INTERNATIONAL JOURNAL OF ECONOMICS AND LAWProf. dr Života Radosavljević ... 8 Avdagić Mehmed, Radić Maja, Golić Dženan COMPETITIVE ABILITY OF THE ASSUMPTIONS OF STABLE GROWTH

FACULTY OF BUSINESS STUDIES AND LAW

INTERNATIONAL JOURNAL

OF ECONOMICS AND LAWVol. 4, No. 10,

April 2014.

Belgrade, Serbia

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International Journal of Economics and Law, Vol. 4, No. 10 (2014)

INTERNATIONAL JOURNAL OF ECONOMICS AND LAW

ISSN: 2217-5504

Scientific magazine reflecting trends in law, economics and management

Published by:Faculty for Business Studies and Law

Printed:3 times a year

Editor-in-chief:Života Radosavljević

Secretariat:Vladana Lilić

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

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

Lector:Marina Kostić

Technical Editor:Miodrag Mandić

Front page design:Ivan Avdagić

Printed by:Beopress, Beograd

Copies:200

Editorial office and administrationFaculty of Business Studies and LawStaro sajmište 2911000 Belgrade, Serbia

Tel. +381 (11) 3131-246Fax: +381 (11) 2132-372

Website: economicsandlaw.orgE-mail: [email protected]

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INTERNATIONAL JOURNAL OF ECONOMICS AND LAW

ISSN: 2217-5504

Scientific magazine reflecting trends in law, economics and management

Published by:Faculty for Business Studies and Law

Printed:3 times a year

Editor-in-chief:Života Radosavljević

Secretariat:Vladana Lilić

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

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

Lector:Marina Kostić

Technical Editor:Miodrag Mandić

Front page design:Ivan Avdagić

Printed by:Beopress, Beograd

Copies:200

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FOREWORD

Dear readers,

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

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

Belgrade, 2014.Editor in chief

Prof. dr Života Radosavljević

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CONTENTS

1 Arsić Miloš , Tomić Radoljub, Lojaničić Radojko, Bojanić Zoran, Arsić SinišaTHE MAXIMIZATION OF EFFECTS BY USING STRATEGY OF REVERSE LOGISTICS AND GREEN LOGISTICS

8 Avdagić Mehmed, Radić Maja, Golić DženanCOMPETITIVE ABILITY OF THE ASSUMPTIONS OF STABLE GROWTH OF THE NATIONAL ECONOMY

15 Bešić Cariša, Bešić-Vukašinović Doloris, Bešić SnežanaTHE АNALISYS OF ASPECTS OF COMPETETIVENESS OF DOMESTIC ENTERPRISES

22 Denysiuk VolodymyrINNOVATION-DRIVEN ECONOMIC DEVELOPMENT IN LUGANSK REGION: METHODOLOGY, EVALUATION AND PROSPECTS

30 Dragić Milan, Kastratović Edita, Anđelković AleksandarHUMAN RESOURCES AS COMPETITIVE ADVANTAGE FACTOR OF AN ORGANIZATION

35 Gijić Nebojša, Lilić Vladana, Jović – Bogdanović Adriana IMPLEMENTATION OF ADVANCED ANALYTICS IN CONSUMER-FACING COMPANIES

43 Jerinić Srđan, Nikolić Zoran, Nikolić MilanA SOLUTION IN THE DEVELOPMENT OF THE BILLING AND INFORMATION SYSTEM

50 Kastratović Edita, Dragić Milan, Miletić Lidija CHALLENGES OF STRATEGIC PLANNING AT THE GLOBAL LEVEL

55 Knežević Rade, Mrdak Gordana, Krgović Milorad, Knežević Željko TECHNOLOGICAL INNOVATIONS AS A COMPETITIVE ADVANTAGE IN PAPER INDUSTRY

63 Kopilović Radmila, Ćilardžić Vesna, Grbović MarijaTHE ROLE OF KNOWLEDGE MANAGEMENT IN MODERN BUSINESS

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71 Lyubov KuratovaFORMING THE COMPETITIVENESS OF POSTAL ORGANIZATIONS IN RUSSIA

80 Matić Goran, Milošević MilanATTACK ON THE CONSTITUTION OF THE REPUBLIC OF SERBIA

86 Mikić Sanja SERVICE BUSINESS AND ENTREPRENEURSHIP

95 Radosavljević Dragana, Anđelković Aleksandar, Panagopoulos Alexios COMPROMISE AS NECESSARY CONCEPT OF ORGANIZATION AND MANAGEMENT

103 Radosavljević Milan, Syngaivska Iryna, Schopf KarlCREATIVE IMITATION-RISK OR OPPORTUNITY?

109 Radosavljević Života, Anđelković Maja, Dorošenko JurijCOMPROMISE AS THE INSTRUMENT OF INCREASED SUCCESS

116 Ratković Milijanka, Marković Jovan, Ratković SnežanaDEVELOPMENT OF SUCCESSFUL LONG-TERM RELATIONS WITH PARTICIPANTS IN THE SUPPLY CHAIN AS THE FUNCTION OF INCREASE IN CUSTOMER SATISFACTION

125 Rstić Milan, Rstić Jovan, Petrevska Miroslava, Petrevska Ljupka LIABILITY INSURANCE OF LAWYERS

132 Stanković Ivica, Mihajlović Aleksandar, Mihajlović Radomir CRYPTO-CURRENCY AND E-FINANCIALS

138 Vasić Dušan, Vasić Nina VIOLATION OF HUMAN RIGHTS AND RELIGIOUS FREEDOM OF ARCHBISHOP JOVAN OF OHRID

INSTRUCTIONS FOR AUTHORS

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THE MAXIMIZATION OF EFFECTS BY USING STRATEGY OF REVERSE LOGISTICS

AND GREEN LOGISTICS

Arsić Ž. Miloš Faculty for strategic and operational management, Belgrade, Serbia

[email protected]ć P. Radoljub

Faculty for strategic and operational management, Belgrade, SerbiaLojaničić Radojko

Faculty for strategic and operational management, Belgrade, SerbiaBojanić Zoran

Faculty for strategic and operational management, Belgrade, SerbiaArsić M. Siniša

Faculty of organizational sciences, Belgrade, Serbia

Resume: The condition in which companies run bussiness, impose the proactive approach and inovative solutions, that maintain competition on the world market. Many companies, within their actions, perform the tasks of logistics, have to concider the strategy of reverse logistics. This paper deals with comparison between strategy of reverse and green logistics, as the example of sustainable growth implementation, and the chance for extraprofit. The main goal of this paper means the assignment of determine in which companies can maximize the use of reverse logistics process, as well to enable actions of green logistics to be improved, in accordance with the business goals and principles of the company, without losing on ef-fectivity and efficiency.

Keywords: reverse logistics, sustainable growth, „green“ logistics

1. INTRODUCTION

The reverse logistics is defined as the group of process which have the goal of receiving raw material, semiproduct and products, in purpose to create extra values, or deposition by the rules. The process of reverse logistic relies on the reverse flow of supply chain, so the main chalenges are refer to facilitacion of reverse flow, parallel with the physical flow of distribu-tion. The costs of the reverse logistics are refer to only 4 percent of the chain cost supply (about 40 billion dollars), while the average percent of return 8% (by the subcategory of production, percent are between 5–15%) [3].

While, other research show that 3–15% of all company costs, refers to revers logistic, but the main benefit from the reverse logistic are:

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THE MAXIMIZATION OF EFFECTS...Arsić M., Tomić R., Lojaničić R., Bojanić Z.,Arsić S.

• savingsof20%intheworkcosts,• savingsof80%inthetransportcosts,• increaseof40%intheprofitabilityofservicesand• increaseof76%satisfactionofconsumers[17].

“Green“ logistics represent activities of sustainable transport, with the minimal costs and minimal influence tothe life environment. Mutual activities, projects, and strategy of re-verseand„green“logisticsaredirectedtodecreasetotalcarbonfootprint-a[16].Thekeyareas of influence are:

• safeandsustainableextractionofrawmaterial;• decreaseofuseenergy,wastfromtheproductionandemissionofgas;• decreaseofuseofthearea;• shipmentofreturnandwaste;• recyclingofthepackageand• operationsofusingtheoldproducts,materialsandreserveparts[9].

According [3], reverse logistics is focused on those material flow, where is still possible to restore certain value, that is inclusing material flow subject into supply chain. „Green“ lo-gistics deals with the optimum use of energy and minimal emission of hazardous materials, during the process of return.

2. THE DIFFERENCE BETWEEN REVERSE AND „GREEN“ LOGISTICS

The most significant difference is that the reverse logistics is concentrated on the save of money and increasing of values by using of material to regain lost profit and for the opera-tive costs. In the green logistics it is about using “friendly” material for the transport and saving the money, but with the accent on the image of a company. [5]. “Green” logistics is concentrated on the questions of transport, recycling and repeted use. In [2] is discussed about that the “green” logistics is focussed on the beginning of process, ontheotherwayonthereverselogisticsitisobservedlikesustainabledevelopmentofthesupply chain. “The main ecological questions in “green” logistics is the consumption of ex-pendable natural resources and, so dangerous, and dangerless waste” [2]. For “green” logis-ticsisoftenusedandtheterm“ecological”logisticsandisdefinedlike“totalunderstandingand minimization of influence logistics to the ecology [8]. These activities are based to measure influence on the life environment, by the decreasing of saving energy and material during the transport. Recycling,repetedproductionandrecyclepackagingistheareawherethereverselogisticandgreenlogisticareintersected[7].Whilethereverselogisticspresentstheexaminationof the waste deposition with the saving of space and the costs of rent (buying) deposition sight.Driverofdecreasewasteinreverselogistics,arelinkedwiththeincreasedcostsofland, complicated regulative, and the economic benefits from the use of raw material in production [8]. Picture 1. is clear ilustration of functions and how they treat strategy of reverse and green logistics.

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Picture 1: The comparison of reverse logistics and “green“ logistics [8]

The company Aberdeen Group conducted the research (2010) which proves that the focus of reverse logistics on the improvement of the last phase of production. This study dis-played how is possible to short the deadlines of the operations of recovery and returns, with average seventeen days to the only 4 days. The effects of shorting the operations deadlines would be reflected in the decrease of the costs of repare for the 10%, so in the increasing of pleasureofbuyersfromthe81%to93%[3].Mutual characteristics of companies, which have revealed the most significant improve-ments, displayed through developed process of recovery and standardized waste material. Recycling and repeated use are the most significant area where the green and reverse logis-tic are agreed, and one of the most challenging for the many companies. Some companies choosetokeeptheoldproductlinesinhopethattheconsumerwillshowinthechaseforthe old parts and products, while some else have politics to product which don’t sell in the frameoftimedeadline–tosendonthemarketofsecondarymaterialormarkforpostpon-ment[9].Developedcountriesbyrecyclingthetrafficof160milliondollarsandtheyhire1,5 million people throughout the world [1].Case study “Estee Lauder” reveals balanced approach to green and reverse logistics by im-plementing and mixing the strategy in both way, reverse and direct products. Companies had problems with the products which are excess. The company wanted to decrease waste, also theywanted todecreasecosts linkedwith the spacewhich thatwastoccupies.Thecompany invested 1.3 million dollars into systems for inventory management which gather and group information. The company succeed to save 500.000 dollars tied for the labour cost which are based on the product strategy designed to limit surplus in product and also tokeepopencommunicationchannelswiththeconsumersforgettingsignificantbackupinformation. Information are used to establish possibility to develop new product line from thereturnedcosmeticproduct,worthabout250milliondollars[6].For the company which desires to be successful in „the green initiative” would be desir-able to leave the trace in the preserve environmental preservation and also to decrease the expenses. Phillips produces wide assortment electronics for the massive use. Many of their product lines, such as electrical tooth brush, rasers, and bottles for babies must deposit according to strict ecological guidelines which are established for the returned goods. Phillips con-cluded partnership with Ryder hat, that helped them to attain 80% reuse of materials. In

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the Ryder’s estimated why the product is returned for reason is the product to put on sale or it is decided to prepare it or deposit. If the product can’t be sold again, it is deployed, and the other rest useful pieces are sorted and recycled according the ecological procedures. Ryder’sassignmentistoimprovethelargestpossiblepriceofreturnedproducts,butkeep-ing the green logistic initiative. Some of variables are used to balance strategy reverse and „green“logisticsbasedondecisionmakingprocessonthevalueoftheproduct.Theprod-uct which is sold for the less 100 dollars in retail, isn’t worth fixing”. Partnership with the Ryder’s, is qualified one object for the management of all returned product lines eliminat-ingthemultipledeliveries.Packagefromallproductlinesareproducedfromtherecycledpaper and card.

3. BALANCE BETWEEN REVERSE AND GREEN LOGISTICS

With the increasing of consciousness of consumers about the effects of green house which contributes climate changes, consumers on the global level demand social responsible and sustainable models of business which can slow down the climate changes. Consumers also want excellent service and the support after purchase. These two areas are often in conflict because demand can influence on the other demand. Nylund’s research (2012) compares equipments for the sea – Wartsila’s, and producer of furniture – IKEA-u, through their green and reverse logistic initiative. The most significant factor for the company Wartsila is time. The company gives to buyer the posibility of delivery, based on the deadlines which arrange the process of distribution in company. If there is adequate disposal time company will consolidated the shipments and choose “green” transport when it is necessary. If the consumers need reserve parts in curtly time, messenger are accustomed to deliver commodities from the central location, in the shortliest possible deadline. In Wartsila’s makeanefforttouse„green“initiative,importantcomponentinthedecisionmakingpro-cess is tied with the deadline of the product delivery, as much fast and cheap possible. IKEA is managing with the luxury of time, so, the company is dedicated to „green“ transport, which often delays shipments and stops the full capacity of transporter. In the IKEA-i are inventive to design the new pallettes, so as the new containers, which will increase the ef-ficiency of delivery [5].From Wartsila’s reported in their research for the parts for the 30 years for the costs of the warehouse. In reverse logistic there is no process that would be return the value. If the buyer announces that the wrong part is sent, product returns on the shelves, without the evaluation of the product. In Wartsil’s are recognized their fight with the reverse logistic management [5]. IKEA has the program for the management of the returned commodity that evaluates the damageanddecidesitogivebacktheproductonsale,toputinthepartforthecommoditywith the reducted price, or to send on the waste. The IKEA-s model is designed to move productsveryquicklyandtosendthemfromwarehousewithinsixweeks[5].Wartsila and IKEA both are dedicated to the improvement of their green logistics, but the both have different limitation, organizational goals and expectations of the buyers which are managed by the green strategy launching. In Wartsila’s didn’t have the formal program of the reverse logistics, but they pointed out to fix this area of business. IKEA has the formal program of the reverse logistics that examines the organizational and ecological influence choosing optimal and feasable to focus the green initiative [5].

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The organization must have the real understanding of their product line, from one part to another, during the direct and reverse cycle of product. The understanding of the differ-ence between management of the reverse logistic and the management of the green logistic, will help the organization to visualise how did the decision will impact on the whole or-ganization, also on the consumers. The organizations that develop the sustainable models ofprofitmakingcandevelopscorechartvariablesthataffectonthelifeenvironmentandcostefficiency.Theinfluenceonthebusinessmustexaminefromallaspectstoavoidbadfinancial decisions. The transformation from „green“ into „gold“ will only happen in the organizations which have the sophisticated management and experience to develop the new vision, which can find the way to collect the facts and the details which are necessary tostarttheefficientinitiative[9].

4. THE EXEMPLES OF THE SYMBIOSIS OF THE REVERSE AND „GREEN“ LOGISTICS IN THE COMPANIES

Inthecompany„McDonald’s”activitiesofcovectiondepositwaste–emptypackageandbottle – called „garbage control”. Every employee from this company each day collects emptyandusedpackages,whicharethrownordroppedintheareaofarestaurant.Thestaff of the company’s restaurant organizes competitions „Litter patrols”. In those actions participate young people that live nearby to protect the environment. This company This company outlines the organization of a competition at shool’s in collecting of thrown bot-tlesunderthename„Withrespecttotheenvironment”.Themillionsofpeopletookpartinthis actions. The newest shares of the british franchise “Mcdonalds” company, in this area of waste treatment, signifies the following:

• Designingsmarter–Thesizehasbeenreducedontheplatesforthe10centimetres,thatgavetheresultsofbysavingofthe84tonsofpaper;

• ThesystemofdeliverySoca-Sole”inthepolietilenambalage–„BaginBox”system,anddeliveryofketchupintheplasticbottlesof5litres,thatreduceswasteforthe25percent;

• Theuseofstrawforthesoda,thatcontains20percentlessplasticmass,thatenablestheirfasterdemolishingandeasierrecycling;

• Departmentfortheourfleetofvehicles–Biodizelismadewiththehelpofusedcookingoil,servesasfueltourfleetoftrucks.ThesavingsintheemissionofCO2will be equal to the removal of the 2424 automobils from roads and

• Creatingtheenergyfromwaste.„McDonald’s“restaurantsinSheffieldmovestheirwaste to the facility for the waste treatment, rather then landfield sight. The energy that is produced in the landfield, warms the local buildings, including the building of the commune Šefild [10].

These are not the unique examples in the large world company’s. Moreover, the good exam-ples of the treatment waste can find in the:

• BurgerKing–IntheUBurgerKingrestaurants,acquiresover32.000tonsoftherecycledpaperannually.Theallnapkinsareusedintheserestaurants,acrossthewholeUSA,madefrom100percentrecycledmaterial.[11];

• PepsiCo-During the lastfiveyears, they reducedpackagesof theirproducts forover158.900tons,onthatwaytheyovercomepreliminarygoalsforthe20percent.

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Reducingtheweightofthepackage,whichisaccomplishedinPepsiCocompany,isequaltotheremovingoverthe95tonsofmaterialforpackageseveryday,duringthe period of the five years [12] and

• Wallmart–companyWalmartreducedthewasteintheUSA,foroverthan80per-cent, causing the return over 231 million dollars last year. This reduction enclose Walmart to a goal „zero waste“ –, which has the potential to force 11.8 million metric tones of CO2 emission per year [13].

5. CONCLUSION

Considerationofactivitiesreverseand„green“logistic,onthestrategiclevel,remarksthelongterm effects of the business decisions on the right way. In [8] are identified the main ways of using the strategy of reverse and „green“ logistics, over the:

• Decreaseoftheinfluenceofcompetition;• Effectivechannelsofdistribution;• Solvingtheproblemofwastedepositionand• Newaddedvalue.

Inthisworkispresentedafewexemplesofthesuccessfulmaximizationofusingthestrat-egyof reverse logisticand„green“ logistics.As thekeycharacteristicof these strategiesis the proactivity in approach, but the identification of new chances for development in theareaofreverseand„green“logisticpovratnei„zelene“logistikese,astheproductsofthe zero value, is removing slowly from use, because companies perceive large reserves in wastethattheydisposeeveryday.Thisalsothemaingoalofthiswork,tofindoutwaysforthe exploiting of these reserves. „Green“ logistics promotes the insurance of safe future of the company and life environment, with aspiration for the elimination of the waste, as with full lean management concept [14].

REFERENCES

[1] Arsić, M., Arsić, V.: Uloga povratne logistike u zaštiti životne sredine, Naučno-stručniskupPolitehnika,Beograd,2013.

[2] Bloomberg, D.J., Lemay, S., Hanna, J.B.: Logistika, PearsonEducation,2006.ISBN953-246-013-0

[3] DeBrito, M. P.: Introduction. In Managing reverse logistics or reversing logistics management.Rotterdam:ErasmusUniversity.,2003.,ISBN90-5892-058-6

[4] Dutton, G.: Reverse Logistics: Money Tree or Money Pit?. Reverse Logistics Magazine.approachedtheday17.5.2013,onthewebsite:http://www.worldtradewt100.com/articles/reverse-logistics-money-tree-or-money-pit.ISSN1934-3698

[5] Nylund, S. : Reverse logistics and green logistics. Master thesis. approached on 16.5.2013.

[6] O’Connell,A.:Improve your return on returns. Harvard Business Review, 30–34., 2007.ISSN0017-8012

[7] Peterson,A.J.:An examination of reverse logistics factors impacting the 463-L pallet program. 2005. Manuscript submitted for publication, Air Force Institute of

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Technology, Wright-Patterson Air Force Base. Reverse Logistics Magazine, website: http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA437509,approachedon7.2.2014.ISSN1934-3698

[8] Rogers,D.S.,Tibben-Lembke,R.S.(1998).:Going backwards: Reverse logistics trends and practices. Reno,NV:ReverseLogisticsMagazine.ISSN1934-3698

[9] Steele,K.,Rodriguez,E.(2008).:Reverse Logistics – Turning Green to Gold. Reverse LogisticsMagazine.,Vebsajt:http://www.rlmagazine.com/edition12p28.php,approachedon25.1.2014.ISSN1934-3698

[10]website:http://www.mcdonalds.co.uk/ukhome/Ourworld/Environment/Litter.html,approached on 28.2.2014

[11]website:http://www.bk.com/en/us/company-info/corporate-responsibility/environment.html, approached the day 28.2.2014

[12]website:http://www.pepsico.com/Purpose/Environmental-Sustainability/Packaging-and-Waste, approached on 28.2.2014

[13]website:http://corporate.walmart.com/global-responsibility/environment-sustainability/waste,approachedon28.2.2014

[14]website:http://www.lean.org/whatslean/principles.cfm,approachedon27.2.2014[15]website:http://www.ups.com/media/en/Reverse_Logistics_wp.pdf,approachedon

1.3.2014[16]website:http://www.nature.org/greenliving/carboncalculator/,approachedon

1.3.2014[17]WiproLtd,(2009).“Reverselogisticsmanagement-Aneffectivestrategyforrevenue

maximizationinCPGIndustry”,Vebsajt:http://www.wipro.com/documents/insights/whitepaper,approachedtheday1.3.2014

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COMPETITIVE ABILITY OF THE...Avdagić M., Avdagić Dž., Radić M., Golić Dž.

COMPETITIVE ABILITY OF THE ASSUMPTIONS OF STABLE GROWTH OF THE NATIONAL ECONOMY

Avdagić MehmedFaculty of Business Studies and Law, Belgrade, Serbia,

[email protected]ć Dževada

Health Center Sarajevo Canton, Sarajevo, Bosnia and HercegovinaRadić Maja

Faculty of Business Studies and Law, Belgrade Golić Dženan

Independent Union PPDIVUT BiH, Sarajevo, Bosnia and Hercegovina

Abstract: Competitive ability is a basic need of every economic activity and increasingly dominates the comparative advantages. It is, in fact, the ability to profitably export, and survive on the domestic market. The essence of the competitive ability is the quality and attractiveness of the products or ser-vices, their innovation, but also in new and smarter ways of doing business and management, with the goal of „smart development”. The role of the state regarding improving and stimulating competitiveness consists in the process of synergy effects equilibrium state measures and market laws, which stimulates everything creative and innovative that can contribute to the competitiveness and stable growth of the national economy.

Keywords: competitive ability, competitive advantages, market and market principles, creativity, in-novation, the role of the state, synergy effects, the national economy

1. DOMINATION OF COMPETITIVENESS

Competitiveness category of the national economy suppressed an existing theory and practice of comparative advantages. The values of natural resources, natural beauty, loca-tions of their potential significance, are entirely replaced by the abilities of companies and the overall economy to produce something, or to offer a service, whose benefit is based on efficiency greater than competition, favorable price and appropriate quality of the prod-uct, or service. In the production of furniture, the most important thing is where high quality wood grows, then where is the most attractive design and distribution logistics, for example.Thus, the ability to profitably export, and also survive in the domestic market, while strengthening the economies of scale, shows the state of things, and who in the space of competitiveness succeeding and who is not.

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The question of how to achieve the competitiveness of the national economy that will ensure the survival of the national and adequate presence on the surrounding, and then the distant markets, it is the assumption of achieving vital development goals of society, such as a higher level of employment of the working age population, social involvement of all sections of the population investment in physical and overall infrastructure, and steady and stable growth of living standards. At the same time, to stop the present trend of outflows of the population in Western Europe and overseas in search of employment that lasts for decades. The basic parameters of the success of economy are measured by GDP growth, the increase in employment rate and suitable infrastructure according to the requirements of business and life, and permanently sustainable growth of living standard.New investments and, consequently, the necessary capital investments, and market share increase in some economic segments of finding their own niche are the only permanent sustainable solution, therefore, raising the level of competitiveness in order to strengthen the export performance.

2. THE COMPETITIVENESS OF THE NATIONAL ECONOMY

Known turbulent events in our region from the late 80s after the fall of the Berlin Wall, marked by the war conflicts, radical changes and transformations, were the main concern of all social factors and the total population.In the same period, the enormous developmental conceptual shift from comparative ad-vantage to competitive advantage of the nation and each individual company has been realized worldwide. More natural resources and locations were not so important, but how to achieve the level of creating more sophisticated goods and services more successful than competition. This new understanding of the contents of competitiveness implies the following: „The competitiveness is the country’s ability to achieve success on the world market, which allows a better standard of living for all. It is the result of numerous factors, especially at the level of competitiveness and favorable business climate that encourages the introduc-tion of new products, processes, and investments. All these factors lead to increased pro-ductivity, increased income, and sustainable development.”1

Thus, the objectives are to achieve stable economic growth, to raise the level of employ-ment and quality of life, which is imperative for any government, i.e. the protagonists of economic policy.But, how to do that? The answer lies in the need to raise the threshold of national com-petitiveness.Raising the level of competitive ability of the national economy is the basic premise of stable growth, i.e. achieving of two important goals – to increase employment and quality of life. The total score of the current situation is contained in the conclusions of the high costs, especially labor costs. Then, weak demand for local products, i.e. limited market op-portunities are a reflection of weak internal and foreign trade competitiveness of domestic producers.Competitive power can be expressed by three basic characteristics – macroeconomic sta-bility, the average growth within the region and the level of employment. A direct and 1 Godišnje izvješće o konkurentnosti Hrvatske, Nacionalno vijeće za konkurentnost, Zagreb,

svibanj 2005., Svezak 2, str. 8

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broader business environment (growth), the dominant mode of restructuring and in-creasing productivity (employment), as well as the need to maintain macroeconomic sta-bility has its impact.Our situation is the fact that the bulk of the privatization process took place within the buying of the existing companies, so-called brown field investments, while the level of in-vestment in innovation and new economic entities is unsatisfactory, lagging behind other leading transition countries.

3. INNOVATIONS – THE BASIS OF COMPETITIVENESS AND PRIORITY OF THE EUROPEAN POLICY

Innovations are not just new technologies, or new products, but these are new and smarter ways to perform tasks, new management methods, new business systems, or new services. Innovations do not only bring greater development, more jobs and money, innovations lead to the creation of „smart” development.Smart development could include eco-innovations that improve the environment, or so-cial innovations that provide similar opportunities to all. Innovations are not based only on higher production, or increasing sales, but bring a real improvement in our lives. In-novations that bring smart growth ultimately require social interaction, and social and cultural environment are the key to the innovation process. Creativity and innovation are the top priority of European policy. Europe’s response to the challenges of globalization is the adoption of the Lisbon Agenda, which established an ambitious set of goals based on the idea that Europe needs to strengthen research and innovation in order to remain competitive. Focusing on innovation has led to the „birth” of a new generation of transnational cooperation programs with emphasis on funding in-novations as a priority.Knowledge and ideas are not by sufficient themselves, because it is important to translate them into action. What is important for the transfer of knowledge into new products and services? Investing in knowledge is not enough if that knowledge does not return the invested funds. Losing a job is not the problem – the problem is there are no new jobs creating. Innovations require competitiveness. In the transfer of knowledge and ideas into products and services, it is important to emphasize the need for better coordination of all levels and better cooperation between all stakeholders, i.e. between so-called “triangle of knowledge” – public policy, education and research community, on the one hand, and the business community on the other.2

A well-functioning research centers, innovative and well-equipped industrial parks, are critical to the achievement of results in research and development. In addition, coopera-tion among regions and countries is specifically emphasized. A common challenge lies in the integration of shared resources, finding a balance between cooperation and competi-

2 Dr Mehmed Avdagić, „Strateški menadžment“, Sarajevo 2009, p.45, The need for business strategy and development of the company comes from the mission and the needs of enterprises to survive, progress and gain profit on the market. On the other hand, the need for a strategy imposes the environment, whose essential feature is the competition, the variability of the structure and characteristics of the market and a host of influential factors from international relations, international and national regulations, and the development of technology, customer requirements, and practices.”

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tion, in order to enhance competitiveness. Shared resources include transport infrastruc-ture, energy and telecommunications, universities, scientific and technological centers and tourism.Innovation and innovation processes belong to the basic factors of development and com-petitiveness of enterprises, whose importance is increased especially today, in a time of so-called knowledge based economy. The OECD defines a knowledge based economy as directly „dependent on the production, distribution and use of knowledge and information.” This approach has evolved from the 60s to the late 20th century, when the influence of knowledge manifests itself as a central element of the new economy, with the domination of information and communication technologies, as key strategic dimensions of competitive advantages through new forms of communication and business – such as e-commerce and Internet use.The concept of innovation is largely evolved in the last decade, together with the extraor-dinary development of innovation management. The European Commission, according to the standard document known as the Green Paper on Innovation from the 1995, de-fines innovation as „improving and enhancing the scope of products, services and related markets, establishment of new methods of production, supply and distribution; introduc-tion of changes in management, organization and working conditions for employees.”3

The development of the theory of innovation is associated with the analysis of J. Schum-peter in ‘30s of the last century, which marked the innovation as a basic factor of techno-logical progress and economic development, in terms of replacing old technology with new, called a creative destruction. He was one of the first scientists who recognized the importance of developing a new product – product innovation for economic develop-ment, considering that the competition, achieved by introducing a new product far more significant than the one based on marginal changes in the price of existing products. The approach by which the phase of establishment of each industry sector there is a radical product innovation developed much later, followed by a radical innovation of the corre-sponding production process, followed by diffusion of incremental innovations.One of the simplest and most popular definitions of innovation is the process of turning ideas into practical application – realization. In other words, the process of innovation – innovation process (project), and output – innovation process output, which can be represented as a relation: Innovation = theoretical concept + technical inventions + the commercial exploitation.4

In its definition of innovation and innovation processes, Porter, who has formulated a model known as five forces of competition, as one of the key elements citing the ability of enterprises to gain competitive – competitive advantage based on innovation, i.e. ability of the company to realize a successful innovational projects.Generally, these elements of innovation processes are implemented in the organization through three key functions: research and development, production and marketing. Suc-cessful management of innovation is based on the concept of managing the knowledge flow within and between these (and other) functions in the company, which should sup-port the communication with the environment in order to increase competitiveness and profitability, and achieving the overall business success.

3 www.symorg2008.fon.bg.ac.yu4 Piter Draker, „Inovacije i preduzetništvo“, Privredne teme, Beograd 1991

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The most important criteria for the classification of innovations, on which depends one of the distinctive attributes of each innovation – the degree of innovation, is nature of in-novation and the type of paper. According to the criteria of the nature of innovation, there are two broad classes of innovations:- Radical (essential) innovations;- Incremental (evolutionary) innovationsIncremental innovations are small improvements, which can be described as „solving problem where the aim is clear and well known, but the solution is to find it.” In con-trast, the result of radical innovations is new products/services/processes, and they can be presented as a process in which a research direction is known, but the ultimate goal is unknown. Incremental innovations are the most common form of innovation in many enterprises and in average, about 80 % of all investments belongs to them. Within the dif-ferent classifications, there is a group of so–called semi-radical innovations (between two general, final shapes). When it comes to the criterion of the type of innovation, the latest edition of a basic document known as the Oslo Manual (2005) – Guidelines for Collecting and Interpreting Innovation Data, for the first time explicitly states the following classes of innovations5:

– Product/service innovation;– Process innovation;– Organization innovation;– Marketing innovation

Bearing in mind that the innovation is one of the key factors of competitiveness, one of the elements essential to the success of the new task is the appropriation of innovation benefits. Appropriability represents an extremely important component that innovation and technological breakthrough transforms into the economic effect. The high degree of appropriability enables the company that is the leader in innovations to achieve the posi-tion of market leader, or to realize the benefit based on innovations. The capacity of the company for the appropriation of the benefits of innovation generally depends on:

– The ability of the company to transform its innovation advantage into commercially important products/services and processes (product/service innovation and pro-cess);

– The ability of the company to defend itself against imitators6.

4. THE ROLE OF THE STATE

When we look at every aspect of the subject that affects the competitiveness, we ask the question, where are the main causes of the unsatisfactory situation in this respect in our country. Are they predominantly a consequence of some of our properties (war, political problems), or the result of some sort of transition disorientation. That is the way to recog-nize how institutions are important.

5 www.symorg2008.fon.bg.ac.yu6 Kyprijanov S., Shevtsova S., Regional innovative system as the main part of the national innovative

system, „LAW, ECONOMY AND MANAGEMENT IN MODERN AMBIENCE“ LEMIMA 2011, 12.-15-APRIL 2011. Belgrade, Serbia

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Today it is a challenge to find the right balance between state and market, between collec-tive action at local, national, and global level, and between government and non-govern-mental actions. As the economic circumstances change, so that balance must be redefined. The government must undertake new activities and abandon the old ones.7 It is of crucial development importance to recognize and to appropriately define the role of the state in the intelligent development of each country, especially those where the process is just at the beginning. The role and responsibility of the state is to structure eco-nomic and political environment by encouraging investments, which inevitably must be preceded by raising the level of export performance. That means ensuring political stabil-ity, arranged legal framework and efficient public administration, create a real economic policy, be internationally active and open, and be more successful and plausible on its way to join the EU. In the field of industrial environment, it is necessary to accelerate the improvement of infrastructure and to encourage the cluster development.In the field of human resources, it is necessary to raise the level of education quality, and encourage the processes of ongoing professional development. In addition, it is necessary to create the legal requirements for flexibility on the labor market, which does not mean an increase in unemployment or uncontrolled deterioration of the conditions of existing employees. Conversely, it must to be aimed at stimulating capital and entrepreneurs to help decide on new investments and new jobs.In the context of raising the level of concern for human resources, it is very important to find ways of encouraging the return of high-quality professionals who spent part of their working life abroad, in the countries of exceptional competitive potential. Therefore, it is necessary to find ways to attract them to be employed in their country, which brings a number of benefits starting from lower infrastructure costs (existing apartment, houses), especially knowledge of social values and social system, faster socialization, and, conse-quently, more efficient professional performance.Problems of export competitiveness must be solved with the full coordination of the gov-ernment and the authorities of the republic, who must provide the clarity of the devel-opment goals, selection of appropriate instruments of economic policy and coherence in achieving development programs, common criteria of success with practicing actual specifics of each country and how to adapt the process of building competitiveness and finding the balance between state and market.

5. RESUME

Raising the level of competitive ability of the national economy is the basic premise of stable growth that is best recognized in increasing employment and quality of life.Weak competitiveness is taking advantages of high costs, especially high labor costs. Cer-tain structural features of the economy contribute to that, which it is necessary to affect on thru the larger share of manufacturing and high-accumulative production of such prod-ucts (and services) that will find its way to customers due to its quality and performance, both on the local and the wider international social and market environment. All this can be achieved by an appropriate activity and synchronization of all economic entities through the process of restructuring activities and checking the intentions regarding the export orientation and their affirmation.7 J. Stiglitz: The Roaring Nineties, Alen Lane – Pengium Group, London 2003., str. XII

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Innovative products and services are the driving force of competitiveness. Innovative products are generators of demand, profits and customer loyalty. Good innovations give the company a positive image; such products eventually become synonymous with qual-ity and often are the decisive factor when deciding which product to choose. However, we should be careful, because each innovation, which carries a greater chance of success, entails a greater risk.Creating innovative products primarily requires knowledge of the consumer target mar-ket, knowledge of their own capabilities, as well as the competitive environment. Innova-tive products enable companies to become market leaders, but involve great risk, that will be reduced or eliminated if development process is properly managed.The state must be able to provide the balance of state measures and market laws in or-der to contribute to synergy effects of that balance, which actually means that achieved balance needs to release all that is creative and innovative, which can contribute to the competitiveness and exports, but also to prevent effect of negative factors that can hamper competitiveness.

REFERENCES

[1] Avdagić Mehmed, „Strateški menadžment“, Sarajevo 2009. godine,[2] Piter Draker, „Inovacije i preduzetništvo“, Privredne teme, Beograd 1991. godine[3] Nacionalno vijeće za konkurentnost: Godišnje izvješće o konkurentnosti Hrvatske

2004., Zagreb, svibanj 2005.[4] Galinec, A., Jurlin, K., Lenardić, M.: Konkurentnost hrvatskog izvoza u EU; IMO –

J.E. Austin Associates, Inc, Zagreb, 2002.[5] Radošević, D.: «Izazovi razvoja», Politička kultura, Zagreb, 2005.[6] Kyprijanov S., Shevtsova S., Regional innovative system as the main part of the

national innovative system, „LAW, ECONOMY AND MANAGEMENT IN MODERN AMBIENCE“ LEMIMA 2011, 12.-15-APRIL 2011. Belgrade, Serbia

[7] Stiglitz, J.: «The Roaring Nineties, Sides of Destruction», Alen Lane and Penguin Group, London, 2003.

[8] www.symorg2008.fon.bg.ac.yu

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THE АNALISYS OF ASPECTS OF COMPETETIVENESS OF DOMESTIC ENTERPRISES

Bešić CarišaUniversity in Kragujevac, Faculty of Technical sciences, Cacak, Serbia

[email protected] Đorđević Dejan

University in Novi Sad, Technical Faculty “Mihajlo Pupin”, Zrenjanin, SerbiaBešić-Vukašinović Doloris

Faculty of Business Studies and Law, Belgrade, SerbiaBešić Snežana

Railways Serbian, Belgrade, Serbia

Summary: New competitive conditions require new approaches in the field of organizational manage-ment and development of competitiveness. Standards and the best practices are the way to excellence, but in the long term. Achieving competitive capabilities in a shorter period of time implies innovation and the improvement of productivity and knowledge. Domestic companies have had a problem with the competitive ability in international level for many years. Insufficient investment in quality has resulted in extremely poor competitive position of the domestic economy. To make local companies become com-petitive at the international level, it is necessary to alter the ways of thinking and adopt modern world achievements in the field of organizational management.

Keywords: competitiveness, management, innovation, quality, knowledge.

1. INTRODUCTION

Global competitiveness is becoming increasingly intensive, noticeable and offensive. The current moment of global economy can be marked by slow but sure rise of enterprises from newly industrialized countries, such as China, India, Brazil, South Africa, Turkey, etc. Enterprises from these countries are becoming global competitors. Their competi-tive ability is based on lower business costs, first of all because of lower labour costs, but also for their readiness to accept foreign investments and the most modern methods and management techniques. The main stimulus for these economies is increased domestic consumption as well as a numerous young population. The latter represents an advantage not only concerning education but everything else as well – as the income rises, people become more educated and they change their preferences.The world economic crisis and its long lasting effects emphasize the need for permanent improvement of knowledge – in recent years only the best, no matter where they come from, can win. The winners are usually the companies which have performed optimiza-

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THE АNALISYS OF ASPECTS...Bešić C., Đorđević D., Bešić-Vukašinović D., Bešić S.

tion between the price and the quality on the grounds of reducing costs and permanent productivity increase by applying standardized QM concept and intensive innovativeness. Chinese and Indian companies are such examples.This implies the necessity for developing new business models aimed at establishing com-petitiveness on the global market. Rapid changes, short-lived advantage, disruptive tech-nologies, revolution-bringing competitors, disturbed markets, omnipotent clients, rebel-lious shareholders – are all the 21st century challenges, putting the worldwide projected organisational constraints on test and bringing the management model flaws, unable to keep the pace with time, into spotlight, [1].When it comes to the competitiveness of domestic enterprises we have to say that it is at a very low level. Insufficient applications of knowledge, low technological level of enter-prises, unproductivity and inefficiency are just part of the problem that domestic compa-nies face.

2. COMPETITIVENESS IN GLOBAL TERMS

The competitive ability of a company in the modern business conditions is hard to achieve and easy to lose. The reason for this attitude is the fact that the rapid technological advanc-es enabled the technology to become available to everyone in the world under reasonable terms. In addition, the global economic crisis has highlighted the fact that it is necessary to create new business models.The challenges which follow establishing, keeping and developing competitive abilities on the global market are much greater today than 20 years ago. The following reasons are considered to be crucial:

• Newcompaniesaremostlybasedonservices,• Newcompaniesaremostlyfromthefieldofknowledgeeconomy,• Thechangeoftechno-economicparadigmcausesconsiderablechanges,• Thenumberofallowedmistakesisfarsmallerthanbefore,• Thenewparadigmis, ingreatextent, inthephaseofpre-standardization,which

makes choosing the winners impossible, [2].

In modern business conditions the following business functions with the strategic role are particularly emphasized in organizational management because of their market orienta-tion: marketing, quality, research and development. The company’s growth, development and success are determined by tight interdependence of these three functions and their synergistic effect. Marketing, as a business function, should create marketing program according to defined needs and customers’ requests with the aim to fulfil customers’ re-quirements, to make profit and satisfy all other interest groups within a society. Market-ing management becomes knowledge management – it makes possibilities for increasing knowledge productivity of other busines functions. Marketing represents the key instru-ment which makes knowledge more productive. The result of research-developing func-tion is development of new technical-technological solutions. Each successful innovation must coordinate technological as well as the whole marketing function. Marketing is es-sential for total process of technological innovation.Quality, alongside with product diversity and marketing communications, represents the key element for creating a successful brand with a stable market position. Quality

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is becoming a primary developing aim expressed in the form of business excellence and achieving world class product and services.Business excellence implies that businesses constantly work on the implementation of quality of business organizations based on the increase in productivity and skills of each employee. Business excellence is the develop-ment of market economy, with the user in focus of the organization, permanent improve-ment operations based on knowledge and productivity of labor and business in line with the requirements of the various interest groups in the region.Countries thatarecompetitiveare also thecountrieswhere the awareness of the need for continuous quality improvement of business has been developed for manyyears. Indus-trializedcountries of the worldsuch as China, India and Brazilare puttinggreat effortsin-spreadingtheconcept ofsacrificingbusiness practicesin order to createconditionsfor im-proving thecompetitivenessof its economy.

Table 1: Ranking of the top 10 countries in the world according to the competitiveness from 2013. [3]

Country Rank in 2013–2014 Rank in 2012–2013Switzerland 1 1Singapore 2 2Finland 3 3Germany 4 6USA 5 7Sweden 6 4Hong Kong 7 9Netherlands 8 5Japan 9 10Great Britain 10 8

3. THE ANALISYS OF THE BASIC ASPECTS OF COMPETITIVENESS OF DOMESTIC ENTERPRISES

Since the early 1980s domestic economy has had problems with improving quality and productivity. The productivity problem did not appear in domestic economy only in the time of transition but it was present before, as well. These problems were the result of inappropriate business performance which was not based on market principles. Certain products had unjustifiably high prices which were not competitive on the world market. Therefore, Serbian companies reduced export prices in order to gain competitiveness on the world market, while domestic customers had to pay this cost of unproductiveness through high prices. Old technology, poor quality, unattractive packaging and high prices are thus the main reasons for uncompetitive appearance of Serbian products on interna-tional market.Technological equipment also represents a significant element of productivity rising. The average machine age in Serbia is about 30 years. Compared to the situation in the region, this represents the approximate 12-year obscolescence. Serbian economy is, technologi-

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cally, 29.5 years behind European Union, which was confirmed on the representative sam-ple of 154 small, medium and big companies within six economical branches with similar production programs. The comparison was carried out in textile, food-processing, phar-maceutical, machinery, chemical and building material industries. Austria was taken as a criterion because of its similar natural, social and demografical characteristics in relation to Serbia [4]. The greatest obscolescence was noticed in textile companies (35 years), then in machine industry (34.5 years). Pharmaceutical companies were best ranked with 21 years’ delay. Considering the regions, the equipment, tools and other production means are most obsolete in south Serbia (41 years) and the least in Backa (18.5 years’ delay). In Belgrade the delay is 20.5 years.The most productive companies are those with the equip-ment and machines of the highest quality. These are pharmaceutical companies, some companies from the field of food processing and companies with foreign capital, which is totally 8.5 to 9% of the whole Serbian industry. Metal industry is in the worst situation, with 35 year- old- machines in average, and reject of 36%, which is more than double compared to the average in EU countries. According to the list of the World Economic Forum for 2013, Serbia ranked 101st place out of 148 countries that were analyzed. Serbia was on the 95th place on the list in 2011 and in 2012 which means that there is movement in competitiveness, but in a negative sense. An interesting fact is that this year, Serbia found itself in the company of Algeria (100th place) and Guyana (102nd place). Our last year „neighbors”, also significantly modified their status – Argentina is „down” to 10 seats (now at 104), whereas Greece moved up five places (now 91st). Table 4 provides a ranking of the countries of the Western Balkans in 2009–2013. Only Serbia and Slovenia were down on the list.

Table 2: Ranking of the country of the Western Balkans towards competitiveness in 2008–2011.

Country Rank in 2009.

Rank in 2010.

Rank in 2011.

Rank in 2012.

Rank in 2013.

Slovenia 37 45 57 56 62Montenegro 62 48 60 72 67Croatia 72 77 76 81 75Macedonia 84 79 79 80 74Serbia 93 96 95 95 101BiH 109 102 100 88 87

Source:based on The Global Competitiveness Report 2013–2014, The Global Competitiveness Report 2012–2013, The Global Competitiveness Report 2011–2012, The Global Competitiveness Report 2010–2011, The Global Competitiveness Report

2009–2010, World Economic Forum, 2013.

Among the countries in the close environment, Hungary is on the 63rd place, Bulgaria is located on 57th place, Romania is located on the 76th place, Greece, as already mentioned, is located on the 91st place and Albania is on the 95th place. As can be seen from Table 4, Serbia has had a problem with global competitiveness in the last five years, and it was

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particularly present in 2013 – Serbia has the worse position in relation to all countries, not only in the Western Balkans, but also in closer environment of southeastern Europe.Table 3 provides a ranking of the countries of the Western Balkans towards competitive-ness indicators. The basic requirements of competitiveness of the country consists of the following indicators – institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labor market efficiency, the efficiency of capital markets, technological capacity and market size. As can be seen, Serbia is slightly better when it comes to business efficiency, than when it comes to innovation, [3].

Table 3: Ranking of the Western Balkan countries to indicators of competitiveness in 2013.[3]

Country Rank in 2013. In sum

Rank to primary

requirements

Ranking by business efficiency

Ranking by innovation

Slovenia 62 37 62 49Montenegro 67 68 72 70Croatia 75 61 68 80Macedonia 74 70 76 94Serbia 101 106 92 125BiH 87 87 89 89

According to the World Economic Forum, all countries in the world are divided into five groups. The first group consists of countries with its economy based on resources and it consists of 38 countries. The third group comprises countries whose economies are based on the development of business efficiency (this group consists of 31 countries) and the fifth group consists of countries whose economies are based on the application and development of innovative activities (this group consists of 37 countries). Second group consists of countries in transition from the first to the third group (this group has 20 coun-tries) and the fourth group consists of countries in transition countries from the third to the fifth group of countries (in this group consists of 22 countries). Serbia is located in the third group of countries (the economy keeping efficiency), together with Montenegro, Romania, Bulgaria, Macedonia, Bosnia, Albania, Indonesia, Chile, and so on. Croatia is in the fourth group (transition from efficiency to innovation), while Slovenia is located be-side the fifth group countries that stem (economy driving innovation and sophistication). The fifth group consists of mainly the most developed countries of the world.The World Economic Forum provides an analysis in the field of sustainable development, from the aspect of social sustainability and viability of protection of environment (Table 4 for the Western Balkan countries). The main pillars of the social indices of sustainable development are: income, youth unemployment, access to sanitation, access to potable water, approach to health services, social welfare, participation of underground economy in the economy, social mobility, the overall unemployment rate. The main pillars of the index in Accounting for just protecting the environment includes: the power of legislation, the protection of land, the number of ratified international protocols and agreements, the

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availability of water for agriculture, emission exposure to carbon dioxide ratio for fishing, the concentration of particles in the air quality of the environment.

Table 4: Ranking the Western Balkan countries by factor analysis of sustainable development in 2013. [3]

Country Ranking by social sustainability

Ranking by sustainability in

the field of environment

Change in relation to previous period

Slovenia 4,68 4,60 Slight increaseMontenegro 4,13 4,13 StagnationCroatia 4,09 4,13 StagnationMacedonia 3,99 3,83 StagnationSerbia 3,58 3,74 StagnationBiH 3,66 3,44 Slight decrese

When it comes to number of certified organizations in the domestic market in the field of quality management, Serbia is the leading country of the region of Western Balkans. The number of certified organizations in Serbia certainly has contributed to a better posi-tion of our economy in the case of improving business efficiency as a parameter of global competitiveness – the level of business efficiency of Serbia is the 92nd position, the level of innovative spirit of the 125th position on the global scale. On the other hand, the number of certified organizations in Serbia is not nearly satisfactory compared to other SEE coun-tries, such as Hungary, Romania, Bulgaria and Greece.

Table 5: Number of certificates of ISO 9001 and ISO 14001 in the Western Balkans. [5]Country ISO 9001s ISO 14001BiH 1.027 145Montenegro 96 15Croatia 2.048 575Macedonia 302 103Slovenia 1.363 313Serbia 2.831 575

4. CONCLUSION

Competitive advantage cannot be achieved as it could have been before the crisis in 2008. The world economic crisis has changed business conditions, which is particularly related to resource management and market competitiveness. A lot of factors contribute to form-ing the strategically insertion, but the three represent a particularly interesting threat to a well-timed renewal. The first one is the leading teams’ tendency to disclaim or ignore the urge to restart the strategy. The second one is the lack of convincing alternatives to the un-

21


changed state. The third one is the allocation rigidity, which complicates talent placement and regrouping behind the new initiatives.Innovations, flexibility and productivity are guidelines for the future development in the field of competitiveness and organizational management. The very essence of the strug-gle for competitiveness lies in accepting changes. Knowledge is the main driving force of permanent productivity growth in the companies from these countries. Companies from transitional countries are faced with numerous problems – among them the most important are those related to improving knowledge and organization. Economic progress and development of Republic of Serbia require creation and development of competitive economy based on knowledge, new technologies and innovations, as well as on overall implementation of integrated management systems.To achieve commercial success of the company it needs to have a competitive advantage in the form of lower costs and / or product differentiation, with a long-term strategy of providing products and services of high quality and continuous innovation. The main problem is the lack of competitiveness of domestic enterprises, which occurs as a result of poor productivity performance and the lack of implementation of new technologies and knowledge and inadequate application of the concept of quality management. Every busi-ness organization must become aware of the fact that the only way to establish and develop competitive capabilities constantly improving sacrificing performance and achievement of the objectives of operational excellence. Among domestic enterprises there has not yet been developed the awareness of the importance of applying business excellence model for their business. The first step in this process is the implementation of a quality manage-ment system by ISO 9001 standard requirements and Development integrated manage-ment systems.

REFERENCES

[1] Hamel, G.: The Future of Management (in Serbian). Novi Sad: ASEE, ISBN 978-86-7668-089-04.

[2] Reinert, E.: Spontaneous Chaos. Economics During a Time of Wolves (in Serbian). Beograd: Čigojaštampa, 2010. ISBN 978-86-7558-763-7.

[3] The Global Competitiveness Report 2013–2014, (2013,).World Economic Forum, 2013.

http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2013-14.pdf[4] Serbia lags technologically behind the EU for three decades (in Serbian). Blic. SRB:

Ringier. Beograd, 16/07/2009.[5] ISO Survey of certification 2012 – Industrial sector. ISO, 2013. www.iso.org.

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INNOVATION-DRIVEN ECONOMIC DEVELOPMENT...Denysiuk V.

INNOVATION-DRIVEN ECONOMIC DEVELOPMENT IN LUGANSK REGION:

METHODOLOGY, EVALUATION AND PROSPECTS

Denysiuk Volodymyr, G. M. Dobrov Center for Science & Technology Potential and Science History Studies,

the National Academy of Sciences of Ukraine, Kyiv, [email protected]

Abstract: A method to derive index of the innovation-driven economic development in a region through estimating innovativity indexes for selected indicators of the innovation process, including indicators of exports of products classified in 4th and 5th technological tenor. The method is applied to evaluate the innovation-driven development in Lugansk region in 2006–2011; it enables to identify advantages and weaknesses in the economic development of this region compared with other Ukrainian regions.

Keywords: innovation-driven economic development, economic innovativity, innovative products, cur-rent prices, constant prices, products classified in 4th and 5th technological tenor.

1. INTRODUCTION

At the end of 20th century and beginning of 21st century, the capability of a country to gen-erate and disseminate knowledge evolved into a core determinant of economic growth. With the innovation cycle growing shorter, development and dissemination of innova-tions has boosted the global competition. Technologically advanced and transitional economies have elaborated medium-term and long-term strategies on intensification of the innovation-driven economic development, its central resource being innovation as knowledge embodied in the commodity form. This strategy can be implemented through constructing relevant tools enabling for sound evaluation of economic development and the effectiveness of system for management and control of mechanisms and stimuli spe-cific to innovation processes. Review of publications. Issues of theory and practice of the innovation-driven develop-ment at country and regional level were elaborated in works of many national researchers in economics, such as A. Alimov, N. Amoshi, Yu. Bazhal, P. Bubenko, M. Butko, V. Geyets, V. Golovatyuk, Ya. Zhalilo, L. Ligonenko, Yu. Makogonov, B. Malitsky, V. Soloviyov, L. Fedulova, Yu Kharazishvili, I. Shovkun and others [1–3]. However, quite many theoretical and practical problems related with evaluation of the economic-driven development in a region are yet to be solved. The objective of the article is to elaborate methodology for estimating index of the inno-vation-driven economic development in a region by calculating innovativity indexes for

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selected indicators of the innovation process, to evaluate the innovation-driven economic development in Lugansk region, a large Ukrainian region, in 2006–2011 by accounting for exports of products classified in 4th and 5th technological tenors (TT), and to outline key dimensions for intensification of the innovation-driven economic development in Lu-gansk region.Results. The method consists of the phases: selection of components and indicators of the innovation process; analysis of change in the indicators; measurement of indicators of the innovation process normalized as employment number and population number; calcula-tion of innovativity indexes for each indicator, with the subsequent estimation of index of the innovation-driven development in a region. The method includes four components of the innovation-driven development in a region. The first component characterizes financing of R&D and innovation in a region, measured by two indicators: (1) financing of R&D, per 10,000 employees, thou. UAH; and (2) total spending on innovation, per 10,000 employees, thou. UAH. The second component charac-terizes innovation activity at industrial enterprises, and consists of five indicators (3) share of innovating industrial enterprises; (4) number of introduced new technological process; (5) number of manufactured innovative products; (6) number of developed high technologies; (7) number of exploited high technologies, with introduction period from 1 to 5 years. The third component (three indicators) is supposed to supply performance-specific information about industrial enterprises and other economic entities in a region, by measuring their sales and exports: (8) sales of innovative products; (9) exports of innovative products; (10) exports of products classified in 4th and 5th TT (high and medium-high technologies). The fourth component (one indicator) characterizes economic performance in a region: (11) labor productivity (gross regional product (GRP) per employee), UAH.The methodology has the following peculiarities:

1. Measurement of the innovation process indicators normalized as employment number and population number in a region allows for comparing the efficiency of the innovation-driven economic development in regions with varying numbers of population.

2. Innovativity indexes for each innovation process indicator are calculated as a share in the average value of each indicator in Ukraine, taken as 1.

3. Use of indicators of exports of products classified in 4th and 5th TT to evaluate the innovation-driven economic development in a region enables for performance evaluation at enterprise (organization) level, and at advanced high efficiency enter-prises manufacturing high tech products.

A follows from the methodology, higher than average innovativity indexes derived for selected indicators are an indication of advantages in the innovation process in a region in relation to other regions, whereas lower than average innovativity indexes are an indica-tion of weaknesses and difficulties in the innovation process in a region.The elaborated methodology is used by the author to evaluate the innovation-driven eco-nomic development in Lugansk region, which stand out of the other Ukrainian regions by noticeable industrial capabilities covering a range of industrial sectors dominated by heavy industries, with fuel and energy complex, with the central role of mining, taking the lead. Other industries found in the region include mechanical engineering, chemical products, oil refinery, food and beverages, wood and products made thereof, textile. The

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region has a noticeable number of R&D organizations and HEEs. The regional population as of 01.01.2013 was 2,256,500 people. The largest cities in the region are Lugansk, Kras-ny Luch, Severodonetsk, Lisichansk, Alchevsk, Stakhanov. The investment attractiveness in the region is rather high when compared with other Ukrainian regions. Thus, direct foreign investment in the Lugansk economy as of 31.12.2012 amounted to 838.5 million USD, with 12th position in the country [4], and 155 million USD in the earlier half of 2013, being 10% higher than in the analogous period of 2012.Measures of Gross Regional Product (GRP), R&D financing, overall spending on inno-vation and sales of industrial innovative products for Lugansk region in 2006–2011 are shown in Table 1.GRP in Lugansk region in 2011 amounted to 57202 million UAH (in current prices) and exceeded GRP in 2006 by 2.37, or 24159 million UAH. In 2008–2006, GRP grew by 1.78. In 2009, in the conditions of financial and economic crisis, it amounted to 38451 million UAH, which was 10.5 percent lower than in the previous year. In 2009–2011, GRP grew by 1.49. Regional employment in 2011 was 1002.2 thousand, which is 5.16 percent lower than in 2006. A key indicator of the innovation-driven economic development is scopes and tendencies of R&D and its utilization for economic purposes. In 2011, overall R&D financing in Lugansk region amounted to 161790.7 thousand UAH, or 1.69% of the total R&D financing in Ukraine (9591349.5 thousand UAH). The main sources of R&D financ-ing in Lugansk region were central budget (14.52% of the total financing), internal funds (21.44%), funds of domestic customers (24.22%), funds from abroad (38.19%), funds of local budgets and special purpose funds (0.95%). Basically, change in R&D financing in 2006–2011 in the region corresponds with the dynamics of change in GRP (with the posi-tive coefficient of correlation between the two variables being 0.98).In 2011, the total financing of innovation in Lugansk region was 167.05 million UAH, or 1.68% of the total financing of innovation in Ukraine (14333.89 million UAH). Its sources were as follows: internal funds – 66.95%; central budget, local budgets and off-budget funds – 1.33%; funds of domestic investors – 9.78%; funds of foreign investors – 0%; loans – 21.94%; other sources – 0%. This distribution is noticeably different from the distribu-tion of innovation financing in 2011 in Ukraine, with the share of financing from internal funds amounting to 59.2%, and the share of loans – 38.3%.In 2006, the total financing of innovation in Lugansk region was 96.92 million UAH, or 1.57% of the total financing of innovation in Ukraine (6159.95 million UAH, a major share of financing being internal funds (52.54%, against 84.6% in Ukraine), foreign inves-tors (30.48%, against 2.86% in Ukraine), loans (15.82%).Comprehensive information about tendencies in R&D financing and innovation spend-ing can be derived from comparisons made in current and constant prices (with use of GDP deflator) [5], to eliminate inflation effects for change in prices on commodities and services in the analyzed period (see Table 1).As follows from the estimates in Table 1, while R&D financing in Lugansk region in 2012, measured in current prices, grew by 2.23 against 2006, the growth measured in constant prices of 2005 was only 1.13. When innovation spending is compared in comparable pric-es, the picture is even more negative. The year of 2011, compared with 2006, marked the decline in innovation spending by 1.37, first and foremost due to rapid decline in spend-ing in 2011, amounting to only 61.3 million UAH in constant prices of 2005. Evaluation of R&D and innovation spending as well as decision-making regarding innovation in a

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region should rest upon a central thesis from Oslo Manual, that the smaller amount of re-sources is allocated in innovation in macro system, the deeper is the decline in innovation capacities at enterprises within this system [6]. If measured by innovation activity, the industry of Lugansk region lagged behind other Ukrainian regions in 2006–2011. The share of innovating enterprises in the region was 13.5% (of 505 surveyed enterprises) in 2011, 11.2% (of 529 surveyed enterprises) in 2010, and 7.4% (of 609 surveyed enterprises) in 2006, against the respective shares for the Ukrainian industry being 16.2%, 13.8%, and 7.9% (see Table 1). Although analysis of time series on innovation performance at industrial enterprises, meas-ured by number of introduced new technological processes and number of manufactured innovative products, shows a minor increase in these categories of innovations in 2011 com-pared with 2006, the figures failed to reach the ones in the pre-crisis year of 2008 (see Table 1).

Table 1: Selected indicators of the innovation-driven development in Lugansk region2006 2007 2008 2009 2010 2011

R&D financing, million UAH (current prices) 69.7 84.7 118.0 98.1 121.1 161.8

R&D financing, million UAH (constant prices of 2005) 60.5 59.7 64.6 53.7 58.5 68.7

Total spending on innovation, million UAH (current prices) 96.9 1343.4 2178.9 111.1 243.1 167.1

Total spending on innovation, million UAH (constant prices of 2005)

84.1 947.4 1192.6 53.6 103.2 61.3

Share of innovating industrial enterprises, % 7.4 11.3 10.2 9.9 11.2 13.5

Number of introduced new technological processes 19.0 52.5 42.1 13.6 28.6 42.9

Number of manufactured innovative products 31.3 31.9 47.7 30.2 38.4 34.9

Number of developed high technologies - - - - 30.5 1.0

Number of exploited high technologies with the period of introduction from 1 to 5 years

- - - - 255.1 334.3

Sales of innovative products, million UAH 3848.9 7720.3 12393.3 6158.0 6749.8 2508.9

Exports of innovative products, million UAH 2257.3 3512.9 9102.7 2930.1 2393.6 911.9

Employment, thousand persons 1054.6 1066.7 1068.8 1026.2 1015.4 1002.2Labor productivity (GRP per employee), UAH 22908 30262 40218 37469 44850 57076

GRP, million UAH 24159 32280 42985 38451 45541 57202Source: data from the State Statistics Service of Ukraine [7].

Also, statistical data on high technologies (advanced production technologies) and their ex-ploitation in the region are used to evaluate the innovation-driven economic development.

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Statistics of high technologies allows for conclusion about the contribution of the regional R&D capacities in the economic development, utilization of R&D results in new tech-nological processes etc. Nearly thrice fold decline in the number of high technologies developed in Lugansk region in 2011 compared with 2010 is an evidence of the decreasing performance of R&D capacities, which may be caused by the reduced financing of innova-tion in 2011. Still, the increased number of high technologies exploited in the region in 2011 compared with the previous year is a very positive sign. According to official statistical reports, the analyzed period features noticeable change in the shipment of innovative products by the regional industry. In 2011, sales of innovative produces amounted to 2508.9 million UAH, or 5.92% of the Ukrainian total, and only 2.7 % in the total sales of industrial products in Lugansk region, which is lower than the analogous figure for Ukraine (3.8%). The author believes that the industrial performance in the region, measured by exports of products classified in 4th and 5th TT and their shares in the total regional exports, has to be central to evaluation of the innovation-driven economic development in a region. Indicators measured by the author with reference to recommendations [8] on harmonization of technologies’ classification by methodology adopted in the OECD for manufacturing industries, and use of data from the State Statis-tics Committee of Ukraine in TT context, are shown in Table 2.

Table 2: Indicators of exports of products classified in 4th and 5th TT from Lugansk region

Year

4th TT 5th TT 4th and 5th taken together

Amount, million

USD

Share in regional

exports, %

Amount, million

USD

Share in regional

exports, %

Amount, million

USD

Share in regional

exports, %2006 585.67 19.5 31.4 1 617.07 20.52007 922.07 23.3 37.21 0.9 959.28 24.22008 1315.6 20.7 36.38 0.6 1351.98 21.32009 450.74 23.9 22.57 1.2 473.32 25.12010 978.81 29.4 27.49 0.8 1006.3 30.32011 1442.22 22.2 4.,43 0.7 1484.65 22.8

Source: derived by the author on the basis of data from the State Statistics Service of Ukraine

As can be seen from the figures in Table 2, due to the financial and economic crisis of 2009 exports of products in 4th TT amounted to 450.74 million USD, falling down by 2.92 com-pared with 2008. Still, the share of products in 4th TT grew up to 23.9% in the total exports in 2009. The period of 2010–2011 marked the increasing exports of products in 4th TT, but their share in the total regional exports fell to 22.2% in 2011, due to a slight growth in the exports of low and medium-low technologies. Analysis of the time series on regional exports of products in 5th TT shows that in spite of their slightly increased exports up to 42.43 million USD in 2011, their share in the total regional exports fell to 0.7. Also, normalization of the selected indicators as employment

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number or population number was made in accordance with the method, with calculating index of the innovation-driven economic development in the region as arithmetic average for the group of innovativity indexes, for each year. The results are given in Table 3.As can be seen from Table 3, Lugansk region leads Ukraine by the selected innovativity in-dexes that are higher than the innovativity average for Ukraine. Yet, the region lags behind Ukraine by innovativity indexes 1 to 7 and 11.Estimations of integral index of the innovation-driven economic development in Lugansk region show its slight increase in 2010 compared with 2009; economic aggravation in the region, which followed in 2011, led to a its noticeable decline (by 1.69) compared with 2010.

Table 3: Innovativity indexes for the economy of Lugansk region, 2006–2011Indicator 2006 2007 2008 2009 2010 20111. R&D financing, per 10,000 employees 0.265 0.27 0.289 0.247 0.269 0.3422. Total spending on innovation, per 10,000 employees 0.309 2.433 3.565 0.275 0.603 0.236

3. Number of introduced new technological processes, per 1,000,000 employees

0.344 0.773 0.536 0.145 0.284 0.347

4. Number of manufactured innovative products, per 1,000,000 employees 0.269 0.264 0.409 0.227 0.323 0.219

5. Number of developed high technologies, per 1,000,000 employees 1.64 0.5

6. Number of exploited high technologies with introduction period from 1 to 5 years, per 1,000,000 employees

0.828 0.9

7. Share of innovating industrial enterprises 0.661 0.796 0.785 0.773 0.812 0.833

8. Sales of innovative products, per 10,000 persons 2.433 3.772 5.338 3.886 3.992 1.186

9. Exports of innovative products, per 10,000 persons 3.445 4.703 7.603 4.403 3.479 1.446

10. Exports of products classified in 4th and 5th TT, per 10,000 persons 1.484 1.607 1.827 1.087 1.734 1.875

11. Labor productivity (GRP per employee) 0.873 0.878 0.89 0.828 0.84 0.891

12. Index of the innovation-driven economic development (without indicators 6 and 7)

1.120 1.722 2.360 1.319 1.371 0.819

13. Index of the innovation-driven economic development (with indicators 6 and 7)

1.346 0.798

Source: derived by the author on the basis of data from the State Statistics Service of Ukraine

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This tendency can be explained by noticeably declined innovativity indexes in Lugansk region in 2011 for several indicators: total spending on innovation, per 10,000 employees; sales of innovative products, per 10,000 persons and exports of innovative products, per 10,000 persons. The highest index of the innovation-driven economic development in Lugansk region was derived for 2007 and 2008, due to high innovativity indexes for 8th and 9th indicators on innovation, which is caused by the established conjuncture, local (regional) and global demand for locally manufactured products, and by the increasing spending on innovation per 10,000 employees. Considering the results from the study, primary dimensions for intensification of the innovation-driven economic development in Lugansk region, should be: revision of the regional innovation policy through prioritizing the sustained growth in the output in 5th and 6th TT, as a core factor behind significant restructuring of the regional economy and enhancing the competitiveness at both regional and country level; building up innova-tion infrastructure as a mix of cross-linked and interacting organizations, associations and other entities contributing to the innovation efficiency; development of tools to stimulate innovation processes in low-tech industries and other economic sectors, and to enhance the innovative focus in research institutions and HEEs; fostering of favorable innovation climate, to promote innovation projects and programs in the region, and secure their sup-port from central and local authorities and the public.

2. CONCLUSIONS

1. The elaborated method and its application for the study of the innovation-driven eco-nomic development in Lugansk region in 2006–2011 show that the method allows for detailed by year analysis of the dynamics of index of innovation-driven economic devel-opment, with identifying advantages and weaknesses in the economic development of the region.2. The primary dimensions in intensification of the innovation-driven economic develop-ment in Lugansk region are formulated.

REFERENCES

[1.] Bubenko, P.G. (2002) Rehionalni aspekty innovatsiinoho rozvytku [Regional Aspects of the Innovation-Driven Development]. Kharkiv: National Technical University “KPI” [in Ukrainian].

[2.] Lazareva, Ye. (2009) Doslidzennia zakonomirnostey innovatsiinykh peretvoren u rehionalnii ekonomitsi [Study of Tendencies of Innovation-Driven Transformations in Regional Economy]. Ekonomist [Economist], 9, 35–37 [in Ukrainian].

[3.] Denisyuk, V. (2006) Metodolohiia otsinky ta analizu dynamiky innovatsiinoi aktyvnosti promuslovosti rehionu [Methoodology for Evaluation and Analysis of the Dynamics of Innovation Activity in a Region]. Ekonomist [Economist], 3, 40–43 [in Ukrainian].

[4.] Investytsiiny atlas Ukrainy 2013. Derzhavne ahentstvo z investytsii ta upravlinnia natsionalnymy proektamy Ukrainy [Investment Map of Ukraine. Ukrainian State Agency on Investment and Management of National Projects]. Retrieved from: http:/www.pwc.com/ua [in Ukrainian].

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[5.] Bulkin, I. A., Denisyuk, V. A. (2013) Finansirovaniye innovatsyonnoi deyatelnosti v promyshlennosti Ukrainy [Financing of Innovation in the Ukrainian Industry]. Nauka i innovatsii [Science and Innovation], 9 (127), 33–37 [in Russian].

[6.] Oslo Manual. Proposed Guidelines for Collecting and Interpreting Technological Innovation Data (2009) OECD and Eurostat, 2009. Kyiv: Ukrainian Institute for Science & Technology and Economic Information, 162 [Ukrainian edition].

[7.] Naukova ta innovatsiina diyalnist v Ukraini. Statystychny zbirnyk [Research and Innovation Activities in Ukraine. Statistical Book] (2012). State Statistics Service of Ukraine. Kyiv, 248–278 [in Ukrainian].

[8.] Bazhal, Yu. M. (2011) Stratehichny analiz mozhlyvostei formuvannia v Ukraini ekonomiky novogo sotsialno-tekhnolohichnoho ukladu [Strategic Analysis of Feasibilities for Building up the Economy in Ukraine, Based on New Socio-Economic Tenor]. L. I. Fedulova (Ed.) Technolohichny imperatyv stratehii sotsialno-ekonomichnoho rozvytku Ukrainy [Technological Imperative for the Socio-Economic Development Strategy in Ukraine]. Kyiv: National Academy of Sciences of Ukraine, Institute for Economics and Forecasting, 203–244 [in Ukrainian].

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HUMAN RESOURCES AS COMPETITIVE...Dragić M., Kastratović E., Anđelković A.

HUMAN RESOURCES AS COMPETITIVE ADVANTAGE FACTOR OF AN ORGANIZATION

Dragić MilanFaculty of Business Economy and Entrepreneurship, Belgrade, Serbia

[email protected]ć Edita

Faculty of Business Economy and Entrepreneurship, Belgrade, SerbiaAnđelković Aleksandar

Faculty of Business Studies and Law, Belgrade, Serbia

Abstract: Human resources, in addition to raw materials and instruments of labor, are an essential element of the work. The success of the organization is caused by the recruitment of talented people who will directed their skills, knowledge, and energy towards innovation and competitiveness of the organization. The expertise of the individual or group within the company is a specific competitive ability, whose importance is increasingly coming to the fore in a modern society and a market economy.

Keywords: human resources, strategy, organization, competition

1. INTRODUCTION

Human resources, in addition to raw materials and instruments of labor, are an essential element of the work. Technological advances have contributed to the growth of the mod-ern machines and robots in the production process but human creativity is the main asset and the most important factor in the growth and development of a company. Instead of technical and conceptual factor, increasing importance pays to the behaviorist approach to management. Human resources have become the most important factor in business while personnel management is considered the most important for the success of a company.

HARD SOFT – transition from hard to soft dimension of a company

The success of the organization is caused by the recruitment of talented people who will direct their skills, knowledge and energy towards innovation and competitiveness of the organization.While 20th century was characterized by material values and resources such as money, land, equipment, and intangible value (brand image, customer loyalty), the basic resource of the 21st century is knowledge. In developed economies, 50% of GDP is based on knowl-edge i.e. intellectual property and expertise of people.1

1 Dess et al. Strategijski menadžment, (Beograd: Data status, 2007), 124

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2. STRATEGY AND COMPETITIVENESS

Strategy is the science and art to set out the main point of attack to any kind of action, in order to achieve goal and success. Strategic management is a series of managerial deci-sions and actions that determine the long-term business performance.2 Strategic planning is the process for implementing and updating the strategy when the need arises.3 Organi-zations in terms of changing circumstances on the modern markets need to recognize the importance of equal access to the organizational strategy and human resources strategy.Several models define the relationship between organizational strategy and human re-sources strategy:

• Separationmodel–thereisnocorrelationbetweenorganizationalstrategyandhu-man resources

• Fitmodel–highlightsthegrowingunderstandingontheimportanceofthepeoplethemselves in achieving organizational strategy

• Dialoguemodel–recognizetheneedformutualcommunicationandsomekindofa debate

• Holisticmodel– thepeople in theorganizationareviewedasakeycompetitiveadvantage and not as a „tool” for the implementation of organizational strategy

• Humanresourcesbasedmodel–humanresourcestrategyisseenasadefaultone

Competitive advantage is what sets an organization apart. The organization has a competi-tive advantage if it is doing something that other organizations are unable to do so, or does so better than others do.4

A strong lobby advocates a position on which the competitive advantage in the job is rather the human potential than the availability of capital or the use of technology.The importance of human resources as a factor of competitiveness can be seen in the rela-tionship between market and book values of modern organizations. In companies where the knowledge and knowledge management are important participants in the develop-ment of products and services and physical resources less important, the market/book value ratio tends to be much higher.5

The intellectual capital = Market value of a company – book value of a companyExperienced and capable workers, talented staff in key areas, superior knowledge and in-tellectual capital, collective knowledge, managerial knows-how, are potential power that each organization strives to achieve.6

The expertise of an individual or a group within the company is a specific competitive ability whose importance is increasingly coming to the fore in a modern society and a market economy.There are many forms of expertise:

•Competence–anaccumulationoflearningandskillsdevelopmentinperforminginternal activities

2 Robbins Stephen. and Coulter Mary, Menadžment, (Beograd: Data status, 2005), 1803 Kastratović Edita, Uvod u menadžment, (Beograd: Fakultet za menadžment u sportu Univerziteta

„Braća Karić”, 2008)4 Coulter Mary, Strategijski menadžment, (Beograd: Data status, 2010), 2015 Dess et al. Strategijski menadžment, 1266 Thompson. A. Arthur et al. Strateški menadžment, (Zagreb: Mate, 2008), 90

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•Corecompetence–asuccessfullyperformedinternalactivitythatisattheheartofstrategy and competitiveness of a company. A valuable force of expertise because it has a central role in the strategy of a company and contributes to the success of the market.

•Thedistinctivecompetence–competitivevaluableactivitythatacompanyperformsbetter than its competitors. It is competitively superior resource strength.7

The highest priority of building organizations in the implementation process is the need for building and strengthening the competitiveness of valuable fundamental skills and organizational skills.There are three stages in the process of developing and strengthening the skills and abili-ties:Phase 1 – The organization must develop the ability regardless of any initial imperfection or inefficiency.Phase 2 – Experience grows, the company’s staff learns how to run activities consistently successful at an acceptable cost. The ability develops into the expertise.Phase 3 – If the organization continues to refining its know -how with the increased per-formance, while becoming better than competitors, then the fundamental skills rise to the level of recognized competence.8

The importance of human resources as a factor of competitive advantage reflects in the fact that the company’s reputation, the trust of employees, teamwork and organizational culture can hardly be imitated and substituted. This fact leads to the conclusion about the importance of human resources and their role in the phenomena listed above. Organiza-tions need resources that are difficult to imitate or substitute.9

Successful organizations must systematically approach to quality human resources as the most important resource. One can achieve this only if complying with the complex ap-proach that involves three vital processes:

• Attractinghumancapital• Developmentofhumancapital• Preservationofhumancapital10

Organizations need to pay equal attention to each of these processes in order to build a solid foundation as a guarantee of competitiveness in the brutal market game.

7 Thompson et al. Strateški menadžment, 90-91.8 Thompson et al. Strateški menadžment, 325.9 Coulter, Strategijski menadžment, 46.10 Dess et al. Strategijski menadžment, 128.

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Figure 1: HRM processes in terms of human capital

The importance of attracting and developing high-quality human resource is reflected in the fact that quality personnel have the ability to recognize the importance of continu-ous learning and rapid adjustment to changing market conditions. Attracting high quality staff, the organization becomes flexible and the staff identifies with new ideas and mutu-ally sharing visions accepting new changes.11

The attitude of the organization on ethical issues can often be criticized in terms of the ethical basis. The inevitability of rapid changes in the global marketplace affect managers regarding the made decisions, which may result in a reduction of interest of one part of employers in terms of business ethics.12

Taking into account theoretical and practical scope of human resources, there is a diversi-fication in terms of approach in this regard. Managers have different views regarding the importance of having human factors in relation to the business (organizational) strategy.There are three theoretical approaches to the strategic human resource management:

• Universalaccess–assumethatthehighlevelachievementmodelisincorrelationwith a high level of an organizational activity in all contexts, regardless of the com-petitive strategy of the organization.

• Accessbasedonintegrationoropportunities–basedontwobasicformsofintegra-tion: external (strategic HRM integrates into the requirements of the business strat-egy) and internal integration (all policies and activities of the HRM integrate mutu-ally making a coherent entirety, mutually supportive and consistently applied).

11 Kopilović Radmila, „The learning organization”, International journal of economics and law, Vol 1, No 2, (2011):75

12 Marković, A., Marković, Lj., „New trends in human resources management”, International journal of economics and law, Vol 1, No 1, (2011):75

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• Theapproachbasedonresources–referstotheformationofconnectionsbetweeninternal resources, strategy and performance. This approach emphasizes the impor-tance of human capital as a competitive advantage.13

3. RESUME

The market economy of modern society does not forgive. The most successful organiza-tions survive those organizations that have clearly observed a strategic approach, identi-fied their strengths and weaknesses on one side, and their chances and threats from the other side.The importance of human resources can be viewed from two angles. High quality per-sonnel are capable of defining and implementing an adequate strategy in the situation in which the organization is. They are able to give their best to the organization in order to be competitive in all dimensions. High quality staff contributes to the competitiveness of the organization in terms of creative ideas and solutions that are directly implemented in the production process or the provision of services (depending on the activities of the organization).High quality human staff is of crucial importance for the success of an organization, so the human resources management is the process with the most important task – to attract, develop, and maintain (retain) high quality human staff.

REFERENCES

[1] Coulter M. Strategijski menadžment, Beograd: Data status, 2010.[2] Dess et al. Strategijski menadžment, Beograd: Data status, 2007.[3] Kastratović, E. Uvod u menadžment, Beograd: Fakultet za menadžment u sportu

Univerziteta „Braća Karić”, 2008.[4] Kopilović Radmila, „The learning organization”, International journal of economics

and law, Vol 1, No 2, (2011):75[5] Marković, A., Marković, Lj., „New trends in human resources management”,

International journal of economics and law, Vol 1, No 1, (2011):75[6] Robins, S. i Coulter, M., Menadžment, Beograd: Data status, 2005.[7] Thompson. A. A. et al. Strateški menadžment, Zagreb: Mate, 2008.[8] Torrington D. et al. Menadžment ljudskih resursa, Beograd: Data status, 2004.

13 Torrington Derek et al. Menadžment ljudskih resursa, (Beograd: Data status, 2004), 34-43

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IMPLEMENTATION OF ADVANCED ANALYTICS IN CONSUMER-FACING COMPANIES

Gijić NebojšaFaculty of Business Studies and Law, Belgrade, Serbia

[email protected]ć Vladana

Faculty of Business Studies and Law, Belgrade, SerbiaJović-Bogdanović Adriana


Abstract: Companies that are actually run by the market recognize the need to constantly be informed about what is happening in the market. Customer needs are ever-changing, often in ways not easily comprehended. The goal of advanced analytics is to benefit the companies and their customers. The company acquires knowledge about the needs and behavior of customers in order to better meet their needs. In this way, companies can build a profile of the needs of the customer. Companies that are re-lated to consumers are required to collect and manage data, to apply analytics that brings both insight and translation of those insights into effective combat operations.

Keywords: management, marketing, companies, analytics, consumers.

1. INTRODUCTION

Market conditions for companies with trade as main activity are daily becoming more complex. Since there are numerous changes in the market, from day to day, it is necessary to find such a business approach that will adequately respond to new changes.The increased complexity of operations occurs as a result of globalization, increased com-petition, rapid technological development, the constant market changes, geographic and demographic change, rapid product development, reduced product life cycle, increasing the amount of information, a higher level of quality products and services, more stringent environmental conditions, daily variation impact on sales, etc. There is no general and ready-made solution, and finding the right solution to changing conditions is a major challenge and a unique way for management of companies to show their creativity and the correct orientation when collecting real data and finding appropriate models for best possible way of implementation.One of the main features brought by new technological opportunities is the growing pres-ence of ‘on-line’ purchase.In a time where the job we do, whether we are top managers in some companies, workers who perform physical work or simply administrative workers engaged in the practices or

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IMPLEMENTATION OF ADVANCED ANALYTICS...Gijić N., Lilić V., Jović-Bogdanović A.

paperwork, takes much too much time and energy, we are on the other hand being offered many opportunities for ‘purchase from chair’ that relieve us of many grueling rounds of retail chains and where we get to your home what you choose; many people do choose ‘on line’ purchase, or even sightseeing and selection via the web site trading companies. Visiting certain websites, leaving comments and criticism, sharing experiences with other consumers, and generally all the activities that consumers make during the visit of a cer-tain web pages constitute endless source of data, which can, with innovative approaches and finding adequate processing model, lead to invaluable information about where and how to invest in order for sellers to improve their sales.Consumer-oriented companies must be able to capture and manage specific data, apply analysis that generate insights into the matter and translate the same analysis in an effec-tive action plan. Retailers and companies that sell products in bulk (CPG), at relatively low cost, have long had access to large amounts of transaction data of your target market. Every day, companies collect pieces of information about each product which has been marketed, sold or withdrawn from sale at any reseller site, as part of the reseller network of related companies. Further, companies are using sophisticated techniques of market research in order to respond to a series of questions such as: Which products should be developed? Which products should have their prices reduced, and when? Which market-ing channels will allow easier access to consumers?In addition to highly valuable information about consumer society and the results of the market analysis, consumer-oriented companies now have access to the information from social networks and other large amounts of data known as ‘macro information.’ This ar-ticle discusses the potential of macro information and advanced analysis of the retail and consumer-oriented companies, and examines the conditions that must be achieved for potential of macro information to be converted into actual market value.

2. POSSIBILITIES FOR ADVANCED ANALYTICS

Retailers need to respond quickly to market changes, to have the capacity for efficient pro-duction, to use supply chain that is ready for a quick response to the latest fashion items could supply the mass market. Stores like H & M, Zara, Mango and Benetton show a re-markable ability to respond to market needs in relation to fashion. These retailers are able to, within short few weeks, offer fashion designs for which there is great demand, which is a step forward compared to the previous practice where the fashion industry used to wait from six months to one year to mass produce these items.1

The company operates in conditions where they have to monitor and respond to competi-tive promotions, price changes and still be able to launch innovative products and expand product lines. Due to the simultaneous production and consumption of services person-nel has a major impact on customer perception of service quality.2 In order for employees to be able to assess the needs of customers, it is necessary to establish standards that will improve the quality of services. Managers hold an important role in standard making. The winner is the manager who achieves the highest number of services and the highest profit.

1 Jobber D., Fahy J., 2006., Osnovi marketinga, Beograd, Data status, 332.2 Rafiq M., Ahmed P., 1992., The Marketing Mix Reconsidered, Salforg, Proceeding of the Annual

Conference of the Marketing Eduction Group, 51.

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The real challenge comes when investing and making business network in order to ‘kill’ competition.3

The combination of macro information and advanced analysis makes a number of sig-nificant opportunities for consumer-oriented companies throughout the consumer chain. Taking, for example, the process of developing a new product, companies can now get a detailed analysis of user needs and can easily identify different consumer segments. Re-turn on this investment can be easily measured in a variety of marketing campaigns, from the traditional to the newer ones (social media). This approach makes it easier to transfer investment funds from less successful into highly effective marketing channels. Through detailed analysis on an hourly and daily basis, retail trade can very effectively increase sales, provide better experience during your purchase to your customers and bring in more revenue, both for themselves and their wholesale partners.Macro information and advanced analysis enable companies to make faster and better decisions in their daily operations. European wholesale companies had revolutionized their retail offer and plans through the implementation of advanced analysis on the basis of the information about the target market and the average consumer. This approach had provided the sales growth of 10% in categories of small growth. The potential is not ex-clusively in sales growth. A recently conducted study by McKinsey and the Massachusetts Institute of Technology shows that companies that use macro information and analysis as part of the operation, surpass their competition by 5% in productivity and 6% in profita-bility.4

3. HOW TO REACH THE GOAL: THREE STEPS

Fully usable information and analysis must fulfill three conditions.5 First, companies need to choose the right information and be able to manage information from various sources. Second, companies must be able to build complex models that will transform the data into models. The third and most important step is: management must undertake transforma-tional change program that will result in a translation model of feasible actions.1. As they prepare to take part in the collection and analysis of data, companies need to an-swer one question: which decisions should be improved, upgraded and strengthened. To begin with, retailers should implement better decisions in the sphere of promotion spend-ing. Range of decisions that need to be perfected can be very broad: do we want to refine the design (number of pages, number of products on one page) leaflets and brochures? Do we want to perfect distribution of promotional material – what printing press to use, to which address should they be provided, etc.? Maybe we should do a new list of products to be found in the brochures? Each decision in connection with some of the questions above requires a separate set of information and analysis of the same.

3 Radosavljević Ž., Tomić R. 2007., Menadžment u modernom biznisu, Privredna Akademija, Novi Sad, 268.

4 Brynjolfsson Eric, McAfee Andrew 2012., Big data: The management revolution, Boston, Harvard Bussines Review, October 2012., Vol. 90, no.10, 61-67.

5 Breuer Peter, Moulton Jessica, and Turtle Robert 2013., Applying advanced analytics in consumer companies, McKinsey Quarterly, May 2013., http://www.mckinsey.com/insights/consumer_and_retail/applying_advanced_analytics_in_consumer_companies.

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When decisions that need to be improved had been reached, companies must collect and process the information needed in order to conduct a detailed and comprehensive analy-sis. Experience teaches us that such a process entails three complex actions: integrate in-formation sources, define data management and establishment of IT infrastructure.Aggregation of information sources. We often encounter cases where a company has all the information needed for further progress and development of the business, but differ-ent important blocks of information are in the possession of different operating centers, i.e. departments within the company. These organizational tanks ‘hide’ information from analysts who want to use them. Take for example a specialist who is trying to do a redesign of promotional email that is sent to a list of 5 million members who took part in a loyalty-card program. While the program itself is extremely successful, revenue and profit are absent. The expert recognized that combining data of different functional groups we can obtain smaller, more targeted segments of members, and understand what types of direct mails result in the highest profit.Once you understand what data are needed, it is necessary to develop a process for ex-tracting and filtering data, and then re-assemble those for the purpose of exploitation, now fully adapted to the situation.Defining data management. Given the huge amount of data that companies collect and dispose of, the accuracy and reliability of information is a constant challenge. Product information – such as packet size or even a description of the category of the product – are not always accurate and fully actualized within the company database. In case of imprecise obsolete data analysis result will always be unsatisfying and unusable. Instead of collecting readily available information and storing them in the condition in which they had been collected, it is necessary to establish rigorous standards of data management that dictate continuous collection of data to be stored in the ready stage to perform the analysis.Establishing IT infrastructure. Company needs IT infrastructure in order to store, access, combine and analyze large amounts of information. Establishment of IT infrastructure re-quires close cooperation between managers, analysts and IT staff in order for data storage to meet the needs of all three of the aforementioned departments.2. Companies must be prepared for a huge influx of data in a short period of time – a task that often requires sophisticated and sometimes very complex analytical models. First, the employees must be actively involved in the development of a model; they must under-stand analytics and ensure that the model does show the desired results. Second, model approach should be directed at the simplest model that will give the desired results The power of the approach by two mentioned steps can easily be seen in the wholesale compa-nies that seek to increase their return on investment in marketing.A recent case speaks of a certain associate to the company who had independently built a model based on paid advertising, or purchase online traffic, with the aim of increasing the return on investment in the field of online marketing. The employees in the company were surprised by the extremely high results, although they were not familiar with the model. Later on, the company developed its own simplified model. The results were clearly weaker: the new model had shown 15 times smaller return on investment than the model used by the external expert. Further analysis shows that one of the analysts employed in the company mistakenly grouped data, while the complexity of the model used initially hampered the analysis of the problem and timely identification of errors.

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3. Collecting data and developing models alone will not bring results, unless the company translates transparent models into feasible actions in the market. Companies must define a whole set of new processes that are easy to understand, both for workers on the market and management.6

When implementing a new system of supplying goods in a certain famous wholesale cent-er, there appeared lack of confidence in management system that has been developed with the aim of predicting moments bargains. The system kept regularly sending retail centers stock of goods to avoid stagnation of traffic due to the discharge of stocks in warehouses. Since they did not know the way the system worked, it had been months until the com-pany’s management began to trust the system to predict demand. Until this moment, the management had been manually performing the same action as the system, reducing the productivity of the company by 100% in a given sector.

4. THE NEW WAY OF UNDERSTANDING THE ONLINE CUSTOMER

Companies that are in constant and direct contact with the final consumers need to un-derstand the operation of the website and how well their web sites linked to the web enti-ties affects the (non)-purchase of their products. In this case interesting web entities are the blogs and websites that are based on positive or negative criticisms of users. These sites are also known as review sites.In recent years behavior of some 11,000 online users had been followed in the territory of the United States.7 All sites visited by the users had been recorded during the period of 6 months, i.e. for the duration of the study. When a number of users click on any of the two sites within the specified period, it is considered that the pairs are connected. All such pairs had been collected for the by companies, information centers and other stakeholders in a given industry.The links in the network map had been presented, which allow us to distinguish between different network segments at a granular level. The number of nodes and the length of the lines reflect the power of the network. Short lines indicate strong relationships while long lines are weak. The strong connectivity means significant overlap in visitors of these sites, which means that the site that influenced the user was operated on real user traffic site that is part of the same network, but users do not go there directly from the site which influ-ences the user. Therefore, it is enough to be part of the network.

Example: Seller A has two strong links with sites that influence users (blog, website re-views), while his competitors, vendors B and C, have far more connections. The number of nodes and the length of the lines reflect the power of the network. Short lines indicate strong relationships while long lines are weak. There is a map of the network that contains 5 online retailers of commercial electronics. Visitors of these sites are likely to visit the sites for reviews of specific parts of the technology, media sites, news from the world of technology, etc. Vendor A has two strong ties, while his competitors for B and C have a

6 Gijić Nebojša, Lilić Vladana, Đuretić Gordana 2013, „The importance of small wins“, International Journal of Economics and Law, Vol. 3, No. 7 (2013), Beograd, FPSP, 40.

7 Kroell Frank, Schaff Rachel, and Zimmermann Stephan 2013., Unraveling the Web: A new way to understand the online customer, McKinsey Quarterly, May 2013., http://www.mckinsey.com/insights/consumer_and_retail/applying_advanced_analytics_in_consumer_companies.

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much larger number of them. It is clear that A can strengthen his ties, increase traffic and therefore sales, by investing in creative partnerships, social media and online advertising.

Standards for data management require that clean, consistent data be collected and stored ready for analysis. Access can be very similar to the way a seller manages and maintains his store, they have a procedure and on the spot checks to ensure that the property is prop-erly cleaned, well-designed and periodically renovated to maintain its useful existence. In the same way, the standards of data management should define what data should be col-lected, the process of checking and maintaining data, and whose responsibility it is within the company for each data packet.Companies need IT infrastructure in order to store, easily approach, combine and analyze vast datasets. Establishment of IT infrastructure requires close collaboration among busi-ness managers, analysts, IT staff to ensure data storage is designed in a way that meets business needs and technical requirements of IT.8

Companies must, within their next step, feel the flow of data – this is a task that requires sophisticated and sometimes very complex methods of analysis. Two principles of man-agement can be helpful. First, business users should be involved in the process of building the model; they must understand the analysis and ensure that the model gives concrete results. Second, model approach should aim to reach the least complex model that pro-vides the necessary insights.Collecting the right data and the development of transparent model will make an impact if the company’s insights, created using data from, become effective, first-line activities. Companies must define new processes in a way that managers and workers in the front line understand and adopt.9

8 Lazarević Petrović S., Lazarević M., Simić Antonijević D., 2013., „Innovations in application of information Systems in business“, International Journal of Economics and Law, Vol. 3, No. 7 (2013), Beograd, FPSP, 102.

9 Radosavljević Života, Soloviov P. Viacheslav, Panagopolus Alexios 2012., „Modern technology application in economics and management“, International journal of economics and law, Vol. 2, No. 4 (2012), Beograd, FPSP, 109.

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5. CONCLUSION

Nowadays organizations have huge amounts of data that is constantly increasing. To obtain meaningful, relevant information we must effectively and efficiently manage the data. For this purpose appropriate knowledge is necessary. Proper and timely information gained is the main weapon in monitoring and predicting the situation on the market, and the understanding and analysis of business trends. The quality of the decision depends on the quality of available information and its timely submission upon manager’s request. The emphasis here is on the best strategic decision-making, based on a full understand-ing of the data. The process of making strategic and other business plans do not end with creating a plan. Today, plans should be adaptable and flexible for they have to deal with changing dynamics of the business environment, changing market trends and constantly changing competitive environment.In the process of creating interactive communication the leading role belongs to market research that makes it possible to observe the requirements of the market in order to improve competitiveness, boost performance, and maximize the profit of the company. On-line technology enables a totally new approach to market research, together with the possibility of conducting research via the Internet. Through continuous development of on-line technology a positive impact on market research is achieved, in view of the fact that the marketers (researchers) are able to very quickly and with relatively low cost reach your target population.The use of advanced analytics in consumer companies to a large extent presents the basis for participation in the market, both in terms of defining and undertaking certain market-ing activities, as well as in other segments. The basis for facing the needs and desires of consumers is certainly adequate data collection, and their subsequent processing. There are countless opportunities placed before marketers and consumers, so that everyone can, according to their needs, enhance their activities.The rapid development of the Internet provides easy access to information not only to end users, but also businesses, both large and small. By analyzing traffic of both your website and competitors websites, companies can easily reach a large number of data crucial for a launch of successful, targeted and profitable marketing campaigns. Because the data gen-erated through the Internet already sorted out and prepared for analysis, primarily due to the Google algorithm that is completely adapted to the development of targeted marketing campaigns, this significantly shortens and simplifies the process of collecting and process-ing data. Complex data processing operations in order to upgrade to the same analytical usable condition is significantly reduced if the company is oriented toward Internet adver-tising. For this reason, Internet advertising should be the backbone of all major marketing companies depending on the level of exploitation of online market presence and online clientele.

REFERENCES

[1] Breuer Peter, Moulton Jessica, and Turtle Robert 2013., Applying advanced analytics in consumer companies, McKinsey Quarterly, May 2013., http://www.mckinsey.com/insights/consumer_and_retail/applying_advanced_analytics_in_consumer_companies.

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[2] Brynjolfsson Eric, McAfee Andrew 2012., Big data: The management revolution, Boston, Harvard Bussines Review, October 2012., Vol. 90, no.10.

[3] Gijić Nebojša, Lilić Vladana, Đuretić Gordana 2013, „The importance of small wins“, International Journal of Economics and Law, Vol. 3, No. 7 (2013), Beograd, FPSP.

[4] Jobber D., Fahy J., 2006., Osnovi marketinga, Beograd, Data status.[5] Kroell Frank, Schaff Rachel, and Zimmermann Stephan 2013., Unraveling the Web:

A new way to understand the online customer, McKinsey Quarterly, May 2013., http://www.mckinsey.com/insights/consumer_and_retail/applying_advanced_analytics_in_consumer_companies.

[6] Lazarević Petrović S., Lazarević M., Simić Antonijević D., 2013., „Innovations in application of information Systems in business“, International Journal of Economics and Law, Vol. 3, No. 7 (2013), Beograd, FPSP.

[7] Radosavljević Života, Soloviov P. Viacheslav, Panagopolus Alexios 2012., „Modern technology application in economics and management“, International journal of economics and law, Vol. 2, No. 4 (2012), Beograd, FPSP.

[8] Radosavljević Ž., Tomić R. 2007., Menadžment u modernom biznisu, Privredna Akademija, Novi Sad.

[9] Rafiq M., Ahmed P., 1992., The Marketing Mix Reconsidered, Salforg, Proceeding of the Annual Conference of the Marketing Eduction Group.

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A SOLUTION IN THE DEVELOPMENT OF INVOICE INFORMATION SYSTEM

Jerinić SrđanTechnical – Economic School, Vitina – Vrbovac, Serbia

[email protected]ć Zoran

University Union-Nikola Tesla, Belgrade, Faculty of Business Studies and Law, Belgrade, Serbia, [email protected]

Nikolić MilanUniversity of Niš, Faculty of Economics, Niš, Serbia, [email protected]

Summary: With analyzing the complexity of the functioning of general departments in working or-ganizations, and with constant expansion of the application of the modern informational technologies in all spheres of life and work, there is a need for projecting software solutions that would significantly improve the performance of these departments. Software processing of the invoice process, as an integral part of economics department, brings time and increases the efficiency of the work department in terms of speeding up the process of managing documents and reducing the volume of paper documentation. In this paper, functional and informational modelling of the Invoice information system is elaborated in details using IDEF method, as well as application model in MS Access program.

Keywords: Decomposition diagram, Activity tree, Invoice, Entity, Database.

1. INTRODUCTION

Invoice information system (IIS), as part of economics department of working organiza-tion, increases the efficiency of the work department in terms of speeding up the process of managing documents and reducing the volume of paper documentation. Software pro-cessing of invoicing is the part of integrated informational system in business of produc-tion organization which besides invoicing includes processes of development, technologic preparation, procurement, production, sales, accounting and payroll. As special informa-tion sections, processes of procurement [1] and payroll [2] are processed and published, while publishing of the commercial department software version is in progress. The au-thors of this paper are working parallel on realization of other parts of integrated infor-mational system of business of the production organization, so publication of a series of papers from this project can be expected in the future.Modern modelling methods eliminate the details, and graphical presentations provide that users think of the modelling process as a figure presentation [3, 4]. In other words, modelling is simplified presentation of the real system through set of objects (entities),

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A SOLUTION IN THE DEVELOPMENT OF...Jerinić S., Nikolić Z., Nikolić M.

connections between objects and object attributes. A set of integrated IDEF (Integration DEFinition) modelling techniques are the basic tools of modern strategies and technolo-gies for improving business processes. Confirmation of high quality of these techniques is their implementation, for example, for the use of USA Government, Pentagon or NATO. Given modelling concept involves the use of this methodology for defining of each docu-ment.In this paper functional modelling of Invoice Informational System (IIS) is elaborated using IDEF0 method, i.e. CASE (Computer Aided Software Engineering) tool BPwin (Business Process for windows). Applying Structural System Analysis (SSA), realized with BPwin tool, the process of IIS is shown by activities of Records of codebook, Creation of invoice and Analysis of invoicing. These activities are further divided into primitive activities (which cannot be divided) that documents, recorded in SSA, are stored in ap-propriate data stores. In realization of the process of invoicing in the part of the data organization informational modelling method IDEF1X is used, and it is carried out with CASE tool ERwin (Entity Relationships for windows) [3]-[6]. In other words, based on conducted functional analysis of the commercial department process, particularly data stores, we started projecting objects-connections model, which is realized by ERwin tool. The informational model is used to create a data base in MS Access program and applica-tion model. In the final designing part, management possibility of developed information system in real conditions is tested.The aim of this paper is to apply modern IDEF methodology within the chosen process of invoicing in order to develop Information System, and to make the system function.For the realization of the set aim functional process model, informational data model and application model are created, and the implementation of IS conducted in order to make it easier for the people working in this field to do their business [6], [7].Significance of the paper is in comprehensive understanding of problems of database or-ganization that could serve as the basis for the expansion of demands of such database and availability of Invoice Information System (IIS) on the site www.webng.com/invoicing.

2. FUNCTIONAL MODELING OF THE INVOICING PROCESS

Projecting of the Invoicing Informational System was preceded by a detailed functional analysis of all the activities that make the process of procurement. The analysis was con-ducted, using SSA method, by which, relatively complex process of commercial depart-ment is shown by set of simpler activities and sub-activities. This explains functioning of the system and enables its implementation.

Functional modelling IIS includes processing of context diagrams (Figure 1), activity trees (Figure 2) and decomposition diagrams of the process (Figures 3-5).Context diagram defines the sets of inputs, controls and mechanisms that produce an output set. At this level the viewed problem is generalized with less detail. General over-view of context diagram of invoicing activity associated with elements of inputs, outputs, controls and mechanisms, in accordance with IDEF0 standard, is shown in Figure 1.

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Figure 1: Context diagram A0 – INVOICING

The activity tree represents hierarchy of defined activities and enables functional decom-position and insight into the in-depth development of links between activities (Figure 2). Activity tree can be defined as method which decomposes complex activity into several subordinate activities among which vertical (hierarchical) connections were established. The hierarchy of activities of the decomposed invoicing process is shown is figure 2.

Figure 2: Activity tree A0 – INVOICING

Decomposition diagrams. By defining decomposition diagram of the activity in IDEFO method, horizontal connections are created, between activities at the same level, which allow the connection of appropriate information, defined within the activity tree [1] - [6]. Invoicing process is decomposed into Records of codebook, Creation of invoice, and Analysis of invoicing (Figure 3).These activities further are decomposed on sub-activities that can be seen on activity tree (Figure 2) and on the pictures 4 and 5, on which are shown their decomposition diagrams Records of codebook and Creation of invoice.

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One of the features of IDEF method is a combination of graphics and text providing ef-ficient work, and helps users to understand and master the operation of the system. Visual observation of the functioning of processes, activities and sub-activities, as well as the flow of data streams imposes a need for explaining them on detail. Therefore, further in text (Figure 3), activities Records of codebook and Creation of invoice are shown only with its decomposition diagrams with related sub-activities and elements of inputs, outputs, controls and mechanisms (Figures 4 and 5).

Figure 3: Decomposition diagram A0 – INVOICING

Figure 4: Decomposition diagram A1 – RECORDS OF CODEBOOK

3. INFORMATIONAL DATA MODELING OF IIS

After the creation of decomposition diagrams, logical data model (ERwin) of invoice ac-tivities has been defined. Information modelling (IDEF1X method) is a simplified rep-resentation of the invoicing process through a set of objects (entities), the links between objects and attributes of objects [1]–[6]. Figure 6 shows a logical data model IIS, which represents the base for defining the physical model and the database itself.

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By generating a physical model from the ERwin into a MS Access database model, rela-tions between the fields in the selected tables are automatically established, towards index-es defined over those tables. Relations between table fields are established by the similarity (equality) of the name, type and the size of the field [1], [2].

Figure 5: Decomposition diagram A2 – CREATION OF INVOICE

Figure 6: Logical model of Invoice Information System (IIS)

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4. MAKING APPLICATION MODEL

The application is carried out based on database schema and specific requirements of the user. This activity was carried out with all the specifics of DBMS system – MS Ac-cess. Menus are defined and forms are appealingly shaped. Defining menus and moving through the application, reflects logical operation mode of users of the application. The database main form enabling efficient management of database is located on the front page of the site www.webng.com/invoicing (Figure 7). Database access enabled by the Ac-tive Server Pages (ASP) is recorded from applications: invoicing, client, payment entries, business subject, payment method and employee [7]-[12]. Other forms, queries and re-ports that fully describe the operation of the system, will be presented in one of the papers that are in preparation. It should be mentioned that existing software tools and methods for all phases and cycles of the development of IIS were experimentally verified.

5. CONCLUSION

Bearing in mind the complexity of the problems of business processes, from the aspect of activities, a variety of input and output data, control of influential factors and limitations of monitoring the flow of information, it is necessary to use the modern methods for computer modelling process.

Figure 7: Main form of IIS

Business process of invoicing was graphically modelled by CASE tools BPwin. It means decomposition of the observed process into sub-activities and defining of all input, out-put, control and enforcement elements for each sub-activity. Hereby Invoice activity is fully defined and conditions are being created for the development of information data

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model. With application of CASE tools ERwin informational modelling of data was done in terms of defining the necessary entities, their attributes and relations between entities.This system is the original work of the author and imposed as need for more efficient operation of invoicing process. The work on the further development of this application requires a certain time to test and validate selected concepts. The project will be fully manifested by verification in practice and when applied by interested subjects.

REFERENCES

[1] Trajković, D., Nikolić, Z., Jerinić, S.: (2010), Funkcionalno i informaciono modeliranje informacionog sistema obračuna zarada korišćenjem IDEF metodologije, „IMK – 14, Istraživanje i razvoj“, UDK 621, ISSN 0354–6829, Godina XVI, Broj 37 4/2010, Str. 97-104, Kruševac, (in Serbia).

[2] Nikolić, Z., Nikolić, M., Jerinić,S., Stanojević, D.: (2013), An Approach to the Development of Informational System of the Procurement Department in Production Organization, 3rd International Conference „Economics and Management – Based on New Technologies”, EMoNT 2013, Proceedings, Plenary and Invitation Paper, Serial number of paper P-6, pp. 45-52, Vrnjačka Banja, Serbia.

[3] Ang, C.L., Luo, M., Gay, R.K.L.: (1994), Automatic generation of IDEF model, Journal of Intelligent Manufacturing, vol. 5, no. 2, pp. 79-92.

[4] Šerifi, V., Dašić, P., Ječmenica, R., Labović D.: (2009), Functional and Information Modelling of Production Using IDEF Methods, Strojniški vestnik, Journal of Mechanical Engineering, UDC 658.511 Special issue: 8th International Conference RaDMI 2008, vol. 55, no. 2, pp. 131-140.

[5] Standards: IDEF0 and IDFE1X, ISO 9000:2000, (www.idef.com).[6] Nikolić, Z., Jerinić, S.: (2009), Functional and Information Modelling of Students’

Service Centre Information System Using IDEF Methods, 1st International Scientific Conference „Law, Economy and Management in Modern Ambience” – LEMiMA 2009, Proceedings, Volume 1, Plenary and Invitation Paper, pp. 96-109, Sokobanja, Serbia.

[7] Matthew, D.: (2008), Access 2007, Mikro knjiga, Beograd (in Serbia).[8] Williams, H.E., Lane, D.: (2004), Web Database Applications with PHP & MySQL,

ISBN: 0596005431.[9] Andrew, G., D.: (2002), Microsoft ASP.NET step by step, CET, Beograd.[10] Buser, D.: (2001), Active Server Pages, Computer Equipment and Trade, Čačak.[11] Microsoft Corporation: (2004), Programming with Microsoft ADO.NET,

Microsoft.[12] Microsoft Corporation: (2004), Developing Microsoft ASP.NET Web Applications

Using Visual Studio .NET, Microsoft.

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CHALLENGES OF STRATEGIC PLANNING...Kastratović E., Dragić M., Miletić L.

CHALLENGES OF STRATEGIC PLANNING AT THE GLOBAL LEVEL

Kastratović EditaFaculty of Business Economy and Entrepreneurship, Belgrade, Serbia

[email protected]ć Milan

Faculty of Business Economy and Entrepreneurship, Belgrade, SerbiaMiletić Lidija

College of Entrepreneurship, Belgrade, Serbia

Abstract: The concept of strategic planning has changed significantly from the time when organizations have realized the importance of expanding its market share in other countries. The process of the global performance involves various benefits, certain obstacles and risks that organizations may encounter. Modern management is based on active adaptation in terms of strategy. Managers of the organizations that seriously count on success in the demanding conditions of modern international markets must be globally focused. The paper presents the challenges faced by managers in strategic planning and strategic decision-making. The benefits and risks of the global performance of the organization are em-phasized. This paper emphasizes the importance of the development of strategic managers but the edu-cation of management students in the direction of global perception of the problem and circumstances.

Keywords: strategy, strategic management, globalization, market, planning

1. INTRODUCTION

The concept of strategic planning has changed significantly from the time when organiza-tions have realized the importance of expanding its market share in other countries. In addition to the usual procedures and requirements provided by strategic planning, there is the concept of competitiveness and the flexibility as essential elements of planning. The inevitability of change stems from the fact that many organizations have not taken seri-ously the need to adapt and therefore brought their survival into question. The process of the global performance involves various benefits, certain obstacles and risks that organiza-tions may encounter. Aspect of the global economy must be viewed through the prism of several factors that determine the specificity of individual countries, i.e. markets. Strategic managers must ensure that their planning activities pass through the context of the po-litical, cultural, economic, and social characteristics of particular countries as potential markets. Modern management is based on active adaptation in strategic terms. Manag-ers of the organizations that seriously count on success in the demanding conditions of modern international markets must be globally focused. The success of the organization is

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conditioned by the inevitability of global perception of the market dimensions with clearly formed belief that success is the result of a globally integrated strategy, not the strategy specific to a particular country.

2. THEORETICAL CONSIDERATIONS

Globalization

There are many reasons why organizations choose to focus on the global market. The mo-tives are different, with the most obvious motive refers to the fact that the global orienta-tion increases the size of the potential market for its products and services. Many multi-national organizations are trying all means to reach markets in China and India because the purchasing power of their citizens, the middle class, has improved significantly. The global spread allows organizations to significantly increase the volume of business and thus increase total revenue. Benefits of global business relate to the possibility of a market offensive in areas that are not saturated, as is often the case with the domestic market by offering products or services offered by the organization. Increasing the volume of pro-duction affects the fixed costs, such as research and development, compared to a larger production capacity.The importance of including the global aspect of strategic planning is becoming increas-ingly important in the harsh conditions of competitiveness at the global level. Overlooked or poor evaluations by manager at the level of strategic planning can leave a huge impact on the organization. C.K. Prahald, professor in the University of Michigan points to a nar-row view on global strategic circumstances. He points out error that large international organizations make neglecting of „the bottom of the pyramid”, which refers to the five billion poor people in developing countries. They have a purchasing power of $14 bil-lion in the segment of their needs related to the improvement of living conditions. Pra-hald pointed out to example of several companies that as the part of the overall strategic analysis included this potentially valuable market segment. Unilever organization offered poor people in India disposable sachets of shampoo at affordable prices for them (one penny). With this strategic move within the untapped market segment, Unilever was able to achieve 60% of the total value of sold shampoo in India.1

Outsourcing – transfer of the activities to other businesses. The decision to transfer ac-tivities to other companies is made when a company decides to hire other companies to perform activities that create value, which previously took place within the company. Transfer of the activity can be carried out at the company within the same country, as well as companies from other countries (global context). The essence of outsourcing in a global sense comes down to a cost reduction with implementation of the same activities in quali-tative and quantitative terms. An example of the challenges in terms of outsourcing refers to the company Misiu Systems based in Bothell (Washington). Todd Hodgen, director of Misiu Systems, which manufactures alarm systems, found that he could save 65 % of the cost of their own design, if the design process is transferred to a Taiwanese company. In addition to the perceived benefits in terms of reduced costs of the design process, Todd Hodgen recognized the potential benefits in terms of saving time in the process of product 1 Dess Gregory et al., Strategijski menadžment, (Beograd: Data status, 2007), str. 241

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development, because the Taiwanese engineers could work in a period when American engineers rest (different time zones).2

Offshoring – the relocation of a business process from one country to another. If the managers of the company estimate that transfer of the activities to other countries will significantly reduce costs and contribute to higher profits of the company, then the off-shoring can be seen as a logical move. If the car can be produced cheaper in Mexico, then it would be logical to produce it there, if the code can be cheaper to write in China, then this activity should be carried out exactly in China. In the strategic decisions of managers there is nothing political or philosophical in terms of offshoring, the essence is simply the fact that the company would thus reduce costs and save money.3

Global business risks

The challenge faced by managers of small and medium-sized organizations in the global marketplace presents both a challenge and an enormous burden. Creativity and the ability to acquire, process and use information are important impulse for survival of organiza-tions that are not among the biggest. The biggest losses have small and medium-sized national companies located in the same market segment as well as large foreign trans-national companies. They find it difficult to survive the competition with international giants, who due to the crisis in underdeveloped countries maximally use the internal re-sources of these countries, tax benefits, charges for the use of local infrastructure and other benefits. This significantly affects the inferior position of small and medium-sized national companies.4

Many realize the globalization only from a positive point of view without a detailed analy-sis of the potential dangers it brings. While the globalization should allow freedom of trade and bring down all geographical barriers representing a line of differences between countries, commitment of the organizations to global trade implies equal openness for both good and bad things it brings.5 Managers of trans-national companies must take into account the risks posed by global business. They need to include these risks in the as-sessment process so defined strategies could be relatively protected from possible market surprises.The challenges of strategic management are not only based on openness, as one of the basic features of global business. In addition to these problems, organizations encounter with much more serious problems arising from the essential and fundamental cultural dif-ferences between countries. These differences are related to the tradition, history, religious beliefs, and value judgments of certain nations. The pursuit of profit-seeking, efficiency and development, as emphasized by notions of capitalist society, as much it is accepted in the United States, Australia, Hong Kong, it is so unpopular in other countries such as France, the Middle East and Scandinavia.6

2 Dess Gregory et al., Strategijski menadžment, 2413 Coulter Mary, Strategijski menadžment na delu, (Beograd, Data Status, 2010), str. 544 Zečević Miodrag i Nikolić Neda, Globalizacija i konkurentnost, 2012, str. 164.5 Coulter Mary, Strategijski menadžment na delu, str.206 Coulter Mary, Strategijski menadžment na delu, str.21

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Global competitiveness

Competitiveness is imperative to success at all levels of the survival on the market, espe-cially at the global level, in which all authorized and „unauthorized” means in order to re-alize the benefits are used. The condition of the globally competitiveness of organizations, reflects in the ability of managers to properly assess market conditions, advantages and disadvantages. Factors that define competitiveness can be classified into two categories:

• Non-pricefactors(innovation,creativity,branding,andcustomerservice).Oneofthe social field in which the importance of the brand is emphasized is sport. For sport, it is specific that all strategic decisions must be based on strong marketing as-sessment so the brand can be presented in the best possible way at the global level. An example of this is the success of Nike in terms of global placement of the „Air Jordan” basketball shoes where the organization made a profit of over $ 100 million per year.7

• Pricefactors(expressedinthefactthatproductsofinternationalcompaniesmayneed to go to the global market with prices that are lower than the prices of other international companies).8

Global positioning strategy

Organizations can use many potential strategies in order to global positioning. What strategy managers of the organization will choose depends on their assessment of current capabilities, as well as estimates of maximizing profit in real terms. Organizations that are looking to expand globally can be oriented towards some of the potential strategies:

• Exportstrategy–theuseoflocalplantsasaproductionbaseforexportinggoodstothe markets of other countries

• Licensingstrategy–makingprofitbyapprovingtheusageofthelicense,theuseoftechnology or knowledge (know -how) to organizations from other countries

• Thestrategyofusingthefranchise–theglobalexpansionoftheserviceandretailsector with setting standards

• Multi-statestrategy–changingthestrategicapproachofacompanyfromcountryto country according to local conditions and differences in the customer’s tastes and preferences

• Aglobalstrategy–theuseofequalcompetitivestrategicapproachtoallnationalmarkets in which the company operates

• Strategicalliancesandventures–allianceswithcompaniesinothercountries, inorder to maintain and to strengthen the competitiveness9.

Globalization is the current necessity. It cannot and must not be avoided. As the process of change, globalization depends on the growth rate of business transformation and the

7 Kastratović Edita i Denysiuk Volodymyr, „Marketing principlesand their application in sport management”, International journal of economics and law, Vol. 1, No. 2 (2011): 52

8 Zečević Miodrag i Nikolić Neda, Globalizacija i konkurentnost, 2012, str.2079 Thomson Arthur et al., Strateški menadžment, (Zagreb: Mate, 2008)str. 180

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amount of technological changes10. Organizations must be prepared to adjust their posi-tioning strategies according to the changes imposed by the global vortex.

3. RESUME

Globalization is inevitable thing and it imposes certain requirements for all market par-ticipants. In addition to managers who are constantly faced with changing circumstances, which the organization must adapt, all employees in the organization must accept the need for adjustment and therefore training. Globalization imposes the need for intensi-fication of certain activities that were not so important in the previous period. Strategic managers are faced with increased demands in terms of market research of the competi-tor countries and countries that are potential future markets. In addition to the research process, strategic managers have intensified the need for a comprehensive analysis, which must include consideration of the risks that are possible in a global business. The term globalization must be seen as a process that evolves and transforms, and the importance of the adaptability must be emphasize both for strategic managers who make decisions on concrete actions of the organization, as well as in the process of educating young managers (ones that will be responsible for the future planning activities at the global level).

REFERENCES

[1] Brnjas Zvonko, Strategijski menadžment, Beograd: „Grmeč”, 2000.[2] Coulter Mary, Strategijski menadžment na delu, Beograd: Data Status, 2010.[3] Draker P. F. Upravljanje u novom društvu, Novi Sad: Adižes, 2005.[4] Jovanović Petar, Strategijski menadžment, Beograd: Visoka škola za projektni

menadžment, 2007[5] Kastratović Edita, Menadžment u savremenom sportu, Beograd: Fakultet za

menadžment u sportu, 2008.[6] Kastratović Edita i Denysiuk Volodymyr, „Marketing principlesand their

application in sport management”, International journal of economics and law, Vol 1, No.2 / avg.2011, page 52

[7] Maksvel K. Džon, Kako da postanete istinski vođa, Beograd: Algoritam, 2005.[8] Manas Džon, Napoleon o projektnom menadžmentu, Beograd: Leo Commerce, 2007[9] Martinović, M., „Globalization and environment impact on business enterprises”,

International journal of economics and law, Vol. 1, No. 3 (2011): 79[10] Robbins P. Stephen, Coulter Mary, Menadžment, Beograd: Data status, 2005.[11] Stoner, Dž. A. F. i sar., Menadžment, Beograd: Želnid, 2000.[12] Thompson A. Arthur. Jr., Strickland A. J., Gamble E. John, Strateški menadžment,

Zagreb: Mate, 2008.[13] Whren, D. i Voich, D., Menadžment: Proces, struktura i ponašanje, Beograd: Grmeč-

Privredni pregled, 2001.[14] Zečević, M. i Nikolić N., Globalizacija i konkurentnost, Čačak: Tehnički fakultet u

Čačku, 2012.[15] Kaplan, S. R. and Norton, P. D., Premija za uspeh, Beograd: FEFA, 2010.10 Martinović, M., „Globalization and environment impact on business enterprises”, International

journal of economics and law, Vol. 1, No. 3 (2011): 79

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TECHNOLOGICAL INNOVATIONS AS A COMPETITIVE ADVANTAGE IN PAPER INDUSTRY

Knežević S. Rade Faculty of Strategic and Operational Management, Belgrade, Serbia

[email protected] Gordana

Higher Professional School of Applied Studies, Vranje, SerbiaKrgović Milorad

Faculty of Technology and Metallurgy, University of Belgrade, SerbiaKnežević ŽeljkoNovi Sad, Serbia

Abstract: In the business development special place belongs to the technology, because it shows the influence of different factors that significantly impact the creation of competitive advantage of countries and companies within the world and the global economy. One of the main generators of competition are technological development and technological achievements. In the first part of the paper technical and technological development of the technology of paper to this day are represented chronologicaly,showing how certain ideas in a certain period can be revolutionary and useful for the development of technology. Through a practical example, with desire to improve the technological process, improve the quality of the final product, reduce production costs, achieve financial savings, achieve competitive advantage, et al., the actual impact of work on improving the technological process of the paper is given in this paper.

Key words: paper, technology, innovation, constant part.

1. INTRODUCTION

Modern business conditions impose the constancy of change and the adoption of the in-novation spirit as a business orientation of all market participants. Consequently, it leads to improvement of many business philosophies and creation of completely new ones, which are trying to respond to the challenges and obstacles of the turbulent environment. A special role in the new business environment belongs to the technology. It shows the in-fluence of different factors that significantly impact the creation of competitive advantage of countries and companies within the world and the global economy. One of the main generators of competition are technological development and technological achievements. The real state of modern business is constant and rapid scientific and technical progress accompanied by dynamic changes. The dynamics and technology changes occurre at ac-celerated rate [9] and its influence on all spheres of life, work and business has made the resolution of questions of management technology particularly topical. Very fast dynamic changes, as well as intensifying scope of new technologies, lead to the rapid apperance of

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TECHNOLOGICAL INNOVATIONS AS...Knežević R., Mrdak G., Krgović M., Knežević Ž.

new generations of technologies, which particularly affects intensive changes in technol-ogy products, services and processes, together with the creation and development of new technological areas. Innovation, creativity and inventiveness are in the forefront of the development of human civilization and the development of technical culture from pre-historic times to the present day. In most cases, it begins with individuals, talented people in some area, with the desire to create something new, hitherto unknown, which brings technical and cultural development. In the history of mankind, creative individuals have created miracles, which even today are not fully understood. If we start from 260 giant sculptures on Easter Island (some reaching heights of up to 12m), the largest astronomical atlas of the world made by the Incas, and the embalming process in ancient Egypt, so far none of these has been explained. 15th century was a period when some scientific areas began to develop, when the first printed book appeared, the famous „Bible of 42 lines,” which pages had two columns of 42 lines, Figure 1 [8]. Printing in Europe begins with the discovery of mobile lead characters. The first trial of casting letters and printing was done by Gutenberg in 1445, and this year is considered to be the year of the invention of printing, when around 200 copies of the Bible in two volumes were printed, of which to this day 49 copies are preserved and which are considered one of the most valuable works of typography.

Figure 1: Gutemberg’s Bible [8].

The technological development of the global industry over the past 200 years occurred in cycles in different areas of the industry, as seen in Figure 2 [11].

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Figure 2:Technology development in the world from the year 1800 to the year 2000 and onwards [11].

In the period from 1800. to 1850. the development of steam engines and textile industries is noticeable, from 1850. to 1900. the development of the industry for the production of steel and railroads was dominant, from 1900. to 1950. development of the electrical and chemical industries, from 1950. to 1990. development of the petrochemical and automo-tive industries, from 1990. to date electronic – information systems. In Figure 2 are also shown the sinuous conjuncture and depression of these industries. Further development of innovative activities was concentrated in countries with major economic power, which used it in order to expand their influence in the world.

2. INNOVATIVE STEPS IN THE PRODUCTION OF FIBERS AND PAPER

The innovative activity, from the idea to its realization, has its flow, as shown in Figure 3 [1].

Figure 3: Innovation system [1].

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By using this scheme in a favorable environment, in practice, great successes in the im-plementation of innovations are achieved. This means that with the right idea, knowl-edge and creation, and implementation of that idea in practice, significant financial results can be achieved, among other things. However, it is not uncommon that many inventors, whose inventions changed the world, earn nothing or almost nothing from their inven-tions. That was the case with Douglas Engelbart, the inventor of the computer mouse, who has recently died. Although this is one of the best selling inventions, the inventor has not earned a dime.

This prompted the BBC to make a list of inventors who lived modestly, some even poor, but the whole world has benefits from their inventions. Not to mention all of them, we will mention only their inventions, without which this world would not be the same: the study of bacteria, the world’s global network, aircraft, LEDs, light bulbs, paper, the wheel, antibiotics, Morse code, a transistor, a compass, a Kalashnikov. As you can see, paper is in this list, which is an invention which has been given special attention in the next section of the article. The paper „borrowed” its name from the papyrus plant, marsh plant that grows on the banks of the rivers of Central Asia and Egypt. Babylonians, Egyptians and Romans made from this plant paper like material by pressing the interlacement parts of stems and leaves. Real paper, obtained by filtering of fiber from the water, was found in China at the beginning of a new era, Figure 4[8].

Figure 4: The road of paper [8]

Ts’ai Lun, born in 105 AD, made the first paper of textile waste and bark of mulberry tree. Before that, the material made of bamboo, animal skin and silk fibers, on which one could write, was used. Manual production of paper in Japan started in V century. Chinese stationers soon found the type of paper that was resistant to insects, which was a big ad-

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vantage compared to existing materials for writing. The continuous increase in the need for paper led to the fact that the Chinese got fibers for making paper from plant materials, eg. bamboo. But, old textiles remained the main raw material for making writing paper until the 19th century. The Arabs took over the technique of making paper around 700 AD. Through Spain and Italy, this technique arrived in Germany, France and the Netherlands.First German paper mill was designed in Nürburgring in 1390. by Ulman Stromer, after which followed Ravensburg in 1392. and Chemnitz in 1398. and the first paper mill in Switzerland appeared in Basel in 1410. Next important technological step was made by stationers from Zaan in 1672. who constructed new grinding machine Holender (“Hol-länder”). Holender enabled accurate milling with the possibility of reproduction of the same degree of milling, which improved the quality of the paper. Complicated crusher was replaced by this, and „soaking container” was also thrown out of use. Grinding in Holender made possible to process a sufficient amount of paper pulp of balanced qual-ity. Its principle of milling was used for a long time, until the the 80 ‚s of the last century.When the Frenchman Robert in 1798. found, and on 18th January 1799. patented a paper machine, it made a breakthrough in the pursuit of further mechanization of papermaking. At that time the paper machine was still put into work manually, Figure 5 [8].

Figure 5: The first manual paper machine [8]

The geniality of the new idea was in the conversion of a discontinuous process, which was carried out in steps, in a continuous process. The first production line was discovered and after 12 years of work Luis Robert defined the production of paper, which still is the base of the paper production, Figure 6 [8]. In the turmoil of revolutionary wars, this patent ended up in England, where it was further developed. The first paper machine was put into operation at the facility for the production of paper of the merchant Fourdrinier, in Fragmor. The supplier of this and other paper machines was machine factory of Brano Donkin. Donkin built 250 paper machine till his death.

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Figure 6: The first mechanical machine Louis Robert [8]

The first production of mechanical wood pulp was developed by Keller, chemical pulp by Mitscherlich and Dal, and Escher Vis and JM Voith developed preparation of pulp and paper machine. The first paper machine was designed by Donkin in 1820. Keller (1816–1895) patented a device for grinding wood pulp in 1845, and his idea was transformed into commercial machine by JM Foyt (1803–1874.) in 1847 in Heidenmheim. At first the fibers of hemp and wool were used, and later wood. American Benjamin Tilghman pat-ented cellulose production by the sulfite process in 1867.Swede Carl Daniel Ekman patented procedure for the production of cellulose by magne-sium – bisulfate process in 1874. and the same year he organized a production of 100 tons per month.Meller began research of production of kraft pulp in 1854. and Dahl patented this process as sulphate or soda process in 1884.The patent for alkaline decomposition of wood in paper mass, with NaOH, was assigned in 1858. to Fa. Watt und Burgess. In 1876. The production of cellulose by chemical decomposition of wood was discovered by the Mitscherlich – process, with Ca – bisulfite, and almost at the same time in 1878. by Ritter – Kellner process. Then followed the sulphate method, defined by Dresel and Dahl in 1879. which entered into production in 1885. In this way the lignin could be removed by boiling by chemicals.. A wide range of raw materials caused a stormy development of the paper industry. At the same time the need for the paper for books and newspapers ap-peared, which was increased by the discovery of the telegraph, and the need for packaging of many new products.The sudden development of paper industry starts from 1950. When it was produced app. 30 millions of tons, and for example, approximately 409 millions of tons were produced in 2011. [6]. All of the above, starting from the first paper to introduc-tion of the latest technology in the production of paper and paperboard, is the result of innovative work, the desire to discover something new, better, more modern, with gaining a competitive advantage in market as the primary goal.

3. PRACTICAL EXAMPLES OF THE APPLICATION OF TECHNOLOGICAL INNOVATIONS

Pulp paper industry is technically and technologically complex industry, where nearly all of the technologies from various scientific fields are present. Newly built pulp and paper factories must be reconstructed every 5 to 7 years in order to reduce costs of production

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and implementation of new technologies. The desire to improve some process, to improve the quality of the final product, reduce production costs, achieve financial savings, achieve competitive advantage, etc. are driving forces for innovators around the world, and the practical use of these solutions represents closing the circle between science and the envi-ronment, from concept to implementation. The example of the improvement of techno-logical process in paper production is done in Lepenka Novi Knezevac, where some ideas were implemented. Also, in this paper the following idea will be briefly presented : recon-struction of the continuous part of the paper machine.This technological complex in the paper production is a very important part of the machine and technological process, for these reasons requires very meticulous and efficient planning, with the adequate choice of optimal equipment, techniques, calculations of all parameters and precise execution of the system. Any failure in planning or performance negatively influences on the stable operation of the system, since all parameters must be constant during the production. By reconstruction of the constant part the following has been accomplished:

1. visual appearance of the paper is much better and meets the requirements of the market, which was the goal of the reconstruction,

2. solid particles are removed from the paper,3. fresh water consumption is reduced and exploatation of raw materials is increased,4. the mechanical properties of paper and capacities of paper machine are increased,5. reconstruction was performed with domestic equipment completely,6. investment costs are approx. 8 to 10 times lower as compared to the new equipment,7. investment returned in 3 months.

By this effects, the factory achieved desired goals and a certain advantage in global market, where the competition is large and unfair.

4. CONCLUSION

Very fast dynamic changes, as well as intensifying scope of new technologies, lead to the rapid apperance of new generations of technologies, which particularly affects intensive changes in technology products, services and processes, together with the creation and development of new technological areas. As well as in every field, technology global trends and developments must be followed and applied in our production processes.The technological development of the global industry over the past 200 years occurred in cycles in various fields of industry. Further development of innovative activities is now concentrated in the countries with major economic power, which they use in order to expand their influence in the world. However, the „small ones” must fight with their in-ventiveness in order to survive in all business conditions.The desire to improve the technological process, to improve the quality of the final prod-uct, reduce production costs, achieve financial savings, achieve competitive advantage, etc, was the driving force in this practical example as well.

REFERENCES

[1] Figurić, M., Mikulić, J. & Palčić., I.: Vrednovanje Inventivnog rada. Zagreb: Radničke novine (1981), pp. 7–13.

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[2] Hain, T. & Muller, M.: Nachhaltigkeit als Schlussel fur eine effiziente und wirtschaftliche Papier-und.

[3] Jovanović, S. & Krgović, M.: Pomoćna sredstva u proizvodnji papira. Beograd: Tehnološko-metalurški fakultet, 2010.

[4] Kersten, A., Hamm, U., Putz, H. J. & Schabel, S.: Zur Diskussion um die Migration von Mineralol in Lebensmittel und das Altpapier – Recycling. Wochenblatt fur Papierfabrikation, (2011), No. 1.

[5] Kohler, A.: Successful startau of Nantong PM 1. Voith Paper TWOGETER, (2010), No. 31.

[6] Krgović, M.: Nove metode za efikasnije sušenje papira u cilju štednje energije. Doctoral dissertation. Tehnološki fakultet Sveučilišta u Zagrebu, 1983.

[7] Krgović, M.: Štednja toplinske energije pri proizvodnji papira. Master thesis. Tehnološki fakultet Sveučilišta u Zagrebu, 1977.

[8] Krgović, M.: Grafički materijali. Beograd: TMF, 2005.[9]. Levi Jakšić, M.: Menadžment tehnologije i razvoja. Beograd: Čigoja štampa, 2006.[10] Maier, J.: Optimierung von Qualitat und Wirtschaftlichkeit durch innovative

Konstanttteile. Wochenblatt fur Papierfabrikation, (2011), No. 2.[11] Putz, H-J.: Altbapier-Recycling-Stiefkind der Bioökonomie?. Wochenblatt fur

Papierfabrikation, (2013), No. 12., pp.881–886.[12] Turunen, T., Heinonen,L. & Banecki, R.: 17 Thesen zur Steigerung der

Energieeffizienz. Wochenblatt fur Papierfabrikation, (2011), No. 3.

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THE ROLE OF KNOWLEDGE MANAGEMENT IN MODERN BUSINESS

Kopilović RadmilaFaculty of Economy, Finance and Administration, University Union, Belgrade, Serbia

[email protected]Ćilardžić Vesna

Faculty of Business Economy and Entrepreneurship, Belgrade, SerbiaGrbović Marija

Faculty of Business Economy and Entrepreneurship, Belgrade, Serbia

Abstract: This paper examines the role of knowledge management in modern business. Last decades indicate this is the time of great and rapid changes demand of organizations to adapt them if they wish to remain or become competitive. The concept of knowledge management sets the requirement for the creation and exchange of knowledge within the organization, and holders of knowledge are employed. Knowledge management is the effective management of information within the organization, but also effective potential management and skills of employees. Knowledge is the most important capital of an organization.For successful business organization, it is necessary to identify knowledge, develop and put into opera-tion of the organization’s objectives. Knowledge management in the organization is realized with the use of processes and procedures for the human resources management.The aim of this paper is to show that knowledge into practice business organization is treated as a re-source that is essential and that has to be improving in the function of creating new values. The effect of human resource management in the application of knowledge management program includes the possibility of sharing knowledge, training, and the ability to evaluate and reward employees. The main factor in today’s economy are people, i.e. human resources, their knowledge, application, development, opportunities, job satisfaction.

Keywords: knowledge, knowledge management, human resource management

1. INTRODUCTION

Knowledge is the most important development resource management in the XXI century, which causes the most dynamic and most profound changes in organizations. In the rap-idly changing and unpredictable environment in which organizations seek to create and survive on a competitive advantage, knowledge becomes the decisive factor in the battle for market supremacy, and in creating and maintaining an organization’s competitive ad-vantages.The modern era is referred to as a knowledge economy; it is characterized by the creation of additional value efficiently utilizing the knowledge of employees, and less financial as-

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THE ROLE OF KNOWLEDGE MANAGEMENT...Kopilović R., Ćilardžić V., Grbović M,

sets of the organization. The combination of knowledge and information opportunities for timely action creates. Knowledge together with the information and experience of employees converts into value on the market that organizations use for successful busi-ness. Knowledge economy is characteristic of the economy of the XXI century in which knowledge has become the main source and driver of economic development.Any company that possesses the knowledge wants to preserve it and continue improving. To achieve this, efficient structures must exist in the organization that promote teamwork and information sharing, a strong leadership that encourages innovations and a culture that demands exceptionalism and ethical behavior.1

2. KNOWLEDGE ECONOMY

Knowledge economy means changing the value systems, change of management mode, changing the organizational structure and culture of the organization. Knowledge is a complex resource, and the fact that from individual should develop into ownership of the organization makes it special.Knowledge management, including its improvement becomes the biggest challenge of today’s economy. Connecting employees who possess specific skills and knowledge be-comes imperative for managers in an effort to secure a sustainable competitive advantage. New type of business relationship requires the development of skills that emphasize in-dependence, communication skills and ability to build and maintain strong relationships between employees. The time for decision-making is becoming shorter. The reaction rate of a company to the turbulence of the environment and its changes is a key factor in its competitiveness, survival and development.Information and communication technology is embedded in interpersonal interactions and business transactions.Knowledge has become not only a symbol of all of man’s achievement, but every day gets new dimensions and meanings, so Peter Drucker marked modern society as a „knowledge society”. Drucker has pointed out in his research that modern organizations operate in a knowledge society. In such conditions, the basic economic resource is no longer capital or natural environment, but knowledge. Drucker believes that knowledge is the only signifi-cant source of organization, a means to achieve social and economic goals.Knowledge is a collection of facts, information, and skills acquired thru education or ex-perience, with the aim of theoretical or practical understanding and solving problems.2

Drucker states, „in the knowledge society the right investments are not those invested in machinery and equipment but in knowledge of skilful workers.3 Knowledge has become essential in all areas of decision-making. It contributes to the development of individuals, companies and organizations. Basic characteristic of knowledge is dynamicity because it appears due to mutual interactions between individuals and organizations. Knowledge flow within organizations creates new value achieving competitive advantage, and there-fore knowledge is the intellectual capital of the organization. Knowledge of an organiza-tion determines its economic strength and ability to develop other resources and increase

1 M. Albijanić, Intelektualni capital (Beograd: Službeni glasnik, 2011), 992 Petkovic, M. Organizacija, (Beograd: Centar za izdavačku delatnost Ekonomskog fakulteta u

Beogradu, 2010), 343 Yi-Chun Huang, Yen-Chun Jim Wu, Intellectual Capital and Knowledge Productivity, 2010 str.4

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the efficiency of their need.4 During the last decades of the twentieth century an increase interest in knowledge as the only form that can guarantee winning the competitive advan-tage of the organization was recorded. Knowledge management is a new business model that manages all aspects of knowledge within the organization, including the creation, codification and sharing of knowledge and the impact of these activities on the promotion of learning and innovation. Knowledge management in practice refers to a set of business processes developed in association with the aim of creating, storing, transferring and ap-plying knowledge. Knowledge management is a structural element of the organization, thereby increasing its ability to learn from its environment and to build knowledge into its business processes.Under the knowledge management, we mean the conversion of individual knowledge of employees in the organization of the collective, organizational knowledge, which would be available, at the right time and in the right way, to all members of the organization at all its levels.5 Practices that have contributed mostly to knowledge management are informa-tion management, quality management and human capital and resource management.6

In the organizational context, knowledge includes routines, processes, practices and norms of behavior, shaped by a system of values, experiences, information, knowledge and skills with which the conditions for the application of new experiences and information create.

3. KNOWLEDGE MANAGEMENT

“Knowledge management is based on the idea that the most valuable resource of the or-ganization lies in the knowledge of its employees.”7

Knowledge management is a set of professional skills, rules and experiences that enhance the ability of the organizations and encourage them to interact, exchange information and experience. The knowledge management process has a number of related and integrated parts that make up its life cycle: creation of knowledge, the conquest of knowledge, storing knowledge, knowledge sharing with others, and use of knowledge.8

The goal of knowledge management is that this cycle is effective and efficient. Organi-zational knowledge must be in forms that are easily accessible to employees. These are the documents, processes and policies incorporated into human resources, information technology and manufacturing process.„Knowledge management involves the recruitment and use of resources in order to cre-ate such an environment that will enable the availability of information to individuals where individuals will be able to acquire, share and use such information to develop their knowledge and where they will be encouraged to apply this knowledge to the benefit of organization as a whole.” For the organization to undergo successful implementation of knowledge management and its activities, access to the establishment of knowledge man-

4 Krstic i Vukadinovic, “Upravljanje znanjem kao izvor održive konkurentske prednosti”, Ekonomske teme br.3, (2008): 56

5 Ðordevic-Boljanovic, Menadžment znanja, (Beograd: Data status, 2009), 206 Ðordevic-Boljanovic, Ključni faktori uticaja na efektivnost programa menadžmenta znanja,

(Beograd: Univerzitet Singidunum, 2008), 467 Ðordevic-Boljanovic, Menadžment znanja, (Beograd: Data status, 2009), 178 Masic, B. Djordjević-Boljanović J. Knowledge management, (Beograd, 2006), 36

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agement must be of strategic character. Knowledge management is the process through which organizations generate value of their intellectual assets based on knowledge.Brileid and Herman defined knowledge management as „the adoption and use of resourc-es in order to create an environment in which the information is available to individuals who acquire, share and use it in order to develop their own knowledge. In such an envi-ronment, individuals are encouraged to implement their knowledge for the benefit of the organization in which they work. „Actuality of the knowledge management concept is significant if one takes into account that for the last two decades the original concept of management knowledge and its prac-tical application experienced progress. A pervasive digitization, particularly through the influence of social networks is changing the traditional form of knowledge management. Employees within their organizations are willing to access data and knowledge with the same ease as they do outside of work. Knowledge management can make use of „smart” devices that are constantly available to employees and thus brought the knowledge the employee needs to transfer within the required time. The concept gets the topicality and importance of taking into account the fact that planet „is getting old” and that a large number of people leave the work taking with them knowledge which needs to be trans-ferred to younger generations. Knowledge management is focused on intellectual capital management strategy, the development of knowledge, skills and competencies of people through education, training and employment and to gain employment and professional experience. Knowledge management is the process of using available knowledge in the production or provision of services, the integration of knowledge in documents and da-tabases storing knowledge, the motivation for the creation of new knowledge, transfer and use of knowledge at all levels of the organization, as well as the creation of new val-ues of the organization.9 Knowledge management is a set of professional skills, rules and experiences that enhance the ability of the organization and encourage them to interact, exchange information and experience.The goal of knowledge management is to make the cycle more efficient and effective. Or-ganizational knowledge must be in forms that are easily accessible to employees. These are documents, processes and policies that are incorporated into human resources, infor-mation technology and manufacturing process. Knowledge management is increasingly gaining in importance, due to the fact that organizations can be competitive only if they have innovative ideas and strategies. For the realization of these strategies are essential to high-quality resources in the form of strategic managers. Modern organizations need resources that are valuable, rare and irreplaceable, and that cannot be perfectly copied, so the organization could be competitive on a global level.10

The end of the last century and the beginning of this century characterized a shift in the planning and the scope of strategic management. Top management of the organization is first faced with intensifying dynamic environment and a greater amount of knowledge that is needed and available, both in the organization and in its competitors. In these cir-cumstances, it is necessary to include the practical management of organizational knowl-edge in the process of making strategic decisions. Bearing in mind the fact that knowledge management requires people to be bearers of the concept, while the managers will be

9 Albijanić,M., Strategijski menadžment, (Beograd: Univerzitet Singidunum, 2013), 19410 Kastratović Edita, Dragić Milan, Ahmić Damir, Mrkić Tanja, „Strategijsko planiranje i strategijski

menadžment“, International journal of economics and law, Vol. 3, No. 8 (2013):

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faced with new demands. They are reflected in the increase of individual competence that each manager has, and overall managerial competence of an organization in a way that allows the successful management of different types of knowledge. The process of knowl-edge management in the organization and the process of developing managerial compe-tencies are complementary and taking place simultaneously. The strategy of knowledge management means designed knowledge management in order to achieve competitive advantage associated with supported business strategy.Knowledge management is to ensure that employees have the knowledge they need, where they need and when they need to, i.e. the right knowledge at the right place and at the right time. Knowledge management comprises three inseparable entities – people, technology and processes. This relationship is best explained by the fact that the main goal of knowl-edge management is to identify valuable and useful knowledge of individuals and that detailed procedures and processes extend through the entire organization. Knowledge management needs to improve the effectiveness of organizations by increasing intellectual specialization and ability to work the right things, to increase efficiency, reduce rework, improve a focus and eliminate work that can be automated.„Applying the knowledge management concept in practice, organizations, generally speaking, strive to achieve two goals:

– The creation of new knowledge in order to accelerate innovation and obtain com-petitive advantages on the market;

– Sharing the existing knowledge in the organization to increase its efficiency11.

Each organization has a specific structure, objectives, modes of functioning, resources and processes. The implementation of projects, plans or knowledge, create a business solution to meet the needs of the organization. Applications of knowledge management are related to the objectives of the organization, and their purpose is to achieve specific results.Effective knowledge management can be organized to provide greater productivity and efficiency and is an imperative for successful business. On the road to a knowledge society that modern civilization aspires to, the education system represents one of the main levers of development. Education should create the conditions so the society is innovation ori-ented, to constantly learn and be trained for entrepreneurial integration into cooperative structure of the modern world. Innovative organization, as part of the economic system in the era of scientific and technological revolution, has become a basic prerequisite of development and competitiveness. In the changed method of managing an organization where the market accountability strengthens, in order to achieve market advantages, intangible „invisible” resource of the organization becomes the most important. Employees need to develop awareness of the value of knowledge and to constantly improve. Practical knowledge has particular impor-tance. Only applied knowledge has value and ability to create value.In the development and application of knowledge management, the manager’s role is cru-cial. Managers must to encourage employees to mutually share knowledge and experience, thereby achieving communication that is more effective and trust as the basis of coopera-tion. Through organizational learning, managers tend to heighten the desire and ability of the organization to understand the organization and its environment and the with the 11 Ðordević-Boljanović, Ključni faktori uticaja na efektivnost programa menadžmenta znanja

(Beograd: Univerzitet Singidunum, 2008), 32

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adoption of appropriate decisions contribute to the continual improvement of competitive position, to encourage training, education, and training employees, develop new methods, competencies, processes and products that are knowledge based. Knowledge management enhances human potential and allows employees to be more effective, they bring benefits to the individual level, but the effect is achieved at the level of the organization. Knowl-edge management includes the process of generating and disseminating knowledge which begins collecting data stored and processed in order to create information, which produce knowledge that are the basis for effective action. The advantage of applying the knowledge economy is the fact that knowledge, unlike physical goods, is an element whose value does not decrease with the time.12

In the battle to win a competitive advantage, organizations are turning to intensive knowl-edge they have. The need for continuous learning is indisputable because the changes are such that the knowledge gained yesterday, has less value tomorrow.For the successful development of the concept of knowledge management and the overall organizational ambience, value system and the way we solve problems are essential. Ap-plying the concept of knowledge management requires an appropriate organizational cul-ture, with a system of values, beliefs, patterns of behavior that employees gain by working together. For the successful implementation of knowledge management, it is necessary to create organizational culture that will recognize, nurture and reward teamwork, trust and sharing knowledge among employees.Knowledge management requires such a process of change in the cultural environment in which the organization will represent knowledge and the appropriate value will be the main criterion in all processes of management behavior and development of employees. The development of knowledge within the organization and effective knowledge man-agement requires a combination of all the elements of knowledge management: people, technology and processes. None of these factors should not be neglected. However, often in practice the importance of people, processes and their initiatives are neglected.Knowledge management involves a series of processes by which it creates, expands and strengthens the knowledge whose efficient management achieves organizational goals. For knowledge as the most important capital of the organization, it is necessary to develop an efficient management system that will lead to significant cost savings, increased pro-ductivity and achieving competitive advantage.Establishing an effective knowledge management program involves the implementation of appropriate knowledge. At the direction to which knowledge management concept is moving to, the greatest impact undoubtedly, have the modern technologies where the es-sential role belongs to the social networks. They are based on the external environment, which in terms of knowledge management has its advantages, but disadvantages also. The exchange of knowledge and creation of new ideas through effective and efficient approach, on the one hand, and the need for continuous monitoring, on the other hand, represents a challenge for the management of organizations that promote the use of social networks in order to improve knowledge management.

12 Krmpot Vera, „New Economy – knowledge economy“, International journal of economics and law, Vol. 2, No. 4 (2012): 62

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4. RESUME

The importance of applying knowledge management is not only reflected in the increase of efficiency by dividing the existing knowledge, but in the successful creation of new knowledge. Thanks to expertise (know-how) many organizations are maximizing their market value in relation to the book value (e.g. Google, Yahoo, eBay etc.).Knowledge has becoming the key factor for the creation of competitive advantage of an organization, because it allows the creation of added value for the organization. Due to the rapid changes that affect each organization, organizational learning has become a vital organizational process. Knowledge is a strategic resource that is not consumed during us-age, but gains in value. Thanks to its knowledge, the organization is in a position to create an opportunity for improvement and to adequately respond to all business challenges. The growth of the market value of the entire concept of its existence based on knowledge justifies the importance given to knowledge in recent years.Key potential in modern conditions become people with their knowledge and skills, while capital, labor and natural resources go into the background. Knowledge has become the key factor that gives the value to products and services, thereby creating additional value for the organization.

REFERENCES

[1] Akhter, H.S. „Strategic Planning, Hyppercompetition and Knowledge Management”. Business Horizons, 2003

[2] Albijanic, M. Intelektualni kapital, Beograd: Službeni glasnik,2011 [3] Albijanić,M. Strategijski menadžment, Beograd: Univerzitet Singidunum, 2013[4] Award, E.M., Ghaziri, H.M. Knowlewdge Management, Person. Prentice Hall, 2004[5] Bacera-Fernandez I., Gonzales A. Knowledge Management – Challenges, Solutions,

and Technologies. New Jersey: Prentice Hall, 2004[6] Brooking, A. Corporate Memory: Strategies for knowledge management. London:

Thomson Business press, 1999[7] Dalkir K., Knowledge management in Theory and Practice. Elsevir Butterworth-

Heinemann publications, 2005[8] Davenport, T. H., Prusak L. Working Knowledge: How Organizations Manage, 1998[9] Dalkir K., Knowledge management in Theory and Practice, Elsevir Butterworth-

Heinemann publications, 2005[10] Drucker P. Upravljanje u novom društvu. Novi Sad: Adižes, 2005[11] Drucker, P. Managing in a Time of Great Change. New York: Truman Talley Books/

Dutton, 1995[12] Ðorđevic-Boljanovic, J. Menadžment znanja. Beograd: Data status, 2009[13] Ðordevic-Boljanovic, J. „Kljucni faktori uticaja na efektivnost programa

menadžmenta znanja”, PhD diss., Univerzitet Singidunum, 2008[14] Frappaolo C. Knowledge Management, Capstone Publishing Ltd. What They Know,

Harvard Business Shool Press, 2006[15] Harman C., Brelade S. Knowledge Management and the Role of HR. New York:

Prentice Hall, 2000

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[16] Janicijevic N. Organizaciona kultura; kolektivni um preduzeca. Novi Sad: Ulixes, 1997

[17] Kastratović Edita, Dragić Milan, Ahmić Damir, Mrkić Tanja, „Strategijsko planiranje i strategijski menadžment“, International journal of economics and law, Vol. 3, No. 8 (2013):

[18] Kolaric, B., Odnos organizacione kulture i menadžmenta znanja, Sremski Karlovci, Visoka škola strukovnih studija za menadžment i poslovne komunikacije

[19] Krmpot Vera, „New Economy – knowledge economy“. International journal of economics and law, Vol. 2, No. 4 (2012): 60–65

[20] Krstic, B., Vukadinovic, D. „Upravljanje znanjem kao izvor održive konkurentske prednosti”, Ekonomske teme br. 3, (2008), str. 85–98

[21] Matison, R. Veb Warehousing and Knowledge Management. McGraw-Hill, 1999[22] Masic, B. Djordjević-Boljanović J. Knowledge management, Beograd,2006[23] Nonaka, I. A Dinamic Theory of Organizational Knowledge Creation, Organization

Science, 1994[24] Petkovic, M. Organizacija. Beograd: Centar za izdavačku delatnost Ekonomskog

fakulteta u Beogradu, 2010[25] Pržulj Ž. Uloga menadžmenta ljudskih resursa u ekonomiji znanja. Beograd: Fakultet

za bankarstvo, osiguranje i finansije, 2009[26] Wiig, K. (1993), Knowledge Management Foundation, Schema Press

www.newedgeinknowledge.com Zack, A.M. „Developing A Knowledge Strategy”, California Management Review, 1999

[27] Yi-Chun Huang, Yen-Chun Jim Wu „Intellectual Capital and Knowledge Productivity: The Taiwan Biotech Industry, Management Decision”, Emerald Group Publishing Limited, 2010, Tekst dostupan na: http://www.druckersociety.at/repository/191109/Arthur_Krupp_Saal/14001530/Huang_knowledge_producti vity.pdf [03. oktobar 2012. godine].

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FORMING THE COMPETITIVENESS OF POSTAL ORGANIZATIONS IN RUSSIA

Kuratova A. LyubovFederal state budgetary establishment of science

Institute of socio-economic and energy problems of the North, Komi Science Centre Ural Branchof the Russian academy of sciences, Moscow

[email protected]

Abstract: The achievement of competitiveness is the most important strategic task of any organization. Nowadays the level of competition grows in all markets of postal services in Russia, including such traditional post services, as subscription and delivery of letters and parcels. The state postal operator is the only organization, capable to provide postal services in all the territory of Russia. Russian Post needs the actual model of the financial and economic management. The purpose of this study was to develop a methodology of forming the competitiveness of postal organizations. To achieve the objective of the study it was necessary to solve the following problems:to define features of the market of postal services in Russia, to develop a methodology of forming the competitiveness of postal organizations, to define a real and predicted consumer demand for services of Russian Post and to compare expected volumes of Russian Post’s services on dynamic ranks of data and ranks of data on regions. The analysis by the proposed methodology helped to predict the volume of postal servicesfor 2013–2014 years and to prove the directions of the postal organizations’ development. This methodology can be used not only by postal organizations, but also by the organizations of any sphere of the economy, by lectures while preparing training courses.

Keywords: postal organizations, factor analysis, cluster analysis, forecasting

1. INTRODUCTION

The achievement of competitiveness is the most important strategic task of any organiza-tion. Nowadaysthe level of competition grows in all markets of postal servicesin Russia, including such traditional post services, as subscription and delivery of letters and parcels. But at any size of demand, the postal organizations are obliged to provide it.However alternative postal operators don’t develop theirbranch in rural areas. Therefore the state postal operator is the only organization, capable to provide postal services in all the ter-ritory of the country. Russian Post needs the actual model of the financial and economic management if it wants to increase the competitiveness. In scientific literature the theory and methodology of formation of competitiveness, its tools, strategy of increasing the competitiveness of services are widely studied. But there are no theoretical and methodo-logical bases of formation of postal organizations’ competitiveness. This research was con-

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FORMING THE COMPETITIVENESS OF ...Kuratova A. Lyubov

ducted on the example of state postal operator – Federal State Unitary Enterprise «Russian Post» (Russian Post).

2. RESEARCH METHODOLOGY

To create competitiveness, Russian Post needs the objective methodology. In this regard, the author has developed the methodology (Figure 1).

Figure1: Stages of the methodology of forming

the competitiveness of postal organizations

The methodology allows solving some tasks:– to identify the internal and external factors affecting the intensity of the demand for

postal organizations;– to restructure branches of postal organizations;– to define a real and predicted consumer demand for services of Russian Post;– to compare expected volumes of Russian Post’s services on dynamic ranks of data

and ranks of data on regions

3. FEATURES OF THE MARKET OF POSTAL SERVICES IN RUSSIA

In Russia, the activities of postal services include reception, processing, transport and delivery of postal items (domestic and international written correspondence and parcel), postal money transfers (remittances, pensions and benefits). These services are provided by postal operators under the licenses. Unlicensed services are express delivery, subscrip-tion to printing editions, the sale of postage stamps, postcards and envelopes. These ser-vices are provided on a contractual basis.

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Now in Russia the post market is liberalized. In 2007 the number of licensees was 121, in 2010 – 272. In 2013 the number of the organizations which have obtained the license, made already 377, including Russian Post. And experts consider that approximately the same number of the organizations renders postal services in Russia without obtaining the license, especially in the market of express delivery. Alternative (non-state) postal operators can render services in all territory of the Russian Federation or only in some regions of the Russian Federation, for example, «GarantPost», «DHL International», «SPSR-Express», «Freyt Link», etc. Also they can render services only in one or two nearby regions of the Russian Federation, for exampleJSC «Urban courier service», JSC «National post service», JSC «Federal post service». Activity of the private postal organizations relating to the last listed category is most often limited to rendering services in the profitable markets in large settlements (the capitals, other large cities of the region), but in rural areas isn’t presented. Also it depends on the temporary period. In the period of economic stability such postal organizations start rendering post services (for example, delivery of written correspondence) and stop their activity during the crisis in the economy. This is particularly evident in the regions remote from the cent-er.The private postal organizations cannot have at all the representation in the region, but open it at the competition announcement on sending mailings by request of government institutions.It occurs because the cities are more attractive market segment. There are the majority of organizations, which are the important users of postal services. Rural areas are characterized by low population density, poor highways development, and underdevel-oped market infrastructure. This leads the increase in cost of postal services in rural areas.The state postaloperator Russian Post was created in 2002 and nowadays it is the largest postal organization having at the order for about 41,9 thousand stationary post offices (from them 30 thousand are located in rural areas and 4 thousand – in remote areas), and also about 1,5 thousand mobile post offices, points and booths. Russian Post employs about 360 thousand employees, 32% of them are postmen, 21% – operators.Russian Post is a monopoly on public postal services. The resolution of the government of Russia approved the list of services of public postal services, which included only one service – transfer of internal written correspondence (postcards, letters, and parcels).This serviceis very necessary because it has social significance and should be requiredfor allus-ers due to the different levels of solvency and within the territory. For this service cannot be a full competition and free pricing.It is the global standard and the inclusion of written correspondence to universal services recommended by Universal Postal Union.According to «Boston Consulting Group» (BCG) Russian Post is the largest player in the market of delivering the written correspondence with a 75% market share. However, in many segments the competition already exists and continues to develop. In B2B sector the share of Russian Post makes no more than 40%, in B2C – 70%, and in the most attractive B2C segments the share of Russian Post doesn’t exceed 30–40%. The main competitors ofRussian Post in this market are the local private postal organizations and organizations which are engaged in express delivery.1

The services «Delivery of parcels» and «Express delivery» often unite in one market, so-called CEP (courier, express and parcels). According to BCG the cumulative share of Rus-

1 «Strategy of development of Federal State Unitary Enterprise Russian Post in 2012-2016», Federal State Unitary Enterprise «Russian Post», accessedJan 17, 2013, http://fc.russianpost.ru/Download/Ab...016.pdf#page21

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sian Post’s services such as«Delivery of parcels» and «Express delivery» makes 26,9% and 6,6% respectively. Most widely Russian Post is presented in the rural areas, i.e. in the least attractive segments. In the most attractive segment in urban areas Russian Post occupies less than 10% of a share of the market.Express delivery is carried out by a separate struc-tural division of Russian Post – «EMS Russian Post». The market of express delivery ser-vice is the most attractive and competitive market which is characterized by high quality of provided services, free pricing, high level of the competition between the organizations acting in this market. In all regions of the Russian Federation this market is in a condition of the competition. In the large and economically developed regions the share of alterna-tive operators makes 70–90%.The market of parcels removed from the state tariff regula-tion since 2003. Since 2004 non-state operators began to work at this market.Russian Post occupies a share about 50% in the market of pensions and social payments’delivery.2 In Russia the pensioner can receive pension in organization cash desk, at home or by transfer of the pension sum into the account in the credit organiza-tion. Thus, bank organizations are the main competitors of Russian Post in this market. It should be noted that Russian Post ranked higher market share in segment of pension’s deliveryhome than in the market of pension payment in cash. Delivery of pensions is necessary for those pensioners who have no opportunity to leave the house, for example, seriously ill pensioners and disabled people. The alternative organizations aren’t interested in delivering pensions to rural and remote unprofitable areas. Newly retiring pensioners prefer to receive pensions in banks, due to the fact that they have an opportunity to get a bank card. Russian Post occupies 15% in a market of remittances according to BCG. In the 1990s when networks of remittances were insufficiently developed, the main part of consum-ers preferred postal remittances. But in 2000 the volume of remittances through Russian Post was reduced three times in comparison with volumes of the transfers of the Soviet period. Now remittance scan be sent not only at Russian Post, but also by means of various systems of remittances (Western Union, Anelik, Migom, etc.) in banks or other organiza-tions. Russian Post occupies the following shares in different sectors of the remittances market: – from an individual to an individual ~ 11%; – from individuals to business (dis-tance selling) ~ 29%; – from individuals for business services, including loans ~ 13%; – international transfers of Commonwealth of Independent States ~ 3%; – payments of businesses to individuals – the share is insignificant.3

The share of Russian Postin the market of publications delivery (both subscription and retail) is 69%. Reception of a subscription is carried out by Russian Post, subscription agencies, publishing houses. And retail of printing editions occurs in distribution net-works, supermarkets, etc.The alternative organizations provide subscription services in the large cities of the region, try to sign contracts with the large enterprises and aren’t engaged granting a subscription in rural settlements or the small cities. At the expense of what their income can be high. But quantity of addresses for delivery is small that gives

2 «Strategy of development of Federal State Unitary Enterprise Russian Post in 2012-2016», Federal State Unitary Enterprise «Russian Post», accessedJan 17, 2013, http://fc.russianpost.ru/Download/Ab...016.pdf#page21

3 «Public report. 2011», The Federal Service for Supervision of Communications, Information Technology, and Mass Media, accessed March 13, 2013, http://xn--80aijjkgebfljd.xn--p1ai/docs/docP_817.pdf

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them advantage in the speed of delivery of printing editions. Also it should be noted that fact that Russian Post has no right to reduce the subscription cost (the subscription price didn’t grow since 2009), and the alternative companies can provide discounts for volume. Only Russian Post is engaged in delivery of subscription printing editions to individuals.The share of Russian Post in different services markets ranges from 6,6% to 75% (Figure 2).

Figure 2: The share of Russian Post in different services markets in 2013

Low level of competitiveness of Russian Post dependents on such negative influences as:– Degenerateinfrastructure. For a long time Russian Post didn’t invest any funds for

its development. Wear of fixed assets makes more than 60%. Their updating de-mands capital expenditure of 5 billion rubles a year. 60% of motor transport and 70% of mail vans developed the resource and demand replacement. 50% of postal offices need under repair, about 10% from them is close to the emergency. Automa-tion level is very low: the share of manual skills exceeds 80%.4 The weight of the written correspondence sent to established control terms decreased in the last three years. In 2011 only 20,84% of written correspondence were sent to established peri-ods.5 The share of the express departures sent by Russian Post according to control terms of sending is only 81,77%. It is the smallest result among all postal operators. At the main competitors this indicator is on the average equal 96%. One of the main reasons of delays is uncoupling of the postal wagons from fast trains. 3,5 thousand cases of uncoupling the postal wagons were recorded in 2012.

– Low motivation of postal workers. Growth rates of an average salary on the enter-prise lag behind growth rates in Russia. In 1998 the average salary in the post sphere made 80%. Now this indicator makes no more than 60%. The low wage creates a situation of continuous workers outflow. And that in turn influences a quality of provided services;

– Regional features. Many regions of Russia are characterized by low regional budg-ets, the population income, and a small number of the large enterprises. There is

4 «The plan of modernization of infrastructure of a federal postal service of the Russian Federation till 2012», Ministry of Communications and Mass Communications of the Russian Federation, Jan 13, 2012, http://old.minsvyaz.ru/ministry/documents/1117/8591.shtml; Stenyaev, «The law future», 25.

5 «Strategy of development of Federal State Unitary Enterprise «Russian Post», accessedJan 17, 2013, http://fc.russianpost.ru/Download/Ab...016.pdf#page21

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a disproportion of the market levels of postal servicesfrom the geographical point of view. To deliver mailings to some rural and remote settlements, the enterprise should use alternative means of transport, such as snowmobiles, boats and helicop-ters.

4. FORECASTING

In this article we’ll consider only results of a penultimate stage of the methodology – fore-casting of demand of Russian Post’s services. According to the analysis the volume of de-mand of written Correspondence delivered by Russian Post will fall in 2013–2014 both on model of dynamic ranks of data, and on model of ranks of data on regions (Figure 3). In Russia in a year only 11 letters per capita are necessary. It is 36 times less than the volume of letters in developed countries.

Figure 3: Comparison of the calculated values of regression in 2012 and forecast values 2013–2014 of demand on model of dynamic ranks of data,

and on model of ranks of data on regions

The main competitive advantage of Russian Post for this service is a wide network of branches, both in urban and in rural areas. But the low level of automation and mechani-zation prolongs the passage of written correspondence to the recipient, which affects the mismatch target dates of passage. One third of the respondents are dissatisfied with the current speed of mail delivery.We can assume that in the future the delivery of written cor-respondence from an individual to an individual will be replaced by electronic channels. Demand for sending written correspondence from the individual to different organiza-tions (public, private) will also depend on the development of electronic sending of infor-mation (for example, e-government).The volume of demand of written correspondence

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from the individual to organizations was reducing since 2009. This can be explained by the liberalization of the requirements of the legislation sent to. For example, there was a reduction in the need of sending notices to judicial and tax government organizations.In particular, now these organizations send not the registered letters but non-registered letters. The number of letters remains the same, but the cost is reduced. Also the number of letters reduced because of combining various notices about taxes in one notice. And of course there is a transition to send messages by mobile phone, SMS, Internet.The volume of demand of written correspondence from the organization to the organizationremains at the same level or will slightly decrease in connection with transition to communication by means of the Internet or a choice of alternative postal operators who can provide faster delivery. Decrease in demand in this segment will depend also on the electronic exchange between the organizations (for example, sending the tax declaration from the organization to tax service).The volume of demand of the service «Delivery of parcels» in model of dynamic ranks of data shows a tendency to growth. At the same time the model for ranks of data on regions shows lack of changes (Figure 3). The volume of demand of the services «Delivery of parcels» and «Express delivery» is increasing around the world, including Russia, because of development of private Internet auctions, remote trade, virtual payment cards, i.e. in a segment of sending parcels from the private organizations to the individual. The volume of parcels in the world grows by 20% each year. Order parcels more typical for urban areas, where the majority of organizations and population often enjoy online shopping. But in the large cities the majority of Russian Post’s competitors are concentrated.The volumes of parcels from an individual to an individual, most likely, remain at the level of 2012.More than a third of the general demand of Russian Post’s services is made by financial and economic services. Growth of volumes of pensions till 2010 was connected with growth of number of pensioners and due to liquidation of the alternative organizations which were delivering pensions at home. According to the analysesin 2013–2014, the demand ofthe service «Payment of pensions» in model of dynamic ranks of data will decrease. However on models of ranks of data on regionschanges in demand volume practically aren’t pre-sent. So rates of decrease won’t be high (Figure 3). Decrease in a consumer demand will happen at the expense of the population receiving pensions in post office. By results of questioning, city pensioners prefer banks in which there is a possibility of transfer of pen-sion on the cash card or opening the pension deposits. The main volumes of this service are in a segment of delivering pensions at homefor pensioners, who cannot walk indepen-dently and physically disabled people, both in urban and in rural areas. Many pensioners prefer to receive pension at home also because of possibility of communication with the postmen.The volume of demand of the service «Remittances» in model of dynamic ranks of data falls. And on model of ranks of data on regions shows an insignificant tendency to growth. Therefore slowdown in decline of remittances is possible (Figure 3). Falling of volumes of Russian Post’s remittances is caused by a set of the reasons, for example:- negative influ-ence of world financial and economic crisis in 2008–2010, first of all due to decrease in number of payments on the credits in banks from the population;- high competition in this market;- replacement of remittances with other ways of sending money without com-mission payment. For example, knowing number of the card and a PIN code, it is possible to put on the card money via the ATM.Further falling of volumes of Russian Post’s remit-

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tances will happen in all segments. More in a segment of sending remittances from the individual to the organizations (payment of the bank credits, payment of goods in online stores).The decline in volumes of printing editions (both subscription and retail) due to sev-eral reasons:- general falling of interest to print media in connection with Internet development;-changing of habits of media consumption of youth;- high cost of a sub-scription (the subscription price includes edition delivery, and cost in retail networks can be lower);- distribution of free editions;- possibility of a subscription to the electronic version of the edition on a publishing house site.But it doesn’t belong to highly specialized newspapers and magazines which extend only on a subscription.Russian Post’s advantages in providing the service «Delivery of publications» is a complete lack of alternative organi-zations delivering printing editions to the mailbox (in urban and rural areas). But in the market of a subscription on printing editions for the organizations Russian Post’s share is much smaller (about 60%) due to a variety of alternative organizations.In rural areas the post office is the only source for the acquisition of mass media at retail.

5. CONCLUSION

Thus, now when forming competitiveness of Russian Post it is necessary to pay special at-tention to the urban areas in the central regions of Russia. If Russian Post wants to reach leading position in the markets of post services, it must increase quality of rendering ser-vices, optimize a network, improve basic qualities of services. The most perspective is the segmentof delivering parcels and written correspondencefrom the state organizations to the individuals, express delivery. For the development of these services it is necessary to improve basic qualities of services, to improve a grocery portfolio, to increase quality of service, to expand the list of additional services, to develop post front offices. Obtaining the limited bank license, optimization of a client zone in offices, introduction the elec-tronic circulation of documents andimproving IT ensuring service will promote the de-velopment of the financial servicesof Russian Post.Using the author’s methodologyallows defining demand for post services more precisely, taking into account influence of the various factors. The methodology can be used not only by postal organizations, but also by the organizations of any sphere of the economy, by lectures while preparing training courses.

REFERENCES

[1] «The register of subjects of natural monopolies in the field of communication concerning which state regulation and control is carried out», Federal Antimonopoly Service of the Russian Federation, accessed May 17, 2013, http://www.fas.gov.ru

[2] «The plan of modernization of infrastructure of a federal postal service of the Russian Federation till 2012», Ministry of Communications and Mass Communications of the Russian Federation, accessed Jan 13, 2012, http://old.minsvyaz.ru/ministry/documents/1117/8591.shtml

[3] Stenyaev S., «The law future prepares for us», Russian Post, No. 1 (2013): 80.

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[4] «Public report. 2011», The Federal Service for Supervision of Communications, Information Technology, and Mass Media, accessedMarch 13, 2013, http://xn--80aijjkgebfljd.xn--p1ai/docs/docP_817.pdf

[5] «Strategy of development of Federal State Unitary Enterprise Russian Post in 2012–2016», Federal State Unitary Enterprise «Russian Post»,accessedJan 17, 2013,http://fc.russianpost.ru/Download/Ab...016.pdf#page21

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ATTACK ON THE CONSTITUTION ...Matić G., Milošević M.

ATTACK ON THE CONSTITUTION OF THE REPUBLIC OF SERBIA

Matić D. Goran The Office of the National Security Council and the Protection of Classified Information of the Republic of Serbia, Belgrade, Serbia

[email protected]šević Milan


Abstract: This paper describes the crime of attack on the constitutional order as a form of legal protec-tion of the constitutional order and security, and the existence of the state itself; this issue was equally critical in the 20th century as it is today, in the 21st century. Let us mention that this issue has been ignored, both in theory and in practice.

Keywords: criminal law, constitutional order, national security, treason,

1. INTRODUCTION

Politically motivated crime is a project that is most often motivated ethnically, religiously or ideologically and it always connects a number of people from related social structures, organized on a hierarchical basis with a view to illegal and legal activities achieve certain political power and influence, and to change the social system as a whole in accordance with their political agendas.The offense of assault on constitutional arrangements in the theory of criminal law is commonly referred to as high treason, which is, unlike treason, directed at the threat to the internal security of the country. Consequently, the criminalization of attacks on the constitutional order is one of the main forms of criminal protection of the constitutional order and security of the state in any legal system.High treason in a general way includes all other crimes against the constitutional order and security, as part of this special mean only a concrete action and protective structures of both general criminal offense of treason. Accordingly, if in a case there are elements of more criminal acts against the constitutional order and security (calling for violent change of the constitutional order, etc.), they will be focused on the apparent ideal concurrence, i.e. there will be only the second offense.

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2. INCRIMINATION OF THE ATTACKS ON THE CONSTITUTION

The offense of the attack on the constitutional order, or treason, is in the Serbian criminal law in the past almost 100 years; so far according to the concept of state ideologically it had been repeatedly revised. It was drastically changed only in 1990; prior to that, besides the fact that it was formulated in broad and vague manner, it contained ideological terms related to the previous political system. In 1990 it was definitely abandoned, both crimi-nal-political and legal dogma, including very controversial and broad wording (‘Whoever commits the offense directed at ...’) which contained the description of the crime until 1990, according to which any action could constitute an act of perpetration of the crime if it is attributed to the subjective orientation of the threat to one of the objects of protection listed in the description of the crime. [1]In the current criminal legislation of the Republic of Serbia, this offence consists in an attempt to force or threat of force to change the constitution established landscaping in Serbia, or to overthrow its highest state authorities. Therefore, this offence has a common criminal object of legal protection, and it refers to the constitutionally established land-scape in Serbia, and in the framework of this work incrimination has two more specific object of protection and at the same time two types of enforcement actions, including: 1) attempt to change the constitutional order, and 2) attempt to overthrow the highest state authority. Therefore, the crime of attack on the constitutional order under Article 308 Criminal Code, by its nature and its name, is a tort of harassment, which means that the completed criminal offense enough causing the abstract threat of criminal protection of listed buildings. In addition, the conclusion is that we should act and conduct of such ob-jective and subjective meaning and purpose, on what is meant in this case, but to prevent their preparatory phase, but only when such acts are objectified and when by itself imply a certain threat to society although it is still abstract (absent), but realistically possible.Similar criminality and treason we encounter in comparative law. Thus, the Criminal Code of the Russian Federation of the crime of forcible seizure of power or forcible reten-tion of power (in Article 278) includes actions aimed at a violent seizure of power or forci-ble retention of power in violation of the Constitution of the Russian Federation, as well as actions aimed at violent change of the constitutional order of the Russian Federation. This crime is punishable by imprisonment of twelve to twenty years in prison.On the other hand, the French Penal Code criminalizes the first two subsections of crimes against state security (articles 75–80), crimes of treason and espionage and crimes against National Defense. In the third subsection, which includes crimes against state authorities and territorial inviolability (Articles 86–92) used the word ‘attack’ aims to: 1) break or change the social system, 2) incite the population to arm itself against the state govern-ment; 3) to arm themselves against each other, and 4) to undermine the integrity of the national territory. Preparations for these offenses are criminalized in a very concrete form, as a conspiracy. [2]

3. OBJECTS AND CONSEQUENCES OF THE ATTACK ON CONSTITUTION

According to the legal description, this crime consists of an attempt to force or threaten use of force change the constitutional order of Serbia or to oust the highest authorities of

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the state. From this we can see, first of all, that this done when there is nothing but intent. It is also evident that the consequences of this crime is not the change of constitutional or-der or the overthrow of the highest state authorities, but only threat to these social values, which means that every attempt is a threat to the protected object to which the attempt is directed.This is generally determined and consequences of all forms of work, and they are reflected in the threats to the constitutional order of the Republic of Serbia. The implications of this work are not specifically mentioned in the law, but derive from compromising the protective facility. As in other such cases, the consequence is there if there is a so-called abstract causing danger for protecting objects. In a sense any opposition authorities who exercise power means endangering the government, but every opposition is not directed at restricting or overthrow the government. In this sense, understand and endangering the constitutional order of the Republic of Serbia as common consequences of all forms of crime.All mentioned protection objects are part of a general protective building – the constitu-tional order of the Republic of Serbia, and its socio -economic development and socio- political system. From this it would at first glance followed that was enough, as the protec-tive structures of the crime indicate only the constitutional order of the Republic of Serbia, as everyone else in the law, these facilities included in this. This, however, would not be justified for two reasons. First, the attacks on the constitutional arrangements in practice occur just by objects that are provided by law. Second, although this is a crime that is es-sentially directed at the threat to the constitutional order, the shapes of the threats are not the same for all security objects that the law states. It is rightly perceived that separation, or closer specification of certain protective structures, this offence becomes more specific and tightly linked to the principle of ‘nullum crimen sine lege.’ [3]Legal protection, regarding political crimes in general, does not usually include direct and what we might call the ideological dimension of the political and constitutional sys-tem. Certain ideology, a certain party or partisanship program criminal protection of the criminal legislation in this area, it is important to emphasize that the general object why certain constitutional arrangements, and his defense of violence or other unconstitutional changes his ways, destruction and overthrow. In the past, the criminal protection was ex-tended to the ideological foundations of the social and state order (for example power of the working class and socialist self-management), which represented a particular danger of possible state repression against ideological opponents through the use of verbal politi-cal offense.

4. ATTEMPTS TO CHANGE THE CONSTITUTION

In the first manifestations of the offense attacks the constitutional arrangements – an at-tempt to change the constitutional order, the object of criminal protection is the consti-tutional order of Serbia. By this we mean a system of organizing the country’s authorities (legislative, executive and judicial), their organization, competence, functioning, consti-tutionally guaranteed human rights, etc.). Institutional forms of constitutional order are: policy of the country, the parliamentary system of government, the judiciary, the defense and the like. According to Article 1 of 2006 Constitution, the Republic of Serbia is a state of the Serbian people and all citizens who live in it, based on the rule of law and social

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justice, the principles of civil democracy, human and minority rights and freedom, and commitment to European principles and values.The story of the manifestations of the offense is defined as an attempt to violent change of the constitutional order of Serbia. To determine the acts of execution used a legal term, so we cannot speak about its precise prescription, because I attempt in criminal law defines as starting acts of commission or its complete absence of the consequences. Therefore, the concept of operations in this section should be interpreted in the context of other features of the offence, especially the protective nature of the object and intent of the perpetra-tor. This means that you should be taking some activities that go beyond the preparatory work in terms of content and objective means endangering the constitutional order. This must be assessed in each individual case, but it is certain that this is the hallmark of the Criminal Code of imprecise and that may create difficulties in its practical application. [4]This relative generality in determining enforcement actions alleviated by prescribing that the existence of this part needs to be an attack on the Constitution established landscaping done by force (absolute or compulsive) or threat of force. Criminalized is only violence to state regulation. For the existence of this type of crime, is not a necessary attempt to change the constitutional order as a whole, but not enough to do so in relation to some of the less important elements of the constitutional order. Force and threats can arise in this case as a way of performing some other activity, but should be taken that only the use of force and threats can represent the action execution. The concept of force and threats should be taken in its general sense. Force may be absolute or compulsion, or consist in the use of mechanical, physical, or other power, hypnosis or intoxicants. The very threat of force itself must be serious and feasible.The offence must be directed at the violent change of the constitutional order. This is the main objective of the offender. The change means replacing the current system of government other, which would not be based on the current constitutional provisions (such as changing a monarchy into a republic). At the same time, it is not important what the solution wants to impose. Also, it is not necessary that the offender activity directed at changing the constitutional order as a whole, it is enough to endanger and any of its components (for example, the parliamentary system, the system of separation of powers, human rights, etc.).Consequences of the act are abstract threats to the constitutional order, so that the work is finished the very acts of perpetration, or attempted his violent change. This result does not have to be determined; it is assumed and is contained in the act of execution risk. Attempt of this offence is simply not possible because it is the very act of committing, i.e. it is equal to the execution as such.Offender can be anyone. The very nature of the offence, however, suggests that its execu-tion means more an organized activity of a number of persons, i.e. it has elements of or-ganized crime in the social order and security of the country. For guilt it is necessary that the offender is aware that he engages in activities aimed at endangering the constitutional order.

5. ATTEMPTS TO OVERTHROW THE HIGHEST STATE BODIES

For another form of crime it is characteristic that it represents an attempt to overthrow the highest state authority. The specificity of this form of the offense is reflected in the criminal

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protection of the facility, and that the highest authorities of the Republic of Serbia, noting that the Constitution provides for separation of powers between the legislative, executive and judicial forms of authority.The very concept of the circle of the highest state authority is determined by the Con-stitution of the Republic of Serbia in 2006, i.e. branches of government, namely: 1) The National Assembly 2) President 3) the Government 4) the Constitutional Court, and 5) The Supreme Court of Cassation. The proof that these are the very highest state authorities may be inferred from the provisions of Article 310 of The Criminal Code which explicitly states authorities identified as the highest state authority. These are the activities that are immediately directed at the overthrowing the government. As the ways of committing these offenses the following was envisionaged: the use of force or the threat of use of force (an attempt to overthrow otherwise does not constitute this crime, but may be any other criminal offense). [5]Overthrow also exists when the State agency or a member is forced to resign. The term ‘resign’ implies that by the overthrow the government body is permanently disabled to perform its duty (usually accompanied by lack of recognition) and replace it with an ille-gal authority, which does not necessarily have to be an unconstitutional category, and this organ can be specified in the Constitution. Overthrow is any unconstitutional deprivation of the functions of a public body or its representatives, i.e. in its very concept there is al-ready included unconstitutionality, but the law further emphasizes this element in order to more strongly emphasize the difference compared to lawful dismissal of the representa-tives of the state authorities. Therefore, temporary disablement of state authority in the exercise of its functions (e.g. prevention of a session of the National Assembly), without negating its legality shall not represent criminal offense.Consequence of the act is an abstract threat to most organs of state power, so that the work is finished by the very acts of perpetration, i.e. through the attempt to overthrow the highest state authority. This consequence does not need to be determined; it is assumed and is contained in the act of execution risk. The attempt of this act is simply not possible, because by the very nature of things the attempt is equal with the completed action of execution.The perpetrator of the attempt to overthrow the highest state authorities may also be any person. The very nature of the offense – conspiracy – without any doubt indicates that its execution has elements of organized crime within the social order and security of the country. To be proclaimed guilty the perpetrator must be aware that he undertakes an activity that is directed to attempt the overthrow the highest state authority.

6. CONCLUSION

The offense of assault on the constitutional organization has been present in the Serbian criminal law for almost 100 years and so far according to the concept of state ideologically revised several times, but has always been a general criminal offense against the internal security of the country, that is treason.The legal nature of the crime stems both from its protective structure that appears as a general protective object of the group of offenses, and the acts of commission, which in-cludes the activities that the attack on the Constitution established landscaping Serbia,

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and not the Criminal Code defines as independent offenses. This is determined by the relationship of this work to other offenses in this group.Therefore, all other crimes against the internal security of the Republic of Serbia are but special forms of this offense. This means that the attack on the constitutional order is liable only if its performance has not achieved another criminal offense in this group. Other-wise, in principle, this crime may be in the ideal and real concurrence with other offenses (minor and serious bodily injury, murder, illegal detention, kidnapping, violation of state, official and military secrets, etc.) set forth in other chapters of the Criminal Code.Finally, the question of its importance in the 21st century is opened, i.e. its existence in actual legal system of the Republic of Serbia, bearing in mind that it is a political offense and the number of persons convicted for this crime in the total number of prisoners rep-resented by 0.0 to 0.1 %, according to available statistics.

REFERENCES

[1] Stojanović, Z.: Komentar Krivičnog zakonika, Službeni glasnik, Beograd, 2007.[2] Bavcon, LJ. i dr.: Kaznenopravna zaštita države i njenog društvenog uređenja –

politički delikti, Globus, Zagreb, 1988[3] Bačić, F. i dr.: Komentar Krivičnog zakona SFRJ, Savremena administracija, Beograd,

1978.[4] Lazarević, LJ.: Komentar Krivičnog zakonika, Pravni fakultet Univerziteta Union u

Beogradu, Beograd, 2011.[5] Đorđević, Đ.: Krivično pravo – posebni deo, Kriminalističko policijska akademija,

Beograd, 2011.

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SERVICE BUSINESS AND ENTREPRENEURSHIPMikić D. Sanja

SERVICE BUSINESS AND ENTREPRENEURSHIP

Mikić D. Sanja Faculty of Business Studies and Law, Belgrade, Serbia

[email protected]

Abstract: Creative transformation is necessary in order to resolve the current crisis in the world. We need synergistic effects of market structure and economic integration especially in the area of small and medium enterprises in relation to services. In the era of the modern industrial world, service business in the form of modern entrepreneurship is coming to the fore. The result of the accumulated deforma-tions of the last century and the immediate preceding period, i.e. the first decade of the new century, manifested as a general crisis of international economic relations between the so-called debt crisis, environmental crisis, population explosion, scarcity of food, raw materials, energy and the crisis of morality and human values. The main cause is laziness and lack of discipline at the individual and the general level of society and ignorance. The process of strengthening the company through the data exploitation and information to be systematized in a particular scientific discipline largely leads to prosperity. Globalization, as a process under the influence of technology is changing the world and the very minds of the people on the stage of the world economy regarding the life and work. SMEs are becoming the economic power base and the concrete expression of micro-economic effects at the global level and strengthening their competitiveness has become one of the leading goals of economic struc-tures around the world.

Keywords: integration, entrepreneurship, technology, ethics, competition, culture

1. INTRODUCTION

„... It is finished with a programmable, cold and practical man of the West, a new person is here...”1 New man with an open mind and heart with a steel will to change the world and ourselves making us more creative and fruitful, for ours and general welfare. Structural changes due to the repercussions that global crisis has had on the economic, political, social and cultural development of all countries around the world, according to its abili-ties was accompanied by a radical change in the life and work of the contemporary man. Computer revolution, economic globalization and regionalization become leitmotiv of every debate about today’s development in all spheres, ranging from the political, legal and economic to cultural and military.Economic and industrial policies are directed in accordance with the millennium devel-opment goals that have been reached at the UN summit to the overall economic revi-talization and strengthening of development and human resources. The birth of a new

1 Milan, D., Janković, Sveti nikolaj Velimirović, od rođenja do kanonizacije, Valjevo print, Valjevo, 2004. str. 12

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economic model marks the birth of a new economic era while entrepreneurship occupies a central place.Deductive reasoning method is gaining in importance particularly if one bears in mind lag in which Serbia has been for a long time, depending on which development field we are talking about.It would be necessary to channel more resources into new technologies and service indus-try. The future lies in innovative and science based industries.Shifts in the global economy dictate the introduction of environmentally friendly tech-nologies for production of energy (biomass, wind and solar energy). The priority of each country is economic growth and employment, but in accordance with the Kyoto Protocol.

2. SERVICE ENTREPRENEURSHIP

Contemporary economic trends impose some new concepts such as service entrepreneur-ship. Service entrepreneurship as a cultural and economic phenomenon is characterized by a focus on profit in relation to economic processes, risk management, innovation and resourcefulness. The main attribute of the service of entrepreneurship is innovation. The scientific response to the economic transformation of reality, i.e. in practice, affects devel-opment of creative, innovative and constructive entrepreneurship today. The new system of labor appears so traditional methods of work are kept only as examples of the former economic theory and practice.Power and knowledge are money and creativity linked with appropriate market struc-tures. Otherwise, there is a very fertile ground for the implementation of innovative ideas into the economy, where the entrepreneur becomes the main driver of the development momentum. Further improvement and development of the business concept, it employs new people, thus expanding the range of activities, which continue to influence all other streams. Freedom of thought and creation provide an opportunity for self- affirmation, but also open up vast limits of growth and development in all fields. In addition, freedom of thought enables us to bring modern decisions in conjunction with the global trends but also in collaboration with colleagues from the given field which information tech-nology allows us. Therefore, creative entrepreneurship is proactively, which boost market impact as greater freedom in the design of business conditions, establishing connections and choice of occupation. In addition, the market is becoming more flexible to changes, innovations, outsourcing, etc.Service based business involves the creation of customer needs through marketing chan-nels and direct contact. Successful business provides a good profit representing a future investment. Social networks, on the other hand provide a new way, a new, virtual environ-ment that accelerates the process of making a profit as well as the very quality and quantity of profits.Innovation is a special tool for entrepreneurship and thus affects the formation of creative entrepreneurship:2

1. Generating innovative ideas2. The selection of the most promising ideas3. Detailed elaboration of expert evaluation

2 Chesnokov, V., Creative enterpreneurship: Nature and subject matter, International journal of economics and law, Vol. 1, No. 3, 2011, str. 6–12

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4. Elaboration of a business plan in relation to the selected ideas5. Expert evaluation of the business plan6. Pilot products and services and testing the market conditions7. Harmonization of product design and market promotion8. Initiation of mass-production and its promotion in accordance with the aligned

design on the market

There is a social entrepreneurship, political entrepreneurship, and scientific entrepreneur-ship.Social entrepreneurship is the process of monitoring innovative solutions to solve social problems. Specifically, social entrepreneurship accepts the mission to create and maintain social values. The entrepreneur accepts the mission of rational usage of resources in order to achieve the above-mentioned objective. Of course, the organization is a framework for achieving specific results in accordance with the possibilities. Business entrepreneurship is reflected through the prism of profitability and return on inputs through crystallization of the results. Social entrepreneurship takes into account the positive repercussions for society as a type of ecological, cultural and social feedback, as well as non-profit reasons. Profit may be a good reason for some companies and enterprises. The world is talking about corporate social entrepreneurship. Notable names of social entrepreneurship are William „Bill” Drayton, Michael Young, Daniel Bell,... Bill Drayton founded Ashoka: So-cial Innovators, a non-profit organization supporting social entrepreneurship in 1981. The organization operates in 70 countries and brings together over 2,000 of social entrepre-neurs. British sociologist Michael Young (August 9, 1915- January 14, 2002) was the chief promoter of entrepreneurship in the last century until the nineties. He introduces the concept of the so-called meritocracy (political philosophy according to which individual rights must be deserved). It also consider protagonist of social reform and as founder of a number of important and socially beneficial organizations (consumer associations, the National Consumer Council, the Open University and National College and a business based on telephonic interpretation. Daniel Bell is the founder of a large number of organi-zations including The School for Social Entrepreneurs.Political entrepreneurship is reflected in the functioning of political parties, i.e. the reali-zation of benefits, subsidies and other benefits through the party by the businesspersons, its members.Scientific entrepreneurship describes the ability to identify or create opportunities and taking action aimed at the realization of innovative knowledge and services. The goal of the scientific enterprise is not to make profit but to achieve more efficient and fruitful business. Professors, researchers and non-profit educational institutions find their refuge in scientific entrepreneurship.

3. MAN AND SCIENCE

Today’s man is different from that at the beginning of the last century by the fact it is using more information technologies and lives quickly, trying to catch up with the upcoming trends while preserving the foundation upon which the rest of humanity is based on. „In a democratic society such it is today, there are a number of limitations. Ignoring these

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limitations regarding the science includes giving wrong recommendations and completely authentic violation of the profession”.3

The main resource for the development of the economy is the man who will carry out fundamental changes at the beginning of the 21st century in the fields of science, educa-tion and technology. In order to survive, the company must take into account the energy, namely, the survival of modern society depends on reliable energy supply, industrial pro-duction, transportation of people, goods and services and transfer of information and communication. The question is – how to direct knowledge and intellectual resources to provide technology solutions that will enable us to achieve the desired growth and competitiveness. It is necessary to invest as much as possible in research, innovation, and creative activities that will stimulate the creation.To study the use of modern technologies in order to thoroughly approach to this „prob-lem”, it is recommendable to create a special institute. The main activity of the institute would be to create professional reports in certain technology areas in the context of encouraging entrepreneurship and science. „It could be said that the history of science consists in refuting insights that were previously regarded as inviolable...”4 To engage a number of elite technological experts in areas including IKT and thereby strengthen their potential as a whole. Strengthening of competitiveness provides the following benefits:

• Strategicgeographicalposition,• Favorableinvestmentclimateandbusiness• Supportivefiscalandfinancialsystem,• Highly-skilledworkforce,• Modernlegalframework,• Infrastructure,• Regionalaccessibility• Telecommunicationsystemsandnumerouscultural,entertainment,sportingand

recreational facilities

According to the words of professor Madzar5, we can conclude that, „Technological pro-gress is the process of spreading sets and changing their composition, at the principled level at which there are defined and productive meetings and abstract technology as a way of articulating their properties, the introduction of technical progresses doesn’t change the analytical based on which the technology is modeled. There are other ways of geometric displaying of alternative technologies. They are mostly confined to formalized presenta-tion of alternatives through the isoquant. When it comes to technical progress, the most common is moving isoquant toward the origin. This means that generally no need to articulate in detail all sub-variants, the same volume of production is encourages with the involvement or spending of all or smaller amount of resources.”

3 LJ. Madžar, Iskušenja ekonomske politike u Srbiji, Sl. Glasnik, Beograd, 2011., str. 215.4 LJ. Madžar, Iskušenja ekonomske politike u Srbiji, Sl. Glasnik, Beograd, 2011., str. 222.5 Lj., Madžar, Planerska hrestomatija, Teorija proizvodnje i privrednog rasta, I tom, Savezni

sekretarijat za razvoj nauke, Beograd, 2002. Str. 340–343.

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4. IMPLEMENTATION OF INNOVATIONS IN SERVICE ENTREPRENEURSHIP

Technological changes are directly correlated with the technological cycle that represents a cycle that begins with the advent of new technology and ends when that technology reaches its ultimate limits and is replaced with a new one. Almost all of the technological inventions follow a typical pattern of innovation of the „S” letter. It is well known that organizations cannot afford to provide a competitive advantage if they have a distinctive competence that allows them to make, do or perform something better than their com-petitors perform. Competitive advantage becomes sustainable if other companies of given distinctive competence cannot repeat the same. Technological competition can provide the same benefits as those of distinctive competence. In order to survive, the company needs to follow the course of their own innovative ideas and products, so-called innova-tive flow.Innovative flow is defined as patterns of innovation that eventually turns and that can create a sustainable competitive advantage. Innovative flow begins with technological dis-continuity, when a scientific discovery or a unique combination of existing technologies provide a major breakthrough in performance or functionality followed by revolutionary changes characterized by replacement of technology and competition in design. Compet-ing in the design is in fact competition between old and new technologies in the establish-ment of new standards or dominant designs. The dominant design is a new technologi-cal process that becomes accepted standard on the market. In that way, incremental i.e. gradual changes alternate with revolutionary changes. Incremental change is the stage of technological cycle in which companies innovate by reducing costs and improving the functionality and performance of the dominant technological design.One of the implications of technological innovation cycles and trends is a multi – canal era in banking where banks are trying to create valuable relationships with clients knowing equally good how to manage innovation in two very different situations – in the process of revolutionary changes as well as in the phase of incremental changes. Overall banking experience involves the processing of large data to identify customer needs in order to create a strategy for identifying them. There are four pillars of modern banking: the next generation branches, mobile banking, social networks and video (CISCO).Innovation comes from great ideas so it is important to manage the sources of innovation. The sources of innovation are people, means managing people and everything that is con-nected to the people, i.e., working environment, so flow of ideas is becoming crucial. Crea-tive working environment requires support (Adobe, the company that produces software for business and publishing, every three months organize the presentation of ideas, where presenters get ten minutes to present one of their ideas for the production, packaging, technology, etc.).In addition to support, the freedom of thought and decision-making that is formed under the influence of responsibility is also important, freedom means having autonomy in daily work and a sense of personal responsibility and control over its own work and ideas. Free-dom is a prerequisite for successful defining of the ideas.When it comes to managing innovation, it is necessary to mention the experiential ap-proach to managing innovation in the process of revolutionary changes and access to summarizing. Companies that implement an experiential approach to innovation in the

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case of revolutionary changes show excellent results. Experiential approach to innovation is an approach based on the assumption that the environment is very uncertain and we should use intuition, flexible options and direct experience to reduce uncertainty and ac-celerate learning and understanding.If wants to improve the design, company is working on the prototype of the service or product, then the model is tested to verify the design, functionality and reliability i.e. quality. Testing is a systematic comparison of different options for the design. So-called multi-functional teams are still of crucial importance. Multifunctional teams are working teams composed of people from different areas. These teams allow faster learning and understanding of phenomena on the market as well as mastering techniques to win the market. The most important thing is the fact that multifunctional teams accelerate the process of innovation. The approach based on summarization assumes that innovation is a predictable process, that incremental innovation can be planned using a series of steps while the summariza-tion of these steps can speed up innovation. Planning incremental innovation is most often based on the idea of generational change. Generational change is change based on incremental improvements of dominant technological designs that have been designed to allow improved technology to be fully compatible with older technology. Implementation of innovation should serve as a good example of achieving competitiveness.Innovations are the intangible capital for the growth and development of a service en-terprise with the positive trend of research and development projects.6 Joseph Stiglitz, American Nobel laureate in economics and professor of macroeconomics at Columbia University, believes that we need new ideas for a new world. The European Commission has published a White Paper citing that the role of market forces will encourage operators to reduce their costs, improve service quality and increase innovation.7 William Baumol in his book „The Free-Market Innovation Machine,” pointed out that there are reasons for optimism for the future and it is because innovation creates a new one and thus created an innovative flywheel. For example, computer has created the need for a mouse, a dirigible created the need for a parachute, etc. a competition stimulates innovation while innova-tion stimulates competition.8

5. ENVIRONMENT AND CULTURE OF SERVICE ENTREPRENEURSHIP

An important business factor is the general environment, both internally and externally. External (factors and events occur outside the company who can act or affect on it), an en-vironment that is used as an independent variable can be universal, variable and specific. General environment is characterized by social and historical components, technological components and business performance. Specific environments are customers, competi-tors, suppliers, regulations, and lobby. What is important to note is the more favorable cli-mate for the realization of the loan. Better information on the individual and cluster level.

6 New Building Blocks for Jobs and Economic Growth: Intangible Assets as Sources of Increased Productivity and Enterprise Value, Report of a Conference by Athena Alliance, 2011.

7 Theo Hitris, Ekonomika EU, Institut z aekonomiku i finansije, Beograd, 2003, str. 263.8 Vilijam Baumol, Inovativna mašinerija slobodnog tržišta, analiza čudesnog rasta u kapitalizmu,

Fondacija postdiplomskih studija, Preduzetnička ekonomija, Podgorica,2006, str. 78

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The internal environment refers to the events and trends that affect the organization of the management, employees and the organizational culture. Organizational culture en-compasses values, beliefs, attitudes that are common to all members of an organization. Favorable environment also influences the creativity and innovation of employees.On the other hand, the business culture has high impact. Key aspects of successful organi-zational culture are adaptability, employee participation, vision, strong individual cultures. Adaptability is the ability to notice changes in the environment of the organization and to timely react. Employee participation is high in successful corporations, for example, Genenkor companies allowed their employees to influence even the architectural design. The most important values of culture in the service business are success and respect. It is necessary that the organization operate as a living organism, because in that way, all errors will be reduced to a minimum. Consistent organizational culture means that the company actively defines and conveys organizational values, beliefs and attitudes.Basic levels of organizational culture are apparent (symbolic characteristics, the dress code, the behavior of workers and managers), what you hear (what people say, how de-cisions are made and explained) what is believed (widely accepted beliefs hidden deep below the surface, rarely discussed). Introducing the new behavior is the process during which the managers and employees seek to adopt new behaviors that constitute the basis and symbol of a new organizational culture that the company wants to create. One of the main ways of changing the organizational culture is through observable characteristics (design, office design, and the dress code of the company, benefits and special offers that the company provides to employees).In order for companies to be successful, it is necessary to incorporate change management in their working code and the ability to create and capture new technology and work pro-cesses. Needed transformation involves the following steps: re-engineering, restructuring, quality programming, changing the culture and way of life but also mergers of companies (e.g. Nokia and Siemens). Reengineering has become a panacea that in times of crisis was attributed to companies in order to survive. Today, all areas are closely related. Strong institutions in the globalization process are the basis of prosperity and economic develop-ment in the world and a successful engineering. Authors who are skeptical regarding the economic globalization argue that the process should be viewed through the categories of trans-national corporations based in the U.S., Japan and Europe.The crisis is an inevitable phase of the business cycle in which its overcoming is condi-tional on greater responsibility and freedom of decision and action under the influence of technological progress and purposeful economic policy. New knowledge and new com-petitive capabilities are necessary to handle obstacles to integration and prosperity. It is necessary to eliminate errors in the theoretical models, keeping in mind that economic issues are now completely open. Linking capacity home should provide a stronger and more stable foundation for economic recovery through engineering and re-engineering of the economy.The social responsibility is an obligation of the company to pursue policies, make deci-sions and take actions that benefit society. Social responsibility can be economic, legal, ethical and discretionary. Economic responsibility is an expectation that the company will make a profit by producing valuable products or services in a sustainable way. Legal li-ability is the social responsibility of the company to comply with state laws and regula-tions. At the end, the ethical responsibility is the social responsibility of companies that

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its business activities do not violate accepted principles defining what is right and what is wrong. Discretionary responsibility is an expectation that the company will voluntarily perform a social role that goes beyond its economic, legal and ethical responsibilities. At the beginning of the third millennium, ethics has profiled in a scientific discipline in all areas including the economy.

6. RESUME

The first thing to do is to set smart goals – these are the specific, measurable, achievable and also realistic and well-timed goals. Creating of a commitment to a goal represent the determination to achieve a certain goal as a matter of good will and character of managers and employees. The action plan is in fact a concrete action, people and resources necessary to achieving a certain goal. Monitoring progress in achieving the goals requires defining close short-term and long-term goals that are primary. Another way to monitor progress is to collect and provide feedback on performance. Maintaining flexibility means planning the multiple options that mean the willingness to invest in many alternative plans, as op-posed to traditional planning. In times of interdisciplinarity in all areas, the engineering as well as a comprehensive science that encompasses all others received great importance. It is the same with economic engineering, which in terms of the applied cutting-edge technologies in the implementation of strategic operational functions finds its use in the service entrepreneurship.

REFERENCES

[1] Burda, Majkl, Čarls,Viploš, Makroekonomija, Evropski udžbenik, Ekonomski fakultet, Beograd, 2012.

[2] George, Soros, The new paradigm for finnacial markets, the credit crisis 2008 and what it means, Perseus books group, Amerika, Fladelfija, 2008.

[3] Kotler, Philip, John A. Casolione, Chaotics, the business of managing and marketing in the age of turbulence, AMACOM, New York, 2009.

[4] Doroshenko, Yuri, Somina, Irina, Radosavljević, Života, National innovation system: the fundamentalapproaches to definition and evaluation, vol.2, International journal of economics and law, 2011.

[5] Đukić, P., Pavlovski, M., Ekology and society, Ekocentar, Beograd, 1999.[6] Ebner, A., Shumpeter and the Schmoller, programm: Integrating Theory and

History in the Analysis of Economic Development, Journal of Evolutionary Economics, 2000.

[7] Iljin, Put duhovne obnove, Logos, Biblioteka ruski Bogotražitelji, Beograd, 1998.[8] Jansson, Jan, Owen, Economics of the services, Edward Elgar, USA, 2007.[9] Kirzner, I., Entrepreneural Discovery and the Competitive Market Process: An

Austrian Approach, Journal of Economic Literature, Vol. 35, March, 1997.[10] Madžar, LJ., Ekonomski potencijali otvorenog društva, Ekonomski anali, No.149–

150, 2001.[11] McMillan, J., Woodruff, C., The Central Role of Entrepreneurs in Transition

Economies, Journal of Economic Perspectives, Vol. 16, No. 3, 2002

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[12] Madžar, Ljubomir, Planerska hrestomatija, Teorija proizvodnje i privrednog rasta, I tom, Savezni sekretarijat za razvoj nauke, Beograd, 2002. Str. 340–343.

[13] Madžar, LJ., Iskušenja ekonomske politike u Srbiji, Sl. Glasnik, Beograd, 2011., str. 222.

[14] Marković, Aca, Holistički pristup upravljanju, EPS, Beograd, 2010.[15] Mikić,D., Sanja, Ekonomski aspekti ekoloških projekata, Ekonomski pogledi, vol. 2,

Ekonomski fakultet, Priština, 2010.[16] R. Constanza, The science and management of sustainability, Ecological economics,

Columbia university, NY, 2009.[17] Radosavljević, M., Radosavljević, D., Somina, I., Inovation and motivation as key

success factors, International journal of economics and law, Vol. 1, No.3, Novi Sad, 2011.

[18] Stiglitz, Joseph, Ekonomija javnog sektora, Ekonomski fakultet, Beograd, 2007. [19] Samardžić, Slobodan, Gavrilović – Gagović, Slavica,“Tendencije uslužnog sektora

privrede srbije“, Tržište-Novac-Kapital br. 2, april – jun, 2011.[20] Chesnokov, V., Creative enterpreneurship: Nature and subject matter, International

jjournal of economics and law, Vol. 1, No. 3, 2011.

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COMPROMISE AS NECESSARY CONCEPT OF ORGANIZATION AND MANAGEMENT

Radosavljević DraganaFaculty of Business Studies and Law, Belgrade, Serbia

[email protected]đelković Aleksandar

Faculty of Business Studies and Law, Belgrade, SerbiaPanagopoulos Alexios

National College, Patris, Greece

Abstract: Even in ancient times, people used to compete, or even fight with each other in order to create prestige on numerous issues. The reasons for the conflict were diverse: mastery over a particular terri-tory, expression of machismo in order to win the gentler sex, or providing large quantities of food, better cuts of meat, concerning other tribes, etc. In industrial organizations, the interests are more or less the basis of every conflict, and extreme antagonism could even lead to strikes, work stoppages, and even war.In modern conditions interests for the most part become the main reasons for the conflict. Evolutionary psychology theorists point out that the man still retains the mentality of hunting and gathering fruit from the Stone Age, as well as the needs, impulses and inclinations. People today still look for traits that facilitated survival in the past, such as the instinct to fight for survival when they are in danger, to acquire new knowledge and skills in order to master other men, etc. In such circumstances, winners and losers, and conflicts are being created. The entire business infrastructure today is designed upon interest postulates, in which there are winners and losers, superiors and subordinates, favored and neglected.This paper aims to point out compromise as a concept in modern conditions that can be used to build new relationships and values, and that would eliminate or marginalize the rivalry, competition, and conflict, conditions where all the elements of natural order would win, i.e. would minimize their losses.

Keywords: Compromise, phases of compromise, inclination for compromise.

INTRODUCTION

The fact is that we live in a world where people’s needs constantly increase, and at the same time the natural resources with which to meet these needs are becoming smaller and smaller. Darwin in his theory of natural selection stated that stronger swallow the inferior, and that human beings share a common heritage with all other species in the natural order. We should add one more alpha plus, and that is that every single person and organization are based on interests, and that there is no organization in the wider context that is without interests or economic dimension as final in every society.This statement alone indicates and proves that life is based on the strugglein which only the strongest survive, and only the fastest in modern business. This is true for humans and

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COMPROMISE AS NECESSARY...Radosavljević D., Anđelković A., Panagopoulos A.

for animals and plants. Each of these elements of the natural order individually as well as collectively stands in natural and social inter dependence and the causal connections and relationships.Thus, the natural and social orders are subject to permanent threats and conflicts of which they are often not aware.In these circumstances and conditions, it is necessary to find the tools and concepts that will reduce the”friction” between the various elements of the natural and social order. The concept of natural selection which had been transferred to the sphere of business and where might makes right, should be replaced with a new system of values in which the loss of an organization is not a condition for the survival and progress of other organizations or individuals.One way of eliminating conflicts, or its marginalization in the natural or-der, are genetic mutations that produce avariation, such as hearing improving, or sharper teeth, or smaller horns. This way the characteristics of the types that need to survive and develop under the laws of natural selection are upgraded. Thus, genetic mutations area sort of compromise in the natural order, which by analogy can be applied to organiza-tional systems.[1]A similar situation exists in organizational systems. Namely, for social or organizational systems it is necessary to introduce compromise or concessions as the primary principle of organization and management. Having said that,it should be noted that compromise is not a goal, but it is a quality instrument for achieving the defined objectives. A key issue in this concept is how to introduce the technology to establish a compromise and preferences of individuals and groups to compromise.

1. HOW TO REACH COMPROMISE?

Compromise tries to balance relationships and interests between people. The starting point is that no individual or part of the organization can maximize their interests, be-cause it conflicts with other individuals, or parts of the organization.This raises the ques-tion of why people behave in a way that does not bring any good, but brings damage for all. Evolutionary psychology as science tries to answer this question. Each one of them is trying to accomplish as much interest as he can, or to get as much as possible from the common ‘pie.’ When these differences in interests become so large, the ‘losers’try to gain a more favorable position, thus causing conflicts, including war conflicts which cause a lot of damage, i.e. problems, which can still be felt in the long run.Conflicts of interest of individuals, organizations and social organizations most success-fully can be reconciled if each participant in the conflict gives up something in order to reach equality, and to avoid situations in which there are winners and losers. This method of alignment of interest is called compromise. In contemporary management it represents a primary principle in which none of the participants feels defeated,but we all feel like winners.The opposite of compromise is malevolent and exclusivity, i.e. inability to accept conces-sions. [2] These two phenomena are especially harmful for manager is and leaders. Stra-tegic managers’ in ability to compromise typically leads to autocratic management style, with a tendency for autocracy to turn into a dictatorship. Exclusivity leads to disintegra-tion in which individuals move away from each other and try to act autonomously. It turns out that the in ability to compromise may not always be seen as a bad thing.The only thing worse are managers for whom compromise is always acceptable.

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Reaching compromise is becoming one of the most complexissues in managing organi-zational systems. It will in the future gain in importance, because there will be a growing inter dependence between players in business and in other activities, which will inevitably lead to conflicts of interest.In these circumstances, when all the people, organizations and countries are put in a situation where their interests are harmonized through the free will, the conditions for homogenization and harmonization in achieving business goals are being created.[3]Management or team leader who leads negotiations must evaluate the possibility of es-tablishing a compromise to avoid was tingun necessary energy.Compromise as a way of resolving or preventing conflictis not suitable in following cases:

• Whenthereisnomotivationtoresolveproblemorconflict• Whenoneofthepartiesdoesnotkeepagreements,• Whenthereisathreat,orfeartoreachanagreement• Whenthereisalargeasymmetryofpowerbetweentheparties,• Ifthereareelementsofabuse,• Ifunauthorizedpersonparticipateincompromise

When it is determined that there is possibility of compromise, the problem is how to reach it. This is the most difficult question because every situation is unique, and each team also has its specifics that must be taken into account.In the natural order, or in the animal world, we have the rule of the stronger and natural selection. Symbols of strength for animal spe-cies are: speed, massiveness, height, jaws, claws, etc.People tend to imitate behavior of ani-mals. Modalities of compromise and the way their establishment may be different. What is certain is that there is no universal concept for the establishment of compromise.People live below their natural features and resources, including the exclusion and inability to use compromise as a way of resolving conflict. According to estimates, should organizational behavior change and should people start to use compromise more, personal and business success would be greater, and people and organizations would be happier, courts would be less burdened, business success would increase. However, it is shown that the exclusivity is largely present in organizational systems today. This forms the conditions for the creation of various modalities of autocratic style and dictatorship. [3]The biggest problem of compromise is not the relationship between two or more people, but the man himself, i.e. whether and to what extent each individual is will not compro-mise, both within himself and towards himself. And, naturally, this also depends on the situation in which we search for compromise. The least chance for compromise is when survival of the people is threatened, which corresponds to the old wisdom: ‘he who is drowning will accept anything and everything.’Compromise never occurs by itself. It must be managed just like other phenomena. The most important thing is to determine the causes of conflict, and in accordance with the specified design,build a system that will eliminate or marginalize the source of the con-flict.Given that the interest is the major cause of conflict, it is in the sphere of interest we should usually seek the reason for the application of compromise.The most important part is to manage our own emotions. No matter that the classical management requires the elimination of emotions, the fact is that they can never be suppressed completely. Even if this was possible, it would be harmful. Emotional psychology further warns us of this, em-phasizing that emotions can never become pletely suppressed and that they have primacy over the intellect, or the mind. [1]

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Practice shows that compromise is reached when the conflict is evident and when it had escalated. Skilled managers are trying to compromise by eliminating the consequences, rather than to eliminate the causes that led to the conflict. There fore, in future, those who prevent the occurrence of the problem, not those who can successfully solve problems shall be successful.The best way to establish compromise is to take the role of the party that refuses to com-promise and search for reasons why there is no willingness to try to solve problems. On the other hand, the old wisdom says: „Treat others the way you would like them to treat you.”This is the best recommendation for the elimination of reasons for the emergence of conflict, or establishing compromise.Compromise is closely related to communication. If there is no communication, it is im-possible to reach compromise. Hence the need to always keep a minimum of communica-tion, even with the conflicting parties, so that in certain situations we might try for conflict resolution.In a dynamic communication, people get to know each other better, and then better understand each other, and this leads to behavior change or correction of certain attitudes. Analyses show that the lack of communication between spouses is one of the most important factors in divorce. The partners comprehend problems in different ways. In these circumstances,the partners with draw into their own quarters, cease communica-tion, burrow into their own”bunker” and defend their positions, and in the case of each remaining in their positions, divorce is inevitable. Therefore, in the process of divorce the first step is to try and find compromise.

2. PHASES IN REACHING COMPROMISE

Man in everyday life and work makes concessions; often he is not ever aware of that. Ex-ecutives in over 40% of cases do not compromise, and those who do usually do not know the techniques and phases of compromise. A large number of managers is not willing to compromise and often respond that they rarely or never make compromises. It turns out that executives are largely uncompromising in the initial phase of conflict, and in time they ‘soften up’ and show willingness to communicate and make concessions.Practice has shown that compromise is accomplished through the three steps as follows:

• GivingInitiative• Reachingacompromise• Implementationofacompromise.

While any other approach is certainly possible, it seems that this approach is the most ap-propriate and at the same time the simplest. Each phase is important and each stands in causal connections and relationships.Giving initiative.This is the first step in which one of the participants in the conflicts how a willingness to find a common solution. Practice shows that many managers through their envoys make it clear to the partners their willingness to compromise. It is possible that, be forgiving the initiative, we seek to establish communication, which is a cure for many diseases and vanity. The party that offers compromise should not explicitly indicate the model of compromise, and economics sacrifices that they are ready to bear. At this stage we should perceive the readiness of the other side to accept our offered hand. Of course, this is the most complex phase, because a large number of individuals and organizations are not willing to offer the first solution,given that such a procedure is often assessed as a

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weakness. From the initial initiative we might see willingness, i.e. honest intent to reach compromise.Compromise. The aim of the previous activity was to come to a compromise. This is at the same time and most complex phase, as more concrete issues, harmonize and formalize agree-ments. The greatest effect is achieved if the compromise is done”step by step” and if the team involves people who were prone to compromise and have the patience to work on it. Practice shows that authorized people should participate in compromise. The biggest mistake is when you get into teams people who lack the power to negotiate and reach compromise. In this phase it is useful to include the persons who will be involved in the implementation.In this context, a compromise maybe difficult, or obtained with huge efforts. Practice shows that the best way to reach compromise is through consensus, i.e. partners should reach solution through their own free will. If a compromise is reached by voting, it is likely that the problem will arise in the implementation phase. Hence the need for compromise to be clear and formalized in writing.Implementation of compromise.Compromise should be implemented, which is the hard-est part of the job. At this stage, sides should be further willing to compromise, because often in the process of reaching a compromise not all the details are defined, and some can be interpreted differently. In the realization of compromise specialists who have the deployment skills should participate,or those with practical experience. It is useful for executives to be involved in reaching a compromise, in order to know the spirit and ideas which largely facilitate its implementation.The length of said phases may be different, depending on a number of factors. In any case, the one who takes the initiative should endeavour to reach compromise as soon as pos-sible, while the one who has been offered a compromise should stole. Yet, this principe should be taken with a grain of salt, because if it is evident that lack of compromise can lead to major damage to the interests of both sides, a compromise should be achieved as soon as possible.

3. WILLINGNESS TO COMPROMISE

Willingness to make concessions and compromise in conflict resolution and in life in general in the work of organizations and countries will increasingly gain importance. This is natural, because in the past, people and organizations were significantly more inde-pendent and were not in such interdependence, as it is today and will be in the future. Urbanization and concentration of population in large centers contributed to this, where people are doomed to make concessions to each other due to ever smaller space and with the increasing urban over crowding. If exclusivity, especially malignant exclusivity,gains in intensity, civilization will be in big trouble.Willingness to compromise is conditioned on a variety of situations, factors and personal-ity traits of the individuals involved in the conflict or compromise. It is not only a cultural and sociological phenomenon, but also economic, educational, gender, professional and other factors and forces. It is shown that adaptive societies have a greater inclination to-wards a compromise, which leads to the so-called adaptive strategy in which compromise is embedded as a way of functioning organizational system. Diversity in organizations for a number of grounds is a great wealth but at the same time a source of exclusion arising from prejudice.Different organizations require balancing, which reduces comfort. In these

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circumstances, „managers must know when to get their way, and when they can allow discussion in order to come to a compromise”. [4]Willingness to compromise is more expressed by people who have a more developed right brain. This is the side that has ability of creativity, intuition, improvisation and instant so-lutions to problems. Right side of the brain is based on the whole, i.e. it is able to shape the big picture first, which then it breaks down to parts; through the analysis of the whole it reaches qualitative conclusions for making business management decisions. This is espe-cially true for leaders, whose decisions and actions must be based on intuition, or leaders with a more developed right brain; the faster they sense a problem, the more able they are to offer better answers and solutions.On the other hand, the left side of the brain is capable of setting logical problems and reasoning, analytical, progress and compliance processes and procedures. It processes the information in a linear manner, that is, from the parts to the whole. In other words, the left hemisphere functions starting from the parts, then assembles them in a logical order, and based on this draws the final conclusions. Individuals who have a more developed left brain perform tasks according to predefined plans and priorities, and once they are finished they round out the process and prepare for new challenges.Determining the level of development of the left or right side of the brain is essential because this diagnosis makes it possible to focus on the side that is isless developed but significantly influences compromise. However, research shows that it is best when strate-gic managers have a balanced development of the left and right hemispheres of the brain. Thisis logical, as executive directors are found in a variety of situations to which they must respond. In other words, when necessary they have to think logically and methodological-ly, but at the same time they must be creative and unencumbered by rules and procedures.This statement also applies to compromise, which means that compromise will not always be applied, regardless of the extent to which this phenomenon is preferred by leaders.Science has found that nature is governed by simple rules, but the experiments did not confirm this view. This was also known to the ancient philosophers. Specifically, they felt that the great truths are simple and right in front of our eyes. Is it possible at the same time both to develop and maintain natural order? Is it possible to be rich and at the same time modest? Finally, is it possible to implement compromise and be successful, i.e. whether exclusivity itself brings business success or is it actually harmful.It turns out that there is no serious scientific claim to what extent compromise contrib-utes to the business performance, i.e. that exclusion is the cause of failure. Moreover, the practice shows that the exclusive leaders can be successful, especially in the short run. In this context, H. Ford was exclusive in relation to buyers of its cars. This can be inferred from his statement: ‘You can choose whatever color you want, provided that it is black.’ Naturally, this exclusion was possible only because during the reign of Ford it was not a problem to sell the car, as there was small and generally poor offer. Today Ford could not implement this strategy. Instead, Ford shall survive only if he seeks a compromise solu-tion, i.e. he must satisfy customers but also ensure his own survival. Due to the above, Ford factory outlived his owners, i.e. his founders. He shall continue to live provided that he respects the needs of customers, not if he continues to be same old Ford. [5]Steve Jobs , one of the most successful people in the last two decades for whom the first place was generally reserved in all the world’s list of the most successful businessmen in the world, did not accept compromise , but insisted on the phrase: ‘No compromise.’

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Strong personalities and people who have ideas and believe in their ideas and vision often can afford uncompromising behavior. This had both helped and undermined his work, and led him into trouble both with his superiors and with subordinates. Lack of com-promise was the novelty of his company, because most technology, i.e. innovative teams used to make only cosmetic enhancements to the product. He often pointed out: ‘I know I might be a little difficult for cooperation, but when you hold the product that I imagine in your hands, you are going to laugh about this ‘a little inconvenient for cooperation.’ Steve was exclusive when it comes to customers. He pointed out that customers do not know what they need and he’s the one who needs to show them what is most beneficial for them, which was largely undermined the classic marketing concept as a basis for making management decisions . [6]The situation is similar with other players from the world of social, business and cultural scene. Charismatic figures such as Alexander the Great, Napoleon, Živojin Misic and oth-ers were not inclined to compromise. For example, Napoleon used to say to his associates: ‘He who wants to be my equal will be shorter by the head.’ He often ignored the sugges-tions of his associates, which is the phenomenon of exclusion as the major problem in the management of complex systems. Napoleon and other military leaders had dazzling victories even against superior opponents. What is ignored is that the victories were ac-companied by massive human casualties and material losses. It must be borne in mind that any goal can be achieved, but the point is the fact that each goal be achieved with as little human and economic casualties. Surely, charisma, or the exclusivity of the above are not solutions; compromise indeed is the solution. Consequently, compromise is a neces-sity, but it is also both cost effective and a much better solution than exclusion.It should be noted that the improvement of tendency to compromise is neither fast nor easy to achieve. Evolutionary psychologists point out that significant change in human inclinations within the population through genetic modification would take tens of thou-sands of years. Hence their claim that the world will continue to change, but human beings will not, at least not the basic features that had existed even in human clans. [1]

4. CONCLUSION

The article identifies the need to establish compromise in modern conditions of life and work. It is shown that the increasing interdependence that objectively exists between all elements of the natural and social order, the uncertainty that exists in social organizations and business in general impose the need for the concept of compromise to be more enter-tained and thus to complete the relative gap that exists in science of management. Denial of compromise and application of exclusion in solving social and business problems will be less and less possible because the problems will be more and more complex, and com-petition bigger and bigger. In such cumstances, it is essential that managers of all types and levels learn techniques at all stages and problems in reaching a compromise.Naturally, management must show willingness to compromise because it is the basis of compromise not exclusion that natural order operates on. It is shown that in the world of great turbulence and ever more scarce natural resources on the one hand,and growing desire and needs of people on the other hand, there is still a place for everyone, provided that he is willing to make concessions. It turns out that the exclusion today is unacceptable and that in the future it will be incre a singly marginalized, which is only logical, because

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it creates conflict and it creates those defeated and wounded, and this group is more or less never reconciled to the situation, which leads to permanent conflict. In the end, it is useful to recall the saying of Lois Brandeis from 1856: ‘The old interpretation of good business meant a transaction in which one party received more than the other. A new sense of good business means a transaction in which both parties benefit.’

REFERENCES

[1] Nicholson, N.: How Hardwired is human behavior. HBR, juli-avgust 1998. pp. 136-147.

[2] Radosavljević, Ž. &i drugi: Samo-Organizacija. Novi Sad: FORKUP, 2011.[3] Vučenović, V.: Holistička teorija organizacije. Novi Sad: FORKUP, 2011.[4] Goffee, R. & Jones, G.: Creating the Best Workplace on Earth. HBR, maj 2013. P.9.[5] Radosavljević, Ž.: Tajne uspeha velikih imena svetskog biznisa. Beograd: DP

Pronalazaštvo, 2001.[6] Isaacson, W.: Steve Jobs. Forest Stewardship Council, 2011.

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CREATIVE IMITATION-RISK OR OPPORTUNITY?

Radosavljević MilanFaculty for Strategic and Operational Management, Belgrade, Serbia

[email protected] Iryna

University of Economics and Law «KROK» University, Kyiv, UkraineSchopf Karl

Akademie fur wissenschaftliche forchung und studium, Wien, Austria

Abstract: It is known that one starting from the first day to the present day succeeded in his work, thanks to continuous innovation and introduction of new technologies, organizational solutions and new approaches in general and philosophy. This is one of the most influential forces that have had a ma-jor impact on the overall social development and progress. Had man not innovated, he would remain at the level of the animals up to the present day.While innovation and new inventions rise to the level of the determining factors of success, yet imita-tion, as a creative process is neglected or underestimated, and in some cases considered to be immoral, illegal and harmful phenomenon. Copycats are often considered plagiarists who live at the expense of innovators, which resulted in the introduction of a number of protections, even at the global level.A deeper analysis show and prove that creative imitation is by its importance, if not more important, then certainly at the level of innovation. Given that there are centuries of misunderstandings and con-troversies regarding these issues, this article aims to shed light on the broader context of this issue and point out that creative imitation is not meaningless copying and plagiarism, or the repetition of some-thing bigger there, but it is a smart quest for improved functional and other characteristics of products or services, as the final results of any organization.The aim of the paper is not to provide definite answers to this problem, since there are no final answers, nor there can be, but to encourage a different way of thinking.

Keywords: creative imitation copycats.

1. INTRODUCTION

The modern world works on classical grounds, often on fallacies that last for decades, and some for several centuries. The numerous solutions are the result of a certain way of thinking, namely certain ideas and answered to a particular social moment, or tech-nical, organizational and other characteristics. These solutions have made an important contribution to human civilization in the past. However, it is shown that contemporary problems cannot be solved by obsolete and outdated concepts since problems often arise because they had not applied the concepts and approaches that suit the business environ-ment in general both in closer and wider environment. It turns out that the innovations in the industrial world are treated as the most important factor that has the greatest im-

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CREATIVE IMITATION-RISK OR OPPORTUNITY?Radosavljević M., Syngaivska I., Schopf K.

pact on business performance up to this day, whole innovators in the developed countries enjoy a special status, but also they provided benefit through legislation in the long run.Along with the above process and the tendency an imitation or creative imitation is pro-duced, which is illogical as a term, because if something is creative it cannot be an imi-tation while if it is an imitation it has nothing to do with creativity. Practice shows that imitation, creative imitation in particular, can be more important than innovation, which is a new approach in innovation management. This approach breaks down the century old stereotypes and misconceptions that exist in the legal, ethical, technical and economic fields, at the macro, mezo and micro levels. It turns out that imitation or creative imita-tion is not pointless duplication or repetition of something that already exists, but the intelligent pursuit of a better, more perfect, than the existing one. Any suggestion that commitment for making creative imitation an important role in the business sphere does not mean advocating „intellectual theft” because it is legally sanctioned and morally con-demned. The opening of the question is quality by itself, because all the scientific research-es show that many misconceptions have persisted for a long time, but they eventually had to be broken, and their places were occupied by new ways of thinking, often being the exact opposite of the first ones.

2. CREATIVE IMITATION AS THE MOST COMPLEX TYPE OF INNOVATION

Imitation or creative imitation occurred almost with the creation of innovation, or the moment when a man tried to set resources for work and improve the tools and weapons and make them more functional than the existing ones. The creative imitation by its com-plexity is placed into the sixth group of innovation. This ranking is in the top of complex-ity, because the highest level of complexity of innovation is considered to be the one where innovations bring revolutionary changes, such as the discovery of internal combustion engine, or the invention of electricity, and so on. Under the creative imitation are under-stood the scientific researches that build on already applied theories and innovation with which they create or enhance new products or services.1 Therefore creative imitation is a complex innovation, which is different from Schumpeter who in his famous works „The Theory of Economic Development”, observed the innovation as a force, namely the force that is capable to transform the economy and society from a state of simple circular mo-tion into the developmental trends and trends through new combinations of business fac-tors. In this view, only the first application of a new idea is considered an innovation, and every other application has not got the character of innovation nor of entrepreneurship. Of course, this understanding of economic theory, especially in the contemporary condi-tions has become unsustainable.2 It turns out that it is largely influenced the built of a clas-sic infrastructure, even at the global level, in order to protect innovation and reportedly rewarded the author or inventor. Thus, a law on the protection of copyrights was created, as well as a code of ethics which condemned the so called intellectual theft and imitators are prosecuted or placed on the pillory.

1 Z. Radosavljevic, The creative imitation, manuscript, 20132 These tasks can be seen in more detail: V. Vucenovic, Champion Management, NIP Educational

informatory, Belgrade, 2004, pg. 93.

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3. CREATIVE IMITATION BEING MORE IMPORTANT THAN INNOVATION

Research and analysis of contemporary business show that creativity is a key factor for the survival and success of individuals or organizations. This is confirmed by research conducted by IBM in the middle of the last decade which gathered over 1500 CEOs from 60 countries around the globe. The results of this study clearly indicate that CEOs believe that the success of the company for the time we live in is more than responsibility, disci-pline and integrity of individuals, and even more important than the vision and necessary creativity.3

Recent research, especially studies carried out by Oded Shenkar showed that imitation is, if not more important, then surely of the same importance for business and personal suc-cess, as well as innovation. Naturally, this finding is analogous to the statement where said that performing exercises on complex high education institutions of lectures and exercises that are more complex than teaching, and that they should be modeled by professors, not teaching assistants, as it is done today. This is natural, since the one who is performing the practical part of lectures has to know the theoretical and practical aspects of the is-sue, or issues, whereas in lectures theory is mainly being used in teaching. Oded Shenkar investigated the place and role of innovation in eight scientific and academic disciplines from history to medical science. In all cases, he came to the conclusion that imitation is the primary source of achieving business and personal success and progress.4 Professor Shenkar points out that of the 48 innovations he had investigated, 75% were plagiarized, as well as that percentage is growing, copying a growing trend. Examples in the automo-tive, textile, leather, fashion and cosmetics industry, construction machinery, as well as in the service industry such as banking systems, tourist destinations, shops (hypermarkets, supermarkets, electronic stores) and so on, confirm this. Usually some time passed before other manufacturers, or service providers copied the practice of those who first applied innovation. According to the data, GM introduced a new model army Spark, and only a year since the launch it was followed by a Chinese imitation QQ, which has exceeded six times the original sale. So, in this case 98% of the profits of the new phone went copycat, not an innovator. In other words, the innovator is awarded for the originality of their ideas and the efforts or costs which he did, and the main benefit is of the one who had waited and followed. A more detailed analysis shows that imitation is the search for new ideas and a permanent copy that enriches innovation and makes it acceptable, as in the wider context allows ex-pansion or its diffusion. It turns out that imitators work is based on the market reaction to the initial innovation and that the process of copying is often accompanied by functional improvement of original ideas. For example, Visa, MasterCard and American Express are the idea of plastic credit cards taken of the Diners Club, which invested heavily in a study of this technology. The situation is similar to the system of department stores which first emerged in Paris, and their model of organizational structure was adopted around the globe; electronic commerce and a host of other managerial, organizational, and techno-

3 The research was conducted by an experienced consulting firm from IBM department of Global Business Services, through interviews conducted face-to-face. In detail, the „Manager of the dolphin”, Belgrade, no. 191st November 2011, pg. 1

4 Oded Shenker, Interviewed at Harvard Business review, 2010, April, pg. 14-17

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logical innovation. Wal-Mart has admitted taking over from his predecessor. The secret is in taking original ideas or innovations from its predecessors, but also any changes in order to get a winning combination. It turns out that many of today’s giants from various indus-tries emerged on the basis of imitation and adaptation. Accordingly, the management sci-ence developed a special technique called benchmarking, developing concepts to explore best practices in a particular field and attempt to apply the same corporate systems.5

4. THE NECESSITY OF DIFFERNET THOUGHTS ON IMITATION

It has already been stated that creative imitation or emulation is one of the most complex types of innovation. Thus, imitation is the life law of nature. This characteristic is inherited from animals by humans and it is being carried for lifetime. Thanks to creative imitation, a man has survived, since he mimicked or imitated animals through education, improved living and working. It is sufficient to note that the man mimicked leaders in the pack of animals and sought to establish leadership, both leadership in life and work. Even today, after the experiments and observations of animals and people in a variety of conditions, scientists regard imitation as a complex and demanding process that requires high intel-ligence and cognitive ability. According to researchers who have been working with ani-mals, great apes have the ability to mimic what it takes to survive in a hostile environment despite physical disabilities. The same goes for the jungle that objectively exists today in the business world and beyond.”6

If in living and working, the same rule is applied- that we should take into consideration the reality, then there is a need to review the relationship of imitation and its treatment in the economic and social life. This is because it is now considered that imitation is unac-ceptable, that it being used only by incompetent followers and unethical people and or-ganizations. Accordingly, a set of regulations and standards stipulate prohibitions or sanc-tions for imitators and imitators. Even companies that accept imitation as a way of doing business, avoid operations that declare themselves as such, because of the characteristics and perceptions that imitators wear, but also because of numerous laws concerning the protection of intellectual property. It is argued that people learn from their earliest youth that copying other people’s ideas and modes of behavior is unworthy and inappropriate and that they must move towards originality as a way of life and work, even though no one knows what originality is and to what extent an individual can be the creator of the original and comprehensive ideas. In other words, in the modern hardly anyone can have exclusivity on an innovation, i.e. that it was his invention. It turns out that many, who have explored and have failed, are also responsible for an innovation or innovator, because they suggest that researchers and followers need to go in a different direction. If this were not the case, many would always begin from the start and would not achieve certain innova-tions.It is shown that imitators improve or adapt an innovation functionally to specific needs. To increase the chances for the implementation and promotion of innovation, it is neces-sary to step back from original ideas and original products, to develop options that enable

5 Радосавлевич М., Анджелкович М., Радосавлевич Ж., Необходимость измениния отношений к имитации, Международная научно-практическая конференция „Стратегические императиви совместного менеджмента“

6 Oded Shenker, Interviewed at Harvard Business review, 2010, April, pg. 14-17

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them to be more effectively used, which places an emphasis on creating a strategy imita-tion.The necessity of changing attitude towards imitation, especially the „creative imitation” or emulating is a radical and fundamental change, such as US-based production concept was changed by the middle of the last century or transformed into the marketing concept. It must be borne in mind that innovation and imitation have a common thread, and that they are the result of a thought process that is taking place at the same scenario. In other words, both of them are the result of conscious thinking and conscious activities of busi-ness men and are an intellectual activity. Many believe imitation is more complex, as the practice shows that many innovations follow the beaten track and go by familiar scientific paths, while imitation goes out of the box. It also appears that many innovations were cre-ated randomly, which is shown by an example of chewing gum, the one’s desire to have a bath created Buoyancy. Fleming, after long study of bacteria, left the dirty dishes from the experiment and went on vacation. Upon returning the bacteria multiplied, which resulted in the discovery of the origin of bacteria, and thus the discovery of penicillin,7 which is considered to be the strategic innovation in this period.The coincidence with creative imitation is disabled. Innovation and imitation are going through the same phases: the preparation phase, the phase of incubation, illumination and verification. The only difference can be seen in the preparation stage, as „Innovation comes from creative chaos, a creative imitation from the imperfection.” The phases of in-cubation and illumination are unconscious and automatic processes in both.Each innovation and imitation has three dimensions, namely: technical, economic and legal. Recently, the highlight is on the ethical dimension. By not underestimating others, the primary dimension is economic one, because every innovation or imitation that does not increase the economic impact of its author, or client who comes may not be accepted and doomed to failure. In the practice of innovation, dominated the legal dimension, and with it the number of disputes in which authorships were being proved or disputed, or setting a time period in which an innovation cannot be used, and so on. In contemporary practice, it is necessary to put emphasis on the economic dimension of innovation, since it ultimately determines the other two dimensions. Having this in mind in relation to the abandonment of classical imitation and innovation is necessary to change the conscious-ness of people, and then legislation that slows the diffusion of innovation. Accordingly legislative, even at the global level is not aimed at increasing commercial success, but quite the contrary it slows the progress of mankind. This is a logical observation, if we imagine where mankind would be, if the whole of human knowledge was made available to all, without the protection and preservation of the known and unknown quarters. Out of this, benefit the individuals, so-called innovators, but the question is how and how much of a modern economy one can have on the authorship of an idea or innovation. It comes more to plagiarism or imitation of an idea which is not transparent enough, so we can ask the question of moral when individuals or teams claim the results of many, often unknown to researchers.

7 http://metro-portal.hr/random-discoveries-that-have-changed-the world/37790

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5. SUMMARY

Practice shows that imitation in modern conditions has become a respectable factor of economic development, and relationship i.e. attitude towards this phenomenon has to be changed. One must keep in mind that imitation, imitation or copying is a natural phe-nomenon and that it is difficult to eliminate it, and was it possible and it would seem to be counterproductive. It turns out that a man copies the behavior of the animals, that children imitate their parents, workers their leaders, or their national leaders. Imitation is present in the sphere of business, as the companies look up at each other and copy their behavior and way of doing business. In other words, the world works on the basis of imi-tation, and we cannot deny it and oppose the at the same time legal standards which are backed by the most penalties, but we can take care of, or use it to improve personal and business success.Of course, everyday experience shows that some global companies see the plagiarism with approval, and often also support by the phrase „good players copy, the best steal.” The practice shows that the greatest effort and financial risk is owned by the innovator, and the greatest benefit by plagiarism, or imitators. Accordingly, it is shown that it is far better to be a plagiarist, instead an honest innovator. However, the above reason does not justify treating imitations in comparison to the old way, because it is a reality, and it is a necessity to manage the imitations.In other words, the problem of imitation and imitating certainly cannot solve only by the legislation and moral convictions. The solution is not to protect intellectual property rights through legislation and insisting on standards that have existed in the past (e.g. the product is different from the patented by 30%in order not to be plagiarism) are absurd. It turns out that innovators should be rewarded in a completely different way than it is done today, or through special innovation funds that would „fill” the effects of which were made imitators. In this context it is necessary to find the specific mechanisms, in order to abandon the existing stereotypes and accept new concepts and approaches to the spread of primarily creative imitation „, as the newspapers in the business world. Therefore, it can reasonably be concluded that the creative imitation is not a threat but an opportunity, both for individuals and business organizations, states and the world in general. In this context it is useful to recall the statement of Michael Eisner: There is not an idea that cannot be improved.”

REFERENCES

[1] „Manager of the dolphin”, Belgrade, no. 191st November 2011[2] Oded Shenker, Interviewed at Harvard Business review, 2010, April[3] Radosavljevic, Z., The creative imitation, manuscript, 2013[4] Radosavljevic, Z., et al., Self-organization, FORKUP, Novi Sad, 2011[5] Радосавлевич М., Анджелкович М., Радосавлевич Ж., Необходимость

измениния отношений к имитации, Международная научно-практическая конференция „Стратегические императиви совместного менеджмента“

[6] Vucenovic, V., Champion Management, NIP Educational informatory, Belgrade, 2004 http://metro-portal.hr/random-discoveries-that-have-changed-the world/37790

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COMPROMISE AS THE INSTRUMENT OF INCREASED SUCCESS

Radosavljević ŽivotaFaculty of Business Studies and Law, Belgrade, Serbia

[email protected]đelković Maja

Faculty for Business Studies and Law, Belgrade, SerbiaDoroshenko Yuri

Dean, Belgorod State Techinological University,named after V.G. Shukov, Belgorod, Russian Federation

Abstract. The fact is that we live in a world of great turbulence, interdependence and complexity. Any individual or parts stand in iterative relations with other parts of the organization, or the environ-ment. It turns out that no one is self-sufficient, but that everything is in constant and rapid motion, i.e. in relationship of dependency and causal relationships. In these new circumstances, it is necessary to introduce new concepts and approaches to the organization of joint life and work. It is shown that com-promise is one of the best instruments to achieve the above goals, but also to increase business success.In traditional organizations and management compromise was not considered and did not receive proper attention. Exclusivity used to be the dominant style in the design of individual modes of organi-zation, which is natural, because classical organizations were based on antagonism between owners and workers, states and organizations, etc. In these circumstances, any insistence on compromise was considered harmful and a sign of weakness, rather than concept that should increase effectiveness.This paper aims to highlight compromise as a new quality in strategic management of the systems and the necessity of its application in modern conditions, as well as the attitude of the governing elite in Serbia towards compromise.

Keywords: compromise, exclusivity, malignant exclusivity, compromise in Serbia.

1. NECESSITY OF COMPROMISE

However, it can be concluded that exclusivity, i.e. unwillingness to make concessions very dangerous for individuals and organizations. Everyday practice shows that ‘too large ant-lers are a group of properties that can be called smart for one, dumb for the other.’ [1] Accordingly, compromise and the ability to go toward solving the problem, or the elimina-tion of the causes that can cause problems is more acceptable. In other words, compromise should be pursued, but whether it will be reached depends on a number of facts and situ-ations.

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COMPROMISE AS THE INSTRUMENT OF...Radosavljević Ž., Anđelković M., Doroshenko Y.

Compromise is in the subconscious of every man. If someone is treated right, he feels the need to reciprocate in the same way. Compromise has a special place in business, or in the negotiations with people with whom we intend to do business in the long run.Compromise is one of the most powerful weapons in the business world. The law devel-oped specific techniques for resolving disputes, such as conciliation, mediation, media-tion teams to coordinate, etc. General’s efforts tend to point out to interested parties the necessity of giving up their maximalist demands, in order to come up with a solution where each partner or party is a winner, if there is an agreement. Another way to achieve compromise is when the parties have defined the arbitral authority to rule, providing that partners agree in advance that they will respect his decision. Any dispute can be resolved through legal means, i.e. through laws, but this is the worst solution because it is the result of authority being imposed by the state or other institutions. The question is whether here we can speak of compromise in the first place?Compromise is mostly applied in negotiations, but it is also applied in everyday life. Wher-ever he appeares, compromise means to give away something in order for both sides to be satisfied and reap benefit. Love is impossible without compromise, and it actually means to give up some of our demands in order to gain the trust of another person. Courtship is already the beginning of the process that leads to compromise.Willingness to compromise is shown by the person who first proposes concessions. In negotiations, this willingness should not be too evident. If a man is willing to offer conces-sions, he gives the first initiative and should be ready to do more, without reply from the other side. Most retailers know this and try to use compromise as a necessary solution, when it is estimated that its achievement is less harmful than not to reach agreement at all. Premature attempts to reach compromise are the first symptom which shows signs of manipulation, because, as Howard Hughes says: ‘Once you make a concession, there is no way you can go back to the beginning.”Compromise is impossible without mutual concessions of partners. „Every concession you make in negotiations should correspond to equal or greater concessions from the other party.” If the other party is asking for concession, we can give it, but it should never be fail to ask for something else in return. If you are not asking for reciprocal concessions, it shall be deemed that your concession has no value and will not be used in the course of negotiations.’ [2] It is shown that the most important journey is the journy where partners can meet each other halfway.Both sides should feel that they are winning. In other words, compromise is a skill of dividing a cake in such a way that everybody believes that they got the biggest piece. If this is not achieved, i.e. if the partners in business are not satisfied, there is no deal, and we should not enter this deal for it cannot last. This unfortunately is not the practice in a large number of negotiation in business, but people continue to try for compromise that had failed at an early stage.

2. COMPROMISE BETWEEN ORGANIZATION AND PERSONAL INTEREST

Quite a lot has been said about the relationship between organizational and personal goals and interests. A. Smith, Charles Darwin and T. Malthus used to emphasize the profound conflict between individual and group goals and interests. Darwin’s basic claim is that

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natural selection increases the individual reproductive success, but there are no claims to what extent they are also positive for all species. Other features help individual repro-ductive success, but also serve the interests of the whole group. For example, intelligence increases the reproductive success of individuals, but at the same time serves the broader interests of species or groups. Properties of the third type enhance individual interests but harm the larger group. Let us mention the huge antlers of male deer that serve as the function of its dominance in the herd to which it belongs, but at the same time increase the risk for the whole group when he finds himself in the jungle, to become the prey of other animals. Perhaps a male with large antlers would give up these benefits in order to reduce the risk in the forest from other animals, but it is simply impossible. Smaller or larger representation of the above characteristics conditions smaller or greater ability to compromise. Broader view of this issue was given by Adam Smith, when he emphasized the consequences opportunistic behavior of individuals, which can be applied analogously in explaining compromise. [3]Regardless of the variety, the views on the issue of individual and general, or organiza-tional interests and goals go into two directions. The first one is represented by the clas-sical organization and it says that organizational goals and interests are a priority and for them personal interests and goals should be sacrificed. This view is held by the owners or management as capital principals, and it is explained by the fact that people are organized primarily to achieve common organizational goals. If this does not happen, the organiza-tion can not survive, and these organizations are doomed to failure.On the other hand, the primacy of personal goals and interests arises from the nature of man as being of interest, as he is ready to make sacrifices to achieve personal goals and interests, or the interests of his offspring. This is explained by the fact that a man is will-ing to sacrifice himself for the organizational goals only if through this he can realize his interests. This is supported by statements by A. Smith, who notes that there is no greater happiness but personal happiness and that if a society consists of happy and satisfied in-dividuals, then it will be happy as a whole and beyond. Therefore, by achieving personal goals and interests of the organization, it is possible to achieve also organizational goals.The fact is that both extremes are not acceptable, indicating that the alignment of inter-ests between individuals or individuals and organizations, and between organizations and society, is one of the most complex issues in modern management and organization. This problem is manifested in the family, as the fundamental cell of every society. Based on the experience of life, people have come up with rational knowledge that conflicts of interest of both individuals and communities can be best solved if everyone gives up some of his interests in order to achieve certain equality. In this case there are no winners and losers, but each partner feels the winner, because he had achieved a particular interest. [4]Therefore, it is necessary to make compromise where personal interests have priority, but they need to be achieved through the organizational goals and success. Thus, if an indi-vidual achieves higher performance, he will receive more revenue thus providing better standard of living for himself and his family. Higher performance, i.e. productivity will be of benefit to the organization. Hence only satisfied employees can be productive and loyal to the organization. In just this kind of situation, the organization has the complete man, who is willing to increase efforts.The previous example clearly explains the necessity of compromise. The introduction of compromise prevents conflict, which typically leads to reduction in personal and busi-

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ness success. Organizations that start with balancing personal and organizational goals achieve better business results. Let us keep in mind that sacrifice of personal interests and goals in order to achieve organizational goals is possible only in the short run, but it is an exclusive case and as such is unacceptable. The same applies when it comes to personal interests. In this context, workers are organized by trade unions which can be organized to put pressure on the owners for the aforementioned extremes to be brough closer and to reach compromise.To illustrate the application of compromise we can use the examples in families, or house-holds where we find the greatest tolerance. Specifically, each member of the family should give up part of his liberty or of his interest, in order to achieve harmony in the family or household. A similar situation exists in the prevention of armed conflict between states, where each state has to give up some of its demands, in order to reach the solution, not to enlarge the problem. In other words, compromise is necessary wherever there are people with their attitudes, preferences and interests that are particular only to man as a reason-able living being. This means that other living beings do no t have the ability to establish compromise, although their genetic code indicates compromise in the animal world.

3. ORGANIZATIONS WHERE IT IS DIFFICULT TO REACH COMPROMISE

Implementation of compromise in organizational systems, channel marketing, or supply chain is determined by numerous, crucial factors. It is shown that in some societies, or-ganizations and other organized structures it is possible to compromise, it is possible for management and employees to try and solve the problem through compromise, while in others it is difficult or even impossible. It seems that the socio-cultural factors here have the greatest impact, which is natural, because compromise is primarily a matter of cul-ture, organizational behavior, but it primarily has the interest or the economic dimension. Bearing in mind that we here elaborate compromise on the level of organizational systems, research shows that compromise is difficult to accomplish in the following organizations:

• organizationsinwhichthereisextensivepresenceoflabor,i.e.people,• organizationsinwhichtherearediametricallyopposedinterestsbetweenindividu-

als and parts • organizationswheretheorganizationalbehaviorisbasedonexclusion,• organizationofbureaucraticandpolitickingtype• teamsandgroupswhereprofessionaldecisionsaremade.

Organizations that have a greater presence of labor, as a rule, have more „friction” between individuals, which inevitably leads to conflict. A typical example is the service sector where many operations can not be mechanized. Even if it were possible, it would often be inef-fective, because the service is best carried out by ‘two legs and two arms.’ [5] Accordingly, in these organizations there is less chance of compromise, due to different people, their interests, views and issues. In other words, highly automated business systems exclude people largely from individual business process, because the role of man in these systems is assumed by mechanisms and machines which operate in the way they had been con-structed by man. Information technology brought decentralization, deconcentration of la-bor, which means that jobs and tasks today can be performed at home creating less chance

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of antagonism between individuals. Therefore, management of these and similar systems is easier, because machines do not have their own views and interests, have nosense of the soul, it cannot be hurt or offended by anyone, so there is no need to compromise.The chances of a compromise are significantly lower in organizations where there is a big difference in status and interests between the various entities of the organization. Cer-tainly in slavery there could be no compromise between slave owners and slaves, because these two classes differ in status so compromise is very difficult to reach. Any insistence on this leads the subordinate class, i.e. individuals into a dangerous situation. Further, differ-ences in interests, for example between owners and workers, are often large and opposed, so compromise is often realized after the devastating strikes, work stoppages, and even conflict between owners and workers. The greater the difference in interests, they are less likely to compromise, and vice versa. [6]Research and everyday practice shows and proves that compromise is an effective cure for many diseases, i.e. for conflict resolution. To reach the above it is necessary to develop special culture and behavior, because compromise as well as tolerance can be learned. It is not something that is acquired by birth, but something that is acquired through life, through working together, learning together and working with people. It is shown that larger number of children in the family creates a positive atmosphere for the development of compromise. Further, children who used to go to kindergarten at an early age have a greater sense of community and they are usually more prone to compromise than children who lived alone and often did not have the need for tolerance and concessions. The same applies to business organizations. Craft worker who was working alone, was not inclined to compromise, but when the technical division of labor occurred a larger number of specialists became engaged, it was necessary to make permanent compromise. Therefore, each organization has to create such organizational behavior in which there will be a cer-tain tolerance that develops the tendency of individuals to compromise.Compromise as a phenomenon is problematic and difficult to achieve in societies and organizations that are based on exclusivity. These are primarily called apathetic organiza-tion, such as: religious, political organizations, military, police, prisons, etc. They all have some common, but also a number of special features. Exclusivity here is often considered a condition of their survival. However, with the emergence of democratic organizations and the development of democracy these organizations too have changed their traditional attitude toward this issue, and in many cases they must adopt tolerance and compromise.It is easier to reach compromise in organizations and groups where there is mutual com-munication and equal status of people. Therefore, compromise is not suitable for bureau-cratic and political organizations, especially when it comes to countries in transition. There is a high level of exclusivity and subordination, because orders flow from the top to the bottom, and from the bottom to the top of the hierarchical pyramid flow reports on completed orders. The starting point of any bureaucratic organization is that lower levels unconditionally execute orders from higher levels of hierarchical piradmide. The ‘deeper’ the organization, it is accompanied by a larger number of hierarchical levels, which makes it difficult to compromise. It is shown that political organizations of the transition coun-tries exhibit the highest level of exclusivity, as leaders in these structures are inviolable, even when they are wrong. Accordingly, these structures are dominated by exclusivity both by competitors as well when it comes to the relationship of leaders to other individu-als and groups in a political organization. The battle for domination and mastery is often

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transformed into malignant exclusivity, which multiplies the problems and conflicts at the level of the whole society. [7]Studies show and prove that the only area in which compromise cannot be present is the area of professional and high-risk decisions and their implementation. Therefore, there must be no compromise in professional work, and in making and implementing the deci-sions that are based on scientific grounds and where we must insist on the adopted and experimentally validated procedures and standards. For example, when ORL doctor oper-ates on tonsils, he can not go for compromise, and remove one tonsil and leave the other one in order to achieve balance. If that were to happen, the remaining tonsil would be a source of future problems and infections. Of course, an expert works within the rules of the profession, and every deviation leads to a decrease in performance, and often can lead a professional into a difficult situation, and even to legal disputes. Therefore, the physician must apply proven and validated scientific methods, and in the event that he fails to do so he runs the risk of large and numerous problems. He even must not compromise with the patient on this issue, because it is assumed that those are highly professional decisions in which every compromise would be dangerous and as such is unacceptable, which is logical because there can be no compromise between knowledge and ignorance. It turns out that the biggest obstacle to compromise is plain ignorance. If we want to increase the chances of compromise, people must be educated and adopt this way of behavior in all the turbulent conditions of life and work.But in modern medicine too there has been change in this regard. When it comes to slight infection, doctor may recommend antibiotics, but most doctors today do not reach for antibiotics because of their frequent and excessive use creating bacterial resistance. If doc-tors are exclusive not to prescribe antibiotics in treatment of ear infection or respiratory organs, the patient will go to a doctor who relatively easily prescribes antibiotics. Hence here too there must be compromise and patient’s attitude must be recognized.

4. CONCLUSION

The paper points out the problem of compromise as a tool and concept of management decision-making and generallly life and work, both of individuals and organizational systems. Although there is no significant scientific research to what extent compromise affects personal and business performance, it is widely accepted, and the only logical con-clusion is that it is more acceptable than exclusivity and uncompromising behavior and actions. This because exclusivity often leads to conflict; malignant exclusivity leads to dev-astating conflicts where both the players and the social and business scenes are devastated. Therefore, all things lead to conclusion that compromise is man’s the best friend; we must never forget that both in life and in business one does not get what he deserves but for he negotiates and achieves through compromise.In the future, the need for compromise will increase and exclusion will decrease. This con-clusion is logical, because interdependence between the different actors in the social and business scene shall continue to grow. No one will be self-sufficient, nor can he survive as an individual, but needs to be linked with other subjects with a high level of tolerance and compromise. Hence the need to focus more attention on compromise; it is both philoso-phy and business concept. Education in this matter must be mission of priority in societies in the future. It will undoubtedly become a significant factor in achieving social and busi-

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ness success. Regarding above, we should considere a quote from Lowell: ‘Compromise is a good umbrella, but quite often a bad roof.’

REFERENCES

[1] Frank, R.: The Economic Naturalist. Beograd: Laguna, 2007.[2] Tracy, B.: The 100 absolutely unbreakable laws of business success. San Francisko: BK,

2000.[3] Smit, A.: Istaživanje prirode i uzroka bogatstva naroda. Beograd: Kultura, 1970. [4] Vučenović, V.: Holistička teorija organizacije. Novi Sad: FORKUP, 2011.[5] Radosavljević, Ž.: Ekonomika trgovine. Beograd: CERK, 2006.[6] Radosavljević, M.: Holistička tehnologija uspešnosti. Novi Sad: FORKUP, 2011.[7] Radosavljević, Ž.: Kraj klasične države i nužnost nastanka ekonomske države. MK

ANTIM, Beograd, (april 2012).

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DEVELOPMENT OF SUCCESSFUL LONG-TERM...Ratković M., Marković J., Ratković S.

DEVELOPMENT OF SUCCESSFUL LONG-TERM RELATIONS WITH PARTICIPANTS IN THE SUPPLY

CHAIN AS THE FUNCTION OF INCREASE IN CUSTOMER SATISFACTION

Ratković C. Milijanka Faculty of Business Studies and Law, Belgrade, Serbia

[email protected],Marković Đ. Jovan

Faculty of Sport, University Union-Nikola Tesla, Belgrade, SerbiaRatković C. Snežana


Abstract: Consumer behavior in today’s environment is subject to more frequent changes in the expres-sion of sympathy for the products and services they consume. Because of these changes, participants in the value supply chain are forced to rethink their strategies and usually focus more efforts on creating quality long-term relationships with customers, but also with those who find themselves on this path of value delivery. The purpose of this paper is to highlight the importance of creating good long-term relationships with customers, and with other participants in the supply chain value to the end user. The aim of this paper is to highlight these relations as potential means of improving the overall operations of the participants in today’s market. At the same time, it is assumed that precisely this ability is a necessity for those who want to expand their business, but also to maintain a successful position in the global en-vironment. In addition to customer relationships, this paper will discuss the relations with partners and the public, with a special focus on the importance of relationships with employees. The above concerns will be placed in the context of relationship marketing and the importance of customer satisfaction will be discussed in more detail in terms of internal marketing.

Keywords: consumers, marketing relations, CRM, satisfaction, internal marketing

1. INTRODUCTION

Some of the main characteristics of today’s global marketplace are the presence of nu-merous competitors, the impact of information and communication technologies and the increasing expectations of consumers. Competition at the global level may pose a threat to some participants, but for some may be the possibility of establishing a mutually beneficial partnership. It seems that this type of claim is too general, but its logic is the fact that cur-rent information and communication technologies allow for the impact of competition in the global environment, either as a threat or potential cooperation. The development of information technology has changed familiar patterns of business behavior.[1] At the

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same time, the expectations of consumers globally are becoming greater as the selection of available products and services is now expanding, thus creating their satisfaction and loyalty becomes the primary focus of the participants in today’s business market.In the current environment of information and communication technologies and the im-pact of competition on a global level, it is increasingly difficult to create loyal customers. At the same time, policy makers, scholars and practitioners agree that e-business is an essential ingredient of socioeconomic advance of developing countries. [2] On the other hand, there are fewer opportunities to create differential advantages over competing prod-ucts and services, which implies that today’s marketers need to use the effects of establish-ing good relations with those who are in the supply chain value to the end user. Recent practice shows that marketing is not enought to meet expectations of the Bayers but also to offer additional value, which is a direct result of increased competition. [3] In this con-text, in addition to establishing a good long-term customer relationships, special attention should be directed toward building and maintaining good relationships with partners, then with the employees and with the public.The subject of this paper refers to the participants in the supply chain value to the end user. Thus, in the content that follows we shall discuss the importance of building good rela-tionships with all participants in the supply chain value. In the same way, the goal of this paper is to present these relations in the light of the possibilities of improving the overall business, and their construction as inevitable as a consequence of the lack of opportunities to achieve competitive advantages in other aspects of business operations in today’s en-vironment. The starting point of this analysis is the assumption that the establishment of good relations with the participants in the supply chain value affects the satisfaction of the consumer. Accordingly, the basic premise of the paper is that employee satisfaction affects customer satisfaction. The reason for separating these hypotheses as essential is the fact that the analysis of all the above relationships in the supply chain values and their influ-ence on consumer satisfaction, was too broad for a paper of this kind. Many authors, in-cluding Velari Zeithaml and Mary Jo Bitner claim that there is clear evidence that satisfied employees make consumers satisfied, and vice versa, the satisfied customer can strengthen the feeling of satisfaction of employees related to their work.[4] Therefore, there is special emphasis in this paper on the analysis of the impact of employee satisfaction on customer satisfaction, but also with emphasis on the importance of establishing good relations with the other participants.

2. MANAGING RELATIONSHIPS WITH CONSUMERS IN ORDER TO INCREASE THEIR SATISFACTION

To understand customer satisfaction, it is necessary to know how to form their expecta-tions. Consumers will be highly satisfied if their expectations are exceeded, and disap-pointed in the opposite situation. Expectations depend on the performance of the prod-uct / service, then from past experience, but also from the influence of people from the region who have already ‘tried’ the product. Also, expectations depend on both explicit and implicit promises of marketers through the mass media, but also in direct contact with customers in the shop in which they are exposed to a variety of stimulating effect. In addition to these impacts / factors in the formation of expectations, and thus satisfaction,

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the relationship that is established by the seller to the consumer in the performance of the purchase process is also important.The objective of the analysis of the factors of satisfaction is to create loyal customers. From satisfied and highly satisfied customers the company may have, in addition to the basic benefit related to their repurchase, also benefits from the affirmative presentation of the products they buy, as from the seller / manufacturer as such. As the influence of the envi-ronment stands out as one of the most important factors in shaping consumer behavior, so do loyal consumers become more and more important for the company. In order for the customer to gain confidence in the company, there must be a high degree of credibil-ity, reliability, intimacy and low self-determination, as shown through the so-called trust model formula, as follows: [5]

Trust = ( C + R + I ) / S gde je:C = credibility, R = reliability,

I = intimacy,S = self-orientation.

It can be said that the company’s profit depends on loyalty, while the precondition that increase their satisfaction on the basis of creating interactive and mutually beneficial re-lationship. In order to achieve long-term good relations between consumers and sellers it is necessary to create strategic loyalty programs that are based on market analysis and segmentation according to the characteristics of the consumer and their requirements. Such programs must include the following: [6]

• Theprocessoffocusingonpermanentcustomers;• Interfunctionalinvolvementofmanagement/employees;• Continuousrecruitmentandtrainingofmanagers/employees• Theprocessofcomparing,measuringandcontrol;• Continuousimprovementofproducts/services,etc.

In this way it is possible to establish a continuous process of improving the business, which is based on knowledge of the wants and desires of consumers. At the same time, the entire process of managing relationships with customers should be created according to the observed factors of consumer behavior, both potential and fixed ones.. The goal of this process is to establish excellent long-term relationships with existing customers and attract new ones, but also to expand the number and values of those loyal to us. Previous literature in this field highlights the three phases of consumer relationship management: [7] 1) winning, 2) retention, and 3) expansion of cooperation. At the same time, forms of behavior during the life cycle, i.e. consumer reactions can be shown through the fol-lowing stages: [8] awareness, testing, expansion, compliance, withdrawal. Proces CRM podrazumeva pronalaženje odgovarajućeg odnosa između ulaganja napora u povećanje satisfakcije potrošača sa jedne strane i ostvarenje profita sa druge. Dakle, kompanije se u kreiranju i isporuci veće vrednosti i satisfakcije kupcima moraju ponašati profitabilno.[9] It is undeniable that this is a very complex task, especially when you take into account the changing environment, global features of today’s market, increased competition and the

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impact of information and communication technologies, which are changing consumer demands and their expectations higher.CRM process that incorporates elements of current technology can be presented in a way that is shown in Figure 1. [10] This figure shows the interactive nature of the process of managing relationships with customers, which must be based on the company’s business strategy. This process includes the consideration of value received by the consumer, then the possibility of contact with him in physical and virtual environments, as well as the as-sessment of performance of the process. Figure 1 shows the relevant process flows, but for the purposes of the topics explored in this paper its main analysis is sufficient.

Figure 1: The interactive nature of the process of

customer relationship management [10]

the process is the key strategic resource for companies in today’s environment. [11] This process integrates current information and communication solutions and technologies, but also independently used and well-known marketing tools and techniques that have

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long been a way of approaching customers and creating good relationships. Nevertheless, in the context of current ICT solutions, well-known tools bring some new positive effects of the CRM process. That is why we can say that CRM has become a potentially important means of improving the business just when the ICT began its progressive growth and im-plementation of business activities. The main advantage of using the ICT is in the oppor-tunities for interactivity with a larger number of consumers than has ever been possible before. Thus, approaches such as one-to-one marketing gaining in breadth, and segmenta-tion of consumers according to various criteria becomes simpler than in the past. CRM based on current information and communication solution involves the use of various technologies, information resources, people, processes, and all this with the intention to improve the service that is directly related to the end user. [12] Therefore, the main pur-pose of the application of new ways of attracting customers and maintaining relationships with them is to improve services and thus increasing their satisfaction through the realiza-tion of interactive connections and relationships that involve the exchange of information and continuous communication. Some of the methods are shown in Figure 1, such as e-commerce, direct marketing, the use of mobile phones, but also the classic sales force and others. Tools and techniques that are within the above-mentioned ways of managing relationships with customers must be coordinated in a way that consumers perceive the offer as added value and thus better than competitive.

3. RELATIONSHIP MARKETING

Not uncommon for authors of articles in the field of relationship marketing to identify this concept with CRM. The reason for this lies in the fact that relations with the customers are main topic being discussed in the framework of relationship marketing. However, for a more detailed consideration of the possible positive outcomes of the implementation of relationship marketing, it is necessary to analyze this concept and relationships between employees, then the relationship with partners, and public relations. Latter are the subject of frequent analysis of the literature of marketing character, but in the context of the im-plementation of current ICT these relations can be improved Public relations as an impor-tant aspect of marketing occupy an increasingly important role in the overall strategy in today’s business environment. [13] Thus, public relations can be said to represent a well-known marketing tool that is now upgraded by current ICT, gaining, therefore, increasing importance. As such, public relations, can be viewed in the context of relationship market-ing as a tool that has its direct positive benefits, but that also can be used to attract new customers and maintain good long-term relationships with existing ones.Developing and maintaining relationships with partners in the chaneel of value delivery to the end operator-oriented in terms of potential competitive advantages of the current practice had already been earmarked as an important way to improve the process of CRM. Further, the establishment of partnership has direct positive economic outcomes for the overall operation of all those who are in the relationship, such as, for example, economies of scale and the like. Thus, the positive outcomes of these relationships are known, and as such can be considered within the potential possibilities of the concept of relationship marketing. What is new for the development of partnerships, as well as others that are discussed in the framework of relationship marketing, is the application of tools and re-sources in the field of ICT.

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Finally, relationships with employees, which should be the core topic of human resource management become a priority area of interest marketing professionals. Human resource management in the direction of training and motivating employees to more effectively meet the wants and needs of customers is one of the basic requirements for survival in today’s market. [14] It is exactly the underused capacities of long-term good relationships with employees that can become a major driving force and motivator for consumers, espe-cially when there is direct contact between the two sides. The logic of this thinking is that the very act of purchasing should not be seen as the final result and success, but as a place and time that should be used to extend the value of customers, whether in the context of the purchase of higher value, or impact on his return, which increases the his loyalty.These four groups of relations can be viewed separately, but one should not ignore their synergistic effect. Therefore, the analysis of the above relationship can be explained by the model 4O, which aims to highlight their importance in the context of potential opportu-nities in today’s competitive business environment. [15] This model includes the afore-mentioned types of relationships between all participants in the channel of value delivery to the end user, through pointing out the importance of their construction continuously, both individually and jointly, precisely in order to create a synergy effect, upon which we actually build and the potential competitive advantage.

4. INTERNAL MARKETING

Internal marketing involves investing continuous efforts to increase the satisfaction of employees in order to increase the positive effects of their work in the company. This definition is broad and vague as such, but the activities that fall within this area can be cat-egorized as those related to attracting staff and activities used in the maintenance of good long-term relationships with them. Basically, attracting staff involves creating an attrac-tive working environment and working conditions, while maintaining a relationship with them, in addition to the above, includes programs of continuous training of employees, proper motivation, care management for employees and others. According to Frank Brad-ley, if employees believe in what the organization does and means, they are motivated to work harder and their loyalty to the organization is more pronounced. [16] More than 20 years ago, Leonard Berry first coined the term internal marketing, defining it as ’means of bringing closer the theory and practice of marketing to people who serve external custom-ers so that (1) the best possible people can be recruited and retained, and (2) employees will do their best in doing their jobs.’ [17] According to Frank Bradley, internal market-ing is very closely related to human resources management and the way the organization develops its distinctive culture. [16] In addition to these, many other authors define in-ternal marketing in their own ways, but the essence of this concept remains a concern for employees in order to increase their satisfaction and thus impact on increasing customer satisfaction. Employees must be motivated to work on implementing customer satisfac-tion programs. [18] This is particularly important when it comes to services, but also in direct contact with the seller of the actual product with the consumer. Naturally, this does not diminish the impact of the employees upon the so-called back office, because they are potential consumers of the product with which they work, and certainly the promoters in their environment, which directly affect the company’s image.

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Edward Little and Ebi Marandi argue that employee satisfaction affects customer satisfac-tion, as illustrated in Figure 2. [17]

Satisfakcija zaposlenih

Pažnja zaposlenih

Produktivnost zaposlenih

Kvalitet eksternih usluga

Satisfakcija potrošača

Lojalnost potrošaća

Kvalitet internih usluga

Produktivnost i rast

Figure 2: Positive feedback [17]

In order to increase the satisfaction of employees and the quality of internal services, Doyle (Doyle) proposes to develop internal strategies, which include the three stages ap-proach: [19]

• Theorganizationneedstodemonstratecommitmenttowardscreationofsecurityand development of its employees in the same way as it does with its stakeholders.

• Theorganizationshouldcreateastructureinwhichthefunctionalbarriersarede-leted. This will primarily empower the employees on the front line, those who are in direct contact with customers.

• Topmanagementmustprovideleadershiptostrengthenthebasisofthesevaluesand offer a vision of what the organization will become.

5. CONCLUSION

The process of managing relationships with customers integrates various tools and tech-niques from the milieu of current information and communication technologies. How-ever, most often it is not enough simply to integrate them in order for the effect of the pro-cess based on it to be proven positive. The CRM must include changing the organizational structure and culture, as well as to integrate all previous knowledge about the history of relationships with existing and potential customers. The mere use of ICT is not enough if the organization and its people continue to work the same way.Changes in relationships with customers in establishing a good relationship at any place and time where possible, should become an imperative for all participants in today mar-ket. This fact stems from the current state of the global environment where there are fewer opportunities for achieving differential advantage and CRM process thus becomes even more important.CRM processes alone can not give effects as when it is a part of an overall strategy of estab-lishing adequate relations with all parties in the supply chain value to the end user. Within the concept of relationship marketing, 4O model has been defined that integrates relation-ships with customers, partners, the public and employees. The latter were the focus of this

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paper, because their impact on consumer satisfaction is both direct and undeniable, as is their significance. Internal relations can be viewed within the concept of internal market-ing which involves the application of the basic postulates of human resources, as well as within the well-known marketing principles of building relationships with consumers on relationships with employees. Both the complexity of these activities and their overlap are obvious;thisisnotthecasejustwiththelasttwomentionedareas,butalsowithrelationswith partners and the public who were not subject to special consideration in this study because of their scope. However, the benefits of all the above types of relationships, and their respective mutual alignment are important means of creating a differential advan-tage in today’s business environment. Achieving synergy through the establishment of good relations with all parties in the supply chain value to the end user should be the main focus of those who want to maintain a successful position in the global market.

REFERENCES

[1] Grubić, G. & Ratković, M.: The analysis of avaliable ERP solutions and trends in industry of management information systems. Practical management, journal of management in theory and practice, Vol. III (2012), No. 4, pp. 86–93. ISSN 1847-8107.

[2] Grubić, G., Ratković, M. &Paunović, L.: Vertical portal e-business model (applied for construction industry in south-east europe). Actual Problems of Economics, No. 5 (143) (2013), pp. 224–236. ISSN 1993-6788.

[3] Ratković, M., Krasulja, N. &Garača, N.: Customer relationship management strategy as an opportunity for improving the modern marketing concept. Kultura, časopis za teoriju i sociologiju kulture i kulturnu politiku, (2013), No. 139, pp. 362–381.ISSN 0023-5164.

[4] Wilson, A., Zeinthaml, V.A.&Bitner, M.J.: Services Marketing: Intergrating Customer Focus Across the Firm. Second European edition. New York: McGraw – Hill, 2012.ISBN 13978-0-07-7131715.

[5] Peppers, D. & Rogers, M.: Managign Customer Relatioship. Second edition. New Jersey: John Wiley & Sons, 2011. ISBN 978-0-470-42347-9.

[6] Wright, R.: Business – to – Business Marketing, a Step by Step Guide. Prentice Hall, 2004.ISBN 0-273 64647-8.

[7] Milenović, B. &Ratković, M.: Strategije marketinga, kako ući na tržište i uspešno opstati na njemu. Beograd: UniverzitetBK, Fakultetzatrgovinuibankarstvo, 2009. ISBN 978-86-7746-174-6.

[8] Dwyer, F.R., Shurr, P.H. & Oh, S.: Developing Buyer-Seller relationship. Journal of Marketing, No. 51, (1987), pp. 1-27.ISSN 0022-2429.

[9] KotlerPh, Armstrong G, Saunders J. &Wong V, Principles of Marketing. Fourth European Edition.Harlow: Prentice Hall, 2005. ISBN – 13: 978-0-273-68456-5.

[10] Payne, A. &Frow, P.: A Strategic Framework for Customer Relationship Management. Journal of Marketing, Vol. 69. (2005), Issue 4, pp. 167-176.ISSN 0022-2429.

[11] Milenović, B. & Ratković, M.: Marketing. Sremski Karlovci: Cekom books, 2012. ISBN 978-86-6185-020-2.

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[12] Vasiljević, M., Perić, N. &Botorić, V.: Odnosi s kupcima kao vid eksternih odnosa s javnošću. In: Zbornik radova međunarodne naučne konferencije EUROBRAND3, TQM centar, 2011., pp. 116–122. ISBN 978-86-88065-15-3.

[13] Grubić, G., Ratković, M. & Dulović, Đ.: Strategija odnosa sa javnošću i krizne komunikacije, Socioeconomica, Vol. 1. (2012), No. 2, pp. 313–326. eISSN 2217-7558.

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

[15] Ratković, M., Grubić, G. &Tasić, S.: Evolution of marketing: from product up to employment. International journal of Economics & Low, Vol. 2. (2012), No. 5, pp. 72–79. ISSN 2217-5504.

[16] Bradley, F.: Strategic Marketing in the Customer driven organization. Chichester: John Wiley & Sons Inc.,2005. ISBN 0-470-84985-1.

[17] Little, E. & Marandi, E.: Relationship Marketing Management, London: Thompson Learning, 2003. ISBN 978-1861529312.

[18] Milisavljević, M.: Marketing napočetku XXI veka. In: Razvoj marketinga – nove tendencije, Niš, Serbia,, November 2001. Edited by Ljiljana Stanković. Niš: Ekonomski fakultet, 2001, pp. 3–13. ISBN 86-80121-61-4.

[19] Egan, J.: Relationship Marketing: exploring relational strategies in marketing. Harlow: Prentice Hall, 2004. ISBN 0-273-68623-2.

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LIABILITY INSURANCE OF LAWYERS

Rstić J. Milan Faculty of Management and Economics, Kragujevac, Serbia

Rstić M. Jovan Jugoimport, Belgrade, Serbia

Petrevska B. Miroslava Higher Technological School of Business Studies, Šabac, Serbia

Petrevska B. Ljupka College of Professional Studies of Traffic Management, Niš, Sebia

Abstract: Lawyers professional liability coverage provides attorneys with liability coverage for financial loss suffered by third parties arising from acts, errors, and omissions in providing professional legal services. In Serbia, as well as in many other countries, a lawyer is obliged to conclude the contract of obligatory liability insurance with a registered organisation that deals with such type of insurance. Also, the lawyer can do this through the Bar deal with an insurance company in a form of a collective obliga-tory liability insurance for all the attorneys enlisted in its directory. Without it, a lawyer cannot perform his duties and continue with his professional career. For the lawyers, these questions are of crucial and existential significance, and for the judges they are landmarks for solving specific cases, and for the insurance companies they are landmarks to form a new product of insurance in our country. This paper investigates the liability insurance in the world, compares it with Serbia and it follows the introduction of new law regulating this area.

Keywords: lawyers, insurance, professional liability, law, legal practice

1. INTRODUCTION

The tradition of lawyers’ profession1 in Serbia is rather long, having in mind that the northernmost part of Serbia, today’s Autonomous Province of Vojvodina, belonged to the well organised Austrian Empire, which had a strong Western tradition of civil society and civilisation norms that coincided with it. The civilisation norms mentioned included strong judicial system, the developed network of courts and the extensive network of law-yers’ offices. The tradition of lawyers’ practice in Vojvodina dates back to the middle of the 17th century, while the first lawyer’s chamber appeared on the 1st of January 1875. In Central Serbia, in the region that was previously known as The Principality of Serbia (later Kingdom of Serbia), the lawyer’s practice appeared in the first part of the 19th century, with the Principality’s liberation from the Ottoman Empire and consequently with the process

1 We will continue with the use of the word “lawyer”, in accord with the definition “a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law” (Henry Campbell Black, Black’s Law Dictionary, 5th ed. (St. Paul: West Publishing Co., 1979), 799.)

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LIABILITY INSURANCE OF LAWYERSRstić M., Rstić J., Petrevska M., Petrevska Lj.

distancing from the Ottoman courts and the kadi2 system. The first law on legal represen-tation was passed on 28th of February 1862, and the first society of legal representatives was formed in August of 1886.Therefore a strong tradition of legal representation in Serbia causes a need to regulate the sensitive field of responsibility of lawyers to their clients and the insurance against the malpractice and the consequences of such malpractice. It is covered by professional liability insurance. Professional liability insurance is required by law in some areas for certain kinds of professional practice (especially medical and legal), and is also sometimes required under contract by other businesses that are the beneficiaries of the advice or ser-vice.3 For example, in reference to medical professions it is called malpractice insurance, while errors and omissions4 (E&O) insurance is used by insurance agents, consultants, brokers and lawyers.5

Lawyers’ professional liability coverage provides attorneys with liability coverage for fi-nancial loss suffered by third parties arising from acts, errors, and omissions in providing professional legal services. Fraud, intentional and criminal acts, bodily injury (BI), and property damage (PD) are excluded from coverage. However, most of the policies provide coverage for personal injury (PI) perils (i.e., defa-mation, invasion of privacy) since allegations of such acts occur frequently in the legal arena. As is the case with most professional liability forms, lawyer’s professional liability policies are written with a claims-made coverage trigger. Lawyers’ professional liability coverage is also available in many states in the world through bar-sponsored captive insur-ers in addition to commercial insurers.6

2. LIABILITY INSURANCE OF LAWYERS AS A NECESSARY MEANS OF PROTECTION

Generally, each lawyer gives the utmost efforts in their legal practice, invests a lot of en-ergy, expertise, knowledge and work in their clients and the job that has to be done. A client’s satisfaction is of supreme importance, but lawyers are human beings and, despite being professionals, they can make mistakes. The oversights and miscalculations, unde-sired errors and wrong decisions in the process tend to appear due to the plied up obli-gations, fast pace of work or due to some other factors (lack of concentration, personal or psychological issues, illness, exhaustion etc). Therefore the legal representatives must insure themselves against the liabilities.Such insurance provides coverage against the indemnity claims of clients (persons who ordered the legal representation services), that appeared due to the errors or malpractice during the legal practice. 2 Or sometimes spelled qadi. A kadı was an official in the Ottoman empire. Based on the Islamic

concept of a judge (Arabic: يضاق‎ qāḍī), the Ottoman official also had extra duties; they performed local administrative tasks, and they were involved in taxation and conscription. Kadi was a judge appointed by the Sultan, ruling in accordance with the Islamic law, Shariah (definition from www.wikipedia.org)

3 www.wikipedia.org4 Common designation in the United States of America5 „Negotiating Your Law Firm’s Malpractice Insurance: How to Avoid Purchasing the ‘Never Pay

Policy’”. The National Law Review. Arnall Golden Gregory LLP. 2012-01-21.6 www.irmi.com/online/insurance-glossary/terms/l/lawyers-professional-liability-coverage.aspx

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These types of insurance, called the insurance from civil responsibility or civil liability insur-ance, appeared relatively recently. The first policies appeared towards the end of the 19th century, but the development was rapid and already in the beginning of the 20th century civil liability insurance became one of the leading branches of insurance.Civil liability refers to the responsibility an individual or entity has to another individual or entity. There are many relationships where civil liability is apparent: employer to em-ployee, professional to client, even homeowner to guest.7 A person likely has a legal re-sponsibility to someone in their life, just as someone else has a legal responsibility to this person. Insurance helps to cover monetary responsibilities that arise from these relation-ships in the event that a liability issue ever comes up. Insurance that protects professionals such as accountants, lawyers and physicians against negligence and other claims initiated by their clients. It is required by professionals who have expertise in a specific area because general liability insurance policies do not offer protection against claims arising out of business or professional practices such as negli-gence, malpractice or misrepresentation. Depending on the profession, professional liability insurance may have different names, such as medical malpractice insurance for the medical profession, and errors & omissions insurance for real estate agents. Professional liability insurance is a specialty coverage that is not provided under homeowners’ endorsements, in-home business policies or business-owners’ policies. It only covers claims made during the policy period.8 In addition, profes-sional liability policies contain what are known as „shrinking limits,” meaning that unlike CGL policies (commercial general liability, where defense costs are paid in addition to policy limits); the insurer’s payment of defense costs reduces available policy limits.9

Civil liability insurance covers all the sources of endangerment that threat the persons that perform certain public professions:

• Personswhoperformservicesincrafts• Privatepersons• Personswhoperformprofessionssuchasdoctors,lawyers,revisers,auditors,con-

trollers, inspectors, brokers, actuaries, architects etc.

Among them, lawyers might be vulnerable to indemnity claims if the client lost the legal battle or feels dissatisfied with the effort that lawyer gave during a legal process. In theory, without a legal framework, a client that lost the legal battle might always sue a lawyer for malpractice, since they can claim that “a lawyer did not do his/her best during the process” or that “a lawyer committed certain errors”. That would lead to endless legal battles and it would multiply the number of cases, which is highly undesirable.Different legal systems have different types of this type of insurance. For instance, in Brit-ish Columbia, a Canadian westernmost province (Canada has a British legal system), the provincial government created The Lawyers Insurance Fund. The Lawyers Insurance Fund is the programme established by the Law Society to provide insurance for British Colum-bia lawyers and protects the profession and the public from the risks associated with the practice of law by providing high quality professional liability and defalcation insurance.

7 http://www.ehow.com/about_6550443_definition-civil-liability-insurance.html8 www.investopedia.com9 www.irmi.com/online/insurance-glossary/terms/p/professional-liability.aspx

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Professional liability insurance protects lawyers who are liable for negligence and ensures that clients receive compensation to which they are entitled. Lawyers are also protected if they fall victim to the „bad cheque” scam, helping ensure that clients do not suffer a financial loss.10

Other countries and provinces around the world have similar laws or similar funds, or-ganisations or trusts.

3. MORAL AND LEGAL BASIS OF LIABILITY INSURANCE OF LAWYERS

Liability insurance of lawyers has deep roots in tradition of fair business practice and it has certain moral and legal grounds.One of the bases is the idea that the principles of United Nations Chart should be embed-ded in laws that regulate the legal practice and legal representation. Also, the idea is to embed the ideas of the Universal Declaration of Human Rights, the International Pact of Civil and Political Freedoms, the European Convention of Protection of Human Rights and Basic Freedoms, as well as the ideas from other international acts. These include prin-ciples of development, promoting and encouraging of human rights and basic freedoms, the equality before law, the presumption of innocence, the right of legal help and advice of a lawyer, the guarantees of defence, the fair and impartial legal process and trial without unnecessary delays, protractions or stall.Also, one of the basic ideas is that advocacy and the practice of law represents one of the free professions in the framework of public order and society, and that lawyer is a special factor in the judicial system, and therefore a lawyer becomes a qualified representative and adviser in all legal matters. Lawyer is therefore obliged to protect the interests of clients, and to do everything in his power to realise the interests of his client, but is also obliged to act in such a manner that the law and legal order keeps preserved, and the justice is done.A special moral responsibility of lawyers comes from the fact that lawyer acts in the do-main in which the client does not know rules, regulations, practice and the system of institutions. In this light, lawyer has to act in such a manner to enable independent, ex-pert, diligent and responsible enforcement of law and justice through performance of the profession. It is one of the main guarantees of the enforcement of law and justice and the realisation and respect of human rights and freedoms.One of the important consequences of lawyer’s behaviour is that the importance and re-spect of legal practice and legal representation is highly dependent upon the behaviour and mode of work of every individual lawyer. The Lawyers Bars and Chambers thus have responsibility to establish and maintain standards of professional conduct and deontologi-cal ethics of lawyers.The Basic Principles of the Role of a Lawyer were adopted at the Eighth United Nations Congress on Prevention of Crime and Treatment of Offenders in Havana, Cuba, in the period 27th of August – 7th of September 1990. Also, The Code of Professional Ethics of Lawyers of the European Union was adopted on the plenary session of The Council of Lawyers’ Bars of the European Union (CCBE) on the 28th of October 1988, and it was renewed and new paragraphs were added in consecutive plenary sessions held on the 28th of November 1998, 6th of December 2002 and 19th of May 2006. 10 www.lawsociety.bc.ca

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The Suggestion 21 of the Council of Ministers of the European Union from 25th of October 2000, named “The freedom of legal practice (advocacy)” was one of the biggest influences in recent days for Yugoslav lawmakers. Also, one of the most important legally binding decisions was the International Convention of the Protection of the Right of Defence, which was adopted and stored in the Lawyers’ Bar of Paris on the 26th of June 1987. The Association of Republic and Provincial Lawyers’ Bars of Yugoslavia, as a legal predecessor of Lawyers’ Bar of Serbia, signed the Convention in Novi Sad, on the 25th of March 1995. There is another document, which is named The Principles of Conduct in Legal Practice, adopted on 28th of May 2011 by the International Bar of Advocates (IBA). All these docu-ments and conventions were a legal basis for the laws in Serbia today.There are some more legal documents that gave the incentive for the passing of law that cover liability insurance of lawyers. These are international legal standards of similar pro-fessions, such as, inter allia, Basic Standards of the Independence of Judicial System, which was adopted on the United Nations Congress on Prevention of Crime and Treatment of Offenders held in Milan in the period from the 26th of August to the 6th of September 1985, the Code of Minimal Standards of Judicial Independence, adopted by the International Union of Lawyers in New Delhi in 1982, the Universal Declaration of Judicial Independ-ence, adopted in Montreal in 1983, the Bangalore principles of Judicial Independence sup-ported by the General Assembly of the United Nations in 2003 and the Instructions for the Role of Attorneys, adopted at the Eighth United Nations Congress on Prevention of Crime and Treatment of Offenders in Havana, Cuba, in the period 27th of August – 7th of September 1990.

4. NEW LAWS ON LEGAL PRACTICE AND THE ROLE OF LIABILITY INSURANCE OF LAWYERS IN IT

The suggestions of new Law on Legal Practice emphasises the responsibility of lawyers to their clients and specifies legal obligation of a lawyer to his or her client to insure himself or herself from the damage caused to the client. It is also important that there is an option to diminish the responsibility by a contract made with the client. For instance, in California, Rule 3-400 (Limiting Liability to Client) defines such cases the following way:“A member shall not:(A) Contract with a client prospectively limiting the member’s liability to the client for the member’s professional malpractice; or(B) Settle a claim or potential claim for the member’s liability to the client for the mem-ber’s professional malpractice, unless the client is informed in writing that the client may seek the advice of an independent lawyer of the client’s choice regarding the settlement and is given a reasonable opportunity to seek that advice.”11

Similar legal solutions are prescribed in the new Law on Legal Practice (Advocacy) in Serbia, from 201112 and 2012.13 Article 37 in this law specifies:

• “Anattorney isobliged to conclude the contractofobligatory liability insurancewith a registered organisation that deals with such type of insurance.

11 http://rules.calbar.ca.gov/Rules/RulesofProfessionalConduct/CurrentRules/Rule3400.aspx12 „Sl. glasnik RS”, br. 31/201113 The ruling of the Constitutional Court of Serbia from 2012.

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• TheLawyersBarcanconcludeacontractofcollectiveobligatoryliabilityinsurancefor all the attorneys enlisted in its directory.

• TheLawyersBarofSerbiawillestablishtheminimumamountofprofessionalli-ability insurance for the potential damages.

• TheLawyersBarofSerbiawilldeny the issueor renewalofattorney’s licence toan attorney who has not concluded contract of obligatory liability insurance with a registered organisation, except if such a contact was already concluded in a way specified in Paragraph 2 of this Article.”14

We therefore conclude that professional liability insurance is an obligatory condition for performing legal practice, retain the lawyer’s licence, and continue with work in the area of legal practice.

5. CONCLUSION

As said previously, lawyers professional liability coverage, commonly known in the United States of America as Errors and omissions (E&O) insurance, is a type of insurance that provides lawyers with liability coverage for financial loss suffered by third parties arising from acts, errors, and omissions in providing professional legal services. Lawyers professional liability coverage, which may exclude negligent acts other than errors andomissions(„mistakes”),ismostoftenusedbyconsultantsandbrokersandagentsofvarious sorts, including notaries public, real estate brokers, insurance agents themselves, appraisers, management consultants and information technology service providers (there are specific E&Opolicies for software developers, website developers, etc.), architects,landscape architects, engineers, attorneys, third-party business administrators, quality control specialists, nondestructive testing analysts, and many others. A mistake which causes financial harm to another can occur in almost any transaction in many professions.In Serbia, as well as in many other countries, a lawyer is obliged to conclude the contract of obligatory liability insurance with a registered organisation that deals with such type of insurance. Also, the lawyer can do this through the Bar deal with an insurance company in a form of a collective obligatory liability insurance for all the attorneys enlisted in its directory. Without it, a lawyer cannot perform his duties and continue with his profes-sional career.For the lawyers, these questions are of crucial and existential significance, and for the judges they are landmarks for solving specific cases, and for the insurance companies they are landmarks to form a new product of insurance in our country.

REFERENCES

[1] Arnall Golden Gregory, „Negotiating Your Law Firm’s Malpractice Insurance: How to Avoid Purchasing the “Never Pay Policy””. The National Law Review. 2012-01-21.

[2] Campbell Black, Henry, Black’s Law Dictionary, 5th ed. (St. Paul: West Publishing Co., 1979), 799.

[3] Фёдоровa, Т. А. Страхование (Москва: Магистр, 2009.) 735–739.

14 www.paragraf.rs/propisi/zakon_o_advokaturi.html

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[4] Тулинов, В.В. Горин В.С. Страхование и управление риском: Терминологический словарь (Москва: Наука, 2000.) 194–265.

[5] „Sl. glasnik RS”, br. 31/2011[6] http://rules.calbar.ca.gov/Rules/RulesofProfessionalConduct/CurrentRules/

Rule3400.aspx, Accessed March 1, 2014[7] www.irmi.com/online/insurance-glossary/terms/p/professional-liability.aspx,

Accessed March 1, 2014[8] http://www.ehow.com/about_6550443_definition-civil-liability-insurance.html,

Accessed February 27, 2014[9] www.investopedia.com, Accessed February 28, 2014[10] www.wikipedia.org, Accessed March 1, 2014[11] www.lawsociety.bc.ca, Accessed March 1, 2014[12] www.paragraf.rs/propisi/zakon_o_advokaturi.html, Accessed March 1, 2014

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CRYPTO-CURRENCY AND E-FINANCIALSStanković I., Mihajlović A., Mihajlović R.

CRYPTO-CURRENCY AND E-FINANCIALS

Stanković B. IvicaFaculty of Business Studies and Law, Belgrade, Serbia

[email protected]ć R. AleksandarMI-SANU, Belgrade, SerbiaMihajlović A. Radomir

NYIT, New York, USA

Abstract: In this paper we present a formal view of the general session, transaction, value, market and currency. Based on the presented view we examine validity of the digital crypto currency while focus-ing on the particular example of Bitcoin. As the most important problem associated with any currency based transaction, we discuss main security issues, indicating the US government as the major poten-tial source of a threat to any crypto currency system.

Keywords: Protocol, session, transaction, crypto currency, digital currency, ecommerce, e-financials.

1. FUNDAMENTAL REMARKS

We define a general session as a joint activity of two or more active entities having one com-mon goal, purpose or application. A minimal session that requires only two cooperating or communicating active entities has a cardinality of two and may be considered a binary session. We shall restrict our discussions to binary data or message exchange sessions that some may call information sessions. In such sessions, each message m has certain semantic content meaningful to both entities involved and defined (statically specified) by what is known as a protocol. According to our definition, a protocol represents a session’s static activity scripts, message format or syntax with actionable message meaning or semantics.

Figure 1: Secure binary session elements.

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We distinguish the terms session and transaction. Each transaction is a session while the opposite does not always hold. For example every business transaction requires a session between business partners. A transaction is assumed to be one completed, i.e., closed, session with all protocol activities performed as specified by the defining script. Figure 1 illustrates a simple one way information session with two parties A and B, where A sends message m to B. All elements of this session maybe exposed to an attack by some intrud-ing third party H (a hacker). A secure session is possible if all entities involved, (A, B and m) are protected. In the case of Web 2.0, common protection against these attacks is based on a set of cryp-tographic protocols involving the third trusted party S, (See Figure 1). The implicit or explicit existence of the authoritative security or supervisory party S is found in most e-commerce system designs. The authoritative party S connects A and B via parallel secu-rity side (out of band) session. Such a security session is an overhead to each application session that is unavoidable whenever application session execution involves public com-munications infrastructure such as Internet. Mandatory involvement of the third security party imposes certain static and dynamic restrictions on the principle application session parties A and B. Statically, both A and B are required to preregister or be pre-configured with S. Dynamically, during the session, both A and B may be required to communicate with S, engage in the security meta-session, waste time and slow down the main applica-tion session. The static limitations are limiting the freedom of both parties A and B. Party A cannot initiate arbitrary secure or trusted peer-to-peer session with any party B un-less both are previously identified and pre-configured to use S security services. A simple passing of the message m relevant to the application protocol is not enough. It seems to us that this fundamental problem of the lack of freedom to initiate unsupervised peer-to-peer session will be solved with the next-step Web, i.e., the true Web 3.0[1]. The session freedom that Web 3.0 promises translates into a freedom with almost endless possibilities of yet to be designed and implemented Web application protocols.

2. COMMERCE AND MARKETS

By some ad hoc definition, the term business defines all individual or collective activi-ties relevant to acquisition or production of goods, as well as the trade of goods and/or services. The terms of acquisition and trade implicitly assume existence of trading parties, traded entities, trading transaction, and trading session.The most elementary trading session would be a two-way (bilateral) and binary in nature involving two parties exchanging traded entities. For example, let us consider a session where party A is offering entity x and party B in return is offering entity y. Upon the evaluation and value matching of the traded entities x and y, party A delivers x of certain value v to the party B and party B responds by delivering to A element y of the same or approximate value v.A domain of physical or logical space offering certain trade related convenience or service, a domain where trading parties may engage in trade can be considered as a market. Acting as a trade transaction context, probably the best trading services that market can offer are:

• Easyandfairvaluevmeasurementorpricingofthetradedentitiesx and y [2], • TradeagreementorcontractenforcementuponAandB,and• TradesecuretransactionprotectionfromtheintrusionbyH.

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Trading on a larger market scale is commonly accepted as commerce, and trading elec-tronically, e.g., via Internet as e-commerce. In addition, any market where logical fungible value equivalents are traded may be considered as a financial market. Apparently, besides being physical in nature, markets also can be logical. Financial mar-kets are sort of logical markets. Some may observe that the e-commerce market digitally implemented on the Internet dedicated, for instance, to the trade of digital or information goods is an example of the logical market too. In addition, Web based auction sites appear as markets too. In such markets trade transactions can take place entirely online and two trading parties A and B do not have to physically meet.In modern economic theory, all goods can be:

• Tangibleakaphysical,and• Intangibleakalogical.

For example, an automobile is a tangible object, while downloaded video clip belongs to an intangible class of logical or digital goods that can be consumed by means of an elec-tronic device such as computer or television set.

3. TRADING AND VALUE

To facilitate fair trading of mismatched entities, e.g., commodities, x and y, a fungible sub-stitute value representative entity z must be introduced. For z to act as an interface entity, the minimal unit of z must be set with such a fine grain that certain number of such units, a price, can be equated to the value of z or of y. It appears that all entities z of such proper-ties represent trade interface entities or value measures. One legacy representative fungible entity used through the ages is gold. By definition, fun-gibility, is the property of a good whose individual units have an equivalence property, i.e., are capable of mutual substitution. For instance, since a given gram of gold is equivalent to any other gram of gold, gold is fungible, and as such may be used as trade element. Ex-amples of other fungible entities are crude oil, silver, copper, soy beans, or papers of value such as shares of stocks, bonds or currency notes known as money. Apparently, fungible entities may be physical or logical. The convenience of using logical fungibles is their convenient physical handling properties, i.e., ease of storage and transportation. The most widely used logical fungible value measure is known as currency or money. As a value representative currency was traditionally and conveniently used in commerce.

4. CURRENCY

As a medium between the provider A and consumer B of some goods or services, cur-rency enables optimal value matching. Due to the logical, understanding based value of currency, the enforcement of the value understanding must be executed by some third authoritative party. The virtual nature of currency implies that the lack of the physical currency value, (e.g., paper currency), is transparent and that currency is accepted by the trading parties as having agreed upon value. Commonly found third party in charge of the currency recognition and virtual value enforcement are governments of countries or unions such as European Union with its own currency.

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Besides being a medium used to connect mismatched parties that are trading goods and services, currency may be treated itself as a form of logical good. Namely if the consumer intends to consume certain currency the producer may be compensated in another type of currency. Such a transaction is commonly known as currency exchange transaction. To most people, the term “currency” is self-explanatory. Currency or money is a generally accepted form of virtual value, or value representative that includes coins and paper notes, which are issued by a government to be used within an economy in trade sessions.

5. DIGITAL CURRENCY

The ancient Greek philosopher Aristotle (384 BC – 322 BC) analyzed and formulated the question of measuring and matching value also known as the problem of commensurabil-ity [3]. He wondered how a fair equating and exchange of mismatching and non-compara-ble goods could be set. Aristotle said that objects of money and currency can be used as a common value measure of all tradable goods and services, making them commensurable, i.e., capable of being matched and equated. Aristotle stated that money or currency is a substance that has a telos, a purpose or application, which is “value measurement”. In ad-dition, Aristotle specified the following four basic characteristics of money:

1. Durable, i.e., it must stand the test of aging and hostile environment, (It must not fade, corrode, or change through time),

2. Portable, i.e., it must small in size and light, 3. Divisible by a common unit without remainder, i.e., it should be easy to combine

the same as well as smaller and larger units. This feature is an extension of the fun-gibility principle, (A good or service is fungible if the same unit objects cannot be distinguished one from another).

4. Intrinsically valuable, i.e., the money or currency value just by itself should be ap-parent to users (people) independent of any other tradable good or service.

Modern definitions of money [4] ignore the fourth Aristotelian characteristic and list three additional characteristics:

5. uniformacy, 6. limited supply, and 7. acceptability.

In response to diminishing sixth property of modern world currencies, an anonymous mathematician Nakamoto Satoshi [5] has proposed special digital crypto-currency named Bitcoins. One of the inventors of the Web, Ted Nelson [6], declares in his video presen-tation that behind the name Nakamoto Satoshi stands brilliant Japanese mathematician Mochizuki Shinichi, [7]. Regardless of the identity of Nakamoto Satoshi, the Bitcoin protocol has started in 2009 a real digital financial revolution, i.e., e-financials has been born.

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Figure 2: Floating dollar value of the total Bitcoin volume available.

The bitcoin protocol limits the total number of all possible Bitcoins. Initially every block of transactions introduced b=50 new coins in the system. With every additional 210,000 blocks the number of introduced coins would be halved, so that the total maximal value would be:

As Figure 2 indicates, by 2013, half of the maximal value was released, and all coins will be released, i.e., mined by 2033 [8]. Although, it looks as Bitcoin is deflationary crypto currency, the floating price (See Figure 2), of individual coins and the fine grain unit of 1 Satoshi = 1/100,000,000 Bitcoin, makes the maximal potential dollar value of all Bitcoins more than large enough to cover entire global trade. Inflationary nature of the fiat paper currency such as dollar has been complemented by the deflationary counter currency. Bitcoin has over 100 rival currencies that are accepted by much smaller number of people, In March of 2014 there were 12,540,000 Bitcoins released with about $600.00 per coin price, representing 7.5 billion dollars in ecommerce power [9].

6. DIGITAL CURRENCY SECURITY

Security problems are important whenever any value is traded over the public infrastruc-ture such as Internet. Our analysis indicates that periodic collapse of crypto currency exchanges such was Mt Goxex change bankruptcy are not due to any defects in the crypto currency protocol but due to the plane critical password theft and other standard systems security defects.

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The problem of multiple spending of the same crypto coin was elegantly solved by the proof-of-work algorithm and the support of the massive coin mining global computer network. The coin mining network helps approve each coin based transaction and in the process release new coins into the system. The main vulnerability of the Bitcoin system is in the fact that a supercomputer of the power comparable to the coin mining network can devastate the coin system. By shutting parts of the network and by activating supercom-puter system, governments such as US government can crush any crypto currency system even as large as Bitcoin. Larger crypto currency systems are harder to crush, which means that almost 10 billion dollar Bitcoin system is much stronger than any of the smaller com-petitor systems.

7. CONCLUSION

It seems that the unstoppable trend of wide acceptance of crypto currencies is in its full swing. After credit card revolution, and after having trading parties identified by their mobile phone number, use their SMS messages as a form of electronic digital currency, the problem of stronger anonymity in trade transactions, greater convenience and lower cost of payment processing was solved by the digital crypto currency systems. Fiat currency regulatory bodies and the banking system are still necessary to measure the value of the digital currency, but vice versa boomerang effect is possible too.

REFERENCES

[1] Mihajlovic, R.A., Mihajlovic, A.R.: Web 3.0, Ecommerce 2.0 and Internet Neutrality. 4th Intl. Conf. LEMIMA 2014.

[2] Mihajlovic, R.A., Gregorek, M.J., Jafari, A., Mihajlovic, D.V.: E-Commerce Contract Modeling and the Contract Law, DCCA 2007, The 1st Intern. Conf. on Digital Communications and Computer Applications, 621–629.

[3] Shiner, R.A.: Aristotle’s Theory of Equity, 27 Loy. L.A. L. Rev. 1245 (1994)[4] Natelson, R.G.: Paper Money APER Money and the Original Understanding of the

Coinage Clause, Harvard Journal of Law & Public Policy, Vol. 31, No.3, 1017-1081, 2008

[5] Nakamoto, S.: Bitcoin: A Peer-to-Peer Electronic Cash System, 2009., Available at: https://bitcoin.org/bitcoin.pdf

[6] Nelson, T.: I Think I Know Who Satoshi Is, Available at: https://www.youtube.com/watch?v=emDJTGTrEm0

[7] Mochizuki, S.: CV Available at: http://www.kurims.kyoto-u.ac.jp/~motizuki/Curriculum%20Vitae.pdf

[8] Driscoll, S.: How Bitcoin Works Under the Hood, Imponderable Things, July 14, 2013, Available at: http://www.imponderablethings.com/2013/07/how-bitcoin-works-under-hood.html

[9] Website: Bitcoin Watch, Available at: http://bitcoinwatch.com/

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VIOLATION OF HUMAN RIGHTS...Vasić D., Vasić N.

VIOLATION OF HUMAN RIGHTS AND RELIGIOUS FREEDOM OF ARCHBISHOP JOVAN OF OHRID

Vasić N. Dušan Faculty of Business Studies and Law, Belgrade, Srebia

dusan.vasic @ fpsp.edu.rsVasić D. Nina

The University of Michigen Law Shool, USA

Abstract: Despite the respect and protection of human rights and freedoms in the XXI century have become universal values and obligations of conduct for states wishing to be called democratic, there are still drastic cases of violations of these rights and freedoms, particularly in Europe. The case of Arch-bishop Jovan, head of the Orthodox Ohrid Archbishopric in FYROM, who for ten years is persecuted by the authorities in Skopje, because of their religious beliefs, is an example of compromising basic human rights outlined in the lofty charters, conventions, declarations and protocols adopted by the United Na-tions, the Council of Europe and the European Union, as well as a number of regional organizations and specialized institutions throughout the world. In this paper, we point out the provisions of inter-national humanitarian law, which are violated by the political persecution of Archbishop Jovan. It also brings into question the character of the system that has remained resistant to all previous appeals and protests of various international organizations, the Conference of European Churches, the World Alli-ance of Churches, individual embassies and government. We point out that the criticism of OSCE was not sustained that the previously imposed sentences were excessive and unjust, that the assessment of the United States at the OSCE was ignored that detention and trial were disproportionate to the alleged guilt and that threaten the religious liberty of the bishop, as the conclusion of two specialized organiza-tions Amnesty International and Freedom House that Archbishop Jovan is prisoner of conscience.

Keywords: Archbishop Jovan, religious freedom, human rights

1. INTRODUCTION

Troubles of Archbishop Jovan are the consequence of long-standing schism in the Ortho-dox Church, because concurrently with the formation of the Macedonian nation, in Tito’s Yugoslavia, the process of local independence of the Macedonian church from the Ser-bian Orthodox Church was going on. After secessionist breaking up of Yugoslavia, local government in Skopje tried to strengthen its national identity as FYR Macedonia, but the uniqueness of the Macedonian nation by establishing a special, the Macedonian Orthodox Church. That was not accepted in European and international ecclesiastical circles. How-ever, the pursuit of separating Macedonian Orthodox Church from Serbian Orthodox Church was stronger, and those who have different religious beliefs in relation to local au-

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thorities have fallen into an awkward situation. One of them was Archbishop Jovan, serv-ing in Ohrid, who is a Macedonian citizen and whose citizen name is Jovan Vraniskovski.

2. SEVEN SENTENCES IN TEN YEARS

In previous decade, the judicial authorities in FYROM are against this head of the Or-thodox Ohrid Archbishopric pronounce seven verdicts, of which two were definitively rejected in subsequent appeals. Each of the judgments had other excuse or referred to the various regulations, as well as the different articles of the same law, accusing Archbishop Jovan to violate them. The first time Jovan, the Bishop at the time, was convicted in 2003 for „disturbing the peace and resisting police officer.” He was sentence in 2004, because he „slandered the Macedonian Orthodox Church”, and spent in prison 220 days. He was sentenced to two years in 2006, for alleged „fraud of 57,000 Euros, then the indictment was overturned and the court acquitted him, however, finally he spent 256 days in prison. Penultimate sentence was to two years in prison for „tax evasion”, announced in absentia, in 2010. He was at that time located in Greece on doctoral studies. FYR Macedonia is then issued an Interpol notice, but when entering Bulgaria where he was going to use the library in Sofia, Bulgarian Court of Appeals rejected a request for extradition from Skopje because it found that Archbishop Jovan is politically persecuted. Ljupce Georgievski, former Prime Minister of FYROM, has repeatedly stated that the Archbishop (at that time only bishop) Jovan is political prisoner. December 12, 2011 he returned to Macedonia, after he de-fended doctoral thesis in the field of religious doctrine, Archbishop Jovan was immedi-ately arrested and has since been in prison for a total of 579 days, until the July 2 of 2013 when he received a new judgment on three years’ imprisonment, for alleged „fraud in the amount of 250,000 Euros.”Together with Archbishop Jovan 18 others priests and believers was sentenced in the area of the Ohrid Archbishopric, to two years, a suspended sentence to five years. Among them were mother and sister of Archbishop Jovan. At the same time, all church property of Ohrid Archbishopric of SPC was confiscated. If one takes into account that not one person in the history of the Macedonian judiciary was so many times convicted in ten years, there is an obvious intent that such a punishment is the intention of government is to scare all those who do not support the schismatic MOC. The latest verdict is the culmination of persistence and consistency fo the Skopje regime to crush religious freedom and the per-secution of the Orthodox Ohrid Archbishopric of SPC on religious grounds.On the latest verdicts numerous institutions activate, primarily religious and those dealing with the protection of human rights and religious freedom. The Conference of European Churches has responded the next day after pronouncing the last judgment. It supported the appeal that the World Council of Churches sent to the UN High Commissioner for Human Rights to carefully examines the subject of Bishop Jovan. In addition, the Com-missioner for Human Rights at the Council of Europe and the EU Special Representative for Human Rights was asked to consider the case. Tomislav Nikolic, Serbian President in 2012, unlike all previous Serbian presidents and prime ministers who in the past ten years did not change the fate of the ecclesiastical dignitaries and refused to take him into care, said for Skopje media that the legal problem was devised. On the information that the

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Bishop Jovan violated the law on taxes, he replied that Orthodox Church does not have the fiscal account, so it is not possible to charge only the Ohrid branch of SPC.Irrespective of these proclamations and criticism politically motivated process of govern-ment in Skopje, it is indisputable that in the international humanitarian law there are a number of options to initiate proceedings for the protection of Archbishop Jovan, for the simple reason that in his case a violation of fundamental rights and freedoms set forth and are guaranteed by numerous international documents of a humanitarian character, legally binding and political imperative character.What is necessary to make a reason for initiating legal proceedings against the regime in Skopje before the relevant international institutions? First, there is clearly a violation of international laws and principles by certain states, regardless of whether these stand-ards are contained in legally binding or merely political documents. Second, international agreements and principles, organization and resolution must allow or encourage states to respond to the situation when violating the rights that are under international protec-tion. The regime in Skopje certainly is familiar with the fact that the European Charter on Human Rights, after the entry into force of the Reform, the so-called Lisbon Treaty on European Union (as of January 1, 2009) became legally binding document.What human rights of Archbishop Jovan are violated? First of all, the right to free expres-sion of beliefs, conscience, and religion. Act of arrest and two years of his detention while a new trial pending, those rights was undoubtedly deprived to archbishop Jovan. Then, the rights of members of religious minorities to practice their religion and performing religious rites in accordance with the canons of the church to which they belong were violated.Where are the legal grounds for the protection and defense of the above-mentioned rights? One of the primaries on our continent is „the European Convention for the Protection of Human Rights and Fundamental Freedoms.” Article 9 expressly provides that „everyone has the right to freedom of thought, conscience and religion” and that „this right includes freedom to change his religion or belief and freedom, either alone or in community with others and in public or private, expresses faith or belief in worship, teaching, practice and observance”1. Article 14 prohibits states discrimination against citizens with regard to the use of these rights on any grounds, including „religion, political or other opinions”.2

FYR Macedonia ratified this Convention too. The Article 33 of the Convention stipulates, „Each party may refer to the court for any alleged breach of the provisions of the Conven-tion or the protocols thereto, which it considers to be attributed to any other High con-tracting party.”3 In order for Convention to have an effective legal ambit, it proclaimed the creation of the European Court for Human Rights. Therefore, here’s one possible basis for the official response of some state or charitable institutions from Serbia, or at least some non-governmental organizations, even more because many public reactions in Skopje and the case of Archbishop Jovan were placed in the context of bilateral and international rela-tions with neighboring Serbia.The Archbishop Jovan itself, then the entire group arrested and convicted believers and some non-governmental organizations (under the Article 34 of the Convention) may

1 Konvencija Evropske unije o zašiti ljudskih prava i osnovnih sloboda, član 9, preuzeto sa: http://www.hjpc.ba/dc/pdf/Europska%20konvencija%20o%20ljudskim%20pravima.pdf /.8.7.2013/;

2 Ibid, član, 14;3 Ibid, član, 33;

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initiate proceedings before the European Court. They do not have to wait to exhaust all remedies before the Macedonian court, but to turn to the European Court immediately, „if they provide enough convincing evidence” that the legal remedies at the national level would have brought no improvement for arrested.4

Zoran citizen of Macedonia with the ecclesiastical title of Archbishop, and the name Jo-van, regardless of the Macedonian nationality, once was convicted and charged for „in-citing national, racial or religious hatred, disorder and intolerance” only because he the exercise the worship in his apartment by the canonical rules of the Serbian Orthodox Church along with 12 other like-minded (Article 319 of the criminal code of Macedonia). 5Thus, the judicial power interpreted its own law so that each confession of Christianity is outside the rules and a facility of the self-proclaimed Macedonian Orthodox Church is a difficult criminal offense.The judicial interpretation that a citizen of Macedonian nationality may cause ethnic ha-tred towards the Macedonians, regardless of whether they are of the same Orthodox or other faith is contrary to the logic. In addition, how this can call for national hatred to-wards Serbs, if he prays in the same way as they do, and Orthodox Serbs in Macedonia accept his spiritual leadership? It is not possible to say he was provoking riots because he performed the rite of baptism in his apartment. It is not possible to discuss intolerance even less, because Archbishop Jovan was never promoting propaganda against members of other religions and churches. Racial hatred as a tort is absolutely excluded, because the local Serbs and Macedonians belong to the same group of South Slavic and Orthodox peoples, it is the same race.Through articles in the Macedonian press regarding Archbishop Jovan lurked insinua-tions in relation to Serbs and Serbia as to the interference in the internal affairs of Macedo-nia using the Serbian Orthodox Church. In doing so, the fact that since the establishment of Orthodoxy in the Balkans at the end of XII century, and then in all stages of the exist-ence of Yugoslavia, the Serbian Orthodox Church had its believers, institutions, regional centers and dignitaries who have lived and worked throughout the area, in accordance the organization of Orthodox churches and canons of this religion is neglecting.After the disintegration of Tito’s Socialist Federal Republic of Yugoslavia 1991/2, the be-lievers, and institutions of the Serbian Orthodox Church extend their normal lives and spiritual activity in emerging countries (former Yugoslav republics, including Macedo-nia), as their citizens, but also as cultural and religious factors. With the creation of new states, these believers and spiritual laborers have become the distinctive religious minori-ties, with a new citizenship but with the same religious identity as before, regardless of na-tional origin or affiliation. The religious right, the conviction and conscience of members of religious and minorities (cultural, national, ethnic, etc.) are also explicitly protected internationally. Although with the signed agreement in Nis in mid nineties, Macedoni-an Orthodox Church agreed to return to the canonical wing of the Serbian Orthodox Church, in 2002 this agreement was abandoned. Among those who still stick that deal was Jovan the Bishop of Ohrid, which still suffers the persecution by the Skopje regime.

4 Ibid, član, 34;5 Krivični zakon Republike Makedonije, član, 319; “KRIVIČEN ZAKONIK –konoslididrani tekst”,

“Službeni vesnik na RM” 37/96, 80/99, 4/02, 43/03, 19/04, 60/06 i Odluka na Ustavni su “Sl. vesnik” 48/01, posećno 08.07.2013, http://aktiv.org.mk/mk/rules-and-legislations/domasni/178-krivicen-zakonik:

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After examining the judgment of the European Court of Human Rights, 2001, „The case of Metropolitan church of Bessarabia and Others v. Moldova” (no. 45701/99)6, a complex knowledge about the types of injuries in the area of religious rights that are identical with discrimination case under consideration here as Archbishop Jovan, and Serbian Ortho-dox Church in Macedonia become obvious.In the aforementioned judgment of the European Court, which can be applied by analogy to the Macedonian state, paragraph 116 states, „Applying its regulatory powers in this area and in its relations with various religions, religious communities and beliefs, the State is obliged to remain neutral and impartial”... „Without relying on coercion, even if these problems are unpleasant”7. In the next, paragraph 117, the Court stated, „the purpose of the Convention excludes that the government estimates the legitimacy of religious feel-ings or the way in which they manifest. State measures which would be give one leader advantage or put pressure on the community or section of the community to be invol-untarily placed under single management would also constitute a violation of freedom of religion”.8” From this point of view, paragraph 119, the right of believers to freedom of religion, which includes the right to manifest religion in community with others, encom-passes the expectation that believers will be allowed to associate freely, without arbitrary government interference. The independent existence of religious communities is even necessary for pluralism in a democratic society, and this is an issue that is at the very heart of the protection provided by Article 9 of the Convention,”.9

In addition to the Convention, other international documents not only allow, but also require states to take specific positive actions when they learn of cases of threats to reli-gious rights and religious beliefs in a state. For example, the Organization for Security and Cooperation in Europe (OSCE) has adopted a series of documents that expressly requires states to respect the rights of every citizen to own belief, religious belief and conscience, and feel free to belong to the church of their own choosing. At the same time, it condemns and prohibits persecution on religious and ideological grounds. Thus, the OSCE Copen-hagen Document (1990) states members in connection with the violation of human rights and civil liberties are called to provide „as soon as possible, but not later than four weeks (the deadline is shortened to seven days in 1993), provide a written response to requests for information in writing by other participating states”10. There will be no written reply from Macedonia because the initiative has not yet sent to OSCE.The most important document in the sphere of human rights, „The International Cove-nant on Civil and Political Rights” (1966) expressly protects „freedom of religion, political or any other opinion”11. Article 27 specifies that „in the states in there are ethnic, religious 6 Evropski sud za ljudska prava, presuda po prestavci 45701/99: CASE OF METROPOLITAN

CHURCH OF BESSARABIA AND OTHERS v. MOLDOVA, http://hudoc.echr.coe.int/sites/eng/pages/search.aspx?i=001-59985, pristupljeno 08.07.2013;

7 Ibid, komentar presude, pafagraf 116;8 Ibid, komentar presude, pafagraf 117;9 Ibid, komentar presude, pafagraf 119;10 Završni dokument Trećeg sastanka Konferencije o ljudskoj dimenziji OEBS (DOCUMENT OF THE

COPENHAGEN MEETING OF THE CONFERENCE ON THE HUMAN DIMENSION OF THE CSCE), Kopenhagen 29. juna 1990, Odeljak IV, tačka 42.1, strana 22, http://www.osce.org/odihr/elections/14304, posećeno 08.07.2013;

11 Zakon o ratifikaciji Međunarodnog pakta o građanskim i političkim pravima, deo prvi, član 2, “ Službeni list SFRJ” br. 7/77;

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(Macedonia became a state in which believers and clergymen of SPC, due to historical and other circumstances, now make religious minority, the author’s note) persons belong-ing to such minorities shall not be deprived of the right to have in community their own cultural life with other members of their group, from practicing their own religion and perform religious duties, or to use their own language”. 12

In the „General Comment of the Article 27,” (which is also an international legal docu-ment) gives the interpretation of the meaning of paragraph quoted above, including, inter alia, appeal to UN Member States to protect the citizens of other countries too. The for-mulation that allows it to state, „These statements also suggest that individuals who in this case should be protected not have to be citizens of a member state”.13

Following relevant document of the UN in this area is the „Declaration on the elimina-tion of all Forms of intolerance and discrimination based on religion or belief ”14 (1981). Article 1 prohibits coercion against the citizens of the state to impede freedom of religion or belief. Article 2, waives the right to states to discriminate its citizens based on religion or belonging to a church, and explains in detail what it consists of. Article 3 is calling for action. It reads, „Discrimination of human beings on the grounds of religion or belief is an affront to human dignity and disregard the principles of the UN Charter, and should be condemned as a violation of human rights and fundamental freedoms (bolded by the authors) as proclaimed in the Universal Declaration of the UN and precise in detail in the International Covenants on human rights as an obstacle to friendly and peaceful relations between nations.”A series of documents that provides the legal basis for the response of many governmen-tal and non-governmental institutions across Europe regarding the assembled political judgment against Archbishop Jovan could be mentioned. The meaning of such a response would not be interference in the relationship between the Macedonian government and its citizen, but the activation of mechanism for the international protection of human rights, freedom of expression and beliefs of exercising religious rituals by the one of the prominent spiritual figures in the SPC and his followers in the neighboring state of Serbia. It should also be emphasized that Serbia as a state does not have any aspirations towards Macedonia, much less the Serbian people and Serbian citizens. Also, be reminded that Serbia and Montenegro has never, nor would ever support any individual or group aspi-rations in that direction no matter whose, of any church, individual priests or believers. All this is to promote tolerance, respect for diversity and promote spiritual pluralism in the Balkans, as essential preconditions for development of democracy in the countries of Southeastern Europe and their entry into the European Union as soon as possible.

12 Ibid, treći deo, član 27;13 MEĐUNARODNI STANDARDI LJUDSKIH PRAVA KOJI SE ODNOSE NA VEROISPOVEST

I VERSKA UVERENJA, Komentari Komiteteta za ljudska prava Ujedinjenih nacija (UNHCR) na članove Međunarodnog pakta o građanskim i političkim pravima (MPGPP) UN (1966), Opšti komentar br. 23 (50) (Član 27), http://veraznanjemir.bos.rs/index.php?page=medu_standardi%20_verska_uverenja&lang=srp&subaction=showfull&id=1248794712&archive=&start_from=&ucat=15&page=medu_standardi%20_verska_uverenja, posećeno 08.07. 2013;

14 Declaration on the Elimination of All Forms of Intolerance and of Discrimination Based on Religion or Belief, UN/A/RES/36/55, 25 November 1981, http://www.un.org/documents/ga/res/36/a36r055.htm, posećeno 08.07.2013;

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3. RESUME

Endangering the religious freedom of citizens, as part of the corpus of universal human rights, wherever it happened, requires timely and decisive response of all competent insti-tutions. International humanitarian law provides a very good base for something like that, makes available effective legal instruments and calls upon states to stand in the way of all forms of abuse. The case of the Macedonian courts that with fabrication of judgment seeks to criminalize religious activity of high dignitaries of the Serbian Orthodox Church in the Former Yugoslav Republic of Macedonia became a precedent of a broad international scale. It is therefore in many international reports the Macedonian judiciary indicated as one of the most problematic segments of society there, primarily due to corruption and susceptibility to political influences. Mounted political process against Archbishop Jovan deserves an epilogue before the European Court of Human Rights. With our paper, we want to provide starting points to applicants of such initiatives for the petition in order to protect the persecuted Archbishop Jovan.

REFERENCES

[1] Beogradska otvorena škola, RELIGIJE SRBIJE – MREŽA DIJALOGA I SARADNJE, izdvač BOŠ, Beograd, 2008, priredili Ćupić Čedomir, Vukomanović Milan i Sitarski Milan, ISBN 978-86-83411-39-9;

[2] Dimitrijević Vojin, Račić Obrad, Đerić Vladimir, Papić Tatjana, Petrović Vesna i Obradović Saša i Papić Tatjana, Međunarodno pravo ljudskih prava, izdavač DOSIJE; Beograd 2007, ISBN 978-86-7738-083-0;

[3] Rašević, Živorad „Zabrana diskriminacije i opšta zabrana diskriminacije u praksi Evropskog suda za ljudska prava”, Glasnik advokatske komore Vojvodine, Novi Sad, knjiga 71, broj 5/2012, str. 344-366, ISBN 0017-0933;

[4] Vasić Dušan, Aktivnosti OEBS u rešavanju kriznih sutiacija u Evropi, (MSc thesis, Pravni fakultet Univerziteta u Beogradu 2006).


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