5TH INTERNATIONAL MULTIDISCIPLINARY

SCIENTIFIC CONFERENCE

EUROBRAND

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 SUGGESTION OF A MODEL OF A CENTRALIZED SYSTEM FOR
PROVIDING SERVICES IN THE FIELD OF CLINICAL TRIALS ON DRUG
Milorad Stamenović, Suzana Pavlović
Clinical Research Associate, Pierrel Research, m.stamenovic@rocketmail.com
Professor at Health Sanitary School of Professional Studies Visan, miskos@verat.net

Abstract: This paper deals with the problems of current decision-making system in the field of clinical
trials in Republic of Serbia and with a suggestion of implementation of proposal of innovative project
management model of a centralized decision-making system in clinical trials. The current decision-making
model in clinical trials in the Republic of Serbia has been observed as time consuming, expensive and
non-transparent, what is burdening the sponsors of clinical trials, the institutions that conduct clinical trials
as well as the participants of the trials. Contrary to this divided and localized system of the management
process of clinical trials, in some EU countries appears that a centralized and more efficient system for
providing services in decision-making processes in the area of clinical drug trials is possible, and it makes
a contribution to the quality of the whole process. Research demonstrated in this paper has value for
Ministry of Health of Republic of Serbia, Medicines and Medical Devices Agency of Serbia, Local Ethics
Committees of Investigational Institutions within Serbia and international and domestic Pharmaceutical
Companies and Contract research organizations involved in clinical trials processes in Serbia.

Keywords: health care management, clinical trials on drugs, innovation, new service development model,
decision-making processes

1. INTRODUCTION

A clinical trial is a study performed on humans with the aim to establish or confirm the clinical,
pharmacological and pharmacodynamic effects of one or more drugs tested, to identify any adverse
reactions to one or more tested drugs. It has for its aim to examine the absorption, distribution,
metabolism and excretion of one or more drugs, as well as to determine safety and efficiency of the drug
(The Official Gazette of RS, 2010).

A sponsor of a clinical trial can be a producer, a legal or a natural person (hereinafter referred to as the
sponsor) and is responsible for the initiation, management, quality and financing of the clinical trial. The
sponsor may transfer some or all obligations related to the conduct of clinical trial to a Contract Research
Organization located in the Republic of Serbia (hereinafter referred to as RS), which is responsible for the
activities that the sponsor had transferred onto them in the process of approval and conduct of clinical
trials on the territory of RS.

The sponsor is responsible for the activities transferred to the Contract Research Organization (The
Official Gazette of RS , 2010). Prior to the beginning of clinical trials, the Local Ethics Committee of the
Research Institution makes a decision on the conduct of the clinical trial (The Official Gazette of RS,
2010).

The Ethics Committee considers the request for conducting the clinical trial with documentation submitted
and brings a decision within 60 days from establishing that the application is complete (The Official
Gazette of RS, 2010). The Ethics Committee is obliged to inform the sponsor of the clinical trial or
authorized Contract Research Organization as well as the Medicines and Medical Devices Agency of
Serbia (hereinafter ALIMS) about its decision within 15 days (The Official Gazette of RS, 2010). If the
Ethics Committee does not make a positive decision on conducting the clinical trial, ALIMS will not issue
the authorization of clinical trials.

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The approval for the new clinical trials on drug/drugs implies that the sponsor of the clinical trial, who
does not have an approval for the drug in RS, or the drug proposed to be used, must apply for the
authorization of clinical trials and submit to ALIMS complete documentation in conformity with the law and
regulations. The sponsor submits the documentation that includes: a summary of the nature and
characteristics of the drug, conducted research in order to define its pharmacological and toxicological
properties, clinical experience, the protocol of proposed trial, a list of all researchers and institutions
involved in the study, as well as the approval of all Local Ethics Committees of the Research Institutions
(The Official Gazette of RS, 2010). The content of the request i.e. documents necessary for the
authorization of the clinical trial, as well as the protocol of the clinical trial, is prescribed by the Minister in
charge of health affairs (The Official Gazette of RS, 2010). If all the requirements stipulated in this law
and regulations adopted in order to implement this law are met, ALIMS will issue the authorization to
conduct the clinical trial (The Official Gazette of RS, 2010).

In the RS the decision-making in the field of clinical trials is conducted in several phases, which are long,
segmented, and with an uncertain outcome. The basic problem in the decision-making system – the
department of service provided by state institutions in the field of clinical trials – appears to be in
localization and segmentation of certain phases of the service in the decision-making system. Based on
EU Directive 2001/20/EC, it is possible to implement various decision-making models in this field. Ministry
of Health of the RS through ALIMS implements a system in Serbia that includes the decision-making
structure during the authorization of clinical trials or the authorization of variations of and amendments to
clinical trials provided in the graphic (Figure 1). Funding for the entire decision-making process is
provided by the sponsor of the clinical trials. The sponsor of the clinical trial on drug/drugs pays the
appropriate sum of money for the services received from the Local Ethics Committee and the ALIMS. The
amount of money paid for the services completed is in accordance with the statutes of these institutions,
and is paid as a compensation for the bringing of the appropriate decision according to the conclusion of
the meeting of the expert committee and submitted documents of the clinical trials on drug/drugs.

The time component in terms of the length of the entire decision-making process is of great importance
for to the sponsor of the clinical trial as well as for the researchers and patients (i.e. potential users of the
drug being tested). In divided and localized decision-making system, the changes of the expected
deadlines are frequent and endless. It should be noted that in this paper the decision-making process is
being reviewed at its most important and most complex processes within the clinical trials related to
institutional decision-making systems such as obtaining the authorization of clinical trials in the RS and
obtaining the authorization of variations of and amendments to clinical trials.

The model from the graphic (Figure 2), of a centralized innovative decision-making system for provision of
services in the field of clinical trials, provides the opportunity to avoid some shortcomings in terms of time,
cost and efficiency of the existing models.

The main contribution of this system would be in optimization of the decision-making within the Ethics
Committees centralized at the national level. Thus, the speed of decision-making would be greater, the
chances to delay the process would be smaller and, ultimately the cost of the process would be reduced.
The centralized innovative decision-making system enables the concentration of certain parts of decision-
making. At the same time the proposed model would reduce the number of procedural and administrative
processes in each institution and thereby it would reduce the cost and increase the efficiency.

2. THE EXISTING SYSTEM FOR PROVIDING SERVICES WITHIN THE DECISION-MAKING

PROCESSES IN THE FIELD OF CLINICAL TRIALS
As part of this paper, the current system for providing services within the decision-making in the field of
clinical trials, based on the existing legislation, is presented (The Official Gazette of RS, 2010). The
process presented (Figure 1) considers a situation in which the sponsor of the clinical trial requests for
the services in the form of an authorization for conducting clinical trials or requests the authorization of
variations of and amendments to clinical trials. These two procedures are considered as the most
complex requests in which we can see the most clearly the decision-making process in Serbia.

Page 3
The system is managed by the highest authority, the Ministry of Health of the RS, through the ALIMS.
The set system can be modified only in case of changes of relevant legislation relating to the existing
procedures.
Process
Start/Sponsor
decission Phase I

Clinical
Research
Organization
Phase II

Investigational Investigational Investigational Investigational

Site 1 Site 2 Site 3 Site n

CRO CRO CRO CRO Phase III

Local Ethics Local Ethics Local Ethics Local Ethics

Committee 1 Committee 2 Committee 3 Committee n 1st Level Decision

Phase IV

Clinical
Research
Organization
Phase V

Competent
Authority

End of
Process/Final
Decission

Figure 1: The current system of providing services in decision-making processes in the field of clinical
trials, provided by the author

Phase I - According to the Law on medicines and medical devices of RS the sponsor of the clinical trial is
required to submit all necessary documents to the decisions-making system within RS for assessment in
order to obtain the authorization of clinical trials in RS or to obtain the authorization of variations of and
amendments to the already authorized clinical trial on the territory of RS (The Official Gazette of RS,
2010). The sponsor of the clinical trial on drug/drugs e.g. a pharmaceutical company that wants to
implement a certain stage of scientific trial on the territory of the RS, authorizes a Contract Research
Organization (CRO) to apply for the conduct or variations within the clinical trial (The Official Gazette of
RS, 2010). In the above mentioned graphic (Figure 1) the sponsor authorized the Contract Research
Organization to submit the appropriate documents to the state institutions.

Phase II – The Contract Research Organization (CRO) is authorized by the sponsor of clinical trial (The
Official Gazette of RS, 2010). Based on the contract between the Contract Research Organization and
the sponsor, the Contract Research Organization has the authority to submit all legally stipulated
documents to the authorities of the state responsible for the decision-making process related to clinical
trials. In the case of the mentioned existing model in the RS, as shown in the graph (Figure 1), the

Page 4
institutions to which documents are being submitted to are Research Institutions, Local Ethics
Committees of Research Institutions and the ALIMS, in the given order. In this step the necessary
documents e.g. contracts, consents of the responsible persons, etc. should be submitted to Research
Institutions and based on those documents the Contract Research Organization is able to move to the
phase III. This phase includes the submitting of all documents related to the clinical trial of a medicinal
product together with the documents received from the Research Institutions of Local Ethics Committees.
When the paid service is obtained in the form of approval of the Local Ethics Committees, that approval
and all the documents are further submitted to ALIMS whose services are paid additionally, depending on
the type of service.

Phase III - The graphic (Figure 1) shows three Local Ethics Committees of Research Institutions and the
th
fourth is shown as the n (there can be a maximum number within the number of existing clinical centers
and medical centers in the RS, because each of them represents a potential research center for specific
therapeutic indications (The Official Gazette of RS, 2010)). We can state that the number of 4-8 Research
Institutions makes an average number of institutions participating in a clinical trial, and therefore the
number of Local Ethics Committees that make decisions on clinical trials is 4-8 - each Research
Institution has its own locally organized ethics committee that provides services in the decision-making
process (The Official Gazette of RS, 2010). The Contract Research Organization (CRO) has the
obligation to submit all the documents received from the sponsor (adjusted to the local laws of the RS) to
the Local Ethics Committees under whose approval it may proceed with the process of submitting
documents to higher instances (The Official Gazette of RS, 2010). In the case of RS the higher instance
for decision-making is the ALIMS. The Local Ethics Committees provide services related to appropriate
decision-making according to specific demands of clinical trials on drug/drugs. They are being paid for
their services by sponsors of clinical trials through the Contract Research Organization (The Official
Gazette of RS, 2010).

Phase IV -shows the step in which the Contract Research Organization takes over the decisions made by
Local Ethics Committees and with further adaptation processes submits the overall documentation
received from the sponsor, together with the approvals obtained from the Local Ethic Committees to the
ALIMS (The Official Gazette of RS, 2010).

Phase V - shows the step in which the documents are being delivered to ALIMS - (Competent Authority),
and then within the legal deadline, depending on the service requested, final approval issued by the
Ministry of Health of the RS is expected (The Official Gazette of RS, 2010).

Phases III and V, present the submission of documents by the authorized Contract Research
Organization to the state authorities paid as a service provided by the state institutions in the name of
provision of services in the area of decision making - making of appropriate decisions at the meetings of
expert committees. Prices are determined by the statutes of the institutions to which the documents are
submitted to. A number of institutions (committees for providing services in the decision-making process)
lead to the multiplication of payments for basically the same service.

3. THE PROPOSAL OF AN INNOVATIVE CENTRALIZED SYSTEM FOR PROVIDING

SERVICES IN DECISION-MAKING PROCESSES IN THE FIELD OF CLINICAL TRIALS
ON DRUG / DRUGS

This section presents a proposal of a centralized system for providing services in the decision-making
processes in clinical trials which is primarily based on the provision of such services on the territory of the
Republic of Romania. Beside the Republic of Romania, many European countries have introduced a
system for providing Centralized services in decision-making processes in the field of clinical trials
(European commission, 2008.). Decision-making process itself is arranged differently from country to
country and adapted to local laws. Among others, the Republic of Romania follows Directives of the
European Commission 2011/20/EC, then Directive 2003/94/EC, 2005/28/EC and ICH E6, which make it
one of the countries of the European Union that has fully harmonized its system with all the European and

Page 5
international regulations and standards (The European Forum for Good Clinical Practice, 2011). EU
Clinical Trials Directive 2001/20/EC, allows the implementation of various models of the decision-making
system - a department for providing clinical trials services. The system shown in the graphic (Figure 2), is
primarily better due to centralized decision-making system. Within this centralization all Local Ethics
Committees of Research Institutions (Figure 1, Phase III) that participate in clinical trials have created
one, a National Ethics Committee, whose goal is to shorten the decision-making time and increase the
quality of decision-making (Figure 2, Phase III). In the Republic of Romania (Figure 2), the National Ethics
Committee for clinical trials is an independent body. National Ethics Committee is under the direct
jurisdiction of the Ministry of Health of Romania (The European Forum for Good Clinical Practice, 2011).

Process
Start/Sponsor
decission
Phase I
Contract
Research
Organization

Investigational Site 1
Phase II
Investigational Site 2

Investigational Site 3

CRO
Investigational Site n

National Ethics Phase III

1st Level Decision
Committee

Contract Phase IV
Research
Organization
Phase V

Competent
Authority

End of
Process/Final
decission

Figure 2: The proposal of an innovative centralized system for providing services in decision-making
processes in the field of clinical trials, provided by the author

In the case of the innovative system based on the examples of service provision systems in the decision-
making processes within clinical trials in the Republic of Romania, the sponsor of the clinical trial would
be, as in the present system of the RS, legally required to submit the documents to the Contract
Research Organization. This Organization would adapt the stipulated documentation to local laws, and
submit it to the National Ethics Committee, instead of numerous Local Ethics Committees of Research
Institutions. In that case the multiplication of the costs, prolongation of the decision-making process and
non-transparency of the decision-making process in the form of paid services to local authorities, would
be avoided. All other decision-making processes and procedural systems for providing services would
remain the same as in the graphic (Figure 1).

Page 6
4. A MODEL OF AN INNOVATIVE CENTRALIZED SYSTEM FOR PROVIDING SERVICES IN
DECISION-MAKING PROCESSES IN FIELD OF CLINICAL TRIALS OBSERVED
THROUGH A PHASE MODEL OF DEVELOPING INNOVATIVE SERVICES
The innovative system for providing services focuses primarily on the formation of a new National Ethics
Committee and by that a new service provider in the decision-making process would be initiated.
Activities of this innovative service would lead to cost reductions and greater certainty regarding time and
finances within the decision-making process. In this paper, in the aim of further implementation of the
model of centralized innovative system for decision-making in clinical trials, one of the well-known
innovation project models in the services, the Sashimi model, can be used. Sashimi model is so called
because it features overlapping phases, like the overlapping fish of Japanese sashimi (Ward, 1998).
Initially it was referred to as the “waterfall model with overlapping phases” or “the waterfall model with
feedback” according to Matkovic and Tumbas (2010). Since the phases in the Sashimi model overlap, it
may point to existing problems during the implementation of the project very well. The phase model of the
development of the new service could be based on this model.

4.1 The phase model of the development of the new service

According to Milutinović and Stošić (2011), the phase development of Sashimi model includes the
following overlapping phases:

1. Possibility analysis
2. Feasibility and defining
3. Design and testing
4. Development
5. Implementation and a pilot test
6. Commercialization

4.1.1 Possibility Analysis

Within this analysis it is necessary to determine if the implemented service would be profitable and thus
justify its implementation. If so, it is possible to move onto the next phase. Involved organizations
estimate the prospects for implementation of such project in terms of capacity and support for further
implementation of this project. The final decision on implementation in this case must be made by the
state, i.e. the Ministry of Health of the RS. Within the Ministry of Health, organizational changes of the
new service model would include institutions of the ALIMS as well as the Local Ethics Committees within
research centers i.e. clinical centers and medical centers in the RS. Their network infrastructure would
have to be eligible. The purpose of the implementation of this model of the decision-making process in
terms of service, when making decisions about clinical trials, primarily is to provide transparent, more
efficient and less expensive process that would bring relief to all participants in this process and mostly to
the sponsor of the clinical trial e.g. cost reduction, the increase in speed of the decision-making process,
then to researchers e.g. increase in speed of decision-making process, and finally to our patients e.g.
enabling the use of the innovative drug in a timely manner. From the state’s point of view, centralized
innovative decision-making would contribute to a clearer and more transparent monitoring system of
clinical trials that are underway, as well as to faster and more efficient decision-making and implementing
decisions on existing or anticipated clinical trials. Also, with the increase of favorable business conditions
and with the convergence of current conditions to efficient and applicable models in the world, the state
would provide good business conditions and thus increase the number of sponsors to whom timely
decisions and pricing could be crucial in the case of selection of the country where they would conduct
their research and commercial activities. The increase in the number of sponsors enables the larger
number of the above mentioned studies that can contribute to creation of new workplaces in the field of
innovative technologies and services, as well as greater visibility and prestige of our Research Institutions
in the world, which is partially reflected through a number of published and successful clinical trials in
which our researchers were the participants. The innovative centralized service provision in the decision-
making process in the field of clinical trials cannot be initiated prior to the changes in the statutory legal

Page 7
framework that would enable its implementation. The ministry is also obligated to harmonize the internal
affairs with subordinate legislations within 60 days from the date of enactment of the necessary legal
regulations.

4.1.2 Feasibility and defining

Within the second phase the service provider/service should be defined. Getting out of this phase would
be in the form of a draft of a final service. It should be defined in detail what the service implies. In the
case of the proposed implementation of the model of the centralized innovative decision-making system
in clinical trials main phases are listed in the graphic (Figure 1 and Figure 2). The graphic (Figure 1)
represents the current service provision system within the decision-making process in clinical trials, and
the graphic (Figure 2) represents an innovative model for centralized provision of services in the process
of decision-making in the field of clinical trials. As stated in the introduction, this decision-making system
is best to be observed through the most complex and the most important decisions related to the clinical
trials in the RS. For providing the decision-making service and for revision of the submitted documents at
the meeting of the expert board of a Local Ethics Committee of a Research Institution, as well as the
ALIMS, certain compensation is provided in accordance with the statutes of these institutions. Such
decisions include the authorization of clinical trials and the authorization of variations of and amendments
to clinical trials.

The idea to implement the innovative model is based on the restructuring the existing decision-making
process and the centralization of the existing decision-making system within which the service of the
decision-making would be transferred from the level of Local Ethics Committees of Research Institutions
to the centralized innovative service of the decision-making system and thus avoid multiplication of
submitting documents required for decision-making, reduce decision making costs i.e. one decision-
making committee would be paid instead of all local committees for making individual decisions, and it
would also reduce the possibility of prolonging the bringing of appropriate approvals – according to the
centralized decision-making system (Figure 3).

Clinical
Research
Organization

Local Ethics
committee
Site 1

National
Local Ethics
Committee
Ethics
Site 2 Committee Clinical
Research Competent
st
Local Ethics (1 Level Organization Authority
Committee Decision)
Site 3 (Final Decision)

Local Ethics
Committee
Site n

Figure 3: Proposal of substantial changes in the infrastructure network of the system for decision-making
services from divided and localized systems into a centralized innovative system for providing decision-
making services in clinical trials, provided by the author

Page 8
4.1.3 Design, development, implementation and pilot test
Within this phase, project should get a clear outline of the design in terms of further solving of the
infrastructural problems. Declaration EU 2001/20/EC enables implementation of the innovative
centralized service model for the providing services in the decision-making process in the field of clinical
trials. Within this phase it is expected that all the components are included and the operational support
systems are identified and defined precisely. The Ministry of Health should define a transition strategy to
the innovative centralized service model for the provision of services in the decision-making process in
the field of clinical trials. The design should be related to the Development of the project and it should be
based on the action plan drawn up in accordance with the strategy. Given the specificity of the service
that is being implemented, it is necessary to determine the position of the Central Ethics Committee i.e.
National Ethics Committee, and official representative body for provision of service in the decision-making
process. In order to reduce costs during the implementation, we suggest that the location of the Central
Ethics Committee should be in the building of the ALIMS. In this way, the physical proximity of the two
inevitable institutions in the service providing system of decision-making within clinical trials will contribute
to the transparency of the service providing process. It is also necessary to establish a professional board
of the Central Ethics Committee that would be responsible for providing services in decision-making in
clinical trials on drug/drugs.

4.1.4 Development
The development is the phase of the model in which the infrastructure of an organization and the
infrastructure of a service are combined and unified (Milutinović&Stošić, 2011). After the planning
process, the work on the infrastructural processes and the time component should be done. Ministry of
Health of the RS is obliged to obtain all necessary documentation related to the implementation of the
innovative centralized service for providing services in the decision-making process in the field of clinical
trials.

4.1.5 Implementation and a pilot test

Serbian Ministry of Health should support all that is required within the implementation in order to carry
out the listed services. The other segment is related specific testing of the innovative decision-making
system in the field of the clinical trials. Within the implementation, it is necessary to analyze the very
infrastructure and the needs for adapting the new services and to adjust them to enacted laws and
regulations, in accordance with the desire for a more efficient service providing system in the decision-
making process in clinical trials.

4.1.6 Commercialization
Commercialization presents a phase of the Sashimi model which should sum all previous phases and
thus ensure the readiness of the entire network for final functioning of the service in commercial
purposes. The particularity of the project leads to further specificities of this phase. Namely, when a
service system for decision-making in the field of clinical trials is changed once, it is not possible to
proceed according to the previous decision-making system, i.e. the selection and the final implementation
and commercialization of innovative system for delivering services in decision-making process in clinical
trials would be a final and unique solution for all further processes of obtaining the authorization of clinical
trials and obtaining the authorization of variations of and amendments to clinical trials. It follows that it is
essential, before the project is finally commercialized, that all users of the innovative decision-making
system in the field of clinical trials are clearly informed about the changes, as well as about and the way
of functioning of the new implemented system. Therefore, it is necessary to make a separate promotion
system of a new innovative model of the centralized service within the decision-making process in the
field of clinical trials that would provide all end users high quality information on time. These kinds of
changes are made by the Serbian Ministry of Health in the Official Gazette of RS. According to the Public
information law, new laws on which the future innovative system is based on will come into force eight
days after its publication in the Official Gazette of RS.

Page 9
5. CONCLUSION
Modern decision-making systems require optimization of resources and time. The present model is shown
to be insufficiently flexible for various requirements of the pharmaceutical industry. In the RS, the
decision-making system in the field of the authorization of clinical trials and the authorization of variations
of and amendments to clinical trials is being conducted in several phases, which are long, segmented,
and with an uncertain outcome. The main problem in the field of clinical trials, related to the decision-
making process, occurs precisely in the localization and division of certain phases of the service within
the system of decision-making. Based on EU Directive 2001/20/EC the use of various decision-making
models in this area is possible and the proposal of the model for implementation presented in this paper
(Figure 2) would allow a significant improvement in the speed of decisions-making, or in terms of
transparency and further cost reductions. Such services provided by the state and paid by foreign
investors, in this case the sponsors of clinical trials, must be highly efficient and advanced to ensure the
satisfaction of the end users of the mentioned services in order to fully optimize quality and time
components. In a time of growing competition, we can say that every innovation in terms of service that
enables optimization of resources represents a comparative advantage in relation to the countries that do
not have such services. The investors who are satisfied with the clear and pragmatic solutions in the
decision-making system in the field of clinical trials will be happy to re-engage in scientific research and
commercial activity on the territory of RS. The benefits are multiple.

In this paper the proposed model of managing innovation projects in the area of new technical services is
used. Based on the specifics of the innovative system, there are certain characteristics in the application
of the Sashimi model. On the basis of adaptation according to the specifics of the innovative project for
providing services in decision-making process in the field of clinical trials, Sashimi phase model of
development of new service can be applied to this subject. Also, it should be noted that the phases of the
Sashimi model may need further segmentation. Of great importance for the implementation of this
innovative system is also legal - political framework, without which it is absolutely impossible to go into the
process of changing the existing model. Experts need to initiate the process of changes on the basis of
the evident shortcomings of the existing system, and the state should recognize further potential of the
planned innovation projects. Also, the strategy and action plan should be done and in this way enable the
implementation of the project. Considering the above mentioned, it can be concluded that during the
development and implementation of new service the local environment must be taken into consideration,
so that the phase model of the development of the new service could be applied in the right way.

REFERENCES

European Commission, Research&Innovation-Biosociety. (2008). National ethics committees 2008.

Retrieved from http://ec.europa.eu/research/biosociety/bioethics/bioethics_ethics_en.htm
Matković, P., Tumbas, P. (2010). A Comparative Overview of the Evolution of Software. International
Journal of Industrial Engineering and Management (IJIEM).(Vol.1, No 4)
Milutinović, R., Stošić, B. (2011, November). Innovations project management model in digitalization
field . Paper presented at the VIII Symposium of businessmen and scientists
Ministry of Health of Republic of Serbia. (2010). Law on medicines and medical devices . The Official
Gazette of RS (No. 30/2010)
The European Forum for Good Clinical Practice (EFGCP). (2011). The EFGCP Report on The
Procedure for the Ethical Review of Protocols for Clinical Research Projects in Europe and
Beyond. Retrieved from
http://www.efgcp.eu/Downloads/EFGCPReportFiles/EFGCP%20ECs%20Report%202011%20-
%20Question%2001.pdf
Ward, E. (1998). World class Telecommunication Service development (1st ed.). London, England:
Artech House

Page 10
COMPETITIVE ADVANTAGE THROUGH THE STRATEGY OF COST
LEADERSHIP-APPLICATION FOR SERBIA

PhD Ničić Milica, PhD Božić Dragan,Mr Hajrović Edib

Higher School of Professional Business Studies, Novi Sad, Serbia,
e-mail:nicicmilica1@gmail.com

Abstract: The strategy of cost leadership as a type of approach is

used by many businesses to enhance their positions within the
marketplace. A cost-leadership strategy attempts to gain a
competitive advantage primarily by reducing its economic costs
below its competitors. To succeed at offering the lowest price
while still achieving profitability and a high return on investment
means, that must be able to operate at a lower cost than rivals.
Also, this strategy has successful application for competitive
advantage of nations, so this paper describes application
for competitive advantage of Serbia through the strategy of cost
leadership.

Key words: competitive advantage, cost leadership

1. THE STRATEGY OF COST LEADERSHIP

Cost leadership is a type of approach that is used by many

businesses to enhance their positions within the marketplace. The basic
idea is to become a cost leader within that market by closely monitoring
and controlling costs or expenses associated with the ongoing operation of
the business enterprise. Doing so helps the business to be in a secure
position in the event that a price war should erupt among competitors,
while also increasing the chances of being able to maintain an equitable
profit margin even when no type of pricing war is taking place. With the
process of cost leadership, the key is to evaluate the business model and
make sure it is operating at the highest level of efficiency possible. This
will involve assessing every aspect of the operation and eliminating waste
and additional costs on an ongoing basis. Doing so will often entail
obtaining raw materials for the lowest possible price that the company can
command, managing labor costs effectively, and even streamlining the
actual manufacturing process so that the highest possible percentage of
those raw materials are used to produce goods that are fit for sale. From
this perspective, reducing cost at every step in the business operation
while still managing to maintain quality is of utmost importance.
This business strategy is to sell products at very low unit through a

Page 11
reduction in costs. The target is to become a cost leader within that
market by closely monitoring and controlling costs or expenses associated
with the ongoing operation of the business enterprise..
Cost reduction is achieved, for example, through the production of
standard products through volume production, use of economies of scale,
efficient use of raw material supplies, use of new technologies, stringent
cost controls and overhead, creating a culture of cost reduction in
employees, reduced costs of sales, marketing and advertising, etc.
Through the strategy of cost leadership, the company seeks to gain
greater market share and thus increase their sales and may even, to have
lower prices than the competition, some competitors out of the market.
The cost leadership strategy is recommended for use in mass market
when the market is made up of consumers who are sensitive to prices
when there are few opportunities for differences between the products,
when consumers do not care too the differences between and other
brand. The disadvantages of using this strategy are that could be imitated
by competitors, or that the interests of consumers could be directed to
other features of the product, not just price.
Generally, cost leadership is about being the lowest cost producer
in the industry. For an organization to gain competitive advantage, it must
achieve overall cost leadership in an industry it is competing in. For
companies competing in a price-sensitive• market, cost leadership is the
strategic imperative of the entire organization. It is vitally important for
these companies to have a thorough comprehension of their costs and
cost drivers in order to pursue a cost leadership strategy. They also need
to fully understand their targeted customer groups definition of quality,
usually denoted in terms of design specifications, contractual
requirements, delivery and services at the lowest possible cost. Of
particular importance will be for the company to attain a cost level that is
low relative to its competitors.
A cost leadership strategy is still vitally important for companies not
competing on price . Companies competing in the industry through
product and service differentiation will need to focus on cost effectiveness
and quality to maintain or enhance the value perceived by their target
customers. Customers will select products and suppliers that provide value
which equals or exceeds the actual and perceived cost both at the time of
purchase and over the products life. Price remains a function of value,
although not to the same extent as for an undifferentiated market.
Therefore cost leadership must be a goal of every organization, regardless
of their specific market orientation. Companies that possess a cost
leadership strategy enable them to defend market share, defend supply,
build entry barriers, weaken threat of substitutes, defend market share
against rival, increase market share, enter new markets and reduce the
cost of capital.

Page 12
 As the business environment become even more dynamic, a
robust cost leadership strategy within the framework of corporate strategy
is vital in order to ensure the success of the organization. It should
provide the direction that the whole organization can pursue to secure the
company future survival and success. There are many techniques and
methodology that organizations can use to lower cost of products and
services by lowering defects and improving quality. Among the popular
and successful techniques used by successful organizations worldwide in
enhancing quality, productivity, lowering cost are Six Sigma methodology,
Kaizen, Lean Thinking, Total Quality Management (TQM), Benchmarking
Competitors, Just-in-Time (JIT), Supply Chain Management (SCM), Total
Productive Maintenance (TPM) and MRP solutions.

2. COMPETITIVE ADVANTAGE THROUGH THE STRATEGY OF

COST LEADERSHIP

A competitive advantage is an advantage over competitors gained by

offering consumers greater value, either by means of lower prices or by
providing greater benefits and service that justifies higher prices. Porter
suggested four "generic" business strategies that could be adopted in
order to gain competitive advantage.With strategy of cost leadership, the
objective is to become the lowest -cost producer in the industry. The
traditional method to achieve this objective is to produce on a large scale
which enables the business to exploit economies of scale.
Company strategies aimed at controlling costs include construction of
efficient-scale facilities, tight control of costs and overhead, avoidance of
marginal customer accounts, minimization of operating expenses,
reduction of input costs, tight control of labor costs, and lower distribution
costs. The low-cost leader gains competitive advantage by getting its
costs of production or distribution lower than those of the other firms in its
market. The strategy is especially important for firms selling unbranded
commodities such as beef or steel.

Figure 1:Competitive advantage through low cost leadership

Page 13
Figure 1 shows the competitive advantage firms may achieve through cost
leadership. The strategies relate to the extent to which the scope of a
business' activities are narrow versus broad and the extent to which a
business seeks to differentiate its products. A cost leadership is one of
four competitive strategies which are summarised in the figure below:

Figure 2 :Competitive advantage through four Porter’s

competitive strategies

Figure 2 shows the competitive advantage, where the

differentiation and cost leadership strategies seek competitive advantage
in a broad range of market or industry segments. By contrast, the
differentiation focus and cost focus strategies are adopted in a narrow
market or industry.

A cost leadership strategy protects the company against all of the

competitive forces achieving a low cost position and maintaining. The
ability to improve performance and reduce costs is one of the key
competencies for corporations. Control and analyzing of costs are no
longer simply concerned with monitoring departmental budgets, but
involves putting in place a cost structure and strategy after severe analysis
has been conducted that will benefit the organization by optimizing the
processes, which will add value to the products and services. Reducing
costs require identifying and analyzing the activities which are undertaken,
measuring their value and cost, and relating these activities to the outputs
of the organization. Value Cost Analysis (VCA) is a pragmatic approach for
managers and executives to execute an action plan. It has become widely
accepted that a comprehensive cost leadership strategy in manufacturing
and service industry can give a company a distinct competitive advantage
in the marketplace and provide operational support for the corporate
strategy.Cost leadership is valuable if buyers are price-sensitive and do
not value differentiation very much and competitors will not immediately
match lower prices. Competitive advantage through cost leadership is
sustainable if there are no changes in consumer tastes, technology and
exogenous prices/costs and if the activities taken to achieve low costs are
rare and costly to imitate.

Page 14
 A strategy of cost leadership requires close cooperation between all
the functional areas of a business. To be the lowest-cost producer, a firm
is likely to achieve or use several of the following (Porter,2005.):

High levels of productivity

High capacity utilisation
Use of bargaining power to negotiate the lowest prices for
production inputs
Lean production methods (e.g. JIT)
Effective use of technology in the production process
Access to the most effective distribution channels

A firm that has a cost advantage that is rare and costly to imitate has
significant potential for earning avove-normal returns. Cost control tools
are full costing method, direct costing method and Activity Based Costing
(ABC): costs per activity. This creates an entirely new approach to costing
and also leads to activity management. It goes without saying that
businesses with the best cost leadership strategy are at the forefront of
the industry but how does a business engaged in a low cost strategy
without compromising other key business objectives such as quality and
customer satisfaction. Cost leadership strategies are only viable for large
firms with the opportunity to enjoy economies of scale and large
production volumes for some writers, but small businesses can also be
cost leaders if they enjoy any advantages conducive to low costs. Cost
leadership strategy may be very useful for whole competitiveness of
country, as very important strategy for some pillars of competitiveness.

3. APPLICATION FOR SERBIA

Competitiveness determines the level of productivity of a country and

may be defined as the set of institutions, policies, and factors for the level
of prosperity that can be earned by an economy. In another words, the
productivity level also determines the rates of return obtained by
investments in an economy, which in turn are the fundamental drivers of
its growth rates and on that way, a more competitive economy is one that
is likely to grow faster over time. The productivity of a country determines
its ability to sustain a high level of income, it is also one of the central
determinants of its returns to investment, which is one of the key factors
explaining an economy’s growth potential. The concept of competitiveness
thus involves many different determinants of competitiveness. While all
determinants of competitiveness are likely to be important for
competitiveness and growth, they are not mutually exclusive—two or
more of them can be significant at the same time. The General
competitiveness index GCI includes many different components, which
are grouped into 12 pillars of competitiveness. The general
competitiveness index takes the stages of development into account by

Page 15
attributing higher relative weights to those pillars that are more relevant
for an economy given its particular stage of development. (Porter
2008,175):

Table 1: Income thresholds for establishing stages of

development

Stage of Development GDP per capita (in US$)

Stage 1: Factor driven < 2,000

Transition from stage 1 2,000–3,000

to stage 2
Stage 2: Efficiency driven 3,000–9,000

Transition from stage 2 9,000–17,000

to stage 3
Stage 3: Innovation > 17,000
driven

GDP per capita for efficiency driven stage of development countries

is 3,000–9,000 US$ and list consists 28 countries, where Serbia takes
23rd place, shown in Table-List 3. (10, www.weforum.,2011/2012,21)

Table-List 2: Countries/economies at efficiency-driven stage of

development

1.Albania 2. Belize 3.Bosnia and Herzegovina 4.Bulgaria 5.Cape Verde

6.China 7.Colombia 8.Costa Rica9Dominican Republic 10.Ecuador 11. El
Salvador 12.Islamic Rep. 13.Jordan 14.Macedonia 15.Malaysia
16.Mauritius 17.Montenegro 18.Morocco 19.Namibia 20.Panama 21.Peru
22.Romania 23.Serbia 24.South Africa 25.Suriname 26.Swaziland
27.Thailand 28.Tunisia.

Serbia is in the rankings to 95th in 2011-2012. year from 85th rank

in 2008-2009.year shown in Table 4. (7, http:/ 2011/2012,24).

Table 3: The Global Competitiveness Index of Serbia in 2008–

2009 vs. 2011–2012SUBINDEXES
Competitiveness Rank -Score Rank -
Index 2008-2009. Score
2011-2012
Basic 88-4.15 88 -4.28
requirements
Efficiency 78-3.82 90 -3.73

Page 16
 enhancers
Innovation 91-3.30 118-2.99
factors
OVERALL INDEX 85 - 3.90 95 - 3.88

Serbia is in the rankings to 23rd, remaining the 28 ranked country of the

European Union at efficiency-driven stage of development and from that
reason, must begin to develop more efficient production processes and
increase product quality.

CONCLUSION

In consederation of Serbia falls in the rankings to 95th, remaining the

lowest-ranked country of the European Union, very important question is
choose adequate competitive strategy. For countries in the efficiency-
driven stage, like Serbia the strategy of cost leadership is imperative. This
can create an important competitive advantage, as it forces companies to
be cost leader and customer oriented. For that aim, organizational
attributes are very important for implementing the strategy of cost
leadership.

REFERENCES

1. Miller, D., "The generic strategy trap" in The Journal of Business

Strategy(2002) 13(1):
2. Murray, A.I. "A contingency view of Porter's "generic strategies."
Academy of Management Review, 13: 390-400. (2008)
3. Porter M.E :―On competition ―(2008).A Harvard Business Review
Book
4. Porter, M.E., "Competitive Strategy: Techniques for analyzing
industries and competitors" New York: The Free Press (1980)
5. Porter, ‖Harvard Business School Faculty Biography‖,Available
from<<a
href="http://dor.hbs.edu/fi_redirect.jhtml?facInfo=bio&facEmId=
mporter" >. (2005)
6. Wright, Peter, Kroll, Mark, Kedia, Ben, and Pringle, Charles. 1990.
Strategic Profiles, Market Share, and Business Performance.
Industrial Management, May 1,
7. Wright, P, "A refinement of Porter's strategies." Strategic
Management Journal, 8: 93-101.(2007)
8. http://reports.weforum.org/global-competitiveness-2011-2012/#=
9. http://ec.europa.eu/cip/Programme for the Competitiveness of
enterprises and SMEs (COSME) 2014-2020
10. http://www.secep.rs/ Support for enterprise competitiveness and
Export promotion
11. www.weforum.org/docs/WEF_GCR_Report_2011-12.

Page 17
 КОНКУРЕНТСКА ПРЕДНОСТ КРОЗ СТРАТЕГИЈУ ТРОШКОВНОГ
ЛИДЕРСТВА –ПРИМЕНА ЗА СРБИЈУ

Резиме:Стратегија трошковног лидерства се као тип приступа

користи од стране многих предузећа како би побољшали своје
позиције на тржишту. Стратегија трошковног лидерства омогућава
стицање конкурентске предности првенствено смањењем економских
трошкова у односу на конкуренте. Да би успели у понуди најнижих
цена, уз постизање профитабилности и високог приноса на
инвестиције средстава, неопходно је бити у стању пословати по нижој
цени од ривала. Такође, ова стратегија има успешну примену код
национане конкурентске предности, тако да овај рад описује примену
конкурентске предности Србије кроз стратегију трошковног
лидерства.

Кључне речи:, конкурентска предност, трошковно лидерство

Page 18
 METHODOLOGY ECONOMIC EFFECTS THE REENGINEERING
PROCESS SMALL OR MEDIUM-SIZED ENTERPRISES

Prof. Ph. D. eng. Slobodan Stefanovic1, Prof. Ph. D. eng. Radoje Cvejic2,
Master Radica Pavlovic3, Master Dragoslav Ilic4
1
Advanced (High) school of applied professional studies, Vranje,
2
Associate Professor, Faculty of strategic and operational management, Belgrade
3
Megatrend university, Belgrede, 4 JKP Vodovod, Zajecar

eurobrandconference@gmail.com
SUMMARY: The design of small and medium enterprises by re-engineering must
be comprehensive (systemic approach) and that there is an effective
methodology that depends on specific companies. The specific needs of
companies dictate the levels of its complexity, the degree of detail and
implementation timetable reengineering in its implementation.
Key words: economic effect, reengineering, smaill medium, vision.

1. INTRODUCTION

The design of small and medium enterprises by re-engineering must be

comprehensive (systemic approach) and that there is an effective methodology that
depends on specific companies. The specific needs of companies dictate the levels of its
complexity, the degree of detail and implementation timetable reengineering in its
implementation.
Reengineering methodology in SMEs will be displayed in six main stages:

1. create a vision, planning and initiation of re-engineering of these types of

companies,
2. research and define the success of these enterprises,
3. production innovation process in these companies,
4. transformation of these companies under the new concept of using the basics of
reengineering,
5. implementation of these processes reengineering companies,
6. monitoring and process control applications reengineering of these companies.

For the implementation of each stage in the methodology of application re-

engineering is necessary preparation and application of reliable methodologies.
Management of these companies has far-reaching reflect, openly and boldly, to challenge
the traditional doctrine of the organization of enterprises and to create new applications in
the spirit of reengineering. Only in this way will increase the productivity of a company
directly stim will increase the income tax.
Reengineering methodology in SMEs should include a systematic approach that is
based on that each organizational unit must be considered individually and that each of
them to form a functional teams (Reengineering Team) which must be composed of
people with appropriate levels of knowledge and the appropriate skills in the work.

1. Creating the vision, planning and initiating re-engineering in small and

medium enterprises
It includes the following four objectives as follows:

Page 19
  form a vision of the company (to create and communicate a vision),
 establish and run a re-engineering methodology,
 develop appropriate goals, measure performance and success of application
reengineering,
 establish and communicate expectations by applying the results of reengineering.

The main processes of this phase of re-engineering are the following:

 creating a vision and goals of the change in the company that brings the application
re-engineering processes,
 recognition capabilities of the production process of enterprises,
 building teams for implementation of reengineering (Reengineering Team),
 communication of the vision of the company and gain confidence in the market,
 creation infrastructure that process. providing support for top managers, who
represent the highest part of the project management application reengineering,
 planning the project through to its dimensioning and through his financial needs.

2. Research and define the success of small and medium enterprises

Through this process should be formulated where small or medium company needs
to be developed and where such way to arrive. Activities to identify these processes
include:

a) analyze the ability of small and medium enterprises and the competition circuit,
b) identification of the external environment, ie. environment in which business is
small or medium enterprise,
c) assessment of needs, abilities and limitations in which business is small or medium
enterprise,
d) estimates that use of others' experiences. Knowledge of competitive enterprises in
the production of the same product,
e) assessing the level of risk the introduction of re-engineering processes in the
organization of small and medium enterprises,
f) determining the precise and convincing presentation of the vision of top
management of this enterprise.

3 and 4. Innovations in manufacturing processes of these enterprises by

introducing projects that include re-engineering and transformation of these
companies under the new concept of using the basics of reengineering

This process involves the following stages of introducing and re-engineering to:

a) evaluation of business and organizational risk of certain production processes by

introducing the re-engineering,
b) the creation of the concept of the whole project with its methods and procedures
using reengineering,
c) determining priorities and the crucial link between the different manufacturing
processes of a small or medium-sized enterprises,
d) ensuring the effectiveness and cohesion of the team for reengineering.

Page 20
5. and 6. The implementation of these processes re-engineering and enterprise
monitoring and process control applications reengineering

Basic operations reengineering in these phases are reflected in recognizing the

opportunities of small and medium enterprise market, the formation and training of teams
for the reengineering and creating infrastructure for reengineering.

Identifying opportunities ie. opportunities for market success – This includes the
need to identify all the tasks that make up the core processes of a small or medium size
company and ubličiti them so that they become feasible to implement re-engineering. In
this process should be implemented:

1. prioritize the introduction of re-engineering (this refers to the beginning start re-
engineering of the company and prior to forming a team for the reengineering,
because it significantly and directly affect the planning staff),
2. process re-engineering also does not need to apply too much process,
3. make use of selection criteria that include: the levels of business risks, advantages
over the competition, resources, assessment of failure, time trejanje application
process reengineering, etc..),
4. necessary continuous and developing knowledge and continuous learning for all
participants in the process re-engineering applications (these are the skills,
competencies and odgovrnosti team for reengineering).

The formation and training teams for reengineering – Reengineering teams are
formed depending on the size of the company, the Cemi team members must be carefully
selected and tested business. They are expected to have all of its energy business focus
on the success of reengineering projects and be able to be continually refined and
beginning to undergo intensive training in the field of innovation implementation process
reengineering in the company.

Communicating the company vision and dedication to work – This section applies
to all those who are directly or indirectly involved in project implementation in the
production process re-engineering companies. These učesnisi must keep their
expectations, that nešire rumors or give inaccurate information as to eliminate his concern
that may arise on the introduction of reengineering the company.

Creation of infrastructure – This refers to the development and implementation:

1. standards and procedures for project management related to reengineering,

2. reporting on the status of the project related to reengineering,
3. integration methods that are related to quality assurance procedures in the
application reengineering.

2. HOLDERS OF ECONOMIC EFFECTS REENGINEERING PROCESS

The subject of the research carrier of the economic effects of reengineering should
relate primarily to the manner of conducting the reengineering in small and medium
enterprises, and include the following costs and savings to:

Page 21
 1. Economic parameters generated by completing and documenting a detailed re-
engineering project that includes: a new organizational model in the company as
well as the characters in the role of new jobs in the new organization; / parameter,
NEE NO NEE NP , NEE NO - the holder of the economic effect of the parameter related
to the new organizational model, and it depends solely on the NEENP - the holder of
the economic effect of the parameter related to the character of the new jobs in
the new organization of small and medium enterprises application reengineering.
2. Economic parameters that arise in the implementation of the system support the
new organization of small and medium enterprises; / parameter NEE SP - parameter
holder of the economic effects related to the implementation system support.
3. Economic parameters that arise implementing "pilot solutions" to the system
support the new organization of small and medium enterprise companies using
reengineering testing on a small scale of production; / parameter NEEPR - parameter
holder economic effects related to the implementation of "pilot solutions."
4. Economic parameters which are general and apply to its employees on the planned
changes and implementation of reengineering plan for the implementation of each
phase; / parameter NEEPP - parameter holder economic effects related to the
invested time needed to implement the planned changes and implementation of
reengineering plan for the implementation in stages in the company.
5. Economic parameters which are general and apply to the training of personnel for
the new process and new systems of work with the planned changes and
implementation of reengineering plan for the implementation of each phase; /
parameter NEE NSR - parameter holder economic effects related to the costs incurred
in training employees on new system of work.
5
In this way the total cost UKN pred.troskovi incurred and are defined as carriers of
i 1
economic parameters in the implementation of reengineering can be expressed by
summing up all the listed parameters:

5
UKN pred.troskovi NEE NO NEE NP NEE NP + NEE SP + NEE PR + NEE PP + NEE NSR 1
i 1

3. COST ANALYSIS OF THE PARAMETERS

In addition to the basic cost of application re-engineering in small and medium

enterprises, it is necessary to analyze the parameters and costs resulting from the
implementation of business process reengineering activities and personnel that
revitalization. adaptation of organizational structures in terms of ownership restructuring
that includes four auxiliary hypotheses as follows:

1. The economic parameters of the financial recovery of a small or medium

enterprises NEE FS , the introduction of reengineering, which includes the introduction
of integrated logical system in a small or medium size company.
2. Economic parameters that ensure the functioning of the enterprise to implement
reengineering NEEKP .
3. Economic parameters that ensure the functioning of all processes, structure and
quality systems in small and medium enterprises uvođenjm reinženjringa NEE SK .

Page 22
 4. Economic parameters that provide the competitive prices of products on the market
resulting NEE CP in a production environment using the reengineering.

1. The economic parameters of the financial recovery of a small or medium

enterprises NEE FS , the introduction of reengineering, which includes the
introduction of integrated logical system in a small or medium size company

The process of procurement, manufacturing and physical distribution are essential

elements of integrated logical system a small or medium enterprises. Logically integrated
system includes a logical domain in which the manifest activity and impact of integrated
system that is logical. omeđava on the totality of logical functions.
The logical system of small and medium enterprise re-engineering techniques can
be applied to the whole logic of the system or some of its selected processes.
Reengineering the logical systems of small or medium-sized enterprises is based on
a system analysis that encourages interaction between the logical structure of systems
and internal and external integration processes.
The initial framework for implementing the procedures are logical systems
reengineering:

PHASE I: Determine the initial values of the logical performance NEE FS IPHASE ,
PHASE II: Measuring the performance of logical systems NEE FS IIPHASE .

The first stage involves determining the initial value of logistics performance. It
analyzes the results compared to the values within a small or medium-sized enterprises
(internal analysis) and by comparing them with the reengineering results successful
competitive companies. The first form involves the use of logical data obtained on the
basis of activities and publications of researchers and consultants (these are costs that
occur during their engagement). Another form involves companies belonging to the
associations and organizations (costs incurred paying membership in these organizations)
that mediate between the cooperative members in the exchange of data used for the
purpose of reengineering. The third form of the initiative includes companies that do the
necessary data comes in contact with companies with which they are not in a direct
competitive relationship (the cost of arrivals, departures and receiving delegation of
companies).
The second phase includes the performance of the logistics enterprise system that
includes a rough picture of the quality of the logistics system in the company as follows:

1. Inventory management strategy,

2. Responsiveness to customer needs
3. Number of adverse events.

The level of inventories indicates the efficiency of the logistics system and its ability
to respond to the needs of the costs that should weigh a minimum (the cost of causing
unnecessary stocks of spare parts, materials, semi-finished products).
Response times indicates an intention and ability of small and medium enterprises
to meet market demand (a decrease in profit due to the untimely proizvdnje ie. Placing
sufficient quantities of products on the market).
The number of adverse events in a logical system (failures of technical systems,
poor quality products, damage to the goods - products during handling and transport

Page 23
activities that are unnecessarily repeated) cause additional costs and also based on them
are made from quality management policy, ie. evaluating the overall position on the
quality of logical support.
Directly monitoring the effectiveness of logical systems before, during and after
implementation of design solutions reengineering is done by introducing a system for
continuous measurement and monitoring of logistics performance. On the basis of it can
be followed:

1. Delivery time on order (which is less time and less cost),

2. Delivery time on products (which is less time and less cost),
3. Time of delivery per customer (which is less time and less cost),
4. During the registration order (which was a faster time to prepare for delivery, so
the lower the costs),
5. Mean time between failures in the operation of technical systems (which is a long
time productivity is higher and costs are reduced),
6. All other costs of the company (of them will be discussed later in this chapter).

2. Economic parameters that ensure the functioning of the enterprise for

the implementation of reengineering NEEKP

To provide entrepreneurship naophodno is that there are responsible carriers or

entities that move, carried out in implementing the results of reengineering. By M.
Hammer and J. Champy among the main protagonists of the process reengineering:
Supervisory Board (Steerring Comittee), Reengineering Team Leader and processes. For
W. Bennis and M. Mischela key nisioci reengineering are iszvršni sponsors, board of
directors, transformational leader, protector, and process reengineering team. DK Carr and
H. J. Johansson among the main participants in the process of reengineering include:
Board of Directors (Executive Council), labor and process reengineering teams, line
management and support staff - counselors.
Although there are some disparities in the division, they may find appropriate
matches. These similarities arise core group of holders and process reengineering to:

1. Business Board of Executive Directors or higher (Steerring Comittee) or

Board of Directors,
2. Reengineering team (working or process reengineering teams),
3. leader process (transformational leaders).

Economic parameters that ensure the functioning of the enterprise to implement

reengineering influence on the income of small and medium enterprises in terms of
providing basic salary carrier group process reengineering.

3. Economic parameters that ensure the functioning of all the processes and
structure of quality systems in small and medium-sized enterprises by
reengineering NEE SK

Each team manager for the implementation of reengineering in SMEs must actively
participate in managing the process re-engineering: a quality system in praduzeću,
production system, system maintenance, system organization and management
companies and others. In order to have success postugne it is necessary to constantly

Page 24
monitor and improve the quality system in a company that includes a number of
subsystems that have their own economic parameters and actively participate in the
formation of prices of products such as:

1. Economic parameters resulting from the formation of the internal metrology with a
network of accredited laboratories NEEIM ,
2. Economic parameters resulting from the formation of internal standardization NEE IS ,
3. Economic parameters resulting from the formation of the system reliability of
technical systems and energy facilities and infrastructure (technology
implementation and maintenance) NEE TO ,
4. Economic parameters resulting from the formation of the system design NEED ,
5. Economic parameters resulting system of deposit formation, destruction and
recycling of products obtained poor NEE DUR ,
6. Economic parameters resulting from the establishment of quality systems support
posprodajne NEEPPP ,
7. Economic parameters resulting from the establishment of quality systems support
posprodajne NEEDI .

The above overall economic setting that provides the processes of functioning of all
structures and quality systems in small and medium enterprises by introducing re-
engineering can be expressed:

NEE SK = NEEIM + NEE IS + NEE TO + NEED + NEE DUR + NEEPPP + NEEDI . 2

4. Economic parameters that provide the competitive prices of products on

the market NEE CP generated in the production environment using the
reengineering
They include objectives and measures of financial prospects of companies. In Table 1. will
be made to display them.

Table 1. The objectives and measures of financial companies perspective

PERSPECTIVE OBJECTIVES STANDARDS
New Products Percentage of sales of new products NEE CP 1
Peripheral suppliers Participation in procurement of key customer
Responsible supply Timely delivery of products NEE CP 2
Consumers in
customers
company
Partnership with Number of joint projects with customers
customers
Production perfection Cycle time - The unit costs NEE CP 3
Design productivity -
Internal processes The introduction of new Actual and planned course of introducing new
products products NEE CP 4
in the enterprise
Technological leadership During the development of a new generation
NEE CP 5
Production learning Time of the capture of the production process
Innovation and NEE CP 6
learning in the
Production focus The percentage of products that
enterprise
provides 80% of sales
Time is now introducing a According to the time of competition

Page 25
 new product
Survival Cash limit
Finance Company Success Quarterly sales (quarterly net profit) NEE CP 7
Development Market Share

4. CONCLUSION

In Table 1. can be presented which may lead to economic parameters that provide
the competitive prices of products on the market NEE CP generated in the production
environment using the re-engineering (Figure 1).

Economic parameters that provide the competitive prices of products on the market
NEE CP generated in the production environment using the reengineering

Percentage of sales of new products NEE CP 1 Timely delivery of products NEE CP 2

Cycle time - The unit costs NEE CP 3

Actual and planned course of introducing new During the development of a new generation
products NEE CP 4 NEE CP 5

Time of the capture of the production process NEE CP 6

Quarterly sales (quarterly net profit) NEE CP 7

Figure 1. Economic parameters that provide the competitive prices of products on the market
resulting in a production environment using the re-engineering

5. REFERENCES

[1] Morabito J., Sack, I., Bhate, A., Organization modeling, Prentice Hall, 1999.
[2] Stefanović S., Parmetri overall financial functions of small to medium enterprises that
cause affecting the implementation of reengineering in transition, Scientific - expert
magazine "reengineering" no. 3 - 4, 2008th, p. 89-93, Zrenjanin, ISSN 1820 – 7294 UDK
005.
[3] Sefanović S., The economic effects of reengineering in SMEs, Ph.D., Megatrend
University, Belgrade, 2010.
[4] Bogavac – Cvetković N., Pavlović R., Stamenković S., Stefanović S., Liqudity analyses
as the function of improvement of company activities in the menagment aspect, Revista
metalurgia international, Romania, 2013.

Page 26
 THE CONCEPT OF INFORMATION VALUE CHAIN AND COMPETITIVE
ADVANTAGE

Dr. Jelena Petković

High Economic Professional School Pec in Leposavic

jelenapetkovic1107@yahoo.com

Summary

The fact is that the company is gaining if it builds a relevant and sustainable
competitive advantage. To have competitive advantage is the same as having the fire
arms in the battle of knives. It is the truth that nowadays most advantages lose their
relevance, and the empirics shows that only few of them are sustainable. The
advantages have temporary character, and more commonly the company is gaining
not only it has one advantage but also because it continuously makes one advantage
after the other in comparison to other ones.
Companies can build a competitive advantage from numerous sources like the
dominance in quality range, design and reliability, speed, service, low spending, low
price, new technology etc. Mostly it is about the unique combination of all listed
features, not just one universal and magical solution and the combination that gives
the advantage.

Key words: company, competition, management, competitive advantage.

INTRODUCTION

In contemporary terms of doing business there are numerous factors of internal and
external nature which in its own way relativize the current position of the company and in
that way provide the needed egzistention conditions. Besides that, to improve the current
position it is essential to make changes in different directions with different volume in
order to keep the market’s position and vitality of business system. The changes cannot
be stopped but, according to the economic practice; they can be channeled and adjusted
to the conditions. One of most important parameters, made in previous conditions, is the
one that influences on the quicker problem solving made under their influence. With the
changes the survival is secured and, logically, the creation of growth and company’s
competitiveness.

The managers of companies agree that the possibilities of their companies on the market
in terms of raising the level of competitive domain clearly change under the influence of
information technology. That influence indicated that information technology is not only

Page 27
the new industry but the new way of conducting the industrial, commercial, educational,
administrative, even some parts of domestic and political management.

New technology will probably determine the methods of work and the competitive
surrounding in which the business activities are preformed. That is why the managers
must be aware of the nature of this technology which will cause these changes. Not only
does it change the ways of performing of different manager actions easily, but also the
information technology drastically changes the business system in the domain in which the
company functions and its competitive domain.

1. THE VALUE CHAIN AND INFORMATION SYSTEM

The exploitation of strategic information systems influences on the changes in the

company and on the changes of its product. In order to find the business opportunity the
company uses the value chain, for the possibilities which exists in the market but are
difficult to identify. The value chain includes the number of activities which are used by
the company for the transformation of input resources (raw material) into the product or
service which is offered to the buyers.

So, the concept of value chain is seen by the company as the number of activities of
which every one ads certain value to the product and so participates in the accumulated
product value (the service). In the subject’s context it is necessary to point to the
importance of the chain value phases: the input logistics, operations, output logistics,
marketing and sales, and service.

The input logistics implies the activities which in this phase are: the procurement of raw
materials, semi fabricants and other material from the supplier, their storage and their
delivery to the production. The input logistics is supported by the informational systems of
the company which are connected with the suppliers. These are the systems for the
electronic data interchange (Electronic Data Interchange-EDI).
The operations imply some kind of creative processing of the raw material in which the
final product of the company (physical product or service) is got. At the service creation,
the operations are closely connected with the information processing. In this phase the
software tools of the information systems are involved (CAD/CAM), as many other systems
for the control of production on the computer basis.
The output logistics as the phase includes the storage of the final products and their
shipping, the delivery to the buyers. Also, the final buyer can receive the goods from the
mediator such as distributor. In this phase the informational systems are used, the system
for the transaction processing and the systems for the electronic data interchange-EDI.

Marketing and sales represent the assignment of the marketing management to ground
the need of the buyer for the product and help them with the assortment and the amount
they order. In that way the sellers can offer buyer in a better way and buyers can show
their demands to the sellers. In this phase the expert system is used which enables the
sellers to offer the buyers the optimal configuration, better say variations of products and
services.
Service as performing services for the buyers and after the selling of product sometimes is

Page 28
regulated with the purchase contract, but above all it is always a good business practice.
Service has to be supported with the information system which by the electronic way
connects the company and the buyers, the users of its products.
The company that wants to make a success on the market, for the improvement of doing
business has to consider the chain value in its wholeness, including the connection
between the links of that chain. Some companies in that process succeed in making the so-
called integrated value chain based on the information systems. According to that, all the
links of the value chain are connected with the information systems and practically the
whole business of the company is done in the electronic way (picture No 1).1

Systems for Production System for Ekspert System for

purchase contolled by automatic systems remote
based on EDI computers ordering for sellers service

Input Operations Output Marketing Service

logistics logistics and sales

“Upstream“supplier chains “Downstream“buyer chains

Picture No1.Value chain and strategic IS

2. THE CONCEPT OF INFORMATIONAL VALUE CHAIN AND

COMPETITIVE ADVANTAGE

The concept of the informational value chain was suggested as a way of considering the
changes made with the use of information technology. It suggested a few levels of that
chain: gathering and transfer of data, managing data, and interpretation of data, models
and systems of decision backup. This model focuses the attention to the importance of
information and its commitment and the need for managing information and their
interpretation before they become of practical use to the decision makers.
Value of information comes from:
- the income of future transactions which would be bigger ;
- the cost of future transactions which would be lower;
- the value made out of the sales of the information itself.2
The possible frame of the value’s influence on the understanding of the way in which the
informational technology can create better opportunities for the company on the market
(chart No 1), is divided in three parts:
- contraction of time,

1
Milisavljević, M. Strategijski menadžment, Čigoja Beograd, page 146.
Blattberg, R., Glazer, R. and J. Little, The Marketing Information Revolution, Harvard Business School Press,
2

1994, page 3.

Page 29
 - overcoming the geographical limitations;
- reorganization of relations.
Contraction of time occurs through the clear communication connections between the
place and the organizational units or between the participants in the process of doing
business.
Telecommunications networks provide that the limitations imposed by the geographical
distance be overcomes and improve the organizational connections in the company and
between the company and other entities. Possible business value of informational
technology does not appear only from increased productivity by the bigger effectiveness,
but also from the better management. Providing relevant information with the help of
backup decision system enables better decision making.
Informational technology causes the introduction of innovations or the improving of the
product’s quality and service and so improves the competitive position of the company.
Coherence of made connections determines the business value of informational technology
regarding the increased operative effectiveness, improved business success or basic
change of business activities of the company.

Chart No. 1. Influence/value frame

Value
Influence Effectiveness Success Innovation
Time Speed up the Lower the transfer of Provide
business information excellent
Geographical Winproceses
the areas Provide control over Winservice
the new
distance global managing markets

Relations Bypass the Repeat the Build

mediators incomplete unbreakable
knowledge connections
In order to complete their tasks add values to the company; the managers need
information which can be internal and external. Internal data are found in different parts
of organization and they make notes about former sales, data about buyers etc. external
data take the form of the information about the size of the market and competition
activity, market opportunities, etc. improved effectiveness of using this information,
through the local area network (LAN- Local area network) or external electronic base of
data should provide improved effectiveness of decision making of the managers and
bigger success in future strategies.
The improvement in decision making is yet just one area in which is expected the
influence of new technology. The development of computers attracted the biggest
attention, but the backup software and peripheral products and services are of equal
importance. Similar to this, the development of network, electronic data interchanges
(EDI) and other communication channels are of great importance for the company’s
competitiveness since they change the relationship enabled within the management of
information system.

Page 30
3. ELEMENTS OF ADVANTAGES OVER COMPETITION

The question of how to transform existing business, become more competitive, the best,
and the cheapest manufacturer is the central question of business operations of every
economic subject. Earning a new advantage over competition and at the same time
slowdown of decline existing advantage is the essence of business strategy of the
company.3
Of course, in practice or in literature on competitive strategy there is no unique meaning
of advantages over competition. There are some opinions that the advantage over
competition is the consequence of proportional superiority in expertise and means which
are used in business. Subject’s elements which are expressed trough the expertise and
means reflect the pattern of previous investment in improving the position relative to the
competition. Maintaining this advantage requires business to put barriers which hamper
the imitation. Given that those barriers are constantly weeking, company must continue to
invest in maintain and increasing this adventage.4
Creating and maintaining advantage over competition are result of lasting cyclic process,
as shown in picture no. 2. The superiority in expertise is linked to ability of employees that
differ ate them from the staff of the competing companies. They can refer to their
knowledge and ability to readily react, or to skills gained from the process within the
company.

Sources of advantages: Positional adventage: Results of work

Superiority in expertise greater value for the satisfaction

cusomer
Superiority in means loyalty
proportionally lower costs
market share

Investing profits in earnings

order to maintain the
advantage

Picture no. 2. Elements of advantage over competition.

Adjusted to : Day., G. S. R.anad Wensley, Assessing advantage: A framevvork for diagnosing
competitive superiority, Journal of Marketing, 1988, sv. 52, No. 2, P. 15.

Superiority in means is more tangible advantage gained from investment in things such as
automated production facilities, computerized systems for ordering and control of
inventories, investment in company’s image or brand, location, etc.
Top management companies should precisely define the sources of advantages, before
using them for creating positional advantage. By defining the matrix of directivity and
exactly recognizing their stronger side, and then invest in its exploitation, the company
takes up a new position against its competitors with customers. Company can achieve
advantage by adding new values to its offer or by reducing costs. If the company precisely
identified its competence and market, it directly opens up the possibility that the customers
notice its superiority in matters that are important to them. This perception of superiority

Day., G. S. R.anad Wensley, Assessing advantage: A framevvork for diagnosing competitive superiority,
3

Journal of Marketing, 1988, sv. 52, br. 2, page 20.

4
Day, G. S., and R. Wensley, Ibidem, page 1-20

Page 31
should then result in greater market share and/or higher profits or some other tangible
advantages5.
Advantage over competition M. Porter sees as a value that he company is able to create for
its customers, which will go beyond costs of the company during its creation. The value is
what customers are willing to pay, and the higher value results from offering lower prices
by the competitors for the same advantages or from providing unique advantages which
rather than make up for a higher price. The same is reflected in precedence in prices and
distinction from the others.
Many companies make mistakes in their business when they follow strategies based on
unattainable visions, instead of sticking to the basic task of the strategy, asking a question:
How specifically company can be distinguished from the others? This is best achieved by
seeking ways for companies to add unique value which cannot be imitated or processed by
others.
This basic economic concept of value added Porter 6 insists to apply for jobs in the
company in the form of the above stated “value chain”. This concept divides the company
by the activities which it carries out in the framing of production, marketing, delivering and
supporting their products, having as main activities: internal logistics, operations, external
logistics, marketing and sales, repair services; as well as secondary activities: procurement,
technology development, personal management, infrastructure of the company; which
permeate main activities and make it possible to implement key activities.
Support activities

Infrastructure of
Planning models
the company

Human resource
Automated staff planning
management

Technology Projecting using a Electronic research of the market

development
computer

Computerized parts procurement

Procurement

Automat Flexi- Autom- Telemar- Remote

ed bile ated keting servicing of
wareh- produc Order- equipment
ouses - Process- Remote
ing terminals Computerized
tion for sales scheduling and
staff determination the
route of the service
team
Integral Operations External Marketing Servicing
Logistcs logistics and sales

Picture no.3 Information technology permeates chain of values

Source: How Information Technology gives you Competitive Advantage, Harvard Business
Review, jul/august 1995, page 149.

5
Kotler, P., How to create, control and dominate the market, Asse, Novi Sad, 2007, page. 33-37.

6
Porter, M. E., Competitive Advantage, Asee, Novi Sad, 2007, page. 142-146.

Page 32
 The company must analyze its costs and performance in each value aspect of activity and
determine in which areas can surpass its competitors. It is desirable, above all, to surpass
competition in areas which that brings advantages which customer’s fins valuable. The
company should gain advantage over competition for suppliers in the value chain,
distribution and customers, which together make “the value system”. These seemingly
independent activities are obviously very connected. Connections occur when a form of
doing one activity affects the costs or performance of other activities. This creates a
correlation of the company’s value chain and value chain of inventory and channels.
By optimization and harmonization of the described relationships, information technology
permeates the value chain, changing the way value activities are performed and the
nature of the relationship between them. Each value activity has a series of physical tasks
which are necessary for the business, as well as an element of information processing.
Therefore, information technology is applied in such repetitive tasks, such as simple
accounting transactions and inventory control, to more complex automated storage and
flexible production (picture no.3).
Into the concept of elements of advantages over the competition besides information’s
about whose costs of obtaining are drastically reduced using appropriate technologies,
should be included different competitive forces, also, location competition and the capital
competition.

4. SYSTEM FOR RECOGNITION OF STRATEGIC ADVANTAGE OVER

COMPETITION

Finding ways to select right strategy for the company was researched by numerous
theorists and practitioners of business. The purpose is always the same, finding modalities
to improve the competitive field of company.
Thus Wiseman 7 created a model that has been called “the creator of strategic possibilities”,
that serves to identify strategic opportunities related to customers, suppliers and
competitors (table no.2).

Table no. 2. System for recognition of strategic advantage

Strategic goal

Strategic move Supplier Customer Competitor

Discernment
Costs
Innovation
Alliance/ cooperation

Source: Adjusted to C. Wiseman, I. Macmillan, Creating a competitive weapon from

information systems, Journal of Business strategy, 1984, sv. 5, no. 2, page 45.

7
Wiseman, C. and I. Macmillan, Creating a Competitive weapon from Information Systems, Journal of
Business Strategy,1984, book 5, br. 2,page 42-49

Page 33
This model predicts a phased approach to identify market opportunities, with the first
phase of analysis refers to the determination of goals of listed groups. When it comes to
suppliers, the goal is to determine who supplies company with necessary means. Purpose
which is related to customers is- whether they may be classified according to the needs or
the crucial importance/influence. Here you may include ultimate users or direct customers
and intermediaries. In competitors you should count those who sell similar products or
substitutes, and potential new competitors, also. It is especially important to understand
competitor’s strategies. After identifying strategic goals, strategies moves must be
identified.
Mentioned author propose three steps:
- Discernment
- Costs and
- Innovation,
Resulting in a matrix that provides nine different strategic opportunities. If the basic
division seems simplified or restrictive, other strategic moves can be added, like
cooperation or alliances.
The greater the success achieved by the company on market is, more competition is
attracted. The company remains hopeful that it will attract only good competitors. This,
however, is never so. Good competitors are blessing. They are like good teachers who
expend horizons and sharpen skills of their students. Average competitors only represent a
nuisance. Bad competitors inflict pain to every decent competitor.8
Therefore, company should never neglect its competitors. It needs to stay alert. If the
company wants to be effective competitor, it must be effective contributor, also. Hence
the competition today is increasingly competition between networks, not companies.
Crucial competitive advantage is company’s ability to, as a participant in the network,
notice the problem faster, learn faster and work faster. In this framework elements of
advantages should be looked for, and to develop systems for recognizing advantages over
rivals in the market.

5.CONCLUSION

The concept of value chain company sees as set of activities, from which each of them
adds some value to the product, and in that way participate in accumulated value of the
product (service). Although the activities which create value are elements of competitive
advantage, the value chain is not the sum of independent activities, but the system of
interdependent activities. Namely the activities which create value are connected with
each other within the value chain, a way that they influence one another in terms of costs
reduction primarily. Thus, competitive advantage often comes from the relationships
between activities as much as from individual activities.
Information technology today, is going beyond its traditional role and affects all company’s
activities. Namely, as complexity and power of computer hardware and software is
growing, with an accompanying development of better electronic communication that also
changes the way the company conducts its usual tasks, and also changes the nature of
market and competition within it. Therefore, information technology is, rightly,
acknowledged of its strategic importance, because it led to the boundaries between
company activity are being deleted, obstacles for entering in some cases are increasing
and in some are declining, nature of products in these markets is changing, like the costs

Kotler, P., Marketing from A to Z:glossary, Asee, Novi Sad, 2004. page. 67
8

Page 34
of production also, and new relations are created. All that requires the company is to
adjust its internal activities, so it can provide advantage over competition.
Finally, establishing lawfulness and optimal functionality of introducing information
technology into the process of strategic management of the company, through integrated
information systems as a tool for creating sustainable advantage over competition,
improving the effectiveness its operational activities, receives its full meaning in practice.

REFERENCE

[1] Blattberg, R., Glazer, R. and J. Little, The Marketing Information Revolution, Harvard
Business School Press, 1994.
[2] Day., G. S. R.and Wensley, Assessing advantage: A framevvork for diagnosing
competitive superiority, Journal of Marketing, 1988.
[3] Kotler, P., How to create, control and dominate the market, Asse, Novi Sad, 2007.
[4] Kotler, P., Marketing from A to Z:glossary, Asee, Novi Sad, 2004.
[5] Milisavljević, M. Strategijski menadžment, Čigoja Beograd, 2008.
[6] Porter, M. E., Competitive Advantage , Asee, Novi Sad, 2007.
[7] Wiseman, C. and I. Macmillan, Creating a Competitive weapon from Information
Systems, Journal of Business Strategy, 1984.

Page 35
 BUSINESS ETHICS-THE IMPERATIVE OF SUCCESSFUL
BUSINESS OF AN ORGANIZATION
Sanja Marković1, Nikola Pavlović2, Gordana Janković3
1
Polytechnic school for vocational studies Zvecan, Nusiceva 6, Serbija,
sanjamark045@gmail.com

ABSTRACT:

Business ethics gains strategic meaning in every organization, because it creates a system
of management based on ethical principles which enable organization to qualitatively meet
requirements of all stakeholders-employees, shareholders, buyers, suppliers and society in
whole. Prosperous shall be those organizations which do not separate profitability from
ethics but successfully harmonize them in their business operations. In the paper are
presented factors that influence on ethical decision making and how organizations today
tend to integrate business ethics in their business operations, from establishing ethical
codex to active socially responsible begaviour.

Keywords: business ethics, ethical codex, mangers, socially responsible behaviour.

1. INTRODUCTION

Successful world and domestic organizations have become the aware of the fact that in
competitive arena the business ethics provides growth and development, increase the
efficiency and productivity. Success and status on the market is not measured only by
financial parameters but its “specificity” has become crucial. It is necessary to offer
something new and to be in demand on the marked due to specificity. The organizations
are expected to, and primarily is necessary to show to potential service users, investors
and partners, that there is a moral subject which, apart from profit, also has certain social
mission.1
According to Nordstrom and Ridderstrale, authors of Funky Business, ethics must pervade
everyone and everything in the organization. It must be applied everywhere and in all
times. According to them, you cannot be slightly ethical or ethical in the moment when it
suits you. Ethics is absolute.2
If they wand long-term growth and development, the organizations must put more
emphasis on making of ethical codices and development of policy of social responsibility.
Business ethics is imposed as necessity-inevitability in all organizations, especially after
outspreading of morally wrong decisions and financial scandals of corporations.

2. FACTORS THAT INFLUENCE THE ETHICAL BEHAVIOUR OF THE

ORGANIZATION

Defining of business ethics could not be possible without previous explanation of terms
moral and ethics. Moral is defined as the set of rules of certain society and social class on
content and style of mutual relationships and human communities. Ethics is very important

1
Paine, L.S.: Value Shift: "Why Companies Must Merge Social and Financial Imperatives to Achieve Superior
Performance", McGraw-Hill, New York, 2004.
2
Nordstrom, K.A., Ridderstrale, J.: "Funky Business, Talent makes capital dance", Bookhouse Publishing,
Stockholm, 1999., p. 281-282.

Page 36
for business operation of each organization because it presents the guidance for behaviour
of all its members. Sincerity, honesty, fulfillment of promises and implementation of the
Golden rule “treat others the way you want to be treated”, generally are considered
ethical. It implies that there are rights and obligations of the company towards legal and
physical entities in mutual relationships.3
Organizations mutually differ according to values they have as well as according to ethical
atmosphere in the organization itself and towards others. These differences have been
determined by the behaviour of the leading management. According the ethical and moral
principles, there are three categories of managers4 in business operations:
Moral managers conform to high standards of ethical behaviour, in their own as well as
in their expectations toward the way of conducting the business. They consider
themselves as the role-models of ethical behaviour, they achieve success within the
boundaries of the letter and spirit of law; they usually consider law as the ethical minimum
and operates more correctly than required by law.
Immoral managers constantly resist to ethical behaviour in business operations and
persistently ignore ethical principles during decision making. Led with philosophy that
successful businessmen must not waste time worrying for interests of others, taking care
only for their or for profit and success of the organization. They consider legal standards
as obstacles which they avoid, believing that according to the competitive nature of
business implies trample or you will be trampled.
Amoral managers can be: intentional and unintentional managers. Intentional amoral
managers believe that business and ethics do not go together because in business
different rules apply comparing with other areas of life. They ignore ethical principles in
their decisions and actions. Unintentional amoral manager do not pay much attention to
the concept of business ethics, but from other reasons. They are simply inconsistent,
negligent or careless regarding the facts that certain business decisions or activities are
indecent or have destructive effect on others. Both types of amoral managers consider it is
necessary to bi in accordance with the law, but they do not see why is necessary to do
more than that, because Government is responsible to grant legal framework which states
what society tolerates.
Behaviour of mangers greatly influences the way subordinates behave, and organization in
whole. When employees faced with ethical dilemma, that is, with question how to respond
to certain situations, they behave differently, which is the consequence of the value
composition that predominates in the organization.
Business ethics has interdisciplinary character, economic policy and business practice
combines with politics, sociology, theory of organization, and is based on philosophy.
However, apart from its interdisciplinary, it is possible to recognize crucial factors that
influence on its formation, that is, on ethical behaviour within the organization itself
(Figure 1). Thus, standards for ethical or socially responsible behaviour are implemented
in each individual as well as in organization itself; its attitudes, norms and beliefs, ethical
standards, framework of ethical decision making and moral development greatly affect the
ethics of the individual. In addition, within the organization there is organizational culture
which consolidates overall picture of values in the organization. Since organization operate
and constantly interacts with environment, it is also under the influence of external
interest groups, like State, customers and market that can affect the standards of ethical
or social responsibility.5

3
Thompson, A.A., Strickland, A.J., Gamble J.E.: "Strategic management", MATE Zagreb 2007., p. 301, 302.
4
Thompson, A.A., Strickland, A.J., Gamble J.E.: "Strategic management", MATE Zagreb 2007., p. 284.
5 Daft, R.L.: "Organization Theory and Design", Thompson South-Western, Ohio, 2004., p. 396.

Page 37
 Individual ethics Organization culture

Beliefs and values Rituals, ceremonies

Moral development Stories, legends
Framework of ethical Language, jargon
decision making Symbols
Tradition, history

Is behavior
ethical or social
responsibly?

Organiz. composition Exteranal interest groups

Structure State regulation
Policy, rules Customers
Ethical codex Special interest groups
Rewarding Global market
Selection, training

Figure 1: Factors influencing ethical behaviour of organization6

3. MANAGEMENT OF BUSINESS ETHICS

It is often difficult something intangible and invisible to the human eye to measure, and
specially to manage it.
In present global conditions of business operations, it is difficult to implement, as Takala 7
points out, the concept of ethics which actually contains an idea of universality, that is,
equality in applying the rules, because what is one man’s meat is another man’s poison.
What is ethics and ethical in one country and culture can be completely unacceptable in
other country or culture. There is a question: How to establish unique rules and make
universally applicable ethical decision? The answer somewhat lies in the fact that ethics,
even it unites the idea of universality, still considers the action and decision making which
shall be beneficial both from the aspect of social equality and individual benefit for certain
organization and its stakeholders-customers, employees, shareholders, environment.
Therefore is necessary for each organization do develop ethical principles which shall
direct ethical behaviour of the organization towards good, namely, it is necessary within
organization to establish standards of ethical activity.
Management of business ethics of organization has the task of formal and informal
management of business ethics issues through forms, programs and practical procedures. 8
According to Crane and Matten management of organization business ethics contains the
following components:

6
Adopted from Daft, R.L.: "Organization Theory and Design", Thompson South-Western, Ohio, 2004., p.
376.
7
Takala, T.: "Editorial: An ethical enterprise–What is it?", Electronic Journal of Business Ethics and
Organization Studies, Vol 11, No. 1,. 2006., p. 4.
8
Crane, A., Matten, D.: "Business Ethics: A European Perspective", Oxford University Press, New York,
2004., p. 144.

Page 38
Company values encompass statements on goals of the company, attitudes and beliefs
as well as the values of the organization. With such statements organizations present their
course of action in the sense of ethics, and therefore present ethical goals of organization.
Ethical codex presents rules of desirable behaviour which are based on basic values,
principles and rules of responsible business and behaviour of the organization, but should
not present strict behaviour rules in every potential situation. Ethical codex is the most
developed and the most present component in management of business ethics in world
business practice, even the acceptance of ethical codex presents acceptance of minimal
standards in ethics management. However, although management of business ethics
encompasses a much broader issues from creation and application of ethical codex, its
application can be considered as the initial step in deploying and managing of business
ethics, that is, ethical business.
Lines of reporting and counseling, which aim is the early identification of ethical
problems and timely response. It is necessary to create such communication channel
which shall facilitate the acquisition and usage of information and management of
organization business ethics. Many organizations have implemented such set of
communications which provide employees with mechanism for help and counseling on
ethical dilemmas.
Ethical managers, employees and boards represent the part of organization that
regulates operations related to business ethics. Their responsibility is reflected in
development of strategy and management which shall provide the implementation of
organization ethical standards.
Ethical consultants are consultants specialized for areas of business ethics which offers
advisory services.
Ethical education and training with different methods helps education of all interested
for application of business ethics principles, various tools for solving of ethical dilemmas.
Primary goal of the training is to motivate awareness on business ethics.
Reporting, accountancy, revision are just some of ways for business control, but also
an attempt for measuring the effect which business ethics management has on overall
efficacy of the organization.
Along with previously mentioned, it is important to point out the modern concept in
business ethic management. That is the concept of corporate social responsibility, as a
way of ethical activity of the organization with the goal of achieving of public domain.
According to Daft, corporate social responsibility (CSR) implies obligation of organization
management to make decisions and undertake actions that will contribute to growth of
state welfare and the organization as well.9
Term social responsibility, relating to business, concerns the responsibility of the company
to operate with means that are not harm interest groups and environment, and through its
decisions and actions to take care for overall welfare of the society. Social responsibility
includes corporate philanthropy and actions of gaining trust and respect of interest groups
in respect to efforts of the company for improvement of overall welfare of the customers,
employees, local communities, society and environment.10

9
Daft, R.L.: "The New Era of Management", International Edition, Thompson South-Western, China, 2006.
p. 166.
10
Thompson, A.A., Strickland, A.J., Gamble J.E.: "Strategic management, MATE Zagreb 2007., p. 301, 302.

Page 39
 The extent to which
the company is trying
to use ethical
strategy and comply
with ethical principles
in business

Charity donations,
Actions for activities in the
ascquisition of service of
different workforce community, actions
Strategy of for improvement of
Corporate the quality of life
social
responsibility

Actions for
improvement of Actions for protection
welfare of employees and improvement of
and working the environment
environment

Figure 2: Categories of socially responsible behaviour11

As it can be seen on the Figure, the design of corporate social responsibility strategy
includes the following:
- Efforts for application of ethical strategy and compliance with ethical principles in
business management for one simple reason because unethical strategies and unethical
behaviour are not compatible with the term of corporate socially responsible behaviour.
- Charity donations, donations in money and time of company’s personnel to community
activities, support to different valuable organization activities, actions for improvement of
lives of people that are unfavorable position.
- Actions for protection and improvement of the environment, and specially minimizing or
elimination of all negative effects on environment that result from the business activities of
the company. This implies that companies should use the best available technologies.
- Actions for creation of working environment that improves the quality of life of the
personnel, and makes company the excellent place to work. This includes various and
interesting tasks, programs for development and rapid progress in career, flexible working
hours for self-supporting parents, opportunity of working from home, equal payments for
both genders, etc.
- Actions for manpower that will be different in regards to gender, race, origin and other
aspects people usually bring to work place.
Akcije za stvaranje radne snage koja je raznolika u pogledu pola, rase, porekla i ostalih
aspekata koje ljudi unose na radno mesto.

11
Thompson, A.A., Strickland, A.J., Gamble J.E.: "Strategic management", MATE Zagreb 2007., p. 302.

Page 40
4. CONCLUSION

Modern business demands new approaches to operation management. Social

responsibility is the top principle in modern business and the imperative of successful
business of the organization.
Ethical organizations operate for the welfare of entire society, and not just for
maximization of the profit. In present environment organizations are responsible, not just
for their own welfare, but must act in accordance to social circumstances and demands.
Organizations are faced with the condition of socially responsible behaviour which rests on
general ethical principles that should be integrated in any organization, primarily through
ethical standards of the organization which is manifested through ethical codices, ethical
boards, training, and therefore become the integral part of organization culture. Making of
ethical codices brings significant advantages to organization in terms to preserve morality
in turbulent times, strengthens team spirit, motivates employees and helps to promote
positive image of the organization in public.
Employees should accept ethical standards of the organization and work in the interest of
the organization in the achievement of social responsibility and ethical business. Social
responsibility not only that provides recognizable image in the environment, but also
attracts new employees, motivates and retains previously employed, provides long-term
competitive force, and primarily, gives the image of the organization as “model citizen”.

REFERENCES

[1] Paine, L. S.: Value Shift: "WHY COMPANIES MUST MERGE SOCIAL AND
FINANCIAL IMPERATIVES TO ACHIEVE SUPERIOR PERFORMANCE", McGraw-
Hill, New York, 2004.
[2] Nordstrom, K.A., Ridderstrale, J.: "FUNKY BUSINESS", TALENT MAKES CAPITAL
DANCE", Bookhouse Publishing, Stockholm, 1999., p. 281-282.
[3] Thompson, A.A., Strickland, A.J., Gamble., "STRATEGIC MANAGEMENT", MATE
Zagreb 2007., p. 284, 301, 302, ISBN 978-953-246-044-5
[4] Daft, R.L.: "ORGANIZATION THEORY AND DESIGN", Thompson South-Western,
Ohio, 2004., p. 376, 396.
[5] Takala, T.: "EDITORIAL: AN ETHICAL ENTERPRISE-WHAT IS IT?", Electronic
Journal of Business Ehics and Organization Studies, Vol 11, br. 1, 2006., p. 4.
[6] Crane, A., Matten, D.: "BUSINESS ETHICS: A EUROPEAN PERSPECTIVE", Oxford
University Press, New York, 2004., p. 144.
[7] Daft, R. L.: "THE NEW ERA OF MANAGEMENT", International Edition, Thompson
South-Western, China, 2006. p. 166.

Page 41
KNOWLEDGE MANAGEMENT FROM ASPECT IN TEAMWORK,
COMUNICOLOGY AND SOCIOLOGY

Nevenka Nićin,PhD, Full Professor, Univerzitet Union- FPIM Mladenovac, Ive Andrića 2,
Serbia ;nicinnevenka@gmail.com

Slobodan Nićin,Msc, University Union- FPIM Mladenovac, Ive Andrića 2, Serbia;

bobanicin@yahoo.com

Miodrag Paspalj,PhD,Professor, Belgrade Business School, Kraljice Marije 73,Belgrade;

m.paspalj@bbs.edu.rs

Vojislava Grbić,master, Agency for CME „Ns student“, Narodnog fronta 78, Serbia;
vojislava.grbic@gmail.com

Abstract

System of professional management was created for and is mainly applied in corporative
type enterprises, as well as in all enterprises that are based on management separated
from ownership. For dominant corporations in developed world economies, it represents
only possible managerial system. Similar processes appear in private family and singular
enterprises when they reach such level of their development that their further succesfull
management can be guaranted only by a professional management. Concept of
transformation of organization has became very important in theory, as well as in practice
of management since 80's and 90's of XX century. Precipitated changes have influence on
discontinuity in many different works and activities. Facing such chalenges, organizations
cannot be succesfull if they rely on gradualy or slow changes. Organizations need
huge,radical, called transformational changes. Surrounded by precipitated and continous
changes and business in conditions of discontinuity, organizations are forced to stream
more and more to perform big, radical and transformational changes.

Keywords: Enterprise, Management, Development, Organizations, Transformational

Changes.

INTRODUCTION

Corporative management is a modern, specific system of managing enterprises in market

economy. This managerial system is also called the system of professional management
that was created for and is mainly applied in corporative type enterprises, as well as in all
enterprises that are based on management separated from ownership. For dominant
corporations in developed world economies, it represents the only possible managerial
system.

Page 42
Similar processes appear in private family and singular enterprises when they reach such
level of their development that their further succesfull management can be guaranted only
by a professional management. In these circumstances,this type of managerial system
represents the only alternative.

The concept of transformation of organization has became very important in theory, as

well as in practice of management since 80's and 90's of XX century. Precipitated changes
have influence on discontinuity in many different works and activities. Facing such
chalenges, organizations cannot be succesfull if they rely on gradualy or slow changes.
Organizations need huge,radical, called transformational changes. Surrounded by
precipitated and continous changes and business in conditions of discontinuity,
organizations are forced to stream more and more to perform big, radical and
transformational changes.

Running business of economy subjects in a function of capital

Augmentation of value of invested capital is appropriated on the basis on private

ownership of certain owner. The essence of enterprise's business in market economy is
based on relation private ownership-capital-profit.

Owner of capital, with property risk, choose the type of organizational structure of
enterprise for most succesfull enabling maximization of profit, doing business activities
legally, with decent business customs and moral.

Depending on their pre-dominant aim, enterprises can be associated in 3 different ways:

1. horizontal (enterprises doing same or similar business activities),

2. vertical ( technologically connected processes of product chain from raw materials

to final producer)

3. conglomerated (enterprises with different business activities that are not directly
associated).

Enterprise establishes,grows and developes until exists it's economical validity. Enterprise
continously identifies basic streams and directions of business activitiesaccording to it's
business orientation. Contemporary decision making has main aim to produce and sell
certain quantity and value of products with highest profit, according to market needings.

Complexity of contemporary business conditions cause complexity of economical subjects,

as well as new role and responsability of employees. Financial function enables starting,
maintenance and development of enterprise's business activities.

Providing and using money from most favorable sources, following by control and
directing flows to more rational dispose, represents the essence of product-technological
activities. All business activities of one enterprise augmentate the value of invested capital.
Economical subjects pass through various relationship one with another, and they
associate and regulate their inter-relationship with different forms of associations for more

Page 43
effective and more efficient business results. This is the way of forming complex
economical subjects.

In newest time has became most and most mentioned the phrase „ creating and
reforming of the organization“. This transformational lidership creates solid base of new
management paradigm of succesfull organizations. Organizational transformation is
associated with huge and radical changes of all elements in one organization.
Organizations can exhaust or lose the energy if thay do not renew and inovate through
formal programs of development and change.

Conducting of changes of big business systems means radical and intensive changes that
consist of all of the components of organization (Model „7 – S“). McKinsey puts in same
level variables of organisation such are organizational culture and strategy along with
managerial style,systems, personell,skills and common values .

Structure of organization represents the main result of organization. Contemporary,

succesfull organization streams to informal organisational structure, because it provides
better elasticity and adaptibility. Business strategies in succesfull organizations are
directed towards challenges, opportunities and threats from environment, as well as
finding advantages comparing to competition.

Organization is an open system. It is influenced by environment, and it also influences the

environment. Inside changes may be caused by outer factors, while outside changes and
decisions can later change mentioned outside factors .

Main causes of transformational processes are:

-Augmentation of business globalization

-Acceleration of the ritam of changes

- Variability of technologies

-More and more complexive environment

-Increasing demands from stakeholders

-Quality and inovation as managerial imperative

-Market instability and instability of economy

-Transition from industrial to knowledge society

-More various work power.

Consequences of transformational processes can appear in three ways:

1. Increasing difficulties connected to prediction of problems and optimal-timed

reaction to them:

Page 44
2. Need for flexible and optimal-timed reaction to surprises that cannot be predicted

3. Need to increase rapidity of implementation of reaction to changes

Enterprises that do not react by finding new ways to provide customer's satisfaction in
right time, can have problems that could be very dangerous. They loose participation in
the market, along with decrease of business to the level at which fixed expences are
difficult to absorbe. As a consequence of this, decrease or elimination of profit can appear,
because of enterprises uncapability to compete at market. Lower cash income constrains
possibilities and inovational investments.

Organization continously has to create new ways of competetive advantages, and this has
to be followed by transformational changes. Transformational change needs time and is
most frequently realised through stages.

Changing the attitude and behaviour of majority of employees in enterprises is crucial

condition of transformation. Change in way of thinking, making decisions and certain
actions. Main aim of change must be clearly defined, so that all employees have focus on
transformational changes activities. Possibility for organization to create something new
requires that organizational nucleus includes 3 systemic praxes (Drucker,)

- Each organization needs constant improvement of everything that is it's function

- Each organization will have to learn how to use, new applications from it's own
success

- Each organization will have to learn to make inovations and to realize that inovation
can and should be organised as a systemic process

Transformation has to be initiated by managers that do try to radically improve business

results by changing their behaviour and capabilities of enterprise. All of the initiated
changes have to be in accordance with targets and strategic vision of enterprise. System
of comunication enables feedback information to enterprise's management.

Kotter suggests new rules that enterprices have to accept if they want to be succesfull:

1. Not relay on conventions ( way that profit was obtained in XX century do not make
results in modern time)

2. It is needed to follow the globalization and it's effects

3. Moving towards small and entrepreneur's, following by moving as far as possible

from birocratical and big enterprise

4. Helping big businesses outside the enterprise, using consultants and others that
offer new possibilities

5. For success in business, both management and lidership are equaly important and
needed

Page 45
6. There are so many business opportunities that enable the enterprise to show it's
preparedness

7. It is needed increasing capabilities for competition, have high standards along with
big desire for winning

8. Not stoping trying to provide growth, while learning and education becames more
and more important for business success.

Organizations that want to be succesfull have to be inovative, learn fast and have skills in
following changes of any kind in their environment. It could be said that companies are
very successfull only if they have reached high level of inovation,

Determinants of transformation of organization

Globalization could be defined as national market barriers, possibilities of cooperate with

lot of countries and facing bigger and bigger competition. It enables production and sale
of produced goods all arround the world. Almost every product can be constructed from
parts that come from many countries. The world of modern business becomes the world
without barriers .

Globalization includes three associated factors :

-Vicinity

-Location

-Attitude

What is becoming more and more important for each country is that their organizations
have high competition level comparing to other countries. Globalization and
internationalisation besides many positive, also have several negative effects, such as big
and high-developed organizations and countries do try to dominate, suppression of some
smaller nations and cultures, increasing difference between rich and poor...

Culture, in modern organizations has to be once in a while reassessed and to change if it

is necessery. Very often there is a discrepancy between present values and normatives in
organization, and those what organization wishes. This discrepancy is also called „cultural
gap“, and it is most frequently caused by fast changes in environment, rapid growth and
development of organization and entering new markets.

Due to a very dynamic environment and strong influence of globalization flows, different
cultures and traditions meet each other. What is also present are meetings of people from
different cultural environments in same organization. Between countries do exist clearly
distiguished cultural, historical and traditional differences, and that is of developing of
multiculturality, respecting the existence of different cultures. „Cultural shock“ is a state of
confusion and unpleasantness that one feels while meeting unknown culture. It has
several dimensions:

Page 46
- Language

- Using of space

- Time orientation

- Religion

- Attitudes

- Education

- Power of distance as an indicator of unequal distribution of power

- Avoiding uncertainty

- Quantitative vs. qualitative way of life.

Organizations nowadays learn one from another, especially less successfull from those
that are very successfull. Sometimes some cultures glorify them comparing with other,
what is called ethnocentrism. Effective management in considerable measure depends on
cultural characteristics.

Knowledge management as a model to modern management

Without knowledge management there is no survival or development of modern

organizations. The Knowledge Management concept has big practical and theoretical
potential for several reasons:

- In it's centre is concept of knowledge as a key resource of whole civilization

- Knowledge is dynamic and unspendable resource

- Processes such as keeping, creating and using knowledge are universal, creative,
opened, cooperative...

- Knowledge has democratical and liberative potential

Modern management (Drucker) is a knowledge about how to use other's knowledge in

realization of aims of organization. The most important responsability of modern manager
is to establish stable and flexible managerial structure. Knowledge management can be
theoretically based and practically applied only if formation,sharing and using of
management in organizations are well studied .

Dynamic or comunicative model of knowledge management overcome realizing of

information and knowledge as fixed complex, where the accent is put on fluid processes of

Page 47
growth and renewing knowledge in continous processes of exchange and comunications
that are receptive for transfering, creating and using of knowledge.

CONCLUSIONS

Growth and growing dynamics of informational technologies, as well as

globalization process, lead to actualisation of new questions and problems related to
knowledge, as a determinating factor in modern economy. Only enterprises that are
capable to develope their own and original strategy based on knowledge, will be able to
survive and compete for their place in knowledge economy.

REFERENCES

|1| Peters J. T. and Voterman R. Jr., „In Search of Excelence, Harperlallions“, 1982., str.
33

|2| A. D., Voich D, Jr., „Menadžment-Proces, struktura i ponašanje“, Grmeč A.D. Privredni
pregled, prevod sa engleskog, Beograd, 2001., str. 257

|3| Milisavljević M., „Savremeni Strategijski Menadžment“, Institut Ekonomskih Nauka,

Beograd, 2002., str. 39

|4| Drucker P., The Daily Drucker, Harper Business , New York,2004

|5| Stoner A. F, ostali, „Menadžment“, Želnid, Beograd, 2002., str. 127

|6| Ratković Abramović Mirjana, „Korporativne finansije“, Beogradska poslovna škola,

Beograd, 2001., ISBN 978-86-7169-365-3

|7| Slobodan Živković, “Strategijski menadžment”, Fakultet za trgovinu i bankarstvo

“Janićije i Danica Karić”, Beograd, 2008., ISBN 978-86-83237-47-0

|8| II Savetovanje “Na putu ka dobu znanja”, Valdanos, 16-20. septembar 2004. Zbornik
radova, Fakultet za menadžment – Novi Sad, str.388, 509-510

|9| Nevenka Nićin, “Mikroekonomija”, Evropski univerzitet Brčko distrikt, Brčko, 2012.

|10| Nevenka Nićin, “Menadžment ljudskih resursa”, Evropski univerzitet Brčko distrikt,
Brčko, 2012.

|11| Nevenka Nićin, “Makroekonomija”. Evropski univerzitet Brčko distrikt, Brčko, 2012.

|12| Nevenka Nićin, “Marketing”, Evropski univerzitet Brčko distrikt, Brčko, 2012.

Page 48
 ORGANIZATION DEVELOPMENT

Prof.dr Nevenka Nićin, Ph.D., Professor, University Union- FPIM Mladenovac, Ive
Andrića 2, Serbia, nicinnevenka@gmail.com
Slobodan Nićin, Master of science, University Union- FPIM Mladenovac, Ive Andrića 2,
Serbia, bobanicin@yahoo.com
Mr Vojislava Grbić, Master of Science, Consulting, management and education agency
„Ns student“, Narodnog fronta 78, Serbia, vojislava.grbic@gmail.com

SUMMARY

The topic of this article is organizational change or organizational development in large

organizations, most often corporations. If there was a big problem in an organization,
consultant manager would get involved, conduct conventional analysis of organizational
charts, processes, procedures, human resources, policy, strategy etc. and then inform the
higher management about the problem which exsisted and the way in which formal
organization should be applied in order to solve the problem. Menagement team would
then make a decision to do (or not to do) what the consultant suggested.

Organizational development tends to emphasize not classical, but behaviour management

– psychology and sociology which are applied in understanding organizations. Behaviour
consultants see most of organizational problems as a consequence of dysfunctional social
factors and resources. (for example, what kind of social dynamics underlies traditionally
called „morale problems“). These people are types of managers who are specialized in
what we call behaviour management.

Key words: corporation, organization, behaviour, manager, strategy

INTRODUCTION

Organizational development tends to emphasize not classical, but behaviour management

– psychology and sociology which are applied in understanding organization. Behaviour
consultants see most of organizational problems as a consequence of disfunctional social
factors and resources. (for example, what kind of social dynamics underlies traditionally
called „moral problems“). These people are types of managers who are specialized in
what we call behaviour management.

A detailed review of organizational change processes i.e. organizational development

includes: a) increasing number of symptomatic evidence supporting a significant problem;
b) number of evidence “raises“ up to the level where the superiors can feel a real pressure
(the pressure may come from their analysis or consciousness, but more likely from the
clients, employees, financiers etc); c) superiors of the organization will most likely put
somebody from the organization in charge of “solving the problem“, by assigning
assistants and funds to that person. These people will probably become insiders who work
with an external change agent; d) the team dealing with the problem recommends that a
change agent should be hired who would really get into the problem and the superiors
agree with that e) seeking after a recognised, highly-qualified change agent; f) the change

Page 49
agent comes on the scene; g) the change agent, if he/she is just a little bit serious,
performs a preliminary “review“ in order to determine what a general situation is like and
whether these people are really serious about an important, long-term project (everyone
wishes for the improvements that can be brought in by the change, but they usually want
it by the end of the week with no inconveniences caused to them) h) a large in-depth
study of the organization, situation and difficulties; i) action plan; j) implementation of
the action plans; k) evaluation, monitoring, feedback information.

First Important Step within the Process - Large, In-Depth Study of

the Organization, Situation and Difficulties

Make sure that you have a detailed understanding of the existing formal structure –
organisational structure, processes, control systems, authority structure, decision-making
processes, policies, employee wages and systems of giving incentives, communication
structure etc. (behaviouristic types do not give much credit to these issues, believing that
real problems originate from behaviour/social dynamics, but the “outdated“ problems of
the management are still present – that is a type of the problem which would have been
noticed and solved by an “old-fashioned“ consultant.)

Analize available data concerning client complaints, leave of absense, quantity of products,
quality of products, discipline in terms of budget allocation, quantity of rejects, disciplinary
measures etc, and keep in mind that self-willing and greedy people usually manipulate
such data to be of benefit to them.

Extensive research of the attitudes and opinion of employees, in search of the hidden
behaviour problems such as conflicts within the sector, disfunctional group standards,
excessive lack of trust of senior managers, decline in morals (and supporting arguments),
miscommunication, immoderately rigid (red tape) structure and atmosphere. (A technique
called “ Research –feedback information“ is used a lot.)
Generally speaking, this behaviour/social examination is a thorough analysis dealing with
not only conventional technical and management structures, but also goes deeper into a
behavioural and cultural character of the company. (thereby you can assess whether you
are involved in the organizational development, and not only in an ordinary change –
people dealing with OR will observe behavioural/social/cultural aspects of the situation,
and they usually argue for behaviour techniques of intervention which are often aimed at
changing the organizational structure.)

Since organizational change programmes usually last for several years and are not realised
in a static environment, a wise thing to do would be to act in other major directions or
tendencies which are up-to-date (organizational, social, political and legal ones).

Since being familiar with the problems during determination of the cause, a detailed
analysis is advised. One of the authors dedicated a short chapter to the collection of data
and research methods.

The study and analysis would be expected to provide a final diagnosis of only the things
that went wrong and of the problems. Furthermore, the analysis would be expected to
point out precisely the causes, and not only the symptoms. And the analysis would be

Page 50
expected to develop an organizational plan which would specify what needs to be done in
order to eliminate the difficulties. It comes as no surprise. However, the report has to
include specific organizational intentions and goals towards which an action plan should be
further developed, and in relation to which they can estimate progress made towards
achieving success. (it is said in Italian:“If you do not know where you are supposed to go,
how are you going to know when to get there?“). That being said in the royal English
language, analysists have to be quite accurate with reference to what they wish to
achieve by the action plan. For instance, reduction of 25% in the control of operational
level, redefining relations between sectors X, Y and Z; organization of the management
according to the goals set by production programme, revised system of employee
evaluation which emphasizes one’s merit and contribution, organization of sensitivity
trainings for all first level supervisors; decrease in the number of client complaints by
50%; running the trainings on how to deal with the conflicts for all the medium-level
supervisors, etc. This accuracy is important not only when directing the actions of
participants, but it is also necessary for the subsequent measurement and evaluation.
Preferably, goals and intentions do not only determine what should be done, but also by
whom, when and to what extent.

Action Plan (How to Achieve These Goals /Intentions?)

Action plan is not simply offered (imposed). If we remind ourselves of the power of
resisting to the change, it is probably necessary that the lower-level managers take part in
making the action plans. They are more likely to cooperate if they take part in making the
action plans. They will be more familiar with the plan if they take part in its creation.
Additionally, they know a lot more about technical aspects of the process than the change
agent and his/her team.

An effort made in terms of the training is closely connected to it. Plans will require
intellectual “stimulation“ for the preparation of the subordinates: the less familiar the
employees are with the plans, the more suspicious they are going to be (and they will
resist more). Therefore communication and preparation training are necessary for the
acceptance. (actuallly,there are a few authors who recommend continuous and open
communication during the entire process and interventions.)

Action plan can include rather unusual changes within the management such as: audit of
the organisational order (review), better budget allocation, change of the employee
evaluation system, moving the decision-making authority, change of the technology used
in the production, improvement of the quality control, addition of the management
information system or control system; introduction of the improved system of cost
calculation. If the study /analysis shows that simple technical/structural/managerial causes
are involved, then the action plan should also include the “outdated“ managerial
solutions.

If the change agent is included in the behaviour type (OR), you may expect
implementation of any of several OR techniques. We are not going to deal with them, but
we will refer you to the glossary in order to provide you with a brief description. Once
again, please pay attention to the fact that OR, unlike conventional management methods,
focuses on human /social/behavioural aspects of the problem, using techniques which
emphasize variability of human attitudes and behaviour, thus changing the organisational

Page 51
culture, as well. We do not know whether these techniques are too “delicate“, as it is said
by the industrial managers. Regardless of how efficient they are, they deal with deep-
rooted problems which are frequently connected with employees and non-formal
organization. And those tiny human creatures are, still, dynamic elements of any
organisation. Keep in mind that these techniques are also very participative and to a great
extent involve the employees in what is going on – which is opposed to the imposing that
comes from the top. A list of most of the OR techniques as follows will provide you with
their general idea.

Laboratory training, which also includes sensitivity training, and perhaps also group
training and group confrontation. (they have been present for a very long time and are
very controversial, but that is also how OR was created .)
Conflict management – people are basically trained to understand how a conflict is created
and how to deal with it.

Team building, at the end, teaches naive workers a better cooperation.

Enriching the work gives a more humane estimate of human beings and changes job
descriptions in order to bring responsibility and authority to lower levels.

Management network method according to Blake and Muton, which is based on renewal of
the organisation through participative approach in 6 steps.

Examination of the attitudes is a root of all the questionnaires and examinations in

analytical stage. They are really trying to find out what each employee is thinking and, as
the aforesaid, action plan is then developed in order to deal with the problems that are
detected through the examination.

Interrelated group activities are designed to teach the confronted sectors how to get on
well for a higher (common) cause.

Teaching techniques and counselling.

MBO, management by objectives, is a combination of behavioural and “rational“. Higher

causes are set, and then subordinate sectors, one after another, reveal (participate) and
give an estimate of how their sector supports higher causes.

Autonomous work groups.

Counselling process gathers all the representatives of different sectors who jointly
participate in a specific process in order to review and emphasize how the process is
precisely proceeding and how it should proceed further on and who is doing what within
it.

Please pay attention to the one of the “hidden“ characteristics of OR: The Management
could design a detailed process and impose it on the subordinates, but by means of a
counselling technique potentially opposed participants are put together, and they are
given a joint task, they are left on their own and have to work together in order to leave
the given premises by the end of the working hours. During the process they uncosciously
start doing things they have not done before: they talk to each other, they start

Page 52
appreciating the tasks the others must do, they realise how it all fits in, and accurately
determine who is going to do what. These are really good things, but please, pay
attention to the participative aspect, as well: the process is now theirs, therefore they will
put themselves personally more into it in order to raise efficiency of the process itself.

To sum up, there is a whole pile of conventional and OR technique types which may be
used by the organization in their intervention action plans – either individually or in a
combination.

Action Plan Implementation

It requires a constant control, which usually lasts for about a year so that the change
agent and the team have to monitor it.

If interest and encouragement fall behind the indicators of the condition, the power of
inertness and resistance will probably prevail the power of change.

Persistence in the implementation of the change deep into the organization and its culture
is essential. Old habits and patterns are difficult to change, and they will reoccur at the
first sign of significant difficulties if a sense of what is important is lost.

Although the approach to the implementation is probably participative, that does not imply
avoiding the use of formal authority and power. Medium-level managers have to
understand that this project must not be ignored or sabotaged – at the cost of disciplinary
measures. The disobedient ones will have to learn some lessons about goals, and that
includes application of the good old authority / power. That being said, it should be
emphasized that even a tyrant approach of senior management does not correspond to
participative techniques.
The aforesaid necessary control points out that perhaps not everything will go according
to the plan, therefore there is no rule against reasonable and well-coordinated adaptation
of the plan.

There should also be open reports monitoring the status at any time; feedback information
on their progress is essential to those who fulfill the plans. That implies some information
or control system which generates progress reports.

Evaluation, Monitoring, Feedback Information

At the end of the process, achieved efficiency is measured. A lot of time, money and effort
is put into it and the participants deserve a report on whether the money and time are
spent in a proper manner. In case of good results, the same programme may be
implemented in other organizations.

As regards characteristics of the Serbian companies in terms of the relation of corporate

management and organizational growth of the companies, numerous research show that
the owners are not ready to delegate the authority to the professional managers which
represents a major barrier to further organizational growth of their companies.

Page 53
 REFERENCES

1.Jones G. R. (2004), Organisational Theory, Design and Change, Fourth edition,

Prentice Hall
2.Janićijević N. (2004), Upravljanje organizacionim promenama, Ekonomski
fakultet, Beograd
3.Adizes I. (1971), Industrial Democracy, Jugoslav Style, Graduate School of
Business, Columbia University and “The Free Press”
4.Dale F. (1967), Planning and Developing the Company Organization Structure ,D.
Petrović, Trstenik
5.Michael S., and Jones H. (1973), Organizational Management: Contepts and
Practice, Intext Educational Publishers, New York
6.Stanivuković D., Carić N, Marić B. (1991), Organizacija i menadžment, Fakultet
tehničkih nauka, Novi Sad
7.Thompson J. (1967), Organizations in Action, Mc Grow-Hill Book Company, New
York

Page 54
 BREND KAO VAŽAN FAKTOR KONKURENTNOSTI INOVACIJE

Prof. dr Slavomir Miletić,

Ekonomski fakultet Priština, Srbija, mil.slavko@gmail.com
Mr Zoran Simonović,
Institut za ekonomiku poljoprivrede Beograd, Srbija, zoki@medianis.net
Vuk Miletić,
Master studije, Ekonomski fakultet Priština, Srbija, vukmiletic88@hotmail.com

REZIME: U ovom radu brend se posmatra kroz prizmu posebno važnog elementa
konkurentnosti inovacije, s obzirom na ključni uticaj koji ovaj aspekt svojine može imati
na percepciju kupaca/ potrošača i uspeh inovativnog prozvoda/ usluge na tržištu. U tom
smislu se temeljni delovi rada odnose na inovacije i inovacione procese, koji uvek iznova
predstavljaju dominantan mehanizam aproprijablnosti i kompetitivnosti inovacije.
U funkciji spoznaje važnosti brendova za konkurentnost privrednog društva
analizirana je relacija između nivoa konkurentnosti inovacije proizvoda/ usluge i brenda.
Svrhu procesa inovacija i razvoja predstavlja realizacija ideje o novom proizvodu/ usluzi
na tržištu. Reč je o ostvarenju poslovnog uspeha koji se ogleda kroz povećanje
konkurentnosti i snažne tržišne pozicioniranosti proizvoda/ usluge.
Klučne reči: brend, konkurentnost inovacije, vrednost brenda, profitabilnost.

BRAND AS AN IMPORTANT FACTOR OF COMPETITIVENESS OF

INNOVATION

ABSTRSCT: In this paper, the brand is viewed through the lens particularly
important element of competitiveness of innovation, in view of the impact that the aspect
of this property can have on the perception of customers / consumers and the success of
innovative products / services to market. In this sense, the fundamental parts of the work
related to innovation and innovation processes which repeatedly represent the dominant
mechanism aproprijablnosti competitiveness and innovation.
The function of the importance of knowledge for competitive brands of the
company analyzed the relationship between the level of competitiveness of the innovation
of products / services and brand. The purpose of the process of innovation and
development is to realize the idea of a new product / service in the market. It is about
achieving business success which is reflected in the increasing competition and strong
market positioning of products / services.
Key Words: brand, innovation competitiveness, brand value, profitability.

1. U V O D

Ako se inovacioni proces u najširem smislu identifikuje kao transformacija ideje u

praktičnu primenu, tada realizacija inovacije predstavlja tržišnu verifikaciju u smislu
povećanja konkurentnosti. To znači da će ideja biti efektivna samo u situaciji njene
uspešne komercijalizacije. Otuda jedan od najvažnijih ciljeva inovacija i razvoja novih
proizvoda/ usluga odnosno procesa predstavlja povećanje konkurentnosti i profitabilnosti
(privrednog društva, grane, grupacije...). U tom smislu efektivan menadžment inovacija
pretpostavlja identifikaciju svih elemenata koji imaju uticaj na uspešno pozicioniranje
inovacije na tržištu. Reč je o onim elementima koji doprinose aproprijabilnosti odnosno
sticanju polze na temelju inovacije, prevashodno u domenu zaštite inovacija od imitacija,

Page 55
kao i u domenu prepoznatljivosti inovativnih proizvoda/ usluga kroz diferenciranost
kojima se uspostavlja željena interakcija sa kupcima.
Posmatrajući brend kao značajan faktor konkurentnosti inovacije, u smislu uticaja
na percepciju kupaca/ potrošača i ukupan poslovni rezultat, kao bazična distinkcija
između pojedinačnog proizvoda i brenda očituje se u zbiru svih psiholoških relacija koje
se uspostavljaju između kup(a)ca i proizvoda/ usluge i emotivnoj vezi koja je izgađena
sa potrošačem. Brend se danas izdiferencirao kao izuzetno značajan faktor konkurentnosti
inovacije i najčešće se poima kao žig ili marka, a u savremenim uslovima poslovanja
predstavlja “brod spasa” za svako privredno društvo. I samo preduzeće može biti brend, te
kao takvo da predstavlja izvor konkurentne prednosti i konstantnog kvaliteta koji se
identifikuje imenom.
Izgradnja brenda od kreatora zahteva realizaciju niza aktivnosti koje se sastoje od
brojnih akcija - od ideja, istraživanja, definisanja suštine, korporativnog identiteta,
testiranja do analize. Da bi se došlo do željenih rezultata kreiranja i realizacije strategije
nacionalnog brendiranja, potrebno je napraviti iskorak u smislu prepoznavanja
mogućnosti, kao i savladavanje načina pravilne komunikacije u okruženju u skladu sa
zahteva tržišta.

2. INOVACIJA KAO BAZIČNI FAKTOR EKONOMSKOG RAZVOJA

I KONKURENTNOSTI

Još 30-tih godina prošlog veka J. Schumpeter je prepoznao značaj razvoja novog
proizvoda - inovacija proizvoda za ekonomski razvoj, smatrajući da je konkurentnost koja
se postiže uvođenjem novog proizvoda daleko značajnija od one koja bazira na
marginalnim promenama cena postojećih proizvoda. Kasnije se razvija pristup po kome u
fazi nastanka svakog industrijskog sektora postoji radikalna inovacija proizvoda koju sledi
radikalna inovacija odgovarajućeg procesa proizvodnje, praćena difuzijom inkrementalnih
inovacija.
Inovacija je u suštini proces pretvaranja ideje u praktičnu primenu - realizaciju.
Drugim rečima, inovacija je i proces - inovacioni proces (projekat), ali i izlaz - autput
inovacionog procesa.1 Takođe, treba istaći da je koncept inovacija i inovativnosti u velikoj
meri, evoluirao u prethodnoj deceniji, zajedno sa izuzetnim razvojem menadžmenta
inovacija, koji se poima kao "unapređenje i povećanje opsega proizvoda i usluga i
povezanih tržišta; uspostavljanje novih metoda proizvodnje, nabavke i distribucije;
uvođenje promena u menadžmentu, organizaciji i uslovima rada zaposlenih".2
Po pravilu, inovativni proces se dovodi u vezu sa poboljšanjem efikasnosti nekog
procesa u organizaciji. Oslanjanjem na nove tehnologije i na akumulirano znanje,
organizacije često mogu da poboljšaju korišćenje resursa, da skrate vreme potrebno za
produkcioni ciklus i povećaju kvalitet. Verovatnije je da će se inovacije i inovativni procesi
pojaviti u kasnijim fazama ciklusa industrijskog života, kada firme žele da ostanu održive i
snažne na tržištima, na kojima tražnja ne pokazuje porast, i gde je konkurencija izuzetno
jaka. Stoga se inovativni procesi često dovode u vezu sa strategijama liderstva u ukupnim
troškovima.3 U svom poimanju inovacija i inovacionih procesa, Porter, potencira
mogućnost firme da stekne kompetitivnu (konkurentnu) prednost na temelju sposobnosti

1
Trott, P., Innovation Management and New Product Development, Pearson Education Limited, Essex, 2006.
2
European Commission, Innovation Tomorrow, Office for Official Publications of the European Communities,
Luxembourg, 2002.
3
Miletić, S. i dr., Izazovi koji nameću inovacije, e-Zbornik radova, Ekonomski fakultet Subotica, 2010, str.
85-86.

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iste da realizuje uspešne inovacione projekte.
Jasno je, dakle, da inovacije i inovacioni procesi pripadaju bazičnim faktorima
razvoja i konkurentnosti privrednog društva, čija se važnost specijalno, povećava danas,
u tzv. vremenu ekonomije znanja. Uopšteno, svi elementi inovacionih procesa
implementiraju se u organizaciji kroz funkcije istraživanja i razvoja (engl. Research &
Development - R&D), proizvodnje i marketinga.
Sa aspekta inovacija i konkurentnosti intelektualni kapital privrednog društva,
predstavlja posebno važan faktor inovativnosti, te osnov konkurentne prednosti i
profitabilnosti. On predstavlja prednost u znanju koje poseduje jedna organizacija i koji
može biti ekonomski značajniji od fizičke imovine, s obzirom na to da tehnologija,
dominantno, obuhvata prećutno znanje koje nije opredmećeno kao fizička imovina.

3. KONKURENTSKA PREDNOST KOJU OBEZBEĐUJE VREDNOST BRENDA

Posmatrano iz ugla ekonomskih efekata privrednog društva brend predstavlja

izvorište sticanja konkurentske prednosti. Naime, brendiranje je već dugo prisutno kao
sredstvo za izdvajanje robe jednog proizvođača od proizvoda nekog drugog proizvođača.
Brendovi danas imaju brojne važne uloge koje utiču na poboljšanje života potrošača i
finansijsku vrednost firmi.4 Brend ima svoju vrednost na tržištu, koja je zasnovana na jakoj
svesnosti imena, dobroj poznatosti, većoj atraktivnosti i lojalnosti, i drugim aspektima kao
što su patenti, trgovinske marke i odnosi sa kanalima. Brend svojom vrednošću
obezbeđuje priznato, poverljivo, relevantno i distinktivno obećanje potrošačima.5
Sama konkurentska prednost na bazi brenda se uglavnom može postići kroz dve
opcije. Kada su u pitanju proizvodi koji su slični sa konkurentskim ili kada se radi o
generičkim proizvodima brend predstavlja ključni izvor diferncijacije. Brendovi iz
pomenute grupe proizvoda prevashodno treba da ostvare vođstvo u troškovima putem
ekonomije obima.6 Vođstvo u troškovima podrazumeva cenu koja je definisana na nižem
nivou od brendova koji spadaju u grupu prosečnih konkurenata i veći profit a sve na
temelju manje participacije troškova u strukturi cene proizvoda.
Ukoliko je reč o brendovima koji poseduju određene specifične, dodatne vrednosti
i kvalitet za potrošača, brend postaje prestiž u odnosu na konkurente. Ovako
identifikovani atributi i isporučene vrednosti izazivaju uvećane troškove organizacije koji su
neminovna posledica ostvarivanja očekivanja potrošača, ali sve navedeno generiše i veći
profit. U komparaciji brenda sa dodatim vrednostima i brendova svrstanih u grupu
prosečnih konkurenata, prvopomenuti imaju veću cenu, više troškove ali i uvećani profit.
Svakako, vrednost brenda osigurava kompanij(ama)i brojne konkurentske
prednosti:7
1. Kompanija može imati prednost u smanjenju marketinških troškova zbog
svesnosti i lojalnosti potrošača brendu,
2. Kompanija ima veću mogućnost izbora u pregovaranju sa distributerima i
trgovcima na malo,
3. Kompanija može povećati cenu za razliku od konkurencije jer brend postiže veći
kvalitet u odnosu na konkurente,

4
Kotler, P. i K.L. Keler, Marketing menadžment, Data Status VBeograd, str. 274.
5
Miletić, S. i M. Ničić, Istraživačka pitanja koja se tiču vrednosti brenda, Zbornik radova EUROBRAND, 2010.,
str. 244-254;
6
Chernatony, L, McDonald, M., Creating Powerful Brands in Consumer, Service and Industrial Markets,
Elsevier, Butterworth Heinemann, 2003.
7
Kotler P., Upravljanje marketingom - analiza, planiranje, primena i kontrola, Mate, Zagreb, 1997.

Page 57
 4. Kompanija lako može izvršiti ekspanziju brenda, jer ime brenda nudi visoku
verodostojnost,
5. Brend nudi kompaniji odbranu protiv snažne cenovne konkurencije.

4. MENADŽMENT INOVACIJA I INOVACIONIH PROCESA

Predmetni aspekti inovacija i inovacionih procesa odnose se na direktnu

povezanost menadžmenta inovacija i intelektualne svojine. Inovaciona strategija je
uvezana sa upravljanjem pravima intelektualne svojine kao posebno važnim
mehanizmom implementacije inovacije i povećanja konkurentnosti. Brend se u datom
kontekstu razlikovanja izdvaja kao jedno od prava intelektualne svojine odnosno
individualizacije inovacije na tržištu, koje se odnosi na tržišno pozicioniranje i marketing
aspekat inovacija.
Izrečeno ukazuje na postojanje potrebe za zaštitom intelektualnog kapitala i
intelektualne svojine, kako bi privredno društvo kontrolisalo svoje znanje, te zadržalo
svoje prednosti u odnosu na konkurente. Ključno pravo sa aspekta konkurentnosti
intelektualne svojine inovacija pripada domenu znakova razlikovanja - to je zaštita
brendom (žigom). To je "pravo kojim se štite znaci koji su u privrednom prometu
namenjeni za razlikovanje robe, odnosno, usluga iste ili slične vrste."8 Radi se, dakle, o
konverziji pravnog aspekta - žig u aspekat menadžmenta inovacija i marketinga - brend.
To je deo inovacionog procesa koji bazira na vezi sa marketing funkcijom, kao jednom od
ključnih funkcija u organizaciji koja je bitna za menadžment inovacija. Stoga je zaštita
inovativnog proizvoda/ usluge (inovacije) robnim/ uslužnim žigom, zapravo, mehanizam
primene jednog od prava intelektualne svojine u procesu kreiranja i razvoja brenda.
Uspešan menadžment inovacija bazira na konceptu upravljanja protokom znanja
u okviru i između ovih (i drugih) funkcija u privrednom društvu, kojim treba podržati i
komunikaciju sa okruženjem, u cilju povećanja konkurentnosti i profitabilnosti, odnosno,
ostvarivanja ukupnog poslovnog uspeha. Posebno pitanje menadžmenta inovacija odnosi
se na korišćenje prava intelektualne svojine (engl. Intellectual Property Rights - IPR),
kroz jasno postavljenu IPR strategiju. To pretpostavlja analizu koristi i troškova koji bi se
pojavili ako se neka od prava realizuju, prognoziranjem efekata koje bi primena ovih
prava imala na ransformaciju inovacionog liderstva u dugoročno tržišno liderstvo (pre
svega, sa aspekta projektovanog nivoa aproprijabilnosti inovacije).
Sa aspekta menadžmenta inovacija, o brendu se može govoriti s obzirom na
sledeće komponente:
- brend se može koristiti kao osnova za lansiranje inovacije - kupci lakše
prenose svoje poverenje i prihvatanje postojećih proizvoda određenog
brenda na nove proizvode istog brenda;
- fokusiranje na razvoj jakog brenda može pomoći kod pozicioniranja
proizvoda/usluge na tržištu;
- jak i jasno definisan brend može biti i limitirajući faktor inovaciji, isključujući
neke od ideja koje bi se mogle istražiti.
Dakle, iz ugla svojine, inovacija se može zaštititi žigom, ali sa aspekta
menadžmenta inovacija i marketinga, postavlja se pitanje da li će taj brend biti prihvaćen
od stane tržišta, tj. da li je inovacioni proces bio uspešan, da li je novi proizvod/ usluga
povećao konkurentnost i poslovni uspeh preduzeća.

8
www.mntr.sr.gov.rs

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 5. UTICAJ BRENDA NA TRŽIŠNU POZICIJU PRIVREDNOG DRUŠTVA
I KONKURENTNOST IZVOZA

Za analizu perspektive brenda i njegovog uticaja na tržišnu poziciju i atraktivnost

izvoza analiza okruženja je od velike važnosti. Okruženje mora da stvara mogućnosti ili
opasnosti za brendove. Ono oblikuje pravila kako se konkuriše u određenim granama,
olakšava ili otežava pribavljanje potrebnih izvora za obavljanje poslovnih aktivnosti. Sam
proces razvoja okruženja može bitno da menja uslove konkurencije u jednoj grani.9
Otuda, različiti trendovi mogu imati različite efekte za različite grane. S tim u vezi od
posebnog značaja je sagledavanje okruženja u kome privredni entitet obitava u smislu
ambijenta koji utiče na porfolio10 najuspešnijih proizvoda - brendova na koje se najviše
računa u borbi za tržišnu poziciju.
Prvi korak u analizi okruženja predstavlja razumevanje sadašnjih i potencijalnih
promena. Nužno je u odnosu na poziciju brenda na tržištu izabrati indikatore koje treba
pratiti i izučavati. Reč je, pre svega, o savremenim faktorima kao što su: ubrzana
globalizacija poslovanja, internet revolucija, uticaj kineske privrede, natalitet i drgim
indikatorima.
Globalizacija poslovanja nastala je kao posledica širenja delovanja kompanija na
okolna tržišta i u krajnjoj liniji njihovo prisustvo na svetskom tržištu usled saturacije koja
je postignuta na domaćem tržištu, a koja onemogućava dalji rast prodaje i ostvarivanje
profita. Globalizacija manifestuje uverenje (činjenično stanje) da je svet mali i da
potrošači postaju sve više slični što dozvoljava firmama da koriste brend marketing
strategije na svim kontinentima.11
Internet nudi šansu novom brendu da postane globalni bez obzira na to kojoj
zemlji porekla pripada. U uslovima virtuelne prodaje Brend je dostupan „on line” 24 časa
dnevno za sve potrošače koji koriste internet. Medjutim, pre nego što se brend pojavi na
internetu potrebno je doneti strategijsku odluku o njegovom izgledu u odnosu na brend
u stvarnom svetu.
Imajući u vidu da je za nastanak i uspešno pozicioniranje brendova neophodno
uspostaviti emotivnu vezu sa kupcem, posebnu pažnju treba pokloniti emocionalnom
pozicioniranju brenda. Privredno društvo koje poseduje brend mora da nastoji da ima
što je moguće veći uticaj na potrošača i da ga drži pod kontrolom. Kao rezultat uticaja
koji proizvođači sa više ili manje uspeha vrše na kupca javlja se reakcija ciljanog tržišnog
segmenta u vidu izbora proizvoda, izbora marke, izbora trgovaca i količine kupljenih
proizvoda.
Na bazi brenda gradi se lojalnost kupca prema proizvodu smanjuje se njegova
osetljivost na povećanje cene i teže ga je uveriti u prednosti konkurentskog brenda. Na
kraju, podaci pokazuju da se na tržištu tri do četiri puta više kupuju brendirani u
odnosu na no name proizvode (bez prepoznatljive marke). Pri tome, vrednost brenda se
može kvantitativno utvrditi kroz tri ključne komponente koje su međusobno zavisne:
koliko su kupci lojalni datom brendu; percepciji kupaca o brendu i da li će kupci uložiti
više kako bi nabavili proizvod sa datim brendom.

9
Keler, K. L., (2006), Strategic Brand Management, UK, London,
10
Aaker, A. D., (2004), Portfolio Stretegy: Creating Relevance Differentiation, Energy, Leverage and Clarity,
Free Press, New York,
11
Chaffey D., Mayer R., Johnston K., F. Ellis-Chadwick, Internet marketing, Strategy, Implementation and
Practice, FT Prentice Hal, 2003.

Page 59
 Kineska privreda, kao indikator promenjenog okruženja omogućila je brojnim
kompanijama da maksimalno smanje cenu koštanja svojih proizvoda time što su iste
bile u mogućnosti da prestanu da se bave proizvodnjom. Tako se npr. kompanija Nike
trenutno umesto proizvodnjom bavi više ispitivanjem potreba potrošača (modela
ponašanja), kreiranjem novih modela dok proizvodnju prepušta drugima. Kineske firme
postale su globalni lideri u proizvodnji za poznate brendove, a Kina je postala i sinonim
za optimalnu alokaciju resursa poslovanja.
Starenje populacije ostvariće svoj uticaj na brendove promenom potreba, navika i
preferncija potrošača. Stalno praćenje stopa nataliteta i ponašanja potrošača na
lokalnom i globalnom nivou pružiće informacije za strategijsko upravljanje brend
promenama.12
Kad je reč o konkurentnosti srpske privrede i njenih privrednih entiteta, prema
Indeksu konkurentnosti Svetskog ekonomskog foruma, Srbija je na 95. mestu liste od
133 države a pretposlednja od zemalja iz bivše SFRJ. Nizak nivo konkurentnosti, Srbiju
lišava priliva stranih investicija, povećavanja izvoza, a samim tim i razvijanja privrede.
Ipak, doslednom primenom više mera za poboljšanje konkurentnosti, koje je Vlada
usvojila, Srbija bi tokom 2013. mogla da stigne nekoliko mesta unapred, ukoliko se
bude ostvario napredak u razvoju infrastrukture, energetske efikasnosti, tržišta dobara,
rada i javne uprave, na šta se usvojene mere odnose.
Svakako, glavni krivci slabog napretka u konkurentnosti odnose se na raširenu
korupciju, nerazvijenu infrastrukturu, odlivu mozgova i u tome što u Srbiji još čvrsto
vladaju monopoli na tržištu.
Bitka za podizanje konkurentnosti srpske privrede na makronivou, tek predstoji.
Hrabri činjenica da je podizanje nivoa konkurentnosti u fokusu državne uprave i u vrhu
liste njenih prioriteta. Sa pozicije privrednih subjekata pravac u kome država nastoji da
obezbedi objektivne preduslove za povećanje konkurentnosti na makronivou predstavlja
signal za adekvatno i blagovremeno pozicioniranje domaćih proizvođača u očekivanju
boljeg ambijenta za dotok stranog kapitala i na bazi toga povećane konkurencije na
domaćem tržištu i izgradnji nacionalnih brendova.
Nacionalni brendovi i njihova vrednost u direktnoj su vezi sa programom
marketinških komunikacija sa okruženjem. Strateško upravljanje brendovima
podrazumeva definisanje ciljeva koji mogu biti kvalitativni i kvantitativni i strategije koja
može biti usmerena na razvoj jednog snažnog brenda, nezavisnih brendova ili porodice
brendova. Pored drugih faktora, na definisanje strategije poseban uticaj ima i pravna
regulativa.

ZAKLJUČAK

Brend se danas jasno izdiferencirao kao izuzetno značajan faktor konkurentnosti

inovacije. Radi spoznaje važnosti brendova za konkurentnost organizacije analizirana je
relacija između nivoa konkurentnosti inovacije proizvoda/ usluge i brenda. U pitanju je
potvrda poslovnog uspeha koji se ogleda kroz povećanje konkurentnosti i snažne tržišne
pozicioniranosti proizvoda/ usluge. Na bazi brenda privredno društvo može da gradi (što
uspešna i čine) lojalnost kupca prema svom proizvodu, smanjuje se njegova osetljivost
na povećanje cene i teže je takvog kupca uveriti u prednosti konkurentskog brenda.
Konačno, podaci pokazuju da se na tržištu tri do četiri puta više kupuju brendirani u
odnosu na proizvode bez prepoznatljive marke.
Uspešan menadžment inovacija bazira na konceptu upravljanja protokom znanja

12
Drucker P., F., (2002), Management Challenges for 21str century, Butterworth Heinemann,

Page 60
u okviru i između ključnih funkcija u privrednom društvu, kojim se podržava i
komunikacija sa okruženjem, u cilju povećanja konkurentnosti i profitabilnosti, odnosno,
ostvarivanja ukupnog poslovnog uspeha.
Izrečeno ukazuje da se bitka za podizanje konkurentnosti srpske privrede mora
fokusirati na kreiranju snažnih brendova, kojima treba adekvatno upravljati. U ovom
strategijskom poslu, država se uključila kako pravnom regulativom, tako i usvojenim
merama ekonomske politike, što je dobar put za izlazak iz dugogodišnje krize i za
podizanje nivoa konkurentnosti.

LITERATURA

1. Trott, P., (2006), Innovation Management and New Product Development, Pearson
Education Limited, Essex,
2. European Commission, Innovation Tomorrow, Office for Official Publications of the
European Communities, Luxembourg, (2002),
3. Miletić, S. i dr., (2010), Izazovi koji nameću inovacije, e-Zbornik radova, Ekonomski
fakultet Subotica,
4. Aaker, A. D., (2004), Portfolio Stretegy: Creating Relevance Differentiation, Energy,
Leverage and Clarity, Free Press, New York,
5. Kotler, P. i K.L. Keler, (2006), Marketing menadžment, Data Status Beograd,
6. Miletić, S. i M. Ničić, (2010), Istraživačka pitanja koja se tiču vrednosti brenda, Zbornik
radova EUROBRAND, str. 244-254;
7. Chernatony, L, McDonald, M., (2003), Creating Powerful Brands in Consumer, Service
and Industrial Markets, Elsevier, Butterworth Heinemann,
8. Kotler P., Upravljanje marketingom - analiza, planiranje, primena i kontrola, Mate
Zagreb, 1997.
9. www.mntr.sr.gov.rs
10. Keler, K. L., (2006), Strategic Brand Management, UK, London,
11. Chaffey D., Mayer R., Johnston K. & F. Ellis-Chadwick, (2003), Internet marketing,
Strategy, Implementation and Practice, FT Prentice Hal,
12. Drucker P., F., (2002), Management Challenges for 21str century, Butterworth
Heinemann,

Page 61
 ТРАНЗИЦИЈА, ПРИВАТИЗАЦИЈА И КОНКУРЕНТНОСТ
ПРИВРЕДЕ СРБИЈЕ

др Миодраг Паспаљ, предавач на Београдској пословној шкoли

др Небојша Пушара, професор на Београдској пословној школи
Шкобић Тања, Државна ревизорска институција Београд

Резиме: Перманентно унапређивање сопствене конкурентности један је од императива

националних привреда у условима глобализације. У раду ће бити потенциран значај завршетка
приватизације као битне детерминанте повећања конкурентности привреде Србије. Биће, такође,
афирмисано становиште по коме би приватизацију требало завршити по постојећем моделу, али уз
коришћење Закона о стечају и ликвидацији у циљу њеног убрзања.
Кључне речи: Транзиција, приватизација, предузетништво, конкурентност, тржишна
привреда, транзициона стратегија, предузеће

Abstract: Permanent improvement of national competitiveness is one the necessities faced by national economies in
conditions of globalization. In the paper, finishing privatization will be emphasized as essential determinant of Serbian economy
competitiveness improvement. It will also be affirmed that privatization should be finished by rules of the existing model, but by using
Bankruptcy Law, in order to accelerate the process.

Key words: Transition, privatization, entrepreneurship , competitiveness, market economy, transition strategy, enterprise.

Увод
Савремена кретања у привредном животу наше земље, па и друштва у целини, карактеришу се
значајним реформским применама. Једна од битних карактеристика, која ову реформу издваја по значају
и концепцији, јесте у чињеници да се ова реформа карактерише радикалним променама у пословној
филозофији. Наиме, концепција текуће реформе се базира на човеку, причему знање и рад треба да
добију цену која одговара тржишним условима привређивања. Коначно смо на путу да схавтимо и
усвојимо давно познату научну истину да поставки, мултидисциплинарног карактера.
Транзиција из социјализма у капитализам је органски процес. То је интересантна мешавина
револуције и еволуције са процесом по принципу покушаја и грешака у којој нека предузећа опстају, друга
нестају, а нове фирме се тестирају пре него што буду прихваћене или одбачене. Што су темељније
организоване институције и организације капитализма - то ће систем показати боље перформансе на
средњи и дуги рок. Брзина спровођења реформи, иако важна, није најважнија за успех реформи
Савремено пословање захтева од предузећа да се прилагоде променама које
седешавају у окружењу. Један од кључних фактора привредног развоја националне привреде
представља њена способност да се укључи у међународну поделу рада, која се одражава кроз њену
конкурентност на глобалном тржишту. С обзиром на значај конкурентности за динамичку ефикасност
националне привреде, у раду ће бити сагледани они механизми њеног генерисања и одржавања, који,
углавном, нису обухваћени конвенционалним приступом овом проблему. Биће, наиме, акцентиран значај
приватизације, чији завршетак представља битну детерминанту конкурентности привреде Србије.
Предузетник је способан да креира промену, да уочи повољну прилику за промену и да реализује
промену.
Осујећени потенцијални предузетник је способан да креира и уочи повољну прилику за промену
али не моче и да је реализује.
Задовољни менаџер не уопчава потребу за променом, иако би могао да је реализује.
Савршен бирократски функционер нити уочава потребу за променом, нити је способан да промену
реализује.

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 Оваква матрица H. Stevensona и D. Gumperta се у потпуности поклапа са мишљењем J. Kottera да
постоје фирме које имају:
- јаке менаџере а слабе лидере.
- слабе менаџере, а јаке лидере и
- јаке менаџере и јаке лидере [11].

Али она се савршено уклапа и у дефиницију лидера (вође) коју је дао Neche: "Вође је неко ко зна
да продрма дрво да са њега подне највише воћа. То је везано за избор тренутка и за постојање
одговарајуће особе која је довољно снажна да протресе дрво"[11].
Оно што се може запазити је да неки аутори праве разлику између предузетника и менаџера а
неки између лидера и менаџера. Стога се може поставити питање: "Да ли су лидер и предузетник исти
појмови?"
У економској литератури, предузетник има своју историју [11]. Најпре предузетником је сматрана
особа која улаже свој капитал у неки посао и комбинује ресурсе на начин да остварује зараду. (У
југословенској пракси је данас ово схватање доминантно). Касније, да би се истакао већи значај
способности за комбиновање ресурса од самог власништва над ресурсима, наглашавало се да
предузетник не мора бити власник ресурса: он може да створи и земљу и капитал и рад захвљујући
својим предузетничким способностима које су редак ресурс.
Предузетник није нужно ни иноватор, јер користи оно што је већ познато. Код њега постоји
спремност на ризик да примени иновацију, чак и када не постоји сопствени капитал. Из спремности за
прихватање ризика произилази да поседује способност визионарства - предвиђања будућности. Како је
предвиђање будућности неизвесно, због сталних промена, издиференцирале су се две посебне
карактеристике предузетника, а које нема ни власник капитала, ни иноватор, ни менаџер, а то су:
- склоност ка ризику и
- вођење у промене, било сопственом креацијом промена, било способношћу да се промена уочи
и искористи.
Због турбулентности у окружењеу, вођење у промене и кроз промене је постало веома важна
способност, па је у литератури реч предузетник замењена речју лидер (вођа).
Лидер је, дакле, савремени предузетник који омогућава да предузеће преживи преко управљања
променама, а менаџер је максимизатор ефеката промена. И један и други су изложени ефекту "маказа
времена": све већи број све сложенијих проблема треба да реше за све краће време.
Временом је постало јасно да то нису харизматске личности [10], већ професионалци за
доношење и спровођење одлука, који поред персоналних карактеристика, морају имати и стручну
способност.
Значај предузетништва у привредном развоју је теоријски разрађено питање, а у привреди земља
са рационалим економијама и практично потврђен. Међутим, примарни циљ приватизације остаје раст
ефикасности привреде и већа конкурентност наших предузећа. Да ли је приватизациони процес у Србији,
за који се може Међутим, предузетништво у нашем условима привређивања се никако не може базирати
на једноставним копијама светских искустава. Оно мора да се базира на реалној концепцији организовања
и функционисања привредног живота код нас, поа отуда треба да има и своја обележја. Савремена
пракса отвара, а отвараће још више, низ питања функционисања предузетништва у нашим условима, па
је за очекивати да предузеништво, као функција, добија на комплексности, како у практичном животу, тако
и у теоријским сагледавањима.

Резултати приватизације
Од средине 2001. године, када је донет нови Закон о приватизацији, па до краја 2006. године
продато је око 70% предузећа предвиђених за приватизацију. Остварени приходи од продаје износе 1.995
милиона евра, док је 967 милиона уговорених улагања у инвестиционе као и 278 милиона евра у
социјалне програме. [3].

Page 63
 Табела 1. Резултати приватизације 2002-2006. године (милиони евра)

Izvor: http://pks.komora.net
Као што се може видети, на основу података из табеле, у периоду од 2002-2006. године број
продатих предузећа у Србији износио је 1779, а проценат успешности приватизације био је 64%. Ако се
има у виду да је део резултата приватизације приказан под називом "тржиште капитала", у ствари остатак
прошлости, јер се ради о продаји пакета акција предузећа приватизованих по Закону из 1997. године, онда
се може закључити да су укупни резултати приватизације више него скромни.
Купци предузећа у Србији могу се поделити у четири категорије:
1. Транснационалне компаније,
2. Страни инвестициони фондови,
3. Домаћа предузећа у приватном власништву,
4. Домаћа физичка лица као предузетници или удружени у конзорцијуме.
1. Настанак и развој мултинационалних и глобалних компанија у периоду после Другог светског рата,
поред других фактора, имали су посебно стимулативну и покретачку улогу на развој међународног
пословања и маркетинга. Мултинационалне компаније (MNCs) настоје да максимирају приходе, пре на
међународном, него на националном нивоу, лоцирајући своје активности у земљама где су услови
пословања најповољнији.
Компаније дају врло уопштене одговоре о мотивима за стране инвестиције:
 жеља да се наступи на још једном тржишту са јаком стварном, или потенцијалном тражњом,
 стабилна економска ситуација земље где се жели да оснује филијала,
 стратегијски разлози,
 пословна политика итд.

Други, специфичнији мотиви укључују:

 продуктивност,
 диференцијацију производа,
 улазне цене,
 транспортне трошкови,
 флуктуације девизних курсева,
 трговинске баријере,
 општа економска клима локалне земље и тд.

За разлику од мултинационалне компаније,глобална компанија посматра цео свет као јединствен

ентитет. Она продаје "исте ствари, на исти начин свуда". На пример, глобална компанија Sony, продаје
стандардизовани wокмен широм света, са компонентама које се производе у различитим земљама.
Постоје разлике између мултинационалне и глобалне компаније: Мултинационална компанија
послује у више земаља и своје производе прилагођава сваком тржишту – уз релативно високе трошкове.
Глобална компанија, с обзиром на њен приступ, да цео свет посматра као јединствен ентитет и да
продаје "исте ствари, на исти начин свуда", наступа са јасном стратегијом – релативно ниски трошкови.

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Nike, Sony, Intel, Filips само су неке од бројних компанија које продају глобалне производе – производе са
којима се наступа у свим земљама без суштинских промена. И као што је настанак и развој
мултинационалних и глобалних компанија имао стимулативну и покретачку улогу на развој међ.пословања
и маркетинга, важи и обрнуто.
Либерализација трговине, раст светске економије и олакшан транснационални трансфер
технологије, људских и финансијских ресурса, стимулативно је деловао на настанак и експанзију МНК и
глобалних компанија. Транснационалне или мултинационалне компаније куповином предузећа у Србији
остварују свој стратешки интерес да се дугорочно позиционирају на тржишту (Coca cola, Philip Moris,
Lukoil, Lafarge и др.). Да би остварили дефинисане циљеве они, не само да врше улагања у купљена
предузећа, већ мењају и органаизацију и прилагођавају је стандардима који важе за матичну компанију.
Купљена предузећа тако постају део транснационалних компанија, показујући већу ефикасност у
пословању и боље резултате на тржишту. Процес о коме је реч, праћен је смањењем броја запослених,
повећањем, продуктивности и растом реалних зарада радника.
2. Страни инвестициони фондови купују предузећа у Србији, најчешће у области производње
хране и пића. Купљена предузећа консолидују, повећавају њихову вредност и побољшавају им позицију
на тржишту, са циљем да их у наредном периоду продају по вишој цени. Примера ради, Инвестициони
фонд Salford из Велике Британије купио је пет млекара, произвођача кондиторских производа "Бамби" и
постао сувласник произвођача минералне воде "Књаз Милош".
3. Домаћа предузећа у приватном власништву, куповином већинског или контролног пакета акција
од Државе или малих акционара, настоје да побољшају свој положај на тржишту. Типичан пример је
компанија Делта, која је истовремено градила сопствену мрежу Маxи и куповала акције трговачког
предузећа Пекабета, док није преузела контролни пакет акција.
4. Домаћа физичка лица, као предузетници, најчешћи су купци предузећа у Србији. Мотиви
куповине су веома различити, па је и судбина овако приватизованих предузећа неизвесна. Досадашња
искуства показују да сам чин промене власништва није довољна гаранција ефикаснијег пословања
предузећа. Постоји велики број примера да приватизована предузећа постижу слабије резултате у односу
на период пре приватизације. Бројни фактори опредељују успешност пословања предузећа после
приватизације. Пре свега, потребне су радикалне промене и прелазак на тржишне принципе пословања.
Нови власници, који су, као домаћа физичка лица, капитал стекли углавном кроз приватизацију у сенци
пословних трансакција, морају прихватити економске законитости и профитне стопе које су неколико пута
ниже од оних из периода санкција, рата или хиперинфлације. Осим тога, шпекулативни капитал који
настоји да купи јефтино и прода скупо преузета предузећа, мора се одрећи меркантилистичког бизнис
модела који се описује као "чекај и посматрај". [4]. Реално је очекивати, међутим, да ће се у наредним
годинама наставити процес укрупњавања капитала. Предмет куповине и продаје биће приватна
предузећа и то, пре свега, она која су остварила нижу стопу ефикасности после приватизације. У том
настојању предузетници користе савете, сугестије, резултате истраживања који се могу наћи у савременој
литератури са овом тематиком, као и искуства разних компанија, трудећи се да их читалачка публика што
боље разумије, а посебно менаџери и предузетници којима је чланак, у суштини, и намењен.
Од посебног је значаја чињеница да је за приватизацију у Србији преостало више од 2000
предузећа, не узимајући у обзир велику групу од такође преко 2000 мешовитих предузећа која у својој
структури имају више или мање друштвеног или државног капитала. Посебно је неповољна чињеница да
су за приватизацију остала друштвена предузећа која запошљавају 16,8% запослених у привреди, што
располажу са 14,6% капитала и која су у већини у тешкој економској ситуацији. Када се овоме дода
потреба за приватизацијом државног сектора привреде, који запошљава 14,1% укупно запослених у
привреди и располаже са 37,2% капитала, тада укупно за приватизацију преостаје друштвених и државних
предузећа који запошљавају око 31% запослених и располажу са око 50% капитала укупне привреде. На
основу ових података могло би се закључити да је приватизација у Србији на пола пута. Неповољна
чињеница је што је та друга половина значајније тежа од прве. [5].

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 Имајући у виду набројано, транзиција у Србији се одвијала у таласима. По правилу је брзина
реформи зависила од изборних циклуса, реформе су биле интензивне у првим годинама Владе Србије,
док би се темпо смањивао са приближавањем избора. Расписивање избора је аутоматски представљао
знак да се са реформе замрзавају да би се након формирања нове Владе реформе одмрзавале. У
наредном периоду треба обезбедити стабилност политичких прилика у земљи како би би се Влади
оставило довољно времена да се спроведу неке тешке реформе.

Приватизација и предузетнишзво као услов конкурентности

Конкурентност привреде Србије налази се на релативно ниском нивоу. Она је у значајној мери
условљена закаснелом транзаицијом, дугогодишњом изолацијом и одсуством са светског тржишта,
дуготрајним дезинвестирањем као и значајним технолошким заостајањем за развијеним привредама.
Србија је у протеклом периоду остварила технолошки развој првенствено кроз прибављање
страних технологија, а мање путем развоја сопствених. Тако је у Србији формиран значајан технолошки
потенцијал уграђен у опрему појединих грана привреде који није значајније ефектуиран. Главни узрок
неконкурентности привреде Србије био је систем који није генерисао потребну мотивисаност привредних
субјеката да убрзано развијају и ефикасно користе технологије и да на тим основама модернизују
привреду и јавни сектор. Привреда Србије после две деценије дезинвестирања у многим секторима има
неконкурентне цене и неконкурентан технолошки садржај због застарелости машина, уређаја и опреме и
застарелости знања и информација. Изостанак инвестиција у људски капитал условио је значајан пад
економске и технолошке конкурентности привреде Србије. [6].
Привреда Србије због ниске конкурентности недовољно је укључена у светску трговину и
неадекватно заступљена на тржишту ЕУ. Примарни производи и репродукциони материјал доминантни су
у размени са земљама ЕУ. Србија заостаје и за другим земљама које наступају на тржишту ЕУ у погледу
квалитета производа и конкурентности због застареле опреме и технологије.
Неконкурентност домаћих производа и услуга на светском тржишту видљива је кроз степен
покривености увоза извозом производа који су више или мање интензивни. Домаћи производи немају
конкурентан технолошки садржај, савремене функције, потребан квалитет, што је условило мали извоз
ових производа и мале приходе од извоза технологије. То показује да Србија технолошки заостаје за
развијеним земљама и да је у великој мери зависна од иностранства, са негативним билансом
технолошких плаћања.
Ниска конкурентност привреде Србије последица је и закаснеле транзиције, а у оквиру ње и
успорене приватизације и незадовољавајућег квалитета институција. За разлику од успешних привреда у
транзаицији које су оствариле трансформациону ефикасност, а њихове институције се успешно
трансформисале и адаптирале на захтеве функцинишуће тржишне привреде, ситуација у Србији је у том
погледу другачија. Наиме, на законодавном плану остварене су промене у привредно-системским
решењима, имплементирана је стабилизациона монетарна политика, извршена монетарна реформа,
либерализоване цене већине производа и услуга, извршена либерализација спољне трговине. Такође,
учињене су радикалне промене у фискалном систему, кроз увођење транспарентне јавне потрошње и
стриктне контроле фискалног дефицита. Донет је Закон о приватизацији и Закон о раду. Имајући у виду
претходно истакнуто, могло би се закључити да су у привреди Србије углавном заокружени формални
институционални услови који би требало да генеришу конкурентно окружење и омогуће успостављање
функционишуће тржишне економије. Уочава се, међутим, да упркос званичне реторике, конкуренција још
није заживела, а уочава се и својеврсни институционални вакум који доприноси одржавању нетржишног
система или, прецизније речено, квази-тржишног система, који има малу развојну способност.
Деформисаност конкуренције није ограничена само на јавни сектор, већ и на делове трансформисаних
предузећа. Све то доводи до стварања хаотичног "несистема", који значајно утиче на подривање
макроекономске стабилности.

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 Постоји више узрока који су условили, не само успоравање већ и слабе резултате приватизације у
Србији. Чини се да су кључни проблеми: модел приватизације, недовољно изграђена законска регулатива
и недовољна транспарентност.
Као што је познато актуелни Закон о приватизацији фаворизује модел продаје путем аукције и
тендера. Да би се једно предузеће приватизовало потребно је продати 70% друштвеног капитала. Уколико
нема купца за 70% друштвеног капитала, предузеће се не може приватизовати. За реализацију оваквог
модела потребан услов је да постоји тражња за куповином око 5000 предузећа, колико је преостало за
приватизацију по овом моделу.
Страни инвеститори нису показали довољан интерес за приватизацију у Србији, без обзира што се
после демократских промена сматрало да ће постати врло атрактивна за страна улагања. Разлог је у
одсуству довољно атрактивног амбијента за прилив страних инвестиција. Уверење да ће економска
стабилизација и либерализација створити повољан економски амбијент који ће довести до брзе
приватизације и економског опоравка, није се остварило. Недостатак одговарајуће институционалне
подршке онемогућио је реализацију очекиваног сценарија, па је приватизација брзо застала.
Конкурентност предузећа подразумева ниже трошкове у односу на просечне и максимизацију
профита као мотива пословања. Да би тај циљ био остварен потребно је да функционише тржиште.
Међутим, по мериторним оценама, у привреди Србије конкуренција је сведена на примитивне тржишне
структуре, а присутни су и разни тржишни супститути и мутантне тржишне структуре, које не могу бити
гаранција веће економске ефикасности. У ствари, ради се о успостављеним многим облицима квази-
институционализације тржишних односа, који се огледају у патернализму, монополизму, рентно
оријентисаном понашању и др. Чак се сматра да поједине номенклатурно-лобистичке групе настоје да
креирају "надинституте", или прецизније речено, да својом разгранатом мрежом неформалних веза и
односа монополишу даље токове институционалне изградње.
Предузеће је упућено на тржиште. Оно живи и ради на тржишту и резултати пословања остварени
на тржишту опредељују будућност предузећа, односно његову тржишну позицију, стабилност и развојне
могућности. Предузеће је отворени пословни систем, директно јеупућено на своје окружење. Своје
пословне ресурсе налази на тржишту, изналази оптималнукомбинацију пословних ресурса која је
опредељена тржишним захтевима (пре свега потребама, захтевима и жељама потрошача) и своје
производе и услуге који су настали пооснову примене пословних ресурса, пласира на тржиште које
оцењује њихову вредност.
Нова конкурентска стварност захтева од предузећа нове приступе у дефинисању пословне
политике и тржишних стратегија. Стално унапређивање квалитета пословања, поређењеса конкуренцијом,
корпоративна друштвена одговорност су само неки од захтева које предузеће мора да испуни да би
постигло пословну разноврсност и светску класу производа иуслуга.
Према индексу глобалне конкурентности Wорлд Ецономиц Форум за 2006. годину, Србија се
налазила на 87. месту међу 127 земаља. [1]. У поређењу са 2003 и 2004. годином, Србија је значајно
погоршала макроекономску конкурентност. [2]. Даље, у процесу рангирања земаља Индексом глобалне
конкурентности, Србији је у 2007. години припала 91. позиција од укупно 131 земље света обухваћене
овим Извештајем. У односу на бивше југословенске републике, Србија је једино испред Македоније
(позиција 94) и Босне и Херцеговине (позиција 106). Изузев, Македоније, Босне и Херцеговине и Албаније,
нижи ранг националне конкурентности од Србије, имају још само земље Африке, Азије, Јужне и
Централне Америке. У условима институционалне незаокружености, структурне неусклађености и
незавршене приватизације стање се не може поправити спонтаним деловањем тржишта. Зато је потребно
дефинисати приоритете у транзиционој стратегији и економској политици. Овај рад има претензију да
укаже на потребу убрзања приватизације, као једног од приоритета.
Конкуренција је од почетка деведесетих година двадесетог века постала изузетноинтензивна, а у
неким сферама пословања и офанзивна. Развијеним земљама света су се уконкурентској борби
придружиле земље Латинске Америке и Азије, као и посткомунистичкеземље које су заокружиле процес

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транзиције и постале чланице Европске Уније. Разлози заизмену конкурентске мапе света се налазе у
следећим чињеницама:
Моћ је са произвођача пренета на дистрибутере;
Мултинационалне корпорације постају све моћније;
Нови производи трају све краће;
Потрошна добра не трају дуго као некад;
Дигитална технологија је довела до развоја читавог низа производа;
Повећава се број регистрованих робних марки и патената;
Повећава се број расположивих производа;
Простор за оглашавање је све засићенији;
Потрошачи су постали пробирљивији.

Основни циљ савременог пословања јесте постизање пословне изврсности и достизањесветске

класе производа и услуга. Ово се може постићи једино по основу континуалногунапређивања квалитета
пословања организације, које је засновано на повећању продуктивности рада и знања сваког појединца
запосленог у организацији. Деведесете године двадесетог века су донеле са собом неопходност
задовољења општих друштвенихинтереса – дакле поред потрошача и власника капитала, предузеће у
савременом пословањумора да задовољи шири спектар интереса који владају у његовом
окружењу.Задовољењем основним економских принципа предузеће може да оствари позитивне пословне
резултате. Међутим то није довољно за даљу будућност предузећа у турбулентномокружењу. Светска
глобализација и динамичко окружење наводе многа предузећа даморају да уче како би се прилагодила
нестабилном светском трижишту. Компетентност предузећа биће заштитни знак у пословном свету.
Некомпетентна предузећа веома брзо пропадају јер нису успела на време да изврше трансформацију и
прилагоде своју организациону структуру и стратегију збивањима на тржишту.Познавање конкуренције је
од изузетног значаја за предузећа.
Приватизација у Србији, а посебно на самом почетку, вршила се у условима институционалног
вакума. Неки закони нису још увек донети (Закон о реституцији) или су донети са великим закашњењем
(Закон о привредним друштвима донет је 2004. године, а Закон о ликвидацији и стечају донет је тек 2005.
године). Осим наведених закона, за креирање повољног амбијента за приватизацију, потребно је
доношење и многих других, али је много значајнија њихова ефикасна примена и владавина права. Како ни
овај услов није био испуњен, то се негативно одразило не само на приватизацију, већ и на развој нових
приватних предузећа. Позитивна хеуристика других земаља у транзицији говори да је раст приватног
сектора на почетку транзиције значајно доприносио приватизацији државних предузећа.
Слаби резултати приватизације узроковани су и нетранспарентношћу прописаних поступака и
процедура у процесу приватизације. То је, без сумње, погодовало корупцији, мада модел продаје спада у
поступке приватизације којим се може избећи већа корупција.
Привреду Србије неконкурентном чине предузећа која су преостала за приватизацију. То су,
углавном пословно неуспешна предузећа, па самим тим нису ни атрактивна за продају. Међутим, без
обзира на ту чињеницу, приватизацију би требало наставити по постојећем моделу, а кључни фактор
убрзања мора бити примена Закона о стечају и ликвидацији. Промена модела не би утицала на убрзање
приватизације, с обзиром да она дуго траје и да је за било какве промене сувише касно.
Неодлучност креатора транзиције око редоследа потеза (реструктурирање па приватизација или
обрнуто) код приватизације великих друштвених предузећа негативно утиче на конкурентност привреде
Србије. Нека искуства показују да би концепт реструктурирања требало напустити, јер се показалао да
таква предузећа више вреде само за износ уложених средстава у том процесу. Реструктурирање би,
дакле, требало препустити будућем власнику, јер ће он најбоље знати шта треба урадити.

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 Тржиште опредељује потенцијал предузећа и њихових конкурената. Веће тржиштеобезбеђује и
већи обим продаје, па тако и већи укупан приход и профит и обрнуто. Зато једнаод основних брига
менаџера предузећа јесте и треба да буде обезбеђење његовогодговарајућег положаја на тржишту. То
значи да предузеће мора имати активан однос прематржишту, у смислу да му се перманентно
прилагођава избором и применом адекватнихстратегија. Извори података за анализу тржишта су бројни,
али ипак се могу груписати у неколиконајважнијих категорија:
1. Само предузеће (подаци о продаји и ценама из фактура, подаци о врстама производа,
рачуноводствени подаци, статистика предузећа и сл.).
2. Службени статистички подаци (јавне статистичке публикације, специјални статистичкиизвештаји и
сл.).
3. Подаци, билтени и информације стручних удружења, струковних организација.
4. Подаци специјално организованих анкета (подаци из упитника и адресара, извештајаанкетара и
контролора анкете).

Као и сваки други аналитички посао, тако и анализа тржишта продаје односно одређених фактора на
њему мора да се обавља извесним редоследом, смишљено и систематски.
Другим речима, цео посао анализе тржишта треба да обухвати следеће:
1. Опис карактеристике производа;
2. Оцену тражње на продајном тржишту;
3. Оцену понуде, односно конкуренције на тржишту и
4. Процену пласмана одговарајућих производа.

Међу најзначајније промене у окружењу убрајају се оне које се дешавају на плану технолошког
прогреса. Велики број тих промена, које су резултат брзог развоја науке итехнологије, налазе се изван
контроле предузећа. Предузеће не сме да има пасиван став према научно-технолошким променама.
Технолошки прогрес утиче на пословање предузећа, на следећи начин:
Делује на застаревање технолошких и производних процеса и опреме;
Делује на застаревање производа;
Делује на застаревање стручних знања и метода управљања.

Технолошки прогрес утиче на појаву нових производа, скраћује време производње, скраћује време
потребно од појаве идеје за нови производ до његове реализације, повећава продуктивност, замењује
живи рад савременом опремом, континуално усавршава средства рада и предмете рада, уводи нове
производне методе и нове начине организације и управљања, смањује утрошак физичких компоненти,
производе чини све мањим по обиму и све лакшим по тежини, повећава укупна знања и подстиче
информисаност људи и сл. Све ово показује да менаџмент предузећа мора континуирано да истражује и
прати најновије тенденције у науци и технологији као и да их уграђује у постојеће производе и осваја нове.
Овде треба истаћи само најзначајније делове тог потенцијала који би требало да се нађу у домену
стратегијске анализе:
Анализа релевантних карактеристика инсталираних технологија у производној сфери првенствено
у грани којој предузеће припада;
Анализа природе технологије, њене старости и контроле продавца над технологијом;
Анализа конкурентског окружења са циљем да се одреди структура инвестиција конкурената на
страни производа и процеса за сваку виталну технологију;
Анализа научно-истраживачког система и његове везе са светом и брзине трансфера научних и
технолошких достигнућа из света;
Анализа управљања технолошким прогресом преко технолошке стратегије земље, организовано-
сти при трансферу технологије, степена међународног трансфера интелектуалних производа;

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 Анализа информатичких технологија и њиховог утицаја на све укупни пословни амбије-
нт предузећа;
Анализа утицаја микро електронике на развој привреде и других друштвених области;
Анализа мерила научно-технолошког потенцијала.

Овде је наведено само неколико најважнијих елемената научно-технолошког потенцијала који

морају да буду обухваћени стратегијском анализом. Положај предузећа је, дакле, према наведеној
анализи одређен са два момента: оно што раде други привредни и остали субјекти и оно што је радило
посматрано предузеће. Научно-технолошко знање, поларизује се не само у предузећу, већ и на
међународном плану до те мере да се произвођачи опреме већином налазе у развијеним земљама.
Наша земља је доведена у позицију готово потпуне маргинализације на технолошком тржишту и
до апсолутне зависности од међународне сарадње и увоза технологија. Катастрофално стање научно-
истраживачког рада није изненађујуће ако се има у виду да смо на зачељу по издвајању за те намене
мерено према ионако незадовољавајућем BNP. Застарелост капацитета мери се деценијама а не
годинама. Ако се зна да смо и пре међуародне изолације каскали у овој области, онда није ни чудо што се
налазимо ту где јесмо. Као да није дошло до спознаје да је јако важно привући транснационалне
корпорације и тако уз капитал дођи и до know-how-a.

Конкурентност предузећа шта је то?

Конкурентост је одржив раст продуктивности вођен квалитетом стратегија и пословања предузећа,
на коју заједно утичу макроекономско и микроекономско окружење. Ниво конкурентости одређује
продуктивност-мера способности да се произведу робе и услуге користећи постојеће властите људске,
финансијске, природне и друге ресурсе. Продуктивност одређује животни стандард државе или регије –
плате, приход од капитала, очување националног богатства. Продуктивност зависи и од вредности
производа и услуга (нпр. њихова јединственост, квалитет) и од ефикасности којом се производе.
Конкурентност предузећа се може схватити као језгро успеха или неуспеха једног предузећа.
За неко предузеће семоже рећи да је конкурентно ако одржава профит на нивоу који превазилази
просек индустријске гране којој припада. У рангирању кључних фактора који утичу на постизање
компетентности предузећа, иновација заузима високо место. Међу првима који су то уочили свакако је био
Joseph Shumpeter, који је иновацију с обзиром на њен разарајући утицај на постојећу економију, назвао
„креативна деструкција“ и на тај начин довео у везу иновацију иконкурентност предузећа.Иновација
представља успешно коришћење идеје, или усмеравање идеје у профитабилне производе и услуге,
процесе или пословну праксу. Иновација је синоним за успешну производњу, усвајање и експлоатацију
новине у економској и социјалној сфери. Супротност од иновације је „архаизам и рутина“. Одржива
конкурентност предузећа превасходно зависи одресурса и способности које предузеће поседује.
Традициониални ресурси предузећа, према су капитал, физички ресурси, радна снага, менаџмент и
време. Способност предузећа чини интелектуални потенцијал запослених, а посебно она знања која
опредељују одређене компетенције.
Значај способности предузећа у поређењу са традиционалним ресурсима данас (а у будућности
поготово) постаје све већи. Може се рећи да одрживу конкурентност једне организације чини шта њени
људи знају и шта они могу да учине са тим што знају.
Конкурентска способност предузећа много више зависи од брзине, којом оно може увести нове и
супериорне производе или услуге, односно од иновативне способности предузећа.Знање избија у први
план и постаје важан фактор одрживе конкурентности предузећа. И тоне било које знање, већ знање
управљања иновирањем, другим речима менаџментиновацијама. Може се констатовати да способност
иновирања предузећа односно иновативна пракса постаје најважнији фактор економске моћи предузећа,
индустријске гране и националнеекономије.

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 Закључак
Привреду Србије је на почетку процеса приватизације карактеришу застарела технологија, вишак
радне снаге, губитак бивших тржишта и последице пословања у условима санкција.
• Мали број предузећа налази адекватног стратешког партнера и унапређује своје пословање.
Велики број наставља да егзистира на тржишту док се одређен број и гаси.
• Приватизација је дала (не)очекиване резултате и након 11 година спровођења још увек није
окончана.
• Будући модели ће укључивати активну улогу државе, пре свега са аспекта улагања средстава у
ревитализацију пословања и смањење броја запослених а затим и формирање ЈВ компанија са
стратешким партнерима.
Дефинисање приоритета у транзиционој стратегији би, у циљу повећања конкурентности привреде
Србије, требало да буде главни задатак креатора транзиционе политике. Један од таквих приоритета је и
убрзање приватизације по постојећем моделу, с тим да би кључни фактор убрзања требало да буде
примена Закона о стечају и ликвидацији. Без обзира што су за подизање конкурентности потребни време
и значајна улагања, убрзање приватизације и њен завршетак би већ у блиској будућности имали
позитиван утицај на повећање конкурентности, повећање извоза и остваривање виших стопа привредног
раста. То је, уједно, и битна претпоставка завршетка процеса транзиције и прикључења Србије Европској
унији.
Спровођење процеса транзиције препуно је потешкоћа. Листа проблема са којима се привреда
Србије сусреће и у којима се већ дуже време налази подугачка је. Тешко их је све побројати; једни
узрокују друге и из њих произилазе.
У сегменту политике конкуренције потребно је уложити највеће напоре како би се повећала
конкуренција на домаћем тржишту чиме би се побољшао квалитет производа и услуга уз смањење
потрошачких цена. У овом сегменту реално је очекивати велике отпоре од стране тајкуна, који су у
условима институционаланог вакума дошли до привилегованог положаја у привреди који им омогућава
остваривање монополског екстрапрофита. Од успеха државе да из овог сукоба са тајкунима изађе као
победник зависи и успех целокупног процеса транзиције.

Литература

1. World Economic Forum The Global Competitivens Report 2006-2007, Geneve, 2006.
2. Ј. Бајец, К. Симић, Макроекономска конкурентност - услов прикључења ЕУ, Економска мисао, 3-
4/2004.
3. Љ. Савић, Српска транзиција - раскорак оствареног и очекиваног, Институционалне промене како
детерминанта привредног развоја Србије, Економски факултет, Крагујевац, 2008.
4. Ђуричин Д., Србија 2007: стање и приоритети реформи, Институционалне промене као детерминанте
привредног развоја Србије, Економски факултет, Крагујевац, 2008.
5. Д. Шуковић, Резултати и перспективе приватизације у Србији, Економика предузећа, март-април,
2006.
6. Вујовић, Душан, Конкурентност државе: Предности и изазови новог модела активног подржавања
конкурентности националне привреде, Економика предузећа, Вол. 13, септембар-октобар 2005.
7. Вујовић, Душан, Конкурентност националне привреде: Нека емпиријска и теоријска питања мерења
институционалне конкурентности, Часопис Финансије, Година LX, број 1-6, 2005.
8. Стратегија конкурентности привреде Србије 2005-2010, Копаоник, Бизнис Форум, 2005.

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9. Костића М. др Василија, Како да будете бољи од конкуренције: стицање конкурентске предности
развојем и унапређењем услуга, Подгорица, 2010.
10. Jefferson Institute. Конкурентност привреде Србије, Београд, 2003.
11. Друцкер Ф., Иновације и предузетништво (Inovacion and enterpreneurship), пракса и принципи, II
издање, Грмеч Привредни преглед, Београд, 1996.
12. http//pks. komora. net

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 A NEW APPROACH TO MONETARY POLICY IN MODERN
CONDITIONS THROUGH A REVIEW OF THE USA

Boris Siljkovic, PhD, assistant professor, School of Economics of Professional Studies in Pec, Leposavic, Serbia
Professor Borislav Radevic, PhD, State University of Novi Pazar, Department of Economics, Serbia
Bojana Jokic, PhD, assistant professor, State University of Novi Pazar, Department of Economics, Serbia

Abstract: The financial crisis of 2007 around the world indicated a change of approach to monetary strategy and policy that
would accommodate the newly arisen circumstances. Influential economists of our time have suggested that money, more or
less, should be no longer as relevant category as prior to the outbreak of the global financial crisis. In contrast to them,
influential academic circles in the US and developed economies are even more concrete as they point out, that monetary policy
strategy should include the so-called loose monetary policy, which will be applied in the near future. Current monetary strategy
of the US is the application of monetary policy which involves targeting the projected inflation rates. Such strategy implies the
modern variant of monetary policy through the creation of the so-called policy on the fly according to the circumstances.
Monetary policy of the Fed over the last five years, has been the policy of “lender of last resort'' in the nation's financial system.
However, monetary policy of the Fed may be at a turning point, as the global financial crisis could come as early as end of 2013.

Keywords: access, crisis, monetary strategy

INTRODUCTION

Monetary policy strategies, as a result of the development of academic thought, in their long evolution,
have been constantly changing. Throughout monetary history, to date, constant changes in monetary
policy of central banking have led to improvements in the monetary policy strategy in the world,
especially in the world’s largest economy. Our comments throughout the paper, will first give a review
of the wide range of theoretical views about monetary policy strategy in modern conditions.
Furthermore, the following will discuss the critical review of the effect of the modern approach to
monetary strategy. Finally, as a result of our research, the paper will show practical consequences of the
application of modern monetary strategy of the Fed, through a review of the US experience.

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1. Theoretical examination of the conduct of monetary strategy in modern conditions

What is left as a constant over the last decades, is doubtlessly that monetary policy continues to affect
prices, but with long and variable lags. This thesis was popularized back in 1960 by Milton Friedman. The
recent global financial crisis has caused many central banks around the world to face a number of issues
beyond monetary policy of the Keynesian or monetarist type. The modern view of the conduct of
monetary policy in modern conditions was developed by economists who are the direct exponents of
this policy, Paul Krugman and Michael Woodford.

They argue that monetary policy, in modern conditions, can escape from liquidity traps, assuming the
projected rate of nominal GDP by lowering real interest rates. This popular idea starts with a change in
the objective of the so-called projected targeted inflation: projected nominal GDP (most commonly used
measure of national production, expressed in current prices) is proposed. The two economists conclude:
if people are afraid that inflation will eventually undermine the real value of their money market funds,
it would essentially oblige the central bank to target higher inflation during the period of depression.
Specifically, Paul Krugman in view of the latest financial crisis of 2008, points out that the use of budget
funds to encourage domestic production will last far longer than some think. This will be the mainstay
for getting out of the recession.1 Due to these circumstances, among other things, the forecast of
targeting monetary and real effects in the economy has become an increasingly popular approach in the
organization of monetary policy strategy in modern conditions.2

Critical judgment of Woodford’s, but also Krugman’s monetary policy strategy, in interpreting David
Laidler, that it is well adapted, but in calm monetary conditions, fair fiscal times, and limited form of

1
Henry Kaspar, “The liquidity trap, monetary policy, and inflation expectations (help needed)“, data and
information available at http://kantooseconomics.com/2012/02/03/the-liquidaty-trap-monetary-p... доступно
дана 23. 5. 2012, p.1
2
For further discussion and examples for more details see: Svensson (1997, 2005) in his work “Advantages of
policy formulation in regard to targeted criteria, rather than explicit instrument of government. " This was
discussed by Svensson (2003, 2011) and Woodford (2011, in preparation). Giaonnoni, P. Marc, Woodford, Michael,
“Optimal Target Criteria for stabilization policy“, Staff report N0 535, Federal reserve bank of New York, January
2012, p. 1

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closed economy. It shows us how to stay on the course of the defined low and stable inflation in such
environment.3

A variant of modern monetary strategy and policy of the central bank is the revival of Keynesian way of
thinking. This means that the monetary policy of the central bank is permanently subordinated to fiscal
policy. The best way to respond to modern conditions is through fiscal consolidation and aggressive
monetary policy. More precisely, aggressive fiscal policy is essential when official interest rate is close to
zero. Actually, the problem is that zero is the lower limit, and this is a problem that occurs despite the
greatest efforts of monetary policy makers.4 The researches conducted by Vasco Cúrdia and Michael
Woodford headed in the same direction, according to which the explicit role of the central bank, which
is now on stage in the crisis and post-crisis period, is creating the policy on the fly, by insisting that
nothing changes . The two authors conclude that such a condition does not necessarily imply such a role
of central banks, primarily due to: quantitative easing, liquidity injections, massive bailout packages as
additional instruments of stabilization policy, even when the lower limit of interest rates is zero.5

In this sense, the opinion of many economists that the best monetary policy is the one that determines
the steady growth trend of the money supply not to be deviated from in the mid-term, regardless of the
distortions in the economy has become crystallized. Monetary policy is insufficiently efficient if
implemented without coordination along with other macroeconomic policies, in particular fiscal policy,
especially in preventing the current recession, which is the main feature of many economies in the
world today. Hence, monetary policy is only one of the systems of economic regulation and for its
successful performance it is necessary that the measures of monetary policy be consistent with other
measures of economic policy.6

3
Laidler, David, “Woodford and Wicksell on Interest and Prices The Place of the Pure Credit Economy in the Theory
of Monetary Policy“, panel discussion held at the History of Economics Society Meeting in Toronto, Toronto, June
25–28, 2004.
4
Svennson, Lars., “Escaping from a liquidity trap and deflation: the foolproof way and others“, Journal of Economic
Perspectives, 17 (4), American economic association, 2003., рр. 145–166.
5
For more details, see: Cúrdia,Vasco and Woodford, Michael, “The central bank balance Sheet as an instrument of
monetary policy“, Staff Report N0 463, Federal reserve bank of New York, July 2010, pр. 1–82.
6
Zivancevic, Milos “Characteristics of monetary policy in developed countries”, Banking, Vol. 33, No. 3-4,
Belgrade, 2004, pp. 44-58.

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In the past, central banks were expected, according to the law, custom, or both of them, to use their
instruments in order to achieve multiple objectives, such as high rates of growth and employment,
provision of funds for state expenditures and solving the problem of balance of payments. Today, the
legal and actual independence of central banks is much higher than it used to be twenty years ago, and
their primary goal has become price stability.7

2. A critical review of the effect of the modern approach to monetary strategy

We have a very clear view of the critics of monetary-fiscal cooperation. Historically, Paul McCulley points
out that fiscal austerity operated only together with monetary easing. This is because in a liquidity trap
the risk of inflation is replaced by the risk of deflation. Fiscal austerity at a time of weak global aggregate
demand has a deflationary effect, as a result of which the recovery from the crisis is much slower and
much less likely. In a liquidity trap governments have no other logical option than to borrow and invest.
In the recession, the interest rate will fall to zero, as for example in the UK in 2009, after the financial
crisis. In this case, banks and other financial intermediaries in Great Britain kept the money with
themselves, instead of lending to the economy. Therefore while borrowing can be stimulated, liquidity
was not passed through the system, i.e. capital was captured and unavailable. Theoretically, this effect
will deepen the recession and weaken the real economy. In this case, the authorities were able to
bypass the banks and inject money into the economy. More formally, the process is called quantitative
easing. Due to these circumstances, especially in developed economies, for the conduct of monetary
policy in times of crisis and depression, Keynesian - fiscal way of thinking that implies an increase in
government spending always and everywhere is becomingly increasingly present on the stage. From our
point of view, in the present conditions in the world through the consequences of the current global
economic and financial crisis may be applied, but only partially, elements of Keynesian strategy.

Ben Bernanke, the US central bank governor points out that under the circumstances in a liquidity trap,
a greater cooperation between the monetary and fiscal authorities is in no way consistent with the
independence of the central bank. However, as Bernanke says, the role of an independent central bank
is different in inflationary and deflationary conditions. The seamy side of inflation is, according to him,

7
Cukierman, Alex “Central bank independence and monetary policymaking institutions: Past, Present and Future'',
Panoeconomicus, Novi Sad, Vol.44, No. 4, Novi Sad, 2007, p. 367.

Page 76
often associated with excessive government borrowing. The virtue of an independent central bank is its
ability to say "no" to the government in a liquidity trap. However, excessive government borrowing and
money creation suggests that problems are likely to arise.8 In this direction, a former president of the US
Federal Reserve (Fed), Ben Bernanke compares the current US monetary policy with sailing. “The wind
fills the sail so fast it knocks you into the sea. Right now, the US is a sailboat that has just made open
water, and has already come about. That wind is coming. The sailor just doesn’t know it.” This is actually
a classic definition of current monetary policy conducted today by the US central bank, namely the US
Federal Reserve Fed.9

As opposed to this, we have a synchronized global slowdown in economic growth worldwide. For
example, the Australian manufacturing is in recession in the mid 2012. India recorded the slowest
growth over the past nine years. China is on the verge of the fall of production. Unemployment is rising
across Europe and is much worse than in the US and Germany. Economic shock from Europe, which is
quite possible, is about to push the US and most of the rest of the world into recession. Weakness in
China and the rest of the Asian continent provides even more reasons for concern that recession is
almost always, by definition, accompanied by deflationary trends.10

Currently, the forces of supply and demand in the US market require very low prices. In addition, the
demand for investments is low as most companies have a lot of unused capacity and are not confident
in their economic future. Therefore, the equilibrium real rates are quite low. All this suggests that the US
economy is in a liquidity trap. The cure for this dilemma - as stated clearly in academic works by
Krugman (1998), Eggertsson and Woodford (2003), Werning (2011) and others – is to devote themselves
to the so-called high loose monetary policy now, and for a longer period in the future. 11

8
Paul McCulley and Zoltan Pozsar, “Does Central Bank independence Frustrate the optimal fiscal monetary policy
mix in a Liquidity Trap“, paper to be presented at the Inaugural Meeting of the Global Interdependence Center’s
Society of Fellows, Banque de France, Paris, Мarch 26, 2012, pр. 1–3.
9
Amity Shlaes: Watch Bernanke's 'Little' Capsize U.S. Inflation, available at http:bloomberg.com/ news/2012-03-
14/watch-bernanke-slittl...mar 15 . 2012, available on 05/10/2012.
10
Mauldin, John.: First Deflation, Then Inflation, But the Timing ..?, The data and information available on the
website: http://www.ritholz.com-blog-2012-06-first-deflation-then-inflation-b ..., June 2, 2012, available on
08/10/2012.
11
Evans, L.Charles: A Perspective on the Future of Monetary Policy and the Implications for Asia, Sasin Bangkok
Forum Luncheon Talk Bangkok, Thailand, July 9, 2012, data and information available at

Page 77
3. Practical consequences of the application of modern monetary strategy through review of the U.S.
experience

From today's point of view, in monetary policy, as well as in many other areas, no size fits all. Monetary
policy should be independent of political pressures and more focused on price stability. After all, the
financial crisis of 2008 largely reached monetary-fiscal-political consensus. This coincides with
Woodford’s (2003) and Weber’s views (2006) through the "new consensus" over the rejection of the
theory of the amount of money and return to the old idea of eliminating high level of inflation by
adjusting nominal interest rates to the changes in the price level. Economist Axel Weber’s view and
some others’ more or less coincides with this point of view. According to them, the primary goal of
central banks should be price stability, defined through the inflation rate at around 2% over the period
of two years. They considered the short-term interest rates a sufficient tool to achieve this goal.
Monetary policymakers should intervene only after the financial crisis has occured, while minimizing
damage through the macroeconomic determination to cut interest rates.12 Today's trend in the world is
moving from inflation targeting to the level of price targeting.

The main lessons that Axel Weber points out through the experience of applied monetary strategy in the
euro zone are as follows: a) monetary policy has to consider the implications for price stability through
the maintenance of price stability, b) the interest rate remains the tool in the fight against financial
imbalances, c) price stability should be seen through stable and low inflation rate, d) without stable
oriented prudent fiscal policy, monetary policy will find it increasingly difficult to ensure price stability at

http://www.chicagofed.org/webpages/publications/speeches/2012/0 ... available on 09/10/2012. For more

details, see Eggertsson, Gauti B. and Michael Woodford, 2003, "The zero bound on interest rates and optimal
monetary policy," Brookings Papers on Economic Activity, Vol. 34, No. 1, pp. 139-211 and Krugman, Paul R., 1998,
"It's baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Vol. 29,
no. 2, pp. 137-206.
12
Weber, A. Axel, „Challenges for monetary policy in the European monetary Union“, This article was originally
presented as the Homer Jones Memorial Lecture, organized by the Federal Reserve Bank of St. Louis, St. Louis,
Missouri, Federal Reserve Bank of St. Louis, Review, 93(4), July/August 2011, p. 236

Page 78
low interest rates. This would also be a message to the central bankers for the conduct of monetary
policy in modern conditions.13

Strong fiscal stimulus helps revive the current economic activity in the world, but will not provide long-
term sustainable economic growth unless accompanied by the required system improvements, primarily
in the financial system.14 Before the financial crisis, some economists reached a consensus simply
supported by a number of theoretical studies and practical experience in many countries. To Edwin M.
Truman, inflation targeting as a monetary policy framework is neither "a cure" nor "a poison pill”. The
rule was established then that monetary policy will be most useful if focused on stable and negligible
growth in consumer prices.15 After the latest economic and financial crisis, the future role of central
banks presents a challenge for the academic and economic thought throughout the world. Central
bankers must have clear objectives and sufficient capacity and independence. Most countries that have
adopted inflation targeting strategy do not have all of these elements at the beginning. It is true in
almost all cases that transparency and communication policy as well as exchange rate flexibility have
improved over time.

3.1.1. Economic perspectives of the path of monetary policy - the US experience

The concept of inflation targeting was first used by Germany and Switzerland after the collapse of the
Bretton Woods international monetary system. Germany has always been careful to avoid a repeat of
the hyperinflation which it experienced in 1920. Its success encouraged other countries to use the
concept of inflation targeting. In 1990, New Zealand, Canada, England, Sweden and Australia adopted a
policy of inflation targeting. Since then, many economies in transition have also shifted to the concept of
inflation targeting: Brazil, Chile, the Czech Republic, Hungary, Israel, Korea, Mexico, Poland, the
Philippines, South Africa and Thailand. None of the countries that adopted the concept of inflation
targeting has given up on it. This is actually a confirmation of the success of this concept. As evidence we

13
Оp. cit, p. 240.
14
Bosnjak, Marinko: The global financial and economic crisis and its impact on the economy and finances of Serbia,
the study for the site of Ministry of Finance of the Republic of Serbia, Belgrade, January 2011, p.6.
15
Truman, М. Edwin: Inflation targeting in the world economy, Book Reviews, Indian Edition, Viva Books Private
Limited, New Delhi, 2005, p.428.

Page 79
also have a very positive experience so far with the application of the concept of inflation targeting in
countries where it has been applied for the longest time (New Zealand, Canada and Great Britain). The
countries in question have been applying the concept of inflation targeting for the longest time,
contributed to lower inflation, lower inflation expectations with lower nominal interest rates. These
effects, in turn, contributed to improving the climate for economic growth. (Figure 1)

Figure 1 GDP growth rate in developed economies in the period 2000 – 2011

Source: Statistics New Zealand, Datastream

If we look at the experience of individual countries, notably the United States through monetary policy
of the Fed through history, it mostly contained features of Keynesian monetary policy strategy. This
included lowering interest rates to help the economy and encourage economic growth, excluding the
seventies, eighties and nineties. The current slowdown in the US economy is the result of, we are free to
say, too inflationary Fed policy that practically led to the erroneous investing hundreds of billions of
dollars. The prospect of monetary policy in these conditions in the US in the short term is almost
certainly neutrality, although there is more and more authority that call for raising key interest rates.
Executive circles of the American Federal Reserve System are thinking of the possibility of continuing
expansionary monetary policy. In the same direction also goes the nformation on forecasting inflation in
the US, where the average annual inflation rate in the period 2014-2018 will amount to three percent.
The unofficial target inflation rate which the Fed supports, or the one which Fed is trying to keep is two
percent.16

16
Milacic Ljubisa, Siljkovic Boris, Kojic Nenad “Collapse of the US banking sector”, Economic Perspectives, No. 2,
Faculty of Economics, Pristina - Kosovska Mitrovica, 2009.

Page 80
Figure 2 Expected inflation in the US over a fiv-year period 2009-2012

Source: http://economistsview.tupepad.com/tim/duy, 2012

In the same direction go some predictions since the reference rate of the Fed will be retained “for long''
in the corridor to the end of 2014 from 0-0.25% in order to increase economic activity in the United
States.17 In the past, the Fed, through the concept of monetary policy, also used targeting monetary
aggregates, as they are more available than real GDP and / or inflation rate.18 A tool that is now used by
the Fed to control inflation is targeting inflation rate. The Fed actually encourages moderate inflation
rate that it announces. However, it must be noted, that for the Fed, maximum employment is explicitly a
part of its mandate.

The question is what actually happened in the US practice, then and now? The classic cure for deflation
is inflation, and the Fed tried to target a certain level of inflation, instead of interest rates. This condition
was characteristic of the Great Depression of the early thirties of the last century, through the massive
federal spending primarily through the New Deal and during the Second World War, for the relaxation of
the economy. If we compare the current period as a result of the current mortgage and the financial
crisis in the US we note that the US central bank (Fed), still buys bonds, for example, through the
bundles of mortgages known as mortgage-backed securities from banks. During the banking crisis of

17
Savic Mirko, Savic Mladen “Monetary policy instruments in different economic systems'', Finance, Banking and
Insurance, University Singidunum, Vol. 7, No. 2, Belgrade, 2010, p. 56.
18
Siljkovic Boris., Obradovic Sasa, Djurovic Todorovic Jadranka “Use of monetary aggregates as targets in
developed economy'', Techinss Technologies Education Management, Vol. 7, no. 2, Sarajevo, 2012, p.569.

Page 81
2007, the Fed created many innovative programs in order to pump trillions of dollars of liquidity into the
economy. Since 2008, the Fed has carried out actions of a series of emergency lending measures (orange
graph in the region). These include US Treasury securities, federal agency debt securities, mortgage-
backed securities and others. In the same direction go current trends as the US central bank has recently
announced that it will undertake the third round of easing, known widely as “QE3” for short, which
means buying $ 40 billion in these bundles of mortgages each month.

Figure 3 The Fed’s lending measures during the period from January, 1, 2007 - 2012

Source: Hamilton, James.: US monetary policy since the financial crisis, august 26, 2012, Federal Reserve
Statistical Release, Econbrowser, Analysis of current economic conditions and policy, Fred economic
data, 2012

The aim of this monetary strategy of the US Fed is to stimulate the economy, which is ideal. Banks would
then lend money to people and companies who want to buy things, such as houses or equipment and
increase spending. This would cause the economic growth. But where does all that money come from?
The most disputable situation is that since the beginning of the mortgage and financial crisis, the Fed's
balance of assets and liabilities has grown rapidly, from about $ 900 billion in mid-2008 to $ 2.8 trillion
at the beginning of the third quarter of 2012. In fact, this situation creates a new monetary value
through the purchase of the bank’s assets. Due to these circumstances, "quantitative easing" has
become a hot topic in American economic circles. 19 The old saying goes, the horse will carry water, but
will not always wish to drink it. A paraphrase of this situation also in recent history would be that
despite the efforts of the General Staff of the monetary policy of the Fed, banks were largely

19
Danielle, Kurtzleben: Can the Fed Unprint money, data and information available at http://
www.usnews,com/news/articles/2012/10/03/can-the-fed-unpri.., October 3, 2012, available on 06/10/2012.

Page 82
independent in forwarding money to the US economy. After all, that is the reason why they ended up in
this situation.

From the perspective of a FOMC (Federal Open Market Committee), rather than raising interest rates,
there should be the fight against unemployment which in the US in august, 2012 was 8.1 percent.
Members of FOMC point out that the fight against unemployment should be explicitly linked to
monetary policy in order to spur growth. It is true that the drop in unemployment provides a solid
platform for the growth in aggregate demand and strengthening of the short-term economic growth in
the world's largest economy.

Figure 4 Unemployment rate in the US during the period 1990-2012

Source: US Department of Labor: Bureau of Labor Statistics, USA, 2012.

CONCLUSION

A general conclusion in 2012, particularly in industrialized economies is lack of money. The development
of the current situation regarding the practical consequences of the application of monetary policy,
particularly in the US is very complex.

Economists like American Nobel laureate Paul Krugman believe that the fear of a new era of inflation is
nothing but hysteria. Back in 2002, Ben Bernanke quoted an economist Milton Friedman, who once
recommended throwing money from helicopters in order to prevent deflation, when prices fall. We
wonder if this is the right solution? Fed's balance sheet already has close to three trillion US dollars in
government bonds, mortgages and other securities, which created a new monetary value. The main
interest rate by the Fed was zero ever since late 2008. Ben Bernanke announced that banks would

Page 83
probably be able to continue borrowing, so to speak, for free from the Fed at least until mid 2015.
Hence, as pointed out by Ben Bernanke and Mervyn King, inflation is, the least worst way out of the
chaos, which befell the US economy.20 Public expectations that inflation will remain low all until the end
of 2014, give the Fed the freedom to maintain a relaxed monetary policy, while keeping inflation
subdued.

In these circumstances, the Fed is becoming increasingly subordinate to the impact of fiscal policy. The
US debt surpassed $ 16 billion in late 2012. Maybe we should re-examine if long-term moderate
inflation might help to reduce the huge debt? An alternative to the current strategy of monetary policy
in the US at this point could be higher unemployment. But we should wonder whether this policy is
popular especially for the general public? In the end, if we summarize all, the effect of US monetary
policy was about as good as could be expected in the crisis environment over the past five years.
However, such monetary policy cannot neutralize the effect of the financial and fiscal crises that the US
economy has faced in recent years. After all, this could be a topic for further research.

BIBLIOGRAPHY

1. Amitu Shlaes: Watch Bernanke's 'Little' Inflation Capsize U.S, available at http: bloomberg.com/
news/2012-03-14/watch-bernanke-slittl... March 15, 2012, available on 05/10/2012.

2. Bosnjak Marinko “The global financial and economic crisis and its impact on the economy and
finances of Serbia”, the study for the site of Ministry of Finance of the Republic of Serbia, Belgrade,
January 2011

3. Cukierman Alex “Central bank independence and monetary policymaking institutions: Past, present
and future“, Panoeconomicus, Novi Sad, Vol.44, No 4, Novi Sad, 2007.

4. Cúrdia,Vasco and Woodford, Michael, “The central bank balance Sheet as an instrument of monetary
policy“, Staff Report N0 463, Federal reserve bank of New York, July 2010,

5. Danielle, Kurtzleben., ,,Can the Fed Unprint money'', data and informatin available at
http://www.usnews,com/news/articles/2012/10/03/can-the-fed-unpri .., October 3, 2012, available on
06/10/2012.

6. Evans, L.Charles: A perspective on the Future of monetary policy and the Implications for Asia, Sasin
Bangkok Forum, Luncheon Talk Bangkok, Thailand, July 9, 2012, data and information available at
http://www.chicagofed.org/webpages/publications/speeches/2012/0... available on 09/10/2012.

20
Lessons from history, The economist, October 10, 2012, data and information available at
http://www.economist.com/blogs/buttonwood/2012/10/debt-crisis, available on 13/10/2012.

Page 84
7. Eggertsson, Gauti B., and Michael Woodford,“The zero bound on interest rates and optimal monetary
policy,” Brookings Papers on Economic Activity, Vol. 34, No. 1., 2003.

8. Giaonnoni, P. Marc., Woodford, Michael, „Optimal Target Criteria for stabilization policy“, Staff
report N0 535, Federal reserve bank of New York, january 2012

9. Henry Kaspar, “The liquidity trap, monetary policy, and inflation expectations (help needed)“, data
and information available at http://kantooseconomics.com/2012/02/03/the-liquidaty-trap-monetary-
p... available on 23/05/2012.

10. Hamilton, James, “U.S. monetary policy since the financial crisis’’, August 26, 2012, Federal Reserve
Statistical Release, Econbrowser, Analysis of current economic conditions and policy, Fred economic
data, 2012.

11. Krugman, Paul R.,“It’s baaack: Japan’s slump and the return of the liquidity trap,” Brookings Papers
on Economic Activity, Vol. 29, No. 2., 1998.

12. Laidler, David, “Woodford and Wicksell on Interest and Prices The Place of the Pure Credit Economy
in the Theory of Monetary Policy“, panel discussion held at the History of Economics Society Meeting in
Toronto, Toronto, June 25–28, 2004.

13. Lessons from history, The economist, Oct 10, 2012, data and information available at
http://www.economist.com/blogs/buttonwood/2012/10/debt-crisis, available on 13/10/2012.
14. Mauldin, John: First Deflation, Then Inflation, But the Timing..?, data and information available at:
http://www.ritholz.com-blog-2012-06-first-deflation-thenninflation-b..., June 2, 2012, available on
08/10/2012.

15. Milacic Ljubisa, Siljkovic Boris, Kojic Nenad “Collapse of the US banking sector”, Economic
Perspectives, No. 2, Faculty of Economics, Pristina - Kosovska Mitrovica, 2009.

16. Paul McCulley and Zoltan Pozsar, “Does Central Bank independence Frustrate the optimal fiscal
monetary policy mix in a Liquidity Trap“, paper to be presented at the Inaugural Meeting of the Global
Interdependence Center’s Society of Fellows, Banque de France, Paris, Мarch 26, 2012.

17. Savic Mirko, Savic Mladen “Monetary policy instruments in different economic systems'', Finance,
Banking and Insurance, University Singidunum, Vol. 7, No. 2, Belgrade, 2010.

18. Svennson, Lars., “Escaping from a liquidity trap and deflation: the foolproof way and others“,Journal
of Economic Perspectives, 17 (4)., American economic association, 2003.

19. Siljkovic Boris., Obradovic Sasa, Djurovic Todorovic Jadranka “Use of monetary aggregates as targets
in developed economy'', Techinss Technologies Education Management, Journal of society for
development of teaching and business processes in new net envinroment in B&H, Vol. 7, No. 2, Science
Citation Index Expanded, EBSCO Publishing(EP) USA, Sarajevo, 2012.

20. Truman, М. Edwin: Inflation targeting in the world economy, Book Reviews, Indian Edition, Viva
Books Private Limited, New Delhi, 2005.

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21. Weber, A. Axel., “Challenges for monetary policy in the European monetary Union“, This article was
originally presented as the Homer Jones Memorial Lecture, organized by the Federal Reserve Bank of St.
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22. Zivancevic, Milos “Characteristics of monetary policy in developed countries”, Banking, Vol. 33, No.
3-4, Belgrade, 2004.

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 A MODERN APPROACH TO KEYNESIAN MONETARY POLICY

Boris Siljković1, Nikola Pavlović2, Miloš Milanović3

1
Higher Economic School of Professional Studies Peć in Leposavić, Sebia,
boris_siljkovic@yahoo.com
2
Kosovska Mitrovica, Serbia, nikpayu@yahoo.com
3
Higher Economic School of Professional Studies Peć in Leposavić, Sebia ,
mmilanovic@gmail.com

ABSTRACT: The aim of this paper is to explain the modern approach to Keynesian
monetary policy. Keynesians as the cause of the economic crisis see a lack of effective
demand and therefore emphasize that monetary policy should encourage spending and
lower the interest rate. Government spending is a tool of stimulating demand only on
condition that the means of monetary policy are exhausted. This is the so-called "liquidity
trap" when interest rates are already at zero and can’t be lowered any longer. Since,
monetary policy is not working and the economy is already in recession, fiscal policy is
being applied. With the advent of the latest economic crisis, Keynesian ideas are getting
more importance in the works of economists: Krugman, Woodford, Egertsson and others
who believe that in the liquidity trap conditions, the government can stimulate economic
growth through fiscal stimulus.

Key words: Keynesians, monetary policy, interest rates, liquidity trap, economic crisis

INTRODUCTION

Monetary policy is the process by which the monetary authority of the country controls the
supply of money, often targeting interest rates to promote economic growth and stability.
The official objectives are related to the relative price stability and low unemployment.
Monetary policy can be expansionary or contractive, where expansionary policy increases
the total supply of money in the economy more quickly than usual; a contractive policy
increases the money supply more slowly than usual, or even decreases it. Expansionary
policy is traditionally used to combat unemployment in a recession by lowering interest
rates; in the hope that easy loans will stimulate business growth. Contractive policy serves
to slow inflation in order to avoid the creation of distortions and deterioration of asset
values.

The key stance of Keynesian monetary policy strategy could be followed through exclusive
change of interest rates, the effect that interest rates have on investment activities, and
investment in the national income. According to Keynesians absence of sufficient
aggregate demand explains the causes of the economic downturn in the Great Depression.
Appropriate macroeconomic policies of the government can stimulate aggregate demand.
In cases where monetary policy proves ineffective, the government is relying on fiscal
policy by increasing its spending or by decreasing taxes.

Keynesian ideas became popular again in the last five or six years with the spread of
influence of the recent financial crisis. Theories of market failure and the need for
government regulation and intervention can again be heard even by many economists.
Asian crisis in 1998 reminded in terms of scale and causes, many economic historians of

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the Great Depression of 30's. Some of them remembered and Keynesian explanations and
remedies for this problem. The most important economists which in recent years has
contributed to the revival of Keynesian philosophy is the Nobel laureate Paul Krugman,
who in his writings states that instead of deficit issue, austerity policies and monetary
policies that are obsessively fighting against inflation, we should focus on consumption
and especially job creation, which can be of great importance for the economic recovery.

KEYNESIAN MONETARY POLICY

Discussion of the mechanism of Keynesian monetary strategy and policy marked the
economic characteristics of the time in which this theory was created in the period
between the 1923rd and 1936th, namely, before and in the midst of the Great Depression.
Keynesian mechanism of the monetary policy strategy belongs to a particular time and in
this context must be considered. In the period of 1929-1933 the most advanced countries
of the capitalist economy were hit by the depression. Deep depression was followed by
the decline, deflation, mass unemployment, a series of bankruptcies of banks and
companies. After all, every theory is a biography of the author, and marks the time he
lived and worked in.

The core of the Keynesian settings as causes of the crisis saw a reason for incomplete
usage of the accumulation and decreasing volume of investments that are actually the
result of interaction between propensity to consume and incentives for investments.
Investments are the engine of growth and the backbone of the capitalist system, Keynes
considered. In this view, when the investment demand is growing, interest rate increases
which encourages saving and discourages consumption. The interest rate does not affect
the savings, but above all, the level of investment and the national income. The decrease
in income is greater than the reduction of investment because investment decline has a
direct impact on the growth of unemployment, lower spending and further decline in
income. The increase in interest rates adversely affects investment by reducing them as
same as income. From such a reduced income, less is being allocated for savings and the
final impact reflects in increased interest rates and a decline in savings. Some protagonists
of Keynesianism went that far claiming that monetary policy is ineffective under conditions
of full employment and inflation, whereas investment demand is inelastic with respect to
interest rate.1

Keynes exposed to criticism quantitative theory of money and proved that prices do not
depend only on the quantity of money in circulation, money velocity and volume of social
production, but also on the relationship between savings and investment. According to
Keynes if the savings exceed investment, then what happens is the fall in prices and
economic depression, and conversely lower savings than investment causes an increase in
prices and economic activity. He also suggested an indirect link between the quantity of
money and real gross domestic product. Indirect relationship manifests through the effects
that quantity of money has on interest rates. Affecting real investment and maybe even
real consumption, changes in the interest rate will produce an indirect effect on real
output. Keynes in his settings went further claiming that at the time of the Great
Depression, the monetary policy was ineffective.2 According to him, the government could
1
Ristić, Ţarko.:Fiskalna strategija-strategijski menadţment javnih finansija, Studio МС, Beograd, 2010, p. 59
2
See also: Ritter, S. Lawrence., Silber, L. William., Udell, F. Gregory.: Principi novca, bankarstva i
finansijskih trţišta, Udruţenja banaka Srbije, Beograd, 2009, p. 465.

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use fiscal and monetary measures to deliberately mitigate the effects of economic
recession and depression. An instructive example is the United States. In the years after
World War I, actually before the Great Depression, there was a great deal of trust in the
power of the U.S. monetary policy, which was expected to achieve so-called new era of
continuous economic prosperity. However, during the Depression, this confidence has
turned into the ultimate distrust in the ability of monetary policy. Some economists,
however, believed that already in the beginning stages of depression, bold and energetic
measures in monetary policy should have been taken. There was supposed to create
immediately favourable credit conditions and flood the market with cheap credit.

By buying government bonds for cash, the central bank can meet the consumption and
reduce the value of money. When there is no excessive demand for cash, there will be no
oversupply of bonds and stocks that provide and finance productive capital of the
economy. Therefore, expansionary monetary policy via standard open-market operations
by the central bank is the first item on the list of what to do in a time of financial crisis.
According to the requirements of Keynesian monetary strategy and policy, the central
bank needs to control the supply of money and credit in the country and: a) to increase
the volume of money and credit at a time when the rate of economic activity and
employment declines and b) to reduce the volume of money and credit at a time when
overall consumption threatens to become excessive. Central banks can increase or
decrease the supply of money and credit because in one way or another, other banks in
the country are linked to them. Keynes considers that it requires an active economic policy
that would strengthen effective demand. Specifically, the state must influence the creation
of general macroeconomic conditions in which will be conducted market allocation of
resources. In this sense, Keynesians calls for active stabilization policy, which, through
monetary and fiscal policy should provide such a level of investment and aggregate
demand for social goods and services that will guarantee full employment of production
factors and the stability of general price level.

According to Keynesians that role should have been mostly taken by the monetary policy.
The first crisis in thirties of the 20th century in the United States was a breakdown of the
securities market. U.S. central bank, the Fed, has increased interest rates and prevented
many banks and businesses that have found themselves in difficulties, to obtain much-
needed funds and continue with their activities. Thus, the U.S. central bank destroyed its
national economy. At that time, almost 2/3 of Americans have lost their jobs (Figure 1).

Figure 1. Unemployment rate in USA in the period 1929-1942

Source: Darby, R. Michael.: ’’Three and –a half Million Employees Have Been-Mislaid, Or an Explanation of
Unemployment, 1934-1941’’, Journal of Political Economy, University of Chicago Press, February, 1976.,
p. 8.

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Keynes then pointed out that in circumstances where the propensity to consume is
insufficient, the interest rate is high, monetary policy should encourage spending and
bring down the interest rate.3 The increase in the quantity of money is desirable in
conducting a policy to encourage consumption and lower the interest rates. Keynes
suggests, first of all, that the state spends directly and therefore encourages faltering
demand, which is the most visible manifestation of the crisis.4 In general all of Keynes
theories are based on the opinions of various forms of balance with an emphasis on full
employment, and here's why. Government spending is a recipe for stimulating demand
only in a situation where resources of monetary policy are exhausted. It's called “liquidity
trap” when interest rates are already at zero and can not be further reduced. Since then
expansionary monetary policy is impossible, and the economy is in recession, resorting to
the fiscal policy (tax policy). Time of Keynesianism or welfare state is corrected with soft
budget constraints. The so-called principle for tax equity is largely cancelled by so called
inflation tax. This was Keynes forced solution to the Great Depression in the United States
in 30-ies.

Figure 2. Annual growth/drop of GNP in United States of America in the period 1928-1940 (in
billions of American dollars)

Source: Derived from Table 16.1 Business Cycle Indicators, Vol II. Geoffrey H. Moore.Ed. (Princeton, 1961),
p.135

According to Keynesians, expectations and monetary policy could be visible through the
monetary policy led by the U.S. central bank - the Fed. After all, it depends on whether
the policy is anticipated / unanticipated. If the Fed is expected to reduce the money
supply, change in interest rates will happen in advance with little effect or no effect at a
time when there is a change in the money supply. If the Fed is expected to reduce the
money supply, subsequently is expected that interest rates will grow then the bond

3
So when interest rates are low, it is likely that the company will undertake the investment in physical
capital and planned investment spending will be higher. Mishkin, S. Frederic.: Ekonomija novca, bankarstva i
finansijksih trţišta, Mate, Zagrebaĉka škola ekonomije i menadţmenta, Zagreb, 2010., p. 529.
4
The state has received a qualitatively new and guiding role in the national economy. It became an active
factor in the initiation and maintenance of reproduction process. Economic liberalism and liberal states give
rise to state intervention and state capitalism. Кеjnz, Мajnard., Dţon.: Opšta teorija zaposlenosti, каmate i
novca, Кultura, Beograd, 1956., p.401.

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holders want to sell bonds as soon as possible to avoid losses. Sale of bonds will decrease
bond prices and interest rates will rise until it equals the expected rate in the next period.
So when the money supply really decreases the rates do not move at all.

A VIEW OF THE CONDUCT OF KEYNESIAN MONETARY POLICY IN MODERN

CONDITIONS

With the emergence of the financial crisis in 2007 the most influential economists of our
time have suggested that money is more or less no longer so relevant category as it has
been by the moment when the crisis occurred. On the other hand, influential academic
circles in the U.S. and the developed economies are more concrete, pointing out that the
monetary policy strategy should include a so-called accommodative monetary policy that
will be in place in the near future. Alternative to current monetary strategy in the United
States is a change in monetary policy, which includes main interest rate targeting. Such a
strategy implies a modern variant of monetary policy through the creation of so-called
policy on the fly according to the circumstances. Monetary policy implemented by the Fed
over the last five years, after the recent financial crisis has been the policy of "lender of
last resort" in the nation's financial system. The old saying goes "You can lead a horse to
water but you can’t make him drink" and may refer to monetary policy. Basically, all that
Fed can do is to make additional monetary reserves available to the banking sector if
banks want to increase the money supply. Yet Fed can not force banks to lend these
reserves and thus increase the supply of money as same as can not force the companies
to increase their investment by taking loans when interest rates fall.5

In relation to the attitude of theorists, we have a specific view of Paul Krugman who said
that slashing government spending in depression conditions worsen the economy further
and austerity should wait until a strong economic recovery is well underway.
Unfortunately, in late 2010 and early 2011 politicians and policy makers in much of the
Western world believed that they knew better and we should focus on deficits, not jobs,
even though our economies had barely begun to recover ... And by acting on that anti-
Keynesian belief, they have proven all over again that Keynes was right. In declaring
Keynesian economics justified ... the real test ... has not come from the half-hearted
efforts of American federal government to stimulate the economy, which were largely
offset by cuts at the state and local level. Instead, it has come from European countries
like Greece and Ireland that had to impose savage fiscal austerity as a condition for
receiving emergency loans – and have suffered depression-level economic slump, with
double-digit decline in real GDP in both countries. The good news is that President Obama
has finally returned to the fight against premature austerity - and appears to have won the
political battle. And one of these years we might end up accepting Keynes’s advice, which
is as valid today as it was 75 years ago.6

Among the proponents of the Keynesian approach, we highlight Joseph Stiglitz, American
economist and professor at Columbia University who considers that we have insufficiently-
regulated banking system and over-regulated democracy. He believes that the current
problems can be seen as a continuation of the crisis in 2008 from which we did not
5
Ruffin, J. Roy., Gregory, R, Paul. : Principles of Economics, Scott, Foresman and Company, Glenview,
Illinois, 1990, p. 285
6
Information available on: http://economistsview.typepad.com/economistsview/2011/12/paul-krugman-
keynes-was-right.html, available on 16.10.2012

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recover. Gross domestic product in many countries is still below pre-crisis levels, and it is
similar with earnings. We were not able to fix the system. In some areas we did, but in
others the situation worsened. There was a modest attempt after 2008 to do so, however,
banks stood against it and did not allow substantial changes. The current austerity
measures will only worsen the situation as they will prevent economic growth - see what is
happening in Greece, Latvia, Ireland and Portugal. Thus, there is growing evidence
indicating that the austerity measures will be counterproductive to growth. We have not
faced with key issues, some of which have deteriorated, and therefore big banks are being
saved now. Deregulation conducted by the Reagan and Thatcher at least contributed to
the strengthening of the financial system crisis. One of the key issues in our society is
deepening inequalities. Restoring Keynesianism and the regulation is not enough to solve
this problem. Hence, return to regulation is necessary but not sufficient condition for
overcoming the present difficulties. 7

A modern view of the conduct of monetary policy in contemporary conditions has been
developed by economists who are direct supporters of this policy, Paul Krugman and
Michael Woodford. They argue that monetary policy in contemporary conditions can
overcome the liquidity trap, under assumption of the projected GDP rate along with a
reduction in real interest rates. This popular measure begins with a change of the goal of
so-called projected-target inflation; it is proposed to project nominal GDP. The two
economists conclude: if people are afraid that inflation will eventually undermine the real
value of their money market funds, it would oblige the central bank to target higher
inflation during the period of depression.

Figure 3. Potential nominal and real GDP

Source: http://research.stlouisfed.org/

Large gap that appears between the total output and the total potential output is what
marks the crisis and post-crisis period. Woodford said in conclusion that the Fed has to say

7
Information available on: http://www.slobodnaevropa.org/content/intervju_dzozef_stiglic/24355284.html,
available on 23.10.2012

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that they will continue to keep interest rates low until the blue line comes back and
touches red line. It is not that the Fed will keep interest rates low until the economy
improves, reduces unemployment or inflation starts to rise, it is only that the Fed will not
ease up on the gas pedal until the economy achieves its full output potential. The idea is
that the Fed is sending a signal to businesses: We are going to keep money cheap for a
long time, even once when the economy is gaining steam so that you are going to make
huge profits. All the uncertainty about what will happen when interest rates increase has
been removed from the agenda, and the Fed maintains all credibility in the world until it
adheres to that objective. 8

Regarding monetary policy, Egertsson and Krugman point out that expected inflation is
the "natural" solution to a deleveraging, in the sense that is how the economy can achieve
the negative natural real interest rate even though nominal rates are bounded at zero. In
a world of perfect price flexibility, deflation will “work” under the terms of the liquidity
trap, if it does, only by reducing the current price level relative to the expected future
price level, thereby generating expected inflation. It is therefore natural, in multiple senses
to think that monetary policy can cope with deleveraging shock by generating the
necessary rise in expected inflation directly without having to go through deflation first.9
Through a look at the most recent financial crisis in 2008, Paul Krugman points out that
the use of budget funds to boost domestic production will last longer than some people
think. This will be the mainstay for a way out of the recession. 10 A critical view of the
strategy of Woodford’s monetary policy but and Krugman’s as well could be seen in the
work of David Laidler. His stance on Woodford’s monetary policy which he thoroughly
elaborated in his book Interest and Prices is that it is well adapted to teaching us how to
sail in already calm monetary conditions, in fair fiscal weather and in the confined waters
of a closed economy. It teaches us how to stay on a course defined by low and stable
inflation in such an environment.11

A variant of the modern monetary strategy and central bank policy represents the return
of Keynesian way of thinking. This means that monetary policy of the central bank is
permanently subordinated to fiscal policy. The best way to respond to contemporary
conditions is through fiscal consolidation and aggressive monetary policy. More
specifically, aggressive fiscal policy is essential if the interest rate is close to zero. Actually
the problem is that the zero lower bound and this is a problem that occurs despite the
best efforts of monetary policy makers.12 In this sense, was crystallized the opinion of
many economists that the best monetary policy is the one that determines the steady
trend of money supply growth from which there should be no deviation in the medium
term, despite the distortions in the economy. Monetary policy is insufficiently effective if
conducted without coordination with other macro-economic policies, particularly fiscal
policy, especially in preventing the current recession, which is the main feature of many
8
More information available on: http://www.businessinsider.com/michael-woodford-endorses-ngdp-
targeting-2012-9#ixzz29b3ry8G, available on 16.10.2012.
9
More information available on: http://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf,
available on 23.10.2012.
10
Kaspar, Henry „The liquidity trap, monetary policy, and inflation expectations (help needed)“, information
available on http://kantooseconomics.com/2012/02/03/, available on 23.05.2012
11
Laidler, David, „Woodford and Wicksell on Interest and Prices The Place of the Pure Credit Economy in the
Theory of Monetary Policy“, panel discussion held at the History of Economics Society Meeting in Toronto,
Toronto, June 25-28, 2004.
12
Svensson, Lars (2003), „Escaping from a liquidity trap and deflation: the foolproof way and others“,
Journal of Economic Perspectives, 17 (Fall) p.145-146.

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economies in the world today. Hence, monetary policy is only one of the systems of
economic regulation and for the success of its activities, it is necessary that measures of
monetary policy are in line with other measures of economic policy. 13

In the past, central banks were expected - according to law, custom, or both - to use their
instruments to achieve multiple objectives, such as higher rates of growth and
employment, the provision of funds for state expenditure and balance of payments
problem solving. Today, the legal and actual independence of central banks is much
higher than it was twenty years ago, and the price stability has become their primary
goal.14

THE OUTCOME OF MODERN APPROACH TO MONETARY POLICY AND USA

EXPIRIENCE

It can be said that the USA and much of developed world are in a liquidity trap, although
this diagnosis is not fully embraced because it requires the application of specific sets of
policies. Some policies will work while others will not. Liquidity trap is a situation in which
the private sector is deleveraging due to the effects of negative animal spirits caused by of
the fall in asset prices and the bursting of credit bubbles that leave private sector balance
sheets severely damaged. In a liquidity trap, the animal spirits of the private sector can
not be revived by reduction in short-term interest rates, because there is no demand for
credit. This means that conventional monetary policy does not work in a liquidity trap. Ben
Bernarke, Governor of the Central Bank of the USA argues that monetary policy can be a
powerful tool but it is not a panacea for the problems currently faced by the U.S.
economy. There is a view that austerity does not work in a liquidity trap because that
everyone cannot save at the same time and because the paradox of thrift and depression
are fellow travellers that are functionally related to each other. Historically, Paul McCullay
points out that austerity has only worked when accompanied by monetary easing - where
wealth effects and greater private demand for credit helped offset the effects of fiscal
austerity - and / or a weaker currency. In a liquidity trap fiscal austerity does not work
because neither monetary policy is functioning properly and is not able to offset for lost
demand.15

Imposing austerity at a time of weak global aggregate demand has a deflationary impact
that makes deleveraging much harder and makes recovery less likely to achieve. In other
words, in a liquidity trap, governments have no other options but to borrow and invest. On
the other hand, advocates of austerity believe that things will only get worse if the
governments increase borrowing. Namely, due to concerns arising from orthodoxies,
governments are not spending money for the right purposes. With regard to that, acting in
accordance with the orthodoxies and going forth with austerity could drag the economy
into deflation and recession. The importance of fiscal expansion and the impotence of
conventional monetary policy measures in a liquidity trap have profound implications for
the conduct of central banks. This is because in a liquidity trap the risk of inflation is

13
Ţivanĉević, Miloš.: Karakteristike monetarne politike u razvijenim zemljama –V deo, Bankarstvo, Vol. 33,
broj 3-4, Beograd, 2004, p. 44-58.
14
Cukierrman, Alex.: Nezavisnot centralne banke i institucije monetarne politike: Prošlost, sadašnjost i
budućnost, Panoeconomicus, Novi Sad, Vol.44, broj4., Novi Sad, 2007., p. 367.
15
McCulley Paul and Pozsar Zoltan , „Does Central Bank Independence Frustrate the Optimal Fiscal-
Monetary Policy Mix in a Liquidity Trap“, Paper to be presented at the Inaugural Meeting of the Global
Interdependence Center’s Society of Fellows, Banque de France, Paris, March 26, 2012, p.1-4.

Page 94
replaced by the risk of deflation. In connection with this, deflation is a function of the
government readiness to stimulate the economy (pump-prime), i.e. to borrow and spend.
Therefore, in times of crisis and depression, especially in developed economies in the
conduct of monetary policy was present at the scene Keynesian - fiscal mindset that
implies increase in government spending, always and everywhere. Ben Bernarke said that
under the circumstances of a liquidity trap, greater cooperation between the monetary
and fiscal authorities is in no way inconsistent with the independence of the central bank
but it can help to solve the problems they face. However, as pointed out Bernarke, the
role of an independent central bank is different in inflationary and deflationary conditions.
Despite inflation, which is often associated with excessive government borrowing and
monetization of government debt, the virtue of an independent central bank is its ability to
say "no" to the government. But in a liquidity trap, excessive government borrowing and
money creation is unlikely to be a problem, and more cooperative stance on the part of
central banks may be needed.16

Paul Krugman, professor of economics and Nobel laureate says that the Fed is the first line
of defence against a recession, which in case of economic slump usually lowers interest
rates. However, short-term interest rates commonly controlled by the FED were almost
bounded at zero and could not be further lowered. Therefore, in this situation, the fiscal
stimulus - a temporary increase in government spending and / or tax cuts was the obvious
answer to boost overall spending and job creation. In fact, Obama’s administration has
made and implemented fiscal stimulus plan that foresaw $ 787 billion. Unfortunately it was
more than deficiently to get things fixed. Certainly this move alleviated the recession but
didn’t’ contribute to the returning to full employment or at least creating a sense that
progress in problem solving is underway. Moreover the failure of the stimulus has
discredited the whole concept of government spending for job creation. Krugman still
believes that the U.S. should borrow more, as their borrowing costs are very low currently.
They are even negative if adjusted for inflation, which practically means that investors are
paying the U.S. government to protect the safety of their wealth. In fact it is about long-
term interest rates, through which are expressed investor’s expectations that there will be
no major problems in upcoming years. Regardless of that alarmists believe that the
borrowing costs will rapidly rise if we don’t reduce the spending. However, the absence of
rise in interest rates did not reflect any early end of the large deficits in 2008, 2009, 2010
and 2011. The combination of lower tax revenues and emergency spending forced the
federal government to borrow more than $ 5 billion dollars. At each increase in interest
rates during that period, influential voices responded by announcing the arrival of bond
vigilantes claiming that America would come to such a situation that will no longer be able
to borrow that much money. All of these jumps were temporary and early in 2012 U.S.
loans came close to historically low levels.

16
McCulley Paul and Pozsar Zoltan , „Does Central Bank Independence Frustrate the Optimal Fiscal-
Monetary Policy Mix in a Liquidity Trap“, Paper to be presented at the Inaugural Meeting of the Global
Interdependence Center’s Society of Fellows, Banque de France, Paris, March 26, 2012, pp.4-5.

Page 95
 Figure 4: 10-Year Treasury Constant Maturity Rate

Source: Board of Governors of the Federal Reserve System,

http://research.stlouisfed.org/fred2/graph/?chart_type=line&s[1][id]=DGS10&s[1][range]=10yrs

It is important to note that it was not only about poor predictions. The point was, in a way
of thinking about the deficit in an economic depression. Keynesian economists have
correctly predicted that a rapid rise in interst rates would not happen until the economy is
in recession.17

A growing number of economists and money managers who originate from the U.S. and
not only from there begin to worry about the category that is opposite of inflation:
deflation, a period of falling prices and decrease in state income. This is expressed by the
formula that everyone is looking for lower prices. In deflationary periods, consumers
delaying purchases as long as possible, believing that they will get lower prices. Less
buying means lower economic activity - leading to lower wages and higher unemployment.
Although, deflation does not mean another Great Depression, it may be sometimes more
dangerous than inflation. Deflation is good for customers, but it is terrible for people who
owe money, because their incomes are reduced but not debts. In contrast we have
synchronized global slowdown in economic growth worldwide. Economic shock in Europe
will surely push the U.S. and most of the rest of the world into recession. Weaknesses in
China and the rest of the Asian continent provide even more reason for concern that the
recession by definition is almost always accompanied by deflationary trends. At the
moment this especially refers to the U.S.; it's just the timing, because inflation will
return.18 In other words, inflation will one day become the remedy of choice in the U.S.
economy. Currently forces of supply and demand in the U.S. market require very low
rates. Households are deleveraging and improving their balance sheets. In addition, the
demand for investment is low because most companies have a lot of unused capacities
and are not sure what economic path to follow. Therefore, the equilibrium real rates are
quite low. In fact, today are lower than actual rates because nominal short-term rates are
constrained by the zero lower bound and can not go down. All this suggests that the U.S.
economy is in a liquidity trap. The cure for this dilemma - as clearly stated in the academic
work of Krugman (1998), Egertsson, Woodford (2003), and others - is commitment to so-
17
Krugman, Pol.:Okonĉajte ovu depresiju odmah, Heliks, Smederevo, Beograd, 2012, p. 119-138.
18
Mauldin, John.: First Deflation, Then Inflation, But the Timing..?, information available on site:
http://www.ritholz.com-blog-2012-06-first-deflation-then-inflation-b...,june2, 2012, available on 08.10.2012

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called highly accommodative monetary policy now, and for a longer period in the future.
All this gives room for a change in current monetary policy that should be conducted by
U.S. Federal Reserves today.

CONCLUSION

It is widely known that the U.S. Fed has dramatically increased the monetary base in last
two years. When this was done, many have predicted that considerable inflation, even
hyperinflation will be reached soon. Monetary base has increased significantly but the
prices haven’t followed that increase. At the same time, economists of Keynesian
orientation, as well as some monetarists, were excelling in predictions that inflation can’t
happen so easy. Keynesians have pointed to the possible existence of the so-called
"liquidity trap." Liquidity trap is a situation where monetary policy no longer has any
impact on GDP or prices.

Monetary policy has usually a short-term impact on GDP - that is not disputable in the
economy. Monetary emission has a short-term impact on economic growth and
employment, and that was the reason why the Fed and other central banks around the
world have tried to create moderate inflation. After such a temporary increase, the
monetary effect overspills on the growth rates that are being adjusted downward. So the
thought is that monetary expansion is not a recipe for long-term growth, but there is no
doubt that it can make a temporary positive effect. Since monetary policy is without
effect, it follows that, if the government wants to stimulate economic growth, has to do it
through fiscal stimulus. Monetary is impossible anyway because interest rates are zero. It
is a theoretical basis for fiscal stimulus since Krugman’s view is that the U.S. economy is
still in a state of liquidity trap, and proof of this are the current zero interest rate. At the
same time this is a basis for Krugman’s theory that fiscal stimulus (either war or alien
attack) would stimulate the economy. The aim is to encourage consumption rather than
resort to austerity measures. IMF researchers identified 173 cases of fiscal austerity in
developed countries between the 1978th and 2009th. They found that the austerity policy
was followed by slackening of the economy and higher unemployment.

Keynesians believe that the Second World War stopped the depression because it
artificially stimulated consumption that had a huge impact of the fiscal stimulus. Ben
Bernanke has used Friedman's metaphor of the helicopter, which is actually a response to
the Keynesian mechanism of interest. If the central bank is throwing money from a
helicopter, it is possible that nothing happens? When interest rates were lowered to zero
and there was no effect, the Fed has decided to do something similar to helicopter
intervention, namely bought a large amount of bank bonds and in return gave them the
primary money. But banks did not forward the money further into the economy. The Fed
has tried to create inflation but failed. The fact that interest rates have not risen even
after the large government borrowing suggests that something similar to a liquidity trap
exists and that U.S is in such a situation now. From this it follows that we should not
automatically accept the Keynesian prescription of fiscal stimulus. Strong fiscal stimulus
helps reviving the current economic activity, but will not provide long-term sustainable
economic growth if it is not accompanied by the required system improvements, primarily
in the financial system. In our opinion, in present conditions in the world today in light of
consequences of current global economic and financial crisis, only partial elements of
Keynesian strategy may be applied.

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REFERENCES

[1] Cukierrman, A.: „NEZAVISNOST CENTRALNE BANKE I INSTITUCIJE MONETARNE

POLITIKE: PROŠLOST, SADAŠNJOST I BUDUĆNOST“, Panoeconomicus, Novi Sad, Vol.44,
broj 4., Novi Sad, 2007.

[2] Кеjnz, M. Dţ.,: „OPŠTA TEORIJA ZAPOSLENOSTI, KAMATE I NOVCA“, Кultura,

Beograd, 1956.

[3] Krugman, P.: „OKONĈAJTE OVU DEPRESIJU ODMAH“, Heliks, Smederevo, Beograd,
2012.

[4] Laidler, D.: „WOODFORD AND WICKSELL ON INTEREST AND PRICES THE PLACE
OF THE PURE CREDIT ECONOMY IN THE THEORY OF MONETARY POLICY“, panel
discussion held at the History of Economics Society Meeting in Toronto, Toronto, June 25-
28, 2004.

[5] McCulley P., Pozsar Z.: „DOES CENTRAL BANK INDEPENDANCE FRUSTRATE THE
OPTIMAL FISCAL-MONETARY POLICY MIX IN A LIQUIDITY TRAP“, Paper to be presented
at the Inaugural Meeting of the Global Interdependence Center’s Society of Fellows,
Banque de France, Paris, March 26, 2012

[6] Mishkin, S.F.: „EKONOMIJA NOVCA, BANKARSTVA I FINANSIJSKIH TRŢIŠTA“,

Mate, Zagrebaĉka škola ekonomije i menadţmenta, Zagreb, 2010

[7] Ristić, Ţ.: „FISKALNA STRATEGIJA-STRATEGIJSKI MENADŢMENT JAVNIH

FINANSIJA“, Studio МС, Beograd, 2010

[8] Ritter, S.L. et al.: „PRINCIPI NOVCA, BANKARSTVA I FINANSIJSKIH TRŢIŠTA”,

Udruţenja banaka Srbije, Beograd, 2009

[9] Ruffin, J.R., Gregory, R.P. : „PRINCIPLES OF ECONOMICS“, Scott, Foresman and
Company, Glenview, Illinois, 1990

[10] Svensson, L. (2003): „ESCAPING FROM A LIQUIDITY TRAP AND DEFLATION: THE
FOOLPROOF WAY AND OTHERS“, Journal of Economic Perspectives, 17 (Fall)

[11] Ţivanĉević, M.: „KARAKTERISTIKE MONETARNE POLITIKE U RAZVIJENIM

ZEMLJAMA –V DEO“, Bankarstvo, Vol. 33, broj 3-4, Beograd, 2004

[12] http://economistsview.typepad.com/economistsview/2011/12/paul-krugman-
keynes-was-right.html (16.10.2012.)

[13] http://www.businessinsider.com/michael-woodford-endorses-ngdp-targeting-2012-
9#ixzz29b3ry8G (16.10.2012.)

[14] http://kantooseconomics.com/2012/02/03/ (23.05.2012)

[15] http://www.princeton.edu/~pkrugman/debt_deleveraging_ge_pk.pdf (23.10.2012)

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(08.10.2012.)

[17] http://www.slobodnaevropa.org/content/intervju_dzozef_stiglic/24355284.html
(23.10.2012.)

Page 99
 FORMS OF FOREIGN DIRECT INVESTMENTS
AND THEIR EFFECT ON GROWTH
Dr Safet Kurtovic1, Dr Boris Siljkovic2, mr Sanja Markovic3
1
Faculty of economics Mostar, University Dzemal Bijedic, safetkurtovic@yahoo.com
2
High school of economics Pec in Leposavic, boris_siljkovic@yahoo.com
3
Polytechnic school for vocational studies Zvecan, Nusiceva 6, sanjamark045@gmail.com

ABSTRACT:

The main purpose of this paper is to highlight the effect of foreign direct investment forms
on growth. It is evident that the foreign direct investment forms (FDI) are an important
segment in the host country development and therefore is very important to know their
strengths and their weaknesses. This is especially important in the professional
community, when there is an controversy about which forms of FDI is more efficient. In
order to determine their contribution, in terms of economic growth, we have presented a
mathematical model based on which we can, conditionally speaking, prove that greenfield
investments have a greater effect on growth in relation to M&A (mergers and acquisitions
- M&A). In addition, it is important to emphasize that the results of this work clearly show
that the use of these FDI forms, largely depends on the particular circumstances on a
targeted market.

Keywords: growth, foreign direct investments, mergers and acquisitions, greenfield

investments.

1. INTRODUCTION

In a globalized world, the decision how fast to meet the needs of foreign markets is
becoming essential, and therefore a large number of companies are faced with that
problem. Foreign direct investments are generally considered as a desirable form of capital
flows. This view has its own explanation. First, it is considered that they directly affect the
total capital of the host country and they significantly contribute to the transfer of
managerial and technological expertise. Second, it is assumed that they are more stable
than other forms of capital flows. When company decides to sell its product in foreign
markets, it has two options: export or local market production. If the company decides to
produce in the local market, then it needs to choose between the construction of facilities
which will be personally owned (greenfield investments) or takes or merges with an
existing local firm (cross-border mergers and acquisitions M&A).
The official definition of foreign direct investment is: FDI is the financial-accounting
transaction, which is considered as FDI, in case when company invests in its subsidiaries
over ten percent of its total capital value (OECD, 2008., p. 263-331). However, this
definition also includes two very different forms of FDI: greenfield investments, which
represent foreign investors who are building new production facilities, and M&A, which
represent taking over and merging with existing local companies. Greenfield investments
impact on capital accumulation, while the other represent a transfer of ownership. These
two FDI forms are fundamentally different, and therefore there is no apriori reason to
believe that their effects are the same on capital assets, productivity and growth.
According to specific sources, foreign direct investments are the most important initiator of
manufacturing products and services in foreign markets. Annual world FDI inflows average

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grew by 50 milrd. dollars during 1981-1985. year, and it grow to 1.9 trillion by year 2007.
At the end of 2007. the world flows totaled to about 15 trillion dollars, which were
controlled by over 80 000 multinational companies which consist of over 800 000 branches
worldwide. World FDI flows decreased in year of 2008. by 15% as a result of the financial
crisis and recession. During 2009. downward trend is continued for almost 50% (UNCTAD,
2009., p. 1-5).
During 2010. FDI inflows were increased slightly when compared to the decline in 2008.
and 2009. year. Global foreign direct investments were totaled at 1.24 trillion in 2010, and
that was a 5% increase in comparison to previous years. This growth is mainly a result of
increased investment flows to developing countries which are together with the transition
economies, for the first time, have absorbed over the half of FDI. In addition, industrial
production and trade have remained far below pre-crisis levels. FDI flows in the year
2010. were for 15% below their pre-crisis average, and 37% below their average in the
best year of 2007. (UNCTAD, 2011., page 2).
In the modern literature, attention is mainly dedicated to the FDI impact on economic
growth in host countries, particularly developing countries. This analysis is especially
important because it points to the recent changes in the composition and direction of FDI.
Foreign direct investments in the neoclassical growth models are promoting growth by
increasing investment volume and efficiency. The new endogenous growth models assume
that FDI influences economic growth through technology transfer, diffusion and spillover
effect. Although, most of the literature are assessing the FDI impact on growth, and
explores the impact of direct FDI forms on the foreign market. Especially in the FDI forms,
the superiority of greenfield investments in relation to M&A is emphasized.

2. REVIEW OF LITERATURE

Undoubtedly there are some empirical studies that analyze the different FDI forms from
several aspects. Most of them usually treats FDI from the perspective of greenfield
investments and M&A (mergers and acquisitions). First of all, in this work we have
analyzed mentioned forms of FDI, so that we can create a clear enough analytical
comparative analysis that would indicate their strengths and weaknesses. In addition,
most papers treat FDI in terms of location, factors of production, fiscal policy etc., while
the relatively small number of them focus explicitly on identifying FDI through greenfield
investments and M&A, as well as the application of mathematical models that can
determine which of the following forms of investment has a greater effect on economic
growth. So Eeventt (2003.), in his work was dealing with problems of greenfield
investments and M&A directed towards those countries which have a similar level of
economic development, or GDP, resource availability, competition, etc.. Besides him,
Dunning (2001.) dealt with the FDI forms issues and he identified the importance of
greenfield investment and M&A in the FDI process, and he offered a conceptual difference
between these forms of FDI. Especially, in his work, he specified the application of some
mathematical models by which he proved the benefits of one FDI form over the other.
Calderon dealt with the similar problem (2004.). They make a distinction between
greenfield and M&A. Especially, focus is on short-term interaction between these two FDI
forms and output. Besides that, they explore different effects on long-term growth of the
host countries of FDI. Burksaitiene (2010.) in his work gives an overview of M&A in the
period between 1990. and 2007. In particular, this paper highlights the importance and
the growing trend of M&A. Harms and Pierre-Guillaume (2011.) treat the problem of the
influence of greenfield investment and M&A on growth. The paper particularly emphasizes
the superiority of greenfield investments in relation to M&A.

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3. MODEL

In this part we are trying to present a model by which we can analyze the impact of FDI
on growth, depending on the nature of foreign direct investments. This model was first
developed by Caves (1974.) and the Hymer (1976.) and then was applied by the
Hamrs&Meon (2011.) in his work. Furthermore, it is important to emphasize that there is
differential impact of greenfield investment and M&A on growth, and therefore we have
emphasis the way of determining the level of influence.
Observing the economy we will see that it consists of n symmetric sectors. Each sector
consists of company part which is listed in the timeframe, where each of them produces
different products and have different prices. Currently for a businesses to begun
production process, to a large extent depends on its profitability. When the companies are
monopolists, and the company's output in time t , y t is proportional to their
profits, y t y t , where y 1 . Profits are therefore proportional to productivity, for
example t A . Company-specific productivity parameter A varies among companies.
For a better understanding we have assumed that productivity is constant over time and it
is equally distributed in a unit time. The parameter depends on the ownership of the
company. We assumed that 1 , in the case where the company is owned by a local
resident, and F 1 , where the company is owned by foreign investor (see more in
Caves (1974.) and Hymer (1976.). Establishment of a new company is linked with
irreversible fixed cost k , which is identical along the sector.
First of which we start in our analysis is the observation of a set of companies and sectoral
outputs in terms of financial autarky and isolation, the period before the foreign investors
were allowed to invest in the domestic economy. After that, we have allowed the inflow of
foreign direct investment in all sectors and we have emphasized the distinction between
forms of investment. In the case of greenfield investments foreign investors may freely
establish new companies, while existing local companies are managed or owned by local
owners. However, in the case of M&A, we have the opposite situation, all existing
domestic firms in the sector are sold to foreign investors.
In our model we provide the possibility that FDI across different sectors follow different
forms or modes of investment, although we assume that all FDI in the explicit sector
follow the same mode or form of investment. In this model, our main goal is to explore
whether the impact of a specific volume of FDI on sectoral output growth depends on the
nature of FDI. For example, we will choose the form of investments and we will determine
how a particular FDI form affects the growth of the overall economy.
Determination the number of companies that are active in financial autarky requires
observation of the critical level of productivity A which should outperform domestic
investors and encourage the creation of new firms. This limit is the determined by the fact
that the present value of future profits must be equal to the fixed costs of starting a
business. This is implicitly defined by the following equation:
1
A kH (1)
t 1 1 r

Above mentioned formula presents the value of the firm, it was obtained based on the
flow of future profits, which is discounted with a constant interest rate r . However, the
following formula represents the fixed costs that occur at domestic investors. Index H

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indicates that these costs may be different for domestic and foreign investors. Using the
fact that the π t A , it is easy to show that the initial value A is marked as:

A rk H (2)

Therefore, only company with A A operates within the financial autarky. Suppose that
A 1 ; in that case certain domestic companies are operating in the initial stage. We
should point it out that the initial value A remains constant until the k H and r do not
change, which we assume. Sectoral output in terms of financial autarky, at any time t , is
the determined by the following expression:
1
Yt yAdA (3)
A

where the lower limit A is derived from expression (2).

At the end of period t , the sector is open to FDI inflow. The greenfield investment regime
alows foreign investors to establish new companies, while existing companies are
continuing with the business. Determining the scope of sectoral FDI, in a given regime,
requires a significant level of productivity A which potential company should have to be
attractive to foreign investor. Allowing possibility that the sunk costs for foreign investors
( k F ) are different from k H , then we can present:
s t
1
A kF (4)
s t 1 1 r

Remember that foreign owners have an advantage in productivity. The initial value A is
calculated based on the following expression:
rk F
A F
(5)

Now we want to emphasize the case when A A . This relationship presents an

assumption that foreign investors would not be motited to invest and thus investments
would be equal zero. This condition requires that the advantage of company productivity
in foreign ownership dominate in relation to the deficiencies established companies
abroad, for example k F / F
k H . This refers to the traditional theory of multinationality
company which have a starting point that foreign companies must have an advantage in
productivity to compensate for the costs of investing abroad (Caves, 1974., p. 176-193)

The volume of period t of greenfield investments in a given sector is equal to the sum of
all fixed costs, with which foreign investors are faced when establishing a new company:
A
FDi rGRF K F dA (6)
A

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Sectoral output in period t 1 is derived from the sum of all companies outputs:
1 A
YtGRF
1 yAdA y F
AdA (7)
A A

A on the basis of equation (2), and A based on equation (5). Given our assumption that

A A , greenfield investments expand the scope of the production in sector which is the
subject of consideration. For example, here we have the extensive margin adjustment.

Greenfield investments are characterized by the establishment of new companies by

foreign investors, while M&A form is characterized by selling existing companies in sector
to foreign owners. In these business forms volume of FDI inflows does not reflect the
aggregate fixed costs, but, despite that, foreign investors are willing to pay them. This
willingness determines the firms value, which is equal to their present value of future
profits (Harms and Meon, 2011., p. 6-7). Total FDI in a given sector, at time t , in the
M&A mode, are obtained by the following expression:
F
1 A
FDI M
r
&A
dA (8)
r
A

and sectoral output in period t 1 is obtained on the basis of:

1
YtM&1 A y F
AdA (9)
A

We should mention that in the M&A regime we do not have adjustment of the extensive
margin, meaning that a specific number of the companies remain unchanged in terms of
production. However, in the case of greenfield investment regime, all companies benefit
from the productivity benefits that are associated with foreign ownership.
Our goal is to determine which FDI type has a stronger impact on sectoral output. We
start with the following statement:
Ytk 1 k FDI kt GRF M& A
Claim1 : Write withk GRF, M & A , thatmeans (10)
yt Yt

Proof: seeing this result, it is necessary to demonstrate that. YtGRF GRF M& A M& A
1 / FDI t 1 Yt 1 / FDI t 1
.
Using expressions or equations (6) and (9) we see that this is the a case if:

y 1 AdA y A F
AdA y 1 F
AdA
A A A
F
(11)
A F 1 A
k dA y dA
A A r

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Simplifying this expression and solving the integral at the rate of return for future profits:
2 2 2
F
0.5 1 A A A
rk 2 (12)
A A

By using equation (2) we can rewrite this as:

2 2 2
2
0.5 1 A A A
F
A (13)
A A

Using standard mathematical income:

2
1 A F F
0.5 A A A (14)
A A

which is equivalent:
2
1 A F
A A (15)
A A

Based on the assumption that A A , expected profit is strictly positive, while the fixed
cost is explicitly negative. This conclusion is a proof of that.
On the basis of our claims both forms of FDI encourage the growth. Additional sectoral
outputs generated increased FDI per dollar in greenfield investment regime. In this case,
the payment at the beginning of greenfield investments for investors is lower than the
value of the company (which is proportional to output), while M&A inflows accurately
reflects this value by generating rent or income for its previous owners. In addition,
activation of M&A-buying existing companies-is more expensive than setting up companies
in the personal possession, and this reduces the coefficient of future SDI output.
The Claim 1 is that-for a certain amount of FDI-the growth of output is higher if the sector
adapts to greenfield FDI regime in relation to the case of regime M&A. The total volume of
greenfield investments, in relation to GDP, has a stronger effect on aggregate output
growth than the overall volume of M&A.
Proof: Suppose that m n , it means that the sectors adapt to the regime greenfield
investments, while the remaining ( n m ) sectors adapt to M&A mode. By marking sector's
with the i's, growth rates between periods t and t 1 , sa gki,t Yik,t 1 / Yi,t and
k (GRF,M&A), we refer to the initial symmetry of all sectors, we can present the growth
rate of aggregate output g y ,t , as:

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 1 m n
g i, t giGRF
,t gM
i, t
&A
(16)
n i 1 i m 1

Combining this term with the fact that:

FDI ki,t
gki,t k
(17)
Yi,t

The rate of return:

1 m
GRF
FDI iGRF
,t n
M& A
FDI M
i, t
&A
g y ,t (18)
n t 1 Yi,t i m 1 Yi,t

Aggregating sectors and recalling the symmetrical result in:

GRF FDI GRF
t M& A FDI Mt& A
g y ,t (19)
Yt Yt

The claim 1. begins with this GRF M&A. Besides that, the marginal impact of greenfield
investments, in relation to GDP, on the growth rate is higher than the marginal impact of
M&A. We have proved this conclusion.
The model emphasizes the reason why greenfield investments and M&A may act
differently on growth. Basically, every dollar invested in greenfield investments increases
productivity. This is due to the large capacity or capability greenfield investments, while in
the case of M&A we have a rent or income that goes to the owner. In the real world,
however, certain assumptions on which our analysis is based can not be realized, and
therefore this can strengthen the superior influence of greenfield investments.
Howewer, we have ignored the spillover effect by which the presence of foreign
multinational companies can increase the productivity of domestic firms. If greenfield
investments are associated with strong effects-eg. considering that the new companies
are more innovative and technologically intensive than the existing companies-a
discrepancy between the two FDI forms, in terms of their effect on growth, may be higher
than the value which our model shows (Marin and Sasidaharan, 2010., p. 1222-1438).
On the other side, our theoretical framework is partly rigid in terms of M&A by assuming
that the income of sales of domestic companies is spent on all, and very litle on new
capital investments. If part of this income is spent on domestic investments, then the M&A
would also contribute to the capital accumulation. Finally, the growth effects of greenfield
investments may be weak or negative in case new firms break the existing domestic
supply chain or reduce the productivity of domestic firms.

4. GREENFIELD INVESTMENT VERSUS MERGERS AND ACQUISITIONS (M&A)

Greenfield investments represent the establishment of production facilities abroad, which

are fully owned by an parent company. Based on this definition we can notice that
greenfield investments are the most typical way of internal growth. On the other hand,

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M&A are the most typical example of external growth. Both mentioned forms of
investment have their advantages and disadvantages. Each of them can provide some
success, in terms of development and company expansion, but there are also some
differences between them, regarding how to enter foreign markets.
The majority of companies can service their domestic market entirely through local
production, but a way of servicing foreign markets largely depends on their productivity.
Companies may choose to service or serving foreign markets by means of export,
greenfield investment or cross-border M&A. The company may choose greenfield
investment to avoid the transportation costs called "iceberg", but it will certainly face a
fixed cost, and vice versa. Instead, the company may resort to cross-border M&A to serve
foreign markets by buying the targeted companies. There are two main reasons: 1)
achieving a synergetic effect based on having the technological capacity of targeted
company and 2) retention of market-specific expertise in targeted company (Lee, 2011., p
8).
According to the majority of researchers, the main difference between the M&A and
greenfield investment is the way of implementation. M&A represents an investment type
based on the expansion of the company’s internal organization through external trading,
where the company is considered as a special product. With this investment type,
company that is the subject of purchase is often overpaid for the offered assets by the
buyer. Furthermore, this investment form does not increase the production capacity of the
host country. This concern the host countries in terms of their industrial structure and
market competition. Especially this concern applies to developing countries. This
investment form may negatively affect the host countries in terms of economic
sovereignty.
On the other hand, greenfield investments contribute in terms of company’s capacity
utilization of resources, internal organization and they increase production capacity and
economies of scale etc. In the case of greenfield investments the way of conducting
market transactions can be replaced by trading companies internal organization, although
this method can eliminate certain costs which are caused by market transactions. The
difference between the cost management internal organization and marketing costs is
determined by the capacity and resources of the company. The essence of M&A and
greenfield investment is based on the selection between markets and internal organization
adjusted to costs and rate of retu.
The difference between these two FDI forms is that M&A adapts to market of existing
companies, while greenfield investments are observed as an addition to the new market
offer. In market-oriented environment, low competition often is associated with higher
profits in the industry. At the same time, FDI are more inclined towards greenfield
investments as form of entering the market. When effective market supply fails to satisfy
the demand, then greenfield investments in that state use the opportunity for themselves
based on their competitiveness. Conversely, the improvement of market supply, the
market becomes saturated. New investors achieve a zero rate of income, based on market
entry and competition becomes more intense when the supply exceeds demand. In order
to survive companies have to reduce the cost and keep the same market share. In such

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situation M&A becomes very important, a strong increase in M&A leads to a larger market
share and production costs are reduced (Wang, 2009., p. 240). M&A affect the taken
targeted companies, which causes decrease in the number of companies on the market
that may be the subject of takeover (Swart and Van Marrewijk, 2011., p. 6).
The degree of competition in the market is often associated with the industrial cycle
phases. Industrial cycle consists of four phases: initiation, development, maturity and
decline. With the introduction of new products and technologies, industry begins with a
new development cycle. In the initial development stage, when competition is small,
greenfield investments are the backbone during a given period. As the industry becomes
more mature and competition increases, the company begins to apply economies of scale
and achieves excess of production capacity. In that case greenfield investments will be
replaced by M&A. Due to the existence of competition, M&A becomes the backbone of
FDI.
Harzing (2002.) identifies the importance of the global strategy of multinational companies
as an important determinant in the choice of investment models. Especially, multinational
companies follow the "multi-domestic" strategy that is more suitable for the M&A form,
while those that follow the "global" strategy will likely decide for greenfield investments.
Based on this we can conclude that countries with relatively large number of multinational
companies follow a global strategy which characterize FDI to third countries which are
mainly greenfield investment. Countries that are hosts of multinational companies
generally follow a multi-domestic strategy that shows a strong preference for M&A in
external activities (Globerman, et.al. 2004th, p. 6).
Furthermore, M&A or greenfield investments are determined on the basis of resources
ownership and personal capacity for transfer. It is common knowledge that when we have
the centralization of capital, then investment trend is moving towards greenfield
investments. When human capital is centralized, then we have a tendency investment
M&A. Human capital refers to the implicit property or assets. Therefore it is very difficult
to transfer assets such as knowledge and technologies, even within the same country or
across borders. However, we can from the acquired company retain the technology,
patents, personnel and technical staff, and therefore save the cost of research and
technological development, reduce time risk, failure and achieve some progress. Key
products that are designed based on the centralization of human capital of the company
are difficult to achieve. New companies require high costs in order to exceede the national
brands. M&A (mergers & acquisitions) resolve this problem quickly by founding production
advantages and avoiding risks.
When analyzing the relationship between greenfield investments and M&A it is important
to consider internal factors. When businesses experiences the expansion, leading
companies believe that M&A are the answer. In conditions of economic globalization, the
corporate speed is not the key to access relevant markets, but the effort to survive and
develop the company. As for speed, M&A are often the first choice in making decisions.
Through M&A companies can significantly reduce the period of execution. The company
that undertakes, gains access to the local market at high speed. Being first on the market,
where strong competition is present, is a big deal. If we choose greenfield investment we

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will need sufficient time to face the complicated administrative procedures. It refers to the
contract, the consideration of getting official permission, infrastructure, installations,
equipment and others. There may occur uncertain factors that can obstruct the investors.
Research shows that the initiation of greenfield investment in the industry, requires the
negotiation of 2 to 3 years. However, in the case of M&A procedure takes only a few
months. With technological development, when compared to greenfield investments, M&A
resolve potential problems related to time delay and risks.

5. CONCLUSION

It is well known that foreign direct investments can occur in various forms. Among other
things, the most important forms of FDI are greenfield investments and cross-border
mergers and acquisitions. Greenfield investments influence the creation of new production
facilities abroad, while M&A affect the change in ownership structure of existing firms.
Obviously, this paper founded that these two conceptually different types of FDI have
different effects on growth. First of all, it means that the scope of FDI greenfield reflects
the expansion of capital flows in host countries, while M&A generally generate rents for
the former owners of domestic firms which are not reinvested in new investments.
Despite realized income that is associated with foreign ownership, every dollar from M&A
has a smaller effect on growth than dollar invested in greenfield investments. In favor of
that, in the paper was applied the model, which we used to predict the effect of FDI
forms. The model showed that the effect of FDI greenfield, in relation to GDP, is much
stronger than the effect of M&A.
Despite that knowledge, it is not simply to make a choice between two specified FDI
forms. Both forms have advantages and disadvantages. In general, the choice depends on
the specific circumstances in which the the company currently is. In a situation when on
market we have present global competition, which is well placed, then the optimal form of
entering foreign markets is through M&A. If we choose in such circumstances greenfield
investments, we will have slow and limited presence, and vice versa.
In the real world, if the investor chooses the right way to appear on the targeted market,
then he can reduce the cost and risk. However, if investor chooses the wrong path, then
he can not easily abandon his expectations. Therefore we believe that all investors, before
they make a decision regarding the choice between two specified FDI form, must consider
what is the best solution for them.

REFERENCE

[1] Brakman, S.: "UNLOCKING THE VALUE OF CROSS-BORDER MERGERS AND

ACQUISITIONS", Cesifo working paper, no. 2294 category 20: empirical and
theoretical methodes May, et.al. 2008.
[2] Burksaitiene, D.: "CROSS-BORDER MERGERS AND ACQUISITIONS: AN
ANALYSIS OF ACTIVITY", 6th International Scientific Conference, Vilnius,
Lithuania, May 13-14, 2010.
[3] Calderón, C., Loayza, N. Servén, L.: "GREENFIELD FOREIGN DIRECT
INVESTMENT AND MERGERS AND ACQUISITIONS: FEEDBACK AND

Page 109
 MACROECONOMIC EFFECTS", World Bank Policy Research Working Paper 3192,
2004.
[4] Caves, R.: "MULTINATIONAL FIRMS, COMPETITION AND PRODUCTIVITY IN
HOST-COUNTRY MARKETS", Economica 41(162), 1974.
[5] Globerman, S.: "ASSESSING INTERNATIONAL MERGERS AND ACQUISTIONS AS
A MODE OF FOREIGN DIRECT INVESTMENT", Ontario, April 24-25, et.al. 2004.
[6] Harms, P., Meon, P.G.: "An FDI is an FDI is an FDI? THE GROWTH EFFECTS OF
GREENFIELD INVESTMENT AND MERGERS AND ACQUISITIONS IN
DEVELOPING COUNTRIES", Study Center Gerzensee, November 15, 2011.
[7] Lee, D.: "CROSS-BORDER MERGERS AND ACQUISITIONS WITH
HETEROGENEOUS", Firms: Technology vs. Market Motives, Working Paper June,
2011.
[8] Marin, A., Sasidharan, S.: "HETEROGENEOUS MNC SUBSIDIARIES AND
TECHNOLOGICAL SPILLOVERS: EXPLAINING POSITIVE AND NEGATIVE
EFFECTS IN INDIA". Research Policy 39(9), 2010.
[9] OECD: "OECD BENCHMARK DEFINITION OF FOREIGN DIRECT INVESTMENT",
Fourth edition, OECD, Paris, 2008a.
[10] Rose, E. I.: "WORLD MARKETS FOR MERGERS AND ACQUISITIONS", Institute
for Financial Research, No 75, September, et. al. 2010.
[11] Swart, J., Marrewijk Van. C.: "CROSS-BORDER MERGERS & ACQUISITIONS: A
PIECE OF THE NATURAL RESOURCE CURSE PUZZLE", Tinbergen Institute, 2010.
[12] UNCTAD: "WORLD INVESTMENT REPORT: TRANSNATIONAL CORPORATIONS",
Agricultural Production and Development. United Nations: New York and
Geneva, 2009.
[13] UNCTAD: "WORLD INVESTMENT REPORT: NON-EQUITY MODES OF
INTERNATIONAL PRODUCTION AND DEVELOPMENT" (online version), 2011.
[14] Wang, A.: "THE CHOICE OF MARKET ENTRY MODE: CROSS-BORDER M&A OR
GREENFIELD INVESTMENT", International Journal of Business and
Management, Vol. 4, No. 5, May, 2009.

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 BALANCE SHEET AND INCOME SHEET AS AN EXPRESSION
OF THE FINANCIAL SITUATION OF THE COMPANY

Nebojša Milanović1
1
Higher Economic School of Professional Studies Peć in Leposavić,
24. Novembra b.b., Serbia, e-mail: boris_siljkovic@yahoo.com

ABSTRACT

Financial reports are the most important instruments for informing of interested subjects
regarding the material and financial standing of a company, as well as regarding the profit
ability of the same.
Accountancy handles with relative data and information regarding the change in capital,
liabilities and properties of a company, and regarding the gained result.
Therefore, balance sheet and income sheet are to be considered as time dimensioned set
of accountancy information on status and success of a company.
Financial position of a company, which can be perceived through the structure of
resources and origin of resources, is expressed in balance sheet and report on capital
changes. Correlating income and expenditure in income sheet the success of the company
can be perceived, and through reports on cash flows can be expressed inflow and outflow
of cash in the company.
More important information, which is important for estimation of financial position of a
company as well as the business profitability, can be expressed as “notes” with financial
reports.
Also, these reports help the determination of efficacy of administrative structure in
company management and preservation of company’s property.
Balance sheet and income sheet and their composition form (MRS-1) correspond to main
goals of a company, that is, long term profit increase, and can be obtained by evaluation
of property, liabilities, incomes and expenditures.
Also, bigger power of expression of real situation in the company can be obtained by
providing additional information in footnote of balance or annex, as well as in detailed
elaboration of report on business in previous period, achieved result and adjustment of a
company to business-political goals.

Keywords: time set, dimensional set, profit, evaluation.

1. INTRODUCTION

In modern economic life balances are used whenever needed to express the condition and
result of any economic activity. In accountancy, the balance is used to express the
condition and performance of an enterprise, hence business events, conditions, and
results of the company are being expressed in a common monetary unit of the summary
standards. The Golden rule of balance implies that long-term assets (fixed assets) should
be financed from long-term resources, and related short-term assets (current assets)
should be financed from short-term resources. So, a very important feature of the balance
sheet is balance equilibrium. The balance sheet is a financial report on the status of

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assets, equity and liabilities at the date of calculation when a balance sheet is made. The
balance sheet is a double-sided overview that shows capital assets (liabilities) and the way
how the capital is invested (assets), assets are recorded at the left and liabilities on the
right side, or in a list format where liabilities are preceded by assets. The balance sheet
provides information regarding the liquidity and solvency of the company on a certain day.
Analysis of short-term liquidity involves a company's ability to earn money and short-term
receivables. Liquidity shows the company's ability to respond regularly to the claims and
obligations that must be settled within the next year. Primarily creditors or potential
creditors creditor are interested in liquidity.1

2. THE THEORETICAL BASIS OF BALANCE SHEET AND INCOME SHEET

The asset is an active mass of assets that are circulating. The asset displays the
transformation of assets from one form to another form. In the asset, effects are being
spent and materialized, therefore based on changes that occur in the asset, observations
on the quantity and quality of business activities that are taking place in the company and
those to be expected in the future, are carried out. The asset consists of real and fictitious
entries. Real assets include commercial and separate assets. Each company has its main
task and business assets that are further divided into fixed and current serve for the
execution of this task. The execution of basic task is supported by special purpose assets
that are formed in the course of operations (separation of income such as reserves and
depreciation). There are so called fictitious assets for the reason that we have business
relationships or transactions between two companies that appear in a form of suspicious,
contentious accounts receivable that have the character of the fictitious assets and they
are the result of reduction in current assets and nonsolid business transactions. Reduction
of current assets on this basis can be temporarily (when the prospects of collection is
evident), and permanent (no billing perspective). The causes that lead to the creation of
fictitious assets can be either internal (unreliability of the business, unprofitability,
tardiness, etc..) and external ones (system failures). Liabilities on the other hand show an
inactive'' mass'' and it provides information on the origin of resources and information on
the purpose of financial assets and expresses the constitution of the company. Seen from
a legal point of view of the liability symbolizes debts or obligations of a company. The
totality of liabilities represents liabilities of the firm to itself in light of profitable operations
that must fulfill liabilities towards third parties. According to the purpose of financial
means, we differentiate financing in the narrow sense or financing of simple reproduction
in fact financing of ongoing business activity and financing activities in the broad sense, or
financing of expanded reproduction in fact new investment. Financing can be regarded as
proprietary, time and dedicated. Proprietary financing is distinguished as its own or self-
financing from the business result, or from foreign sources such as banks, business
partners and the like. From the position of the maturity, could be differentiated long-term
permanent sources for financing fixed assets and permanent current assets and short-
term temporary sources for financing temporary needs of current assets. From the point
of use each source must have a defined purpose.

By the twenties of the 20th century, the balance sheet had a dominant role since has
shown assets and liabilities of the company, but with the development of competition,

1
Zeller, T.: Understanding of Corporate Annual report; John Willey & Sons, 2003., pg. 32.

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development of new enterprises and increasing importance of performance results for the
future of the company, the importance of income sheet is growing. Income sheet shows
revenues, expenditures and results achieved in a period of time. Balance sheet shows the
financial results viewed from two perspectives, namely: positive financial results, with
revenues greater than expenditures, mean an increase in own resources and the negative
financial results where expenses exceed income which means a reduction in resources.
Income sheet can be annual or periodic and can be drawn up by the gross and net basis,
although the gross principle is now generally accepted. The two-sided view on the left
shows the expenditure and a positive financial result, while the right side shows the
income and negative financial results. This mode is more descriptive and clearer and it is
in close connection with the accounting. The company may in its income sheet express the
gross gain or gross loss. If gross income is greater than the gross loss, the income sheet
expresses the profit and vice versa, if the gross income is less than the gross loss, the loss
is recognized. Gain is surplus of revenues over expenditures and an analysis of the
elements from which it is composed is to be made. First, should be analyzed the extent of
the realized gain, its dynamics in the trend over the previous year and its share in total
income. On the other hand we have a loss when realized income is less than the expenses
and the company operates at a loss. The loss occurs due to external and internal factors.
Internal factors are an expression of disturbances in reproduction flow of the company,
and these include among others the level of unused capacity, the wrong choice of
technology and means of work, the process of disorganization, lack of creative workers
and so on. External factors that cause the occurrence of loss are: inflation, increasing
foreign exchange rates, customs rates, the revaluation of assets etc. The loss may be a
business (the business outlook is poor), financial and extraordinary character in cases
where the expenses of these activities of the company are greater than the revenues.

Category of business income represents the safest income since the majority of business
incomes are formed on the basis of invoiced or collected means for realized activity.
Factors of business income are the amount of products Q and sales prices and C, which
gives P = QxC. The amount of products and services affect the business income through
the factors of production (capacity, labor), and implementation factors (product quality,
price, etc..). Prices (C) as another important factor in the formation of business income
can be formed on the market and administratively. Analysis of the structure of business
income should be derived through the participation of certain types of income, e.g. from
sales, rents, subsidies, compensation, etc. in business income. Also, since the size of the
business income is formed upon product realization, it needs to be analyzed whether these
revenues come from domestic or foreign markets. The analysis of business income is
performed for the organization as a whole, but also for organizational units and products.

Expenditures include all expenditures by business enterprises and are divided into
commercial, financial and extraordinary. That part of expenditure which is related to the
production of products that can be included in the cost price makes the cost category.
They are consisted of business and financial expenses.2 Growing rate of expenditures
participation in total income leads to a reduction of business performance and profitability
of enterprises. Percentage share of business expenses in total expenditures should
approximate the percentage share of business income in total income. The share of
extraordinary expenses is an indicator of extraordinary activities of the company. Reducing
them to zero is a sign of positive trends in the economy of a company. The share of

2
Bogetić, P.: Analiza bilansa, Ekonomski fakultet Podgorica, Podgorica, 2000., p. 172.

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financial expenditure in total expenditure depends on the degree of indebtedness and the
amount of interest rates paid on loans borrowed. Financial income includes interest
income, realized exchange rate differences and dividend income earned from transactions
with related parties, by mutual participation with other entities, as well as other financial.
In this regard, we conducted a financial analysis as an expression of the financial situation
in an enterprise through an example of a joint stock company'' Piramida''. Balance sheet
(Table 1) and income sheet (Table 2) of the company that has issued 1560 shares and
made the following financial results for the current and previous year.

Table 1: Balance sheet of joint stock company ''PIRAMIDA'' on 31.12.2006

ASSETS Previous year Current year

1. Fixed assets
- plant 1.340 1.500
- buildings 1.200 1.400
- motor vehicles 400 150
- patent, copyright 300 400
- Long-term investments 400 500
2. Current assets
- inventory 800 530
- receivables 400 600
- cash 200 200
- short term securities 200 170
Liabilities
1. Equity 2.640 3.340
2. Long-term loans 1.000 840
3. Short-term loans 550 700
4. Payables to suppliers 550 300
5. Other liabilities 500 270

Table 2: Income sheet of joint stock company ''PIRAMIDA''

Previous year Current year

1. Revenue 8.000 12.750
2. Cost of sales 4.000 7.050
3. General and Admin. Expenses 1.000 2.000
4. Profit before interest 3.000 3.700
5. Interest expense 850 1.000
6. Profit before tax 2.150 2.700
7. Tax expense 1.250 1.640
8. Profit after tax 900 1.060
9. Dividends 200 400
10. Retained profit 700 660

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We have the first group of indicators that we analyze through the balance sheet and
income sheet as an expression of the financial situation of the company through the
financial structure:
TUI
a) Safety margin: MS
SI
Previous year:
Long term loan Short term loan Payables to suppliers Other liabilities
MSp (1)
Equity
1000 550 550 500
MSp 0.98 (2)
2640

Comment: In previous year every dinar of capital financed from its own resources was
covered with 0.98 dinar from foreign sources.
Current year:
840 700 300 270 2110
MSt 0.63 (3)
3340 3340

Comment: In current year every dinar of capital financed from its own resources was
covered with 0.63 dinar from foreign sources.

TUI
b) Coverage ratio: SP x 100
UI
Long term loan Short term loan Payables to suppliers Other liabilities
SP
Equity Long term loan Short term loan Payables to suppliers Other liabilities
(4)

Previous year:
1000 550 550 500 2600
SPp x100 x100 49.6% (5)
2640 1000 550 550 500 5240

Comment: In previous year, the share of foreign sources in the total resources (total
capital) was 49.6%.

Current year:
840 700 300 270 2110
SPt x100 x100 38.7% (6)
3340 840 700 300 270 5450

SI
c) Self-financing ratio: SS x100
UI
Equity
SSp
Equity Long term loan Short term loan Payables to suppliers Other liabilities
(7)

Previous year:
2640 2640
SSp x100 x100 50% (8)
2640 1000 550 550 500 5240

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Comment: In previous year, the share of own resources in total resources (total capital)
was 50%.
Current year:
3340 3340
SSt x100 x100 61% (9)
3340 840 700 300 270 5450

Comment: In current year the share of their own resources in total resources (total
capital) increased and now amounts at 61%.
This group of indicators of financial structure will be ended up with:

DI SI DO
d) Coefficient of financial stability : KFS
DVS FS Z
Equity Long term loan
KFS (10)
Plant Buildings Motor vehi cles
Patent, copyright Long term investment Inventory

Previous year:
2640 1000 3640
KFSp 0.82 (11)
1340 1200 400 300 400 800 4440

Comment: In previous year, ever long-fund dinar is covered by 0.82 dinar from a long-
term source.
Current year:
3340 840 4180
KFSt 0.93 (12)
1500 1400 150 400 500 530 4480

Comment: In current year, every long-fund dinar is covered by 0.93 dinar from a long-
term source.

The second group of indicators that will be analyzed here will point to the financial success
of above organization, and we will start with:

PPP
a) Profit ratio: SPD
US
Profit before tax
SPDp (13)
Equity Long term loans Short term loans Payables to suppliers Other liabilities

Previous year:
2150 2150
SPDp 0.41 (14)
2640 1000 550 550 500 5240

Comment: Last year every dinar of the total funds yielded 0:41 dinars before tax (rate of
return on total funds is 41%).
Current year:
2700 2700
SPDt 0.49 (15)
3340 840 700 30 270 5450

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Comment: The situation has improved in the current year, every dinar of total funds now
yields 0:49 dinar profit before tax (rate of return on total funds is 49%).
PPPZ
b) Net profit ratio: SND
NV
Profit after tax
SND (16)
Equity

Previous year:
900
SNDp 0.34 (17)
2640

Comment: In previous year every dinar of own funds yielded 0:34 dinar profit after
interest and tax that, rate of return on own funds is 34%.3

Current year:
1060
SNDt 0.32 (18)
3340

Comment: In the current year the situation has deteriorated so far that every dinar of own
resources yields 0,32 dinars profit after tax and interest, ie. rate of return on equity is
32%.

3. INDICATORS OF FINANCIAL CONDITION OF JOINT STOCK COMPANY

''PIRAMIDA''

Through the third group of indicators that we analyse, will be observed the interest
burden and dividend policy. 4
Dividend
a) Dividend per share (stock):
Number of shares
Dividend
Dividend per stock (19)
Number of shares

3
Maximization of return on equity in the long run is the basic requirement of capital owners. Therefore, to
maximize the rate of return on equity is often advocated as a proven way of maximizing profits. Yet most
companies have a defined goal in terms of increasing shareholder value over time. Companies like Coca-Cola
Company, Mobil, The Quaker Oats Company, Ameritech, Cambel Soup Company, and many others have just
defined the primary business objective in a mentioned way. Horne, Van., C. James., Wachowicz, M., John.:
Fundamentals of financial Managment, Ninth Edition, New Jersey, Prentice Hall, 1995., str. 3÷6.
4
The ratio P / E as ratio the market value per share and the yield per share is used for estimating the shares
in market in terms of determining what actions are relatively inexpensive, and which ones are relatively
expensive (in relation to each other). Ratio P/E Market price per share
Earning per share
For companies in the U.S. P / E ratio is between 10 and 20 Shares with high P / E are companies with ratio
over 20, and are typical young companies in ascent. Especially interesting are the results of a survey
conducted in the United States on a sample of 50 shares with low P / E ratio and a high P / E ratio for a
period of 45 years (1950 ÷ 1995) which showed that in the long run it pays off to invest in shares with low P /
E ratio. Downs, J., Goodman, J.: Dictionary, 1987.

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Previous year:
200
0.13 (20)
1560

Comment: In previous year dividend per share was 0,13 dinar.

Current year:
400
0.26 (21)
1560

Comment: In current year dividend per share is 0,26 dinar.

ZD PPPZ
b) Dividend coverage:
DD Number of shares x DD
Profit after tax
Dividend coverage (22)
Dividend per share (stock)
in previous year x number of shares

Previous year:
900
4.43 (23)
0.13 1560

Comment: In previous year earning per share was 4,43 times higher than dividend per
share.
Current year:
1060
2.61 (24)
0.26 1560
Comment: In the current year earning per share was 2.61 times higher than the dividend
per share which indicates that the company has invested most of its profits to the
developmental needs of which we should expect returns in the future.
DD Number of shares x DD
c) Payout ratio:
ZD PPPZ
Dividend per share x Number of issued shares x 100
Payout ratio (25)
Profit after tax

Previous year:
0.13 1560
100 22% (26)
900

Comment: In previous year 22% of earning per share was paid as a dividend.
Current year:
530 600 200 170 530 970
0.76 (27)
700 300 270 1270

Comment: In current year 38% of earning per share was paid as a dividend.

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We will start the fourth group of indicator by calculating:

Obs
a) Current ratio liquidity: TRL
TO
Inventory Receivables Cash Short term securities
TRLp (28)
Short term loans Payables to suppliers Other liabilities

Previous year:
800 400 200 200 1600
TRLp 1 (29)
550 550 500 1600

Comment: In previous year ratio of current assets and current liabilities was 1:1.
Tekuća godina:
530 600 200 170 1500
TRLt 1.18 (30)
700 300 270 1270

Comment: In current year ratio of current assets and current liabilities was 1,18:1

LKS OS - Z
b) Quick liquidity ratio: 5 BRL
TO TO
Inventory Receivables Cash Short term securities - Inventory
BRL (31)
Short term loans Payables to suppliers Other liabilities

Previous year:
800
400 200 200 800 800
BRLp 0.5 (32)
550 550 500 1600
Comment: In the previous year ratio of current assets less inventory and current liabilities
was 0.5: 1
Current year:
530 600 200 170 530 970
0.76 (33)
700 300 270 1270

Comment: In the previous year ratio of current assets less inventories and current
liabilities was 0.76: 1
c) Net current asset:6 NOS Obs TO
NOS Inventory Receivables Cash Short term securities -
(34)
- Short term loans - Payables to suppliers - Other liabilities

Previous year:
NOSp 800 400 200 200 550 550 500 1600 1600 0 (35)

Comment: In the previous year long term sources were not used to finance current assets.
Current year:
5
The average values for the RRL in 50% of companies in the UK are around 0.90 (0.60 ÷ 1.10).
6
While RTL and RRL use only values from the balance sheet, the yield ratio of net current assets includes a
value in the income statement. The average value of the ratio of current assets in the U.S.is about 7%, while
the UK is between 10 - 21%. Mihailović, N.: Finansijska analiza u funkciji ocene finansijskog realnog stanja
kompanije, Poslovna politika, vol. 37, Beograd, 2008., str. 63÷66.

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 NOSt 530 600 200 170 700 300 270 1500 1270 230 (36)

Comment: In current year 230 dinars of long term sources was used to finance current
assets.

And the fifth group of indicators that will analyze is the risk exposure of the organization
through the operating and financial leverage.

MD PP - TP
a) Operating leverage ratio: PL
PD PPKP
Revenue Cost of sale
PLp (37)
Profit before interest

Previous year:
8000 4000 4000
PLp 1.33 (38)
3000 3000

Comment: In previous year percentage change in marginal profit was 1.33 times greater
than the percentage change in operating profit.
Current year:
12750 7050 5700
PLt 1.54 (39)
3700 3700

Comment: In previous year percentage change in marginal profit was 1.54 times greater
than the percentage change in operating profit.

PD
b) Financial leverage ratio: FL
PPP
Profit before interest
FLp (40)
Profit before tax

Previous year:
3000
FLp 1.4 (41)
2150

Comment: In previous year percentage change in profit before tax was 1.4 times greater
than the percentage change in profit after tax.
Current year:
3700
FLt 1.37 (42)
2700

Comment: In current year percentage change in profit before tax was 1.37 times greater
than the percentage change in profit after tax.

Through the evaluation of the current financial situation and the financial prospects of the
company, we conclude:
On the basis of the calculated indicators can be concluded that the company'' Pyramid''
has increased the share of own resources in total capital, compared to previous year from

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50% to 61%, so that currently is away from the'' dangerous'' lower limit of 50% where
was before. There was an increase in the coefficient of financial stability from 0.82 to
0.93, which indicates that the company is moving to a state of greater stability and
adopting Hedging financial policy and long-term assets (fixed assets and permanent
current assets) are almost entirely financed by long-term sources.
Profit before tax increased and the rate of return on equity is 49%, but there has been a
reduction in profit after tax and interest so that at each invested dinar now gets 0.32
dinars, not 0.34. The company retains most of its earnings as profit, and 38.32% of the
total earnings of shares are paid as a dividend. All this tells us that the company is
development-oriented and results of this business policy need to be expected in the near
future. Current liquidity ratio in this year increased to 1.18. A ratio of current assets and
current liabilities is 1,18:1 and is still far from that (by some authors) ideal ratio of 2:1.
Quick liquidity ratio is 0.50 which is a good ratio between inventory and current assets for
maintaining a satisfactory level of liquidity. Thus, viewed as a whole the company is liquid.
Indicator of operating leverage has increased, but not much, and financial leverage is
reduced so that the company is not exposed to excessive risk. Based on the above, it can
be concluded that the company'' Pyramid'' is a successful enterprise which pays
remarkable dividends and directs enviable amount of funds for development, which in
conditions of turbulent environments and the rapid development of technology is a good
policy. The company is liquid, and the maturity of resources and claims is adjusted. The
company slowly but successfully reduces the share of foreign capital in the total, which is
very positive. The company is financially stable. The proposal is to invest surplus funds in
such an enterprise. This method of financial analysis precisely developed through the
balance sheet and income sheet as an expression of the financial situation of the company
can be a useful tool for the analysis of financial reports, even though the past is not
always a good basis for assessing the future, but it is often the only, always objective and
according to rule, quite affordable basis of that assessment. After all, the previous analysis
is a very useful scientific reading that organizations and businesses may apply, and our
ratio figures that are used here are very useful tool for the analysis of financial
statements, but they must be properly interpreted.

4. CONCLUSION

By using the balance sheet and income statement as applied financial state, could be
achieved analytical examination of company’s earning ability, and financial condition of the
company.
Applying ''ratio analysis'' with the help of visual methods such as an analysis using account
cover, as well as cutting income method, could be gained analytical procedures for
examination and evaluation of the financial position of the company.
Also we have an insight and short-term and long-term financial balance, as well as
solvency of the company.
By correlating individual items in the balance sheet and income sheet, and applying certain
indicators (whatever is examined, liquidity, solvency, net current assets fund, net current
assets, etc.) we could obtain the required financial condition of the company.
Correlating certain individual positions we get the exact business result from which we can
evaluate the business activity, and possibly if it is negative, what could be done to improve
the situation.
Also by using the balance sheet and income sheet we can make a comparison of several
business years.

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This business comparison is very important for the overall operations of the company, as
well as current cutting balance, and perception of business in the past and planning the
future business activities.
Through analysis of the financial status and structure of sources, analysis of the scope and
structure of the implementation, analysis of the scope of quality and origin of achieved
results, analysis of efficiency, we get the answer to the question of optimizing the financial
position and earning ability of the company.
Based on the above, we can conclude that by using the balance sheet and income sheet
we get an accurate picture of the financial position of the company as well as the results
of operations for the analyzed period.

REFERENCES

[1] Zeller, T.: ''Understanding of Corporate Annual report'', John Willey & Sons,
2003., p. 32.
[2] Bogetić, P.: ''Analiza bilansa'', Ekonomski fakultet Podgorica, Podgorica, 2000., p.
172.
[3] Horne, Van., C. James., Wachowicz, M., John.: ''Fundamentals of financial
Managment'', Ninth Edition, New Jersey, Prentice Hall, 1995., p. 3-6.
[4] Downs, J., Goodman, J.: ''Dictionary'', 1987.
[5] Mihailović, N.: ''Finansijska analiza u funkciji ocene finansijskog realnog stanja
kompanije'', Poslovna politika, vol. 37, Beograd, 2008., p. 63-66.

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 IMPACT OF AGRICULTURAL DEVELOPMENT OF SERBIAN
ECONOMY
Pr, dr . Zorka Jugovic . mr . Danjela Pecarski Visoka zdrastvena sanitarna skola Tosin Bunar Beogra

Pr. Dr . Miodrag Pantelic Tehnicki fakultet Čačak

ABSTRACT

Agriculture and the rural population is an important economic potential as a producer and consumer
of material goods but also an important socio-political factor. Development problems of humanity,
in the new environmental paradigm, since globalization observed at the level of the entire planet,
which is a major step forward in terms of the survival of civilization, implements and controls as an
integral part of every human activity, food production, which is the condition of human survival
existence man.

Keywords: agriculture, economics, manufacturing, market, village

INTRODUCTION

Definition of Agriculture and although at first glance it seems clear to stop farming and provides easy
to give a definition, it is not so. It is very difficult to give a universal definition because it depends on
the achieved overall economic development of a country, achieved by the division of labor in
industry and agriculture. If we start from that which is involved in holding such organizational forms
in agriculture, then farming can be defined as the area of material production in which people deal
with cultural upbringing of plants and animals in order to satisfy human needs, directly and
indirectly, including domestic processing and processing of agricultural products.

1. Classification and Market Structure

Since the interface between production and consumption, the exchange is important to say that it
takes place in a certain area in a certain time period. When it comes to the market, this space may
be different. It may be in their nature and significance, and the local and very small in size, we can
serve as a criterion for distinguishing between the so-called. Local markets (markets, supermarkets,
traditional shops in cities and towns) and may have a rounded character and economic unit, when it
comes to the regional market. If we bear in mind the space of an entire country, where traffic is
carried various types of products and services, then we are talking about the national market, and
when we consider all possible economic transactions between different countries, speak of the
world market.

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If you are in the division and classification, followed by other criteria, it is possible classification of
different markets. If, for example, takes into account the nature and function of the goods being
bought and sold, we can talk about the market of means of production and market products for
personal consumption, and it is possible its further disaggregation, such as for example industrial
products markets, and the quantity of goods to be bought and sold on the market can be
distinguished wholesale and retail trade.

2. IMPORTANT ECONOMIC CHARACTERISTICS OF AGRICULTURE

2. 1. Agriculture as a producer of food for humans

Food production is the most important task of agriculture from which all others are derived.
Organizing agricultural production people involved in cultural upbringing plants that are only able to
process of photosynthesis convert inorganic to the organic matter, which serves as the building
blocks of the human body and energy source. A sufficient amount of high-quality and healthy foods
and nutrition of the population of each country are in good health condition of the population, its
working capacity, longer life and demographic reproduction, which is favorable impact on the overall
economic and social development. Agro-food products have always been a factor in the economic,
social and political stability in each country. So today, all countries, even those that do not have
favorable conditions for the development of agriculture at least try to be self-sufficient in
agricultural products.

2.2. Agriculture - manufacturer of raw materials for industry.

Economic growth and deepening of the social division of labor have developed industries that its
activities are based solely on raw materials from agriculture. These sectors are: food processing,
textiles, tobacco, leather and footwear industry for feed production, processing industry waste from
agriculture and others. With the development of economy and the increase in household income,
agricultural products are increasingly used as processed and refined - and less finalized products as
bait production. In economically developed countries, from 70.0 to 90.0% of production goes to bait
consumption after processing. Through the processing of agricultural products easily spoiled
prolonged use value and allow for continuous time consumption, despite the fact that their
production has a seasonal character.

2.3. Agriculture and foreign trade.

The development of productive forces, the international division of labor and social traffic allowed
the agricultural products, and to a large extent become the subject of international trade, trade.

Through foreign trade for many agricultural countries, became a factor in balancing their payments
and balance of trade.

In the modern world, all countries keep foreign trade policy and it is an integral part of the overall
economic policy. In an organized way is accomplished export and import of agricultural products and
a variety of measures and instruments to regulate it, such as: customs and non-customs duties,
quantitative restrictions (contingents, quotas), incentives for exports and imports, and limit you.
Some countries have built a system of measures for preventing or hindering the import of
agricultural products in order to protect their consumers, which is known as agricultural

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protectionism. Exports of agricultural products are of utmost importance for the economic
development of underdeveloped countries. They agriculture is usually the dominant area of
production.

2. 4. Agriculture as a source of accumulation for the development of non-agricultural activities

In the process of economic development, especially in developing countries, favoring rapid

economic development, the method of industrialization, agriculture has been used as a source of
accumulation for the development of non-agricultural activities. This has been a characteristic of
countries that until recently had a reputation as a socialist, because open positions so that the
agricultural population permanently underemployed and so present. Latent - agrarian
overpopulation. As soon as the opportunity arises agricultural population is ready to abandon
farming and seek employment in other industries.

From agriculture to population through migration from rural - urban, agriculture - non-agricultural
activities, is basically positive phenomenon. Farming in this way frees agrarian overpopulation,
reducing the agricultural population to the use of modern means of production in agriculture and
non-agricultural growth - expanding urban populations and increasing market demand for
agricultural products, which are all beneficial effect on the development of agriculture. However, if
the migration from agriculture - non-agricultural activities take place too rapidly, chaotically
disorganized and they often have adverse implications for the situation in agriculture and rural areas
in Serbia. Since leaving agriculture mainly young people, who are easier to manage and adapt to
urban living conditions, leads to aging-increasing share of the village. Male population also largely
abandoned agriculture and countryside, and agriculture remains the female labor force - the
feminization of agriculture and rural areas. Employment in non-agricultural sectors of the population
also leaves adverse effects in urban areas are experiencing a problem resolving housing issues,
school children and others. The agricultural population is often no suitable training, does not have
work discipline, hard to adapt to the industrial mode of production. The main methods used for part
of the income from agriculture in order to provide funds for the development of other industries,
especially industries are low-depression prices of agricultural products; tax policy, with progressive
tax rates and levies are taken from farmers for import of means of production and other products
that are used by farmers and rural population activities.

2. 5. Agriculture as the internal market for products of non-agricultural activities

With the overall economic development, agriculture and developing countries because there is no
economically developed and underdeveloped agriculture, and vice versa. With the development and
intensification of agriculture in increasingly use modern means of production that are produced in
other industries: the means of machinery, transportation equipment, chemicals (fertilizers,
pesticides and livestock) feed and others. Increase income of farmers and rural people, they use
durable goods for domestic industrial origin (home furniture, radios and televisions, refrigerators,
washing machines and judgment, cars, etc..), Building materials, clothes, shoes, etc. . In this way,
agriculture and the countryside is becoming a significant segment of the internal market of each
country. So to a certain rate of economic development industry supports the development of
agriculture, among other things, to provide markets for their products.

2. 6. Agriculture as a source of working-age population for other activities

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Other activities later were built mainly in the framework of agriculture, the social division of labor
from these facts and others that the population of rural population of the City Council and that the
conditions of life and work in urban areas better than rural, farming is emerging as a source of labor
force for the development of non-agricultural activities. Of economic development is changing socio-
economic structure of the population in which the agricultural population is constantly decreasing in
absolute and relative terms. Because of the weak accumulation is slower in agriculture create jobs so
that the agricultural population permanently underemployed and so present. Latent - agrarian
overpopulation. As soon as the opportunity arises agricultural population is ready to abandon
farming and seek employment in other industries.

2 .7 . Agriculture and rural areas as well as broader economic technological social factors

Agricultural production is organized mainly in rural areas, she, especially in some periods
"associated with" a significant part of the population, direct agricultural producers and others.
Agricultural and rural population is an important economic potential as a producer and
consumer of material goods but also an important socio-political factor. Farmer, farmer's
noble because farmers engaged in Production of food, which is a condition of human
existence. From the attitude of society towards agriculture, its economic position of social
and political status of farmers depends largely on the socio-economic and political stability in
almost every country. Agricultural and rural populations are the guardians of the fundamental
values of a nation: customs (social, economic, religious) morality, patriotism,
broadmindedness, honest attitude to work, democracy. The village and the creative potential
of the peasantry almost every nation is not surprising that the great minds were of peasant
origin, people "healthy farmer's mind."

3. BASIC QUESTIONS THE STUDY OF AGRICULTURE AND RURAL

AREAS GOING TO MEET THE FUTURE DEVELOPMENT TRENDS
In the study of agriculture and rural areas it is necessary to take into account the whole socio-
economic development process. This requires the application of relevant methods and
procedures for analysis and synthesis, achievements and related controversies. On this basis,
it is possible to establish reliable knowledge about the laws of synthetic mutual development
of agriculture and other economic activities. It should be assumed that the village is
becoming broader and more significant segment of the overall socio-economic and
technological development.

Unlike the villages in the past was destined mainly for agricultural development in modern
conditions, especially in developed countries, it develops the reciprocity of certain businesses, and
there are much wider economic and social structure.

In reviewing the material basis of new opportunities and rural development and agriculture in
the future, despite the impact of the crisis characteristics manifested in the last few years, it is
necessary to take into account developments in the period up to the nineties, and the
possibility of optimizing the routing of development at the achievements of scientific-
technical and technological progress.

Despite the relatively rich statistical material that is offered by the official statistical services are

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lacking comprehensive studies performed on the socio-economic changes in rural areas and in
agriculture.

In previous approaches to the analysis of global changes in the number and structure of farms and
agriculture in their possession are not comprehensively studied legality, development specificity and
contradictions. Because no comprehensive capture the socio-economic content demonstrated
tendencies and changes it was not possible to predict the process of rural development and
agriculture in the future of Serbia.

4. THE INSIGNIA OF THE VILLAGE IN SERBIA 2010

In Serbia in 2010 as 4600 villages, 86% saw a drop in population, less than 100 inhabitants has 702
villages, a list of the total 50,000 villages abandoned houses, you only need 15 years to another 700
villages left without inhabitants. Na145ooo house they live in 260 000 men who approached 5
decades, and they started a family. Necessary 20 years to disappear a quarter of the total number of
villages. Agricultural benefits generated 183,000 farmers amounting to only 9000 dinars, 38 percent
are poor than 700,000 poor 43% in south-eastern Serbia. For half a century, from 1950 to 2000 from
the villages to the cities crossed the 8 million people in the former PI, and in the world for such a
process would require 120 to 150 years in Serbia every year more die than are born around 33,500
people disappear after a great place, and if this continues Serbia 2060 will have a population of 1.6
million, and 2225 will be more of us If this trend continues.

The intensification of the social division of labor and diversification of economic activities for the
benefit of industry, contributed to all areas in Serbia significantly intensify the employment of
working-age population in non-agricultural sectors, especially in cities and agglomerations.

Observed in Serbia as a whole, total employment increased from about 1111 thousand in 1960. to
about 2611 thousand economically active population, or 236% in 1985. year. Parallel to this process
was the process of outflow of the working age population and labor force, particularly the youth,
agricultural and non-agricultural activities in the villages and towns.The relation to the population
growth of agricultural migrant population in and Serbia, an increase of 110% in 1960. year to 152%
in 1969. year or approximately 230% in 1981. year. Significant drain on the economically active
population in agriculture is still remained in the countryside on agrarian households. As a result of
these strands in the period in all regions of Serbia are constantly decreasing and the relative
influence of a number of agricultural populations. According to data from the 2002 total agricultural
almost one-third of the population older than 55 years and is engaged in agriculture, 10.9 percent of
the total population of 817,000 people. Reduction of labor in agriculture may threaten production,
and thus the country's economy, the livelihoods of the population. And prices of agricultural
products. Aspects of agricultural production with the age structure are unfavorable, which affects
not only the development but also the performance agricultural business. Comparison with
developed countries Serbia educational level is still very low.

Paperback issue of land reclamation authors treated quite simplistic and piecemeal. More analyzes
short-term effects of this process on developments in agriculture. Insufficiently studied its socio
economic significance within the overall agricultural development policy. It is not disputed that,
which otherwise frequently emphasized that Serbia belongs to the group of countries that have had
the fastest process of reorganization of the agricultural population in the world. It is disputed,

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however, that, in assessing the socio-economic results deagrarizacija often emphasize only it’s the
apparent contradictions in a spontaneous event. Without going into the whole agricultural
development factors, including the economy, too much emphasis on the negative impact of land
reclamation. Takes is that "excessive" population inflow into non-agricultural activities on one side
caused unproductive employment in industry and other non-agricultural sectors, while on the other
abandoned significant production, especially natural resources in rural areas. Such understanding is
a great theoretical misleading, because it is known that the natural conditions are very one-sided
and extensively used in the right circumstances underdeveloped agrarian economy and large
population.

In such circumstances, since the majority of agricultural production properties of natural wealth is
not even noticed, much less productive and socio-economically expedient and rationally used. This
can be realized only by assuming the extent to which the reduced agricultural population in which
the leaves and Semi-subsistence production.

According to the second approach results in land reclamation in the country last years with all
its attendant contradictions and even with some uncontrolled marks, have extremely large
socio-economic and developmental significance. Based on the so far achieved deagrarization
created qualitative and quantitative socio-economic implications not only for intensive and
productive agricultural development, but also for industrial and overall economic
development, based on the increasing use of scientific and technological achievements. In
this connection it should be noted that they are technologically modern and contemporary
forms of agricultural production, industrial in character. Through them all on a larger scale
achieved integration and connectivity of agriculture and industry, and other industries.
The speed and efficiency of introducing natural sound technologies in the commercial and economic
sectors outside of urban areas must be based on the overall development policy of the company.

In particular, it must focus comprehensively scientific and technical progress. This line of preventive
environmental protection is a decisive strategic role sustainable application development method
for the effective protection of the environment, especially in urban areas.

It is particularly important to provide for incentives to intensify scientific and technological

research as the basis of technological and environmental transformations of urban areas and
the society at large. Develop and implement policies for sustainable development of urban
areas in the immediate environment on quality of human resources activities. To this end it is
necessary to develop an efficient system of education and professional and scientific staff, the
principles set out in the Bologna Declaration, the European vision of education and highly
skilled scientific staff.

5. INFLUENCE OF INTEGRATION OF CENTRAL AND EASTERN EUROPE AND

THE POSSIBILITY OF ADAPTING OUR COUNTRY TO NEW MARKET
CONDITIONS

With the expansion of the internal market integration in Central and Eastern Europe (10) in 2004.
The Balkan countries as expected 2010th year, it is reasonable to expect significant changes in the
economic and development capabilities integrated EU.

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Agriculture is much more important economic sector in the CEE-10 than in the EU-15, so that the
association of these countries will be a significant increase of the agricultural sector in the enlarged
EU. This will cause a change in the economic structure in favor of agriculture. The significance of this
trend stems from the time of the CIE which makes the transfer of income from the rest of the
economy to boost agriculture. In the first wave of enlargement with the five countries of CEE

Estonia, Poland, Czech Republic, Hungary and Slovenia) agricultural land in the EU will increase by
23% and the number of farmers will increase by 55%. This will come to the fore with the integration
of new countries in the EU in 2007. In addition, the high level of prices contained in the current CAP
would have a strong impact on low-income populations in CEE countries, which on average spend
36% of income on food. This level of producer prices contributed to the increase of income of the
rural population compared to other sectors, which is not fair.

The latest reform CIE will lead to lower market prices of these products. Will be reduced and prices
for products such as pork, poultry, eggs, and also there will be a price drop of competitive products,
such as sheep meat. Lower market prices of food products induce lower costs of food, which implies
that consumers will greatly benefit from the reform of the CIA.

However, the reform will lead to CIE increased costs due to additional direct payments to producers.
Distribution charges vary for different sectors and products. In field crops changes are likely to
reduce costs, in part because of falling rates of direct payments for oilseeds, and partly because of
anticipated rapid increase in spending on intervention stocks of cereals.

Lower prices of agricultural products provided new CIE reform will lead to a reduction in the gap
between prices in the EU and CEE and the Balkans, which will greatly facilitate their integration, but
will increase the amount of direct payments to producers, which, at the time of enlargement made
significant pressure on EU budget.

CONCLUSION
The concept of sustainable agriculture means an integrated developmental care, which is planned
and organized. The current socio-economic development of agriculture characterized by extremely
reckless and irresponsible attitude towards nature, due to the uncontrollable desire for excessive
increasing material wealth, has led humanity into a dangerous situation and it really serious fear for
their future, quality of life and, ultimately, the survival of the planet. Thus developed social
consciousness of the necessity of a rational and moderate use of natural resources and bringing
economic development opportunities in line with the natural environment. Development problems
of humanity, in the new environmental paradigm, since globalization observed at the level of the
entire planet, which is a major step forward in terms of the survival of civilization, implements and
controls as an integral part of every human activity.

REFERENCES
1 skripta pr .dr. Jeremija Simovic

2 statistika sela u Srbiji 2010-Beograd

3 .organizacija i ekonomike poloprivrede pr. Dr Randelovic Beograd 2000god.

4 centar za demograska istrazivanja , Beograd

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 THE DEVELOPMENT ROLE OF MICROCREDITING SMALL
BUSINESS IN VOJVODINA

Zoran Najdanovic1 PhD

Luksa Lulic2 PhD

Summary:

In the economic development of each country, as well as in employment, small

business and crafts have the primary role. In developed world countries over 90
percent of the overall economicy are small business and trades with up to ten
employees. After going throught administrative diffilcuties entrepreneurs in
establishing and operating the start, there is the problem of financing the
development of the microenterprises. Due to financing problems of the small
enterpreneurs the European Commitee has defined the term of microcredit loans as
ones that don't exceed 25k, however EU members can also reduce the amount due
to the height of its GDP compared to the EU average, while approving of them can
microcredit organizations established with the objective of micro entrepreneurs,
artisans and the poor population, all in to increase employment and higher living
standards.

1
VPSZ, Ulica grada Vukovara 68, Zagreb, Croatia,
zoran.najdanovic@gmail.com
2
Hrvatska elektroprivreda, Zagreb, Croatia

Page 130
1. SUMMARY
1.1. Scope and Purpose
1.2. The purpose of the research
1.3. Research Hypothesis
1.4. Research Methodology

2. MICROCREDIT
2.1. The term of microcredit
2.2. Microcrediting in the world
2.3. The need for legislation
2.4. Development impact of the microcrediting organizations to a small business

3. PRIMARY RESEARCH RESULTS

4. CONCLUSION

5. REFERENCES

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1.1. Scope and Purpose

With Microcrediting in Serbia being completely neglected, i.e. undeveloped,

and legislation taking for many years the primary purpose of this work is to show the
how important role of microcredit is in the development of small business.

1.2. The purpose of the research

The biggest driver of any economy, whether it is about the economy of

developed countries or countries still in development, is a small economy. It
encompasses most of the businesses in the country, which often exceeds the
proportion of ninety per cent of the total enterprises of each country. There is a very
small number of entrepreneurs on their beginnings who have access to credit from
the financial sector, the purpose of the research is to demonstrate the importance of
creating their own regulatory framework for microcredit, and the impact of
microcredit on the development of small business.

1.3. Research Hypothesis

By enabling the legal framework in MFIs business, we will provide financial

resources for entrepreneurs beginners, who will start their entrepreneurial ideas,
there will be a self-effect, i.e. a reduction of unemployment, and thus raise living
standards.

1.4. Research Methodology

For the purposes of this study uses the results of primary research conducted
on a representative sample of 1000 people in Bosnia and Herzegovina under the title
"The inclination to take a loan to start a business" and secondary the existing data
sources.

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2.1. The term of microcredit organisations

The microcredit term must be restricted to the definition of the European

Commission (EC), which is strictly determined by the amount of micro-credit loan
that must not exceed the amount of 25,000 EUR, with the fact that members of the
European Union might reduce the amount due to the comparison of the own GDP
amount to the EU average.
Although the European Union's social protection that has been at the very top of the
world, still 25% of the developed western Europe have no access to the formal
financial sector, and their business ideas are being funded through microcredit.
Microcredit organizations are defined as institutions that provide microcredit to
households with low or irregular income, self-employment and similar groups that
have no access to bank loans.
Globally global microcrediting is a project that aims to create a network of financial
institutions in which the poorest would have access to a variety of financial services,
to reduce poverty and raise living standards.
Microfinance services include not only microcredit, but also savings, insurance,
money transfers and related financial services.
Microcrediting as such is recognized worldwide as one of the most important
instruments for reducing poverty and creating jobs.
Unlike banks that are requiring guarantee with a clear owner, and ensuring that
many households don't have it, microcredit organizations are focused just on that
segment of the population. What is specific for microcredit organization is the fact
that loans are disbursed in stages, from small loans to start business with a client, to
an increase in the later stages of the business. Between 60-70% of microcredit
beneficiaries upon payment of the first loan takes a larger second loan and
continuing with using the services of a microcredit organization. After several cycles
of microcredit, their users become creditworthy and the use of larger bank loans.

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2.2. Microcrediting in the world
The Historz of microfinance encounters back in the 17-th century in Ireland.
Jonathan Smith started granting loans for the improvement of the first trades that
helped artisans who are in financial straits. Instead of having the guarantors
craftsmen could guarantee that the neighbors are honest, diligent, hard-working and
so on.

One of the first names linked to microcredit, which is kept up to date is that of
Raiffeisen. In 1864 social reformer Friedrich Wilhelm Raiffeisen founded the
Agricultural Bank, that gathered farmers and artisans from different villages along
the joint responsibility of parent cooperatives where they belonged.
Some members of cooperatives were guaranteed for other members who have taken
loans from a bank and thus increase the credibility and credit worthiness of each
borrower.
Raiffeisen model soon spread to all the German-speaking world, and in 1902 there
was established an alliance Raiffeisen banks in Switzerland. After that credit unions
called Credit Mutuel established in France and other parts of the world.

Yet most of today's modern microcrediting in the world had Professor Yunus from
Bangladesh. In the early seventies of the last century he had started the project of
financing women in Bangladesh, one of the poorest countries in the world, to include
credit incompetent women to start cottage industries and crafts, and thus raise the
standard of living for their families.
Project Professor Mohammad Yunus over the years has expanded to all regions of
the world and became the project financing of the poor in all parts of the world.
Some thirty years after commencement of microfinance in Bangladesh, Grameen
Bank established (Land Bank), Professor Yunus was awarded the Nobel Prize, and
the UN Declaration of the 2005 was declared the Worldwide year of Microcrediting.
Today Grameen Bank in Bangladesh has more than eight million customers, mostly
women, who microfinance projects saved from poverty and hunger.

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Having said that, there’s still 5% of the world's poor participating in the microfinance
project.

2.3. The need for legislation

If we take in consideration the situation in the Republic of Serbia, we will

recognize that unemployment is still a great, and economic growth is very low.
Unemployment is evident especially in the rural areas. More than 40% of the
population has no access to bank loans, which makes them unfit and thus makes
unable for a promotion or start their own enterprise. Most banks in Serbia are not
willing to provide services to entrepreneurs beginners. In comparison with
neighboring Bosnia and Herzegovina, where for a long time now is a law on
microcredit organizations, in Serbia something like that could be awaited for a long
time. Even at first glance there is a demonstration of a fascinating fact that 10.4% of
the adult population in BiH are being funded through a local microcredit organization,
and it should be sufficient to run the activities. Also, Croatia has a longstanding laws
of Microcrediting through the Savings and Credit Cooperatives of the early nineties,
to the Credit Unions Act harmonized with the EU.. Regulatory authorities in Serbia
need to perceive the inability of banks to finance the poor population and novice
entrepreneurs, if not from their own decisions due to increased costs of granting
small loans, then from the decision of the National Bank of Serbia, which determines
the required provisions. Foreign funds and other investors are waiting for the legal
regulation of the microfinance market in Serbia, as well as the implementation of the
of the European Commission definition that defines microcredit as a means of
financing micro-enterprise hence puts them in disadvantage.

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2.4. Development impact of the microcrediting organizations to a small business

The impact of microcredit organizations is clearly defined through previously

mentioned UN Declaration from 2005 when it was declared as the year of microcredit
in the world and the European Commission's guidelines that defined their role in the
economy. It was defined that the purpose of microcredit is to serve people who are
in disadvantage in the banking system and don’t have the conditions for taking the
loan. Persons with this disadvantage were mainly unemployed, refugees, displaced
persons, invalids, pensioners and similar categories of people.
For banks unsatisfactory criteria represents even the people who have owned the
property, i.e. house, land, etc., but not listed in the registry of property, which is in
the region often are, especially when it comes to rural areas.
In the countries of the European Union average microcredit is between 7.000 and
7.500 EUR, while in Serbia is only between 800 and 1.000 EUR. Specifically for such
low amounts of loans is obvious that those banks are not able to approve a number
of reasons, the most important increase in operating costs, and thus a negative
impact on the operating result. For those types of loans there has to be a legal
framework for microcredit operations.
The impact of microcredit organizations itself , starting from this is extreme,
especially in terms of small businesses, so-called microenterprises in the European
Union accounts for over 90% of the total number of enterprises. Starting position of
these undertakings would extremely improve their access to financing, and since it
was not possible in the banking sector, the only quality alternative to the microcredit
organization.
As already indicated that more than 40% of the population has no access to bank
loans, the number of entrepreneurs who start or enhance their entrepreneurial
venture is extremely large.
Percentage of people who would like to get to the source of funding for your
business project, but don’t have an access to bank loans, and that the self employed
and every member of your family can be seen in the next section of this paper the
results of primary research conducted in BiH on a representative sample of 1100
respondents named "Willingness to raise loans to start their own business."

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3. PRIMARY RESEARCH RESULTS

Almost one third of respondents in Bosnia and Herzegovina (30%) is ready to raise a
loan for starting a job, if offered the chance to do so. The interesting fact is that
there is around 7% of respondents that were not sure whether to take advantage of
the possibility of a loan to start a business.

Page 137
The majority of respondents (26%) were planning to launch a business and hire a
family member. Only about 8.4% of the respondents would not employ any of the
members of his family if he began business.

G RAF 3.

As we can see from above Chart 5, when starting a business respondents are
planning to hire from 1to 3 people.

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4. Conclusion

In Republic of Serbia it is very important to rapidly grasp the importance and

role of microfinance as a global project to reduce poverty, create job opportunities of
self-employment project.
How small businesses accounts for over 90% of the total number of entrepreneurs,
their establishment, survival and development requires an alternative to bank loans
since current access is highly restricted.
By improvement of small businesses we are building a stronger economy and we
encourage its growth, thereby create a healthier and better society as a whole.

5. References

(1) Tomašević Lišanin, M.: "Bankarski marketing", Informator, Zagreb, 1997.

ISBN 953-170-045-1
(2) Zelenović, V.: "Marketing u bankarstvu", Kopi komerc, Novi Sad, 2008.
ISBN 978-86-97277-03-8
(3) Grandov, Z., Međunarodna ekonomija i globalizacija, BTO, Beograd, 2009.
(4) Hrvatska narodna banka (www.hnb.hr)
(5) Kotler, P., Upravljanje marketingom, Informator, Zagreb, 1999.
(6) Kotler, P., Marketing management, New Jersey, 1994.
(7) Leko, V., Bankarski rječnik, Masmedia, Zagreb, 1999.
(8) Marušić, M., Vranešević, T., Istraživanje tržišta, Zagreb, 2001.
(9) Najdanović, Z., Istraživanje imagea banaka i bankarske ponude, Zagreb, 2000.
(10) Rocco, F., Poslovni marketing, Školska knjiga, Zagreb, 1998.

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 Управљаое прпфитпм у банкама у ризичнпм пкружеоу
прпф.др Предраг Јпванпвић
Државни универзиуеу у Нпвпм Пазару
pjovanovic@np.ac.yu

Апстракт: Нпви уурбуленуни пднпси на макрп и лпкалнпм плану услпжоавају ризишне сиууације у кпјима се банка, пп прирпди свпга
ппсла, и инаше налази, па све уп намећу банкама преиспиуиваое циљевa, пплиуика, сурауегија, уакуика, щуп иницира и ппуребу
другашијег и кпмплекснијег управљаоа ппслпвима. Гпвпрећи глпбалнп п ппслпвнпм успеху, када је реш п банкама и другим
финансијским инсуиууцијама кпје пружају услуге у банкарсуву, мислимп на уп да се ппслпвни успех пднпси на шиоеницу да банке и ли
друга финансијска инсуиууција мпгу адекваунп да испуни циљеве свпјих акципнара ( депнишара ), заппслених, деппзиуара и других
кредиупра, кап и да преппзнају уржищне ппуребе.
Најважнији ппказауељи банкарске прпфиуабилнпсуи кпје банке кприсуе су: ROE (принпс на акципнарски капиуал), ROА (принпс на
акуиву), неуп камауна маржа , некамауна маржа, неуп банкарска пперауивна маржа, зарада пп депници, иуд. Кап и сви финансијски
ппказауељи, пви ппказауељи прпфиуабилнпсуи варирају крпз време, разлишиуп пд уржищуа дп уржищуа. Ппказауељи
прпфиуабилнпсуи, везани за исказиваое пднпса неуп принпса ппсле пппрезиваоа и укупнпг власнишкпг капиуала, пднпснп укупне
импвине, су и даље најбпљи сурпгау за индикаупре уржищних вреднпсуи, у слушају да се акције дпмаћих кпмпанија не кпуиуају на
дпмаћим и сураним финансијским уржищуима, щуп је данас, углавнпм, у Србији слушај.
Неразвијенп финансијскп уржищуе пмпгућава банкарскпм секупру у Србији виспке камауне марже, ппсебнп највећим банкама, кап и
виспке индикаупре прпфиуабилнпсуи. Меначмену највећих банака , измећу псуалпг, знашајнп кприсуи ппвпљне мпгућнпсуи финансијске
пплуге и ангажпваоа ууђих средсуава у Србији у циљу сувараоа већег неуп прпфиуа.
Будући развпј ппдразумева даље укрупоаваое банака у Србији, развпј дпмаћег финансијскпг уржищуа, кап и пкреуаое и сураним
финансијским уржищуима, щуп мпра кпд дпмаћих банака да развије капациуеуе да се упусуе у сурпжије услпве надмеуаое на
финансијскпм уржищуу. Сурпжији услпви надмеуаоа на финансијскпм уржищуу дпвещће и највеће дпмаће банке дп свпђеоа
индикаупра прпфиуабилнпсуи на нивпе индикаупра прпфиуабилнпсуи банака у развијеним земљама.

Кључне речи:банкарски сисуем, индикаупри прпфиуабилнпсуи,финансијскп уржищуе

Profit management in banks in risky environments

Abstract: New relations in the turbulent macro and local level imposed banks to review their objectives, policies, strategies, tactics, and the
need for different and complex management of their jobs. When we talk about business success, when we talk about banks and ot her financial
institutions that provide services in banking, the business success related to whether banks or other financial institution t hat can adequately
meet the objectives of its shareholders (shareholders), employees, depositors and other creditors, as the id and recognize market needs.
The most important indicators of bank profitability, which banks use the ROE (return on shareholders' capital), ROA (return on assets), net
interest margin, no interest margin, net banking operating margin, earnings per shares, etc.. As with all financial indicators, these indicators of
profitability may vary over time, varies from market to market. Profitability indicators, related to the demonstration of net returns after tax and
total proprietary capital, and total assets, SUI still the best surrogate for the indicators of market value, in the event that the shares of domestic
companies not listed on the domestic and foreign financial markets, which is mainly in the case of Serbia. Underdeveloped financial market
enables the banking sector in Serbia high interest margin, particularly the largest banks, as well as indicators of high profitability. Management
of the biggest banks, among other things, significant use of financial leverage and the possibility of engaging others in the order to create a
larger net profit. Since development means more merging banks in Serbia, the development of domestic financial markets, as well as turning
and stop the financial markets, which must be in local banks to develop the capacity for the stricter conditions of competition in the financial
market. Stricter conditions of competition in the financial market and bring the largest domestic bank profitability indicators to reducing the
levels of indicators of profitability of banks indeveloped countries.

Key words: banking system, the indicators of profitability, financial market

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 Кризне пкплнпсти у ппслпваоу банака

Свака банка се у свпм ппслпваоу неминпвнп сусреће са разлишиуим врсуама ризика из кпјих
мпгу прписуећи негауивни ефекуи на ппслпваое банке. Управљаое ризицима у банкарскпм
ппслпваоу пбухвауа иденуификпваое, мереое и прпцену ризика с циљем минимизираоа
оихпвих негауивних ефекауа на финансијски резулуау и капиуал банке. Банка је дужна да пбразује
ппсебну прганизаципну јединицу у шијем је делпкругу управљаое ризицима. Такпђе, банка је
дужна да свпјим акуима прппище прпцедуре за иденуификпваое, мереое и прпцену ризика, кап и
за управљаое ризицима.
Ризици кпјима је банка нарпшиуп излпжена у свпм ппслпваоу су: ризик ликвиднпсуи, кредиуни
ризик, уржищни ризици (камауни ризик, девизни ризик и ризик пд прпмене уржищне цене харуија
пд вреднпсуи, финансијских деривауа и рпбе), ризици излпженпсуи банке, ризици улагаоа банке,
ризици кпји се пднпсе на земљу ппрекла лица према кпме је банка излпжена, пперауивни ризик,
правни ризик, репууаципни ризик и сурауещки ризик.Ризик ликвиднпсуи је ризик мпгућнпсуи
насуанка негауивних ефекауа на финансијски резулуау и капиуал банке услед несппспбнпсуи банке
да испуоава свпје дпспеле пбавезе.Кредиуни ризик је ризик мпгућнпсуи насуанка негауивних
ефекауа на финансијски резулуау и капиуал банке услед неизврщаваоа пбавеза дужника према
банци.
Тржищни ризик пбухвауа камауни и девизни ризик.Камауни ризик је ризик мпгућнпсуи
насуанка негауивних ефекауа на финансијски резулуау и капиуал банке услед прпмене камауних
суппа.Девизни ризик је ризик мпгућнпсуи насуанка негауивних ефекауа на финансијски резулуау и
капиуал банке услед прпмене девизнпг курса.Ппсебну врсуу уржищнпг ризика предсуавља ризик
пд прпмене уржищне цене харуија пд вреднпсуи, финансијских деривауа или рпбе кпјпм се ургује
или се мпже ургпвауи на уржищуу.Ризици излпженпсуи банке пбухвауају ризике излпженпсуи
банке према једнпм лицу или према групи ппвезаних лица, кап и ризике излпженпсуи банке
према лицу ппвезанпм с банкпм.Ризици улагаоа банке пбухвауају ризике оених улагаоа у лица
кпја нису лица у финансијскпм секупру и у пснпвна средсува.Ппд ризицима кпји се пднпсе на
земљу ппрекла лица према кпме је банка излпжена (ризик земље) ппдразумевају се мпгући
негауивни ефекуи на финансијски резулуау и капиуал банке збпг немпгућнпсуи банке да наплауи
ппураживаоа пд пвпг лица из разлпга кпји су ппследица пплиуишких, екпнпмских или спцијалних
прилика у земљи ппрекла упг лица. Ова врсуа ризика пбухвауа пплиуишкп-екпнпмски ризик и
ризик урансфера.Операуивни ризик пднпси се на мпгућнпсу насуанка негауивних ефекауа на
финансијски резулуау и капиуал банке кпји су ппследица прппусуа у раду заппслених,
непдгпварајућих инуерних прпцедура и прпцеса, неадекваунпг управљаоа инфпрмаципним и
другим сисуемима, кап и услед непредвидивих ексуерних дпгађаја. Правни ризик предсуавља
мпгућнпсу насуанка губиуака услед казни и санкција прписуеклих из судских сппрпва пп пснпву
неиспуоаваоа угпвпрних и закпнских пбавеза, кап и услед казни и санкција изрешених пд суране
регулаупрнпг уела.Репууаципни ризик се пднпси на мпгућнпсу насуанка губиуака услед негауивнпг
ууицаја на уржищнп ппзиципнираое банке. Сурауещки ризик се пднпси на мпгућнпсу насуанка
губиуака услед неппсупјаоа дугпрпшне развпјне кпмппненуе у управљашкпм и рукпвпдећем уиму
банке.

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 Екпнпмска и финансијска криза у свеуу, ппремећаји у ппслпваоу финансијских уржищуа, кап и
прпблеми у банкарскпм ппслпваоу, дпдаунп услпжоавају ппуенцијалне ризике у ппслпваоу и
намећу ппуребу урансфпрмисаоа екпнпмскпг и финансијскпг сисуема у земљама са уржищним
привређиваоем. Кпмплекснпсу банкарскпг сисуема, кпји је у фпкусу нащих размаураоа, је и у
упме щуп на оегпвп ппслпваое ууишу брпјни и разнпврски факупри: пплиуишки пднпси и прпцеси у
свеуу, екпнпмскп-финансијски разлпзи, прпмене и инпвације банкарских прпизвпда, мпуиви
ппслпвне и правне сигурнпсуи деппзиунп-кредиуних ппслпва, прпмене мпуива и нашина ппнащаоа
кпмиуенауа банке, мера макрпекпнпмске пплиуике држава иуд.
Дугпгпдищои уренд у банкарсуву везан за прпцес глпбализације, дерегулације,
инуернаципнализације и ресурукууираоа банака, дпведен је у пиуаое у услпвима кризе, када
имамп на делу дирекуну државну инуервенцију, у циљу спрешаваоа суешаја и ликвидације банака
пд ппсебнпг инуереса за функципнисаое екпнпмскпг сисуема, а ради предупређеоа негауивнпг
ланшанпг ефекуа u екпнпмији, па се разним државним мерама ппкущава да неууралище
драсуишнп смаоиваое друщувене прпизвпдое, пупущуаое радника а уиме пшува екпнпмски
ппуенцијал земље и пдржи спцијални мир.
Нпви уурбуленуни пднпси на макрп и лпкалнпм плану намећу банкама преиспиуиваое свпјих
циљевљ, пплиуика, сурауегија, уакуика, кап и ппуребу другашијег и кпмплекснијег управљаоа
свпјим ппслпвима. Гпвпрећи глпбалнп п ппслпвнпм успеху, када је реш п банкама и другим
финансијским инсуиууцијама кпје пружају услуге у банкарсуву, мислимп на уп да се ппслпвни
успех пднпси на шиоеницу да банке или друга финансијска инсуиууција мпгу адекваунп да испуни
циљеве свпјих акципнара ( депнишара ), заппслених, деппзиуара и других кредиупра, кап и да
преппзнају уржищне ппуребе.

Прпфитабилнп ппслпваое у функцији максимизираоа вреднпсти банака

Ппсупји јаснп изражена кпрелација између прпфиуабилнпг ппслпваоа фирме и оене вреднпсуи,
па су и акуивнпсуи меначменуа фирме кљушнп усмерене ка сувараоу дугпрпшних услпва за
убираое прпфиуа. [Јпванпвић, П., 1998] Меначмену банке управља свпјпм акуивпм и пасивпм
ради псувареоу највећег мпгућег прпфиуа. У упм ангажпваоу меначер банке има шеуири пснпвна
задаука: [Mishkin, S.F., 2006 : 208]
- да пдржава ликвиднпсу банке,
- да управља акуивпм банке,
- да управља пасивпм банке,
- да управља капиуалнпм адекваунпщћу.
У свпм ппслпваоу банке се мпрају држауи пдређених нашела ппслпваоа укпликп жели да
раципналнп ппслује и да се пбезбеди пд ппуенцијалних ппслпвних ризика:
- нашелп ликвиднпсуи,
- нашелп ефикаснпсуи улагаоа и сигурнпсуи пласмана,
- нашелп ренуабилиуеуа ппслпваоа. [Ђукић, Ђ., Бјелица, В. , Рисуић,Ж., 2006: 7]
Нашелп ренуабилнпсу ппслпваоа банке у себи сублимира и изражава целину екпнпмскпг
инуереса банке да псувари щуп већи прпфиу у пднпсу на улпжени капиуал.

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 Прпфиуабилнп ппслпваое банке је у функцији максимизираоа вреднпсуи банке, щуп је и
кљушни циљ за скпрп све финансијске инсуиууције. Укпликп дпђе дп неуспеха меначменуа банке у
ппдизаоу вреднпсуи акуиве банке, у складу са пшекиваоима акципнара, уренууни инвесуиупри
мпгу да ураже да се ппвуку оихпве акције, а пнда би банка имала уещкпће у прикупљаоу нпвпг
капиуала ппуребнпг за будући расу и развпј банке.Кап пдгпвпр на уај изазпв меначмену насуавља
акуивнпсуи са циљем максималнпг расуа вреднпсуи акције кпнкреуне финансијске инсуиууције.
Цена акције сваке финансијске инсуиууције је функција (Рп), кпја се израшунава на следећи нашин:

Вреднпсу банкарске Ошекивани прилив ∞

акуиве(Рп) = дивиденди акципнара = ∑ E(Dt)

¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ t=o ¯¯¯ t

Ескпнуни факупр (базиран (1 + r )
на минималнпј ппуребнпј уржищнпј
камаунпј суппи на акцијски капиуал
са дауим нивппм ризика сваке банке

где E(Dt) предсуавља дивиденде акципнара кпје уреба да буду наплаћене у нареднпм перипду,
ескпнупване пп минималнп прихвауљивпј суппи прихпда (r) везаним са банкарски прихвауљивим
нивппм ризика.. Минималнп прихвауљива суппа прихпда r, ппнекад се пднпси на урпщкпве
капиуала инсуиууције и сасупји се пд две главне кпмппненуе: (1) камауне суппе без ризика (шесуп
ппказауељ уекућег прихпда пд државних пбвезница) и (2) премија за ризик акцијскпг капиуала
(кпји је прпјекупван да кпмпензује инвесуиупру прихвауаое ризика улагаоа у банку или друге
кпрппрацијске пбвезнице пре негп да улаже у харуије пд вреднпсуи кпје не нпсе ризик). [Rose S.P.,
Hudgins C.S. , 2005 : 145]

Најважнији ппказатељи банкарске прпфитабилнпсти

Најважнији ппказауељи банкарске прпфиуабилнпсуи кпје банке кприсуе су: ROE (принпс на
акципнарски капиуал), ROА (принпс на акуиву), неуп камауна маржа , некамауна маржа, неуп
банкарска пперауивна маржа, зарада пп депници, иуд. Кап и сви финансијски ппказауељи, пви
ппказауељи прпфиуабилнпсуи варирају крпз време, разлишиуп пд уржищуа дп уржищуа.
Ппказауељи прпфиуабилнпсуи, везани за исказиваое пднпса неуп принпса ппсле пппрезиваоа и
укупнпг власнишкпг капиуала, пднпснп укупне импвине, су и даље најбпљи сурпгау за индикаупре
уржищних вреднпсуи, у слушају да се акције дпмаћих кпмпанија не кпуиуају на дпмаћим и сураним
финансијским уржищуима, щуп је данас, углавнпм, у Србији слушај. У класишнпј лиуерауури за
финансијски меначмену уи пднпси су предсуављени пвакп: [Van Horne, C.J., Wachowicz,M.J.Jr,
2002.:140-142]
Принпс на улагаоа( ROI) = Неуп дпбиу ппсле ппреза
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупна импвина
Принпс на главницу( ROE) = Неуп дпбиу ппсле ппреза
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Акципнарски капиуал

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 Виспк принпс на акципнарски капиуал шесуп пдражава прихвауаое квалиуеуних инвесуиципних
прилика и ефикаснп управљаое урпщкпвима.. Али акп је предузеуник пдлушип да има нивп
задуженпсуи кпји је изнад суандарда делаунпсуи, виспк ROE једнпсуавнп мпже биуи резулуау
превеликпг финансијскпг ризика..
Декпмппнпваое кпефицијенуа ROE мпже се изврщиуи на разлишиуе нашине, зависнп пд ппуреба
меначменуа кпмпаније.
Рецимп, да бисмп деуаљније анализирали уај принпс, мпжемп уппуребиуи Du Pontov присууп-
пднпснп расуавиуи уу меру принпса на оене кпмппненуе :
Принпс на главницу (ROE) = Неуп дпбиу ппсле ппреза =
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Акципнарски капиуал

Неуп дпбиу ппсле ппреза Неуп прихпди пд прпдаје Укупна импвина

¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ x ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ x ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Неуп прихпди пд прпдаје Укупна импвина Акципнарски капиуал

ROE= Маржа нетп дпбити x Кпефицијент пбрта укупне импвине x Мултипликатпр акципнарскпг капитала
Кпд је вреднпсу акције, у уеприји, најбпљи ппказауељ ппслпваоа кпмпаније, јер пдражава
уржищну прпцену ппслпваоа, уај индикаупр шесуп није ппуздан у банкарсуву. Разлпг упме је да се
већинпм банкарских акција, ппсебнп акцијама кпје су издале мале банке, не ургује акуивнп на
међунарпднпм или дпмаћем уржищуу. Та шиоеница уера финансијске аналиуишаре да се врауе
наураг на сурпгауе за индикаупре уржищних вреднпсуи у пблику разлишиуих ппказауеља
прпфиуабилнпсуи.
Најважниј ппказауељи прпфиуабилнпсуи у банкарсуву кпји се данас кприсуе су ппказауељи ROE и
ROА, пднпснп принпси на власнишки капиуал и принпси на акуиву, кпји се исказују на следећи
нашин: [Rose S.P., Hudgins C.S. , 2005 ]
Принпс на власнишки капиуал (ROE) = Неуп прихпд ппсле пппрезиваоа
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупни власнишки капиуал
Принпс на акуиву (ROА) = Неуп прихпд ппсле пппрезиваоа
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупна акуива
Иакп је ROА примарнп индикаупр меначерске ефикаснпсуи, пн индицира кпликп је меначмену
бип сппспбан у кпнверупваоу акуиве у неуп зараду. ROE је, с друге суране, мера принпса кпји уеше
ка акципнарима банке. Тп апрпксимира неуп бенифиције кпје су акципнари примили пд
инвесуираоа свпга капиуала у банку (пласирајући свпја средсува с ризикпм, у нади да ће зарадиуи
пдгпварајући прпфиу).
Меначмену банке насупји да нађе најбпљи пднпс између принпса и ризика. Декпмппнпваое
ппказауеља прпфиуабилнпсуи банке пмпгућава да се пажоа усмери на кљушне кпмппненуе и уакп
ууврди сппспбнпсу меначменуа банке и заппслених да генерищу прихпд банке,пперауивну
ефикаснпсу банке,задуженпсу банке (финансијски леверич) и планираое банке, везанп за
испуоеое оених ппреских пбавеза. Декпмппнпван ROE ппказује да на оегпву велишину ууишу

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кпефицијену ROA и мулуипликаупр акципнарскпг капиуала , кпга шини пднпс укупне акуиве и
укупнпг акципнарскпг капиуала:
ROE = Неуп прихпд ппсле пппрезиваоа =
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупни акципнарски капиуал

Неуп прихпд ппсле пппрезиваоа Укупна акуива

¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ x ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупна акуива Укупан акципнарски капиуал
ROE= ROА x Мултипликатпр акципнарскпг капитала

Друга, врлп кприсна фпрмула прпфиуабилнпсуи кпја се фпкусира на ROE је:

ROE = Неуп прихпд ппсле Укупни пперауивни

пппрезиваоа x прихпди x Укупна акуива
¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯¯ ¯¯¯¯¯¯¯¯¯¯¯¯¯¯
Укупни пперауивни прихпди Укупна акуива Укупни акципнарски капиуал

ROE= нетп прпфитна маржа (NPM) x ппказатељ искпристивпсти активе(AU) x мултипликатпр

капитала(EM)

Свака кпмппненуа пвакп дефинисанпг ппказауеља ROE је ппказни индикаупр разлишиуих

аспекауа банкарских пперација ,щуп је видљивп на слици 1. Тп знаши да је пвај индикаупр дпбар
ппказауељ меначменуу банке за дијагнпсуицираое суаоа и ппкреуаоа планских акуивнпсуи.
Акп билп кпји ппказауељ ( неуп прпфиуна маржа, суепен искприсуивпсуи акуиве, мулуипликаупр
капиуала) пада, меначмену банке мпра хиунп да ууврди разлпге кпји ууишу на уу прпмену. Од пва
ури ппкатауеља мулуипликаупр капиуала (EM) највећи је у мнпгим банкама, пуприлике 15 пууа и
вище. Највеће банке ппслују са мулуипликауприма 20 или вище. [Rose S.P., 2003 : 164]
Мулуипликаупр је мера нивпа финансијске пплуге - кпликп акуива мпра биуи ппдржана пд суране
акципнарскпг капиуала и средсувима прписуеклим из задуживаоа банке.
Прпфиуна маржа (РМ) упућује на кпнурплисаое урпщкпва и максималитираое прихпда.
Пажљивим управљаоем пптицијама у банкарскпј акуиви у правцу смаоеоа ритика али и
ппвећаоа прихпда, меначмену банке ппвећава дпбиу везану за акуиву (AU).

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Слика 1. Елеменуи кпји пдрећују суппу дпбиуи банке зарађену на инвесуицијама акципнара у
банку (ROE)

Извпр:.Rose, S.P. (2003)

Закључак

У услпвима глпбалне екпнпмске и финансијске кризе, кпја услпжоава и пнакп ризишнп

ппслпваое банака, банкарски секупр насупји да пдржи прпфиуабилнп ппслпваое.
Свака банка се у свпм ппслпваоу неминпвнп сусреће са разлишиуим врсуама ризика из кпјих
мпгу прписуећи негауивни ефекуи на ппслпваое банке. Управљаое ризицима у банкарскпм
ппслпваоу пбухвауа иденуификпваое, мереое и прпцену ризика с циљем минимизираоа
оихпвих негауивних ефекауа на финансијски резулуау и капиуал банке. Банка је дужна да пбразује
ппсебну прганизаципну јединицу у шијем је делпкругу управљаое ризицима. Такпђе, банка је
дужна да свпјим акуима прппище прпцедуре за иденуификпваое, мереое и прпцену ризика, кап и
за управљаое ризицима.
Екпнпмска и финансијска криза у свеуу, ппремећаји у ппслпваоу финансијских уржищуа, кап и
прпблеми у банкарскпм ппслпваоу, дпдаунп услпжоавају ппуенцијалне ризике у ппслпваоу и
намећу ппуребу урансфпрмисаоа екпнпмскпг и финансијскпг сисуема у земљама са уржищним
привређиваоем. Кпмплекснпсу банкарскпг сисуема, кпји је у фпкусу нащих размаураоа, је и у
упме щуп на оегпвп ппслпваое ууишу брпјни и разнпврски факупри: пплиуишки пднпси и прпцеси у
свеуу, екпнпмскп-финансијски разлпзи, прпмене и инпвације банкарских прпизвпда, мпуиви

Page 146
ппслпвне и правне сигурнпсуи деппзиунп-кредиуних ппслпва, прпмене мпуива и нашина ппнащаоа
кпмиуенауа банке, мера макрпекпнпмске пплиуике држава иуд.
Ппсупји јаснп изражена кпрелација између прпфиуабилнпг ппслпваоа фирме и оене
вреднпсуи, па су и акуивнпсуи меначменуа фирме кљушнп усмерене ка сувараоу дугпрпшних
услпва за убираое прпфиуа. Меначмену банке управља свпјпм акуивпм и пасивпм ради
псувареоу највећег мпгућег прпфиуа. У упм ангажпваоу меначер банке има шеуири пснпвна
задаука: да пдржава ликвиднпсу банке, да управља акуивпм банке, да управља пасивпм банке, да
управља капиуалнпм адекваунпщћу.

Литература

Van Horne, C. J., Wachowicz, M. J.,Jr, Osnove financijskog Menadžmenta, deveto izdanje, Mate, d.o.o
Zagreb 2002.
Ђукић, Ђ., Бјелица, В. , Рисуић, Ж., Банкарсувп, Ценуар за издавашку делаунпсу Екпнпмскпг
факулуеуа у Бепграду 2006.
Јпванпвић, П. Меупде за вреднпваое прпјекауа за расу и развпј предузећа, Весник ,
Инвесубанка ,Бепград 1998.
Rose, S. P., Hudgins, C. S. Bankarski menadzment i finansijske usluge , Data status, 2005.
Rose, S. P. Menadžment komercijalnih banaka,četvrto izdanje, Mate, Zagreb 2003.
Frederic, S.,Mishkin,F.S. Monetarna ekonomija, bankarstvo i finansijska tršišta, sedmo izdanje, Data
status 2006.
Heffernan,S. Modern Banking in Theory and Practice, John Wiley&Sons Ltd, Chichester 1996.

Page 147
 Miodrag Todorović,MA
Zoran Vasić,PhD
E-mail: miodragtodorovic61@gmail.com
Mr. Saša Stefanović
GMS International, Belgrade
stefanovic.sasa@gmail.com

Tax control and prevention of tax evasion

Abstract

Much of the revenue is lost through tax evasion. Therefore it is necessary to undertake
different measures for suppresion of tax evasion. It is estimated that 30-50% of gross
domestic product of Serbia outflows through tax evasion. Taking in consideration this
topic, main causes which enable tax evasion in the Republic of Serbia in both main forms
legitimate (legal) and illegal are underlined. The results of tax audits in detecting tax
evasion are presented in materials, as well as conclusion which gives the main guidelines
for the reduction of tax evasion.

Key words: tax evasion, suppresion of tax evasion, tax control

Introduction

Tax as a socio-economic and historical category has always attracted the attention of
both the doctrine (economic and financial as part of economic) and the wider auditorium.
Everything related to taxes and taxation has always been shrouded in mystery, at least for
a wide range of taxpayers. The tax and its effects are understood at the same time little
and much, and this contradiction determines the ratio of the fiscal obligations. Difficulty
to accept the tax liabilities arises from the compulsory nature of these benefits and that in
return immediate, visible consideration share is not seen, which is found in some other
social obligations opposite to taxes. The meaning of such concepts may be most
eloquently expressed through the thought of an author: "What you really get from
honesty is a greater tax burden" 1
Especially in the present conditions of economic and social development, the
importance of tax liability comes to the fore in regard to the functions of a modern state
that provides necessary funds for its operation largely through taxing of legal subjects
and citizens. By paying the taxes, normal life in the community and the progress of
civilization are obtained. The funds collected through all forms of public revenue are
present in all aspects of social life like a red thread and without their full flow there
would be delays in the functioning of state mechanisms. That is the reason why modern

1
Derek Morris: The Economic system in the UK, Oxford, University Press, 1977, str. 283

Page 148
state is concerned that taxpayers in large numbers meet their obligations through public
revenues. Irregular, untimely, incomplete or complete absence of taxes and other revenue
leads to various forms of tax evasion and other public revenues. Modern state also
combats with the problem of tax evasion. The outcome of that battle is uncertain and
largely insufficient. Regardless of the relevance and importance of this phenomenon on
achivement of various objectives of fiscal and broader economic policy, insufficient
attention is paid to the tax evasion in fiscal theory and practice. Resistance to tax(and
other revenue) paying in the contemporary condition of everyday faster socio-economic
and technological development in particular, begin to have such proportions that require
adequative actions by the authorities and public administration.

The phenomenon of tax evasion is always interesting and important but insufficiently
studied in our doctrine. Insufficient exploration of this issue is one of the reasons why
this topic is taken for objective of this paper. Studies on tax evasion are always a
challenge for researchers and therefore this complex phenomenon and can be viewed
from different aspects: legal, economic, financial, social, political, psychological, social,
political and other. In this sense, in order to provide more complete and realistic
perception of the topic and valid scientific results, the cooperation of experts from
several fields of study (disciplines) is needed.

1. The theoretical basis of tax evasion

Tax evasion is illegal avoiding of paying taxes. This can be done by presenting of
inaccurate turnover, income, and expression of greater business expenses. Consequence
of the increase in tax evasion is the erosion of tax revenues. 2
Taxes have had significant role in every social community or state. State has always
filled budget and for tax payers it has presented more or less a burden. Through history as
well as today people who know to plan and distribute tax obligations to pay to state only
what is necessary are well appriciated. 3
The term «evasion» is derived from the Latin word «evaddere», that means running
away or avoiding.
In tax terminology under this term we consider different ways of tax evasion. In the
nature of taxpayers is tendency to pay taxes and contributions in reduced amount by use
of loopholes or lack of precision in regulations. 4
Tax evasion is intended, illegal tax evasion. Ideal in optimal designing of tax is
zero level of tax evasion, but in practice it is always greater than zero, no matter how
other elements of taxation and other institutional arrangements are defined. The fact that
tax evasion exists whenever there is a tax is usually explained by the fact that the taxes
are used to finance public goods, where existists "free use". 5
This phenomenon creates difficulties in defining the exact parameters required for
2
Jadranka Đurović Todorovic, 2009., "The problem of tax evasion in selected countries," Economics of
Enterprise P 452.
3
Ljubisa Dabic, 2010., "Tax consulting the Serbian Republic and other countries in the region," Institute of
Comparative Law, Belgrade P. 91.
4
Jadranka Đurović Todorovic, 2009., "The problem of tax evasion in selected countries," Economics of
Enterprise, Nis, P. 452.
5
Goran Milošević, 2006., "Economic aspects of tax evasion," The economic horizon, Kragujevac, P. 52.

Page 149
the determination of economic policy and implementation of appropriate commerce
measures and economic instruments. It reduces, in some cases dramatically, the income
of the state fiscus. In addition, since this phenomenon permeates the entire economy, it
prevents holders of economical politics to have an accurate picture of what is happening
in the national economy. 6
Tax evasion distorts market competition, changes the results of public politics,
and violates the principle of fairness (the person with the same income pay the same
taxes), which is in terms of growing fiscal risks the most important, and which leads to
loss of public revenue. The main objective of taxation is to collect a certain amount of tax
revenue. Achievements in this goal depend on how the tax base, tax rates and tax cuts are
defined, but also depend on the scale of tax evasion. Therefore, in order to effectively set
a permanent tax system, as well as to make its possible reforms, reducing the level of tax
evasion is necessary. To make this possible, it is necessary to determine which are the
main determinants, ie. factors affecting the level of tax evasion. In this respect, modern
economic theory and relevant empirical research depart from the Allingham-Sandmo
model of tax evasion, according to which level of tax evasion depends on the amount of
marginal tax rates, penalties for tax evasion, and the probability of detection of evasion
by tax authorities. 7

2. Main causes of tax evasion

In every fiscal system there is a tax evasion in miner or greater extent. The
intensity of tax evasion depends on several factors that have a different dimension in
various modern fiscal systems. In terms of classifying the causes of this phenomenon, a
special interest of both, financial science and fiscal practices, is to determine their
significance and effect.
Classification (sorting) tax evasion causes can be made based on their nature and first of
all can be devided into subjective and objective. For subjective causes some personal
moments related to the taxpayer are present. These are: tax conscience, sense of
belonging to a particular state, tax mentality, the notion of regularity of the tax system,
education and other. The objective character causes are: size of the tax burden, taxation,
vocational training and organization of the tax authorities and others.
Some of the main factors that negatively affect the propensity of many subjects to
conscientiously fulfill the obligation of paying taxes are:
- Numerous cases of tax evasion for which is known to have remained unsanctioned
- Inadequuate efficiency of tax provisions with regard to some specific categories of
taxpayers to which the appropriate sanctions are also not applied, which leads to large
number of citizens' belief that the most skilled people who avoid tax paying go for the
best,
- Decline in reputation and respect of the tax authority and its agencies for a broad class
of taxpayers,

6
Mileva Andjelkovic, 2009., Public Finance and Financial Law, Publications Center, Faculty of Nis P. 45.
7
Randjelovic Sasa, 2011., "Reducing evasion to work as an instrument of fiscal consolidation," QM double
issue 25-26.

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-Often poor outcome of solving of many problems of public finance
-Frequent misuse in spending public money. 8

Subjective reasons related to the personality of the taxpayer are:

-Class-exploitative character of the state,
-Degree of tax burden
-Weakness in control and leniency of sanctions

It is a fact that these are very important factors in tax evasion, but for further
understanding of etiology of this phenomenon, the subjective factors should not be
neglected.
Establishing the fundamental facts of tax evasion is the basis of efficient design of tools
and measures for its reduction. The level and modalities of tax evasion are affected by
economic reasons, social and political causes, psychological causes and fiscal technical
reason. 9

3. The forms of tax evasion

The state has always sought to enlarge the tax liability, but also to make it fair. Contrary
to the state, legal entities and persons - tax payers have always tried to find the possibility
to pay less tax, as far as they do not suffer any consequences. These two competing
interests cause different reactions of the participants. State seeks to introduce the rules of
tax procedure to collect taxes and to prevent tax evasion.
The tax law two types of tax evasion are known:
-Legal (allowed, legal) and
-Unlawfull (illegal, illicit)
Legal evasion exists when tax incentives encouraged by law are used, as well as when
loopholes in tax laws are used, because of the imprecision and vagueness.
Unlawful evasion is defined as avoidance of tax liability by taxpayers and acting contrary
to legal provisions.

3.1. Legal tax evasion

Wish of taxpayers is that goal of business is achieved without unlawfull actions,

or with full respect towards tax laws. The taxpayer, respecting the tax law articles and
procedure act by the law and minimise tax liability. The actions of taxpayers which are
not in conflict with the law and are aimed to avoiding or reducing the tax burden, are
called legal evasion.
Under the legal tax evasion two types of behavior should be considered among
which, however, is not easy to draw a line of demarcation: a legitimate tax avoidance and
unacceptable tax evasion. 10

8
Mileva Andjelkovic, 2009., Public Finance and Financial Law, Publications Center, Faculty of Nis, Nis,
P. 45.
9
Paul Marie Gaudement: Finances Publiques-Emprunt et impot, Editions Montchrestien, Published 2009
P.330.
10
D. Popovic, 2006., Tax law. general part, Cekos-in, Belgrade p. 452.

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 In tax practice it is not easy to differ those two types of legal tax evasion. Legal
evasion is a form of tax evasion in concordance with intention of legislature. Legislature
in certain cases renounces of the part of tax income, because in that way it accomplishes
the goal of taxation. So if there is no tax evasion there is also no goal of taxation. 11
Unacceptable tax evasion existists when taxpayer with its actions seeks to
circumvent the provisions of the law and thereby avoid and minimize the tax burden.
Unacceptable tax avoidance does not lead to achieving the proclaimed goals of taxation,
although legally and formaly it does not violate tax law provisions. The taxpayer uses the
existing tax legislation, but in a way that allows the use of legal loopholes or
inconsistencies.
Demarcation between the two forms of legal tax evasion is an important issue that arises
before the financial science. Of course, this is the special task of tax administration.
Assessing the importance of "recognizing" unacceptable tax evasion laws, Popovic in the
analysis of the problems introduced tests. Any transaction that is suspected of
illegitimacy must be subjected to tests: the intentions, the existence of elements of
artificiality, tax savings, the existence of solutions of the competent tax authority. 12
Legal forms of tax evasion are: escape the tax, reduce or cancel the consumption
of certain domestic and foreign products, by the law organized evasion, finding gaps or
holes in the legislation and tax incentives.

3.2. Unlawfull tax evasion

Running away from the obligation to pay the fiscal burden often involves illegal conduct
of holders. If a taxpayer avoids the payment of taxes he comes into conflict with the law.
Then we talk about the illegal or unallowed tax evasion. Illegal tax evasion consists of
conscious and wanted efforts to reduce or completely avoid the enforcement of existing
tax liabilities. 13
The main characteristic of this evasion is the conscious and wanted effort of taxpayers to
fully or partially avoid the enforcement of existing tax liabilities. So the taxpayer in both,
formal and material way breachs the tax law and therefore he conduct strictly contrary to
tax regulations. The characteristic of this form of evasion is that the types and variations
of fraud are almost unlimited and imagination of taxpayers unpredictable. 14
The actions of taxpayers in illegal tax evasion are reduced to the act of tax evasion itself,
or failure to comply with the requirements of tax administrative relations, which are
imposed to the taxpayer to ensure that the tax obligation is fulfilled (to file a tax return, to
regularly keep books, to allow tax control, etc.). 15 These actions or omissions in order to
eliminate or reduce tax liability in an illegal manner are basically illegal evasion.
Depending on the extent of illegal tax evasion it can be complete and partial.
Complete tax evasion occurs when a taxpayer fails to report the entire amount of income

11
Boris Siljkovic, Borislav Radevic, Bojan Jokic, 2012., Tax policy of south-east Europe and the
European Union as a function of economic development, Technics Technolgies educataion
management, Sarajevo. p 148
12
D. Popovic, cit. offense p. 452.
13
M.Petrović, 1982., Finance and Financial Law, Proceedings of Osijek, Osijek, p. 27-28.
14
Mileva Andjelkovic, 2009., Public Finance and Financial Law, Publications Center, Faculty of Nis p. 45.
15
D. Popović, cit. offense. p. 452.

Page 152
earned or any property which is subject of taxation, or if he hide transactions that give
rise to tax liability.
Partial tax evasion occurs when the taxpayer report income, property or the transaction to
the tax authority but in incomplete or incorrect manner, or if false information stating the
reduced tax liability is given without legal rights.
Forms of illegal evasion of tax evasion are: fraud or evasion, smuggling or trafficking,
double bookkeeping and illegal work.

4. The scope and structure of tax evasion in the Republic of Serbia

The scope and structure of tax evasion will be analytically monitored through:
1) the total number of controls with the number of controls in which the irregularities are
noticed,
2) set a total evasion of taxes.

The established scope of tax evasion shall be observed by structural tax forms,
and spacially, by the regional centers of the Republic of Serbia. Analytical and
operational structure of the amount of evasion will be seen through:
1) the relative share in total amount of the selected criteria,
2) the dynamic change in the established range of evasion and relative structures.
In order to achieve statistical and analytical consistency and to measure the dynamics of
the observed phenomenon overall financial term of tax evasion is calculated in constant
dinars from the last observed 2010th in order to eliminate the inflation component. This
will allow the measurement of range and efficiency of tax control over time. The second
analytical method of expressing these changes will be through relative relationships of
tax evasion and number of controls and population. The first criteria will show the
effectiveness of tax administration in relation to the scope of its jurisdiction, and second
critera will measure its effectiveness, in correlation with both, whole tax area and tax sub-
areas of the Republic of Serbia. For a realistic measure of tax evasion deflatitioning
method was applied so all currently defined financial amounts of evasion are calculated
in constant dinars of 2010th year. For that objective, annual indices of consumer price
levels of 2006 to 2010. year were used. (2006/2005 = 112.7; for 2007/2006 = 106.8; for
2008/2007 = 111.0; for 2009/2008 = 110.1 and for 2010/2009 = 106.5). In order to
measure the extent of tax evasion in the regional centers established financial amounts
were placed in correlation to the demographic base of each regional center in particular.
During that process official data from the census of 2002. year were used. By introducing
in the analysis the expression of the amount of tax evasion in constant dinars from 2010.
to the static indicator in form of amount of tax evasion per every control, a realistic
criteria for measuring efficiency of tax administration will be added.

4.1. The amount of tax evasion by the regional centers in the Republic of
Serbia in 2005.

In 2005 the tax administration made 112 438 controls, 773 tax inspectors were
involved, the newly established public revenues (total detected tax evasion by the tax
controls) in the Republic of Serbia were in total of 17,160,080,879 dinars. From the total

Page 153
of 112 438 controls, irregularities were registered in 24 072 controls and the remaining
number of controls were without irregularities.

Table 1. Newly established budget revenues in the Republic of Serbia in 2005.

Amounts
Amounts of evasion Score of Amount
of evasion in tax of evasion
No if in millions evasion per capita Evasion per
Regional centers No of inspecto millions of dinars per RC in in dinars control in
(RC) controls rs dinars 2010. % in 2010. dinars
BELGRADE 31.149 231 4.495 7.042 26,20 2.807 226.078
NOVI SAD 35.064 216 3.491 5.470 20,34 2.692 155.987
KRAGUJEVAC 22.000 166 3.829 5.999 22,31 3.714 272.684
NIŠ 23.382 135 2.902 4.545 16,91 3.389 194.400
Large taxpayers 14,24
unit 849 25 2.443 3.827 4.507.240
REPUBLIC 112.438 773 17.160 26.883 100,00 3.585 239.090

Source: www.poreskauprava.gov.rs

In the initially observed 2005. the total volume of detected tax evasion in the
Republic of Serbia, expressed in constant dinars from 2010. was in total amount of 26.9
billion dinars. The initial amount of tax evasion will be considered as the mark for the
observation of scale evasion in the coming years. Proportional with the size of tax
administrative area the largest amount of tax evasion was discovered in the Regional
Centre (RC) of Belgrade. However, if measured by relative per capita the highest volume
of detected tax evasion was in RC Kragujevac. The average tax evasion by conducted
inspection in the Republic of Serbia in this and coming years is burdened by relatively
large amount of tax evasion after control by Large Taxpayer’s unit. This is also because
this center deals with control of the largest taxpayers. Having this analytical digression in
thought and not coming back to analyse of this special tax unit, from the data in Table 1
it can be concluded that the highest efficiency of tax administration was made in
Kragujevac RC (14% above the average RS), followed by RC Belgrade and Nis while the
lowest amount per one control was made in RC Novi Sad (35% below the average RS).
Such efficiency of tax administration in Kragujevac RC is most probably due to the
relative scale of tax evasion per capita in the same center. The presented results indicate
the degree of compliance with tax regulations, which is the biggest in Vojvodina, and the
worst in southern Serbia, which is a reflection of cultural and historical heritage.

4.2. Amount of tax evasion per RC in the Republic of Serbia in 2006.

In 2006. the total of 72.396 tax controls were made, 690 tax inspectors
involved, and newly established revenue in the Republic of Serbia was in total amount of
30.007.787.386 dinars. From the total of 72.396 controls, irregularities were detected in
26.786, and remaining number of controls were without irregularities.

Page 154
Table 2. The review of evasion parameters in the Republic of Serbia in 2006.
Amount
Amount s of
s of evasion Score of Amount
evasion in tax of evasion
No if in millions evasion per capita Evasion per
REGIONAL No of inspecto millions of dinars per RC in in dinars control in
CENTERS controls rs dinars 2010. % in 2010. dinars
BELGRADE 21.855 211 8.656 12.032 28,85 4.796 550.538
NOVI SAD 23.447 194 7.704 10.710 25,68 5.270 456.754

KRAGUJEVAC 12.232 154 8.898 12.369 29,65 7.659 1.011.193

NIŠ 14.666 115 2.589 3.599 8,63 2.683 245.396
Large Taxpayer’s
Unit 196 16 2.160 3.003 7,20 15.321.345

REPUBLIC 72.396 690 30.008 41.712 100,00 5.563 576.170

Source: www.poreskauprava.gov.rs
In our study in 2006. the total amount of detected tax evasion in Serbia,
expressed in constant dinars from 2010. was 41.7 billion dinars. In proportion with tax
administative area largest amount of evasion was discovered in the Regional Centre in
Kragujevac. Measured by relative measure per capita the largest volume of tax evasion
was also in RC Kragujevac. In correlation to the mean relative amount of tax evasion in
the Republic of Serbia, larger amount was registered in RC Kragujevac and in regional
centers in Novi Sad, Belgrade and Nis the amount was lower. From the table 2 it can be
concluded that the highest efficiency of tax administration was made in Kragujevac RC
(75% above the average RS), followed by RC Belgrade and Novi Sad, while the lowest
amount per one RC control was registered in Nis (62% below the average RS) .
Average is calculated by the ratio of tax evasion by a regional center for the control, with
evasion by a control for RS.
The efficiency of tax administration in the RC Kragujevac may be due to the larges
relative tax evasion amount per capita in the same center, and efficient work of tax
inspectors of the center.

4.3. Amount of tax evasion per RC in the Republic of Serbia in 2007.

In 2007. total of 47.144 tax controls were made, 917 inspectors involved, and newly
established public revenues in the Republic of Serbia were in total amount of
679.154.372 dinars. From the total of 47.144 controls made, in 13.710 irregularities were
registered, and remaining controls did not show any irregulaties.

Page 155
Table 3. The review of evasion parameters in the Republic of Serbia in 2007.

Amount Amount
s of of
Amounts evasion Score of evasion
of evasion in tax per Evasion
in millions evasion capita in per
REGIONAL No of No if millions of dinars per RC in dinars in control in
CENTERS controls inspectors dinars 2010. % 2010. dinars
BELGRADE 14.681 286 8.218 10.700 34,71 4.265 728.846
NOVI SAD 13.968 248 5.510 7.174 23,27 3.530 513.583
KRAGUJEVAC 9.242 191 6.552 8.531 27,67 5.282 923.035
NIŠ 8.809 172 1.881 2.449 7,94 1.826 278.007
Large Taxpayer’s 6,41
Unit 444 20 1.518 1.977 4451.995
REPUBLIC 47.144 917 23.679 30.830 100,00 4.112 653.959
Source: www.poreskauprava.gov.rs

In 2007. the total volume of detected tax evasion in the Republic of Serbia,
expressed in constant dinars from 2010. was in total amount of 30.8 billion dinars. In
proportion with tax administrative areas, the largest amount of evasion was discovered in
the Regional Centre of Belgrade. Measured by relative per capita the highest amount of
detected tax evasion was in RC Kragujevac. In relation to the mean relative amount of tax
evasion in the Republic of Serbia, larger amounts were registered in RC Kragujevac and
Belgrade, while in RC Novi Sad and Nis it was lower.

4.4. Amount of tax evasion per RC in the Republic of Serbia in 2008.

In 2008. total of 44.245 tax controls were made, 906 inspectors involved, and newly
established public revenues in the Republic of Serbia were in total amount of
25.950.769.217 dinars. From the total of 44.245 controls made, in 13.095 irregularities
were registered, and remaining controls did not show any irregulaties.

Table 4. The review of evasion parameters in the Republic of Serbia in 2008.

Amount Amount
Amount s of of
s of evasion Score of evasion
evasion in tax per
No if in millions evasion capita in Evasion per
REGIONAL inspect millions of dinars per RC dinars in control in
CENTERS No of controls ors dinars 2010. in % 2010. dinars
BEOGRAD 14.280 276 11.182 13.116 43,09 5.228 918.510
NOVI SAD 14.264 264 5.076 5.954 19,56 2.930 417.404
KRAGUJEVAC 7.849 196 5.413 6.350 20,86 3.932 809.000
NIŠ 7.293 152 2.625 3.079 10,11 2.296 422.172
Large Taxpayer’s 6,38
Unit 559 18 1.655 1.941 3.472.866
REPUBLIC 44.245 906 25.951 30.440 100,00 4.060 687.993
Source: www.poreskauprava.gov.rs

Page 156
 In 2008. total amount of tax evasion in the Republic of Serbia expressed in
constant dinars from 2010. was 30,40 miliards of dinars. In proportion with tax
administrative areas, the largest amount of evasion was discovered in the Regional Centre
of Belgrade. Measured by relative per capita the highest amount of detected tax evasion
was in RC Belgrade. In relation to the mean relative amount of tax evasion in the
Republic of Serbia, larger amounts were registered in RC Belgrade, while in RC Novi
Sad, Kragujevac and Nis it was lower.
4.5. Amount of tax evasion per RC in the Republic of Serbia in 2009.

In 2009. total of 38.126 tax controls were made, 893 inspectors involved, and newly
established public revenues in the Republic of Serbia were in total amount of
27.919.738.436 dinars. From the total of 38.126 controls made, in 13.152 irregularities
were registered, and remaining controls did not show any irregulaties.

Table 5. The review of evasion parameters in the Republic of Serbia in 2009.

Amount Amount
Amount s of of
s of evasion Score of evasion
evasion in tax per
No if in millions evasion capita in Evasion per
REGIONAL inspect millions of dinars per RC dinars in control in
CENTERS No of controls ors dinars 2010. in % 2010. dinars
BEOGRAD 14.150 290 11.953 12.730 42,81 5.074 899.615
NOVI SAD 10.904 243 5.258 5.600 18,83 2.756 513.546

KRAGUJEVAC 7.454 194 5.916 6.301 21,19 3.901 845.303

NIŠ 6.915 161 3.057 3.255 10,95 2.427 470.785
Large Taxpayer’s 6,22
Unit 108 17 1.736 1.849 17.119.498
REPUBLIC 39.531 893 27.920 29.735 100,00 3.966 779.901
Source: www.poreskauprava.gov.rs

In 2009. total amount of tax evasion in the Republic of Serbia expressed in

constant dinars from 2010. was 29,70 miliards of dinars. In proportion with tax
administrative areas, the largest amount of evasion was discovered in the Regional Centre
of Belgrade. Measured by relative per capita the highest amount of detected tax evasion
was in RC Belgrade. In relation to the mean relative amount of tax evasion in the
Republic of Serbia, larger amounts were registered in RC Belgrade, while in RC Novi
Sad, Kragujevac and Nis it was lower.
From the Table 1.5. it can be concluded that the highest efficiancy of tax
administration was in RC Belgrade (15% above the average of the Republic of Serbia),
followed by RC Kragujevac, (8% above the avarage), RC Novi Sad, while the lowest
efficiacy rate was in RC Niš (40% below the average of the Reoublic of Serbia).

Page 157
4.6. Amount of tax evasion per regional centre and in total for the Republic of
Serbia in 2010.

In 2010. 28.486 tax controls were made, 762 tax inspectors involved, and newly
established revenue in the Republic of Serbia were in total amount of 24.182.692.808
dinars. From the total of 28.486 tax controls made, in 9.206 irregularities were registered,
and in others irregularities were not registered.

Table 6. The review of evasion parameters in the Republic of Serbia in 2010.

Amount
Amount s of
s of evasion Score of Amount
evasion in tax of evasion
No if in millions evasion per capita Evasion per
REGIONAL No of inspect millions of dinars per RC in dinars control in
CENTERS controls ors dinars 2010. in % in 2010. dinars

BELGRADE 8.774 231 10.752 10.752 44,46 4.286 1.225.425

NOVI SAD 7.386 191 4.898 4.898 20,25 2.410 663.137
KRAGUJEVAC 6.715 179 3.876 3.876 16,03 2.400 577.237

NIŠ 5.547 139 2.721 2.721 11,25 2.028 490.451

Large Taxpayer’s
Unit 64 22 1.936 1.936 8,01 30.253.206
REPUBLIC 28.486 762 24.183 24.183 100,00 3.225 848.933
Source: www.poreskauprava.gov.rs

In 2010. total amount of tax evasion in the Republic of Serbia expressed in

constant dinars from 2010. was 24,1 miliards of dinars. In proportion with tax
administrative areas, the largest amount of evasion was discovered in the Regional Centre
of Belgrade. Measured by relative per capita the highest amount of detected tax evasion
was in RC Belgrade. In relation to the mean relative amount of tax evasion in the
Republic of Serbia, larger amounts were registered in RC Belgrade, while in RC Novi
Sad, Kragujevac and Nis it was lower.
From the Table 1.. it can be concluded that the highest efficiancy of tax
administration was in RC Belgrade (44% above the average of the Republic of Serbia),
followed by RC Kragujevac, (22% 8% above the avarage), RC Novi Sad, while the
lowest efficiacy rate was in RC Niš (43% below the average of the Republic of Serbia).

Page 158
5. The share of tax evasion in gross domestic production of the Republic of Serbia in
period 2005.-2010.

Data presented in the previous table allows to trace the flow of movement of
detected evasion in absolute amounts and relative parameters in the observed years. The
total amount of the tax evasion in constant dinars from 2010. shows the same as relative
parameter in the form of tax evasion conpared to total public revenues. In the first
observed year it was 27 billion dinars, that expanded to 42 billion next year, and then in
following three years it was stabilized at a level of 30 billion and began a slight decrease
trend. In the last observed year (2010.) the lowest absolute amount of detected tax
evasion (24 billion) was noticed and it was on a lower level than in initially observed
year, when VAT was introduced for the first time into our system of tax revenue and
which is proved to be challenging for tax evasion, especially that of a bigger scale. All
annual real rates of change of tax evasion amount were negative, but because of a high
rise in tax evasion in 2006, the average five-year rate was still positive (1.4%).

Table 7. The share of tax evasion in gross domestic production of the Republic of
Serbia in period 2005.-2010

Rates of % tax
Total amount of tax evasion i
Year tax evasion in Tax evasion evasion gross Rate of tax
millions of per control in growth domestic evasion
constant dinars Rates of tax constant dinars per product growth in
from 2010. evasion in % from 2010. control in RS GDP in RS
2005 26883 239.090 0,99
2006 41712 55,2 576.170 141,0 1,63 64,6
2007 30830 -26,1 653.959 13,5 1,03 -36,8
2008 30440 -1,3 687.993 5,2 0,88 -14,6
2009 29735 -2,3 779.901 13,4 0,92 4,5
2010 24.183 -18,7 848.933 8,9 0,76 -17,4
Average: 1,4 36,4 1,04 0,1
Source: www.poreskauprava.gov.rs, statistic analysis done by authors

The second part of the table gives the possibility to check the relative extent of
evasion in Serbia. The first parameter - the evasion per control - allows to evaluate the
effectiveness of tax examiners for the observed years, since the calculation is performed
based on comparable constant dinar from 2010. The total amount of tax evasion by a
single control, although tax evasion in following years decereases in both absolute and
relative means, has constant increase trend, even in years when there is a stagnation of
economic activity and total amount of revenue. This directly shows that tax examiners
constantly raised the efficiency of their work, which grew at an average annual rate of
36.4%. If we exclude the extreme 2006., then in following years there is a constant high
rate of efficiency of the tax authorities, so it can be said that the expansion of tax evasion
in 2006. only provoked their better efficiancy. By the end of the observed time period
average annual growth rate of the tax efficiency of the controller of 10.2% was achieved.

Page 159
 Finally, an parameter in the form of the relation between total amount of evasion
and gross domestic product, as the most indicative macroeconomic aggregate that
indicates the dynamics of the relationship between the detected evasion, and the overall
situation of economic activities in Serbia. Oscillations of the growth rate from 64% to -
36% and -17.4% in 2010. show that between these two observed phenomena do not exsist
strong correlations. The average rate of tax evasion in total GDP in the Republic of
Serbia of 1.0% and its average annual dinamics in the observed period in the mean of
growth rate of 0.1% showed only ostensible stability. In the years of economic crisis
(after 2008.) the changes in rate of tax evasion in GDP in Serbia are sometimes the
opposite of the flow of rate of evasion growth. Yet, comparing the average growth rates
of these two parameters in the last three years of crisis, can be seen that the average
participation rate of evasion in GDP (-9.1%)is lower than the average growth rate of the
evasion (-7.4% ), which means that evasion is reduced more than a fall of GDP of Serbia.
Between these two phenomena in the period of crisis the constancy of decrease is shown
this way, and decrease of newly established tax evasion in BDP of RS can be considered
as the consequence of efficiacy of tax control, as it was mentioned before.

Table 8. Comparative survey of total and successful tax controls for the period 2005-
2011.

Year No of No of controls Controls with irregularities

controls with per No controls in %
irregularities
established
2005. 112.438 24.072 21,41
2006. 72.396 26.786 37,00
2007. 47.144 13.710 29,08
2008. 44.245 13.095 29,60
2009. 39.531 11.296 28,58
2010. 28.486 9.206 32,32
01.01.-
30.09.2011. 39.726 6.942 17,47
Source: Author view

Page 160
Chart 1. Comparative survey of total and successful tax controls for the period 2005-
2011.

120.000
100.000
No. of controls
80.000
60.000
No. of controls with
40.000 irregularities
established
20.000
0
.

09 0.

1.
05

06

07

08

09

01
20

20

20

20

20

-3 20

.2
0.
1.
.0
01

Source: Author view

From the previous table and chart it can be seen that in 2006., and especially in
2007., there is significant decreases in number of performed tax controls. Efficacy is
usually maintened at the same level, i.e. at the level between 28,50 and 32,30%. In
nominal amount it means that newly established revenue of the budget of the Republic of
Serbia due to tax control were decreased compared to 2005. and 2006.

CONCLUSION

In an effort to prevent tax evasion, legislative has brought criminal acts in secondary
criminal laws in order to protect public revenue. Insufficantly severe penalty politics
enables taxpayer to avoid tax (public revenue) payments.
Relativly high fiscal pression for our economic condition has negative effect on
production and commercial growth. Despite of fiscal pression, the basic need in the field
of global and common consumption are hard to satisfy, and even when they are sataisfied
they are at the low level. The tax administration structure in the Republic of Serbia relies
on consumption taxes. These taxes make 75% of budget revenue of the Republic of
Serbia. It indicates that in our country a significant part of economic strength remains
untaxed.
Because of severe consequences made by tax evasion, it is necessary to preform
upgrade of tax administration modeled on developed coutries with market economy,
modernisation of tax administration and to improve collaboration between each segment.
Work has to be done on improvement of material and spiritual need of sitizens and
improvement global life conditions, education of tax administration worker, efficent

Page 161
revealing and publication of severe public revenue avoidance with the final goal of
prevention etc.
It is necessary to introduce sistetic tax on citizen income so all income during year
can be taken in considertion. That would mean that citizens who have the biggest income
also pay the biggest tax rates. This could prevent current taxation of individual income of
citizens and enable to achieve bigger public revenue amount.
The high value property is out of taxation system. This is a consequence of
volontary tax registration. Inefficency of cadastre as well as illegal construction have as a
consequence lardge amount of taxpayer without legaly reported property which
contibutes to high propery tax evasion.
Traditional attitude and behaviour of administration have to be changed in
direction of cooperation, giving advices and protection of taxpayers’s rights. The
improvement of relatioship between tax administration and taxpayers has influence on
collectibility, establishment of confidence in tax system and decrease of proffesional tax
administration worker’s outflow.
Increase of penalty politics in the field of public revenue would partially lead to
suppression of tax evasion. In that sense penalty politics should be altered that penalties
in currency have to be in the scale several times bigger than amount of tax evasion. This
further implicates the need that subjects in community are enabled to do their function as
soon as possible in new taxation sistem. The process of tax administration change should
not be considered as routine and easy. Difficulties in organisation, work conditions, new
forms of tax evasion, render impossible the creators of tax authority to battle the topics in
their jurisdiction. It will take much more time to develop tax administration system and to
alter it in the way of market conditions, with simultaneous reduction of tax evasion at the
minimal level.

REFERENCES

1. Boris Siljkovic, Borislav Radevic, Bojan Jokic, 2012., Tax policy of south-east Europe
and the European Union as a function of economic development, Technics Technolgies
educataion management, Sarajevo.
2. Derek Morris: The Economic system in the UK, Oxford, University Press, 1977
3. D. Popovic, 2006., Tax law. general part, Cekos-in, Belgrade
4. Goran Milošević, 2006., "Economic aspects of tax evasion," The economic horizont,
Kragujevac
5. Jadranka Đurović Todorovic, 2009., "The problem of tax evasion in selected
countries," Economics of Enterprise
6. Ljubisa Dabic, 2010., "Tax consulting the Serbian Republic and other countries in the
region," Institute of Comparative Law, Belgrade
7. Mileva Andjelkovic, 2009., Public Finance and Financial Law, Publications Center,
Faculty of Nis, Nis
8. M.Petrović, 1982., Finance and Financial Law, Proceedings of Osijek,Osijek
9. Randjelovic Sasa, 2011., "Reducing evasion to work as an instrument of fiscal
consolidation," QM double issue
10. Paul Marie Gaudement: Finances Publiques-Emprunt et impot, Editions
Montchrestien, Published 2009.

Page 162
 HOLISTIC MARKETING AS A FUNCTION OF SUSTAINABLE
DEVELOPMENT

Neško Božović1
Fakultet Umetnosti u Prištini - Zvečan, Kosovska Mitrovica, Srbija

Abstarct Access to new business and strategic marketing is based on a number of

changes, such as globalization and hyper. Companies that have been recognized in this
time of change and develop a range of activities, skills isposobnosti, today is a professional
and ethical challenges facing new environments and markets. A typical example is the
need for different strategies to competition. Managers dealing with strategic issues
companies recognize the need to complete and cohesive approach compared
sastejkholderima. A new approach to relations with stakeholders is oriented towards a
holistic concept. The concept is based on a holistic approach to the development, design
and implementation of strategic programs, processes and activities, based on the breadth
and comprehensiveness of tasks and dependencies generated effects. The holistic
approach assumes that all of the business significantly, and that the practice is necessary
broad but integrated strategies. Components of the holistic approach: the concept of
network, integrated marketing, internal marketing and corporate social responsibility
Keywords: holistic marketing, managers, companies, environment, business

1. INTRODUCTION

Holistic marketing is the integration the research activities value, value creation and
delivery of value, with the goal of building long-term, mutually zadovoljavajudih relations
and common prosperity among key stakeholders (stakeholders). The holistic approach
assumes that the business and substantially all of that in practice often requires a
comprehensive, integrated strategy but.
Marketing ethics is the area of management that marketing was the theory and the
practice began to develop intensively in psolednjih A decade years. Marketing ethics
involves the application of ethical principles and rules of conduct in carrying out marketing
activities (advertising activities; marketinših research activities - from the perspective of
marketing ethics - ethical responsibility include research / market research agencies to the
respondents, the ethical responsibility of researchers to customers / clients / sponsors
research and ethical responsibility of the customer to researchers and others.) and making
marketing decisions on product safety, product quality in terms of effects on the health of
customers / users / consumers, packaging and packaging from an environmental
standpoint and uticja on the environment and other elements of the marketing mix of the
organization.

2. CONCEPT OF HOLISTIC MARKETING

As seen in Figure 1, the components of holistic marketing are: internal relations,

integrated marketing, socially responsible marketing and relational marketing.

1
nesko_bozovic@yahoo.com

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 Figure 1 Dimensions of holistic marketing

A holistic approach to internal relations in an organization ensures that everyone in

the organization accepted marketing principles, especially senior management levels. One
of the principles of holistic approach to internal relations is "not obedavaj exceptional
service if the employee is not willing to provide."
Internal marketing is the need for all of the company apply appropriate marketing
principles, and that all involved in the selection, implementation and communication of
customer values. Its function is to recruit, train and motivate capable personnel, who
would be prepared for the maximum servisirsanje consumers. Done on two levels: at the
level of marketing as a business function, including sales operations, product
management, marketing research, service, and other promotional activities at the
corporate level, the acceptance of marketing orientation by all the other functions and
their personnel. It is crucial that all activities are coordinated across the enterprise going,
because the quality of supply, largely depends on the quality of interaction between
business functions.2
Marketing function may be organized in the form of functional organization,
geographic organization, organizational structure based on the product or brand,
organizational structure based on the market, matrix organizational structure and
corporate-Divisional organizational structure. No matter what the organizational structure
of the company to choose, it must be ensured harmony and coordination of the interaction
of all subsystems marketing and all business functions of the company. In doing so, must
identify the possible causes of conflicts with the production of marketing, finance and
accounting, personnel functions, research and development functions, and so on. Mutual
relations must be so orderly, to achieve maximum results for the whole company, and that
they, at the same time, they promote the interests of consumers and society. Only under
conditions of full coordination of functions, they can maximize the business results.
Of particular importance is the creation of a favorable climate in the company, to
the benefit of all employees feel the quality of its work and to establish such relations, the
conflict is minimal. In the case of absence of motivation, conflict, tension, and other
negative, it will inevitably affect the quality of supply and the relationship with customers,
and will affect customers' trust and loyalty. It is no accident, it is considered to be all-
important, when planning and implementing marketing activities.

2
Kotler, F., , Keler, K.,L., Marketing menadžment, Beograd, Data status , 2006.

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 Integrated marketing program consists of a series of decisions related to the
improvement of the overall performance of the business process and management
activities, which the company uses to achieve its objectives. For example, decisions about
differentiation and diversification of the production are long-term, the decision, which
must integrate all the subsystems in achieving the objectives of demand and marketing
network. Integration of marketing activities and processes aimed at maximizing their joint
effects.
Integrated marketing involves advocating for the implementation of multiple
instruments of creation, delivery and communication of values, which refer to a search for
their optimal combination. Marketers are assigned to devise marketing activities and
create integrated marketing programs for creating, communicating and delivering value to
customers. Marketing activities are manifested in various forms. One of the classic forms
of event marketing activities, the marketing mix, as well as combinations of instruments
4P marketing / product, price, distribution and promotion /, which form the core offerings.
From politics and manufacturing programs, as well as the policy price, promotion
and distribution, resulting numerous consequences, positive or negative in relation to the
principles of sustainable development. Way of making the product, making material,
procedures, means of transport, location and storage facilities, emissions of hazardous
substances in air, water and land, making inadequate promotional messages, and so on.,
The possible causes many environmental problems, which often take dramatic even tragic
proportions. Let us remember that the decade-long series of promotion of harmful and
dangerous products, human health and other living beings / tobacco, alcohol, lots of
chemicals, etc. /, We realized that the terrifying power of persuasion by sending, in these
cases, inadequate promotional content.
It is the understanding of the impact and power marketing and the marketing mix
instruments such substantial content offerings, people's behavior in consumption, we
consider a powerful marketing mechanism of society in the way of redirecting demand
trends and to promote the principles of sustainable development. All the more, so that, at
best, a maximum accenting the interests of consumers, companies and society, ensuring
their harmonies on a permanent basis and contributes to improving the quality of human
life, the protection of nature and the unbridled growth and development of companies.
Therefore the role defined marketing strategies, marketing plans and marketing
objectives, of great importance, not only for the company but also for their immediate and
wider environment.
Of greatest interest is the company that many activities in defining the optimal
combination of marketing, are coordinated, so to maximize the effects of the offer. In
doing so we emphasize three important factors that require permanent hiring managers
and marketers. The first arises from the fact of ekvifinaliteta and able to achieve goals
through a variety of ways of combining instruments of marketing. Practically, due to the
complexity of each of these instruments, a large number of possible combinations, in
order to define goals realized. The second factor concerns the optimal combination of
instruments in terms of the dynamic changes in the company and its environment /
technology trends, demographic factors, economic factors, political and legal factors,
social and cultural environment, competition, etc. .. As a rule, the time optimality supply is
getting shorter. Marketing must adapt to constant changes, to always be at a level that
ensures maximum results, the realization of the three navoñenih interest. The third factor
arises from the fact that the offer can always be better, to be more attractive and
acceptable to a wider range of consumers. This opens up unlimited opportunities for
managers and marketers and can be a powerful Orun in parrying the competition.

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 Business is conducted in a specific community that has its rules and expectations in
a limited environment, the market is strongly influenced by the community and the
employees who have rights. Bearing this in mind, the development of the modern concept
of socially responsible marketing is becoming an important factor in competitiveness. Like
some of the important principles of socially responsible marketing include the following:
business ethics, respect for human and labor rights of individuals and groups in the
market, compliance with environmental principles in the development of new products, the
fight against corruption in the market economy and respect for ethical principles in the
design of communication with the market groups.
Socially responsible marketing is the holistic marketing subsystem, that is, for the
most part, in agreement with the statement that this new marketing concept, can play a
significant role in implementing the principles of sustainable development. It is often used
for this subsystem and Temin'' green'','' eco'' and'' humanistic'' marketing. You used the
term corporate social responsibility. The essence of this subsystem is that all participants
in the marketing activities of applied social and ethical norms and thus promote corporate
goals and contribute to a higher level of quality of life and a healthy environment.
For new orientation of the company, based on the principles of sustainable
development, maintain the ecological movements around the world. Their efforts are
aimed at protecting the natural environment from damage caused by economic activity.
Advocating for the use of those elements of the business, contributing to the preservation
of the environment, the use of packaging that can be recycled, ozone layer protection,
conservation of energy resources, environmental protection, protection of experimental
animals, are just some of the activities of environmental organizations. In particular, while
we emphasize the social costs of consumption, not just a personal cost to consumers. How
much it costs, when it is switched and indemnity for the environment, the issues that are
facing the company. The absence of these issues for decades, killed and mutilated
hundreds of millions of people around the world, brought many environmental accidents,
exterminated numerous plant and animal species, climate worsened, for what it is, very
few people, who had the responsibility. These are the collateral damage of greed for
profit.
The use of biodegradable and natural ingredients, polilmera plant-based,
environmental packaging, recycling, increased taxation of pesticides, fertilizers and
greenhouse gas emissions, the introduction of unleaded fuel and catalytic converters,
manufacture of equipment for pollution control are just some of the myriad of measures
that are available to companies and the implementation of which involves them in the
ever-expanding ecosystem of Defense front and prevent possible damage to the operating
environment degradation. Many states elaborate Strategy for new energy, which are
based on renewable resources.
The main task of relationship marketing is direct to the optimal level of relationship
building, both with customers and with other groups that make up the microenvironment
of the companies, which to a large extent determine the conditions and criteria of market
economy in certain situations. Marketing to the database makes modern variation of the
traditional concept of marketing and involves the collection and analysis of individual user
data, as well as storage and transmission of information, in order to establish two-way
communication, keeping their customers and secure their loyalty.
Relational marketing is a result of the economic interests of both sides. The fact
that repeated purchases account for about 60% of all orders received, indicating the
obvious interest of the company to maintain relationships with existing customers. This is
even more so because all of the analysis confirm that the multiple cost-effective to retain
existing customers than to attract new. From the consumer standpoint, the motives are:

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authenticity, confidence, risk reduction, strengthening the status, and the like. The buyer
is faced with a familiar partner and familiar elements of the proposal, has experience from
previous purchases, the purchase decision is made easy and turns into a routine, and so
on. Pointing to the implications of changes in the marketing environment relevant
organizations operating in the first decade of the new millennium, Kotler in his most
recent works in the field of marketing of management committed to the implementation of
holistic marketing concept, which involves a broader, integrated approach to managing
marketing activities.3

3. SUSTAINABLE DEVELOPMENT

The rapid development of science and technology, in recent times, the human race
trying to conquer Nature, that is changing, correcting some of its processes, intervene in
the sphere of its structure and obeys her own interests. Aware of their increased
capabilities, they often loses some control over their actions in relation to nature, as it is,
like a boomerang, returns, through a series of negative effects, it punishes Which nature,
for all negligence which, in relation to it , done.
Like never before, a man trained to use and abuse of the elements of nature, to
subdue, put in their own service. Damage from such human capabilities is very much
present in the different directions the relationship of man and nature. The list could be
indefinitely consequences arising from uncontrolled human activities in various fields of
research and development of human society. As the man tried to exempt itself from
nature, to stand out, to subject themselves and the nature of their selfish interests.
By his selfish actions in relation to the nature of the human species was anarchic.
There, mostly, it was a perfect line or organization. Declaring the ultimate ideal of freedom
of creativity, people and their groups are simply competing who will find better
mechanisms to subordinate nature. Competed as individuals, organizations, nations,
states. Globally, there was nothing that will make some frames, ceilings, which guided
science, engineering and technology, the development of those lines, which would enable
the harmonious and coordinated development of the symbiosis between man and nature.
In support of the need to take measures for the protection of nature, among the
first to raise their voices philosophers, ethicists, thoughtful people, among them a
prominent place with representatives of environmental ethics as a philosophical discipline
of spontaneous and learned how behavior in the environment, which includes moral
behavior of people towards all living beings and the factors that enable life. From
Emerson, Leopold, through Gliksona, Norton, Enger, Turner and many others, to Grula,
Russell, Einstein, Gandhi, according to the strong voices in favor of preserving the
ecological balance and environmental ethics of respect in human activities.
Sustainable development is a harmonious balance between the environment and
the economy, to the natural resources of our planet and preserve for future generations.
It can be said that sustainable development is a general direction, striving to create a
better world, balancing social, economic and environmental factors.
Sustainable development is an integral economic, technological, social and cultural
development, aligned with the needs of protection and improvement of the environment,
which will ensure the people's needs and improve the quality of life. It involves interaction
between the development and the ecological systems and emphasizes the quality of the
environment and quality of life. Among other things, includes a new consumer-style, which
takes into account the quality of the products and inhibiting irrational consumerism.

3
Kotler, F., , Keler, K.,L., Marketing menadžment, Beograd, Data status, 2006.

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Sustainable development involves such activities, which would ensure human nature
preserve on a sustainable basis, and to use it to a level that allows users to play. Any
activity beyond that level leads to the degradation of ecosystems and environmental
accidents.4
Just over a decade ago, the World Commission on Environment and Development
(World Commission on Environment and Development), also known as "Bruntlendova
Commission" (Brundtland Commission) released a report entitled "Our Common Future"
(Our Common Future), which points out the danger to people and the planet, from the
politics of economic growth without taking into account the possibility of regeneration of
the planet Earth.
World leaders at the Earth Summit in Rio de Janeiro 1992nd The Commission
adopted the recommendations Bruntlendove, and one of the results of the summit was
Agenda 21 which provides recommendations for the sustainable management of land,
water and forest resources in the 21st century.
This committee, chaired by Canadian Jim McNeill, defined sustainable development
as development that meets the needs of the present without compromising the
possibilities of future generations to meet their own needs.
United Nations Conference on Environment and Development (UNCED), held in
June 1992 in Rio de Janeiro (Brazil), was the largest of any ever held conferences
Ujedinjenijh Nations. It was attended by close to 10,000 official representatives from
about 150 countries, including 116 national political leaders. Parallel events - conferences
to non-governmental organizations, has attracted more participants. The conference was
attended by more than 7,000 representatives of the "fourth estate".
However, as expected, the summit participants did not manage to reach an
agreement and consensus on many issues. In fact, it was difficult to reach a consensus
between countries on issues where they found a different impact on economic interests.
Earth Summit 1992nd was succeeded in that for the first time linked the issues of
development and environmental protection. In addition, the result is the adoption and
signing of several important documents, including the Declaration on Environment and
Development - better known as the Rio Declaration, the Convention on Climate Change,
the Convention on Biological Diversity, Principle of management, conservation and
sustainable development of all types of forests, and an action plan for sustainable
development for the 21st century, called Agenda 21.
One of the key documents adopted at the Earth Summit in Rio de Janeiro's Agenda
21 - Declaration of intent and commitment to sustainable development in the 21st
century. At about 500 pages, there are 40 chapters - on the topic of poverty, protection of
the atmosphere, forests, water resources, health care, agriculture, environmentally sound
management of biotechnology to the issue of waste disposal. Novelty compared to other
UN documents explicitly recognize the role of a "major groups", such as women, children
and youth, farmers and entrepreneurs. Since 1992. onwards, the United Nations has
begun to increasingly rely on the role of these groups in their programs, as opposed to the
previous practice which excluded all subjects except national governments and observer
organizations favored few.
One of the chapters of Agenda 21 on the relevant groupings is a chapter on the
role of local authorities. From all over the world, various bodies have emphasized their key
role in the concrete implementation of "sustainability" at the local level.
From this it is derived and recommendations made in the 28th chapter - that local
authorities should consult with the population in terms of devising strategies for Local

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Agenda (LA) 21 Unfortunately, it took several years before there are any guidelines as to
what this is supposed to mean, and what specifically should be taken, so that, at first, only
a handful of pioneers accepted the job.
Today, many local councils are working in accordance with the principles of Local
Agenda. Each process has its own characteristics, marked by local conditions, including
the general public, geographic conditions (urban and rural areas, for example, differ in
their shortcomings), which is taken into account when making decisions, it is for the
political attitudes, as well as resource issues. However, from the start it was clear that the
next of local there are some general factors that must be part of each LA 21 process.
Local Agenda is not only environmental protection strategies. Sustainability plan
includes addressing social and economic issues. Local Agenda includes all of society, or at
least the largest possible cross-section of events, with all available resources. Shop Around
Agenda must create consensus - a joint effort against the outdated model of the
competing interests.
The first step is to gather information about local conditions and local priopritetima
- discovering real people's needs and desires. Further, action is needed to identify. No
organization or social structure can not have a monopoly on good ideas. It is important to
find ways to measure progress, to know that our efforts have results.
One bias is that the protection of the environment comes into conflict with the
interests of economic growth - growth in GDP, standard of living, job creation. The
practice of most developed countries and developing countries over the last decade shows
the opposite: the traditional concept of development oriented to increase both production
and consumption of natural resources growth has reached its limits. The so-called.
"external costs" that produces pollution, depletion of resources and damage to human
health are beginning to outstrip the benefits that brings further growth. Capital is now in
the most developed countries are increasingly investing in environmental protection,
energy conservation and other resources and the development of technologies friendly to
the environment. It is in these areas are opened and many new jobs. Less developed
countries have no choice, they have to follow that path. Sustainable development should
be encouraged by fiscal measures at the local level, which are aimed at preventing
pollution and waste of natural resources.
Priority issues addressed by the meeting in Rio, are: climate change, protection of
the stratospheric ozone layer, transboundary air pollution, protection of international rivers
and lakes, deforestation, destruction of land and desertification, biodiversity conservation,
protection of oceans, seas and coastal zones and rational the use and development of
their living resources, protection of fresh water resources, waste management, particularly
hazardous waste, prevention of illegal international transfer of toxic and dangerous
products and wastes, toxic chemicals management, etc...
Of the 27 principles of the Rio Declaration'll list some, which we consider to be of
use in support of our efforts to expose this important topic in a way that serves the
laborers in marketing.
Human beings have a central place in caring for sustainable development. They are
entitled to a healthy and productive life in harmony with nature / Principle 1 /.
The right to development must be achieved in order to meet the needs of equal
development and environmental protection of present and future generations / Principle
3/.
In order to achieve sustainable development, environmental protection is an
integral part of the development process and can not be considered separately from his /
Principle 4 /.

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 States shall cooperate in a spirit of global partnership to conserve, protect and
restore the health and unity of the Earth's ecosystems ... / Principle 7 /.
States should cooperate to strengthen the internal capacity building for sustainable
development by improving understanding of science through the exchange of scientific
and technological knowledge, as well as boosting development, adaptation, dissemination
and transfer of technologies, including new and innovative technologies / Principle 9 /.
States should cooperate to improve the favorable and open international economic
system that would contribute to economic growth and sustainable development in all
countries, to better solve the problem of environmental degradation .... / Principle 12 /.
War by its nature destructive effect on sustainable development. States shall
therefore respect international law that ensures the protection of the environment in times
of armed conflict, and, where appropriate, cooperate in its further development. Peace,
development and environmental protection are inseparable and meñuzavisni / Principle
24/.
Economic activities should be carried out so as to avoid wasteful expenditure of
energy and raw materials, to prevent jeopardizing biodiversity and introduction of
pollutants in water, air, soil and biological species. So, you must carry out a risk
assessment of toxic, hazardous, and others. materials and their adaptation to the
conditions of safe use.
Based on the principles of sustainable development emerged legislation, which aims
are: to protect the land, water and air pollution, and toxic waste elliminisanje chemicals,
radioactive radiation protection and the protection of natural resources. The legislation
specifically protects human health and biodiversity. Special attention was paid to
improving the quality of products, which includes: protection from radiation, chemicals,
posledicse deliberate or accidental release of GMOs into the environment, waste
management, noise emissions from factories and other facilities, pollution of land, water
and air, and the like. Important place in the legal procedure dedicated to the rights of
consumers to healthy food and protection from the harmful product to their health and
life.
Along with raising awareness about the vulnerability of ecological systems and the
organized activities of states and governments to adapt to the economic behavior of the
principles of sustainable development, according to the numerous movements for the
protection of nature, which are global in nature. Powerful voices ecologists, caused the
states and their governments more rational steps, especially in the legislative and
executive activities, prescribing and implementing a series of measures to prevent further
degradation of the ecosystem and eliminate the effects of past neglect in this area.
Ecological movements are becoming more radical, with more and more activists, so
no, any serious government can not ignore their legitimate demands for the protection of
nature, vulnerable systems, in which the most important is the role of man.

4. HOLISTIC MARKETING OF SUSTAINABLE DEVELOPMENT

One of the new concepts, some of which are rightly expected the largest
contribution to realization of a marketing principle of sustainable development, the
concept of holistic marketing.5
Changes in the approach to marketing are becoming an essential need. Former
passive role, in which marketing is mostly appears in the role of actors who sees the
current desires and needs of consumers and on that basis to anticipate their future
5
Filipović, V, Janičić, R., Strategijski marketing, Beograd, Fakultet organizacionih nauka, 2009.

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behavior and demand in energy, it becomes prevaziñeno. Because, in countless cases it
turned out, that are often unreasonable desires and needs of consumers wrongly directed
the activities of companies and list them in creating offerings that are in disagreement
even with consumer interests, especially the interests of the whole society. So the markets
are flooded with numerous hazardous products, poor quality products that endanger the
health and even the lives of consumers, products that cause irreparable damage
ekološkoom system, products based on renewable resources, which spent the last
surveyed reserves of many metals, non-metals, energy. The drastic increase in the
number of examples of smokers, alcoholic drinks, drugs, weapons, wars for energy
resources, and the like., Only exposed in some forms of consumption, which is the result
of extreme povlañivanja consumer preferences, with such spending, mostly opposing the
interests of consumers, to say nothing of the wider repercussions of such a relationship.6
The focus of the new marketing is a great trinity of interests and bringing them into
compliance on an ongoing basis. Marketing, thus acting proactively, rational and humane,
and assumes the role of active promoters of sustainable development. On the basis of
such marketing must be ethical principles, which do not mean a handicap for the
company, but she, on the contrary, creates limitless market opportunities for expansive
growth. Rather, sustainable development is a new marketing opportunity for the future.
The power of marketing is, in this respect, are immense, and its huge importance.
It is the most important mediator between suppliers and consumers, with great influence
on both sides. The publicity-oriented companies / and there is a world /, defined
landmarks future marketing activities of the company and plays a key role in drafting the
offer. Marketing has also, in the future will have more impact on consumers and their
consumption. Consumers will find it easier to specify the demand and consumption of
products that are important for solving their problems, and who, at the same time,
respected its long-term interests.
Personnel in marketing, led by marketing management, at all levels, in doing so,
must be advocates and implementers of sustainable development principles, to be
established at all levels of social organization, from local to global. One must not wait for
decades, even centuries, to establish that a product is in disagreement with the interests
of consumers, although for some of them, as soon as their application no such knowledge,
but it is not communicated, for profit companies, for example . If you are involved in all
bribed experts, politicians and lawyers, there nepočinstva, directly Gentiles consumer's
interests.
Marketing today, is the result of evolutionary processes and is directly related to the
business orientation of the company. In terms of production orientation, the role of
marketing activities amounted to the market research and PR, as well as the
implementation of some of the sales activities. Rather, marketing is in a position to help
you more efficient implementation of the second phase transport process of reproduction,
with very little opportunity to influence the overall process.
The importance of marketing in terms of increased sales orientation, however,
marketing activities are taking place in the field of market research, promotional activities
and aggressive sales. Very little attention is paid to the analysis of customer satisfaction,
achieved after purchase. Sell at any price, that's the motto for the management and this is
largely responsible marketing. Who cares what consumers want and what their interests
are, must sell what is produced. Incorrectness, unscrupulousness, aggressiveness,
arrogance, and the so-called basic attributes. '' hard sell''. Methods and techniques
appropriate to them, which are used to persuade customers, were brought to perfection,

6
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ensuring efficient sales. This is a typical example of respecting the interests of only one of
the three possible and desirable, and that the interest of the company. Everything else is
peripheral. Interests of consumers and society are simply bypassed, they are blurred,
inferior, sheltered profit and revenue growth.
The origins of modern marketing are dominated by the perception that the
company engaged in satisfying the needs and desires of consumers. This is the beginning
of the era of marketing. Marketing takes the lead in deciding what to produce and what
will define the offer, which is, of course, subject to research needs and market demand.
Planning the company began marketing plan. The focus is on the needs of consumers,
who are becoming landmark enterprise business process. Way to realize the objectives of
integrated marketing, the goal is to make a profit, which occurs as a result of customer
satisfaction.

5. CONCLUSION

Evolution of marketing, perception appears to be the selfish interests of companies

and consumers, often carried out at the expense of the interests of society, which may
lead to unforeseeable consequences for the general social development. The business
operations of the company, including the social interests, as equal to the other two
interests. This is happening at a time of affirmation of the principles of sustainable
development and measures to be implemented on a global basis, in order to curb the
greed of corporations, which threatened drastic degradation of ecological and social
systems. Marketing, in these new circumstances, the company and the consumer gets
itrećeg actors, whose interests must be taken into account, which must be represented in
the process of decision making and management of marketing activities. The third actor in
the company, which has its own interests, which is certainly a priority if we want to
overcome the element in development.
The evolution of marketing, from traditional and transactional, flowed through
relational, ecological and social, to holistic marketing, which is, for now, the most
complete answer to the increasing demands that are placed before marketing of
tomorrow.
Basically the system is holistic marketing approach to marketing and the company,
in which concepts such as social system, economic system, business, marketing, and so
on., Looking through the prism of interdependence, which is characteristic of the systems
and their parts - subsystems, that can not be seen separately, in isolation from each
other. The system allows access to the perceived complexity of the company and the
marketing and perceive their interactions with the environment, with which they are in
continuous communication. Of particular importance, without, knowledge of the
multidimensional nature of the interaction between systems and subsystems, and the
subsystems within a whole. Dynamic interaction of subsystems within a system, and also
an adequate system of interaction with their environment, the condition of the efficiency
and effectiveness of business processes.
Marketing, because of their positions in the company and the importance of linking
the actors, who are above the interests of their coordination and interaction, takes on the
characteristics of organizational, open, complex, dynamic, stochastic, labile, evolution and
behavior of the system with the appropriate and necessary. He has seen all the key
interests of stakeholders which addresses the marketing activities, to include the most
important factors that enable a wide coordination in the preparation of bids, the
implementation of which will benefit both those who make decisions and implement them,

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and those who offer designated. All this is achieved with quality marketing management,
which contributes to the realization of sustainable development.

REFERENCES

1. Kotler, F., Keler, K.,L., MARKETING MENADŽMENT, Beograd, Data status (2006),
2. Filipović, V, Janičić, R., STRATEGIJSKI MARKETING, Beograd, Fakultet organizacionih
nauka, 2009.,
3. www.unep.org „Declaration of the United Nations Conference on the Human
Environment“ (17.11.2012.)
4. www.unep.org „Rio Declaration on Environment and Development” (17.11.2012.)
5. www.unep.org „Agenda 21“ (18.11.2012)
6. www.ekoforum.org/ (18.11.2012)

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 APPLICATION OF NEURAL NETWORK IN THE ECONOMY

Ivana Jovanović

State University of Novi Pazar, Department for Economics, ijovanovic@np.ac.rs,

ivananp2001@yahoo.com

Abstract: The basic premise of modern business is "You're either quick or you're dead." This
raises the need for company management to make timely and effective decisions in a short time.
Decision making has been traditionally based on assumptions such as intuition, experience, and
of course the entire input information of companies, both internal and external factors. For
making a good business decision, it is common opinion that the experience is one of the most
important factor. Lack of valid information can lead to the adoption of unsuitable or inefficient
decisions, even when we talk about experience managers.

In light of today's businesses, with increasing external competition in every business segment as
well as the globalization of business, the company management deals with the problem of
identifying important information in the crowd as they arrive. Sources of data are growing,
which affects on the amount of information that should be read, understood and processed. It is
not uncommon that certain information can not be easily link to, they are incomprehensible, and
often quite useless. How in these conditions make fast and efficient decision?
The only possible way to achieve this goal is the proper and efficient management of ideas,
knowledge and information based on modern business intelligence systems.

The aim of this paper is to introduce one of business intelligence tools, namely neural networks,
and how they can help an organization to make decisions.

Key words: business intelligence, neural networks, neural network training

INTRODUCTION

Business intelligence is a broad field of applications, tools and technologies intended for the
collection, storage and analysis of data in support of decision making and business performance
management systems. The main goal of business intelligence is to overall organization's
information resources put in use of realization of the factors of running business and making
high quality and fast decisions, all in order to achieve certain strategic objectives, strengthen the

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competitive position in the market and identify new business opportunities.1 Business
intelligence enables organization, studying their behavior and actions of the past, of course,
where the organization was, to determine the current situation and predict what affects what will
happen in the future. Internally, business intelligence can provide an analysis of business
activities and processes to help: increase efficiency, reduce costs, eliminate conflicting reports,
improve communication and coordination among parts of the company. Externally, they can
identify important trends, analyze customer behavior, the actions of competition, identify
opportunities, enhance competitiveness and strategic information exchange with business
partners. Business intelligence technologies are mutually related and complementary. Some of
them are: detection of legality in the data, and neural networks to be dealt with in this paper.

Data Mining can be defined as a process that is based on collecting, analyzing and determining
the legality of large amounts of data receiving quality information and knowledge that assist
decision makers in the process of decision making. In the past ten years in the field of data
disclosure laws are increasingly being developed and implemented successful applications in
various fields, such as medicine, finance, marketing, etc..

Artificial neural networks (ANN) are by the structure, function and information processing
similar to biological neural networks, they are a relatively new technology that solves the
problems of classification and prediction. ANN is a collection of mathematical models that can
simulate some of the properties of biological nervous systems and draw similarities with
adaptive biological learning. Today neural networks are treated as standard tools for data mining
and used for many tasks, data mining, such as classification of patterns, time series analysis,
forecasting, and clustering. They are composed of many interconnected neurons which, like the
biological neurons, are associated with their relationships that include bandwidth (weight) ratios,
which are similar to the role of synapses. Neurons are organized into three levels: input layer,
one or more hidden layers and an output layer. For the presentation of artificial neurons, we use
the following codes:

- xi (i = 1, 2, ... , m)- inbound links, the value of inputs that a neuron receives
- wki (i = 1, 2, ... , m)- the so-called. Weights
- uk- cumulative value, which is the total weighted input
- a (.) - activation function
-
 k - Activation threshold;
- yi- the value that is output

1
Čupić, M., Suknović, M., “Odlučivanje”, FON, Beograd , 2008.

Page 175
Schematic representation, with the use of those marks, is presented in figure 1. Each of the input
connections, which are indicated by x, and which has m, multiplied by its weighting factor wki.
Such values are then multiplied add up, and get the value of the UK. So:
m
uk   wki xi
i 1

Figure 1: Schematic representation of the artificial neurons

Then, the value of uk is using as input to the activation function, which is generally non-linear,
and most of the so called. sigmoid (logistic) function (Figure 2). Here, the link between the
activation threshold activation function is usually such that the value subtracted from the value of
the uk , so that the difference is used as input to the activation function. In this way a value of the
output, ie. output yi.

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 a(v)

1 b1

b2

b1  b2

Figure 2: Sigmoid (logistic) function

NEURAL NETWORK ARCHITECTURE

Architecture of the neural network is a specific arrangement and connectivity of neurons in the
grid. By architecture, neural networks vary according to the number of neural layers. The most
famous neural network with a single layer is single perceptron. For networks with multiple
layers, each layer typically receives inputs from the previous layer and sends its output to next
layer. The first layer is called the input, the output is the final, the other layers are usually called
hidden layers. One of the most common architectures of neural network is a network with three
layers. The first layer is called the input, the output is the final, the other layers are usually called
hidden layers. One of the most common architectures of neural network is a network with three
layers. The first layer (input) is the only layer that receives signals from the environment. The
first layer transmits signals to the next layer (hidden layer) which processes the data and extracts
the characteristics and patterns of the received signal. The neurons in the input layer are passive,
they do not handle but the information has to be easily used for the reception of data forms and
then submit them to the neurons in the next layer. Data that are considered important indicates to
the output layer, the last layer of the network. Complex neural networks can have multiple
hidden layers, and the feedback loop and elements delay time, which are designed to enable
more efficient separation of the important properties or outline of the input level. Today, the
most studied and applied multilayer neural networks in addition to the input and output layers
containing neurons in the middle (hidden) layer. Figure 3 presents the network with four layers.

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Figure 4: Schematic representation of neural network with four layers

CLASIFFICATION OF NEURAL NETWORKS

Classification of neural networks can be done in several ways, depending on the criteria used for
classification. According to the type of connection, the neural network can be divided into:

- Laminar neural networks- neurons are arranged to form layers. At the entrance of one
neuron we are bring out all the neurons of the previous layer, and its output is kept to the
inputs of all neurons in the layer above. Neurons of the first (input) layer have only one
entrance. Outputs from the last neuron (output) layer are outputs from network.
- Fully-connected - the output of one neuron leads to the output of all neurons in the
network.
- Cellular-are interrelated only neighboring neurons. Regardless of local relevance, the
signals are spread in neurons outside the neighborhood, the indirect propagation of
information.

The main advantage of neural networks is that they are able to use some a priori unknown
information hidden in the data (but not able to be extracted). "Catching" the unknown
information is called "learning neural network" or "neural network training."

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We can categorise the learning situations in two distinct sorts. These are: 2

- Supervised learning or Associative learning in which the network is trained by providing

it with input and matching output patterns. These input-output pairs can be provided by
an external teacher, or by the system which contains the neural network (self-supervised).

- Unsupervised learning or Self-organisation in which an (output) unit is trained to respond

to clusters of pattern within the input. In this paradigm the system is supposed to discover
statistically salient features of the input population. Unlike the supervised learning
paradigm, there is no a priori set of categories into which the patterns are to be classified;
rather the system must develop its own representation of the input stimuli.

- Reinforcement Learning -This type of learning may be considered as an intermediate

form of the above two types of learning. Here the learning machine does some action on
the environment and gets a feedback response from the environment. The learning system
grades its action good (rewarding) or bad (punishable) based on the environmental
response and accordingly adjusts its parameters.

-
According to direction of propagation of information, neural networks can be divided into:

- Feedforward (non-recursive or non-refundable) - Higher layers do not return information

in the lower layers. Signal propagation occurs only in one direction (from the inlet to the
outlet), signal propagation

- Feedback (recursive or feedback) - The upper layers are turned back into the lower layers
of information. Output from the neuron returns to the lower layers or the same layer

APPLICATION OF NEURAL NETWORK IN THE ECONOMY

The flexibility of neural networks enables their implementation to a wide range of problems,
from prediction to classification, as well as time series analysis. However, its applicability
depends on the specific characteristics of the problem. Problems that can be successfully applied
neural networks are those in which:
1. There are many past representative examples (at least about 100, and preferably
more);

2
Singh, Y., Chauhan, S., „Neural networks in data mining“, Journal of Theoretical and Applied Information
Technology, vol.5, no.1, 2009.

Page 179
 2. The rules of coming to a decision are not familiar ie. experts do not exist or are not
available;
3. Variables can be quantified (as in most cases it is possible);
4. Standard statistical methods have shown success, ie. phenomena can not be
represented by some linear model;
5. The occurrence of unpredictable behavior, the data are incomplete, and needs a robust
tool.

Neural networks are used in numerous different areas, some of which are:

 They are used in various fields of economics. Having success in the financial markets
where the non-linear nature of financial data makes the application of classical methods
very difficult
 In predicition stock values are superior to that of statistical
 Making decisions based on many variables
 Assessment of credit standing for business and individuals
 Prediction time series related to the demand: marketing analysis: predicting future
customer behavior customers in the future, identifying target groups-market segmentation

In the market, today, there are a number of tools for the construction and design of neural
networks, tools with which we can carry out the prediction and classification based on a number
of data, and in order to make better business decisions. One of such tools is Alyuda Forecaster
XL. It is actually a tool for the prediction using neural networks, with integrated support for MS
Excel. It is the first choice for users who need a tool to predict which is easy to learn, and
provides a reliable prediction, a tool that is embedded into a familiar Excel interface.

Forecaster XL is a very easy-to -use tool, with automatic neural network architecture and
selection of training parameters. It allows users to improve their prediction, without spending a
lot of time on learning theory and neural networks architectures and parameters choice suitable
for their forecasting problem.

As Forecaster XL is an Excel add-in, it allows the prediction to be made on the basis of data
already entered into Excel's table. In the following example we show how we can determine the
risk of credit approval to the applicant, by using this tool.

Granting of loans to applicants is a classic neural network application. To solve this problem a
neural network should be trained to perform correct classification between applicants. After the
network has been properly trained, it can be used to guide decisions for granting or denying new
loan applications. Database, upon which we training network, contains information that is collected by
the applicant and, in most cases, the following information:

1) "Sex" - applicant's sex;

2) "Age" - applicant's age;
3) "Address Time" - how many years the applicant has been living at the present
address;

Page 180
 4) "Marital Status" - applicant's marital status;
5) "Occupation" - applicant's occupation type;
6) "Job Time" - how many years the applicant has been employed at the present
job;
7) "Checking" - presence of a checking account;
8) "Savings" - presence of a savings account;
9) "Payment History" - number of on-time payments for the previous credits;
10) "Home Ownership" - does the applicant own a home or rent it;
11) "Financial Ratio 1" - integrate financial ratio, incorporates expenses, income, debt ratios, requested
loan amount, etc;
12) "Financial Ratio 2" - integrate financial ratio, incorporates debt ratios, checking and/or savings
accounts balances, etc.

Target column:
13) "Credit Risk" - risk level of granting a loan to the applicant.

The picture below shows what it looks like table with all data related to the applicants. When we
have collected data, first we train a neural network on set of data we know.

Figure 5: Database on applicants for loans on which is training the network

So, within Excel's Add-Ins menu activate Forecaster XL in addition to the drop-down menu
option to activate Create Network..

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 Figure 6:Dialog box in Forecaster XL

After pressing the Create network option opens a dialog box, as shown below, which contains
fields for entering data. In section Input range enter data from all columns related to data on
applicants, in the section Target Range enter information about the target values for all
applicants.

This dialog box contains the Options button in which you can set certain parameters, the
parameters related to data, network, reports that we want as output, after training the network.

Figure 7:Dialog box, with input data and target data

Page 182
 Figure 8: Dialog box called options, where we can set some parametars

When all the parameters are set or separately specified, click Train. The display box will appear
as shown below, where can trace phases through which the train network, such as analysis, pre-
processing, training, and testing. We can also keep track of the number of iterations that will pass
through the course of their training in, and the time needed for training the network.

Figure 9: Dialog box which shows training progress

As a result of the training network we have specific data, classified into several categories. The
first of these is the summary table in which we have the data, data set for training and test set.,
the average error tolerance and the percentage of good and bad forecasts.

Page 183
 Figure 10: One of the report output neural network training

As an output report from training neural network is table Actual vs.Forecasted Table where we
can compare estimated value of the credit risk of applicants to those who was earlier given as
output values. In accordance with that we estimate absolute and relative error, and quality
assessment as either good or bad.

Forecaster Xl shows 4 output columns:

1. Forecasted target value, i.e. calculated neural network output.

2. Absolute forecasting error, i.e. difference between actual target value and forecasted
target value.
3. Relative forecasting error, i.e. relative difference between actual target value and
forecasted target value.
4. Good/Bad estimate of the network forecasting quality.

Records selected for the test set are marked with bold. Test set errors are useful for analyzing
what forecasting errors a user should expect with new data.

-
Figure 11: One of the report output neural network training (Actual Vs. Forecasted table)

Page 184
The importance of input data is one of the output reports and charts that we have available. From
this chart we can see which column or parameter has a great impact on the result of the neural
network, and which one can be safely removed. Caution should be exercised in interpreting this
chart, because we need to take into account the fact that the input column, ie. parameters are
interdependent.

Figure 12: A chart that shows the importance of the input parameters

When we are done with the training of the neural network , then we go on forecasting , which is
performing on the new data. Everything that was learned during the neural network training,
now is applied to a new set of data, and provides output that is related to the credit risk of the
applicant, ie. whether the risk is low or high.

Page 185
Figure 13: Tables with data of applicants for credit to determine the credit risk to

So, within Excel's Add-Ins menu activate Forecaster XL in addition to the drop-down menu, you
activate Forecast.

Figure 14: A dijalog box in Forecaster XL

After pressing command Forecast, shows a dialog box, as we can see on figure below.In section
Input range enter the data from the new table, data on applicants for a loan, for which we want to
determine whether the risk of lending to them is high or low. After that, pressing command
Forecast and as a result we obtain values that will be entered in the output column, column we
have selected.

Figure 15: A dijalog box in Forecaster XL

CONCLUSION

Neural networks, such as could be seen, is widely used in economics and statistics. Their proven
success in applying the classification problems has brought about the most in this area and used.

Page 186
However, one should not ignore the use of neural networks in forecasting. As can be seen, the
neural network is a robust tool, adapted for use in situations of uncertainty and incompleteness of
data. Important feature of neural networks is related to their ability to generalize, ie. giving
satisfactory value of output and when some input values are not known. In addition, neural
networks, in contrast to standard statistical methods of multivariate analysis, have no problem
with non-linear dependencies between the dependent and independent variables.

Considerable ability, just typical for neural networks, is the ability to learn. How is it in the
paper, learning is done in the examples, where are known input and output values. The
introduction of inputs to the network, with appropriate weighting coefficients, we get out to
compare the value of the output of specific examples. Learning, therefore, seems to change the
weights in the event that this output is not equal to the output of neural network which provides
the initial coefficients. When the network is "learned" or trained, can make output for value of
input which is entered.

In the market, today, there are a number of tools for the construction and design of neural
networks, tools with which we can carry out the prediction and classification based on a number
of data, and in order to make better business decisions. One of such tools is Alyuda Forecaster
XL. It is actually a tool for the prediction using neural networks, with integrated support for MS
Excel. It is the first choice for users who need a tool to predict which is easy to learn, and
provides a reliable prediction, a tool that is embedded into a familiar Excel interface.

REFERENCES

1. Balaban, N., Ristić,Ž, “Poslovna inteligencija”, Ekonomski fakultet Subotica, 2006.

2.Čupić, M., Suknović, M., “Odlučivanje”, FON, Beograd , 2008.

3. Freeman, J., Skupura, D.,” Neural Networks: Algorithms, Applications and Programming
Techniques”, Adison-Wesley Publishing Company, ISBN 0-201-51376-5, USA

4. Milić, M., Lalić, N., “Uloga i značaj sistema poslovne inteligencije u savremenom
menadžmentu”, Symorg 2008., XII Internacionalni simpozijum Menadžment i dreštvena
odgovornost, FON,

5. Singh, Y., Chauhan, S., „Neural networks in data mining“, Journal of Theoretical and Applied
Information Technology, vol.5, no.1, 2009

6. http://www.alyuda.com/forecasting-excel-software-with-neural-network.htm

7. www.learnartificialneuralnetworks.com

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Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator

DINAMICS MODEL OF BUCKET-WHEEL EXCAVATOR

Author’s: Zoran Golubović, Zlatibor Lekić, Srdjan Jović

Abstract
In this paper, dynamics models of bucket wheel excavator (BWE) superstructure in the vertical plane, the boom lifting drive system and bucket wheel
drive system describes in a mathematical model or single program. This model allows to evaluate the effects of structural changes in one subsystem to its
dynamic behavior as well as a dynamic behavior of the other subsystems on the BWE. Mathematical model solving provides the basic mechanical
characteristics that define the dynamic behavior of a BWE in the process of digging. The obtained moments, angular velocity, displacement and force time
functions are graphically represented. Results analysis of BWE dynamic calculations indicates that the appropriate reconstruction must be made to
improve such a negative dynamic behavior in the process of digging.

Keywords: bucket-wheel excavator, dynamic model, mathematical model, digging.

U ovom radu dinamiĉki modeli noseće konstrukcije rotornog bagera u vertikalnoj ravni, pogonskog sistema podsistema dizanja i pogonskog sistema
podsistema kopanja, matematiĉki su opisani jednim modelom odnosno jednim programom. Taj model omogućava sagledavanje efekata konstruktivnih
izmena na jednom podsistemu na njegovo dinamiĉko ponašanje i na dinamiĉko ponašanje drugih podsistema na rotornom bageru. Rešavanjem
matematiĉkog modela pomenutih podsitema rotornog bagera dobijene su osnovne mehaniĉke karakteristike koje definišu dinamiĉko ponašanje rotornog
bagera u toku procesa kopanja. Dobijene vremenske funkcije momenata, ugaonih brzina, pomeranja i sila grafiĉki su predstavljene. Analiza rezultata
dinamiĉkog proraĉuna podsistema rotornog bagera ukazuje na potrebu odgovarajuće rekonstrukcije kako bi se nepovoljno dinamiĉko ponašanje u procesu
kopanja glavnih podsistema na rotornom bageru poboljšalo.

1. Introduction 2. Dynamics model of BWE main subsystems

Dynamic model of BWE is represented by dynamic
models of its major subsystems that are most loaded in
the excavation process. Dynamic models of digging
[1,2,3,4], lifting [5] and superstructure [6] subsystems
were examined separately without considering the impact
of one subsystem dynamics behavior to another. These
three subsystems are in the process of digging exposed
load that comes from digging forces[7].
Number of influential parameters whose individual
contribution to a very different and mutually conditioned
affects on character of digging force. The main
parametars are: specific resistance to excavation (SFRE)
presented in reference [8] , cutting conture length (kL) ,
cutting speed. According to researches[9],
value of SFRE is greatly influenced by cutting speed, too.
From the ather side cutting conture depends on bucket
wheel vibration in vertical plane [10,11].
Electric motor torque according to [4] is described by an
exponential function. Moments of inertia, stiffness and
damping are calculated according to [13]
The results obtained using the dynamic model presented
in this paper can be used to identify the optimal retrofit
solution [14] .
Figure 1 shows the kinematics scheme of the boom lifting
drive system, consisting of: an asynchronous electric
motor (EM), mechanical coupling (S), gearbox (R),
brakes (K) and drum for rope winding (D). For this work
interesting is the case where the balance established
between the braking and load torque. Because of the
changing nature of the torque load at the catch is only a
few teeth of gears coupled. This leads to very rapid wear
of the gears tooth flanks, and therefore to a relatively
small gear life. Oscillatory system is represented as five
rotating mass on a single shaft wedged:
J r - the reduced gearbox moment of inertia on the shaft
brake,
J 5 - the reduced gear number 5 moment of inertia on the
shaft brake,
J 6 - the reduced gear number 6 and drum moment of
inertia on the shaft brake,
J 7 - the reduced boom and bucket wheel moment of
inertia on the shaft brake.

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Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator

y Fu

6
Mp 8

rd
Cu

Fw
7 J7,ls
 Mw

lu

x=ls7

II

K J II Mw
EM S 5
I  II
1 5

CI II(I-II)
R 6 JI
5

I
D
Mm

a)Boom l ifting drive system b) Bucket wheel drive system

Figure 1. Mechanical model of bucket wheel excavator

Dominant influence of the oscillations of the system has J 5  5  c56  6  5   d 56  6  5 
upper supporting structure. According to analysis [6], the
upper supporting structure accumulates around 85%, (1)
portal sheet 10%, suspension system about 3% while all  cr 5 5   r   d r 5 5   r   0
other substructure (boom, the drive bucket wheel system
and lower supporting structure) accumulated less than 1%
of the system potential energy in its oscillations. Those
J 6  6  Fu rd  c56 6  5   d56 6  5   0
facts suggests that, in the analysis of the systems low-
frequency oscillations, the deformability of the lower Boom oscillations can be described by equation:
support structure, boom and bucket wheel drive system
can be ignored. J 7  7  Fu lu sin   (ls  rt ) Fw (2)
For the mechanical model shown in Figure 1, we write the
system of differential equations for the boom lifting drive
system motion [5]: Force in the rope ( Fu ) can be determined as the product
of stiffness and rope elongation:
J k  k  c kr  r   k   d kr r   k   M k
 l 
Fu  cu  u 7  rd ik6  (3)
 sin  
J r  r  cr 5 5   r   d r 5 5   r 
Where is:
 ckr  r   k   d kr  r   k   0  k ,  r , 5 , 6 , 7 [rad ] - absolute angles of rotation

Page 189
Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator
reduced on the shaft brake, 2
x 10
4 Input data

M K [KNm] - braking torque, M m [KNm]

ci Nm / rad i  k , r ,5,6,7  - reduced stiffness on

1.8

1.6

the shaft brake,

 i  k , r,5,6,7 - dumping reduced on
1.4

2
di Nm / rad 1.2

the shaft brake, 1

cu , d u - rope stiffness and dumping; 0.8

0.6
Fu [KN ] - Force in the rope reduced on the shaft brake,
l s m - boom length,
0.4

0.2

x m  ls   7 - vertical movement of bucket wheel, 0

0 10 20 30 40 50 60 70 80 90 M rad
100 / s
110

rd m  - radius of the drum,

Figure 2. Electric motor torque (P=900 KW)
rt m - bucket wheel radius,
l u m  - distance from the boom rotation axis and rope
Tangential component of a load force, which presents
90% of total load of bucket wheel drive system, according
hanging point. [7] is given by the following equation:
Fw  1,1 Ft KN  - digging force (tangential force
increased by 10% due to other Ft    k L Lsr f   (6)
resistance).
Where is:
Oscillatory system of bucket wheel drive system [2] is
represented as two rotating mass
sin za 0     / 2

f        /    / 2 za  / 2     -
J I - Electric motor moment of inertia.
J II - Bucket wheel and bucket wheel drive system 0 za   
gearbox moment of inertia 

Differential equations for the bucket wheel drive system k L  random [ K L ] - Randomly selected value from a
motion [5]:
range of specific resistance measured values

J I  I  CI II  I   II   M m
Lsr - Length of a bucket cutting contours.
(4) According to experimentally obtained the values of SFRE
J II  II  CI II  I   II    M w [KL] in the Kosovo coal basin for gray compact clay
excavation [15] tangencial component of load force is
where is: presented graphically in figure 3:
 I , II [rad ] - absolute angles of rotation reduced on the 600
electric motor shaft Ft (KN )
X: 18.26
Y: 589.5

M m [KNm] - electric motor torque 500

M w [KNm] - load torque reduced on the electric motor 400

shaft
300

Electric motor torque according to [4] is described by an

exponential function and thair graphic interpretation is 200

given on figure 2.
100

9
M m   C ( j )  e  ( j )m (5) 0
0 2 4 6 8 10 12 14 16 18
j 1
t (s) 20
Figure 3. Tangencial component of digging

where is: C(j) – interpolation coefficient

  j  - interpolation coefficient
Torque load of bucket wheel drive system cab be
calculated according to equation:
 M - angular velocity of the electric motor
shaft dt
M w  Fw  (7)
2

where is: d t - diameter of bucket wheel.

Page 190
Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator
Solving the system of differential equations (1), (2), (4) Simulink Modul (fig. 4) obtained the results that will be
using Runge-Kutta methods in Matlab software package graphically represented.

2.Force on gear no. 6

Out1

3.angular coordinates gear no. 5

Out2 4.angular coordinates gear no 6

5. angular velocity gear no. 5

Out1
Out3
In1
Out2 6.angular velocity gear no. 6
Out3 In2
In2 7.vertical movement of bucket wheel
Out4
Out4
digging Mux
force Out1
dizanjekop1300
8.digging force
digging In1
force angular coordinates 9.force in the rope To File
Out5 Out2
of bucket wheel
digging subsystems 10. Moment of electricmotor - digging subsystems
drum angular Out1
coordinates vertical movement In1
Out2
Out6 In1 Out2
of bucket wheel Out3 11.x coordinates movement of the bucket cutting conture
In2
Out4
lifting subsystems In3 Out1
12.y coordinates movement of the bucket cutting conture
bucket
digging supporting structure trajectory
force of BWE 13.Actual buckets cutting contours length

Mux
force in the rope

vertical movement
of bucket wheel

Figure 4. Simulink model of BWE dynamics model

Figure 5 graphically presented the load force at the last 1500

pair of toothed gears. Dynamic load on the bucket wheel 5 [rad / s]
in excavation process, despite the elasticity of the rope 1000
has a decisive influence on the vibrations of boom lifting
drive system.
500
4
x 10
4
F56 ( KN ) 0
3.5
X: 17.52
Y: 3.577e+004
3 -500

2.5
-1000
2

1.5
-1500
0 2 4 6 8 10 12 14 16 18 20
1 t (s)
Fig 6. Angular velocity of gear no.5
0.5

-0.5
2500
6 [rad / s]
-1
0 2 4 6 8 10 12 14 16 18 t (s) 20 2000
Fig.5. Load force at the last pair of toothed gears (lifting subsystem)
1500

1000
Angular velocity oscillations of large amplitude at the last
pair of toothed gears, where are in the process of digging 500

in conjunction only two possibly three gear tooth, 0

resulting in rapid wear of the teeth. From the figure 6 and
figure 7 it can clearly be seen that the coupled gears 5 and -500

6, with a stiff shaft motors, much moved. This process -1000

leads to wear on their hips, so they lose their involute
shape. In addition, as the latest gears pair is outside the -1500
gearbox housing, weather conditions affect the removal of
-2000
grease from their contact surfaces. That enhances their 0 2 4 6 8 10 12 14 16 18 20
t (s)
wear. High-frequency oscillations are particular expressed Fig 7. Angular velocity of gear no.6
in gear no.5.

Page 191
 Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator
4
x 10 1.4
2

M m (KNm) X: 8.4 rt [rad / s]

Y: 1.947e+004

1.5 1.2

1 1

0.5
0.8

0
0.6

-0.5
0.4

-1

0.2
-1.5
10 12 14 16 18 20
0 2 4 6 8
t (s)
0
0 2 4 6 8 10 12 14 16 18 20
t (s)
Fig 8. Electric motor torque (bucket wheel drive system)
Fig10. Angular velocity of bucket wheel
Time function of electric motor (Fig. 9) and bucket wheel
angular velocity (Fig. 10) shows that the coupling 4. Conclusion
elements of the gear have very little influence on the
reduction of vibration caused by the stochastic load on the Results analysis of BWE dynamic calculations indicates
bucket wheel. A large gear which is connected with shaft that the appropriate reconstruction must be made to
to a bucket wheel has the largest angular velocity improve such a negative dynamic behavior in the process
oscilations, so it can be concluded that the impact loads of digging .
on its tangent is greatest. As done in the module SIMULINK of software
The oscilation of electric motor torque (Fig. 8), after package MATLAB (Fig. 4) program provides easily
starting period which is not the subject of this analysis, is changes of some or all program sub-elements and quickly
consistent with the load torque oscillations (Fig. 3). It obtain the results. That is an opportunity to examine the
speaks of gear and coupling small absorption capacity. effect of individual subsystem reconstruction on BWE
Oscillations amplitude greatly exceeds the nominal value dynamic behavior in process of digging .
of the electric motor torque, which shows that he is Reconstruction may involve the following
constantly overloaded and under the influence of heavy intelligent retrofit solutions:
loads.  additional holding brake system independent of the boom
The difference of electric motor shaft and gearbox input lifting drive system to reduced vertical movement of
shaft angular speed that reaches up to 10 rad / s shows   bucket wheel,
 coupling and gearbox replacing in digging drive
that the coupling which establishes a connection between subsystem to reduced the oscillations amplitude and
gear units and motors exposed to high torque twisting. frequence of bucket wheel drive system,
 design changes of bucket wheel construction to reduced
120
displacement under load .
 M [rad / s]
100
References
X: 8.428
80 Y: 89.62
[1] V. Jevtić, Z. Golubović., Z. Lekić. : Mathematical modeling
of resistance moment as the basic component for the
60 dynamic behavior of the BWE, XIV international
conference on material handling and handling and
40
warehousing, Belgrade, 1996.
[2] V. Jevtić, Z. Golubović., Z. Lekić, S. Makragić: The
analysis of dynamic processes in the BWE working wheel
20 drive system with a hydrodynamic coupling, 6th Sever
symposium on mechanical gears, Subotica (1997). pp. 179-
185
0
0 2 4 6 8 10 12 14 16 18 20 [3] Z. Golubović, V. Jevtić, Z. Lekić : Dynamic behavior of
t (s) planetary gear in BWE drive systems , Yugoslav Congress
Fig 9. Angular velocity of electric motor shaft (bucket wheel drive of Theoretical and Applied Mechanics 97 XXII, Vrnjaĉka
system)
Banja, 2-7 jun 1997.
[4] Z. Golubović: Contribution of drive system reconstruction
feasibility for middle class BWE, master's thesis, Kosovska
Mitrovica 2009.
[5] V. Jevtić Theoretical and experimental studies of flow
stresses in lifting subsystem structural elements, master's
thesis, Niš-Bohum, 1979.
[6] Volkov, D.P , Ĉerkasov V.A. – Dynamics and strength of
excavators, translated from the Russian, Department of

Page 192
Z. Golubović, Z. Lekić, S. Jović dinamics model of bucket-wheel excavator
Mining Institute for Informatics and Economics , Beograd,
1989.
[7] K. Hitzschke. Experimentelle Analyse der Belastung des
Schaufelrades durch den Grabvorgang, Hebeyeuge u.
Fördermittel, 1984, H.9
[8] V. Raaz Assessment of the Digging Force and Optimum
Selection of the Mechanical and Operational Parameters of
Bucket Wheel Excavators for Mining of Overburden, Coal
and Partings, Krupp Fordertechnik, Esen 1999.
[9] N. G. Dombrovski, Multi –bucket excavators: theory,
construction, calculation, (In Russian), Mashinostroenie,
1972.
[10] S. Bošnjak, N. Zrnić, Z. Petković, Bucket wheel excavators
and trenchers - Computer added calculation of loads caused
by resistance to excavation. Machine Design, University of
Novi Sad, pp.121-128(2006).
[11] S. Bošnjak, N. Zrnić, D. Oguamanam, On the dynamic
modeling of bucket wheel excavators, FME Transactions
(2006) 34, 221-226.
[12]D. Ignjatović, I. Ristović, M. Stojković, The methodology
of the selection of auxiliary mechanisation for the open pit
mines of lignite, Mine planning and equipment selection.
a.a. Balkema, 2000, (2000), pp. 577-581.
[13] V. Batinić, Determination of gear mesh stiffness in
planetary gearing, Military Technical Courier. 2008,
vol. 56, no. 2, pp. 227-236.
[14]M. Gnilke Intelligent retrofit solutions for bucket
wheel excavators, MAN TAKRAF Fördertechnik
GmbH, Lauchhammer,2006
[15] D. Ljamić, M Arsić, B. Ćirković, Experimental analysis of
BWE SchRs 650/5x24 bucket wheel load, Mining
Machinery - scientific Meeting, Beograd 1995

Authors addresses:

mr.sc. Zoran Golubović dipl.ing.

Faculty of Technical Science
University of Pristina
Knjaza Milosa bb,
SRB-38220, Kosovska Mitrovica
e-mail: zoran@vgn.rs

prof. dr.sc. Zlatibor Lekić dipl.ing.

Faculty of Technical Science
University of Pristina
Knjaza Milosa bb,
SRB-38220, Kosovska Mitrovica
e-mail: zlatibor.lekic@gmail.com

doc. dr.sc. Srdjan Jović dipl.ing.

Faculty of Technical Science
University of Pristina
Knjaza Milosa bb,
SRB-38220, Kosovska Mitrovica
e-mail: jovic003@gmail.com

Page 193
 DISTRIBUTED LEARNING OBJECT REPOSITORIES
Vuk Pavlović1, Gordana Đokić2
1
Prirodno-matematički fakultet, Novi Sad, vuk@vukvuk.com
2
Prirodno-matematički fakultet, Novi Sad, profesoricagoca@gmail.com

ABSTRACT
Object repositories are great places for finding, exchanging and storing learning objects.
Users connect, use and share learning objects through centralized systems (repositories).
These repositories, in most cases, are not connected.Often, users manually have to
“transform” objects from one repository system to another, due to the lack of connection
or interoperability between different learning systems. With this paper we wanted to show,
that even independent, centralized learning object repositories, based on different learning
systems can work together seamlessly, within single distributed learning object repository
system.
Keywords:learning objects,learning object repositories, distributed learning object
repositories

INTRODUCTION
Focus of this paper are basic principles behind network topologies in distributed learning
object repositories, types of repositories and types of connections between repositories.
We will not focus on actual systems and standards like SCORM (Sharable Content Object
Reference Model) [1], Moodle [2], Desire2Learn [3] etc. Our goal is to show, that no
matter what standard or technology is used, we can always attain high level of
interoperability between different learning systems. If we can attain “good enough”
interoperability, creating and maintaining distributed learning object repositories, becomes
much easier.

LEARNING OBJECTS DEFINITIONS

Learning objects need to be described and understood in ways that make their advantages
apparent to creators, teachers and learners. Meaning of learning objects need to be clear
both to developers and to end users.[4][5][6][7]
Definition appropriated for this work represent learning object as any digital element
which can be used for learning content.

TYPES OF DISTRIBUTED LEARNING OBJECT REPOSITORIES

Learning objects are stored and organized in a repositories. Learning object repositories
usually represent resources of learning objects that should be easily accessible and
sharable. Usually repositories have some search function ranging from simple keyword
search tool to more advanced searching features. Users access to learning objects stored
in repositories with adequate systems. Also, repository has to follow certain standards
which ensure structurally searching and objects exchange between different repositories.
One of the best known general learning object repositories is MERLOT[8]. MERLOT
represents repository based on referencesof learning objects, which include links to online

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digital materials with reviews and assignments. It is a free and open online resource for
sharing learning materials.
There are several other learning objects repositories such as: Wisc-Online (Wisconsin
Technical College System) [9], NCLOR (North Carolina Learning Object Repository) [10],
Content Sharper Authoring Tool and Virtual Inorganic Pedagogical Electronic Resource
[11].
Learning object repositories generally are not standardized and don’t follow same format
for storing learning objects. Consequently, there are many types of learning object
repositories.
In our previous work, we discussed about preparing learning content for centralized
repository. Categorization and using centralized resource of learning objects brings order
in system, allows ranking the learning objects and improves process of learning. Access to
large resource of learning objects on the same location, improves process of searching
and using these objects. [12]
Centralized repositories
Centralized repository is the most basic type of repository. It’s not connected directly to
other repositories. Only connectivity is between user (with some type of learning
management system) and repository.

User User

Learning Object
Repository

User
Power User
(can modify content)

Figure 1 - Centralized Repository. Regular users can access content and power users
can modify it.

Figure 1 describes centralized repository where regular users can only access content and
power users can update, delete and insert new learning objects.

Asynchronous trusted distributed learning object repositories

In most basic distributed learning object repository system, every repository is
synchronized with every other repository (Figure 2).
Every repository is equal, and can be synchronized automatically, at any time. As with
centralized depositories, user and power users can access and modify content. All learning
object repositories are based on same standard.

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 Learning Object
Repository

Learning Object Learning Object

Repository Repository

Figure 2 Basic Distributed Learning Object Repository System, every repository is

synchronizing with every other repository.

Asynchronous untrusted distributed learning object repositories

In asynchronousuntrusted distributed learning object repositories, every trusted repository
is synchronizing with every other trusted repository. Untrusted repository requires data
validation before sync. As shown on (Figure 3), data validation is required for syncing
learning object from untrusted source. Untrusted learning object repositories can be
synced with any (and every) learning object repository, however because new data
requires validation, data is usually validated only once, thus it’s connected to single
repository.

Learning Object Untrusted Learning

Repository Sync Requires Data Validation Object Repository

Learning Object Learning Object

Repository Repository

Figure 3 Partialy Distributed Learning Object Repository System. Every trusted

repository is synchronizing with every other trusted repository. Untrusted repository
requires data validation before sync. For convinience, untrusted repository is
synchonized with only one trusted repository.

Figure 3 describes how data validations depend on requirements. In some cases, every
new object from untrusted learning object repositories has to be checked and verified “by
human” manually. In other, to objects are just added additional Meta tags.
Trusted repositories can be synchronized automatically, at any time, however sync with
untrusted repositories depends on data validation process. All learning object repositories

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are based on same standard. As with centralized depositories, user and power users can
access and modify content.
Synchronous distributed learning object repositories
System with parallel process is said to be synchronous if all process run using the same
clock. In such system, if any process starts to have independent clock, system stops to be
synchronous.Synchronous distributed learning object repositories, theoretically are
possible, but would not be practical.
As with asynchronous, same principles applies to synchronous distributed learning object
repositories.

CONNECTIONS BETWEEN DIFFERENT TYPES OF LEARNING OBJECT

REPOSITORIES
Today, we do not have strong standards for eLearning and learning objects. There are
many organizations actively developing standards and specifications, like: IMS Global E-
Learning Consortium, the IEEE Learning Technologies Standards Committee, ISO
Subcommittee on "Information Technology for Learning Education and Training” etc. In
most cases, these standards do not regulate systems for managing and delivering of
learning objects.
Even within standards, implementations may vary widely, making it difficult to create
connected object repositories.
To create interoperability between two different learning object repository systems, we
have to create some kind of converter (translator).

Translator – Type B to Type A

Learning Object Learning Object
Repository Repository
Type A Type B
Translator – Type B to Type A

Figure 4 - Communication between different types of Learnig Object Repositories

These “converters” vary depending on the situation and purpose. However basic are
always the same. Learning content, text, data, multimedia has to be converted in
predefined format to be compatible with new standard. This conversion can be painless,
but sometimes, everything needs to be converted to different format. Figure 4 describes
this process.
For example:
HTML text has to be converted to ASCII text.
Images are http links and have to be downloaded and stored.
Videos are stored in proprietary format and have to be converted to an open one.
etc.

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Creating Meta data for new converted object, depends on the standard too, but it’s more
straightforward process, because information needed for Meta data is precisely defined.

CONCLUSION AND FUTURE WORK

During our work on independent learning management system, we tested many popular
LMS. We found out that most of them have same basic functionality, like system for
storing learning objects. Most of the LMS, even have some support for importing learning
objects from other popular LMS. Unfortunately this support is often one way and not
automatic. We wanted more. We wanted API (Application Programming Interface) that can
easily access to other types of learning object depositories, and to use learning objects
with different standards, natively without need to conversion and storing to our local
depository.
As we have shown in our work, this is possible with two approaches: a) Every learning
object depository (or system) has to have 2-way API b) connection between learning
object depositories are managed via "convertor”, which translates object from one
standard to other. For our work, we selected the first approach, because at the moment,
our main goal is to connect our LMS and our learning object repository to another type of
LMS and repositories.
Our final goal is much broader, than creating of the network of synchronized learning
object repositories. We want to add connections (one way) to the semi-static data (as html
pages, pictures and video from web etc.) by converting it on-the-fly to usable learning
objects. However, this approach requires one more layer of conversion that will be the
focus of our future work.

ACKNOWLEDGMENT
This work is financially supported by Ministry of Education, Science and Technological
Development, Republic of Serbia, under the project number TR 32044 ”The development
of software tools for business process analysis and improvement”.

REFERENCES
[1] Sharable Content Object Reference Model (SCORM). Available on Web site:
http://scorm.com/scorm-explained/technical-scorm/
[2] Modular Object-Oriented Dynamic Learning Environment (MOODLE), Available on Web
site: http://www.moodle.org/
[3] Desire2Learn Incorporated (Desire2Learn), Available on Web site:
http://www.desire2learn.com/
[4] Wiley, D. A.: Connecting learning objects to instructional design theory: A definition, a
metaphor, and a taxonomy, The Instructional Use of Learning Objects, (2000). Available on
Web site: http://reusability.org/read/chapters/wiley.doc
[5] Recker M. M., Walker A., Wiley D. A.: Collaboratively filtering learning objects,
Designing Instruction with Learning Objects, (2001). Available on Web site:
http://reusability.org/read/chapters/recker.doc
[6] Polsani, P. R. (2003, February 19). Use and abuse of reusable learning objects. Journal
of Digital Information,3(4)

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[7] Friesen, N. (2003). Three objections to learning objects. Learning objects and
metadata. London7 Kogan. Available on Web site:
http://phenom.educ.ualberta.ca/~nfriesen/
[8] MERLOT - Multimedia Education Resource for Learning and Online Teaching. Available
on Web site: www.merlot.org
[9] Wisc-Online - Wisconsin Technical College System. Available on Web site:
http://www.wisc-online.com/
[10] NCLOR - North Carolina Learning Object Repository. Available on Web site:
http://nclor.learnnc.org
[11] Virtual Inorganic Pedagogical Electronic Resource. Available on Web site:
http://www.c-shaper.com/
[12] RadojeCvejić, GordanaĐokić, VukPavlović, Preparation of the learning content for
centralized learning object repository, 3rd International Conference "Application of New
Technologies in Management and Economy" ANTiM 2012, 19 - 21. April 2012., Belgrade,
Serbia

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RELATIONSHIPS AND CONNECTIONS BETWEEN LEARNING OBJECTS
Gordana Đokić1, Vuk Pavlović2
1
Prirodno-matematički fakultet, Novi Sad, profesoricagoca@gmail.com
2
Prirodno-matematički fakultet, Novi Sad, vuk@vukvuk.com

ABSTRACT
In the field of learning objects there are many unsolved problems, especially considering
definition, granularity, classification and standardization of learning objects. This paper
propose one solution for those problems, by defining relationships and connections
between learning objects. Defining relationships and connection between learning objects
is essential to standardize process of creating and using learning objects. In order to
achieve maximum efficiency of proposed concept of learning object relationships and
connections, we set complete scenario in collaborative, multi creator environment. Our
work can be used as general guidelines for using relationships and connections between
learning objects.
Keywords: learning object, learning object system, learning environment, learning
objects connections, learning object relationships

1. INTRODUCTION
Learning objects are introduced in order to enable effective use of learning contents. They
are considered as components of which learning content consists. These components
should be connected in order to produce content that responds on different learning goals.
Relationships between learning objects usually refer tothe hierarchy between elements of
learning objects. Some elements or components of learning objects are representedwith
metadata which are regulated with standards.
Many organizations are actively developing standards and specifications for learning
objects and e-learning, such as: the IEEE Learning Technologies Standards Committee [1],
IMS Global E-Learning Consortium [2], ISO Subcommittee on "Information Technology for
Learning Education and Training” [3].
One of the most used concept is LOM (Learning Object Metadata)[4], which is an
internationallyrecognized open standard for the description of learning objects. This
standard regulate relevant attributes of learning objects such: type of object, author,
owner, terms of use, format of object and pedagogical attributes.
So far, standards only successfully regulate learning objects metadata. Metadata include all
relevant attribute of learning objects for description, but they don’t describe how learning
objects and its components are created, organized and used.
Many learning systems and frameworks can be very useful for creating learning content,
but they often do not share a common mechanism for creating, finding and using learning
objects. Standards are needed to assure the interoperability of different learning objects
and different instructional technologies. Main purpose of standards are to make learning
objects to be modular, interoperable, reusable, sharable and discoverable. Many unsolved
problems are connected with categorization and organization of learning objects.

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Our approach represented in this paper includes solution how to standardize organization
of learning objects with defined concept of relationships and connections between learning
objects. We represent solution how to create and use learning objects and organize them
in multi creator collaborative environment.
The structure of the paper is as follows. There are two main part of our work, first is
based on learning object relationships and other is based on learning objects connections.
In Section 2 we represent problems connected with learning object relationships and our
solution for describing relationships between learning object components and relationships
between learning objects and learning environment. In Section 3 we represent problems
connected with learning object connections and our solution for describing connection by
categorization and design of learning objects, as well as solution for connecting objects in
learning environment. Finally, Section 4 gives our concluding remarks and benefits of our
work.

2. LEARNING OBJECT RELATIONSHIPS

The concept of relationships between learning objects first introduced in learning object
metadata. Existing learning object metadata standards and specifications support the
concept of relationships between learning object components. As example LOM and Dublin
Core [5], include an account of this kind of relations.
However, this concept of relationships only include categorization between learning object
components which are included in its metadata. This paper propose different kind of
relationships between learning objects. We propose recommendation to use higher level of
relationships (including relationships defined by metadata) which will include relationships
between learning object components, relationships between learning object and users,
relationships between learning object and learning environment. Also in order to achieve
maximum benefits of this approach, we recommend using our concept of relationships
between learning objects in multi creator collaborative environment which will be
described later in this paper.

2.1. Problems and Related Works

While LOM and other related specification as Dublin Core can provide some form of
relationships between learning objects, combining learning objects to form higher-level
units of instruction and reusability means having precise metadata that contain detailed
considerations about usage of learning objects. This means that metadata must include
complete details about learning objects components and must be provided in appropriate
compatible and understandable form for different platforms and software. In this way
relationships between metadata as well as relationships between learning objects and
learning environments can be established. Existing learning object metadata specifications
somewhat support the concept of relation between objects. Also certain learning object
metadata records include information on relations between learning objects. However, its
use can be problematic, because there are no standards that regulate general learning
objects relationships.
SCORM (Sharable Content Object Reference Model) represents collection of standards and
specifications for the packaging and sequencing of educational material in the form of
shareable, reusable content objects [6].This standard can be used for building effectively

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reusable learning objects, but don’t regulate relationships and connections between
learning objects in defined environment.

2.2. Solution: Defining Relationships between learning objects

This paper represent recommendation for solution to define relationships between learning
objects. This solution can be used as general guideline or basic directive in order to
standardize learning object relationships.
Defining relationships between learning objects start by defining learning object, its
components, creators, users and learning environment.
There are no agreements in the reach of a learning objects, its definition, granularity or
standards [7][8].Problem with the definition of learning object is that it fails to exclude
what could not be “referenced during technology supported learning”
[9][10][11].Definition appropriated for this paper is that learning objects are digital
entities of which learning content consist. This study is focused to define what learning
objects contain and how to create, store and use components of learning objects.
Relationships are introduced in order to standardize creation and use of learning objects.
Learning object relationships include:
Relationships between types of learning objects
Relationships between components of learning objects
Relationships between learning objects, authors and users
Relationships between learning objects and learning environments
Types of learning objects depends on categorization of learning objects. Categorization
defines types of object as lower-level objects and higher-level objects. The presented
strategy (which will be detailed discussed in next part of paper) focuses on a new learning
object concept and solutions for describing, creating, collecting, connecting and using
objects in multi creator environment.
The problem with relationships between types of learning objects is solved by using
approach of three levels of learning objects. The simplest objects (0 level) are called
standalone and they contain only individual multimedia elements. Objects at next level (1
level) are defined as primary learning objects and they contain text, reference to the “level
0” objects. The high level objects (level 2) are defined as a learning “connectors” which
contain references to the primary “level 1” objects.

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 Connector Connector Connector
... object n
object 1 object 2

Primary Primary Primary

...
object 1 object 2 object n

Standalone Standalone Standalone

... n
1 2

Figure 1: Direction of relationships between types of learning objects

As shown infigure 1, relationship between types of learning objects can be in onedirection

or can be in two direction between objects at the same level.
One direction:
standalone to primary - primary object can include standalone, but standalone
cannot include primary (or connector)
primary to connector - connector object include primary objects, but primary cannot
include connectors
Two direction:
standalone to standalone - standalone object can include other standalone object
primary to primary - primary object can include other primary object
connector to connector - connector object can include other connector object

2.2.1.Relationships between learning objects and users

In a learning scenario, there are learning objects, a learning environment and the user.
When users interact with learning objects, they first take adequate role in a learning
scenario and then performs the activity. User can be both, the creator of learning object
and the learner.
Relationship between user and learning object include:
Creator to learning object (standalone, primary, connector)
Learner to learning object

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 Learning
User Learning environment Object
Repository

Figure 2: Relationships between users and learning objects

Storage for learning objects is called learning object repository. Figure 2 shows that users
access to learning objects through learning environment and adequate learning platform.

2.2.2. Relationships between learning objects and learning environment

Learning objects are stored and organized in a repository. Learning objects stored in
repository should be easily accessible and sharable. Repository also has to follow certain
standards, which enables structurally searching of learning objects. Users access to
learning objects stored in repositories with adequate systems. For that purpose can be
used LMS (Learning management system)that facilitate access to learning content and
administration. Learning objects are more connected with LCMS (Learning content
management system) that used for creation, storage, access to and use of learning
objects.
Generally, learning environment provide users access to learning content, but it is
important that learning objects are well organized in learning repository. Our proposed
system of creating and connecting learning objects (presented in next part of this paper)
provide creating learning environment and learning content that is easy accessible and
sharable.

2.2.3.Relationships between learning object in multi creator collaborative

environment
Collaborative environment or system usually represents computer software developed to
help people involved in a common task to achieve common goals. Collaboration in these
systems includes individuals working together in a coordinated fashion. Multi creator
systems are types of collaborative systems where different authors work on same task.
Learning object environments are mostly used within web environmentsand usually have
collaborative characteristics in order to allow individual learners to work together towards
common goal.Multi creator systems are types of collaborative systems where users work
together, but each user have unique version of his work (which can be collaborated work).
In meaning of learning objects, multi creator system includes every object ever created by
every creator and all objects are active at same time. Creators can work together on same
object, but system store every version of that object and remember the each author
(creator) of that new version of object. The same object can have many versions with
different authors. End users can usethe particular version (not only last version, which is
case in simple collaborative systems), which is most appropriate for their purpose.

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 Creator 1 Creator 2

Creator’s 1 Creator’s 2
version version

Learning object

Figure 3: Relationships between creator and learning object in collaborative multi creator
environment

Figure 3 present relationships between creators (two creators of the same learning object)
and learning objects (versions) in collaborative multi creator environment.

3. LEARNING OBJECT CONNECTIONS

Learning objects have many potentialities for facilitating effective learning, but there are
many problems related to connecting learning objects. Our strategy attempts to provide
one solution to the problems that may be encountered, using collaborative multi creator
system to create and use learning objects. Also we introduce three level of learning
objects in order to standardize classification and connection of learning objects. This
system enable easy way to create and connect learning objects into effective learning
courses.

3.1. Problems and Related Works

Metadata standards focus on describing the learning content, but in many cases metadata
is not enough solution, because it is difficult to select one description that coherently
addresses all issues. Also these standards don’t regulate learning content and systems for
managing and delivering that content. Moreover, learning content and learning systems
often are developed independently of one another, in a manner that makes it very difficult
to support their interchange and connection. Most of e-learning standards are developed
manly to ensure the interoperability, portability and reusability of learning content and of
these systems [12].

3.2.Solution: Defining Connection between learning objects

A recommended learning object system and concept of connection of objects have
potential to solve some of the most noticeable problems, but at the same time represent a
completely new concept of learning object systems and a completely new way of thinking
about learning objects.
We present the concept of learning object system that is based on creating and using
three levels of learning objects. Presented learning environment allows that single creator
can create standalone and primary objects and then implement them into connectors
learning object by choosing their reference from system. With this approach, all learning

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objects are independent from each other and they don’t change if its original parts are
changed.Primary object in connector objects (or standalone in primary object) don’t
changes if it’soriginally version is changed (it changes only if author of that connector
objects allows that).
For many educators it is hard and time-consuming to find, collect and connect learning
objects into predefined templates.[8] This problem is solved by using connector objects as
a base that represent complete learning lesion with all required education goals.Advantage
of this system is also suggesting relevant and connected primary learning objects to the
creators (this is done so by searching relevant metadata).

3.2.1. Connecting learning objects in multi creator collaborative environment

As we mentioned before in first part of this paper, collaborative multi creator systems are
types of collaborative systems where different authors work on same task.Major
advantage of using collaborative multi creator environment for creating and using learning
objects is that objects can be used without any defined frameworks or templates. Also
they are completely sharable and reusable. There are benefits from new versions of
learning objects. Defining and connecting a learning objects is facilitated by categorization
according to function and level of learning object. Principle of connecting standalone and
primary object in connectors object allow standardization and centralization of learning
object connection.

3.2.2. Connecting learning objects by referencing in collaborative multi creator

environment
This paper attempts to provide one solution to the problems of connecting learning
objects, using collaborative multi creator system to create and use learning object.
The general categorization problem is solved by using principle of three levels of learning
objects.Level 0 contain standalone objects,which are the simplest objects and they include
only individual multimedia elements (image, animation, sound, fixed text (like poem) etc.),
level 1 represents primary learning objects (with its parallel versions)which contain text
and references to the “level 0” and “level 1” objects, and level 2 contain connector objects
which include references to primary “level 1” objects and other “level 2” objects.
The basic of this system represent creating and using parallel learning object, as well as
connecting them into connector objects. In order to achieve maximum efficiency of this
system, all parallel learning objects are based on reference score and other attributes (we
discussed them in our previous works [13][14][15]).
In this environment, single creator can create level 0 and level 1 objects, and then
implement them into “connecting” level 2 object by choosing their reference material in
their metadata. This enables the use of collaborative multi creator environment in creating
granular learning objects (by three levels).
For creation appropriate metadata for each objects, we recommended to use standards-
compliant metadata, such as one defined in LOM standards. But, the goal of this paper is
not to provide detail description of implementation of metadata, the focus in on defining
relationships and connection between learning objects in represented environment.

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Each primary (and standalone) learning object can be referenced in connector learning
object. Each of those learning objects can be improved by a new author by using
collaborative environment. Creating new learning object becomes child object of that
particular learning object – parent learning object. Parent primary objects and children
objects are connected and regulated by metadata. Children objects of particular object
represent its newer (changed) versions. Connector objects can contain references to any
learning object (parent or child version).

Connector object
(A2, B3, C)

Primary learning Primary learning Primary learning

object A object B object C

A1 A2 … An B1 B2 B3 … Bn C1 … Cn

Connected primary learning objects

Referenced primary learning object into connector object

Figure 4: Connected primary learning object into connector object by referencing

Figure 4 shows the connection between primary objects by referencing them in connector
learning object. Using collaborative method of this environment, each of those primary
learning objects can be improved by a new author. Connector objects can be connected to
any learning object.
The system stores several versions of the same learning object (same by subject or
content, regulated by metadata) which represent parallel versions of that particular
learning object. All previous and future version of particular learning object represent its
parallel versions.
To ensure that system can function in collaborative and multi creator environment,
particular parallel learning object include historic data (content changes, information of
authors, their changes, etc.). This ensures that newly added information and references
can be compared to the previous versions. The advantage of this system is that creators
can get suggestion to use the latest and most improved version of used primary learning
object. In this way, creators of connector objects can include in their object new and
improved learning objects, but they can also reference or revise old objects if they decide
that older versions are more appropriate for their use.

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Searching the learning objects can be facilitated by reference score and learning object
weight. Reference score represents how many times this object was used in learning
object connectors (learning object that have higher reference score are ranked higher).
Alsothis system allows that objects can also be ranked to their pedagogical, quality criteria
or some other criteria.

3.2.3. Connecting learning objects by design in collaborative multi creator

environment
Connecting learning objects by design principle (presented by this concept) is based on
following recommendations:
Standalone objects include only multimedia elements
Primary objects include standalone objects with (dynamic) text
Primary objects also can reference each other
Connector objects include reference to primary and standalone objects.
Metadata include all relevant information about objects, its authors and rights
Every object has short description about its content

4. CONCLUSION AND FUTURE WORK

In order to solve problems of classification, granularity and standardization of learning
objects we presented new concept of creating and using learning objects in collaborative
and multi creator system.
Defining relationships and connection between learning objects is essential to standardize
work with learning object.
Connecting learning objects in collaborative, multi creating system by defining three level
of learning objects and by other object’s attributes, we achieve to create more sharable
and reusable objects.
Findings have shown that by defining relationships and connection objects become linked
and more useful.As result, presented concept of learning objects system offers numerous
benefits, ensure quality during the process of creating learning objects and has potential
to increase the educational achievement. This work present general guidelines for using
relationships and connections between learning objects, our future work will be focused on
presenting detailed regulation and specification for connecting learning objects in
collaborative multi creator environment.

ACKNOWLEDGMENT
This work is financially supported by Ministry of Education, Science and Technological
Development, Republic of Serbia, under the project number TR 32044 ”The development
of software tools for business process analysis and improvement”.

REFERENCE
[1] The IEEE Learning Technologies Standards Committee. Available on Web site:
http://www.ieeeltsc.org:8080/Plone
[2] IMS Global E-Learning Consortium. Available on Web site: http://www.imsglobal.org/

Page 208
[3]ISO Subcommittee on "Information Technology for Learning Education and Training”.
Available on Web site:
http://www.iso.org/iso/iso_technical_committee.html?commid=45392
[4]IEEE (2002). Position Statement on 1484.12.1 – 2002 Learning Object Metadata (LOM)
Standard Maintenance/Revision December 2002. Available on Web site:
http://ltsc.ieee.org/wg12/index.html
[5]Dublin Core Metadata Initiative, “DCMI Metadata Terms”, 2003.
[6]Sharable Content Object Reference Model (SCORM). Available on Web site:
http://scorm.com/scorm-explained/technical-scorm/
[7]Victor Gonzalez-Barbone, Luis Anido-Rifon: Creating the first SCORM object, Computers
& Education 51 (2008) 1634–1647
[8]Jessica Griffiths et al: From course notes to granules: A guide to deriving Learning
Object components. Computers in Human Behavior 23 (2007) 2696–2720
[9]Wiley, D. A.: Connecting learning objects to instructional design theory: A definition, a
metaphor, and a taxonomy, The Instructional Use of Learning Objects, (2000). Available on
Web site: http://reusability.org/read/chapters/wiley.doc]
[10] Recker M. M., Walker A., Wiley D. A.: Collaboratively filtering learning objects,
Designing Instruction with Learning Objects, (2001). Available on Web site:
http://reusability.org/read/chapters/recker.doc
[11] Polsani, P. R. (2003, February 19). Use and abuse of reusable learning objects.
Journal of Digital Information,3(4)
[12]Dr. Sarat Chandra Babu, e -Learning Standards. Available on Web site:
http://www.cdac.in/html/pdf/session6.1.pdf
[13] RadojeCvejić, GordanaĐokić, VukPavlović, Importance of using parallel learning
objects and history data in multi creator collaborative environment, "Quality of Education -
Management, Certification, Recognition", International Scientific and Methodological
Conference, October 31 - November 2, Kramatorsk, Ukraine
[14] GordanaĐokić, VukPavlović, RadojeCvejić, Importance of learning objects based on
reference score in multi creator collaborative environment, IV Međunarodnonaučno –
stručnakonferencija o ekonomskomiregionalnomrazvojueurobrand 2011, 9 - 11 decembar,
TEMIŠVAR, VRŠAC
[15] RadojeCvejić, GordanaĐokić, VukPavlović, Preparation of the learning content for
centralized learning object repository, 3rd International Conference "Application of New
Technologies in Management and Economy" ANTiM 2012, 19 - 21. April 2012., Belgrade,
Serbia

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 PAY PAL E-PAYMENTSYSTEM

Zoran Katanić
Mobil Shop,KosovskaMitrovica, Serbia,mobilshopkm@yahoo.com

Abstract: This study is meant to explain the Pay Pal payment system which is a global
leader in cash transactions in real-time through Internet. The study shows the procedure of
account opening, the way of application communication with the system, implementation
procedures, provision of Pay Pal transaction protection, authorization system, as well as the
latest Pay Pal innovations. Furthermore, the study intends to point out the simplicity of Pay
Pal system application, which contributed to its wide usage, being the fastest and completely
secured way of goods ordering. Pay Pal is an example of payment mediator enabling and
facilitating global internet sale. The advantages and shortcomings of this system have been
given at the end of the study.

Key words: Pay Pal, Pay Pal SMS Security Key, Pay Pal Here, Pay Pal Sandbox.

1. INTRODUCTION

Pay Pal system allows financial deposits and money transfers conducted exclusively through
Internet. Pay Pal is the most popular payment on-line service in more than 190 countries,
performing transactions in 23 currencies, with over 100 million registered users.1System for
electronic payment Pay Pal was established in 1998, and it has been a property of company
e-Bay since 2002. Pay Palsystem-internet banking2was created as an alternative solution to
the traditional methods, such as checks and money contracts. Pay Pal is a kind of “client-
client” (person –to-person P2P) services.3 P2P payment method allows anyone who has got

1
http://www.hostirex.com/nacini-placanja-hosting-usluga (29.09.2012)
2
http://www.beogradwebdizajn.com/implementacija-paypal (29.09.2012)
3
http://www.e-drustvo.org/Proceedings/YuInfo2012/html/pdf/302.pdf (28.09.2012)

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an e-mail address to send money to someone else who also has got an e-mail address and an
account. A user communicates with Pay Pal through browser.4In order to conduct payment by
Pay Pal system, an initiator of transactions has to register first at the Pay Pal station, than to
transfer certain amount of money from its own user’s account to someone else’ s.

The transfer of money may be conducted directly from the bank account or using credit or
debit cards (Visa,Visa Electron, Amex, MasterCard and American Express).The Pay Pal
transfer beneficiary may take over the Pay Pal check, open its own user’s account, or may
transfer money to its bank account. “Pay Pal Sandbox”is used for implementation of Pay Pal
in web administration. It is Pay Pal’s service which simulates performance of Pay Pal, with test
orders containing certain amount of money. “Sandbox service” is designed for programmers
who are to use this application to simulate real transactions.

1.1 Communication of application with Pay Pal, (figure 1).

This system functions on the following way: upon selection of a product or a service to be
purchasedat certain price, the first step in payment process is to fill in a form with shown
price and button “Pay with Pay Pal”. It is redefined form with its “hidden” fields containing
final price of service, identification number from data base and e-mail of the buyer.
Connection of the Pay Pal service and seller’s web-site may be established in two ways:
Website Payments StandardandPayPal API.5Redirection towards Pay Pal site where a
buyer should log in is made by clicking the button “pay”. Upon successful log in, on the left
side, the Pay Pal will display an account with details of service forwarded from the “hidden”
form fields. When the transaction has been successfully conducted, Pay Pal system performs
redirection towards this application with return information and transaction status registered
into data base and connected to the buyer. This is the way how conducted transaction in Pay
Pal system is registered and stored.
4
.Veličković, Z.,:“Electronic business management of e-business”, Advanced Technical School, Niš,2012
www.vtsnis.edu.rs/Predmeti/elektronsko_poslovanje/e_BIZ_8.pdf(30.09.2012)
5
.Sladić, G.,:” Online payment”Faculty of Technical Sciences, Novi Sad,
2011,http://informatika.ftn.uns.ac.rs/SEP?action=AttachFile&do=get&target=10-online-placanja.pdf

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 figure 1: Pay Pal logo

2. Pay Pal account opening procedure

Figure 2: Pay Pal application

In order to open an account, it is necessary to click the “Sign up” on Pay Pal web-page.
After that, the system offers two options – to open personal, business or premier account. By
selecting option “personal account”, web-page is opened where the personal data are to be
filled in, as well as password, address and other information. Upon data entry, one should
click “Agree and Create Account”. Then, it is necessary to enter a type of payment card,
expiry data and security three-digit number on the rear of the card. Number on the rear of
the card CVV (Card Verification Valve) is unique for each type of card. After card registration,
Pay Pal status of account is yet unverified. In order to verify account, it is necessary to click
the link “Get verified” and select option which card is used, debit or credit. Pay Pal informs a

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user that the transaction will be made charging 1.95 USA dollars from the account so that the
transaction will confirm validity of the user verifying Pay Pal account.
Once the money has been charged from a user’s account, Pay Pal will send four numbers
called “”expanded use number” (EUN) in the description of the payment to the bank of the
payment card owner. The user logs in to its own Pay Pal account again as soon as he/she
gets these four numbers, clicks verification of the account and enters these four numbers.
Thus, the Pay Pal has been verified. Upon verification, the amount of 1.95 dollars is paid back
to the card owner’s account. This means that everything is ready for on-line buying. Pay Pal
account may be used for payment at most of on-line sellers who support this system,
including the most popular auction site e-Bay. Also, it may be used for deposing and payment
of other users. In order to be able to buy at eBay, it is necessary to open an account, free of
charge, and then to connect to Pay Pal account. Thus, the on-line purchase is simplified. The
personal data need to be identical on both accounts.

In order to receive money on Pay Pal account, it is necessary to adjust the account for money
receiving option by clicking “request money and set up your account”and connect the
card to the Pay Pal computer. At the end of the process, the notification shall be received that
money may be received; however, it will be transferred to the card after 30 days.
 Send Money–an option designed for social network Facebook. Facebook users may
send certain amount of money directly or by electronic card displayed on the wall of
the Facebook user sending money, and which contains a message, a photo or video
clip.
 Auction Tools–an option designed for buyers on eBay auctions. Almost ¾ of buyers
on eBay auctions use Pay Pal as a main payment method. There is a wide range of
available free of charge services, simple payment model and delivery confirmation, as
well as transportation costscalculation.
 Website Payment Processing–is designed for creation of Pay Pal “button” and
approval of instant payment on web-site. Approval for card payment or account
transfer is done via Pay Pal “Buy Now Buttons”.

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  Money Market–is an option designed for USA users only allowing them to do
business with their accounts, including savings or participation in “money market
funds“.
 International Payments–is an option with smaller or greater limitations depending
on user’s county of origin.
 DownBadable log–is an option offering the users an overview of all conducted
transactions.
 ATM-Debit Card- Pay Pal system in cooperation with VISA system issues co-branded
cards currently used in USA for Premier and Business accounts.
In order to send money to someone via Pay Pal, it is only necessary to know her/his e-mail
address. Also, that person needs to have an activated option for money reception. Money is
sent by entering e-mail, amount to be sent, currency and reason for money sending.
Naturally, it is necessary to specify who pays the transfer costs by checking the option “I will
pay the fees”. The person who checks it, agrees to pay fees. The confirmation on conducted
transaction will be shown.

Pay Pal is a specialized service for on-line payment.6 The greatest number of Pay Pal users
buys and pays goods on eBay; however, there are more and more new users who use this
site for transactions with other sites. The main task of Pay Pal is collection and concentration
of capital. Bearing in mind that all deposit assets are not used immediately, it means that Pay
Pal accumulates certain amount of unused funds which may be further send through bank
flows. If this payment system appears on bank market, it will have significant capital (if each
of 50.000.000 users has only 100 dollars on account, it is a sum of 5 billion dollars on Pay Pal
account). Pay Pal pays interest for all deposited funds. Pay Pal offers international payment
and charges a fee for that service; then, it issues own credit and debit cards to be used on
ATM cashpoints. In case the user wants to transfer funds from own account to someone
else’s, the system will allow it by charging certain fee.

6
http://www.swebdizajn.com/blog/paypal-uskoro-dolazi-u-srbiju.php

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 3. Pay Pal transaction protection

Pay Pal system provides protection to both buyers and sellers in scope of “Pay Pal Buyer
Protection Policy” and “Seller Protection Policy” rules.7The system user may send an objection
on any conducted transaction in course of 45 days, or s/he may stop any transactions, in
cases s/he changes his/her mind, in course of 72 hours .8The objection usually refers to cases
when buyers have not received the paid goods, or in case different goods had been delivered
instead of paid one. Once the objection has been accepted, the buyer gets money back to
his/her account.

Also, similar protection is provided to the sellers. This protection is offered in case of potential
buyer’s malicious objection. Usually buyers report that they did not receive the order, even
though they had got it. In case the seller has delivery note or trackingnumber,9the buyer will
not get money back. Naturally, there are certain restrictions regarding countries participating
in transactions, way ofpayment and delivery tracking.

It is interesting that only Pay Pal guarantees to its users complete protection in case of
unauthorized access to their accounts, excluding situation when the account assets were used
by family members. If a user suspects that someone had spent money from his/her account
on unauthorized manner, he/she files an objection and money is back in course of 10 days.
Besides this, Pay Pal also uses other protection procedures, which rank it amongst one of the
most secured systems for electronic payment on Internet.

4. Pay Pal SMS Security Key

Pay Pal has introduced two-factor system of user’s authorization in scope of user’s
orders. The user uses code, user’s name and password for access. Pay Pal SMS Security Key

7
7.http:// hr.wikipedia.org/wiki/Paypal (29.09.2012)
8
http://tehinfo.wordpress.com/2012/01/16/paypal-jos-na-cekanju-elektronska-trgovina/ (30.09.2012)
9
www.blogowski.eu/2010/05/21/paypal-u-srbiji/(30.09.2012)

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System functions on principle of generating six digit code on each 30 seconds. Pay Pal system
with SMS authorization is active in USA, Australia, Austria, Canada and Germany. Security
code delivery is free of charge, whereas only standard SMS price is paid to telecommunication
provider. The aim of this system is protection from cyber criminals.

5. Latest from Pay Pal

Pay Pal Company has started testing the latest beta versions of a new virtual debit cards
system in cooperation with Master Card.10System functions on principle of generating number
of Master Card verification code for single use connected to Pay Pal user computer and it is
used for payment of goods or services on Internet. When a user buys on site accepting
Master Card, Pay Pal system will ask the user if s/he wants to pay by virtual credit card. Using
new technology, virtual debit card generates unique number for each new purchase. The
new service is a substitute for existing virtual system Debit Bar Pay Pal which uses static
numbers of Master Card for on-line sellers who do not accept Pay Pal system directly. Pay Pal
has also introduced a new system of mobile payment “Pay Pal Here“.11
System uses the accessory for connecting payment card “square” and application for iPhone
“getgiving”. Square is a small plastic accessory for iPhone which is inserted into phone audio
input in order to become card reader. Using special applications, there is no more need for
terminal and service provider. Application will soon be used by Android devices. Pay Pal Here
will charge 2.7 percent fee.

One of novelties also introduced by Pal Pay is a money transfer on touch screen phones with
NFC technology. It is a new peer-to-peer system of payment, with two Android phones,
where the application in both devices is easily initiated, the amount of money to be

10
http:// www.economy.rs/finansije/2572/paypal-isprobava-sistem-virtualnih-debitnih-kartica.html (28.09.2012)
11
http:// tehnologija.me/paypal-lansirao-novi-sistem-mobilnog-placanja/ (29.09.2012)
http://www.srbodroid.com/tag/placanje/(30.09.2012)

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transferred is specified and phones are touched screen-to screen. After audio sign “buzz”, the
necessary information is entered and transaction is done.12

Pay Pal system has certain shortcomings.13This system does not cover all countriesfor
various reasons, thus financial transactions cannot be conducted. Also, Pay Pal is not a real
bank, but only mediator in financial transactions, which gives it a chance to limit availability to
system users’ money. Pay Pal may block the user’s account without prior notification or
information. The special attention needs to be paid on the fact that one should register into
own countriesif it is in Pay Pal system. No by-pass registration should be made.

CONCLUSION

It cannot be said that electronic payment systems have been designed for the future, since
they have become a part of daily life, even though their impact and presence in financial
transactions via Internet is not great. Greater usage of information technologies and
networking wouldaccelerate electronic payment development aiming to,consequently, push
out money as we know it. It is noteworthy that development of electronic payment does not
depend only upon technology, but also the legislative regulations need to be applied in order
to provide greater security to the participants of electronic business management and, thus,
enable faster development of electronic payment systems. The advantage of Pay Pal system
application is in the fact that the time needed for financial transaction has been shortened, as
well as that the users do not have to reveal credit card and account numbers to each other,
which was the main problem of Internet buyers. The best way to increase Internet sale is to
offer the potential buyers an opportunity to pay easily and safely. Pay Pal has offered the
shops several payment options, which consequently, has increased number of buyers. Pay Pal
system impacted on increase of confidence into payment system on Internet, since it has
given credibility to small shops in a certain way. Pay Pal is a widely accepted system for its
security and efficiency. Security comes from the fact that the company is seated in USA which
means that it is subjected to very restrictive regulations in terms of business management

12
www.srbodroid.com/tag/placanje/(30.09.2012)
13
http://www.zaradainternetom.com/internet_banke.php (29.09.2012)

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legality. One more great thing done by Pay Pal is the opening of public code. Virtual money
has become more important with Pay Pal.

New opportunities for numerous companies and firms doing business over Internet would be
opened, if Pay Pal started operating in Serbia. Existing potential in this segment would be
used to increase export from Serbia and to decrease unemployment. Entrance of Pay Pal to
the market would regulate provisions regarding customs, accounting, foreign currency
turnover and payroll system. On the other hand, foreign citizens could buy goods through
numerous on-line shops. Introduction of this electronic system of payment would increase
efficiency of financial transactions with foreign countries and decrease the costs for our
citizens and companies.

REFERENCES

1. http://www.hostirex.com/nacini-placanja-hosting-usluga (29.09.2012)
2. http://www.beogradwebdizajn.com/implementacija-paypal (29.09.2012)
3. http://www.e-drustvo.org/Proceedings/YuInfo2012/html/pdf/302.pdf (28.09.2012)
4. Veličković, Z,:“Electronic business management e-business”, Advanced Technical
School, Niš,2012
www.vtsnis.edu.rs/Predmeti/elektronsko_poslovanje/e_BIZ_8.pdf(30.09.2012)
5. Sladić, G.,:” Online payment”Faculty of Technical sciences, Novi Sad,
2011,http://informatika.ftn.uns.ac.rs/SEP?action=AttachFile&do=get&target=10-
online-placanja.pdf(30.09.2012)
6. http://www.swebdizajn.com/blog/paypal-uskoro-dolazi-u-srbiju.php
7. http:// hr.wikipedia.org/wiki/Paypal (29.09.2012)
8. http://tehinfo.wordpress.com/2012/01/16/paypal-jos-na-cekanju-elektronska-trgovina/
(30.09.2012)
9. www.blogowski.eu/2010/05/21/paypal-u-srbiji/(30.09.2012)
10. http://www.economy.rs/finansije/2572/paypal-isprobava-sistem-virtualnih-debitnih-
kartica.html (28.09.2012)

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11. http://tehnologija.me/paypal-lansirao-novi-sistem-mobilnog-placanja/ (29.09.2012)
12. www.srbodroid.com/tag/placanje/(30.09.2012)
13. http://www.zaradainternetom.com/internet_banke.php (29.09.2012)

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 ELECTRONIC BANKING SEGMENTS

Zoran Katanić1, Verodrag Miletić2

1
Mobil Shop, Kosovska Mitrovica, Serbia, mobilshopkm@yahoo.com
2
Administration of Customs, Ministry of Finance, Belgrade, Serbia, veromil972@gmail.com

Abstract: Contemporary banking business is performed by application of the new

communication devices and technologies. The banking sector is a leader in acceptance of
new IT solutions. Therefore, this study deals with the electronic banking segments, with
special focus on application of electronic devices for communication and protocols allowing
data base assess. The electronic banking utilizes electronic technologies leading to joint
application of information technologies and telecommunications, thus it allows transfer of
more information on greater distances in relatively short period of time. This is how the
communication via Internet has enabled faster development of electronic technologies,
where electronic banking is dominantly impacted by integration of various technologies
diverse by characteristics and properties.

Key words: ATM cashpoints, POS terminals, Internet, on line, virtual or e-banking

1. INTRODUCTION

The electronic banking is a process which allows clients to conduct their business on
electronic way, either through Internet or other specialized networks which do not have to
be based on Internet technologies. Nowadays, electronic banking is accessible in any
moment, from any place in very short time. It gives positive effects in comparison to the
bank services and products, thus increasing competitiveness among banks and their
penetration to new markets. The electronic banking is seen as a serious opportunity for
countries with undeveloped financial systems to speed up business development.
Communication services nowadays may be studied in frame of information technologies,

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whereas the convergence of communication and IT (information technology) services are
supported by IP (Internet Protocol) networks.
Business applications are based upon utilization of contemporary methodologies in
Windows environment. Most software applications automate some defined tasks, but not
entire processes.1 Utilization of interface in applications enables work with various types of
data bases. Advantages of electronic banking in bank management are the following: less
branch offices and less employees offer better and faster services, as well service provision
to greater number of clients. Therefore, the electronic banking offers less expensive
services available in any time with less commission fees, decreases unnecessary
administration, waste of time and long queues.
Electronic technology development allowed automation of management and
improved provision of financial services. Initially, ATM (Automatic Teller Machine), then
EFT/POS (Electronic Fund Transfer Point of Sale) terminals, on-line (internet) banking and
virtual or e-banking were introduced.

2. ATM cashpoints

Cashpoints are electronic devices which enable cash withdrawal, payment of

services, transfer of assets among computers etc. ATM cashpoints function on-line and
database is available in real-time. ATM cashpoints operate as self-serviced, a user of bank
card may access its own assets on computer in any moment regardless the opening hours
of bank counter. ATM cashpoint is constantly opened bank counter.
ATM cashpoints were initially used for cash payment. Nowadays, ATM cashpoints
are used for currency exchange, depositing and other banking services. ATM cashpoints of
new generation conduct transaction in the moment when they were created.
ATM cashpoints are devices composed of CPU (Central Processing Unit) keyboard,
screen, printer, magnetic or processing card reader, security crypto- processor and
telecommunication connection with central bank computer.

1
Kalakota, R., Robinson, M.: ”e-business 2.0”, Mate, Zagreb,2002., str.139

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 ATM cashpoints are activated by inserting card and identification number (PIN). The
keyboard is used for selection of type and number of services in scope of available
transaction options. The ATM network represents connection with several banks. When
cashpoints of main bank are used it is called on-us transaction, whereas usage of ATM
cashpoints of other banks is called non-us transaction and it is performed through central
transmission switch.2

2.1. Division of ATM cashpoints

According to micro-location, ATM cashpoints are divided into:

 lobby (installed at the entrances of banks and post offices),
 indoor (installed at the counter offices of banks and post offices),
Outdoor (installed at the entrances of public institutions and places).
According to the installed functions, ATM cashpoints are divided into:
 cash dispenser devices used for cash payment,
 info cashpoints used for issuance of bank orders and information,
 currency exchange cashpoints used for currency exchange,
 bill payment cashpoints,
 cashpoint for daily turnover deposit,
 cashpoints for sale of valuables such as insurance cards, stamps, envelopes,
etc.
 multi-functional cashpoints which simultaneously perform several functions.

According to manner of work, the cashpoints are divided into on-line and off-line.
Terminals for cash payment have attracted the greatest investments of all ATM cashpoint
types. Great number of banks is focused on this type of cashpoints. On the other hand,
cashpoints for deposits have not made significant entrance to the market.
The users do not want to use them for complicated services such are purchase of
stocks and searching for financial advice. Certain banks continue to install ATM cashpoints
as a part of strategy for improvement of services to beneficiaries, decrease of
expenditures and attraction of new clients.

2
. Backović, N., “and associates”,: “Electronic business and Internet marketing”, Advanced economic school
of vocational studies Peć in Leposaviću, Leposavić,2009., page.288, ISBN 978-86-84345-43-3

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 Table 1. Number of ATM transactions in Serbia in period 2005-2011

Number of ATM Average

Credit Business
Year transactions in amount per
transactions transactions
Serbia -debit transaction
2005 16,876 920 144 3691
2006 19,115 2,541 207 4083
2007 17,178 2,101 194 4418
2008 16,131 1,829 206 4824
2009 15,389 1,500 214 5289
2010 16,158 1,216 255 5802
2011 17,901 1,062 324 6249

Source: Obradović, S., “Causes Delays in the Development of Card Business in

Serbia”, Infoteh 2011, Jahorina

3. EFT/POS terminals

EFT/POS terminals are devices which allow transfer of non-cash money not only in
retail sales (hypermarkets, newsstands, etc.), but also in sectors of delivery, transport,
lottery, taxi, with network and bank data base. This system is meant for sale points of the
companies where the direct contact with clients is made, as well as to enable direct
transfer of money from the buyer’s bank account to the seller’s account.3 For less than 15
seconds, the system allows bank account check through the network which connects the
shops all around the world with the center for card processing and card issuer.4 These
electronic devices enable both deposit and cash withdrawal from the client’s card.
EFT/POS terminals are also used for payment of household duties, sale of services, as well
as television fees, lottery, installment payment etc. The electronic pre-paid mobile phone

3
http://www.virtuonasoft.com/Wiki.jsp?page=POSTerminal_sr/( 27.09.2012.)
4
http://www.scribd.com/doc/54644360/4/Bankomati-ATM (27.09.2012.)

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credit may be refilled using EFT/POS terminals. As for the account with the bar code,
there is also possibility to read account information, post number and a bill may be paid
anywhere. That payment is done via so-called “smart electronic card” (smart card). The
card has a microchip with memory with stored data: name and surname of the card
owner, identification number, and data on loan availability and bank account balance. The
microchip immediately registers any transaction and alters the account balance. The
transactions are based on on-line connection of EFT/POS terminals and servers at banks.
Several different cards may be used on one EFT/POS terminal: Visa, Maestro Card, Master
Card, Visa Electron.
The initial application of the first EFT/POS terminals was limited to issuance of
correct bills for all elements defined by the lawmaker. The traders have realized very soon
that the application of these devices may be expanded to other purposes also. The
dynamic and prosperous companies were the most interested in application of EFT/POS
terminals, since their managements easily spotted the needs of modern markets.

3.1. Direct profit and other advantages

The most important advantages of introducing EFT/POS terminals are the following:
 Timely charging and faster turnover of money, causing greater profit.
Payment system via EFT/POS terminals may be automated for processes,
such as production planning and procurement,
 Better customer service, since the usage of EFT/POS terminals increases
satisfaction of the clients, and it provides information enabling placement of
a right product or service to the appropriate place at appropriate time,
 Using EFT/POS terminals, the ration of price and system exploitation, valued
according to the business effects, is very favorable, and financial profit
gained by using this system is evident immediately after introduction.
Therefore, this system is an ideal solution, especially for small and medium
companies
 There is no other simpler solution for transaction control,
 The business is done immediately,

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  System is easily adapted to business changes, since the terminal software
system change expands business services,
 Greater accuracy on stock balance,
 Decreases business expenditures, since EFT/POS system integrates business
processes from all aspects into one integral system. The main benefits
gained by implementation of EFT/POS terminals are expected to be:
decrease of business expenditures, company marketing and customer’s
support (help desk support),
 Upgrading of usual business, since the EFT/POS system allows better data
access, so that the management may have immediate overview of all data
needed for successful business. It also helps in determination of business
expenditures and activity based costing.

3.2. Usage of EFT/POS terminals

EFT/POS terminals are activated by pulling the card through the terminal which
reads magnet strip chip of the card and by specifying transaction amount which is done
through constant telephone line or ISDN 23 connection. At the same time the bank
account balance is checked on-line for less than 15 seconds using the network connecting
the trader with the center for card processing and card issuer. The same method is used
for sending return information back to the terminal. Usually, new terminals require PIN
code of the client, the card owner. The value of the sold product or service is manually
entered by the seller or it is sent from the cash desk, then card data are transferred -
including the value of the purchased goods or services-to the bank or automatized center
with request for transaction automating. Each terminal has its own identification number,
so that the institution conducting transaction may forward data exactly to that terminal.
At any moment the seller may compare the authorization stored in the terminal with
signed bills. The transaction is done very swiftly and simply. Slip signed by the card owner
is used to confirm the transaction and its validity. One slip copy with a signature stays at
the seller’s, whereas the other copy is given to the buyer.

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 3.3. E-refilling via EFT/POS terminals

EFT/POS terminals are devices containing electronic refilling function. Terminal is

always connected to the refilling system through transaction center which represents the
managing center (processor) for terminals of one producer, whereas the connection
between terminals and the center may be established in three ways:

 Via GSM network,

 via GPRS/USSD component of mobile telephone network,5
 a physical link.

Each of GPRS terminals is connected to certain SIM card through which GPRS data
transfer is done using allocated APN (Access Point Name), IP address, User Name,
Password, port and dial number *99#, which are different and depend upon mobile
operator offering GPRS network. Data are easily entered for e-refilling via GPRS terminals,
however, in case of an error (wrong number or wrong entry) it is possible to stop all
disputable transactions6 on all terminals. E-refilling allows easier, faster and, above all, less
expensive pre-paid refilling. This new option of pre-paid system refill has completely
squeezed out the voucher refilling, so-called “scratch” card, for a very short period of time.
This way of refilling allows greater control of the situation on the market, and furthermore,
it decreases provider’s expenditures and shortens charging period.

5
http://www.lanus.rs (27.09.2012.)
6
http://www.e-drustvo.org/Proceeding/YuInfo2007/html/pdf/078.pdf (27.09.2012.)

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 Figure 1. Block scheme for remote control and GPRS terminal control

EFT/POS terminals with integrated modem allow wireless connection of the terminal
on the sales point with the server of the Tax authority or some other server via mobile
phone network.
There are also external GPRS modems with the same function. They are connected
to EFT/POS terminal via USB, RS-232 connection.7 An integrated terminal has its own IP
address (fixed or dynamic) and it conducts two-way data transfer using GPRS service.
GPRS terminal is programmable, completely manageable and equipped with a clock of a
real-time and operative memory. Data entry into the terminal is done automatically, as
well as reading and sending of sale report or fiscal reports. Terminal may be given the
time deadlines for performance of desired activities. In case of GRPS network
disconnection, the device will automatically re-establish the connection the very moment
the access to network becomes possible. Data transfer costs are minimal and proportional
to the amount of transferred data, not to the time of transfer process.

The advantages of GPRS terminal usage are the following:

 integrated EFT/POS terminal decreases costs of procurement, increases
reliability and simplifies usage;
 fast, silent and good quality print up to 14 lines a second,
 two alfa-numeric LCD displays,
 ten fast keyboards for sale of the most popular products,
 option for monitoring product stocks ,

7
http://telefonija.rs/resenja-i-usluge/e-poslovanje/gprs-terminali.html (27.09.2012.)

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  mechanism for easy thermo-roll insert
 automatic winding of journal rolls,
 bar scanner sale,
 computer data processing and product entry into terminal,
 continuation of work interrupted by supply disconnection,
 autonomy of 20 hours, “power save” function,
 simple installation and usage.

4. On-line banking

On-line banking has wider usage because it does not depend upon ATM or EFT/POS
system. However, it needs interactive communication networks of telecommunication
companies. On-line or PC banking offers a client an opportunity to use a computer and
conduct usual bank transactions for which s/he had to visit some of the financial
institutions. Web-browser is used to allow a client access to the financial institution.

In order to conduct a transaction in on-line banking, it is necessary to have:8

 specialized software (Microsoft Money, Manage Your Money…) installed in
client’s computer,
 triple business connections among parties (client, bank and software company)
 stored data about conducted transaction on client’ computer hard disc, however,
they are not protected against potential hacker intrusions;
 financial means are needed for software purchase,
 time for installation and training for usage are needed.
 Services provided by on-line banking are available 24 hours a day. The services
available are:
 check of balance on bank accounts and credit cards,
 invoice payment,
 money transfer from one account to the other,
 financial accounting with support of an additional software.

8
Stankić, R.: “Electronic business”, Publishing Center of Faculty of Economy in Belgrade, Beograd, 2009.,
ISBN978-86-403-0988-2

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 5. Internet banking

Bank management using a computer and internet connection is called internet

banking (cyber banking). It is important to have a computer connected to the Internet. It
is not necessary to have any special software in this kind of banking, and data are not
stored on client’s computer hard disc. The bank takes care on maintenance of its own
hardware and software system9. In terms of costs, the Internet banking is the cheapest
kind of bank services. Clients visit electronic market by themselves; conduct transactions
on their own when buying or independently run own bank account. Internet banking is a
phenomenon of modern times. Bank industry is pretty inert and inclined to traditional and
well-known methods, so the real explosion in banking sector is yet to come.

CONCLUSION

Application of new communication devices and technologies in electronic banking

brings positive effects: saves management cost, provides high level of financial service
provision, decreases cash turnover transactions, minimizes paper work and decreases
abuse risk. Transitions are conducted relatively fast by applying new communication
devices and technologies. Traditional models of business cannot address challenges in era
of electronic banking, therefore the services in this sector are being constantly upgraded.
Technologies are used in order to: accelerate business operations; have better product
marketing; improve relationship with clients and ensure profit increase. New technology
has changed entire platform and created new generation of applications to support
business. Practical application of modern technology has changed a life style and habits of
participants in digital connectivity, consumers and companies on less expensive manner.

9
Backović, N., “associates”.,: “Electronic business and Internet marketing”, Advanced economic school of
vocational studies Peć in Leposaviću, Leposavić,2009., page.292, ISBN 978-86-84345-43-3

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 REFERENCES

1. Backović, N., “and associates”,: “Electronic business and Internet marketing”,

Advanced economic school of vocational studies Peć in Leposaviću, Leposavić,
2009., str. 288, ISBN 978-86-84345-43-3
2. Kalakota, R., Robinson, M.: ”e-business 2.0”, Mate, Zagreb, 2002., str. 139, ISBN
953-6070-81-2
3. Stankić, R.: “Electronic business”, Publishing Center of Faculty of Economy in
Belgrade, Beograd, 2009., ISBN978-86-403-0988-2
4. http://www.virtuonasoft.com/Wiki.jsp?page=POSTerminal_sr/ (27.09.2012.)
5. http://www.lanus.rs (27.09.2012.)
6. http://www.scribd.com/doc/54644360/4/Bankomati-ATM (27.09.2012.)
7. http://www.e-drustvo.org/Proceeding/YuInfo2007/html/pdf/078.pdf (27.09.2012.)
8. http://telefonija.rs/resenja-i-usluge/e-poslovanje/gprs-terminali.html (27.09.2012.)

Page 230
 Iranian people: Iranian Ethnic Groups

Vahid Rashidvash
Department of Iranian Studies, Yerevan State University, Yerevan, Armenia,
E-mail: rashidvash@yahoo.com

Abstract
The world is a place containing various racial and lingual groups. So that as far as this issue is
concerned there is no difference between developed and developing countries. As if, among all
existing countries and islands in the world, about 160 countries have an increasing situation
regarding race and culture. Iran is not an exception, because it can be called a multi-national or
multi-racial community. The Persians are descendents of the Aryan (Indo-Iranian) tribes that
began migrating from Central Asia into what is now Iran in the second millennium BC. The
Persian language and other Iranian tongues emerged as these Aryan tribes split up into two major
groups, the Persians and the Medes, and intermarried with peoples indigenous to the Iranian
plateau such as the Elamites. The Persian people are part of the Iranian peoples who speak the
modern Persian language and closely akin Iranian dialects and languages. The origin of the
ethnic Iranian, Persian peoples are traced to the Ancient Iranian peoples, who were part of the
ancient Indo-Iranians and themselves part of the greater Indo-European ethnic group.

Key words: Indo-Iranian, Iranian people, Iranian languages, Ethnicities in Iran.

1. Introduction
The Iranian plateau is a special geographical part of Asia continent containing Iran. Iran is
located in the Middle East, between Turkey and Iraq on the west and Afghanistan and Pakistan
on the east; it borders the Persian Gulf and Gulf of Oman in the south and Armenia, Azerbaijan,
the Caspian Sea, and Turkmenistan in the north. Library of Congress – Federal Size: Iran’s total
area is nearly 1.65 million square kilometers, of which 1.64 million square kilometers—an area
slightly larger than Alaska—is land mass. Land Boundaries: Iran is bounded by Afghanistan
(936 kilometers), Armenia (35 kilometers), Azerbaijan proper (432 kilometers), Azerbaijan’s
Nakhichevan enclave (179 kilometers), Iraq (1,458 kilometers), Pakistan (909 kilometers),
Turkey (499 kilometers), and Turkmenistan (992 kilometers). Disputed Territory: Iran and the
United Arab Emirates (UAE) dispute sovereignty over three islands in the Persian Gulf that are
occupied by Iran. Iran’s coastline includes 2,440 kilometers on the Persian Gulf and Gulf of
Oman and 740 kilometers on the Caspian Sea. Iran has rugged mountain chains surrounding
several basins collectively known as the Central Plateau, which has an average elevation of about
900 meters. East of the Central Plateau are two large desert regions, a salt desert in the north and
a rock and sand desert in the south. There are lowland areas along the Caspian coast, in
Khuzestan Province at the head of the Persian Gulf, and at several dispersed locations along the
Persian Gulf and Gulf of Oman coasts. Principal Rivers: Iran has no major rivers. The only

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navigable river is the Karun, which is 830 kilometers long. Other rivers include the Safid Rud
(1,000 kilometers), Kharkeh (700 kilometers), and Zayandeh Rud (400 kilometers).
In Achaemenian dynasty it was named Iria. It was the name of an Iranian tribe. This word was
applied by Caucasian nation as Irvoun- Ir- Irou. Some words such as Arians, Aria, Iran and
something like them are taken from that. Iran has been serving as an important bridge between
the East and the West from many years ago and main highways were crossed there connecting
the civilizations of two sides [1]. Iran has historically been a multinational empire dominated by
Persians, not a nation-state, leading to a complex ethnic makeup in the modern Iranian state. The
Persians account for slightly more than half the population of 70,000,000, a smaller proportion
than the Russians were in the Soviet Union. Arabs made up a sizable minority in Iran 3 percent
of the total population in 1986. In November 1986, the government reported that the preliminary
count in the fourth national census, which had been conducted during October, showed a total
population of 48,181,463. The population of Iranian nationals, approximately 45.6 million,
represented an increase of about 12 million over the 33.7 million enumerated in the 1976 census.
This indicated that the Iranian population had grown at an annual rate of 3.6 percent between
1976 and 1986. A population increase in excess of 3.3 percent per year put Iran's population
growth rate among the higher rates in the world at the time. Iran has a heterogeneous population
speaking a variety of Indo-Iranian, Semitic and Turkic languages. The largest language group
consists of the speakers of Indo-Iranian languages, who in 1986 comprised about 70 percent of
the population. The speakers of Indo-Iranian languages were not, however a homogeneous
group. They include speakers of Persian, the official language of the country and its various
dialects, speakers of Kirmanji, the term for related dialects spoken by the Kurds who live in the
cities, towns and villages of western Iran and adjacent areas of Iraq and Turkey, speakers of Luri,
the language of the Bakhtiaris and Lurs who live in the Zagros and Baluchi, the language of the
seminomadic people who live in southeastern Iran and adjacent areas of Afghanistan and
Pakistan. The official language of Iran is Persian the Persian term for which is Farsi. It is the
language of government and public instruction and was the mother tongue of half of the
population as of 1986 [2]. Persian is spoken as a second language by a large proportion of the
rest. Many different dialects of Persian are spoken in various parts of the Central Plateau and
people from each city can usually be identified by their speech. Some dialects, such as Gilaki and
Mazandari, are distinct enough to be virtually unintelligible to a Persian speaker from Tehran or
Shiraz. The Persians constitute the largest ethnic component in Iran. They predominate in the
major urban areas of central and eastern Iran, in the cities of Tehran, Esfahan, Mashhad, Shiraz,
Arak, Kashan, Kerman, Qom and Yazd, and in the villages of the Central Plateau. An estimated
50 to 60 percent of the population speaks Persian as a first language. By 2008 the main ethnic
groups in Iran remained the Persians (65 percent). Other groups were the Azerbaijani Turks (16
percent), Kurds (7 percent), Lurs (6 percent), Arabs (2 percent), Baluchis (2 percent), Turkmens
(1 percent), Turkish tribal groups such as the Qashqai (1 percent) and non-Persian, non-Turkic
groups such as Armenians, Assyrians and Georgians (less than 1 percent). The Persian language
(Farsi) was said to be spoken by at least 65 percent of the population and as a second language

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by a large proportion of the remaining 35 percent. Other languages in use are Azeri Turkish and
Turkic dialects, Kurdish, Luri, Arabic and Baluchi.

2. Iranian people
Indo-Iranianlanguages constitute the easternmost branch group of the Indo-European language
family. They are among the best attested languages of this family having records that date back
thousands of years. The ancestral Indo-European language is thought to have arizen around the
southern part of the Urals. Somewhere between 4000-3500 BCE some speakers of this ancestral
language moved east and south of the Caspian Sea into what is now Iran, and into what is now
Pakistan, India and Afghanistan. Eventually, the languages of these areas formed the Indo-
Iranian Branch. There have been competing theories regarding the spread of the Indo-European
languages. The Indo-Iranian Branch of the Indo-European Language Family has traditionally
been split into two sub-branches: the Indo-Aryan and the Iranian language groups. According to
Ethnologue, there are 220 Indo-Aryan languages some of which had yet to be definitively
classified. The number of people who speak many of them was unknown. Chances were that you
had never heard of some of them although many of these languages have sizable populations of
speakers.These languages were spoken primarily in India, Pakistan, Bangladesh and
Afghanistan. Scattered throughout central, southern, and eastern Iran are small groups speaking
many different Indo-Iranian languages. In the southern part of the Central Plateau are such small
nomadic and seminomadic tribes. Other tribes, related to groups in neighboring Afghanistan and
nations formerly part of the Soviet Union are found in Khorasan. Also in Khorasan are an
estimated 25,000 Tajiks a settled farming people related to the Tajiks of Afghanistan and the
Soviet Union (now in various central Asian republics including the appropriately named
Tajikistan).Distinguishable but comparatively smaller Indo- Iranian- speaking minorities
comprised the following tribally organized settled groups: the Hazareh, Barbai, Teimuri,
Jamshidi, and Afghani in Khorasan, the Qadikolahi and Palavi in Mazandaran and the Sasani and
Agajani in the Talesh region of Gilan. The origins and dispersal of farming and pastoral
nomadism in southwestern Asia are complex and there is controversy about whether they were
associated with cultural transmission or demic diffusion. In addition, the spread of these
technological innovations has been associated with the dispersal of Dravidian and Indo-Iranian
languages in southwestern Asia. Intriguingly, the population of modern Iran, speaking a major
Indo-European language Farsi, appears to have had little genetic influence from the Indo-
Iranians [3]. It was possible that the pre-Indo-European population of Iran-effectively an eastern
extension of the great civilizations of Mesopotamia, might have reached sufficient population
densities to have swamped any genetic contribution from a small number of immigrating Indo-
Iranians. If so, this might have been a case of language replacement through the elite-dominance
model. Alternatively an Indo-Iranian language may have been the lingua franca of the steppe
nomads and the surrounding settled populations facilitating communication between the two.
Over time this language could have become the predominant language in Persia, reinforced and
standardized by rulers such as Cyrus the Great and Darius in the mid-first millennium BCE [4].

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The term Persia was adopted by all western languages through the Greeks and was used as an
official name for Iran by the West until 1935. Due to that label, all Iranians were considered
Persian. Also, many others who embraced the Persian language and culture are also often
referred to as Persian as a part of the Persian civilization culturally and or linguistically.
Geographic distribution of modern Iranian languages. Modern Persian green and other related
Persian some descendant of Middle Persian like Lur .The origin of the ethnic Iranian peoples
Persian peoples are traced to the Ancient Iranian peoples, who were part of the ancient Indo-
Iranians and themselves part of the greater Indo-European linguistic family. The Ancient Iranian
peoples arrived in parts of the Iranian plateau circa 1000 BCE. Important Iranic tribes such as
Old Persians Medes, Parthians, Bactrians, Scythians and the Avesta people used the name Arya
Iranian, which was a collective definition, denoting peoples who were aware of belonging to a
generally common ethnic stock, speaking very closely related languages, and mainly sharing a
religious tradition that centered on the worship of Ahura Mazda. The Old Persians who were one
of these ethnic Iranian groups were originally nomadic, pastoral people in the western Iranian
plateau and by 850 BCE were calling themselves the Parsa and their constantly shifting territory
Parsua for the most part localized around Persis Pars bounded on the west by Tigris river and on
the south by the Persian Gulf. The first known written record of the term Persian is from
Assyrian inscriptions of the 9th century BCE which mention both Parsuash and Parsua.
The Iranic Persians and Medes were initially dominated by the Assyrian Empire for much of the
first three centuries after arriving in the region. However the Medes and Persians played a major
role in the downfall of Assyria after it had been riven by internal civil war. These cognate words
were taken from old Iranian Parsava and presumably meant border, borderland and were
geographical designations for Iranian populations who referred to themselves as Aryans as an
ethnic designation or showing the nobility. Nonetheless, Parsua and Parsuash were two different
geographical locations, the latter referring to southwestern Iran, known in Old Persian as Pârsa
Modern Fars. The Greeks who tended earlier to use names related to Median began in the 5th
century to use adjectives such as Perses, Persica or Persis for Cyrus the Great's empire which is
where the word Persian in English comes from. In the later parts of the Bible where this kingdom
is frequently mentioned it is called Paras (Hebrew ), or sometimes Paras ve Madai ( )
i.e. Persia and Media. As the Old Persians gained power, they developed the infrastructure to
support their growing influence, including creation of a capital named Pasargadae and an opulent
city named Persepolis. Starting around 550 BCE, from the region of Persis in southern Iran,
encompassing the present Fars province the ancient Persians spread their language and culture to
other parts of the Iranian plateau and assimilated and intermingled with local Iranic and
'indigenous non-Iranic' groups including the Elamites, Gutians and Manneans over time. Persians
also interacted with other ancient civilizations in Europe and Africa. The first Persian empire
extended as far as the limits of the Greek city states where Persians and Athenians influenced
each other in what is essentially a reciprocal cultural exchange [5] .
At the same time, the Old Persians were part of the wider Ariya Iranian nation Darius and Xerxes
boast of belonging to a stock which they call Iranian. they proclaim themselves Iranian and "of

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Iranian stock, ariya and ariya čiça respectively, in inscriptions in which the Iranian countries
come first in a list that is arranged in a new hierarchical and ethno-geographical order. Until the
Parthian era, Iranian identity had an ethnic, linguistic and religious value, however it did not yet
have a political import. The Parthian language, an important Iranian language, was spoken by the
Parthians and is mutually intelligble with the Middle Persian language became an official
language of the Parthian empire. The Parthian language had an important influence in the
modern Persian language as well as other Iranian languages. In the 1st century BCE, Strabo (c.
64 BCE–24 CE) would note a relationship between the various Iranian peoples and their
languages. Ariana is extended so as to include some part of Persia, Media and the north of
Bactria and Sogdiana. for these nations speak nearly the same language. He mentions the
Cyrtians, the plausible ancestors of the modern Kurds as one of the Persian tribes. Cyrtians, the
generally accepted progenitors of the Kurds and Lurs might already have been significantly
scattered in the Zagros from Persis into Media. During Sassanian Iran, a national culture, fully
aware of being Iranian took shape and was partially motivated by the restoration and the revival
of the wisdom of the sages of old, dānāgān pēšēnīgān. Other aspects of this national culture
included the glorification of a great heroic past and an archaizing spirit. Throughout the period,
the pre-Islamic Iranian identity reached its height in every aspect. political, religious, cultural and
even linguistic. In terms of linguistic, Middle Persian, which is the immediate ancestor of
Modern Persian and variety of other Iranian dialects, became the official language of the empire
and was greatly diffused amongst Iranians. The intermingling of Persians, Medes, Parthians,
Bactrians and indigenous people of Iran including the Elamites gained more ground and a
homogeneous Iranian identity was created to the extent that all were just called Iranians Persians
irrespective of clannish affiliations and regional linguistic or dialectical alterities. The Elamite
language may have survived as late as the early Islamic period. Ibn al-Nadim among other
medieval historians, for instance, wrote that The Iranian languages are Fahlavi (Pahlavi), Dari,
Khuzi, Persian and Suryani and Ibn Moqaffa noted that Khuzi was the unofficial language of the
royalty of Persia, Khuz being the corrupted name for Elam. However the Elamite identity might
have vanished already. Furthermore, the process of incomers' assimilation which had been
started with the Greeks, continued in the face of Arab, Mongol and Turkic invasions and
proceeded right up to Islamic times [6].
The name Persia was the official name of Iran in the Western world before 1935, but Persian
people inside their country since the Sassanid period (226–651 CE) have called it Iran.
Accordingly the term Persian was used in the Western world as the people inhabiting Iran, for
instance, Ramsay MacDonald (1866–1937), the Prime-Minister of the United Kingdom and the
British ambassador in Iran, Percy Loraine, used Persian and Persian people to talk about the
Iranian people and government. On 21 March 1935, the ruler of the country, Reza Shah Pahlavi,
issued a decree asking foreign delegates to use the term Iran in formal correspondence. From
then on Iranian and Persian was applied interchangeably to the population of Iran. It is still
historically being used to designate predominant population of the Iranian people living in
Iranian cultural continent [7].

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3. Ethnicity
While a categorization of a Persian ethnic group persists in the West, Persians have generally
been a pan-national group often comprising regional people who often refer to themselves as
'Persians' and have also often used the term Iranian in the ethnic-cultural sense. As a pan-national
group defining Persians as an ethnic group, at least in terms used in the West, is not inclusive
since the ethnonym Persian includes several Iranian people including the speakers of Modern
Persian. Some scholars, classify the speakers of Persian language as a single ethnic unit the
Persians and exclude those Iranians who speak dialects of Persian or other Iranian dialects
closely related to Persian. however this approach to ethnicity in Iran is erroneous, since the
designation Iranian (Irani) as an ethnic term has been used by all these ethnic group in Iran,
including the Persians irrespective of their origin.

3- 1. Azeri people
Azerbaijani, also known as Azeri, is a Turkic language that is closely related to Turkish and
influenced by Persian and Arabic. By far the largest Turkic-speaking group are the Azerbaijanis
who account for over 85 percent of all Turkic speakers in Iran. Most of the azerbaijanis are
concentrated in the northwestern corner of the country where they form the majority population
in an area between the Caspian Sea and Lake Urmia and from the Soviet now the independant
states of Azerbaijan and Armenia border south to the latitude of Tehran [8]. Azerbaijani is
structurally similar to the Turkish spoken in Turkey, but with a strikingly different accent. About
half of all Iranian azerbaijanis are urban. Major azerbaijani cities include Tabriz, Urmia, Ardabil,
Zanjan, Khoy, and Maragheh. In addition an estimated one-third of the population of Tehran was
azerbaijani as of 1986 and there were sizable azerbaijani minorities in other major cities, such as
Hamadan, Karaj and Qazvin. The life styles of urban azerbaijanis do not differ from those of
Persians, and there is considerable intermarriage among the upper classes in cities of mixed
populations. Similarly customs among azerbaijani villagers do not appear to differ markedly
from those of Persian villagers. The majority of azerbaijanis like the majority of Persians are
Shia Muslims. A tiny minority of Azerbaijanis are Bahais. By 2008 Azerbaijanis represented
about 16 percent of the overall Iranian population [9].
Turkic-speaking peoples first appeared in the area that is present-day Azerbaijan in the 7th
century. The region became Turkic speaking in the 11th century when it was invaded by the
Turks. The area was invaded by Mongols in the 13th century but the invasion was short-lived. In
the early 1800s Azerbaijan was divided between Persia and Russia. Following the fall of
Imperial Russia Russian Azerbaijan became an independant nation until the Soviet Union
reasserted control over the region. According to 2500-year-history of Iran Atropatgan inhabitants
have been considered as Iranians and united with all of them. They are known as Iranian nation
and we can not consider any new race for these people. The race of people in Atropatgan has
been the same as Iranians from the beginning. Azerbaijan inhabitants (Atropatgan) are among the
most original and the oldest Iranian families namely Aryan race. They have kept all Iranian
characteristics in Achaemenidae, Arsacides and Sassanid dynasties and so far kept their ethnical

Page 236
nobility. Through history, particularly in the contemporary history Atropatgan has been the
pioneer of progressing social and political movements and intellectual events in Iran. Therefore
knowing them as non-Aryan on the view of ethnical characteristics is completely rejected.
Moreover all of the documents indicate that they are Aryan. They are the reminders and
grandchildren of Aryan and Parse Medes. All Kurds, Lors and Iranian races are their reminders.
Atropatgan inhabitants are the real generation and heritors of their ancestors' race, namely
Aryans [10].

3- 2. Kurds
The Kurds speak a variety of closely related dialects, which in Iran are collectively called
Kirmanji. The dialects are divided into northern and southern groups, and it is not uncommon for
the Kurds living in adjoining mountain valleys to speak different dialects. There is a small body
of Kurdish literature written in a modified Arabic script. Kurdish is more closely related to
Persian than is Baluchi and also contains numerous Persian loanwords. In large Kurdish cities,
the educated population speaks both Persian and Kurdish.
There were approximately 4 million Kurds in Iran as of 1986. They were the third most
important ethnic group in the country after the Persians and Azarbaijanis and accounted for about
9 percent of the total population. By 2008 Kurds represented some 7 percent of the total Iranian
population. They have historically been concentrated in the Zagros Mountain area along the
western frontiers with Turkey and Iraq and adjacent to the Kurdish populations of both those
countries. Kurds also lived in the Soviet Union and now in various independant nations and
Syria. The Kurdish area of Iran includes most of West Azarbaijan, all of Kordestan, much of
Bakhtaran formerly known as Kermanshahan and Ilam and parts of Lorestan. Historically the
Kurds of Iran have been both urban and rural with as much as half the rural population practicing
pastoral nomadism in different periods of history. By the mid-1970s fewer than 15 percent of all
Kurds were nomadic. In addition during the 1970s there was substantial migration of rural Kurds
to such historic Kurdish cities as Bakhtaran known as Kermanshah until 1979 Sanandaj and
Mahabad as well as to larger towns such as Baneh, Bijar, Ilam, Islamabad (known as Shahabad
until 1979), Saqqez, Sar-e Pol-e Zahab and Sonqor. Educated Kurds also migrated to non-
Kurdish cities such as Karaj, Tabriz and Tehran [11] .
The majority of both rural and urban Kurds in West Azarbaijan and Kordestan practice Sunni
Islam. There is more diversity of religious practice in southern Kurdish areas, especially in the
Bakhtaran area where many villagers and townspeople follow Shia beliefs. Schismatic Islamic
groups such as the Ahl-e Haqq and the Yazdis, both of which are considered heretical by
orthodox Shias traditionally have had numerous adherents among the Kurds of the Bakhtaran
region. A tiny minority of Kurds are adherents of Judaism.

3- 3. Lurs
In the central and southern Zagros live the Bakhtiaris and the Lurs two groups that speak Luri a
language closely related to Persian. Linguists have identified two Luri dialects. Lur Buzurg,

Page 237
which is spoken by the Bakhtiari, Kuhgiluyeh and Mamasani tribes and Lur Kuchik which is
spoken by the Lurs of Lorestan. Like the Persians the Bakhtiaris and Lurs are Shia Muslims.
Historically each of the two groups was organized into several tribes. The tribal leaders or khans,
especially those of the Bakhtiari tribes were involved in national politics and were considered
part of the prerevolutionary elite. The Lurs closely related to the Bakhtiaris live in the Zagros to
the northwest, west and southeast of the Bakhtiaris. There were about 500,000 Lurs in Iran in the
mid-1980s. The Lurs were divided into two main groups the Posht-e Kuhi and the Pish-e Kuhi.
These two groups were subdivided into more than sixty tribes the most important of which
include the Boir Ahmadi the Kuhgiluyeh, and the Mamasani. Historically the Lurs have included
an urban segment based in the town of Khorramabad, the provincial capital of Lorestan. Prior to
1900, however the majority of Lurs were pastoral nomads [12].
Traditionally they were considered among the fiercest of Iranian tribes and had acquired an
unsavory reputation on account of their habit of preying on both Lur and non-Lur villages. As of
2008 the Lur population in Iran was reportedly between 2-6 percent of the overall population.
The close relation and flexibility of the term Bakhtiaris could account for the relatively large
discrepancy.

3- 4. Bakhtiaris
In the central and southern Zagros live the Bakhtiaris and the Lurs, two groups that speak Luri a
language closely related to Persian (Farsi). Linguists have identified two Luri dialects. Lur
Buzurg which is spoken by the Bakhtiari, Kuhgiluyeh and Mamasani tribes and Lur Kuchik,
which is spoken by the Lurs of Lorestan. Like the Persians the Bakhtiaris and Lurs are Shia
Muslims. Historically each of the two groups was organized into several tribes. The tribal leaders
or khans especially those of the Bakhtiari tribes were involved in national politics and were
considered part of the prerevolutionary elite.The Bakhtiaris have been considered both a political
and a tribal entity separate from other Lurs for at least two centuries. They are concentrated in an
area extending southward from Lorestan Province to Khuzestan Province and westward from
Esfahan to within eighty kilometers of the present-day Iraqi border. A pastoral nomadic tribe
called Bakhtiari can be traced back in Iranian history to as early as the fourteenth century but the
important Bakhtiari tribal confederation dates only from the nineteenth century [13].
Historically the Bakhtiaris were divided into two main tribal groups. The Chahar Lang were
located in the northwest of the Bakhtiari country and until the middle of the nineteenth century
retained the leadership of all the Bakhtiari tribes. The Haft Lang the southwestern group were
more closely associated with modern Iranian politics than the Chahar Lang and in some instances
have exercised significant influence

3- 5. Qashqais
The Qashqais are the second largest Turkic group in Iran. The Qashqais are a confederation of
several Turkic-speaking tribes that historically resided in Fars Province numbering about
250,000 people. They are pastoral nomads who move with their herds of sheep and goats
between summer pastures in the higher elevations of the Zagros south of Shiraz and winter

Page 238
pastures at low elevations north of Shiraz. Their migration routes are considered to be among the
longest and most difficult of all of Iran's pastoral tribes. The majority of Qashqais are Shias.
The Qashqai confederation emerged in the eighteenth century when Shiraz was the capital of the
Zand dynasty. During the nineteenth century, the Qashqai confederation became one of the best
organized and most powerful tribal confederations in Iran, including among its clients hundreds
of villages and some non-Turkic-speaking tribes. Under the Qashqais' most notable leader, Khan
Solat ad Doleh, their strength was great enough to defeat the British-led South Persia Rifles in
1918. Reza Shah's campaigns against them in the early 1930s were successful because the
narrow pass on the route from their summer to winter pastures was blocked, and the tribe was
starved into submission. Solat and his son were imprisoned in Tehran, where Solat was
subsequently murdered. Many Qashqais were then settled on land in their summer pastures,
which averaged 2,500 meters above sea level. The Qashqais, like the Bakhtiaris and other
forcibly settled tribes returned to nomadic life upon Reza Shah's exile in 1941. Army and
government officials were driven out of the area, but the Qashqais, reduced in numbers and
disorganized after their settlement, were unable to regain their previous strength and
independence. By the 1980s the terms Qashqai and Turk tended to be used interchangeably in
Fars especially by non-Turkic speakers. Many Turkic groups however such as the urban
Abivardis of Shiraz and their related village kin in nearby rural areas and the Baharlu, the Inalu,
and other tribes were never part of the Qashqai confederation. The Baharlu and Inalu tribes
actually were part of the Khamseh confederacy created to counterbalance the Qashqais.
Nevertheless, both Qashqai and non-Qashqai Turks in Fars recognize a common ethnic identity
in relation to non-Turks. All of these Turks speak mutually intelligible dialects that are closely
related to Azarbaijani. The total Turkic-speaking population of Fars was estimated to be about
500,000 in 1986. By 2008 the Qashqais population was reportedly 1 percent of the total Iranian
population [14].

3- 6. Arabs
Arabic and Assyrian are the two Semitic languages spoken in Iran. The Arabic dialects are
spoken in Khuzestan and along the Persian Gulf coast. They are modern variants of the older
Arabic that formed the base of the classical literary language and all the colloquial languages of
the Arabic-speaking world. As a Semitic language Arabic is related to Hebrew, Syriac and
Ethiopic. The conquering of Persia by the Arabs in 642 CE has been credited with bringing Islam
to Iran. Islam subsequently became the predominant religion in Persia (now Iran) replacing a mix
of Christianity, Judaism, Baha'ism and Zoroastrianism that had existed before. In 1986 there
were an estimated 530,000 Arabs in Iran. A majority lived in Khuzestan where they constituted a
significant ethnic minority. Most of the other Arabs lived along the Persian Gulf coastal plains,
but there also were small scattered tribal groups living in central and eastern Iran. About 40
percent of the Arabs were urban, concentrated in such cities as Abadan, Ahvaz and
Khorramshahr. Both the urban and the rural Arabs of Khuzestan are intermingled with the
Persians, Turks and Lurs who also live in the province. The Khuzestan Arabs are Shias. While

Page 239
this physical and spiritual closeness has facilitated intermarriage between the Arabs and other
Iranians, the Arabs have tended to regard themselves as separate from non-Arabs and have
usually been so regarded by other Iranians. Among the Khuzestan Arabs there has been a sense
of ethnic solidarity for many years [15].

3- 7. Baluchis
The Baluchis who constitute the majority of the population in Baluchestan va Sistan also known
as Sistan and Baluchestan numbered approximately 600,000 in Iran in the mid-1980s. They were
part of a larger group that forms the majority of the population of Baluchistan Province in
Pakistan and of some areas in southern Afghanistan. In Iran the Baluchis are concentrated in the
Makran highlands, an area that stretches eastward along the Gulf of Oman coast to the Pakistan
border and includes some of the most desolate country in the world. The Baluchis speak an Indo-
Iranian language that is distantly related to Persian and more closely related to Pashtu one of the
major languages of Afghanistan and Pakistan. Historically Baluchi has been only an oral
language although educated Baluchis in Pakistan have developed a written script that employs
the Arabic alphabet. Unlike the majority of Persians the majority of Baluchis are Sunni rather
than Shia Muslims. This religious difference has been a source of tension especially in the
ethnically mixed provincial capital of Zahedan. Religious tensions came more to the forefront
following the Iranian Revolution and the Iran-Iraq War [16] .

3- 8. Turkmans
The Turkmans are an ethnic minority who speak the Turkish language with the Eastern Oghoz
accent. The same dialect is spoken in the Republic of Turkmenistan. They live in the Turkoman
Sahra and in the Gorgan plains. The area is a fertile plain near the Iranian border with the
Republic of Turkmenistan. It extends from the Atrak river in the north, to the Caspian Sea in the
west, Quchan mountains to the east and the Gorgan river to the south. Iranian Turkmans have
been living in Iran since 550 AD but they first began forming tribes from 750 AD onwards. They
are the descendants of Central Asian Turks, who retained their ethnic identity during the Mongol
invasion. Not all the nine Turkoman tribes live in Iran. The most important Iranian Turkoman
tribes are Kuklans and Yamotes. The Kuklans have six branches, and live in the central and
eastern Turkoman Sahra. The Yamotes have two large clans, the Atabai and Jaafarbai, and live to
the west of Turkoman Sahra. There are also smaller tribes to the east of the region in a few
villages .

3- 9. Mazandaran and Guilan

Mazandaran and Guilan People of Mazandaran and Guilan who are settled in the Caspian seaside
villages separated from the Persians in Alborz valleys by the northern climate condition of
Alborz. They are original Iranians. Their difference with Persians is resulted from the separation
on the side of Alborz and geographical climate condition and not for race. They have medium
stature with dark and pale appearance, black eyes, black and thick hair and beard.

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3- 10. Assyrian
Arabic and Assyrian are the two Semitic languages spoken in Iran. The Assyrians are a Christian
group that speaks modern dialects of Assyrian an Aramaic language that evolved from old
Syriac. Language and religion provide a strong cohesive force and give the Assyrians a sense of
identity with their coreligionists in Iraq in other parts of the Middle East and also in the United
States. Most Assyrians adhere to the Assyrian Church of the East sometimes referred to as the
Chaldean Church or Nestorian Church. Many theologians regard this church as the oldest in
Christendom. In the nineteenth century Protestant and Roman Catholic missionaries proselytized
among the Assyrians and converted many of them. There were about 32,000 Assyrians in Iran at
the time of the 1986 census. Many of them emigrated after the Revolution in 1979 but at least
20,000 were estimated to be still living in Iran in 1987. The traditional home of the Assyrians in
Iran was along the western shore of Lake Urmia. During World War I virtually the entire
Assyrian population fled the area, which had become a battleground for opposing Russian and
Turkish armies. Thousands of Assyrians perished on the overland flight through the Zagros to
the safety of British-controlled Iraq. Eventually, many of the Iranian Assyrians settled among the
Assyrian population of Iraq or emigrated to the United States. During the reign of Reza Shah
Assyrians were invited back to Iran to repopulate their villages. A few thousand did return, but
since the 1940s most young Assyrians had migrated to Tehran and other urban centers [17].

3- 11. Armenians
Armenians, a non-Muslim minority that traditionally lived in northwestern Iran adjacent to the
historic Armenian homeland located in were eastern Turkey and Soviet Armenia and
subsequently the independant state of Armenia speak an Indo-European language that is distantly
related to Persian. There were an estimated 300,000 Armenians in the country at the time of the
Revolution in 1979. There was considerable emigration of Armenians from Iran since, although
in 1986 the Armenian population was still estimated to be 250,000. Armenian forms its own
independent branch of the Indo-European family. It has no close living relatives. It is thought to
be most closely related to Greek. It is estimated that Armenian is spoken by about 6 million
people worldwide Ethnologue. It is the official language of Armenia where it is spoken by some
3.5 million people. It was used in Armenia in the schools and in the media. However, nearly half
of Armenian speakers today live outside of Armenia. Armenians call their country Hayastan and
their language Hayaren. The term Armenian is used to refer to three different languages:
Classical Armenian a fifth-century classical form of the language, maintained by the Armenian
church Eastern Armenian spoken in present-day Armenia, Iran and India, and Western
Armenian, which was spoken by Armenians in Anatolia Turkey, prior to the Armenian Genocide
in Turkey in 1915-1916. The Armenian alphabet was invented by the missionary Mesrop
Mashtots circa 400 CE. Originally it consisted of thirty-six letters six vowels and thirty
consonants to which two letters were added in the 12th century. It shows the influence of Greek
and Persian writing. From the early 1920s on Eastern Armenian was affected by two sets of
Soviet-promoted orthographic reforms. In the past there were many Armenian villages,

Page 241
especially in the Esfahan area where several thousand Armenian families had been forcibly
resettled in the early seventeenth century during the reign of the Safavid ruler Shah Abbas. By
the 1970s, the Armenians were predominantly urban. Approximately half lived in Tehran and
there were sizable communities in Esfahan, Tabriz and other cities. The Armenians tended to be
relatively well educated and maintained their own schools and Armenian-language newspapers.
By 2008 non-Turkic groups such as Armenians, Assyrians and Georgians made up less than a
percent combined of the total Iranian population. Two seats remained reserved for Armenians as
an officially recognized minority group in the Iranian parliament or Majlis [18].

3- 12. Talysh
Talysh of Iran are an Iranian people very limited and Sporadic living near Alborz Mountains in
Iran especially in the south of Qazvin province. Talysh of Iran use the Tati language Iran is a
group of northwestern Iranian dialects which are closely related to the Talysh language. Persian
and Azeri are also spoken. Talysh of Iran are mainly Shia Muslims and about 300,000
population.

3- 13. Iranian Georgians

Iranian Georgians are an ethnic group living in Iran. They are Twelver Shia Moslems. The
Phereidnuli Georgian dialect is still spoken in Iran. The number of Georgians in Iran is estimated
from 50,000 to over 100,000. According to Encyclopaedia Georgiana 1986 some 12,000-14,000
lived in rural Fereydan prior to 1985 but these numbers are obvious underestimations. The
Georgian alphabet is also known to some in Fereydunshahr. The Georgian language is still used
by some people in Iran. The center of Georgians in Iran is Fereydunshahr a small city 150 km to
the west of Isfahan. The western part of Isfahan province is historically called Fereydan. In this
area there are 10 Georgian towns and villages around Fereydunshahr. In this region the old
Georgian identity is retained the best compared to other places in Iran. In many major Iranian
cities such as Tehran, Esfahan, Karaj and Shiraz live Georgians too. In many other places such as
Najafabad, Rahmatabad, Yazdanshahr and Amir Abad near Esfahan. In Mazandaran Province in
northern Iran there are ethnic Georgians too. They live in the town of Behshahr and also in
Behshahr county in Farah Abad and many other places which are usually called Gorji Mahalle.
Most of them no longer speak the Georgian language but retain aspects of Georgian culture.
Some argue that Iranian Georgians retain remnants of Christian traditions, but there is no
evidence for this.

3- 14. Iranian Pashtuns

There has been a long history of population movements between Afghan Pashtuns and Iranians.
Iranian Pashtuns live in northeastern Iran primarily in South Khorasan Province to the east of
Qaen near the Afghan border. Their native population not including refugees is 113,000 in Iran.
A further number of Pashtuns also live among the Afghan refugees in Iran [19] .

Page 242
Conclusion:
Around 3000 BCE, the ancestors of Iranians first immigrated from their Central Asian homeland
- where they lived with their Indian kin as one people - to the Iranian Plateau. There they came
into contact with the already established civilisations such as the Kassites or the Elamites, the
latter having over 2000 years of political presence in the plateau. Probably mostly through
integration and taking advantage of the weakness of these civilisations because of their constant
warfare with the empires of Mesopotamia, the Aryans came to dominate the society, although at
the same time adopting much of the existing culture and social norms. The integration of Aryans
with the locals and the settlement of the tribes all around the plateau gave raise to the first Iranian
civilisations. Throughout its long history people of Iran have intermarried with Greeks, Arabs,
Mongols, Turks and other tribes. Today, most of the population have similar characteristics and
obvious differences are rare.The worthy exceptions are the members of the semi-nomadic
Turkman tribes who show clear Turko-Mongolian anatomies.

REFERENCES
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2. Nasidze I., Quinque D., Rahmani M., Alemohamad S. A., and Stoneking M. (2008). Close
genetic relationship between Semitic-speaking and Indo-European-speaking groups in Iran.
Annals of Human Genetics.; 72: p. 241.
3. Minorsky V. (1953). Studies in Caucasian history. Cambridge University Press, p.178
4. Goldschmidt A, Davidson L. (2005). A Concise History of the Middle East. Westview Press;
Eighth Edition, p.576.
5. Diakonoff IM. (1990). Language Contacts in the Caucasus and in the Near East. In: Greppin
J, Markey T (eds) When Worlds Collide: Indo-Europeans and Pre-Indo-Europeans, Karoma
Publ., p.401.
6. Bosworth CE. (1968). The Political and Dynastic History of the Iranian World (A.D. 1000-
1217). In: Boyle JA (ed) The Cambridge History of Iran, Vol. 5. The Saljuq and Mongol
Periods. Cambridge University Press, p.778.
7. Hambly G. (1991). Agha Muhammad Khan and the Establishment of the Qajar Dynasty. In:
Avery P, Hambly G, Melville C (eds) The Cambridge History of Iran, Vol. 7. From Nadir
Shah to the Islamic Republic. Cambridge University Press, p. 104.
8. Raies niya, Rahim. (2007). Azerbaijan in the History of Iran, 1st edit, Tabriz: Nima
publishment, p. 145.
9. Golden PB. (1992). An introduction to the history of the Turkic peoples: Ethnogenesis and
state-formation in medieval and early modern Eurasia and the Middle East. Otto
Harrassowitz, p.483.
10. Johanson L.(1998). The history of Turkic. In: Johanson L, Crato E (eds) The Turkic
languages. London, Routledge, p. 81.
11. Safizadeh,Sedigh(1999).History of Kurd and Kurdestan,f irst edit, Atiyeh pub,p.254.
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13. Saidiyan, A. A.(2004). people of Iran. 1st edit. Tehran: sience and life publishment,p. 178.
14. Saidiyan, A. A. (2004). people of Iran. 1st edit. Tehran: sience and life publishment,p.165.
15. Zarrinkub A. (2008). The Arab Conquest of Iran and Its Aftermath. In: Frye RN (ed) The
Cambridge History of Iran, Vol. 4. The Period from the Arab Invasion to the Saljuqs.
Cambridge University Press, p.747.
16. Rashidvash, Vahid (2012). The race of the Azerbaijani people in Iran. International Journal
of Research in Social Sciences- India, Vol. 2, No.2, 437- 449.
17. Saidiyan, A. A.(2004). people of Iran. 1st edit. Tehran: sience and life publishment,p. 254.
18. Pasdermajiyan, H. (1998). History of the Armenian. 1st edit,p.123.
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 CONTENT

IMPRESSUM

MANAGEMENT

M31-01 Stamenović, M., Pavlović, S.: SUGGESTION OF A MODEL OF A CENTRALIZED

SYSTEM FOR PROVIDING SERVICES IN THE FIELD OF CLINICAL TRIALS ON DRUG 2

M31-02 Ničić, M., Boţić, D., Hajrović, E.: COMPETITIVE ADVANTAGE THROUGH THE
STRATEGY OF COST LEADERSHIP-APPLICATION FOR SERBIA ............................ 11

M31-03 Stefanović, S., Cvejić, R., Pavlović, R., Ilić, D.: METHODOLOGY ECONOMIC EFFECTS
THE REENGINEERING PROCESS SMALL OR MEDIUM-SIZED ENTERPRISES ............ 19

M33-04 Petković, J.: THE CONCEPT OF INFORMATION VALUE CHAIN AND COMPETITIVE
ADVANTAGE ..................................................................................................... 27

M33-05 Marković, S., Pavlović, N., Janković, G.: BUSINESS ETHICS-THE IMPERATIVE OF
SUCCESSFUL BUSINESS OF AN ORGANIZATION .................................................. 36

M33-06 Nićin, N., Nićin, S., Paspalj, M., Grbić, V.: KNOWLEDGE MANAGEMENT FROM
ASPECT IN TEAMWORK, COMUNICOLOGY AND SOCIOLOGY................................. 42

M33-07 Nićin, N., Nićin, S., Grbić, V.: ORGANIZATION DEVELOPMENT .............................. 49

M33-08 Miletić, S., Simonović, Z., Miletić, V.: BREND KAO VAŢAN FAKTOR KONKURENTNOSTI
INOVACIJE (BRAND AS AN IMPORTANT FACTOR OF COMPETITIVENESS OF
INNOVATION) ................................................................................................... 55

M33-09 Paspalj, M., Pušara, N., Škobić, T.: TRANZICIJA, PRIVATIZACIJA I

KONKURENTNOST PRIVREDE SRBIJE .................................................................. 62

ECONOMICS

M31-10 Siljković, B., Radević, B. Jokić, B.: A NEW APPROACH TO MONETARY POLICY IN
MODERN CONDITIONS TROUGH A REVIEW OF THE USA ..................................... 73

M31-11 Siljković, B., Pavlović, N., Milanović, M.: A MODERN APPROACH TO KEYNESIAN
MONETARY POLICY ........................................................................................... 87

M33-12 Kurtović, S., Siljković, B., Marković, S.: FORMS OF FOREIGN DIRECT
INVESTMENTS AND THEIR EFFECT ON GROWTH................................................. 100

M33-13 Milanović, N.: BALANCE SHEET AND INCOME SHEET AS AN EXPRESSION OF THE
FINANCIAL SITUATION OF THE COMPANY .......................................................... 111

M33-14 Jugović, Z., Pecarski, D., Pantelić, M.: IMPACT OF AGRICULTURAL DEVELOPMENT
OF SERBIAN ECONOMY ..................................................................................... 123

BANKING

M33-15 Najdanović, Z., Lulić, L.: THE DEVELOPMENT ROLE OF MICROCREDITING SMALL
BUSINESS IN VOJVODINA .................................................................................. 130
M33-16 Jovanović, P.: UPRAVLJANJE PROFITOM U BANKAMA U RIZIČNOM OKRUŢENJU
(PROFIT MANAGEMENT IN BANKS IN RISKY ENVIRONMENTS) ............................. 140

FINANCE

M33-17 Todorović, M., Vasić, Z., Stefanović, S.: TAX CONTROL AND PREVENTION OF TAX
EVASION .......................................................................................................... 148

MARKETING

M33-18 Boţović, N.: HOLISTIC MARKETING AS A FUNCTION OF SUSTAINABLE

DEVELOPMENT ................................................................................................. 163

TECHNICAL-TECHNOLOGICAL DEVELOPMENT

M33-19 Jovanović, I.: APPLICATION OF NEURAL NETWORK IN THE ECONOMY .................. 174

M33-20 Golubović, Z., Lekić, Z., Jović, S.: DINAMICS MODEL OF BUCKET-WHEEL
EXCAVATOR ...................................................................................................... 188

INFORMATICS

M33-21 Pavlović, V., Đokić, G.: DISTRIBUTED LEARNING OBJECT REPOSITORIES ............. 194

M33-22 Đokić, G., Pavlović, V.: RELATIONSHIPS AND CONNECTIONS BETWEEN LEARNING
OBJECTS .......................................................................................................... 200

M33-23 Katanić, Z.: PAY PAL E-PAYMENTSYSTEM ............................................................ 210

TELECOMMUNICATIONS

M33-24 Katanić, Z., Miletić, V.: ELECTRONIC BANKING SEGMENTS ................................... 220

ETHNOGRAPHY

M33-25 Rashidvash, V.: IRANIAN PEOPLE: IRANIAN ETHNIC GROUPS............................... 231

CONTENT........................................................................................................... 245