined goals, all humanity made progress. Of course, carriers of innovative management in time run out of energy to create an innovative atmosphere, because there is a need for changing management in innovative systems. New people in management brought changes of style that has a positive impact on organizational performance.

5. MASTERFUL MANAGEMENT

Increase of the overall world population and the development of the global market increase competition in the production of goods and services, which actually means a battle for survival. To survive, organizations must continually increase their efficiency and effectiveness in its operations; otherwise, it will stagnate and will be exploited by competitors. Moreover, it will survive thanks only if management is appropriately involved in the search for new, modern ways to increase business performance. It is the management who is the leader in all areas of administration and management of the organization and which has a significant impact not only on the success of the organization, but has an impact on the success of the national economy. Such management achieves superior business results and is called a champion or a masterful management. Maestro or a master is the notion that "usually refers to professionals who have attained the highest level of artistry and skill in performing a

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task." 3 Such management primarily encourages and supports all new and quality previously unknown methods, techniques and technology in achieving the objectives in the management of organizations. "The basis of masterful management is creation, accompanied by brilliant discoveries and ideas that have not been applied in management. Maestros never meet existing solutions, whatever kind of quality they were." 4 Of course, the result is the most important, because without the results there is no champion, i.e. maestro. Masterful managers are engaged in business development and improvement and functioning of an organization. They have no fixed working hours or are forced to spend their time in office; we can say they do not much buy they work smartly. They are characterized by a number of interdisciplinary knowledge and skills that they know the right way to realize in practice through the processes of organizing, directing and control of the organization. The main characteristics are creativity, invention and innovation, training, perseverance, ingenuity, and scientific. Masterful managers do not have one, but many of cited characteristics. The characteristics are mutually dependent, and often one without the other does not represent a value for itself. "5

According to numerous scientific studies, people every day use only 5% of its total potential, and about 95% remains unused. Those people who are aware of that have greater potential than others, and use them in whole, in relation to other people, more effectively achieve the desired goals, and in the organizations they work, they are working with much less effort and more satisfaction, than other employees, have greater efficiency and effectiveness in business and thus become maestros in their profession. In the specific ways, they achieve defined goals in a short period of time using the available resources. Such people are dominant in their own, not just the business environment, but also in the environment. Capital owners always want these people for themselves, i.e. that they manage their capital, solve problems, build quality relationships and motivate their employees to devote the best part of themselves in their work, and for such managers we can say they are as “maestros of a great orchestra.” An important characteristic these managers possess is the ability, , to create incentive motivational culture of the organization and carry out the selection of personnel who will accept and adapt to their system of work and behavior through their work. They know how to invoke the so-called professional conflicts that give birth to a radical, in some cases, a revolutionary solution in terms of business management system. Management formed in the period of industrialization humanity was intended, primarily, for the maximization of profits for the owners of capital, regardless of what happens with the resources, environment, etc. Professional management was looking for new ways to maintain and, furthermore, the dispersion of the current situation of industrial society. However, a gap that has always exists between wishes and reality in people forcing them (and still does) to find unused methods, methods and techniques to achieve its goals. Exactly that those managers who are called maestro in managing organizations, as each new age requires new management expertise were doing.

3 The term maestro is of Italian origin, the Latin magister, means a great master in the creation of musical works, music teacher, a great chess player, gentleman, etc., M. Vujaklija, Leksikon stranih reči i izraza, Prosveta, Beograd, 1991, p. 508 4 Ž. Radosavljević, Menadžment znanja i(li) znanje u menadžmentu (Od predvodništva do maestranosti i dalje ...), CERK, Beograd, 2008., p. 112 5 Ž. Radosavljević, Menadžment znanja i(li) znanje u menadžmentu (Od predvodništva do maestranosti i dalje ...), CERK, Beograd, 2008., p. 115, 116

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The new experts in management, i.e. masterful managers in their work rely on knowledge, experience, facts which are supported by scientific research, scientific discoveries. "In that sense, the large international corporations, associated with elite universities, but they themselves, represent the universities, because they constantly learn. Professors of elite faculties participate in making important business decisions of corporate, as well as corporate presidents, CEOs participate in the department, and scientific and technical council of business schools and faculties of business studies and thus connects theory and practice. The benefits are multiple, as experts from companies in the communications with universities refresh their knowledge, while corporate managers participating in the schools can transfer the practical demand." 6

This indicates that there has been an inevitable connecting of science with professional management, that is, scientific-technical progress as a basis of power of the modern business management system. Thus, the modern scientific knowledge embedding in management processes, they take new qualitative forms, and in accordance with that, take the development of the society.

RESUME

In the following years changes will be faster and competition stronger. Business system having the potential to overcome the speed of changes and uncertainty of time, will be able to learn and apply gained in practice, to implement original ideas and new approaches to solving problems will successful achievement of its goals. Peter Drucker in his book, "Management Challenges for the 21st Century" talks about the skills of management that needs to be developed "today" in order to be successful tomorrow and says, "Anyone who waits until these (challenges) become trendy, top-priority buzzwords will be left behind".

BIBLIOGRAPHY

1) Bandura, A., Self-Efficacy: The Exercise of Control, 1st edition, Worth Publishers,

USA, 1997. 2) http://ehstoday.com/news/ehs_imp_33020/, posećeno 30.01.2012. (The Magazine for

Enviroment, Health and Safety Leaders, Does Traditional Safety Work or Have We Been Duped?, Mar 1, 2000., F. David Pierce, CIH, CSP, is vice president of Leadership Solution Consultants, Sandy, Utah, and a contributing editor to Occupational Hazards)

3) http://www.getyouredge.com/GYE%20Docs/masterfulmanagementskills.pdf, posećeno 30.01.2012.

4) http://www.politika.rs/rubrike/Posao/t23051.lt.html, autor teksta Jovanović Jelena, “Ljudski kapital i nova ekonomija”, pisano 22.03.2007., sajt posećen 25.12.2011.

5) Malik, F., Managing Performing Living – Effective Management for a New Era, Campus Verlag, Frankfurt a. M., Germany, 2009.

6) Radosavljević, D., doktorski rad „Korporativni menadžment i korporativna društvena odgovornost u razvijenim zemljama i mogućnost primene u Srbiji“, Univerzitet BK, Fakultet za menadžment, decembar 2008.

7) Radosavljević, M., Vučenović, V., Holistička tehnologija uspešnosti – kako postati uspešan, FORKUP, Novi Sad, 2011.

6 Ib., pp. 119

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8) Radosavljević, Ž., Menadžment znanja i(li) znanje u menadžmentu (Od predvodništva do maestranosti i dalje ...), CERK, Beograd, 2008.

9) Radosavljević, Ž., Teorija, praksa i veština savremenog menadžmenta, DP pronalazaštvo, Beograd, 1998.

10) Senge, P., Peta disciplina, Adižes, Novi Sad, 2003. 11) Vučenović, V., Šampionski menadžment, NIP Obrazovni informator, Beograd, 2004. 12) Vujaklija, M., Leksikon stranih reči i izraza, Prosveta, Beograd, 1991. 13) Milojević Miroslav, et al, “Business Intelligence”, International Journal of economics and law,

Vol.2, No. 4, FORKUP, Novi Sad, April 2012.

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OSVRT NA OPSTE PRIHVACENE OSNOVE INZENJERSKOG MENADZMENTA

S’ ASPEKTA EMPIRIZMA I RACIONALIZMA

Radoljub Tomić1, Života Radosavljević2, Suzana Pajić2, Tomislava Mutavdzić2

1Alfa Univerzitet, Fakultet za strateski i operativni menadzment, Beograd,

Srbija, radoljub.tomic@fsom.edu.rs 2Alfa Univerzitet, Beograd, FORKUP, Novi Sad, suzana.pajic@fpsp.edu.rs

Rezime:Autori su, posredstvom iznetih razmatranja, pokusali da skrenu paznju naucnoj i strucnoj javnosti, da se u oblasti inzenjerskog menadzmenta puno toga mora istraziti, uraditi i urediti, te da se o inzenjerskom menadzmentu mora govoriti kao o multidisciplinarnom problemu, iz ugla tehnike i ekonomije. Znacajan doprinos treba da se da iz ugla filozofije i psihologije. Ovde razmatrani relevantni koncepti inzenjerskog menadzmenta zasnovani su na saznanjima u oblasti inzenjerstva, organizacije i ekonomije, kako bi se ova oblast najpre ispravno shvatila, uz siroko prihvacene odgovarajuce metodologije i tehnologije. Dominantno su reprezentovani aspekti empirizma i racionalizma. Definitivno je dat i osvrt u vezi uskladjivanja sadrzaja na razmatranu temu sa zakonomernim principima i pravilima, kao kod standardno ustanovljenih modela menadzmenta u slucajevima kada se analiziraju stanja ili procesi klasicnog inzenjerstva i ekonomije. Razmatranja su izvrsena u skladu sa prezentiranim dijagramima i tabelama, koji sami po sebi predstavljaju odgovarajuce rezultate pretezno proceduralnog tipa. Autori su svesni da je i ovo samo jedan od skromnih doprinosa da se ukaze na dominantno sistemsku dimenziju inzenjerskog menadzmenta, te da se otpocne objektivnije i pouzdanije pisati i raditi, da bi nauka dala svoj puni doprinos zazivljavanju menadzmenta u privredi, imajuci u vidu dosadasnja dostignuca i dileme i sto vise reprezentativnih rezultata. Ključne reči:. Menadžment, inženjering, empirizam, racionalizam, razvoj, nove procedure

REVIEW OF THE GENERAL ACCEPTED FOUNDATION ENGINEERING MANAGEMENT

WITH ASPECTS OF EMPIRICISM AND RATIONALISM

Summary: Authors through the presented discussion, tried to draw the attention to scientific and professional public, that in engineering management has much to explore, perform and edit and to the engineering management must be referred to as a multidisciplinary problem, from the perspective of technology and economics. A significant contribution to that from the perspective of philosophy and psychology must be done. Presented discusses are relevant engineering management concepts are based on the findings in the field of engineering, economics and organization to this area, first for properly understanding widely accepted the appropriate methodology and technology. Dominantly, aspects of empiricism and rationalism are represented. Definitely a review of the harmonization of the content on the topic being considered regulations with the principles and rules, as defined in the standard model of management in cases when analyzing the situation or process engineering and classical economics. Studies were carried out in accordance with presented diagrams and tables, which themselves represent the corresponding results mainly procedural type. Authors are aware that this is only a modest contribution to indicate the dominant systemic dimension of engineering management, and needs to begin to write and work more objectively and reliablly write, so that the science could give full contribution to establishing a management of the economy, taking into account the achievements and dilemmas, and the much more representative results.

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REVIEW OF THE GENERAL ACCEPTED FOUNDATION ENGINEERING MANAGEMENT

WITH ASPECTS OF EMPIRICISM AND RATIONALISM

1. Introduction The problem of scientific engineering management can be considered through the basic questions of epistemology. So that is here, for the initial consideration of engineering management, attention is directed firstly at the basics of the epistemology of the relevant problem. From comparative literature [1-5] can clearly be indentified that central questions of epistemology are:

(1) What is knowledge – which is that correct analysis or definition of conceptual knowledge?

(2) What includes all of our knowledge – from which things our knowledge comes from? (3) What are the sources of knowledge – on what way is certain knowledge acquired? (4) Is there a primordial knowledge? (5) What is a justified belief - under what conditions a certain belief can be considered

justified?

In the history of philosophy, philosophers have only sporadic interest in this last question, but still it becomes of crucial importance for many philosophers of the twentieth century and today. It will be mentioned that general scepticism is the beginning of epistemology in a way that it is traditionally understood, and this is just an attempt to justify the claim that knowledge about things is possible and to determine the role that the senses and the intellect play in acquiring that knowledge. In present context, should always be born in mind Plato’s teaching. Plato can be considered the true beginner of epistemology, since he was the first to deal with the attempts of providing answers to fundamental questions of epistemology: What is knowledge? How much knowledge can we meet, and how much of that what we usually think of as knowledge can be considered true knowledge? Are our senses the guide to knowledge? Can common sense be replaced with the knowledge? What is the connection between knowledge and true belief? – So all these questions are present even today. There is the opportunity to initiate this work in a broader discussion about sustainability of “Engineering Management” at the level of the concept, process and industrial content and even wider!

Beliefs that in terms of engineering management has reached certain acceptable level (especially in our country) are based on good or bad assumptions about what the experts in the field of science should speak and present evidence that encourage a subject presumption to which these beliefs are based. Usually, when a belief is true and when it is based on established principles of area it originates, we can say that this is knowledge. However, the most important question for us is whether is it justified to claim that certain class of truths is the knowledge (or, is knowledge about certain class of truths possible at all), which make that those epistemological questions are asked as general even here.

Epistemological directions depending on the source of knowledge are related to: rationalism, irrationalism, empiricism, sensitivity, criticism, intuitionism, dogmatism and skepticism.

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The authors here choose only two directions, believing that this will be enough to provide an initial answer to this question, otherwise, the authors continue to believe, that there is a danger that engineering management is adopted as a dogmatic model (based on the axiomatic approach), which it mustn’t and cannot be. That is why we should expand perspectives, critically examine the theory, models, solutions and general achievements in engineering management and rationally contribute to its implementation there where it is important from aspect of achieving the good effects in establishing and managing a reliable system models. It isn’t everything in engineering management as a legacy algorithm, since some of its variables do not behave in accordance with deterministic models.

It is worth to say that the size of irrationalism, sensitivity, criticism and dogmatism shouldn’t be ignored, since it is about people as essential elements through which the engineering management is realized.

For initial identification of the underlying problem we will firstly start from the widely accepted definitions of engineering.

The current definition of engineering refers to the use of basic mathematical principles, models and tools for developing useful solutions, tools and objects in different fields of engineering, technology, energy, economy and other realms of construction or achieving results in different line sizes. Today, practically there is no enterprise that can be performed without the application of knowledge and achievements in the field of engineering. Thus, in terms of generalization we can indentify two primary groups of the project that is activity:

- Researchable and developmental activities in order to achieve a new product and/or process,

- Design, technical and technological and production activities related to implementation of complex objects of different types, sizes, degrees of complexity and function.

2. A problem identification

Therefore, in accordance with the definition of engineering, item 1, the logical conclusion is that engineering management is actually management of engineering programs and processes. The term engineering originates from the word engineer – like someone who operates an engine, in accordance with [8]. The term engineering is used in practice to refer to a discipline that applies different methods, scientific and technical knowledge and experiences for designing and implementation of usable products, objects or processes. The term engineering is therefore used in practice to mean the organization or process in which the discipline of engineering is applied [8]. Engineering as a discipline for pragmatic realization of various projects can be defined as an engineering in several different levels:

a) Engineering in the broadest sense, includes the study of choice concept, the activities of designing and design and carrying out an investment project, which includes facilities, equipment, products and / or processes, applying project management.

b) System Engineering - Systems engineering, includes a series of evolutionary systems made of integration of more engineering disciplines and functional engineering, for the realization of complex engineering projects.

c) Engineering Management - Engineering Management, as the area that connects engineering and management, and includes the entire management of the organization

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with an orientation to the definition, documentation, realization, engineering, technology and production.

The term engineering management (or, preferably immediately establish the correct definition: Engineering Management System), evident and final, not unnecessary category invented, area and direction, or the need and compatible process with other processes essential for the successful realization of global or super-process that overall leads to the highest successful or final results and objectives, including the satisfaction of all participants in the realization of engineering interventions. The central part of the engineering structure is the system (as already stated), which if not fully defined, the way the nature of the problems, standards and users applications demand, allows participants in the realization of "management procedures" to do the selection, analysis and optimization of irrelevant or even the wrong variables, and to manage inappropriate model and processes while they (wrongly of course) think that they are coming to optimal and rational solutions. So, without exaggeration, in a set of errors and deviations that may accompany engineering management, we can talk about the wrong model of engineering management that, instead of reflecting managerial engineering, treats the problem in its bases (not) of the control engineering, i.e. one can speak of a process that can be characterized as a "model of violence" and not the management model (model, in the broadest sense of the word model as an object, product, process, etc.).! Firstly to determine the trends of science development and technology is necessary to put the relevant objectives of the company in various domains (humanistic, educational, cultural, technical, etc...) relating to:

- elimination of hunger - elimination of war - disease prevention - adequate treatment and prolonging the active human life - fighting against delinquency - prosperity - improving levels of education - reduce the share of physical labor - reducing working hours and etc.

Apparently the place and role of science and technical-technological development is clearly defined in the system development to the benefit of people. Tendencies of technical and technological development should be seen in the regulatory process to achieve adequate performances of technical systems (product, design) in terms of mechanization, automation, electrification, computerization, use of new working systems and etc. By comparing products made at different time we can see a tendency towards changing characteristics (dimensions, weights, design, safety and reliability, strength, speed, power consumption, environmental protection, safety and health protection of employees in the workplace, price, etc…). Technical features in overall clearly define the technical level of products. For example, the evolution of means for transporting people and goods (ships, trains, cars, airplanes) in terms of increasing the operating speed (ranging from a few tens of km / h up to several times faster than the speed of a sound, for the last hundred years) may consider the relationship of these features and technical level to the level of science, technology and available materials, production and control facilities, etc.., at the appropriate time. So, it is clear that the technical level of products changes with time. Similar thing happens in other domains too.

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Evolution of product demand also changes with time. At some time period new and old products supported by adequate processes are regularly in exploitation. New products don’t immediately displace the old ones (for example specialized agricultural machines didn’t entirely substitute agricultural tools, cultivators, tractors, harvesters). The old machines are still used but with reduced volume of usage. In accordance with stated above it can be clearly indentified:

- saturation of the market and reduced demand for old products - slowing down the product demand in standard application - growth in demand when it comes to the modernized existing products - affirmation and growth in sales of new products and - promotion and establishment of new products - prototypes of innovative content.

Demand depends on the product market needs, market stability, political, social and economic conditions, the correct segmentation of the market and etc. Evident is the fact that thanks to technical progress using the product cycle is constantly decreasing. That is way the cycle of demand and product placement also decreases. All of this should be taken into account in identifying market needs, research and development, design and construction, production and verification, as well as marketing of new products.

All set requirements should be developed in accordance with clearly defined realization program, which contains an optimal technical-technological product definition, activity plan with the bearers of the tasks and procedures and process for determining the complete work list, and control of critical parameters. All this is supported by a wide variety of management processes.

For the purpose of efficient realization of the underlying tasks many methods of research have been developed, development and design, which can roughly be divided into two groups:

- heuristic (intuitive) - algorithmic

Depending on whether we want to discover new scientific facts and knowledge, or we are looking for the instructions that are prescribing the sequence of activities during the design and execution of engineering interventions. The main stages of the project realization are principally related to:

1. Recognition; 2. Programming; 3. Planning; 4. Research and development; 5. Designing; 6. Preparation of prototype production; 7. Development and prototype testing; 8. Preparation of serial production of a product; 9. Development and serial products testing; 10. Product delivery; 11. Products monitoring in production and exploitation.

Activities under the number 4) and 5) are represented at all levels of project development (ideal design, preliminary design, technical design, and detailed design) in accordance with the chronological phase order of the product. With this level and scope of the above-mentioned facts, the problem will be understood in a good possible way if there is still something

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differently structured and analyzed at least minimally from the aspects of empiricism and rationalism. So, first things first!

3. The aspect of empiricism

Without too many comments, if you look at engineering breakthrough, one can easily establish a correlation between achievement and actual goods, effects and experiences with them. For example, the findings such as: lever, wheel, gunpowder, steam engine, sus engine, electricity, hydraulics, pneumatics, mechatronics, servo-technology, robotics, nano-technology, through which we can clearly analyze all technical and technological important for revolution and the development of society. All is being created in different evolutionary period of conscience and action of a man with different duration of definite fine tuning applicable solution, figure 1, and of course everything has been subjected to empiric’s evaluation and verification.

Empiricism in philosophy is defined as the direction towards which the whole knowledge is based on experience, there are no innate ideas, but only acquired ones (“Nothing exists in the mind that wasn’t in the senses before”). In the present context, methodologically speaking, it is a direction that collects, processes, and evaluates the empirical facts and generalizes the knowledge with inductive reasoning [2-4]. From an engineering point of view, empiricism and rationalism are difficult to distinguish, and even more difficult to exclude, and it will be in a such way, taken into considerations in this paper, able to spot during the discussion about each of these models.

The issues of product development (products and services) are very complex both from the aspect of designing technology, and aspects of the philosophy and methodology of defining, implementation and product placement. It is being studied and discussed on the basis of achievements and models establishment in the different disciplines, both technical as well as the other, primarily economic and mathematical. The goal is to through engineering management, i.e. through managing and regulatory processes fulfill a given goal and achieve the maximum possible effect. The reasons for extending the domain of definition and products design are primarily related to:

- General trends of product development (increasingly stringent requirements in terms of function, ergonomics, safety and reliability, ecology and quality control and testing, etc...),

- Methodology and technique (the use of appropriate mathematical models and optimal procedures) that allows effective product designing with a different objective function (minimum weight, high performances, effectiveness of implementation technologies, rational planning of production processes, rational maintenance of a product in exploitation, optimal parameters of process control in manufacturing and testing of a finished product, the application of statistical analysis and drafting of empirical models related with products, etc..),

- Market requirements (product with reasonable price, timely and continuous supply of products of stable quality of the market), as well as

- Special demands of the users on commercial and special purpose funds dealing with specific contract situations.

It is clear that science is based on the overall achievements in science but also in developments in the industry, where it can clearly be seen particularly rapid progress especially in the last quarter of the last century.

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The efficiency of manufacturing firms depends on the market competitiveness that is measured by the cost, quality, on time products delivery and adequate logistic products support, in exploitation. In the same sense are evident new trends of development and modernization of existing products and the requirements that the company presents to designing organizations in terms of developing and products designing for the market. Identification of market needs and providing the necessary conditions (organization, equipment, materials, personnel, documentation) for the realization of appropriate products quality is a priority of manufacturing firms. Therefore, manufacturing firms must promptly and continuously change and adapt the program orientation and product range, quality, price and performance of products and resources involved in realization of a new profitable program.

A trend of your own research - development and project oriented companies regarding the establishment and implementation of new products is evident. The reasons should be sought in the need for quick and clear view of the organization and the possibility of establishing effective systems of work in accordance with available resources. It is still the most realistic and most common variant of the product development based on the unambiguous division of labor between production companies and specialized organizations of design.

The task of science is to investigate the object in the process of development and design, and to reveal the internal lawfulness of the development process and on that basis to develop regulations and procedures that will enable the work process to be rationally governed and controlled.

Science should provide the secure base for solving the project tasks and to implement hierarchical essential procedures for solving different tasks on the same basis of clearly defined procedures and practices. With the advent of computers, for example, in the designing process and calculated construction budget (CAD / CAM / CAE), a new phase of the science designing with the trend of developmental methods that will enable more comprehensive and universal application in this field is generated. The computer is suitable for operation in all areas, from setting requirements / tasks, through the elaboration of a functional structure, searching for solutions for every partial feature of structures, conceptual problem solving, decision making in various forms, the technical and economic evaluation of options, to designing, development and project control documentation and database creation and definition of technology for the realization of the product [9]. It is similar in other areas. It is evident that empirical dimension is dominant here. The man release of a physical work is also the subject of research procedures that lead to faster development and putting a new product into operation. A number of other properties of various systems and structures such as aesthetic, manipulation, ergonomic, technological, and economic properties, properties in terms of energy efficiency and environmental characteristics, and product compliance with legal standards, make a significant impact on research and product development. Therefore, it is necessary to use scientific methods more effectively, increase the motivation to better design and establish the appropriate methodology prototype testing to verify the developed products in order to guarantee that the same is in operation to behave with set requirements. The typical products development in the period from the eighteenth to the second half of the twentieth century is given in Figure 1, in accordance with what is set out in [9]. To be able to carry out more realistic analysis of the indicators in Figure 1 it should be considered the appropriate conditions in terms of science conditions and working conditions of

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creative people at the appropriate time. It is clear that at the present time the designing process was developed primarily on the basis of science and in the earlier periods was dominant experience.

Century XVIII XIX XX Time for development

Product /year/

Micro processors Integrated circuits Transistors Radar Television Radio Telephone Steam engine Photography

2,5 3,0 5,0 15 25 35 56 85

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Figure 1. Characteristic products development in appropriate time

4. The aspect of rationalism How should, all that was discovered found be rationally used concerning the aspect of rationalism. Suitable applications, organizations, rational energy management and energy efficiency, ergonomics, ecology, aesthetics, safety and health at work, reliability, quality, and permanent research of products parameters, technologies and processes, these are all areas where engineering management reasonably could find a foothold from the aspect of rationalism. Rationalism is a position in the theory of knowledge according to which the process of learning a critical role and importance of these findings as a measure of value has human reason [4]. With the framework set out in empiricism, further discussion will be focused on the evolutionary product development, as well as compatible and complementary to the whole engineering management focused on the development of products [9]. Evolution of products in general, is primarily caused by:

- Continuous improvement of technical and technological level of products - Evolution of product demand - Development of new materials - Development of production and control technologies - Development of production and control capacities - Development of production and control processes - Type and volume of research and development papers

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- Organization - Standardization - IT support - Logistic support of products in exploitation - Reducing development costs, production and exploitation and - Other social goals

The procedure for initiating, establishing, implementation and marketing of new profitable products is given in Figure 2 [9], a procedure with identification of specific conditions in terms of security indicators to enter into a new program with a reasonable risk given in Figure 3, a table with the expert evaluation of partial functions, which all in all determinates the level of competence of the company that under reasonable conditions must accept the development of a new product is presented in a table T-1, using equation (1). The content of Table T-1 is based on the optimization equations (usually using several criteria optimization with different types of variables), where must clearly be identified the objective function, variables and constraints of equality type and / or inequality, equation (2) to (5), with the illustration in Figure 4, in accordance with [9].

Fof = ∑qi pj / (pmax ∑q i ) ≤ 1,0 (1)

Where: -F of , is a function of company capabilities

-q i , is an important factor in the partial functions of the company

-p j , is a level of competence of the company based on these partial functions (number of points)

-p max , is a number of points for the supposed ideal solution

For a product to be of a highly overall quality it is necessary to be of a high technical level with stable quality indicators with competitive ability in the market, to ensure economic efficiency and that its quality of the normative and technical documentation is high.

The procedure, from initiation of the program (first articulation and selection of ideas for a new product) to choosing a variant of realization, shown in Figure 2 is in accordance with [10]. Always, after the identification of market needs, it is necessary to conduct a proper analysis for investigating the necessary conditions (new and available that should be provided) under which the program can be implemented, providing that the technical and economic risks are minimal.

For respective purposes many heuristic and algorithmic methods have been developed. Here a presented method is based on both concepts. In the first phase, it respects the intuition of a proposer and in the following stages is based on logical and mathematical algorithms.

If the idea of a new program, project or product is positively assessed, according to Fig. 2 and 3, and Table T-1, it accesses the definition of access to the development of products based on research, development and testing concepts. In accordance with the project it is defined and cost successful marketing strategies and techno and economic analysis, based on which the business makes a definitive decision about joining the program, or a decision on the development of technically and commercially reliable product.

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YE AN IDEA

Is the idea in accordance with the N objectives, strategy, and resources of the

firm?

YE GENERATING IDEAS

Is the idea worth onsid ing?

N

YE

YE

Definitely a new product implemented is presented to a market testing to determine whether defined sales system meets the expectations of the company. If it is necessary, the product continues to refine, so as to ensure a standard product whose sales will meet expectations of the supplier. And at this level, if it is necessary, the product is modified or marketing program, or both, in order for product placement to take place in the desired way to a better effect on the basis of profits, sales, sales growth and customer preferences. Based on complete and clearly defined requirements, a product design is accessed, where the evolution of designing solution begins the task of studying the phase and phase ends with the monitoring and improvement or modernization of a serial product or product that is already in exploitation.

BUSINESS

ANALYSESS Will the goal be achieved? N Market and cost analysess.

YE MARKETING STRATEGY

DEVELOPMENT

Establish a cost successful marketing N strategy in accordance with the terms that a company can provide. Propose a

cost, promotion and products destribution.

PRODUCT DEVELOPMENT YE Develop a technicaly and comercialy

reliable product

YE MARKET TESTING

Does the sales of a product satisfie the company expectations?

N YE

N Can a product definition be further worked out?

YE N DEVELOPMENT AND TESTING CONCEPTS

Do the consumers want this kind of a

product? Develop an alternative product conception

in order to find suitable options of a product.

Reject a posibility of further

developmet!

N

COMMERCIALIZATION Does the sales of serial product meets

the company expectations?

N YE

Would a modification of the product or marketing program

help?

Future Plans Development

Figure 2. General diagram of a further development of a new product

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NO

NO NO

NO

NO

NO

Proposals and plans (initially)

Are the

NO requirements of wider interest of

society satisfied?

Are the conditions of the market opportunity

compatible with the interest of the

company?

YES

YES

YES

YES

OBJECTIVE-I: environmental protection and increase the

quality of life OBJECTIVE-II: profit, customer preference, volume and sales

growth

Are the conditions in the market

compatible with the funds of the company?

YES

YES

The company has adequate capital?

YES

NO Can be the capital

available at a reasonable price?

Can be the know-how

YES

YES

The company contains the

necessary know-how? The company has the necessary capacity of

the distribution?

NO YES

NO YES

available at NO a reasonable price?

Can be the capacity of distribution available at

a reasonable price?

Next phase: Development and testing of concepts

Reject the possibility of the program evaluation

Figure 3. Analysis of compliance requirements in terms of risks based on

entry in development and implementation of a new product

The process of studding and decision making is developing in accordance with the importance level of the considered problem and established limitations [9]. This process implies the following global activities:

- Important parameter analysis for establishing concepts of designing task; - Identification of the main problem of product development; - The state level of science and technology in the domain of the task; - Identification of conditions for realization and distribution of products; - Classification requirements; - The entire task elaboration.

Based on the foregoing, a competent analysis that needs to give the answer regarding the availability of economically viable variants of the development, implementation and marketing of products should be done, and that defined product will be of required quality. Product requirements are classified as: primary, alternate and minimal, with important differences. The main requirements are related to the function, capacity, security and reliability, and etc. Alternative requirements are relating to the choice of generators and power, size and

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number of devices and so on, and the minimum is related to the disposition of the components, color, etc... Generally, the problem must be placed at the level of optimization and then can be described by the following set of functions:

W = W (X 1 , X 2 ,.... X n )

ψ 1 = ψ 1 (X1 , X 2 ,.... X n ) = 0

- the objective function

......................................... - constraints of equality

ψ m = ψ m (X1 , X 2 ,.... X n ) = 0

l1 ≤ φ1 (X1, X 2 ,.... X n ) ≤L1

Where:

......................................... – constraints of inequality

ls ≤ φs (X1 , X 2 ,.... X n ) ≤L s

W- is the objective function X 1 , X 2 , X 3 ,...., X i – are variables, (i=1-n) ψ1 , ψ2 , ψ3 , ...., ψj , ...., ψm - are functional limitations, (j=1-m) φ1 , φ2 , φ3 , ...., φk , ..., φs - are regional limitations between lower l k and upper Lk , borders(k=1- s).

A special case of the regional restrictions are page limitations, which require that all variables X1, X2, X3, Xn must be positive. Functional limitations ψ j = 0 require leading optimization procedure with variables in the form

of relations among the parameters, which may be dependent and independent. Figure 4, grafically interprets some of these concepts in 3D space.

Figure 4. The objective function W(X 1 , X 2) with limitations in 3D space

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The objective functions with more pronounced extremes in mathematical programming, called multimodal functions [9]. In relation of optimization it is possible to search for minimum or maximum objective function. In mathematical terms, the problem of maximizing the objective function W '(X) in the set X, is reduced to the problem of minimizing the function W” (X) by the relation:

(5) W''(X) = - W'(X)

Additional considerations regarding the problem of optimization are possible in accordance with [9] and the content presented in the point 6. Each and every idea should be ranked bringing it into connection with conditions available to possible investors and implementers. Thus, for example many different ideas could be ranked, including ideas for large projects such as: the construction of hydropower plants, construction of power stations, the construction of landfill waste, construction of infrastructure for inter- modal transport, development and manufacture of new construction machinery, development and production of wind turbines, development and production of new cars and so on. Here the major projects are taken tentatively as projects that involve significant investments, involve high costs, characterized by a high degree of complexity, which bring together a number of specialized subcontractors etc. Here, the idea is not to directly deal with specific projects but to call the relevant methodological approach in respect of obtaining a valid assessment to decide on new projects under specific conditions.

Table T-1.The company capability analysis dealing with the entrance into development and

implementation of a new product (the idea ranking for the product; example 1)

Rating ideas for product Skill level of a company

Requirements for Relative (b) Marginal ranks success of product

Image of the company and

humidity (a) 0, 0,

0 1 0, 0, 2 3

0, 0, 0, 0, 4 5 6 7

0, 0, 1, 8 9 0 0,

c (a×b)

buyer’s affection 0,08 8 0,064

Marketing 0,05 0. 9

R&D 0,16 0. 7

Staff 0,14 0, 6

Finance 0,11 0, 5

Production 0,12 0, 9

0,045 0,112 0,084 0,055 0,108

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Location and communication benefits (advantages) 0,06 0,

7 0,042

Quality and ecology system 0,06 0, 8

0,048

IT system 0,08 0, 6

0,08

Procurement and general logistics 0,14 0,

9 0,126

(Mandatory) Σ=1,00 Overall rating: Σ=0,764 W is always ≤1,00

*RANKING: W=0,00 – 0,40: WEAK; W=0,41 – 0,75: SATISFACTORY; W=0,76 – 1,00: GOOD

Therefore, it can happen that some technical and technological projects are found good, but that in specific setting (because of the lack of available technological and production resources, no funds or would the market response due to the current crisis be inadequate and etc.) they cannot be realized with reasonable risk, and should not be immediately rejected for all time, but they can temporarily be postponed, but still kept in mind, and when conditions are recognized in a certain cycle that the subject projects can successfully be implemented, they should be activated. Of course, there will be a group of projects that will technologically obsolete, and so it had to bear in mind the final filing proposed with the adding "definitely with no perspective." According to the results of analysis and condition quantification, Table T-1, under which products can be realized (the parameters are taken conditionally for a particular domestic firm that operates under the principles of a large business system), the idea for the development and manufacture of the windmill ranked (with the mark W1=0.764). It is evident that the idea is attention worthy and it gives a clear indicator regarding the acceptance of the subject for project development with minimal risk. Based on the presented procedure, Figure 2 and 3, and based on equation (1) to (5) and Table T- 1, several possible options are defined and discussed for solutions and new products in terms of project implementation regulated landfills for municipal waste (the idea is marked with W 2 = 0.638) and for program development of new construction machines (the idea is marked with W 2 = 0.547). The complete issue can be extrapolated to the global level of corporate governance, this is directly related to consideration of the information state in the development of a new product or service (as part of the environmental information), or in the context of defining a suitable model of education (for example, concerning the avoidance of entry into programs that carry a high risk in the implementation as well as regarding the terms of total market or business success), and the argumentative favoring different levels of investment projects in order to establish sustainable development strategies that is poverty reduction in Serbia [12]. Further on we could focus the attention on aspects of skepticism, as will be discussed in our future works. Why? -Only when you take into account the widely accepted definition of skepticism, as explained below, everything becomes much clearer [4]. Skepticism is orientation based on a thought that stands its grounds that all lies on a theme- driven consciousness which is negatively expressed about being able to grasp the truth using the senses or the way of thinking.

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Skepticism is usually defined as the philosophical doctrine of the doubt. However, skepticism is not a point of a doubt. The term doubt refers to uncertainty, indistinctness and indecision. Philosophy of skepticism is not the philosophy of a doubt. On the contrary it is built on a position of certainty that sensuous and thoughtful cognition does not necessarily lead to the truth. In its doubt, this philosophy is certain in falsity of human cognition [4]. Skepticism is the seeking, exploring (Gr. skepeein - search, explore, skeptikos - or zeletikos – the one that asks, investigates, reviews). The meaning of skepticism is contained in the attitude of trial restraint. Summary, of what was being stated could be set as the norms of behavior managers and holders of management functions solely as a sustainable management system with an active attitude, critical thinking and creation in the area in which the underlying processes are realized, always respecting the current level of science and practice of the profession.

5. Final notes

There will be, for easier understanding the complexity of the system correctly set problems related to engineering management, firstly a set of loops will be displayed in the multi criteria optimization of the values of variables for a given objective function and the corresponding limitations, Figure 5, which is in connection with unambiguous previously discussed issues regarding the display of diagrams that reflect the evolutionary process of market-oriented solutions, Figure 2, and the process of deciding on joining the new program with a reasonable risk, Figure 3, in accordance with [9,10,11].

To obtain an optimal solution for the generally accepted market model of the product, it is necessary to implement a number of optimization iterations for the different loops, from the mathematical to the market, Figure 5.

Here we clearly see that it is not enough to go immediately to a variant solution from concept to full implementation, since a simple and obvious way cannot establish a set of parameter values that provide the maximum of the product high marks with its positive effects in terms of achieving the objective function, but it has to analyze more variants, and variants within these more specific solutions, so to be to able to develop a reliable product for the market in order to all development and production costs, including investment, be reduced to a minimum. The logic of selecting the optimal solution, regarding the set requirements fulfillment based on the development, manufacture and new product marketing (new product, technology, process, software, services,) can be seen precisely in accordance with the diagram below, Figure 5. For the compatible considerations let’s remind ourselves of the equation (1) to (5), with appropriate justification, that table T-1, as well as support tools and expert evaluation of proposals for new or existing projects with innovative aspect of conditions fulfillment at required level of firm-supplier regarding the implementation of rational acceptance of each project considered [10].

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Consumers’ demands

Mathematical models

Through all of these models we

are going to minimize the

costs of development,

production and marketing (W-

objective functions:

minimum of cost)

With the

Energy- efficient

models

Functional models

Structural models

Technological

models

Ergonomic

models Does not satisfy

Does not satisfy

Esthetic models

inclusion of environmental dimensions, necessarily

increase the cost

Satisfies

Economic Models (the lowest cost)

goals but not the operating

performance of the system).

or process does not change the

characteristics of the system, or may even be

reduced!

Does not satisfy

Ecological models Satisfies Opste prihvaceni Satisfies

environmentally go to the market and exploitation

income (if does not satisfy goes back in a loop to optimize the new

limitations!

M A R K E T

Figure 5. Complex block of optimization solutions for the general market successful product

6. Conclusion The authors, through the consideration set forth above, tried to draw attention to scientific and professional public, that in engineering management has much to explore, edit, and do, and that the engineering management must be referred to as a multidisciplinary problem, from the

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viewpoint of technical persons and economists who have the appropriate upgrade to the epistemological aspect parameters, and the point of view of philosophers and psychologists who deal with (i.e. which necessarily have to deal with) models of engineering management from their own perspective and upgrade in the field of engineering, organization and economy, to this area is first properly understood and defined, and then establish the level of widely accepted methodologies and technologies, and definitely would be brought into line by legitimately principles, as defined in the standard model of classical condition or process engineering and economics. It is the long way, to come to valid results, and above all through the impact of engineering management, but it is time to proceed with less enthusiasm to say that we have adopted the subject area, widely accepted and applied, to understand and to continuously generate better results , which in nowadays it is not true, and what would the next day with a systemic and systematic work had to be leveled with the rules. In accordance with the general effort to get to higher level of knowledge through various types of education, in the interest of reducing overall poverty in Serbia, the relevant aspects of management can be seen in [12]. Today, in countries with extensive development, the results are accomplished of which could be related with interventions based on engineering management, without any surprise are likely to speak in favor of withdrawal from such operations, but in favor of its acceptance, because the results of the subject types are of low rank and importance in relation to the results realized by renowned pragmatist, primarily in industry and economy. In fact, for the purpose of making the correct assessment we should first start with the fact that the engineering management can be implemented only where there is order, and with us in most cases the order, in the full sense of the word, there is none (at various levels, often in companies that are lead conventionally, which long time ago stopped to learn and innovate processes, organization, management and leadership, as well as lower-level processes in this environment, the level of the firm or project), and where there is no order cannot be controlled but it leaves the possibility of different kinds orientation of stochastic type, and therefore the results of low rank are achieved that are present today in under developing countries. Engineering management involves regulation of the system, establishing a cautious and responsible i.e. the host taking care of everything that is important for the sustainability of a system [10].

BIBLIOGRAPHY

[1] Popper, Karl R. (1972), Objective Knowledge: An Evolutionary Approach, Oxford: Clarendon Press.

[2] Rescher, Nicholas (1978), Scientific Progress: A Philosophical Essay on the Economics of Research in Natural Science, Oxford: Basil Blackwell.

[3] Popper, Karl R. (1984), “Evolutionary Epistemology,” in Evolutionary Theory: Paths into the Future, J. W. Pollard (ed.), London: John Wiley & Sons Ltd.

[4] Radnitzky, G. and Bartley, W. W. (1987), Evolutionary Epistemology, Theory of Rationality and the Sociology of Knowledge, LaSalle, Ill: Open Court.

[5] Rescher, Nicholas (1989), Cognitive Economy: The Economic Dimension of the Theory of Knowledge, Pittsburgh: University of Pittsburgh Press.

[6] Rescher, Nicholas (1990), A Useful Inheritance: Evolutionary Aspects of the Theory of Knowledge, Lanham, MD: Rowman.

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[7] Renzi, Barbara G. and Napolitano Giulio (2011), Evolutionary Analogies: Is the Process of Scientific Change Analogous to the Organic Change, Newcastle: Cambridge Scholars Publishing.

[8] Heleta M, Cvetkovic D., Osnove inzenjerstva i savremene metode u inzenjerstvu, Univerz. Singidunum, Fakultet za informatiku i menadzment, ISBN: 978-86-7912-204-9, Beograd, 2009. str.268. [9] Tomić R., Projektovanje masinskih konstrukcija (Design of mechanical structures), University book, M-Graf, Trstenik, 2004. CIP - Cataloguing in publication National library of Serbia, Belgrade, 621.01 (075.8), ISBN 86-906119-0-8, COBISS.SR-ID 117161228, pp.288.

[10] TomićR., Nikiforova E., Pajić S., One approach to selection of the effective product in the domain of internal transport, ANTiM2012, 3rd International Conference “Application of New Technologies in Management”, “Faculty for Education of the Executives-Novi Sad”, proceeding-Vol. 1, ISBN 978-86-87333-02-4, Belgrade,19 – 21 April 2012. p.548-553.

[11] TomićR., Radosavljević Ž., Kastratović E., Šćekić V., Radosavljević M., Pajić S., Crucial elements of new product development management, Journal TTEM – Technics Technologies Education Management, Vol.8, No.2, 5/6. 2013, ISSN 1840-1503, Sarajevo, 2013. (acknowledgment of paper reviews and publication). p. -__.

[12] Pajic S., Poverty Reduction Strategy in Serbia Through Education, 1st International Conference “Law, Economy and Management in Modern Ambience”-LEMiMA2009, Proceedings Vol. 1, ISBN 978-86-87333-02-4, Sokobanja, 2009. pp.309-314.

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LOGISTICS RESEARCH TOOLS FOR FLEET OPTIMIZATION IN ROAD TRAFFIC1

Strašek Rok1, Kavkler Iztok2, Orbanić Alen3, Horvat Boris4, Novak Matjaž5 1Faculty of Management Koper, University of Primorska, Slovenia, rok.strasek@fm-kp.si

2Institute Andrej Marušič, University of Primorska, Slovenia, iztok.kavkler@upr.si 3Institute of Mathematics, Physics and Mechanics, Slovenia, alen.orbanic@fmf.uni-lj.si

4Abelium d.o.o., Research and Development, Slovenia, boris@abelium.eu 5Faculty of Management Koper, University of Primorska, Slovenia, matjaz.novak@fm-kp.si

Summary: Relatively cheap costs of GPS tracking in combination with modern information technologies and accessible good quality digital maps (GIS) represent new possibilities for development of quality research tools in logistics. With the current economic crisis, increasing fuel costs and considering that the logistics represents a large portion of costs in value chains, the interest of modern companies for investments in research and development of custom fleet optimization tools is increasing. The contribution deals with research in progress of in a project with a road maintenance public service enterprise in Maribor, Slovenia. Issues and approaches are presented in the contribution.

Keywords: transportation, logistics optimization, operations research, digital maps, GPS

1. INTRODUCTION

A logistic system dealing with road transportation activities typically consists of a fleet of various vehicles (specific functionalities, parameters), logistic processes (depending on the purpose of the system) and a road network to operate on. Motivation for investments in research and development regarding system's operations depend on economic situation, while the level of information technology support in the system plays a significant role. A common setting includes integration of company's information system with a service offering up-to-date digital maps (matching the current state of the road network) and a real time GPS (Global Positioning System) tracking service, provided that the tracking devices are installed in all vehicles of the fleet.

2. TECHNOLOGY

The main challenge with digital maps (so-called GIS - Geolocation Information System) include providing up-to-date data in the geometric layer (the base level of GIS) topology layer, as well as in other information layers, which are specific for a particular logistics system (for instance direction of roads, width of roads, critical points, crossroads, pavements, additional infrastructure, elevation, speed limits, distribution plans, etc.). The main challenge concerning GPS tracking, on the other hand, is to provide a reliable tracking infrastructure. In the era of mobile phone networks, the real costs of a unsophisticated tracking system includes a server connected to relevant software and tracking devices, which

1 The work presented in this paper is partially financed by Slovenian Research Agency (ARRS); project L5-4282

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are nowadays of similar complexity and price range as ordinary mobile phones. Some of the providers of such devices are offering HaaS (Hardware as a Service) payment model. Hence, such a technology is affordable nowadays even for smaller logistics enterprises. The infrastructure for data collection is thus currently available, which means that the challenges now focus more on so called Business Intelligence, including data organization, transformation, analytics and reporting, providing real-time feedback to support company's processes and provide valuable inputs to management. Additionally, data sets can be often used for providing new services that base on the exploitation of the data collected and processed (for instance, providing the up-to-date network data to other enterprises). The main goals of the project in progress are: (1) identify possible useable data sources, (2) organize efficient data model for data storage and management, (3) provide relevant business intelligence tools and (4) establish prototype optimization and decision support framework for a chosen complex problem (for instance managing a fleet while plowing the snow in the winter). The project has started in the middle of 2011. This paper briefly summarizes the challenges and some current achievements of the project.

3. DATA LAYER

Efficient modern information systems in logistics represent a continuous challenge. Logistic transactions and data related to the environment in which a logistic system functions are usually represented by large datasets, which have to be handled using special approaches to obtain from them the information of an added value. Nevertheless, it is often the case that in spite of the size, such datasets miss certain information due to improper collection of data or storage saving provisions in the past. Ideally, an information system would have to record every (logistic) transaction and have available the entire environment related information (current state of roads, whether conditions, traffic jams, etc.). Such a system would have to have a large amount of intelligent sensors to collect and process huge amounts of data. Clearly, by using nowadays computer technology, this is not affordable and hence possible. However, on certain data collections more and more advanced specialized applicable services can be built already with the current technologies. The most important data sources needed to establish data model framework, of course specific to a logistic problem we are trying to optimize, are: (a) up-to-date digitized network, (b) relevant data of fleet (capacity, costs, equipment on the vehicles) and their tasks (distribution, road maintenance, plowing etc.), (c) real-time GPS tracking data and (d) specification of processes involved including their requirements and other constraints (laws, time-windows, detailed process descriptions etc.). Access to high quality digital maps is currently provided mainly by two international corporations, Tele Atlas 2 and NAVTEQ3, which offer professional maps with several layers of metadata (category of roads, directions, turns, traffic info etc.); their maps are regularly updated. These maps are essential in professional applications like GPS navigators and other traffic monitoring and guiding systems. Using them involves certain costs that can pose limitations for research use, although these companies offer certain discount possibilities for universities and academic use. But for researchers there are also other possibilities. For instance, a Wiki-like open source project OpenStreetMap 4 provides the access to decent quality

2 Tele Atlas (TomTom), http://tomtom.com 3 Navteq, http://navteq.navigation.com 4 OpeStreetMap, http://openstreetmap.com

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digital maps for certain areas, which are contributed by the community under Creative Commons copyright license 5. In Slovenia, Surveying and Mapping Authority of the Republic of Slovenia established Cadastral register of the economic public infrastructure of the Republic of Slovenia 6 in which the data from geographic information systems covering Slovenian road infrastructure is stored. This dataset contains quite reliable information, but not so many useful metadata for routing planning, like the above-mentioned digital maps services provided by the professional companies. Finally, there is Google Maps7 service, which through Google Maps API and Google Directions API provides powerful user interface, visualization, geo-location and even GPS tracking visualization support. In particular, the later service represents an important breakthrough in availability of the GIS services for wider public including researchers. It is important to note, that the underlying technology for Google Maps are Tele Atlas maps. In our particular case, the logistic enterprise involved in the research project is also in charge for local road mapping (municipality of Maribor) which together with the everyday maintenance and supervision services presents an excellent test case for research and development. Hence, our team will be able to work on means of effective logistics supervision, data analytics, optimization, providing instant feedback and transparency for management purposes. In addition such instant feedback opens possibilities for development and testing of various decision support and optimization tools. The company's fleet and processes are specific to their tasks, which are related to the road maintenance activities, and include monitoring the state of roads, cleaning roads, plowing and sanding the roads, etc. All the vehicles of the company have GPS tracking devices installed, which report the current position (GPS coordinates) and velocity of the vehicle periodically in time intervals as small as 15s. The tracking system infrastructure is provided by a specialized provider, who also maintains certain vehicle statistics. The setting in which the company has simultaneously control over map maintenance and tracking provides an excellent research environment for development of data management, analytic and optimization techniques and thus contribute to overall improvement of the chosen and similar logistics systems. In our prototype data system we use PostgreSQL8 database with GIS addition PostGIS9, which is a high quality open source database system. Communication with GPS platform is implemented using Web services offered the GPS tracking service provider's server.

4. SOFTWARE LAYER

In the current state of the project we have made a desktop application in C# language using the library SharpMap 10 with bindings to PostGIS (visualization and management of GIS data) and using WCF (Windows Communication Framework) for communication using Web Services. By using this computer program we provide a minimal basis for further data managing and prototyping.

5 CC licences, http://creativecommons.org/licenses 6 Zbirni kataster gospodarske javne infrastrukture, http://e-prostor.gov.si/index.php?id=240 - in Slovene 7 Google Maps API, http://maps.google.com 8 PostgreSQL, http://www.postgresql.org 9 PostGIS, http://postgis.refractions.net 10 Geospatial application Framework for the CLR, http://www.codeplex.com/SharpMap

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Figure 1. Screenshot from the current application showing a GPS vehicle position on the digital map with terrain in the background.

Figure 2. Screenshot from the current application showing a GPS vehicle and the underlying graph representing the network topology.

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But the challenges of the project do not stop here. One of the partners in the project is the company Abelium11, research and development, whose main expertises are development of tools for data analysis, data exploitation and optimizations. Using the knowledge obtained through knowledge transfer from the University of Ljubljana, they are developing a powerful network analysis tool net.Plexor, which is based on the past knowledge of a well established academic software for large network analysis Pajek12, see [1]. The tool is still under development and will be used in further phases of the project to carry out certain advanced data analyses and visualization. Using it, we shall develop specialized analytics and presentation methods, which can be later incorporated in the monitoring and optimization framework. With such a powerful tool combined with other data mining tools, we will address the issues of monitoring of the optimality of vehicle behavior (for instance usage of gas), segmentation of the network for purpose of developing more efficient logistic distribution plans (for instance in snow plowing) and will be able to analyze variations of the plans which happen because of interventions due to external factors (weather change, breaking down of a vehicle, an accident). This will contribute to constant improvement of the logistic distribution plans, which will now with the support of the technology be much more faster and efficient. Beside the optimization based on the past data, one of the big challenges is how to provide redistribution of tasks for the vehicles in the real time, if priorities in the system change (again due to external factors). A concrete example of a logistics activity will be plowing the roads, where each vehicle has its own plowing plan with priorities assigned to the routes. A large majority of vehicles is plowing simultaneously while a small part of the fleet is on stand-by. If weather conditions change, efficient way of redistributions of parts of the plowing plans has to be carried out.

5. FURTHER WORK

The current result is an implementation of the application which involves a database and integrates various data sources. In continuation of the project, we shall address the analytical and optimization challenges, which will contribute the most to cost-cutting and will enable us to develop the new services through the exploitation of the data. For that, certain new analytic methodologies will have to be developed and implemented.

BIBLIOGRAPHY

[1] W. de Nooy, A. Mrvar, V. Batagelj: Exploratory Social Network Analysis with Pajek, CUP, 2005. Appendix 4. ESNA in Japanese, 2010. Second edition, 2011.

11 http://www.abelium.eu 12 Pajek, http://pajek.imfm.si

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GROWING IMPORTANCE OF LEGAL PATENT PROTECTION

Vladan Stanković, Nebojša Gijić, Bojan Zdravković

Faculty for Education of the Executives, Belgrade, Serbia E-mail: vladan.stankovic@fpsp.edu.rs, nebojsa.gijic@fpsp.edu.rs,

bojan.zdravkovic@fpsp.edu.rs

Abstract: Innovation has become one of the most important vectors of sustainable enterprise development and economic prosperity of the whole society. Companies must constantly improve or renew their products and services, if they want to keep or capture market share and remain competitive. Legal protection of patents leads to economic, cultural and social progress. Serbia has a very weak position in terms of patenting, partly due to low investments in research and development, and partly because of the enormous costs for international protection.

Keywords: intellectual property, innovation, patents, legal protection, management

1. INTRODUCTION

Intellectual property protection is an important factor in economic growth as it encourages innovation, cultural diversity and technical development as part of a broader policy framework. Intellectual property is unique and is the result of personal creativity and innovation. It can be any activity from any area of life: an invention in any field of technology, the name under which the sale of products or services are offered, song, painting, film, etc. In the developed world, with the increasing number of scientists and technical intelligence, the number of patents increases as well. The greater the number of research personnel is, it is natural to expect a greater number and quality of patents. However, the number of patents in Serbia declines from year to year. Disputes in the business world are often based on the lawsuit for copying technology, or because of claims that a company uses another company's patents. One can say that all in some way, abusing patents of other companies. Today, companies are forced to pay large sums of money for the protection of technologies that were developed in order to protect its patent so they would not have later to claim its rights in court. Legal protection against infringement of patent rights (violation) is not given automatically but only when the patent owner wants that. Therefore, patent holders should regularly monitor the business activities of others if they want to implement their patent rights. It is obvious that, when a problem exists, it should be resolved, because the resolution of multiple issues is important for the theory and practice of management. 1 The ability of management to solve certain problems, in this case, the problems related to patents, largely depends on the effective functioning of the whole organization.

2. INNOVATION AND THEIR LEGAL PROTECTION

There are different understandings of innovation. Peter Drucker under the innovations include,

1 Radosavljević Ž., Tomić R. 2007., Menadžment u modernom biznisu, Novi Sad, Privredna Akademija, 138

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"A specific function of entrepreneurship ... by which the contractor create new sources of wealth creation or process existing resources with high potential for wealth creation." 2 Peter J. Dining and Robert P. Dunham define innovation as an art, getting people to adopt change. 3

Innovation consists of the first commercial application of a particular product, so the post- adaptation (the way organizations develop new key advantages in response to environmental changes) by other companies is secondary and less important. The effectiveness of technology is the primary goal of following innovations in the organization. The complexity of the technology - organization relationship causes the classic model of innovation: invention - innovation. Invention means the original idea and a prototype implementation of innovation and commercial sales of the new technology on the market. 4 Structural differentiation invention of innovation leads to certain conclusions regarding the organization's policies. In case of, for example, discovery of penicillin, a scientific breakthrough led to the discovery, market forces were enough to translate the invention into innovation, and eventually the government funded basic research. Companies often invest large sums in research and development especially in advertising and marketing their products or services. These investments will not occur if companies are not in a position to recoup their costs. Therefore, adequate and effective protection of intellectual property gives innovative companies a powerful incentive to invest and contribute to economic progress. Protection of intellectual property, through a system of national and international rules (so- called intellectual property rights), is necessary for the acquisition and financing of innovation and creativity, which in turn lead to economic, cultural and social progress. 5 Intellectual property protection also encourages the production and dissemination of knowledge and wide range of high quality products and services. Intellectual property rights add value for consumers and can provide a guarantee of origin and quality. Society provides the right to intellectual property to encourage inventions and creative works of which companies and the individual has benefits, and to help creators make a living from their work. These rights, which may be exercised by individuals or organizations (universities or scientific research), are recognized by the government and the courts. The system is designed to maintain a balance to ensure the needs of both creators and users. Depending on the nature of intangible assets (which include human capital, know-how, ideas, strategies, business plans, brands, design and other creative and innovative talents of the company), the law offers different legal instruments to protect them, and one of them is that the innovative products and procedures can be protected by patents.6

2 Drucker P. 1996., Inovacije i preduzetništvo, Grmeč, Beograd, str. 52 3 Denning J. Peter, Dunham P. Robert 2010., The Innovator's Way: Essential Practices for Successful Innovation, USA, Cambridge, The MIT Press 4 Radosavljević Života 2008., Menadžment znanja i (li) znanje u menadžmentu, Beograd, FORKUP, 95- 96. 5 Besarović Vesna 2011., Intelektualna svojina, Industrijska svojina i autorsko pravo, Beograd, Pravni fakultet Univerziteta u Beogradu, 30 - 34 6 World Intellectual Property Organization, International Trade Centre 2010., Tajne intelektualne svojine : vodič za male i srednje izvoznike, Beograd, Zavod za intelektualnu svojinu, 5

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3. COMMERCIAL IMPORTANCE OF PATENTS

The patent is exclusively right for patent protection. 7A patent provides its owner the exclusively right to prevent other to commercially use invention in a limited period of time in exchange for disclosure of the invention. Thus, the patent owners (owner of the patent) can prevent others from making, using, offering for sale, selling or importing the patented invention without a license and may seek court protection from anyone who use patented invention without appropriate protection. The financial reward that arise from using the patent and invention disclosure for public dissemination and usage can encourage innovation and raise the technological level of the national economy, which brings obvious benefits to the trade. While it is true that not all companies develop patentable inventions, it is also wrong to believe that patents apply only to the complex physical and chemical processes and products, or that they are only useful to large corporations. Patents can be obtained for any area of technology - from paper clips to computer paper. Already there are thousands of patents for simple, everyday products such as pens, glass bottles, textile fabrics, or bicycles. In December 2010, four companies, including "Microsoft" and "Apple", paid $ 450 million for about 880 patents and applications owned by "Novell", a leading software company. 8 In July, the two companies and four other companies, including "Research in Motion," the producer of "Black Berry's," spent $ 4.5 billion on a 6000 patents owned by the company "Nortel", a failed Canadian manufacturer of telecommunications equipment. Before the last deal, "Google" has acquired 1,000 patents from the company "IBM", whit which it has a dispute. "Apple" claims “Samsung” and “Motorola” are copying their technology in its "Android" phones. "Oracle" is in the proceedings with "Google," for about $6 billion, arguing that "Android" is using their patents. "Microsoft" is also in litigation with the "Android." "Nokia" recently completed trial with the "Apple." Often, companies that are majority owners of patents share prices on stock exchanges rising (E.g. "Google"). Today, innovations in IT mainly rely on a small number of technology improvements and technological advances, which means it does not specify what inventions patent law covers. It is an open secret that, in some way, all abuse patents of other companies. This creates an incentive for companies to build their patent portfolios in order to strengthen its position in the negotiations, which led to this whole issue is compared to the arms race. Such cases are, with a minimum fee are legally regulate through "cross-licensed" agreements. Payment of fees is considered a better solution than the destructive exchange of endless lawsuits. Those who establish and "pack" the standard to be used around the world will be successful instead of those who "invent" the patent. Synchronization of "American rules" with those in other countries will be a step towards greater cooperation and efficiency in patent examination at the global level. Large companies support the proposal because it gives them more legal certainty that will not appear someone claiming to be the first to come to an idea. However, inventors, like Steve Perlman, WEBTV founder and other companies argue that the power of companies is in the fact that it applies for patents of inventions before they are fully developed. This, says Perlman, lead to even higher incremental improvements instead of big innovative step, and put a toll on America's competitiveness.

7 World Intellectual Property Organization, International Trade Centre 2010., Tajne intelektualne svojine : vodič za male i srednje izvoznike, Beograd, Zavod za intelektualnu svojinu, 17 8 The Economist, „Intellectual property“ The Economist, 20. 08. 2011., USA, New York, The Economist Group

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Year 2007 2008 2009 2010 National applications1

Application by domestic applicants Applications of foreign applicants

International applications2

PCT application in national phase

Expanded European patent applications

5.372 5.625 4.258 3.559

TOTAL 5.835 6.100 4.618 3.888

4. PATENT PROTECTION IN SERBIA

In the past rarely happened that our great innovators become rich. The example of Nikola Tesla is the best. While Tesla lived for science, world famous inventor Edison was living from science. 9 The Edison bought Tesla's action form "General Electric" company, which was based on the invention, which has made a huge fortune. In addition, the fact is that the various "inventors" have appropriated many of Tesla's patents. The first Serbian patent was registered in 1921, and was entitled "Brandy still." 10 Among other inventions of that period there are "the procedure for destruction or suppression of pests," "device for showering", "Pocket typewriter," etc. That same year, the first trademark was registered. Since then it has been registered over 50,000 patents and more than 55,000 marks. According to the Law on Patents of the Republic of Serbia patent is "the right granted for an invention in any field of technology that is new, involves an inventive step and is industrially applicable." 11 Currently, Serbia is at very weak position in terms of patenting and partly due to low investments in research and development, and partly because of the enormous costs for international protection, which range of 14,000 to 50,000 Euros or more. The structure of patent applicants in Serbia - Statistical data for the period 2007-2010:12

1) Patent applications:

1 submitted directly to the Office 2 filed through PCT contract and the Agreement on the cooperation and extension

2) Applications of small patents:

Year 2007 2008 2009 2010 Domestic applicants 155 136 101 97 Foreign applicants 3 1 4 4 TOTAL 158 137 105 101

3) Registered patents:

Year 2007 2008 2009 2010 Domestic applicants 71 70 103 98 Foreign applicants 207 224 300 854 TOTAL 278 294 403 952

9 Radosavljević Života 1996., Savremeni menadžment, Beograd, DP Pronalazaštvo, 224 10 www.discoverserbia.org/sr/tradicija-srbije/prvi-patenti 11 Zakon o patentima,"Sl. list SCG", br. 32/2004 i 35/2004 - ispr. i "Sl. glasnik RS" br. 115/2006. 12 www.zis.gov.rs/prava-intelektualne-svojine/patenti/statistika.7.

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4) Registered small patents: Year 2007 2008 2009 2010

Domestic applicants 93 81 86 74 Foreign applicants 3 3 0 4 TOTAL 96 84 86 78

5) The number of requests for registration of an extended European patent in the register of patents:

Year

2007

2008

2009

2010

Requests for registration of an extended European patent in the register of patents

53

148

218

250

National Assembly of the Republic of Serbia in 26.12.2011 adopted a new law on patents. Compared to current law, the bill introduces a number of new things. 13 The important change relate to the grant of the patent process. An obligation for the Intellectual Property Office that the patent applicant to submit a report on searches of national and international databases is introduced. This allows the applicant to assess the chances of obtaining a patent before paying fees. In addition, this report will depend on his decision to patent abroad, and a decision on a possible correction of the patent claims in order to maximize the chance of obtaining a patent. Search report of national and international databases, which are state of the art also will provide information to potential investors about the prospects of obtaining a patent, thus contributing to the industrial application of the invention. New law, as the old, in addition to the protection of inventions by patent, offer protection and the ability to provide certain types of small inventions patented. This protection is provided for inventions that typically have a shorter market life, and relating to product design or layout of its components. The old law was not caused entitle to sue for patent infringement proving that a small patent meets the requirements in terms of news, inventive step and industrial applicability. This practice could lead to abuse of rights, of which the most drastic ban on the production of products that were known before the filing of a small patent. In order to eliminate the perceived lack, new law provided testing of the suitability of a small patent for protection and issuing of an appropriate certificate of compliance with these conditions. Only if the holder of a small patent protect certificate stated he is entitled to civil protection or apply for a compulsory license. This solution will contribute to the lawful behavior and reducing the number of lawsuits in this area. An important innovation is the prescription of obligations for the court that in the lawsuit for infringement of a patent application cease the proceedings until the decision of the Institute on the application, which prevents making a judgment on the violation of the right that is still not recognized (published patent application - the unexplored right). Institute for intellectual property in such case is entitled to examine a patent application in an expedited procedure. In addition, the patent will be examined urgently and on-demand of market inspection and customs when the procedure for customs inspection or for infringement of a patent application is started.

13 Passed Law on patents, Institute for intellectual property, available on Web site: www.zis.gov.rs/pocetna.281.html?newsId=360

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As with other laws on industrial property, this law introduces the right to appeal the decision of the intellectual property relating to patents and small patents. A new legal solution will enable efficient protection of the rights. Introducing review in civil proceedings for patent protection will be solved a legal gap created by the entry into force of amendments to the Code of Civil Procedure in 2009.

5. RESUME

Creativity is the ability to create something new, whether it is about a new solution of the problem, or finding a new method, a new idea. This term refers to the originality of thinking, the richness of ideas and practical work. New inventions, products cannot be like existing inventions because their significantly different. They should be more successful and more efficient to meet the needs of both individuals and entire societies. Intellectual property rights enable people to benefit from their innovation and creativity and to prevent others from copying or unfairly profit from the creativity and investment of inventors. Only protected intellectual property can be verified by the court. This encourages the production of a wide range of products and services and helps to maintain healthy competition. Moreover, these rights allow innovators, creators and producers to finance their work through the market. There are other models of financing, such as government funding or private patronage, but the intellectual property rights remain the basic and most common type of financing used by individuals and organizations for their work and spread. Intellectual property rights give the freedom to creativity and encourage innovators and creators to respond to the expressed needs of customers. In the largest number, patents derive from organized systems, research institutions, development and innovation centers, and the minimal number of individuals and private entities. Serbia is different in this respect, because the smallest number of patents comes from institutes as organized scientific institutions, and the greatest number comes by private individuals.

It is necessary to change patent system at the global level, particularly in information and communication technologies, because they are the fastest growing. In addition, we should not ignore the fact that today many inventors increasingly face with the theft of their patents, so it is difficult, usually in court, to prove to be the owners of a patent. In order to solve the problem, companies need to harmonize their approaches to solving this complex and important issue.

BIBLIOGRAPHY

[1] Besarović Vesna 2011., Intelektualna svojina, Industrijska svojina i autorsko pravo, Beograd, Pravni fakultet Univerziteta u Beogradu. [2] Denning J. Peter, Dunham P. Robert 2010., The Innovator's Way: Essential Practices for Successful Innovation, USA, Cambridge, The MIT Press. [3] www.discoverserbia.org/sr/tradicija-srbije/prvi-patenti [4] Drucker P. 1996., Inovacije i preduzetništvo, Grmeč, Beograd. [5] Radosavljević Života 2008., Menadžment znanja i (li) znanje u menadžmentu, Beograd, FORKUP. [6] Radosavljević Života 1996., Savremeni menadžment, Beograd, DP Pronalazaštvo [7] Radosavljević Ž., Tomić R. 2007., Menadžment u modernom biznisu, Novi Sad, Privredna Akademija. [8] The Economist, „Intellectual property“ The Economist, 20. 08. 2011., USA, New York, The Economist Group.

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[9] Zakon o patentima,"Sl. list SCG", br. 32/2004 i 35/2004 - ispr. i "Sl. glasnik RS" br. 115/2006 [10] www.zis.gov.rs/pocetna.281.html?newsId=360 [11] www.zis.gov.rs/prava-intelektualne-svojine/patenti/statistika.7 [12]www.zis.gov.rs/upload/documents/pdf_sr/pdf/seminari/Nacionalni%20postupak%20zastite %20patentom.pdf [13] World Intellectual Property Organization, International Trade Centre 2010., Tajne intelektualne svojine: vodič za male i srednje izvoznike, Beograd, Zavod za intelektualnu svojinu.

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BENCHMARKING ANALYSIS OF FOOD CATERING SUBJECTS

B. Tesanovic1, S. Jovic2

1Professor at Vojna Akademija MO, brate@verat.net 2Assitant, Vojna Akademija MO, sudimnja@gmail.com

Abstract: Using benchmarking method firms from the field of catering food were analyzed - military restaurants, "Dedinje" vojna ustanova doo, "Odrzavanje i usluge" doo - Novi Sad, "Odrzavanje i usluge" doo - Novi Sad and Nis Student Center. By the analysis of the elements included in the price of the daily ration of food was found that the student center Nis is a market leader in catering business. Comparison with the market leader, militarily restaurants may look way to reduce existing costs, which may help them to become new market leaders in catering food.

Keywords: benchmarking, the market leader, militarily restaurants

1. INTRODUCTION

In order to determine the effectiveness and efficiency of production and distribution of food in the organization of the Serbian Army (hereinafter VS) method of benchmarking analysis of microeconomic producers was applied. Using quantitative and qualitative indicators can be made a comparison of its own firm with a market leader in the business of catering services, determination of the reasons of the difference in performance.

Businesses that are observed are: 1) military restaurants (VR), 2) "Dedinje" Vojna ustanova (VU) 3) "Odrzavanje i usluge" doo - Novi Sad, 4) " Odrzavanje i usluge " doo - Novi Sad, and 5) Student Center Nis (SCN). Of these subjects, considering the number of employees, turnover, number of meals that are prepared daily, facilities for food preparation - three subjects (1), 2) and 5)) fall into the category of medium and large, and two (3), and 4)) in the category of small enterprises. All subjects, except the first, are profit-oriented. The number of employees is the same with 3) and 4) and smaller regarding 10, and with other over 30 persons. These data influence the costs per unit of prepared meals increasing them in case of 3) and 4), and lowering regarding other subjects. Selection of five selected subjects of analysis is sufficient for the implementation of benchmarking research process, and thus avoided the risk of misapplication of benchmarking, which relate to excessive number of analyzed subjects, rambling volume of data, and the prolongation of the study, difficult distinguishing between relevant and irrelevant results. 1

1 According to Djuricic Z., Ksenija Jovanovic and Djuricic R., the benchmarking process comprises defining the problem and collecting data, analyzing the collected data, the decision on the best solution, and application of solution. Benchmarking as the instrument of modern management, International Conference, Krusevac, 17 to 18. March, 2010, p. 141

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2. RESEARCH RESULTS

Considering the relevant elements of the calculation, the price of the cost of service production and distribution of food in the considered subjects of the economy2 is shown. In calculating the cost of one meal (d/o) for the Army transportation costs and salaries of employees are not included, as well as energy consumption, 3 which makes the wage lower. In calculating the cost of meals in the civilian, in accordance with the Law on Value Added Tax, at the current price it should add the tax, which increases the cost. 4

The study subjects, considering the elements included in the calculation of prices, the percentage of costs are ranged as follows

Table 1: Calculation of the cost of the daily ration of food

N o.

Elements of cost

Odrzavanje i usluge

Odrzavanje i usluge

SC Nis

VU „Dedinje“

ВР

1.

Foodstuffs

RSD 504 540 251,5 735,5 300,1 EUR 5,04 5,40 2,52 7,36 3,00 % 60,00 61,78 60,60 78,53 61,62

2.

Water

RSD 4 9,3 22 0,75 69,7 EUR 0,04 0,09 0,22 0,01 0,70 % 0,48 1,06 5,3 0,08 14,31

3.

Electricity

RSD 7 84 28,2 41,15 39,2 EUR 0,07 0,84 0,28 0,41 0,39 % 0,83 9,61 6,80 4,39 8,05

4.

Heating

RSD 8,5 22 15,2 29,4 36,4 EUR 0,09 0,22 0,15 0,29 0,36 % 1,01 2,52 3,66 3,14 7,47

5.

Depreciation

RSD 43,5 42,2 38,4 2,2 18,6 EUR 0,44 0,42 0,38 0,02 0,19 % 5,19 4,82 9,25 0,25 3,83

6.

Transportation costs

RSD 90 62 26,7 21,63 23 EUR 0,90 0,62 0,27 0,22 0,23 % 10,71 7,09 6,43 2,31 4,72

7.

TRS

RSD 117 39,5 13 105,97 0 EUR 1,17 0,40 0,13 1,06 0,00

%

13,93

4,52

3,13

11,31 0,00

2 The calculation represents methodology of determining the cost and selling price. The structure consists the cost of consumable materials, the cost of others' services (energy use), labor costs, depreciation, administrative and general costs of directing traffic (other dependable expenses). For the calculation of the cost of the daily ration of food, calculation method of full cost was applied. Zivota Rodosavljevic, (2001): Vojna Ekonomika, KUM, Belgrade, pp. 293 – 303. 3 The exact use of energy - electricity and water can be determined by VR, since they do not have control of measuring instruments, so their consumption is determined from empirical methods, and estimates of average estimations. 4 Official Gazette RS no.84/04, 86/04, 61/05 and 61/07

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8.

Profit

RSD 66 75 20 0 0 EUR 0,66 0,75 0,20 0,00 0,00 % 7,86 8,58 4,82 0,00 0,00

9.

TOTAL

RSD 840 874 415 936,6 487 EUR 8,40 8,74 4,15 9,37 4,87 % 100,02 99,99 100,00 100,02 100,01

Source: General Logistics Department of Defense and commercial services in SC Nis, 2010

2.1. Cost of PP

Cost of PP range from 60% to 78.5%. The lowest cost had "Odrzavanje i usluge " doo - Novi Sad, and the highest - VU "Dedinje." The first falls into the category of small businesses, and it can be assumed that it has shown the percentage of lower order to take part in market competition. VU "Dedinje" PP procurement implement without the use of the PP and the purchase price significantly higher than other competitors. The amount of the cost of PP, which showed the VR and SC Nis, may be considered closest to the real market, since both subjects carry out PP purchasing by applying the Law on Public Procurement. Thanks to that, businesses realize the positive effects of economies of scale. 80% of respondent share the costs of PP purchasing is approximately 60% of the total cost structure. In 20% of analyzed subjects, the share of these costs amounted to almost 80% of the cost structure of the d/o food.

2.2. Energy consumption

Energy consumption of water, electricity and heating - ranging from 2.3% to 29.8% of the d/o food cost. The lowest amount of energy costs in the calculation of rates d/o has shown "Odrzavanje i usluge" doo, and the highest - VR. The main reason for the low share of energy consumption in the total cost of the calculation is the use of liquefied petroleum gas as primary energy sources, but in a few d/o that prepare, as a result of the high proportion of the impossibility of precise readings of their consumption, and its presumptive determination. Since the SC has Nis measuring instruments for monitoring consumption, we can say that the share of their expenditure is closest to objective calculation cost. We must consider that energy prices differ from one place to another 5, and the type of energy used in providing services. 6

With 40% of respondents, which may be classified as large companies, the way of determining the share of energy in the calculation of the structure is problematic since it is arbitrarily determined.

5 Price of 1m3 water for businesses users on 02.08.2011 was - Novi Sad – 190RSD, Belgrade - 100 RSD, Kraljevo - 79 RSD, Krusevac - 86RSD, Nis - 70RSD. The price of electricity is unique on the territory of the Republic of Serbia, but it varies depending on the volume consumed and the amount of kwh. 6As the sources of thermal energy, analyzed business subjects were using the electricity, liquefied petroleum gas in certain situations fuel, which contributed to the difference in the amount of total cash expenditure.

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2.3.Amortization

Depreciation ranging from 0.2% in VU "Dedinje" to 9.2% of the d/o food cost in SC Nis. A high percentage of depreciation in SC Nis conditioned by acquiring modern manufacturing techniques, with a shorter useful life and a higher percentage of annual write-off for faster renewing and monitoring of new technologies in the field of catering. In contrast with the VU "Dedinje", renewing period is much longer with a higher percentage of electricity consumption and frequent failures. Amortization of other analyzed subjects ranged from 3% to 5% of the total cost. In 60% of depreciation is accounted for 5% of the d/o cost. In 20% it has shown in a much higher percentage, as a result of technological obsolescence, and in 20% of respondents incorrectly set at low level.

2.4. The costs of food distribution

The costs of food distribution showed two analyzes subjects - "Odrzavanje i usluge" doo - Novi Sad and " Odrzavanje i usluge" doo - Novi Sad. These entities signed up for the realization of catering services in the municipality of Novi Sad for 40 people located in seven different locations. With first mentioned subject, these costs accounted for 10% of the total cost, and with second 7%. Analysis of the remaining three subjects did not show these costs as part of the cost. Depending on the distance from the place of preparation to the place of distribution and the number of locations where food is necessary, these costs may seem about 10% of the total cost as estimated by author. The problem of transport costs is represented on a smaller scale at VU because they do not have to comply with Public Procurement Law (PPL), the implementation of the procurement of products that are the subject of further sale or processing for sale. 7 This VU provides with an opportunity in the selection of suppliers who will purchase food products (PP) to take into consideration purchasing from nearby sources. Selecting a larger number of suppliers, geographically closer to the place of final delivery of products, transport costs are lower. This lowers the share of transport costs in the calculation of d/o, i.e. they become negligible at the same measure unit. Costs of delivering are shown in 40% of respondents, who were also from the category of small enterprises, which were the only reported on an ad for food production and distribution in a number of distant objects.

2.5. Cost of labor

Labor costs ranged from 3.1% in SC Nis to almost 14% of the d/o food cost code in "Odrzavanje i usluge" doo - Novi Sad. Approximately the same share of these costs (4.1%) in the structure of cost achieves "Odrzavanje i usluge" doo - Novi Sad, while the VU "Dedinje" doo and "Odrzavanje i usluge" - make up about 11% of calculation. These VR costs were not displayed as a part of the d/o cost, as they would further burden the existing calculations. Labor costs are showing 80% of respondents, while the remaining 20% did not. Of the respondents that showed these costs, half of them were include them in the proportional amount of about 12%, and half in the amount of about 4% of the total d/o food cost.

2.6. Other dependable expenses

Two analyzed subjects - VR and VU “Dedinje”, presented other dependable costs. These costs

7 Law on Public Procurements, art. 7

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included the consumption of consumables. The same form 4.7% in the first and 2.3% of the price in the analysis of the second. Further analysis of the economic entities did not show these costs.

2.7. Profit rate

Profit rate ranges from 4.8% in the SCN to 8.6% for "Odrzavanje i usluge" doo - Novi Sad. In the scope of its d/o calculation price, VR and VU "Dedinje" did not display this element. The amount presented by SCN can be described in the achievement of economies of scale. Small business entities such as the remaining two subjects in their calculations accounted larger share of profits because they are incompetent on the market, and given the lack of interest of other market competitors, they can count on a higher amount of profit without fear of losing their jobs. 60% of total respondents display the share of profit in its calculation.

3. COMPARISON WITH THE MARKET LEADER IN FOOD CATERING SERVICES

Of all tested subjects, none showed all the elements necessary to produce the full d/o food cost. If we ignore the amount of other variable costs, 40% of the overall structure of the cost. The above percentage refers to the subjects who belong to category of small enterprises, which have low market share. Almost all respondents identify companies for comparisons between, but only 20% of respondents generate new ideas. Private companies, 40% of respondents in this study, in order to survive in the market, trying to take jobs for which large business entities aren’t interested. Based on the above data, and discussing the number of d/o food being prepared, we can determine that the SC Nis gave the most realistic calculation of food price, with the presentation of almost all elements of the calculation, except for the food distribution costs, which could increase the cost structure shown up to 10%. If the defense system recognizes the need to keep VR, it is necessary, like in a restaurant in foreign armed forces, to introduce their profit orientation and facilitate their participation in the market. This would also contribute to reducing the opportunity and sunk costs, which VR has due to fact that production capacity is not fully used. Given the difference in the size of the analyzed volume of production, we can say that competence can be seen comparing VR and SC Nis. 8

It is evident that SC Nis is the market leader in the field of service production and distribution of food 9, the same we can use to compare their own organization with the same order of finding

8 "The size of the production volume adversely affects the comparability of the two companies due to the impact of fixed costs on the cost of capital. Fixed costs, namely, decline per unit of cost in proportion to the increase in production volume, which affects the total cost, which also decreases per unit of product, while increasing in production volume. Variable costs, however, remain unchanged (per unit), because they grow in proportion to the volume of production. Due to the legality, the cost, depending upon the volume of production will be different, which means that two companies, although they have the same structure of production, have different financial results." Pejanovic R. (2009): Ekonomska analiza kao metod istrazivanja u agroekonomskoj nauci i struci, Agroekonomika Magazin, Faculty of Agriculture, Novi Sad, p.14. 9The introduction of food safety systems, SC Nis has achieved the following benefits - improving quality, increasing the number of persons for whom food is prepared due to the increased interest by customers after the introduction of this system, the establishment of a stable supplier system, the manufacturing process has been completed; individualized responsibility of each person.

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the best business practices to help ensure long-term competitive advantage. Comparison with the market leader such as SC Nis is necessary to increase business efficiency by establishing a more efficient organizational structure. VR capacity utilization ranges from 10 to 40%, allowing for cost reductions in the future if the increased number of d/o is being prepared. If we compare data with the same indicators of SC Nis, we can see that it is present in about 50%. Since the VR prepares about 10,000 d/o food and that they are not profit oriented, we cannot talk about revenues. Average amount of expenditures incurred by the calculation shown is 487 dinars per meal. The same indicators for SC Nis amount 415 dinars per meal i.e. daily revenue is 1.24 million dinars or daily expense is 395 dinars/meal i.e. daily 1.18 million, creating per d/o more than 20 dinars i.e. 60,000 dinars per day. 10

If we compare the individual elements, which form an integral part of the d/o food cost structure between these two competitors, we can say: • Expenditure of funds for the PP procurement in one meal is lower by 48.6 dinars in SC Nis so the costs of SC Nis compared to VR at daily level of 145 800 dinars lower. Time costs of labor per measurement unit are higher in VR in relation to SC Nis. • Expenditure of funds for payment of the energy consumed for one meal is lower for 79.9 dinars in SC Nis, and the costs of SC Nis compared to VR are lower for 239.700 dinars at daily level. • The amount of funds that are written down on depreciation for one meal is higher by 19.8 dinars in SC Nis so the expenses of SC Nis in relation to VR on a daily basis are increased by 59.4 thousand dinars. • Expenditure of funds intended for payment of other related cost per meal is higher by 3.7 dinars in SC Nis and the expenses of SC Nis in relation to VR on a daily basis are increased by 11.100 dinars. • Expenditure of funds intended for payment of the cost of labor, which is calculated in the calculation of SC Nis per serving of food is 13.0 dinars so the expenditures in SC Nis in relation to VR on a daily basis are increased by 39.000 dinars. These costs are not accounted for in calculating rates of d/ o food prepared in the VR. Based on this data it can be found that VR has on a daily basis has 276.000 dinars (2,760 Euros) higher cost relative to SC Nis, despite the fact that the VR calculation doesn’t include labor costs.

4. RESUME

The analysis of these expenses show the possibility of reducing the same VR, if we take the appropriate changes in organizational structure, increased engagement of installed technical capacity, faster updating techniques, VR certification in accordance with the requirements of the Law on Food Safety, installing alternative energy sources (electricity, liquid petroleum gas, photo cells, etc.), profit and market orientation. Normative framework that regulates the VR, it is not upgraded in accordance with the need of market orientation, and should be upgraded. According to the author, as long as the system does not solve market orientation of VR it will operate with losses, too many employees in relation to real needs, so the extent of depreciation will not be realistically assessed. Infrastructure of VR is presented to objects whose surfaces beyond the needs of the daily number of meals being prepared. The technique is obsolete, often corrupt, and its maintenance

10 Data for the preparation of 3000 d/o food were compared

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cost further increases the production of food. Advanced training in the form of additional training of the skills and knowledge of professional and specialist staff of VR should be raised to a higher level, and with the same number of employees can be produced and distributed a great number of d/o food. One possibility, which may lead to lowering the total cost of VR, is a transfer of production and distribution of food for the needs of the Army to responsible legal entities such as the SC Nis, who possess the required international and domestic standards for food safety, renting production facilities are equipped with means, with compensation in the form of preparation of a number of d/o food. This would reduce the amount of investment required for the introduction of HACCP, reduce the energy costs and increased food security of the Army. It is necessary to exploit the comparative advantages that VR has - a great capacity of working resources, competence of employees, professional and specialist staff, attractive location, lower costs due to implementation of procurements, etc. These effects of economies certainly lead to lower procurement costs, production and sales.

BIBLIOGRAPHY

1. Đuričić Z., Jovаnović Ksenijа i Đuričić R. (2010): Bendžmаrking kаo instument sаvremenog menаdžmentа, Međunаrodnа nаučnа konferencijа, Kruševаc,

2. Figаr Nаdicа (2003): Troškovi preduzećа, SVEN Nis, 3. Životа Rodosаvljević, (2001): Vojnа ekonomikа, KUM, Beogrаd, 4. Pejаnović R. (2009): Ekonomskа аnаlizа kаo metod istrаživаnjа u аgroekonomskoj

nаuci i struci, čаsopis Agroekonimikа, Poljoprivredni fаkultet, Novi Sаd, 5. Rodić J., Vukelić Gordаnа i Andrić M. (2007.): Teorijа, politikа i аnаlizа bilаnsа,

Poljoprivredni fаkultet, Zemun. 6. Zаkon o jаvnim nаbаvkаmа, 7. Službeni glаsnik RS br.84/04, 86/04, 61/05 i 61/07

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ONE APPROACH TO SELECTION OF THE EFFECTIVE PRODUCT IN THE DOMAIN OF INTERNAL TRANSPORT

Tomić Radoljub1, Nikiforova Evgenia2, Pajić Suzana3

1 Faculty for Strategic and Operative Management, Belgrade, Serbia 2 Belgorod State Technological University n.a. V.G.Shoukhov, Belgorod, Russia

3 Faculty for Education of the Executives, Novi Sad, Serbia

Abstract: In this paper, an estimate method with technical and economical aspects of products is considered. This complex management method is based on the intuitive concept, in the first phase, and algorithmic model in other phases. The best project solution is selected according to results of the optimization and analyzes of variance of the feasible product definitions. According to the presented method is possible to perform best solutions therefore of other products for different purposes and operational conditions. This method contains universal methodology for optimal products choices.

Keywords: management, internal transport, effective product, development, estimate of variance, rank of ideas

1. INTRODUCTION

Increasingly stringent demands of the market and the general need for high-performance products, obviously and according to rule require the identification of suitable models for the selection of optimal variants of products that, with reasonable risk, can go into the development, production and marketing and thereby not making positive effects of low intensity or losses. It is now usual in all areas of marketing products and services. In the future, we should expect complex and stricter market demands. The problem of internal transport and storage of materials and goods is randomly selected, only as an example for analysis using the model specified here (not the most important for companies and society but must not be underestimated, especially because of the significant impact on total costs generated during the preparation, production and selling of goods). Otherwise, problems and solutions of internal transport and storage of materials in recent years are expressed fully. Specific needs have grown, so all the more serious demands in terms of logistical support to production and cost reduction requirements based on inventory, shorten development time and improve product quality are obvious. It is obvious that the by the means of lifting primarily technical, ergonomic and functional levels of resources and the level of overall quality of internal transport and storage (storage and keeping) of goods and materials, these requirements can be significantly more satisfied, achieving more ambitious dynamics of and marketing, as well as lower costs of producing market-oriented products. It is clearly necessary to develop suitable and (more rational and more reliable) resources within the system of effective transport and storage. For this purpose, appropriate means of effective development methodology were proposed whose basic principles will be presented in this paper. The complete procedure of developing devices includes phases of identification, conceptualization, formalization, implementation, and opinions that would definitely provide a reliable means of stable quality in the serial production. Regarding all this, the question of training of new propulsion company-producers of the equipment must be asked. New products, their identification, development and production planning are one of the most important results of forecasting and predicting product life cycle (there are few products that has an extremely long life cycle, as the technology in all sectors of the economy changed extensively). New products must be developed and placed in a time when their predecessors

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just passed the zenith of its cycle, and not at the very end. Only in this way it is possible to ensure steady growth and development of specialized companies with a distinctive program identity and offer new and better means to market.

2. INITIATION OF PROGRAMME AND SELECTION OF SOLUTIONS

The procedure, from initiation of the program (first articulation and selection of ideas for new means of production) up to a variant of realization is shown in Figure 1 according to [2]. Always, after the identification of market needs, is necessary to conduct a proper analysis for investigating the necessary conditions (available and new to be provided) under which the program can be implemented, if the technical and economic risks are minimal.

Figure 1. New product development and placement process

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Many heuristic and algorithmic methods have been developed for the respective purposes. Method presented here is based on both concepts. In the first phase, it respects the intuition and the applicant in the following stages based on logical and mathematical algorithms. In order for product to be of high quality, high level of technical indicators with stable quality with competitive ability in the world market should characterize it, to ensure economic efficiency and that quality of normative-technical documents is high. In the phase of technical definition phase is not easy to determine the properties of products, essentially because there is the physiognomy of the building and its dimensioning isn’t performed in accordance with operating conditions, applicable regulations and calculations. In the design phase, the parameters subject to biased estimations should not be chosen. Application of optimization methods is very important for defining the optimal values of design variables on the level of synthesis of each solution, and based on modal analysis technique and comparison with available solutions. It is necessary to find appropriate solutions for partial features of the system, to identify weak spots in the preliminary solutions. Due to the limited scope of the paper, the concept of optimization will only be mentioned. Finding extreme value of (usually the minimum) objective function –F with corresponding limits -G for the independent variables-x is defined based on (1).

Conditions, necessary for resolving problems refer to the continuity and differentiability of represented functions. For solving many engineering optimization problems, Lagrange's multipliers are used to determine the value of variables for which F has an extreme value, equations (2) - (4).

(2)

����

���� 𝑚

= + �𝜆

��

𝐺𝑗

(3)

�� 𝑥𝑖

�� 𝑥𝑖

�� 𝑗 ��𝑥𝑖 =1

(4)

Above-mentioned method was successfully applied to determine the minimum amount of structural material resources needed for storing certain volume of raw materials and goods. If a larger database important for evaluation, the influence of subjectivism is weaker, since designer defines the parameters and the corresponding factors of importance are determined

138

𝑝𝑝

��=1 𝑗

using the expert method. The total number of k-points and for variants j - variable is determined based on equation (5).

(5)

𝑚 𝑊��𝑗 = �𝑞��𝑗 𝑝𝑝��𝑗

��= 1

were q kj – factors of importance for k variant (k = 1,2, .... n), and p kj points for k variant and number of properties j (j = 1,2, .... m).

𝑊��ј ∑𝑚 𝑞�� ��𝑗

��=1

(6)

𝑊𝑘 =

𝑊𝑖

= 𝑗 �����∑

𝑚 𝑞

�𝑥

Rating of variant is determined by the relation (6), where: pmax is the number of points of assumed ideal solution, Wi - total number of points of the ideal variant, and q j – is the factor of importance for an ideal variant. Based on (6), if parameter of validation is W> 0.25, the solution is accepted as satisfactory, and if W> 0.88, the solution is above the set target. The process of evaluation and decision-making in the design process using hierarchical goals at levels, where the initial level represented by the general purpose is applying, while other levels is receiving using general de-leveling of goals [1]. Determining the sizes of the goal importance is done gradually from simpler to more complex functions that determine the target.

3. EXAMPLE The analysis in the paper, is given as the description, but has already successfully passed the test in the development of special means of transport without requiring accurate positioning (wheelbarrow - RK), and the funds placed in the material (lattice wall pallets - BP ) [3]. The product can be evaluated from many aspects, so it is possible to get technical, economic, and exploitation values of the product. Here we are going to show the results of the analysis of development possibilities, implementation and marketing based on real conditions that meet one company, while the technical value of the product is defined as a set of technical system qualities - products.

Table T-1: Rating ideas for product

RATING IDEAS FOR PRODUCT

REQUIREMENTS FOR THE SUCCESS

OF PRODUCT

RELATIVE HUMIDITY

(a)

SKILL LEVEL OF A COMPANY

(b)

0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0

MARGINAL RANKS

(a×b)

IMAGE OF THE COMPANY AND

BUYER’S

0,08 0,7 0,056

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AFFECTION

MARKETING 0,05 0,8 0,040

R&D 0,16 0.6 0,096

STAFF 0,14 0,2 0,028

FINANCE 0,11 0,5 0,055

PRODUCTION 0,12 0,9 0,108

LOCATION AND COMMUNICATION

BENEFITS QUALITY AND

0,06 0,4

1,0

0,060

ECOLOGY SYSTEM 0,06 0,024

IT SYSTEM 0,08 0,8 0,064

PROCUREMENT AND GENERAL

LOGISTICS

0,14

0,9

0,126

(MANDATORY) Σ=1,00 TOTAL: Σ=0,657

W is always ≤1,00

*RANKING: W=0,00 – 0,40: WEAK; W=0,41 – 0,75: SATISFACTORY; W=0,76 – 1,00: GOOD

According to the results of analysis and quantification of conditions, Table T-1, under which products can be realized (rating is W = 0.657), it is evident that the idea is worthwhile. Based on the procedure, Figure 1 and equation (1) to (6), several possible variants are defined and discussed. Selected variants were evaluated with W=0.891 (for RK) and W=0.663 (for BP), which are successfully implemented, where optimization is applied based on equations (1) to (4). Savings in materials, developed resources in relation to the funds that were in operation is greater than 32%. The complete issue can be extrapolated to the global level of corporate management [5,6], this is directly related to consideration of the information state in the development of new products or services (as part of the information environment), or in the context of defining a suitable model of education (for example, in regarding the avoidance of entry into the programs that carry a high risk in the implementation and in terms of total market success, and favoring of different levels of investment projects in order to establish sustainable development strategies and poverty reduction in Serbia [7].

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4. RESUME

The presented methodology, compared with a completely intuitive approach gives reliable results and the possibility to evaluate initial evaluation of new ideas for the program (a product or service) with fewer risks, then to determine the cost-effective marketing strategy, analyze the market and costs, and to develop technically and commercially reliable product of high quality and high level of repeatability of production and delivery. It is clear that any objectification of the goal and finding suitable solutions to come to this goal are more reliable than uncontrolled copying of available solutions on the market or subjective values (usually leaving out a very important element of analysis and optimization that make the variables and factors of lower importance than it really deserve. In this sense, the authors hope to have aroused researchers, designers and business people, especially in the areas of investment and technological development program, to provide higher level of caution regarding entering into new projects, which is particularly important for rational investment of otherwise modest means in these times of crisis (whether it is a budgetary funds, soft loans of development banks, or company's own funds). Based on this example, it is clear therefore that we must seek to establish a suitable management model regarding costs and effects, to be able to work [8], with the achievement of optimal i.e. rational effects.

BIBLIOGRAPHY

[1] Đokić V.B., Teorijа i metode konstruisаnjа mаšinskih sistemа, Grаdinа, Niš, 1993. [2] Mitrović B.B., O+P+P=Priručnik zа uprаvljаnje propаgаndom, Beogrаd, 1988. [3] Tomić R., Progrаm rаzvojа i reаlizаcije robe široke potrošnje u "Soko-Vаzduhoplovnа industrijа" d.d., Mostаr, 1991. [4] Tomić R., Projektovanje masinskih konstrukcija (Design of mechanical structures),

university book, M.Graf, Trstenik, 2004. CIP - Cataloguing in publication National library of Serbia, Belgrade, 621.01 (075.8), ISBN 86-906119-0-8, COBISS.SR-ID 117161228, pp.288. [5] Radosavljevic Z., New Challenges and Responses of Corporative Management in Information Era (invitation papers), 1st International Conference “Application of New Technologies in Management”-ANTiM2009, Proceedings Vol. 1, ISBN 978-86-87333-02-4, Vrnjacka Banja, 2009. pp.1-14. [6] Radosavljevic Z., Corporate Management in Times of Crisis (invitation papers), 1st International Conference “Law, Economy and Management in Modern Ambience”- LEMiMA2009, Proceedings Vol. 1, ISBN 978-86-87333-02-4, Sokobanja, 2009. pp.1-11. [7] Pajic S., Poverty Reduction Strategy in Serbia Through Education, 1st International Conference “Law, Economy and Management in Modern Ambience”-LEMiMA2009, Proceedings Vol. 1, ISBN 978-86-87333-02-4, Sokobanja, 2009. pp.309-314. [8] Bosаnаc K. i dr., Domаćinsko stаrаnje (monogrаfijа), SINERGON, Beogrаd, 2001.

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PERFORMING ENTREPRENEURIAL ACTIVITY IN THE REPUBLIC OF SRPSKA

Gordana Vuković

Ministarstvo industrije, energetike i rudarstva Republike Srpske, Banja Luka, vukovic_g@teol.net

Abstract: In the Republic of Srpska since 01. 01. 2012, a new law on entrepreneurial activities is applying. With this work, the author wants to present conditions, the start, and how termination of crafts and entrepreneurial activities, organization of entrepreneurs and the register of entrepreneurs. The objective of this law is the development and promotion of entrepreneurship, the protection of old arts and crafts and handicrafts. The author also commented on the changes that are introduced by this law, as well as the expectations of the Act.

Keywords: crafts, entrepreneurial activity, entrepreneur, partners, act, register of entrepreneurs

1. INTRODUCTION

In the Republic of Srpska economic activities, determined by a valid classification of economic activities, they could deal with companies and entrepreneurs. The manner of performing activities of companies regulated by the Law on Enterprises, and the conditions, the start, and how termination of crafts and activities of entrepreneurs in the Law on Handicraft entrepreneurial activity. 1 Craft-entrepreneur sector is of great importance. To begin this activity did not require great resources and employment opportunities in entrepreneurial activity are high. Currently in the Republic of Srpska operates about 27,000 of shops that employ over 45,000 people. Trend of closuring shops is caused by the economic crisis, unfair competition, numerous administrative barriers present in the Republic of Srpska. The new Law on crafts and entrepreneurial activities are simplified procedure of registration of entrepreneurs, created the conditions for closer monitoring of these areas are open opportunities for better training of entrepreneurs and persons employed by entrepreneurs for vocational and independent performance of activities, enabled active participation of entrepreneurs in creating business environment with respect to the positive European practices in this area. Crafts and entrepreneurial activity is any economic activity, determined by a valid classification of economic activities by natural persons-entrepreneurs in production, trade and services on the market for profit, and whose conduct is prohibited or regulated by special law. Entrepreneur for all liabilities incurred by performing entrepreneurial activities corresponds with all of its assets. A special form of entrepreneurial activity is a craft activity, including craft production, the provision of vocational services, and old trades and crafts. The entrepreneur may perform one or more of the activities of which is predominantly, if the conditions for their performance. When applying for the performance of the entrepreneur himself determines prevailing activity. Entrepreneurial activity is determined by code and name of the activity, the lowest hierarchical level of the current classification. Such an innovation of the services and the aim is primarily to facilitate the competent authorities of local self- government licensing process and the uniqueness of treatment in all local authorities in the Republic of Srpska. In addition, more individuals (partners) can jointly carry out entrepreneurial

1 “Official Gazette of the Republic of Srpska”, no. 117/11

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activities. Entrepreneurial activity is carried out in the form of activities, workshops, offices, bureaus, agencies, studios, guesthouses, studios, lounges, laboratories, etc., if the business activity is needed office space. Some entrepreneurial activities can be performed in the home (e.g. textile weaving, toy making, accounting and bookkeeping services, etc.) or without premises (collection of fruits, etc.).

2. METHOD OF PERFORMING ENTREPRENEURIAL ACTIVITY

Entrepreneurial activity can be performed as a primary, supplemental and additional interest. Engaged in entrepreneurial activity is a natural person who is not employed. If another employer on a full-time employment employs the individual, entrepreneurial activity may be performed solely by personal work, no longer than half the weekly full-time as an additional source of income. A natural person who is employed at another job or a retiree can register as an additional occupation and conduct entrepreneurial activities, hiring a person who meets the requirements to perform the required activities. Compared to the previous legal provisions has been expanded ability to conduct entrepreneurial activities. Entrepreneurial activity can be performed seasonally, but not to exceed six months during the calendar year. The introduction of the seasonal performance of entrepreneurial activity allows the entrepreneur to carry out registration activities for the period for which it performs. In this way, an entrepreneur cannot sign in and out its activities each year, and during the time does not work does not pay taxes. Maximum of ten individuals can jointly perform entrepreneurial activities. Those persons performing activities of partners and their mutual relations are governed by the contract. The joint performance of entrepreneurial activity stops if the number of partners is reduced to one, but the joint execution of activities can be pre-registered in the independent performance of activities. This principle of pre-registration is valid and if an independent contractor wants to get partners.

3. CONDITIONS FOR PERFORMING ACTIVITIES

To a natural person engaged in entrepreneurial activity must meet certain requirements: be of legal age, that his final decision of the competent authority is not banned from carrying out these activities, the general health capacity and special health requirements if requested to undertake an activity that is appropriate qualifications or to hire a person with appropriate qualifications if required to perform certain activities and to have the equipment and labor resources, personnel and office space, unless the nature of work to do requests. An entrepreneur can start doing business after obtaining approval from the competent authority of local governments in whose territory is to have a seat, and no later than 30 days. The request to carry out entrepreneurial activities entrepreneur submits evidence that it meets the requirements for performing the required activities. Compared to the previous legal decision made easier by the conditions and reduced the number of necessary documents (proof of citizenship), a statement of eligibility shall be filed only in cases prescribed by special law. The request is not submitted any evidence of an employee or a use permit for office space. The competent body of the entrepreneur is obliged to grant authorization for work within five days of the request. Compliance with the conditions for carrying out checks by the competent inspection authority within 45 days from the date the contractor received approval. Entrepreneurial activity may be engaged and if the foreign national meets the

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conditions necessary to perform required activities, can start its operations from obtaining a work permit. After issuance of the performance of entrepreneurial activities authorized body of the entrepreneur entered in the register of entrepreneurs. The new law reduced the limit for issuance of license to practice from 8 to 5 days, and inspection period was extended from 15 to 45 days. A natural person who intends to take steps to address the entrepreneurial activity, and has no office space or the means of production, the competent authority of local government may issue a decision on approval of the preparatory activities for work but not over one year. This solution is also entered in the register of entrepreneurs. Before the commencement of the activity, the individual is required to address the competent authority for approval to carry out entrepreneurial activities.

4. NAME AND HEADQUARTERS, FEATURED OFFICE SPACE AND DUTIES OF ENTREPRENEURS

Entrepreneur has a business name and seat. Office is the place where the entrepreneur carries out the activity, and if not for the performance of required office space is considered to be based in a place where the entrepreneur resides. Entrepreneur, during the activity, may change its registered office in the territory of the same local government unit, so it can feed into another unit of local government. When the entrepreneur is changing from one office to another local authority, then the request for the performance of the one submitted to the local authority in whose territory will be the new headquarters, a competent authority for issuing the decision (within five days of receipt of the request) is entered in the Register of Entrepreneurs and inform other agencies and local government unit in which the entrepreneur had previously to the seat was eliminated from the records of entrepreneurs. The business name is name under which the entrepreneur performs the activity and as such is registered in the register of entrepreneurs. Business name must contain the name entered in the register, name of the entrepreneur, a description of activities, marked sp (Independent contractor) and seat. Business name may contain certain images and drawings that detail the activity performed. Business name cannot contain the name and insignia that are inconsistent with applicable international rules and regulations, or may cause confusion about the identity of another entrepreneur or an activity carried out. Business name must be posted at the entrance of the headquarters building and a separate business premises or at the entrance of the apartment building, if the activity is performed in a residential area. Entrepreneur can carry out the activity registered in one or more isolated offices. Performing of registered business in an isolated area must be reported to the competent authority of local governments to bring about a solution, also entered in the register of entrepreneurs, and informs the local government unit in which the contractor has a registered office and other authorities who monitor the work of entrepreneurs. The entrepreneur is required to separate the premises to hire workers. An entrepreneur can also entrust the conduct of the written authorization of operations manager who is employed by him. The manager leads the work in behalf of the entrepreneur. The entrepreneur is obliged to perform registered business in high quality manner in accordance with regulations, best practices and business ethics. The obligation to entrepreneurs in the business area has highlighted the prices of their products and services, working hours, to guarantee the quality of products or services, keep proper records, observe the prescribed safety measures and protection of the environment and report all changes related to a registered business.

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5. TERMINATION OF BUSINESS

An entrepreneurial ceases its entrepreneurial activity logging out or by operation of law. An entrepreneur can also temporarily stop performing the activity to a total of six months for two years. As for the temporary cessation of the activity, contractor shall submit to the competent authority of local governments in which the reasons for temporary cessation and duration of temporary cessation. The contractor shall submit a request before it stops working and no later than eight days after the cessation of the activity. Temporary cessation of activities may be granted exceptionally and for more than six months as follows: a period of two consecutive years due to illness, training or force and maternity leave until the child reaches three years of a child. A temporary cessation of the activity as well as the beginning of re-performing entrepreneurial activities of the competent body of the solution that delivers the register of entrepreneurs. The entrepreneur is obliged to report the continuation of the activity no later than eight days after the expiration of the period of temporary cessation of activities. Compared to the previous legal solution, precisely is defined duration of temporary cessation of activities. When the contractor ceases to its operations by signing out, the request for cancellation is submitted to the competent authority of the local government prior to the cessation of activities shall be issued on the solution and removes the entrepreneur from the register of entrepreneurs. If on the request for cancellation is not listed date of termination, the date of application will be taken. Competent local authorities on the basis of findings of fact and after the state makes a decision on the termination of entrepreneurial activities and deleted from the register of entrepreneurs in the following cases: the death of the entrepreneur, if within 90 days is not an application for continuation of the activity, if the probate proceedings are not completed within two years and if the period of three months cannot be the address of the employer made a written submission of the two bodies of local self-government and administrative bodies and the same points were made 15 days on the bulletin board of the local self-government if the entrepreneur final act prohibited from doing business, if a natural person who had the approval of the preparatory work within one year to submit an application to carry out entrepreneurial activities, if the entrepreneur does not report the continued operation within eight days after the date on which the approval Temporary cessation of activities; at entry to serve his sentence if he is sentenced to imprisonment for more than six months, the loss of legal capacity, if no request for continuation of the activity, if a foreign national cannot submit a work permit within 30 days from the date of the decision on its operations, if the entrepreneur to the beginning of 2013, does not align its operations with the provisions of the crafts and entrepreneurial activity, if the competent authority determines that the entrepreneur issued a decision to carry out activities on the basis of forged documents relating to the terms of the activity. This broad set of termination of entrepreneurial activities under the law was aimed at creating conditions for maintaining up to date register of entrepreneurs and entrepreneurs’ malpractice. Competent local authorities shall issue a decision on the termination of the activity, the entrepreneur is deleted from the register and informs the other competent authorities, if the competent court of honor at the Chamber of entrepreneurs propose to the entrepreneurs make a decision on the termination of the activity. The Law on handicraft entrepreneurial activity, in the event of death of the entrepreneur, given the possibility of member of the family or heirs can continue to do business in person or through an employee-interim manager. This request shall be filed within 90 days of the death of the entrepreneur. A continuation of the activity of the local competent authorities shall issue a decision that lasts until the end of the probate process, a maximum of two years. The same

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possibility for the continuation of the activity is in the case if the entrepreneur has lost the capacity to act. Then an entrepreneur named guardian submits a request within 30 days from the date of the decision determining the loss of business skills of entrepreneurs.

6. ENTREPRENEURS ORGANIZATION

Registering in the register of entrepreneurs, entrepreneurs are becoming members of Chamber of Crafts and Entrepreneurship of the Republic of Srpska. The novelty of this law is the principle of compulsory membership. Chamber members may be other organizations, associations and professional associations of entrepreneurs. The Chamber is an independent, professional, business, non-profit association that represents and coordinates common interests of entrepreneurs in the Republic of Srpska. The Chamber organizes its work in one or more local government units that are linked through the territorial associations of entrepreneurs as the basic organizational unit of the single chamber system. Tasks entrepreneurial chambers are numerous and the most important are: the representation of members' interests before the relevant bodies and organizations of the Republic of Srpska, initiatives, proposals and opinions of the competent authorities in connection with the issuance of regulations and measures relating to entrepreneurship and entrepreneurs, providing business consulting services, professional and advisory assistance in the establishment and business activities, promoting products and services of the Chamber members at home and abroad, analysis of market conditions and the possibility of entrepreneurship, informing members and the competent ministries, protection and promotion of craft activities, old crafts and cottage industry, managing a single register of entrepreneurs, etc. The law detail deals with the bodies of the Chamber and their responsibilities. It is necessary to mention the Court of Honor as an independent body. Court of Honor takes actions and makes decisions on violations of business practices, contracts, market rules and regulations, failure to perform and non-compliance to decisions of the Chamber. At the end, it is necessary to mention the provisions relating to master levels, and that the previous law did not know. The aim of these provisions is to further sustainable development of the craft activities that is not possible without constant improvement of knowledge and skills and transfer the same to the younger generation. In this regard, the Act prescribes the manner of acquiring the title of master, taking the master's exam, the possibility of organizing training for the examination of theoretical and practical, the register of entrepreneurs who are masters of its trade.

7. RESUME

Law on entrepreneurial activities is made in a modern way with partial takeover of European directives in this field. The law allows all individuals who wish to engage in entrepreneurial activity, to a very quick and easy way to begin performing the desired activity. The law is also built to date long-standing practice in the field of entrepreneurship in the region. Planned to adopt a number of by-laws that will more precisely define the old and artistic crafts and cottage industry, the performance of entrepreneurial activities that do not require office space and that can be done in housing, as well as defining the activities that can be perform seasonal. Furthermore, production of a single form to apply for vocational-performing entrepreneurial activity, the data changes and the cessation of activities as a way of keeping the

146

register of entrepreneurs will allow all businesses the same treatment as all units of local government equivalent treatment in this area. The law was left for one year for entrepreneurs, which is carrying out activities authorized under previously existing law, to coordinate their activities with the provisions of this Act. This alignment will cause some entrepreneurs in the cost of issuing new solutions, development of new seals, etc., but it will certainly lead to unique entrepreneurs carrying out activities on the entire territory of the Republic of Srpska.

BIBLIOGRAPHY

1. Zakon o zanatsko-preduzetničkoj djelatnosti, „Službeni glasnik Republike Srpske“, broj 117/11

2. www.zanatskakomorars.com 3. www.ekapija.ba

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IMPORTANCE OF CORPORATE GOVERNANCE

Zoran Vukčević Directorate for Development of Small and Medium Size Enterprise, Podgorica, Montenegro,

zoran.vukcevic@t-com.me

Summary:The state creates a systemic environment to guarantee the rights of the company owners to get registered and to invest. Companies engage in business activity and earn profit, thus affecting the environment around them. However, through the institute of corporate management the society demands from the companies to act in a collective manner that will serve its interests in the best way. This is achieved by creating an environment conducive to investments and competition, encourages development, productivity and motivates managers and employees, while the use of formal and informal rules limits the abuse of authority.

Key words: corporate governance, systemic environment

1. INTRODUCTION

Corporate governance creates the structure, in which the company objectives are defined, tools for their achievement and supervision by the owner over the operations of the company. If the corporate governance system is sound, it will give effective incentives to achieve the objectives in the best interest of the company and the shareholders. This will contribute to the more efficient supervision over operations, with direct impact on the effective use of resources in the company. Dynamic business environment requires from business companies to be flexible and to react quickly to the market demands. 1 In a market economy, corporate governance encourages economic development, ensures economic growth and allows companies to get involved in long-term projects. Corporate governance can be defined in a usual manner, “corporate governance is a system through which companies are managed and supervised” 2. In this way, corporate governance is defined as a set of mechanisms through which the company operates when ownership is separated from management. The commonly seen issues with corporate governance do not arise in all types of companies, but can arise only in the ones where there are several owners and where ownership and management are two separate areas. There are two central issues regarding corporate management, and their existence and solution depend on the ownership structure in the company. On one hand, in the shareholding companies with dispersed ownership, the basic difficulty is how the external shareholders can control performance of the managers if they do not have enough power to influence them. On the other hand, in the companies with a small number of owners, managers are usually controlled by the

1 Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012. str. 35. 2 Report of the Committee on the Financial Aspects of Corporate Governance (Cadbury Report), 1992

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biggest owner/s, so the main issue when it comes to good corporate governance is how the minority shareholders can prevent the controlling owner/s from achieving excessive benefits through actions that are harmful for minority owners.

2. FUNDAMENTS OF CORPORATE GOVERNANCE

Corporate governance deals with relations between various stakeholders in the limited liability company; it is the manner in which the shareholders, directors, managers and suppliers, employees, main clients and communities mutually interact. Formal and informal rules of corporate governance can be found in the legal, institutional and regulatory framework of every country. Corporate governance represents a key element in improving economic efficiency and growth, as well as increased trust of the investors. Corporate governance also ensures structure, through which company goals are set, as well as ways to achieve those goals and monitoring of results. Good corporate governance should ensure adequate incentives to the Board of Directors and the management in the achievement of goals that are in the interest of the company and its shareholders, as well as ensure easier and more efficient monitoring. Companies must build mutual trust with the byers bz guarantying satisfaction, safety and privacy. 3

Corporate governance depends on a reliable and functional legal system and institutional environment that enable establishment of corporations and their proper operations. However, such an environment can be created through positive development that will prevent abuse of authority, and investments will not be made until the companies feel certain that the risk of the project and the risk of the “state” are bearable.

3. IMPORTANCE OF CORPORATE GOVERNANCE

Corporate governance contributes to growth and development of the corporation itself, the related activities and the state in general. For a long time now the role of the company is not only to produce or provide services and make profits in this way. Companies take responsibility for development of the social environment. It is not possible to ensure development of the company relying only upon the interest of the company, while neglecting the overall development of the community. Corporate governance contributes to improved efficiency and effectiveness of the economic system. The existence of an efficient system of corporate governance within a company or the economy as a whole helps to reach the level of trust necessary for proper operations of a market economy. As a result, we have lower cost of capital; companies are encouraged to efficiently use resources, thus supporting growth.

4. PRINCIPLES OF CORPORATE GOVERNANCE (OECD)

Existence of a good system of corporate governance ensures transparency, fairness and accountability to the shareholders and other stakeholders in the company. Key role of corporate governance is to introduce the instruments for supervision of managers’

3 Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012. str. 33.

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behavior, to ensure corporate responsibility and cost-effective protection of interests of investors and the society with regard to the insiders. Recognizing the importance of corporate governance, OECD requested (1998) definition of corporate governance standards and guidelines for the national governments of the member states, other relevant international organizations, including the World Bank and the private sector. The principles represent a general basis that the countries find important for development of good governance practice. They are supposed to be concise, understandable and accessible to the international community and they focus on the following4:

I. Creating basis for efficient corporate governance framework II. Rights of shareholders and key ownership functions III. Equal treatment of shareholders IV. Role of stakeholders in corporate governance V. Data disclosure and transparency VI. Responsibility of the Board

By observing these principles corporate governance can ensure strategic management of the company, efficient supervision of the management and responsibility to the company and the shareholders.

5. ROLE OF THE STATE IN CORPORATE GOVERNANCE

Role of the state in corporate governance consists of improving and encouraging development of companies and ensuring responsibility in the exercise of power, as well as protection. Local entrepreneurs in the markets of the developing countries need political initiative to convince local and foreign sources of finance to enter the market. The state is obliged to give guidelines and to: - Ensure incentives and sanctions for companies - Balance gap between wages in the public sector and private companies - Protect the interests of persons who have an interest in the company.

Lessons to be learned from successful market economies are that the state policy should strive to create an environment that leads to the following: - Easing the initiation of business activity - Reducing the obstacles for business arrangements - Friendly and fair tax environment - Service oriented state administration - Provision of export incentives - Incentives for job creation and regional objectives - Protection of persons having an interest in the company (suppliers, clients and employees)

4OECD Principles of Corporate Governance - 2004 Edition, OECD Mission to Serbia and Montenegro

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- Protection of rights of shareholders

The state should support the stock market as one of the important sources of capital investments, but also the capital providers, such as the market of bonds and other securities and the commercial banking sector.

6. CORPORATE GOVERNANCE INSTITUTIONS

Corporate governance institutions consist of the key actors and formal and informal rules that the system is comprised of. Key actors in corporate governance are: government, corporations, business managers, stock exchange and securities commission, market agents, business associations, judicial system and other actors, including the pension funds, the media that report on financial issues and institutional investors. Formal rules that apply to the aforementioned institutions are as follows: regulations based on which the corporation is granted the status of a legal entity, regulations that define the business regulatory framework, regulations regarding the stock exchange, stock exchange listing requirements. Informal rules involve the following: licensing of professional associations, provision of information and exerting pressure on members that contribute to the observance of professional standards, business associations affect the behavior of actors regarding the generally accepted practice.

7. CORPORATE GOVERNANCE AND DEVELOPMENT

Corporate governance is important for economic development and its important role is to encourage local and foreign investments in the economy. However, there will be no inflow of investments until the investors are convinced that the risk is reduced and until they get tangible evidence that the government activities do not involve mere rhetoric. It is possible to present huge investment possibilities to the investors, but they will not come if the government and the local businessmen do not observe the rule of law. In the developing countries, the role of the government is to pave the way. Consistency, transparency, and honest government will be necessary for support to corporate governance reform. Business community would like to be given the opportunity to participate in planning the stages of reform, thus contributing to the reduced resistance to change and encouraging adoption of principles of good governance. In other countries, the stakeholders, such as business community leaders and professional bodies have accepted the opportunity to contribute to debate. Having in mind the investment opportunities in Montenegro, foreign and local investment communities with long-term interests in the country, should prove their readiness to cooperate in improving the good corporate governance. To summarize, there is no standard package of measures that can be applied. Good corporate governance requires good political governance.

8. CONCLUSION

Corporate governance contributes to growth and development of the corporation itself, the community around it and the state in general. For long now the role of the company is not only

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to produce or provide services, thus acquiring profit. Companies now take the responsibility for development of the social surroundings. Corporate governance represents a key element in improving economic efficiency and growth and increasing the trust of investors. Corporate governance is important for economic development and its important role is to encourage local and foreign investments in the economy. However, there will be no inflow of investments until the investors are convinced that the risk is reduced and until they get tangible evidence that the government activities do not involve mere rhetoric. Existence of a good corporate governance system ensures transparency, fairness and responsibility to shareholders and other stakeholders in the company. It is not sufficient to adopt the laws with the aim to improve corporate governance. Global financial and economic crisis demonstrated that even in the developed countries, there are weaknesses in the overall corporate governance system, especially in the corporations dealing with financial affairs. The US example shows that this is not so simple, not even in the countries with big experience in implementation of market principles, thus, it is necessary to continuously upgrade the overall system. In the modern times of business operations, the strategic path of the top management should focus on how to implement socially responsible activities in the company operations. Top management must find the ways in which corporate responsibility can be effectively incorporated into the company strategy, as a necessary and sufficient prerequisite for achievement and maintenance of competitive advantages in a turbulent environment.

BIBLIOGRAPHY:

1. Aguilera Rutt V., Rupp Deborah E., Williams Cynthia A. and Ganapathi Jyoti Putting the S back in corporate social responsibility: a multi-level theory of social change in organizations, Academy of Management Review 32/3, 2007

2. Ansoff Igor H., Strategic issues management, Strategic Management Journal 1/2, 1980 3. Baron David, Private politics, corporate social responsibility and integrated strategy,

Journal of Economics and Management Strategy 10, 2001 4. Business for Social Responsibility Overview of corporate social responsibility, BSR

Issue Brief, available at http://www.bsr.org/ insight/issue-briefdetails, 2003 5. Carroll Archie B., A three-dimensional conceptual model of corporate performance,

Academy of Management Review 4/4, 1979 6. Carroll Archie B., The puramid of corporate social responsibility: toward the moral

management of organizational stakeholders, Business Horizons 34, 1991 7. Donaldson Thomas and Preston Lee E., The stakeholder theory of the corporation:

concepts, evidence, and implications, Academy of Management Review 20/1, 1995 8. Društvena odgovornost preduzeća u Crnoj Gori, istraživanje, UNDP u saradnji sa De

Facto Consultancy, Podgorica, 2010 9. Džon Dramond i Bil Bein, Poslovna etika, Clio, Beograd, 2001 10. European Commission, Promoting a European framework for corporate social

responsibility, Green Paper, Luxembourg: Office for Official Publications of the European Communities, 2001

11. Filip Kotler, Nensi Li, Korporativna drušvena odgovornost, Čigoja štampa, Beograd, 2007

12. Freeman, Edward R., Strategic Management: A Stakeholder Perspective. Englewood Cliffs, NJ: Prentice Hall, 1984

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13. Friedman Milton, The social responsibility of business is to increase its profits, New York Times Magazine, September 13,1970

14. Galbreath Jeremy, Building corporate social responsibility into strategy, European Business Review, 21/2, 2009

15. Kontić Jovan and Kontić Ljiljana, Mergers and acquisitions in banking sector, Bankarstvo 5-6, 2009

16. Nilolas Ind, Korporacijski imidž, Clio, Beograd, 1996 17. OECD Principles of Corporate Governance - Edition, Misija OECD u Srbiji i Crnoj

Gori, Beograd, 2004 18. Pregled korporativnog uprvljanja, Prestruktuiranje preduzeća-tehnička pomoć, Crna

Gora, EU, Podgorica, 2003 19. Report of the Committee on the Financial Aspects of Corporate Governance (Cadbury

Report), 1992 20. Ričard T. Di Džordž, Poslovna etika, Filip Višnjić, Beograd, 2003 21. Robert C. Pozen, The Case for Professional Boards, Harvard Business Review,

December 2010 22. Milenović, B. and Ratković, M.: Marketing, Cekom books, Sremski Karlovci, 2012.

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MANAGEMENT OF PREVENTIVE MAINTENANCE AS A FACTOR OF SUCCESSFUL TECHNOLOGICAL PROCESS

Velimir Šćekić 1, Vladana Lilić 2, Krstina Reko2

1 Alfa University, Belgrade, Faculy for Strategic and Operational Management, Belgrade, Serbia

2 Alfa University, Belgrade, Faculty for Education of the Executives, Novi Sad, Serbia

Summary: Preventive maintenance should lead to reduction in failures, i.e. it should create such conditions that break-downs do not occur at all. Preventive maintenance is one of the ways of preventing break- downs or deadlocks while performing technological operations during business operations, and it also reduces the number of break-downs. This paper presents parts of organizational guidelines (procedures) that deal with preventive maintenance, and it also shows the diagram of the cost of preventive inspections.

Key words: preventive maintenance, preventive inspection, interventions.

INTRODUCTION

Maintenance of machinery systems is a very important function; realization of technological processes in any production depends on this function. With new technologies coming along it is necessary to develop new technologies of maintenance. It is widely believed that it is exactly the new maintenace technologies that will become a very important segment in the future increase of productivity. We already, in a whole range of industry sectors, use most of the adopted technologies of maintenance of technical systems, but in order to improve and use to the fullest such a large number of various maintenace technologies it is necessary to organize multidisciplinary activities of specialized engineers who are equipped with all the necessary knowledge and expertise regarding maintenance jobs.

Therefore, the need to create mechanisms to adopt new knowledge in the area of technical systems is a very actual and realistic need, as is the need to define steps in technological maintenace in order to meet all the demands (needs) of all those who use technical systems in their production processes.

Utility value of any technical system is explicitly dependant on all its technical characteristics regarding maintenance, as well as on the quality of the very process of maintenance. Maintenance of a system (machinery) consists of a whole string of steps and activities with the aim to prevent occurence of break-downs (failures), as well as to bring the system back into the 'operational' mode after the 'failure' mode had appeared.

Preventive maintenace results in extended life scope of equipment and in reduced number of break-downs, and all this means better and faster performance of technological operations and improved business operation in the company as a whole,

MAINTENANCE AS A TERM AND AS A FUNCTION

Maintenance of technological systems consists of a whole string of actions that actively

include both the manufacturer and the user of the technological system (machinery). The main

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task for technical maintenace is to keep the machinery system in operational mode in order to perform all the technological steps in the process of production, Fig. 1. [1]

Figure 1- Phases of work in maintenance process

Cost of maintenance and of break-downs in the process of production should be as low as possible, and the quality of final parts and production productivity should be as high as possible. Per product unit, total costs due to designing, manufacturing, exploitation and system maintenance (through planned life scope of a system) should tend towards minimum, disregarding where and when those costs were created. The main function of technical system maintenance is to perform all the necessary procedures so that the technical system remains operable (in working mode), and that it remains operable within required parameters of reliability, productivity and economy during its projected life scope.

The main tasks of maintenance are: [1] - to provide that the technical system operates within desired state of reliability during its

exploitation, - to provide that total costs of maintenance remain minimal, - to limit and prevent that technical system becomes obsolete, - to provide better quality of the system, - to increase the level of work motivation, - to deliver products to consumers on time, - to increase productivity of production, etc.

Maintainance of the system with regard to its contents and dynamics must be coordinated with real needs; otherwise we get unwanted effects. Development of new sciencies, specially cybernetics, theory of system, informatics... has contributed considerably to the change in the process of maintenance of technical systems. Technical system is not perceived as an aparatus or machinery, but as an integral part of the general system of nature that is subject to general and special laws, common to all other systems in nature as well.

1) The concept of maintenance is the feature of maintenance, and it influences the overall quality of the system of maintenance.

2) Organization of maintenance systems defines relations between several levels. i.e. places – factory plants, where procedures of maintenance are executed.

3) Technology of maintenance defines procedures of maintenance and the way of executing procedures of maintenance – how to perform certain steps, with what tools, in what order, in what time-frame – and this technology is valid for all the

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levels of maintenance separately, and for all the allocated (planned) procedures of maintenance as well: [1]

- basic maintenance by worker in charge – technical supervision; - preventive periodical inspections, without special tools, - inspections regulated by law and regulations, - lubrication, - technical diagnostics, - preventive change of parts - location and removal of weak spots, - repair and refurbishing of worn out parts - preventive periodical repair, - general periodic repair and modernization.

4) Designing is based on constant monitoring and control of the main causes of failure and it is based on activities that we undertake to remove failures, or it is based on significant reduction of failure consequences. In the same manner, this concept does treat break-down as a normal or possible state of things, but it undertakes a whole set of measures to prevent failure from occurring (i.e. to provide 'healthy life' for machinery); this way the concept prolongs the machinery life scope to the fullest. [2]

- terotechnology, - logistics system of maintenance, - intelligent maintenance, - maintenace according to present state, and - overhaul.

Terotechnology – this is a set of activities dedicated to preservation of fixed assets during their life scope. The terotechnology activities include: maintenance of everything manmade: maintenance of factory plants, machinery, buildings, constructions; installations; they also include implementation; modification; replacement. Terotechnology includes specifications and designing, as well as all the other areas of maintenace of physical goods and technical means.

Logistics maintenance system – this is a technical branch that comprises work, functioning and work conditions of technical systems. This brunch comprises all the basic activities during the life scope of a system. Its task is to provide all the necessary factors for realiable work process of a technical system and for its return from 'failure' mode into 'operational' mode.

Intelligent maintenance – this term is used for expert systems as well, and it includes 'general purpose programme, tasked with solving problems by imitating human intelligence.' All the above have their own costs:

- cost of supply (transportation, insurance...) - cost of labour (work force, energy, building, etc.); - cost of maintenace (work force, parts, tools, etc.): - cost of administration

All those total costs can be shown as: T

Cu = Cv + ∫ f (t ) ⋅ dt + Ck ⋅ T , 0

(1) where:

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Cu – total cost, Cv – ownership cost, C k – cost of use per time unit, f(t) – density of time function, up to break-down T – time of use

Nevertheless, total costs can be classified into two groups: - direct costs (activities related to servicing, replacement of broken parts, location of

broken parts, periodical preventive repair, technical diagnostics, lubrication, overhaul, etc.) and - indirect costs (deadlocks, damaged parts in technical means, lower quality of

production, rejects, etc.). Graphic representation of the mentioned costs is shown in Fig. 2.

Figure 2 - Cost of maintenance

Maintenance according to reliability – it is based on reliability theory and on system sciences in general; it is based on knowing characteristics of reliability in order to provide prognosis of future states during the operations of technical system, i.e. this serves to foresee failures.

Overhaul – this was introduced in Japan in the 1950s and its aim is to maximize productibility of the system with minimal cost within life scope of the system through elimination of 'the three groups of large losses' that lower system efficiency:

- losses due to break-downs (sudden break-downs and adjustment of equipment) - losses due to lack of efficiency (idling and small failures) and - errors in the process (removal of errors during the operations and reduction in income

due to losses from difference in initial and stabile production.

SYSTEM MAINTENANCE PROCEDURES

Maintenace procedures differ in high degree and this is shown in Figure 3. [3]

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Figure 3 – system maintenace procedures

In this case we differ two different types of maintenance: 1) Corrective maintenance – includes the set of procedures necessary to bring the

system back from failure mode into operational mode, with the aim of performing given functions within the scope of tolerance.

2) Preventive maintenance – includes the whole string of procedures necessary to prevent failure mode, i.e. includes maintenance of function parameters within the scope of tolerances, as long as possible.

Preventive maintenance procedures can be executed as: maintenace according to present state (executed by inspection according to current state) and maintenace by replacement (executed by replacement of parts, disregarding their quality).

Organization of maintenance process has a decisive role on the overall level of efficiency of the system through following:

- execution of maintenance procedures in as short a period as possible, - modelling of database in order to achieve higher level of compliance of maintenance

system, - creation of basis in order to place procedures into system testing, - influence over development of steps for work humanizaton by providing basis for

better work conditions, etc.

When allocating budget for maintenance one may specify the scope and type of work, where one may use part of potential of the available work force that can be included into maintenance. If it is some special equipment, equipment that is still under guarantee, then cost plan – as the first level of operational planning – must include all those facts.

PLANS FOR PREVENTIVE REPAIRS

In the process of maintenance of technical systems all the plans are quite similar,

therefore we list the following: Mid term plans – these are usually five-year plans and they are the basis for all the rest plan- making;

- plan of preventive periodical repair of basic technical systems, and

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- plan of all the maintenance activities that, apart from preventive repair, contains other tasks as well (e.g. investments, liquidation of fixed assets, etc.).

After mid term plans, one should make yearly plans of preventive and periodical repair. Here we specify details

Then we have operational plans which serve to specify activities in shorter intervals, most often for one month, in accordance with yearly plan. Their task is as follows:

- to use to the fullest both the work force and the means of production, - to make sure that work is not on hold while we wait for spare parts and material, - to make sure that business flow is not interrupted.

Then we have workshop plans that provide for global planning: repair and tasks normally executed by in-house maintenace (no help from central maintenace). This stems from demands for periodical preventive inspections received from other sector (or from production).

Any maintenance planning must strictly be kept within the scope of economic efficiency principles. That means that when creating plans we must keep in mind both economic principles and productivity of work in performing preventive periodical repairs (capacity, work force capacity, machinery and equipment capacity, etc.) With the development of science and technics, i.e. with work almost fully automatized today, more and more people work in the maintenace process. Therefore, the main factors that influence planning of the number of people necessary for the maintenace process are:

- implementation of conventional and modern methods of maintenance (preventive – combined methods, corrective methods)

- procedure for the organization of maintenance function (centralized – decentralized) - policy of engaging cooperators (externally or internally).

INFORMATION SYSTEM FOR IMPLEMENTATION OF MAINTENANCE TECHNOLOGY

Information system for implementation of maintenance technology is tasked with

performing all the necessary maintenace jobs. Data and information on current jobs, necessary workers and executives and their training – these are the necessary information, and more specifically so: [3]

- data on available human resources - place (factory plant – workshop) - time - type of maintenace process - special workshops or laboratories if necessary - necessary tools, instruments and means of transportation - required material and parts - time (allocated) for maintenance procedures - coordination and such.

All the parts within an information system cooperate with information sub-systems, but specially with the following:

- production and commercial sub-systems (supplies, sales, accounting and budgeting), - human resources, etc.

The following should be included in process of designing information system: - data and information (sources, streamflows and destination),

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- data, info and database carriers - data processing and modeling of information - steps and analyses from info, as well as steps in the decision-making process.

During the process of designing information system, it is extremely important to establish the necessary and adequate data, their source, steps in their processsing and adequate information for the decision-making process.

Carriers of data and information are the basis that includes the results of the whole process, and at the same time they include means of transportation and data processing with the aim of acquiring reliable information on the current state of the system. Data are presented without any subjective description; the number of carriers and information should remain as low as possible, but still adequate to fulfil the tasks before us. [4]

- list of technical systems - structural map of the system - record of work-life of technical system - record of system over time - record of reliability indicators, - Workshop documentation (work order, request for failure removal, technological

process, construction documentation, requisition for spare parts, returnee of spare parts, request for material and spare parts, time plan, technical instructions and standards, inspection and time specification, material and spare parts specification, form for recording the handover of orders and check-ins, form for maintenance working groups.)

CONCLUSION

Implementation of the system of prevention into the maintenace process and its rigid follow-up are necessary and they should lead to reduction in number of break-downs, i.e. they should create conditions where we have no break-downs at all. Organizational manual defines in detail procedures, authority, responsibility and all the documents through which preventive maintenance is regulates and executed.

BIBLIOGRAPHY

[1] Adamović Ž., 2000. "Totalno održavanje" – DP" Pronalazaštvo" Beograd. [2] Avramović, Ž.i grupa autora.: 2005.Uvod u totalno održavanje, Grfid dd. Banja Luka,

Beograd. [3] Drašković, M.,Smiljić S., Kukrić M.:2012, „Intellectual capital-a competitive advantage of modern business systems“, INTERNATIONAL JOURNAL OF ECONOMICS AND LAW, Vol. 2, No. 4. [4] Jaikumar, R.: 1993, 200 years to CIM. IEEE SPECTRUM, IX.

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manufacturing and agricultural engineering. Strojniški vestnik – Journal of Mechanical Engineering, Vol. 54 (2008), No. 2, pp. 122-130. ISSN 0039–2480.

[2] Radosavljević, Ž. & Tomić, R.: Menadžment u modernom biznisu. Novi Sad: Privredna akademija, 2006. pp. 445. ISBN 86-84613-47-3.

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